History > 2009 > USA > Economy (VIII)

Monte Wolverton

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2 November 2009

Op-Ed Columnist

The Jobs Imperative

November 30, 2009
The New York Times
By PAUL KRUGMAN

If you’re looking for a job right now, your prospects are terrible. There are six times as many Americans seeking work as there are job openings, and the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s.

You might think, then, that doing something about the employment situation would be a top policy priority. But now that total financial collapse has been averted, all the urgency seems to have vanished from policy discussion, replaced by a strange passivity. There’s a pervasive sense in Washington that nothing more can or should be done, that we should just wait for the economic recovery to trickle down to workers.

This is wrong and unacceptable.

Yes, the recession is probably over in a technical sense, but that doesn’t mean that full employment is just around the corner. Historically, financial crises have typically been followed not just by severe recessions but by anemic recoveries; it’s usually years before unemployment declines to anything like normal levels. And all indications are that the aftermath of the latest financial crisis is following the usual script. The Federal Reserve, for example, expects unemployment, currently 10.2 percent, to stay above 8 percent — a number that would have been considered disastrous not long ago — until sometime in 2012.

And the damage from sustained high unemployment will last much longer. The long-term unemployed can lose their skills, and even when the economy recovers they tend to have difficulty finding a job, because they’re regarded as poor risks by potential employers. Meanwhile, students who graduate into a poor labor market start their careers at a huge disadvantage — and pay a price in lower earnings for their whole working lives. Failure to act on unemployment isn’t just cruel, it’s short-sighted.

So it’s time for an emergency jobs program.

How is a jobs program different from a second stimulus? It’s a matter of priorities. The 2009 Obama stimulus bill was focused on restoring economic growth. It was, in effect, based on the belief that if you build G.D.P., the jobs will come. That strategy might have worked if the stimulus had been big enough — but it wasn’t. And as a matter of political reality, it’s hard to see how the administration could pass a second stimulus big enough to make up for the original shortfall.

So our best hope now is for a somewhat cheaper program that generates more jobs for the buck. Such a program should shy away from measures, like general tax cuts, that at best lead only indirectly to job creation, with many possible disconnects along the way. Instead, it should consist of measures that more or less directly save or add jobs.

One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.

Meanwhile, the federal government could provide jobs by ... providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

Finally, we can offer businesses direct incentives for employment. It’s probably too late for a job-conserving program, like the highly successful subsidy Germany offered to employers who maintained their work forces. But employers could be encouraged to add workers as the economy expands. The Economic Policy Institute proposes a tax credit for employers who increase their payrolls, which is certainly worth trying.

All of this would cost money, probably several hundred billion dollars, and raise the budget deficit in the short run. But this has to be weighed against the high cost of inaction in the face of a social and economic emergency.

Later this week, President Obama will hold a “jobs summit.” Most of the people I talk to are cynical about the event, and expect the administration to offer no more than symbolic gestures. But it doesn’t have to be that way. Yes, we can create more jobs — and yes, we should.

    The Jobs Imperative, NYT, 30.11.2009, http://www.nytimes.com/2009/11/30/opinion/30krugman.html

Weekly Jobless Claims

Drop Below 500, 000

November 25, 2009
Filed at 8:33 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

WASHINGTON (AP) -- The number of newly laid-off workers filing claims for unemployment benefits fell more than expected last week to the lowest level in over a year.

The concern is that the big improvement will be temporary as the weak economy continues to push unemployment higher.

The Labor Department says the number of people filing first-time claims for jobless benefits fell by 35,000 to 466,000. That was the lowest level for initial claims since the week of Sept. 13, 2008, and was far better than the 500,000 that economists had expected.

The number of workers receiving benefits also fell sharply, dropping 190,000, to 5.42 million, the lowest level for continuing claims since February.

    Weekly Jobless Claims Drop Below 500, 000, NYT, 25.11.2009, http://www.nytimes.com/aponline/2009/11/25/business/AP-US-Economy.html

From the Hospital Room to Bankruptcy Court

November 25, 2009
The New York Times
By KEVIN SACK

NASHVILLE — Some of the debtors sitting forlornly in this city’s old stone bankruptcy court have lost a job or gotten divorced. Others have been summoned to face their creditors because they spent mindlessly beyond their means. But all too often these days, they are there merely because they, or their children, got sick.

Wes and Katie Covington, from Smyrna, Tenn., were already in debt from a round of fertility treatments when complications with her pregnancy and surgery on his knee left them with unmanageable bills. For Christine L. Phillips of Nashville, it was a $10,000 trip to the emergency room after a car wreck, on the heels of costly operations to remove a cyst and repair a damaged nerve.

Jodie and Charlie Mullins of Dickson, Tenn., were making ends meet on his patrolman’s salary until she developed debilitating back pain that required spinal surgery and forced her to quit nursing school. As with many medical bankruptcies, they had health insurance but their policy had a $3,000 deductible and, to their surprise, covered only 80 percent of their costs.

“I always promised myself that if I ever got in trouble, I’d work two jobs to get out of it,” said Mr. Mullins, a 16-year veteran of the Dickson police force. “But it gets to the point where two or three or four jobs wouldn’t take care of it. The bills just were out of sight.”

Although statistics are elusive, there is a general sense among bankruptcy lawyers and court officials, in Nashville as elsewhere, that the share of personal bankruptcies caused by illness is growing.

In the campaign to broaden support for the overhaul of American health care, few arguments have packed as much rhetorical punch as the there-but-for-the-grace-of-God notion that average families, through no fault of their own, are going bankrupt because of medical debt.

President Obama, in addressing a joint session of Congress in September, called on lawmakers to protect those “who live every day just one accident or illness away from bankruptcy.” He added: “These are not primarily people on welfare. These are middle-class Americans.”

The Senate majority leader, Harry Reid of Nevada, made a similar case on Saturday in a floor speech calling for passage of a measure to open debate on his chamber’s health care bill.

The legislation moving through Congress would attack the problem in numerous ways.

Bills in both houses would expand eligibility for Medicaid and provide health insurance subsidies for those making up to four times the federal poverty level. Insurers would be prohibited from denying coverage to those with pre-existing health conditions. Out-of-pocket medical costs would be capped annually.

How many personal bankruptcies might be avoided is unpredictable, as it is not clear how often medical debt plays a back-breaking role. There were 1.1 million personal bankruptcy filings in 2008, including 12,500 in Nashville, and more are expected this year.

Last summer, Harvard researchers published a headline-grabbing paper that concluded that illness or medical bills contributed to 62 percent of bankruptcies in 2007, up from about half in 2001. More than three-fourths of those with medical debt had health insurance.

But the researchers’ methodology has been criticized as defining medical bankruptcy too broadly and for the ideological leanings of its authors, some of whom are outspoken advocates for nationalized health care.

At the bankruptcy court in Nashville, lawyers provided a spectrum of estimates for the share of cases in Middle Tennessee where medical debt was decisive, from 15 percent to 50 percent. But many said they felt the number had been growing, and might be higher than was obvious because medical bills are often disguised as credit card debt.

“This has really become the insurance system for the country,” said Susan R. Limor, a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket one recent afternoon included medical debts of more than $1,000.

Under Chapter 7, a debtor’s assets are liquidated and the proceeds are used to pay creditors; any remaining debts are discharged, and filers are left with a 10-year stain on their credit ratings.

“You can’t believe how many people discharge medical debts,” Ms. Limor said. “It’s a kind of trailing indicator of who’s suffering in this economy.”

Kyle D. Craddock, a bankruptcy lawyer here, said his medical cases were heartbreaking because the financial devastation was so rapid and ill-timed. “They’re sick, they’re bankrupt, and if they stay sick for too long, they end up losing their jobs as well,” he said.

That was the case for Ms. Phillips, 45, who said she was fired in October from her job in a shipping department because she had missed so much work while recuperating from her car accident and operations. Her firing came only 11 days after she filed for bankruptcy, listing about $7,000 in unpaid medical bills among her $187,000 in liabilities.

“The medical bills put me over the edge,” said Ms. Phillips, who lost her health insurance along with her job. “I had no money for food at this point. How was I going to do it?”

It was the same for the Mullinses, who have two children. They had a mortgage and owed money on credit cards and student loans. “But the medical problem is what took us down,” said Ms. Mullins, who is packing to move from the two-bedroom house they will soon surrender to Wells Fargo. “Everything was due, they wanted their money now, now, now, and it just became overwhelming.”

For some, like Nathan W. Hale, 34, who had an attack of pancreatitis two months after losing his job with a Nashville cable company, it is the absence of insurance that pulls them under. Others, like Robin P. Herron, 35, of Eagleville, Tenn., have insurance, but it is not enough. Her Blue Cross Blue Shield policy covered only 80 percent of the cost when her daughter needed surgery to remove a cyst from a fallopian tube, leaving her $6,000 in debt.

After cortisone injections failed to cure his gimpy knee, Mr. Covington, 31, had surgery because the pain was forcing him to miss days of work as an emergency medical technician. His recovery kept him off the job for five months.

Simultaneously, his wife, a 911 dispatcher, developed sciatica while pregnant and had to take months off on reduced disability pay. Their insurance policy, with an $850 monthly premium, has a $4,000 annual deductible per family.

As the bills rolled in, the Covingtons compounded their troubles by placing medical charges on credit cards, simply to make the collection agencies stop calling. They fell months behind on their mortgage, and by August had lost their house and both cars.

Mr. Covington, who has taken a second job, said he found it ironic that it had not been the recession that forced them into bankruptcy. “I tell my wife that we beat the economy,” he said, “but health care beat us.”

    From the Hospital Room to Bankruptcy Court, NYT, 25.11.2009, http://www.nytimes.com/2009/11/25/health/policy/25bankruptcy.html

Price War Brews

Between Amazon and Wal-Mart

November 24, 2009
The New York Times
By BRAD STONE
and STEPHANIE ROSENBLOOM

Ali had Frazier. Coke has Pepsi. The Yankees have the Red Sox.

Now Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com.

In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.

The tussle began last month as a relatively trivial but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this fall. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven, a 45-year-old toy from Hasbro that usually heats up small cakes, not tensions between billion-dollar corporations.

Last Wednesday, Wal-Mart dropped the price of the oven to $17, from $28, as part of its “Black Friday” deals. Later the same day, Amazon cut its price, which had also been $28, to $18.

“It’s not about the prices of books and movies anymore. There is a bigger battle being fought,” said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. “The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon.”

Retailers are already fighting for every dollar consumers spend this holiday season. Sales are not expected to drop as much as they did last season, but the National Retail Federation, an industry group, predicts that they will decline 1 percent, to $437.6 billion.

Of course, Wal-Mart and Amazon are fundamentally different companies, and for now, at least, Amazon poses little immediate threat to the behemoth from Bentonville, Ark.

Wal-Mart, with $405 billion in sales last year, dominates by offering affordable prices to Middle America in its 4,000 stores. Amazon is a relative schooner to Wal-Mart’s ocean liner, with $20 billion in sales, mostly from affluent urbanites who would rather click with their mouse than push around a cart.

This fight, then, is all about the future. Rapid expansion by each company, as well as profound shifts in the high-tech landscape, now make direct confrontation inevitable. Though online shopping accounts for only around 4 percent of retail sales, that percentage is growing quickly. E-commerce did not suffer as deeply as regular retailing during the economic malaise, and it is recovering faster than in-store shopping. People are also shopping on smartphones and from their HDTVs.

Amazon, based in Seattle, has harnessed all of these trends, and is also behaving more like a traditional retailer. This fall it expanded its white-labeling program, slapping the Amazon brand onto audio and video cables and other products, and introduced same-day shipping in seven cities, trying to replicate the instant gratification of offline shopping.

For rivals both real and putative, Amazon is expanding its slice of the retail pie at what must be an alarming rate. In the third quarter of this year, regular retail sales dipped by about 4 percent and e-commerce over all was flat. But Amazon sales shot up 24 percent, sending its shares soaring.

More important for Wal-Mart, sales in Amazon’s electronics and general merchandise business — which competes directly with much of the selection in Wal-Mart stores — were up 44 percent. Wal-Mart does not break out Web sales, but it has been reported that its online business produces revenue of several billion dollars.

“If you are Wal-Mart, you want to have your proportional piece of this change in consumer behavior,” said Scot Wingo, chief executive of ChannelAdvisor, which helps retailers sell online. “You can even paint a scenario where e-commerce one day is 15 percent of all shopping, and that could really start to erode Wal-Mart’s offline business.”

That is why many analysts are unsurprised that Wal-Mart executives have placed Amazon squarely in their sights, with public throw-downs in interviews and pointed discounting.

It began last month with what appeared to be a public-relations-oriented competition on book prices, with both companies (along with Target, based in Minneapolis) dropping prices on books like “Under the Dome,” by Stephen King, to below $9.

The companies then began jousting over the prices of DVDs. Less visibly, there were isolated skirmishes, some of which also lowered prices in Wal-Mart’s stores. Wal-Mart offered a $15 gift card with a purchase of the new video game Call of Duty: Modern Warfare 2 — and Amazon matched soon after.

Wal-Mart and Amazon then both offered the Xbox 360 gaming console for $199 — with a $100 gift card thrown in. Last week, they both began offering the new Palm Pixi phone for around $30 — nearly $175 off the suggested retail price.

Of course, online retailers have always competed on price, monitoring rivals’ sites for changes and adjusting accordingly.

“We’ve grown up in a supercompetitive environment where customers can check prices with one click, and we like it that way,” said Craig Berman, an Amazon spokesman.

But rhetoric from Wal-Mart itself has stoked the flames of rivalry. In an interview last week, Raul Vazquez, the president and chief executive of Walmart.com, asserted that the site was growing faster than Amazon’s; suggested that Amazon Prime, a two-day-shipping service that costs $80 a year, was too expensive; and said that it was “only a matter of time” before Wal-Mart dominated Web shopping.

“Our company is based on low prices,” Mr. Vazquez said, laying down a challenge. “Even in books, we kept going until we were the low-price leader. And we will do that in every category if we need to.”

Friction between the two companies is not entirely new. In the late 1990s, Amazon assembled at least some of its knowledge of retail supply chains by hiring away Wal-Mart employees. Wal-Mart sued, and the two companies settled privately.

In a battle over prices, Wal-Mart is on more familiar turf. With its unmatched size, Wal-Mart has more leverage than anyone to negotiate better terms with suppliers. Offering the lowest price “is in our DNA,” Mr. Vazquez said.

Among Amazon’s advantages are a sophisticated distribution network built specifically for Web shopping, the thousands of outside sellers who offer products on Amazon.com, and a recognizable online brand. Amazon’s customers also do not pay sales tax in most states, a crucial advantage that companies like Wal-Mart, and their lobbyists, are trying to eliminate.

Jeffrey P. Bezos, Amazon’s chief executive, is fond of saying that retailing is a big market with room for many winners. But for Ms. Dias, from GSI Commerce, Wal-Mart’s campaign against Amazon is overdue. As an executive at the now-defunct Circuit City chain, and as an adviser to traditional retailers today, she says she has watched many companies overlook the long-term threat posed by Amazon.

“We have to put our foot down and refuse to let them grow more powerful,” she said. “I applaud Wal-Mart. It’s about time multichannel retailers stood up and refused to let their business go away.”

    Price War Brews Between Amazon and Wal-Mart, NYT, 24.11.2009, http://www.nytimes.com/2009/11/24/business/24shop.html

U.S. Mortgage Delinquencies

Reach a Record High

November 20, 2009
The New York Times
By DAVID STREITFELD

The economy and the stock market may be recovering from their swoon, but more homeowners than ever are having trouble making their monthly mortgage payments, according to figures released Thursday.

Nearly one in 10 homeowners with mortgages was at least one payment behind in the third quarter, the Mortgage Bankers Association said in its survey. That translates into about five million households.

The delinquency figure, and a corresponding rise in the number of those losing their homes to foreclosure, was expected to be bad. Nevertheless, the figures underlined the level of stress on a large segment of the country, a situation that could snuff out the modest recovery in home prices over the last few months and impede any economic rebound.

Unless foreclosure modification efforts begin succeeding on a permanent basis — which many analysts say they think is unlikely — millions more foreclosed homes will come to market.

“I’ve been pretty bearish on this big ugly pig stuck in the python and this cements my view that home prices are going back down,” said the housing consultant Ivy Zelman.

The overall third-quarter delinquency rate is the highest since the association began keeping records in 1972. It is up from about one in 14 mortgage holders in the third quarter of 2008.

The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders. Mortgages with problems are concentrated in four states: California, Florida, Arizona and Nevada. One in four people with mortgages in Florida is behind in payments.

Some of the delinquent homeowners are scrambling and will eventually catch up on their payments. But many others will slide into foreclosure. The percentage of loans in foreclosure on Sept. 30 was 4.47 percent, up from 2.97 percent last year.

In the first stage of the housing collapse, defaults and foreclosures were driven by subprime loans. These loans had low introductory rates that quickly moved to a level that was beyond the borrower’s ability to pay, even if the homeowner was still employed.

As the subprime tide recedes, high-quality prime loans with fixed rates make up the largest share of new foreclosures. A third of the new foreclosures begun in the third quarter were this type of loan, traditionally considered the safest. But without jobs, borrowers usually cannot pay their mortgages.

“Clearly the results are being driven by changes in employment,” Jay Brinkmann, the association’s chief economist, said in a conference call with reporters.

In previous recessions, homeowners who lost their jobs could sell the house and move somewhere with better prospects, or at least a cheaper cost of living. This time around, many of the unemployed are finding that the value of their property is less than they owe. They are stuck.

“There will be a lot more distressed supply entering the market, and it will move up the food chain to middle- and higher-price homes,” said Joshua Shapiro, chief United States economist for MFR Inc.

Many analysts say they believe that foreclosures, instead of peaking with the unemployment rate as they traditionally do, will most likely be a lagging indicator in this recession. The mortgage bankers expect foreclosures to peak in 2011, well after unemployment is expected to have begun falling.

There was one sliver of good news in the survey: the percentage of loans in the very first stage of default — no more than 30 days past due — was down slightly from the second quarter. If that number continues to decline, at least the ranks of the defaulted will have peaked.

“It’s arguably a positive, but it doesn’t undermine the fact that there are still five or six million foreclosures in process,” Ms. Zelman said.

The number of loans insured by the Federal Housing Administration that are at least one month past due rose to 14.4 percent in the third quarter, from 12.9 percent last year. An additional 3.3 percent of F.H.A. loans are in foreclosure.

The mortgage group’s survey noted, however, that the F.H.A. was issuing so many loans — about a million in the last year — that it had the effect of masking the percentage of problem loans at the agency. Most loans enter default when they are older than a year.

When the association removed the new loans from its calculations, the percentage of F.H.A. mortgages entering foreclosure was 30 percent higher.

The association’s survey is based on a sample of more than 44 million mortgage loans serviced by mortgage companies, commercial and savings banks, credit unions and others. About 52 million homes have mortgages. There are 124 million year-round housing units in the country, according to the Census Bureau.

    U.S. Mortgage Delinquencies Reach a Record High, NYT, 20.11.2009, http://www.nytimes.com/2009/11/20/business/20mortgage.html

Pathology of a Crisis

November 19, 2009
The New York Times
By ERIC DASH

The coroner’s report left no doubt as to the cause of death: toxic loans.

That was the conclusion of a financial autopsy that federal officials performed on Haven Trust Bank, a small bank in Duluth, Ga., that collapsed last December.

In what sounds like an episode of “CSI: Wall Street,” dozens of government investigators — the coroners of the financial crisis — are conducting post-mortems on failed lenders across the nation. Their findings paint a striking portrait of management missteps and regulatory lapses.

At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late. At Haven Trust, for instance, regulators raised alarms about lax lending standards, poor risk controls and a buildup of potentially dangerous loans to the boom-and-bust building industry. Despite the warnings — made as far back as 2002 — neither the bank’s management nor the regulators took action. Similar stories played out at small and midsize lenders from Maryland to California.

What went wrong? In many instances, the financial overseers failed to act quickly and forcefully to rein in runaway banks, according to reports compiled by the inspectors general of the four major federal banking regulators. Together, they have completed 41 inquests and have 75 more in the works.

Current and former banking regulators acknowledge that they should have been more vigilant.

“We all could have done a better job,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation.

The reports, known as material loss reviews, delve into the past, but their significance lies in how they might shape the future. As another wave of bank failures looms, policy makers are considering a variety of measures that would generally strengthen banks’ finances and limit their ability to lend money aggressively in risky areas like construction. Bankers contend that such steps would not only hurt their businesses but also the broader economy, because they would throttle the flow of credit just as growth is resuming.

But while the worst seems to be over for the banking industry as a whole, many lenders are still in danger. The havoc caused by the collapse of the housing market is now being exacerbated by the deepening problems in commercial real estate, which many analysts see as the next flashpoint for the industry.

Given the past lapses, some wonder whether examiners will spot new troubles in time. Of the nation’s 8,100 banks, about 2,200 — ranging from community lenders in the Rust Belt to midsize regional players — far exceed the risk thresholds that would ordinarily call for greater scrutiny from management and regulators, according to Foresight Analytics, a banking research firm.

About 600 small banks are in danger of collapsing because of troubled real estate loans if they do not shore up their finances soon, according to the firm. About 150 lenders have failed since the crisis erupted in mid-2007.

Many bank examiners acknowledge they were lulled into believing the good times for banks would last. They also concede that they were sometimes reluctant to act when troubles surfaced, for fear of unsettling the housing market and the economy.

Then as now, banking lobbyists vigorously opposed attempts to rein in the banks, like the 2006 guidelines that discouraged banks from holding big commercial real estate positions.

“Hindsight is a wonderful thing,” said Timothy W. Long, the chief bank examiner for the Office of the Comptroller of the Currency. “At the height of the economic boom, to take an aggressive supervisory approach and tell people to stop lending is hard to do.”

Haven Trust, founded in 2000, enjoyed a light touch from its regulators, according to its autopsy, which was completed in August.

Almost from the start, examiners with the F.D.I.C and the state of Georgia raised red flags. In 2002, F.D.I.C. officials found problems with the bank’s underwriting practices. Over the next few years, Haven’s portfolio of risky commercial real estate loans grew so quickly — by an astounding 40 percent annually — that the regulators raised questions about the dangers.

But not until August 2008 did examiners step up their scrutiny by telling Haven to raise its capital cushion. A month later, the regulators issued a memorandum of understanding, known as an M.O.U., ordering the bank to limit its concentration of risky loans.

Haven’s examiners “did not always follow up on the red flags,” says the report, which runs 29 pages. “By the time the M.O.U. was issued in September 2008, Haven’s failure was all but inevitable,” it concluded.

But the fiasco at Haven Trust was not all that unusual. At the fast-growing Ocala National Bank in Florida, for example, examiners from the Office of the Comptroller of the Currency found loose lending standards and a high concentration of construction loans.

But regulators “took no forceful action to achieve corrections,” according a review after the failure. The bank collapsed in late January.

At County Bank in California, a potential powder keg of construction and land loans warranted “early, direct and forceful” action from the Federal Reserve Bank of San Francisco, according to a review of the failed lender, which collapsed in early February.

Regulators have begun to act on some of the lessons learned. Federal officials are discussing whether to impose hard limits, not just soft guidelines, on the portion of bank balance sheets that can be made up of commercial real estate loans. That would automatically prevent the buildup of risky assets and take more discretion out of the examiners’ hands.

Other ideas include requiring all lenders to hold more capital if they report big concentrations of risky assets or rapid loan growth — an approach that is the centerpiece of the Obama administration’s policy for too-big-to-fail banks.

Daniel K. Tarullo, the Federal Reserve governor overseeing bank supervision, recently proposed to impose new rules that would require banks to raise capital in the event they breach certain financial thresholds in areas like loan delinquencies or defaults.

At the F.D.I.C., Ms. Bair has been increasing the hiring of experienced examiners in the last few years, and recently empowered its on-site supervisors to impose restrictions on dividends, brokered deposits and loan growth. Every major regulator has urged examiners to take swifter action and issue more formal enforcement orders.

Still, banking executives and some regulators worry that after the long period of lax oversight chronicled by the reports, regulators will crack down too hard. The challenge, these people say, is to strike a balance between rigorous oversight and oppressive regulation. A heavy hand might discourage banks from lending.

“Right now, bankers don’t need to be told it is a dangerous world,” said William M. Isaac, the former F.D.I.C. chairman and now a regulatory consultant. “Right now, they need to be told there will be a tomorrow.”

    Pathology of a Crisis, NYT, 19.11.2009, http://www.nytimes.com/2009/11/19/business/19risk.html

U.S. Home Building

Unexpectedly Slumps in October

November 19, 2009
The New York Times
By JAVIER C. HERNANDEZ

New home construction slowed unexpectedly in October to the lowest level in six months, the Commerce Department said Wednesday, resurrecting fears that the housing market may be slow to recover.

A separate report showed consumer prices inched upward in October, but not enough to make inflation a concern even as the dollar weakened and with interest rates at historic lows.

The data on home construction showed a decline in the rate of single- and multiple-family homebuilding, contributing to an overall decrease of 10.6 percent in housing starts from September. In total, construction was at a seasonally adjusted annual rate of 529,000 housing units in October, falling short of the 590,000 predicted by analysts. Building permits, an indicator of future construction, declined as well, to an annual rate of 552,000 from 575,000, also falling short of forecasts.

Apartment construction slowed to a historic low, dipping to a seasonally adjusted annual rate of 53,000 in October. Analysts attributed the decrease to the reluctance of banks to finance large construction projects and lackluster demand for rentals as vacancies remained abundant.

Part of the overall decline in housing construction might be explained by the uncertainty in October over whether Congress would extend a tax credit for first-time home buyers. Earlier this month, lawmakers voted to extend the credit through April, but builders may have been reluctant to begin construction in October without assurance that homes would be bought.

The revival of the housing market is considered crucial to reviving the economy. Construction adds jobs to the economy, and once a home is sold, consumers typically go on spending sprees as they stock up on furnishings like televisions, refrigerators and sofas.

“These figures can be pretty volatile from month to month, so it may just be a blip,” Paul Ashworth, senior United States economist at Capital Economics, wrote in a research note on Wednesday. “Nevertheless, taken at face value it suggests homebuilders are still uncertain about the sustainability of the rebound in home sales.”

Celia Chen, senior director at Moody’s Economy.com, said demand for homes would likely remain weak into 2010.

“The housing market is still very fragile,” she said. “It seems that the market has bottomed in terms of sales and starts, but that stability can be easily broken, even if affordability is very high.”

The Labor Department’s report on consumer prices showed the Consumer Price Index climbed 0.3 percent, slightly above analysts’ estimates of 0.2 percent. The index measures the changes in the cost of a bundle of goods for consumers — everything from cooking oil to airplane tickets to medical care.

The increases came because of rising energy and motor vehicle costs, the report said. When the government excluded the cost of food and energy, which can be volatile, prices rose 0.2 percent.

The prices of cars and trucks showed steep increases. Analysts said that could be a side effect of the government’s popular cash-for-clunkers program, which depleted the supply of both cheaper 2009 models and used vehicles, driving up prices.

The small increase in consumer prices signaled that inflationary pressures, by and large, appear to be in check, restrained by the nation’s high unemployment rate and significant unused factory capacity. On Tuesday, a report on wholesale prices showed similar results, though there were signs that higher prices might be on the horizon.

“Effectively, this gives the Federal Reserve a checkered flag to keep rates exceptionally low for an extended period of time,” said Brian Bethune, chief United States financial economist for IHS Global Insight.

    U.S. Home Building Unexpectedly Slumps in October, NYT, 19.11.2009, http://www.nytimes.com/2009/11/19/business/economy/19econ.html

Editorial

Another Round

of Regulatory Reform

November 18, 2009
The New York Times

Throughout the fall, lawmakers in the House have been drafting and reworking legislation to reform the financial system. Senate Democrats weighed in last week with a plan that is stronger than the House bills on aspects of derivatives regulation and consumer protection. It also invites healthy debate on other issues, like the role of the Federal Reserve in a reformed system.

But the proposal, created by Senator Christopher Dodd, the chairman of the banking committee, is just a draft. Senators will have to stand up to pressure from banking and business lobbies, which surely will try to weaken the beneficial parts of the plan as it makes its way through the legislative process. On that score, the experience in the House has not been encouraging. Some major issues:

DERIVATIVES An overarching goal of reform is to ensure that derivatives are traded on public exchanges rather than as opaque and risky private bilateral contracts. Proposals in the House and by the Obama administration undercut that goal by exempting derivatives from exchange trading for corporations that use them to hedge risks, like a utility that wants to hedge against swings in energy prices. The Dodd plan would correctly leave it up to the regulator to rule on any such exemptions.

Still, it does not attack all loopholes. As in House and administration proposals, it excludes from oversight a type of derivative known as a foreign-exchange swap. That is dangerous because it could enable various types of derivatives — say those used to hedge against interest rate spikes — to be structured to avoid regulation.

CONSUMERS Like the House and the administration, Mr. Dodd calls for a Consumer Financial Protection Agency to ensure that financial products sold to the public are in a consumer’s best interest. Unlike the House version of the new agency, Mr. Dodd would always allow states to impose tougher consumer protection regulations, in addition to federal rules. Also in contrast to the House, the Dodd plan does not have carve-outs for auto dealers who offer credit, or for other special interests.

BANK REGULATION The House and administration would distribute supervisory powers among the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Mr. Dodd calls for the creation of one main federal regulator, reasoning that a single regulator would end “regulator shopping” — whereby banks choose their own overseer, invariably opting for the weakest one.

But that still ignores the problem of “regulatory capture” — whereby regulators come to be controlled by the entities they regulate. With only one primary federal regulator, the risk of capture is heightened, because there would be no parallel regulatory regimes by which to judge the relative strength or weakness of the single regulator. A better approach may be to retain multiple regulators, but restrict the easy ability of banks to pick and choose among them. Congress must also do a better job of overseeing the regulators, a duty it largely abdicated in the years before the crisis.

THE FED The House and the administration propose new bank regulatory powers for the Fed. But they have not called for the changes needed in the clubby and secretive Fed system for the central bank to exercise its new powers in an unbiased and transparent way. The Dodd plan pulls in the opposite direction. It would strip the Fed of regulatory powers, even though Fed supporters say that such powers are central to the Fed’s ability to make informed decisions about the economy.

None of the proposals have yet to strike a workable balance, but Mr. Dodd is right not to blindly accept the notion that the Fed has the expertise and willingness to regulate, when such expertise and willingness were manifestly absent in the run-up to the crisis.

TOO BIG TO FAIL Like other reform proposals in Congress, the Dodd plan imposes costs — like higher capital requirements — on large and interconnected firms. The aim is to make size and complexity so costly that firms opt to be smaller. The plan stops short, however, of creating a fail-safe mechanism to break up too-big-to-fail firms — before they fail — if incentives to downsize don’t work.

The Dodd plan is also in line with other proposals in calling for resolution authority — the power for regulators to seize and restructure large bank holding companies and nonbank financial firms when imminent failure poses a systemwide threat. But unless the final legislation is very tightly written, resolution authority could be misconstrued as bailout authority — the ability of regulators to use taxpayer money to keep failing firms alive. Some regulators and administration officials may prefer that flexibility. But it is imperative that resolution authority rule out the possibility of such bailouts. Otherwise, it will be impossible to control risks in the system.

It is also important to grapple with the limits of resolution authority. Most large and interconnected firms are global, and thus would require an international resolution system to dismantle them in a crisis. Resolution authority for American regulators is a necessary step to confront the nation’s outsize financial sector, but it is not a sufficient fix for the too-big-to-fail problem.

With the House moving forward and a Senate plan on the table, opportunities exist for strong reform. The other option, which sadly also exists, is that lawmakers will entrench the status quo under the guise of reform.

    Another Round of Regulatory Reform, NYT, 18.11.2009, http://www.nytimes.com/2009/11/18/opinion/18wed1.html

Job Woes

Exacting a Heavy Toll

on Family Life

November 12, 2009
The New York Times
By MICHAEL LUO

THE WOODLANDS, Tex. — Paul Bachmuth’s 9-year-old daughter, Rebecca, began pulling out strands of her hair over the summer. His older child, Hannah, 12, has become noticeably angrier, more prone to throwing tantrums.

Initially, Mr. Bachmuth, 45, did not think his children were terribly affected when he lost his job nearly a year ago. But now he cannot ignore the mounting evidence.

“I’m starting to think it’s all my fault,” Mr. Bachmuth said.

As the months have worn on, his job search travails have consumed the family, even though the Bachmuths were outwardly holding up on unemployment benefits, their savings and the income from the part-time job held by Mr. Bachmuth’s wife, Amanda. But beneath the surface, they have been a family on the brink. They have watched their children struggle with behavioral issues and a stress-induced disorder. He finally got a job offer last week, but not before the couple began seeing a therapist to save their marriage.

For many families across the country, the greatest damage inflicted by this recession has not necessarily been financial, but emotional and psychological. Children, especially, have become hidden casualties, often absorbing more than their parents are fully aware of. Several academic studies have linked parental job loss — especially that of fathers — to adverse impacts in areas like school performance and self-esteem.

“I’ve heard a lot of people who are out of work say it’s kind of been a blessing, that you have more time to spend with your family,” Mr. Bachmuth said. “I love my family and my family comes first, and my family means more than anything to me, but it hasn’t been that way for me.”

A recent study at the University of California, Davis, found that children in families where the head of the household had lost a job were 15 percent more likely to repeat a grade. Ariel Kalil, a University of Chicago professor of public policy, and Kathleen M. Ziol-Guest, of the Institute for Children and Poverty in New York, found in an earlier study that adolescent children of low-income single mothers who endured unemployment had an increased chance of dropping out of school and showed declines in emotional well-being.

In the long term, children whose parents were laid off have been found to have lower annual earnings as adults than those whose parents remained employed, a phenomenon Peter R. Orszag, director of the White House Office of Management and Budget, mentioned in a speech last week at New York University.

A variety of studies have tied drops in family income to negative effects on children’s development. But Dr. Kalil, a developmental psychologist and director of the university’s Center for Human Potential and Public Policy, said the more important factor, especially in middle-class households, appeared to be changes in family dynamics from job loss.

“The extent that job losers are stressed and emotionally disengaged or withdrawn, this really matters for kids,” she said. “The other thing that matters is parental conflict. That has been shown repeatedly in psychological studies to be a bad family dynamic.”

Dr. Kalil said her research indicated that the repercussions were more pronounced in children when fathers experience unemployment, rather than mothers.

She theorized that the reasons have to do with the importance of working to the male self-image, or the extra time that unemployed female breadwinners seem to spend with their children, mitigating the impact on them.

Certainly, some of the more than a dozen families interviewed that were dealing with long-term unemployment said the period had been helpful in certain ways for their families.

Denise Stoll, 39, and her husband, Larry, 47, both lost their positions at a bank in San Antonio in October 2008 when it changed hands. Mrs. Stoll, a vice president who managed a technology group, earned significantly more than her husband, who worked as a district loan origination manager.

Nevertheless, Mr. Stoll took unemployment much harder than she did and struggled to keep his spirits up, before he landed a new job within several months in the Kansas City area, where the family had moved to be closer to relatives. He had to take a sizable pay cut but was grateful to be working again.

Mrs. Stoll is still looking but has also tried to make the most of the additional time with the couple’s 5-year-old triplets, seeking to instill new lessons on the importance of thrift.

“Being a corporate mom, you work a lot of hours, you feed them dinner — maybe,” she said. “This morning, we baked cookies together. I have time to help them with homework. I’m attending church. The house is managed by me. Just a lot more homemaker-type stuff, which I think is more nurturing to them.”

Other families, however, reported unmistakable ill effects.

Robert Syck, 42, of Fishers, Ind., lost his job as a call-center manager in March. He has been around his 11-year-old stepson, Kody, more than ever before. Lately, however, their relationship has become increasingly strained, Mr. Syck said, with even little incidents setting off blowups. His stepson’s grades have slipped and the boy has been talking back to his parents more.

“It’s only been particularly in the last few months that it’s gotten really bad, to where we’re verbally chewing each other out,” said Mr. Syck, who admitted he had been more irritable around the house. “A lot of that is due to the pressures of unemployment.”

When Mr. Bachmuth was first laid off in December from his $120,000 job at an energy consulting firm, he could not even bring himself to tell his family. For several days, he got dressed in the morning and left the house as usual at 6 a.m., but spent the day in coffee shops, the library or just walking around.

Mr. Bachmuth had started the job, working on finance and business development for electric utilities, eight months earlier, moving his family from Austin. They bought something of a dream home, complete with a backyard pool and spa.

Although she knew the economy was ultimately to blame, Mrs. Bachmuth could not help feeling angry at her husband, both said later in interviews.

“She kind of had something in the back of her mind that it was partly my fault I was laid off,” Mr. Bachmuth said. “Maybe you’re not a good enough worker.”

Counseling improved matters significantly, but Mrs. Bachmuth still occasionally dissolved into tears at home.

Besides quarrels over money, the reversal in the couple’s roles also produced friction. Mrs. Bachmuth took on a part-time job at a preschool to earn extra money. But she still did most, if not all, of the cooking, cleaning and laundry.

Dr. Kalil, of the University of Chicago, said a recent study of how people spend their time showed unemployed fathers devote significantly less time to household chores than even mothers who are employed full-time, and do not work as hard in caring for children.

Mr. Bachmuth’s time with his girls, however, did increase. He was the one dropping off Rebecca at school and usually the one who picked her up. He began helping her more with homework. He and Hannah played soccer and chatted more.

But the additional time brought more opportunities for squabbling. The rest of the family had to get used to Mr. Bachmuth being around, sometimes focused on his search for a job, but other times lounging around depressed, watching television or surfing soccer sites on the Internet.

“My dad’s around a lot more, so it’s a little strange because he gets frustrated he’s not at work, and he’s not being challenged,” Hannah said. “So I think me and my dad are a lot closer now because we can spend a lot more time together, but we fight a lot more maybe because he’s around 24-7.”

When Rebecca began pulling her hair out in late summer in what was diagnosed as a stress-induced disorder, she insisted it was because she was bored. But her parents and her therapist — the same one seeing her parents — believed it was clearly related to the job situation.

The hair pulling has since stopped, but she continues to fidget with her brown locks.

The other day, she suddenly asked her mother whether she thought she would be able to find a “good job” when she grew up.

Hannah said her father’s unemployment had made it harder for her to focus on schoolwork. She also conceded she had been more easily annoyed with her parents and her sister.

At night, she said, she has taken to stowing her worries away in an imaginary box.

“I take all the stress and bad things that happen over the day, and I lock them in a box,” she said.

Then, she tries to sleep.

    Job Woes Exacting a Heavy Toll on Family Life, NYT, 12.11.2009, http://www.nytimes.com/2009/11/12/us/12families.html

U.S. Says Mortgage Help

Is Reaching More Homeowners

November 11, 2009
The New York Times
By THE ASSOCIATED PRESS

WASHINGTON (AP) — After a slow start, the Obama administration’s mortgage relief program has reached one in five eligible homeowners, a government report said Tuesday.

More than 650,000 borrowers, or 20 percent of those eligible, have signed up for trials lasting up to five months, the Treasury Department said Tuesday. The modifications reduce monthly payments to more affordable levels.

Started with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan modification offers have been sent to more than 3.2 million eligible homeowners. That works out to 29 percent, up from 15 percent at the end of July.

In California, about 130,000 homeowners have been enrolled in the “Making Home Affordable” loan modification plan, which President Obama introduced in February. That works out to about 19 percent of homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.

Two other hard-hit states, Arizona and Nevada, had similar rates of assistance as California, at 22 percent and 18 percent. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that did not qualify for the program.

The $50 billion plan got off to a slow start, but government officials say they are pressing the industry hard to improve performance. Still, many housing advocates have been disappointed with the plan’s progress and say that getting a loan modification is still a battle.

And economists doubt the Obama administration will reach its broad goal of helping three million to four million borrowers within three years.

Most of the borrowers enrolled so far have been signed up for preliminary trial modifications for up to five months. To make the change permanent, though, they must complete a big stack of paperwork and show they can make their payments on time. The government expects to release details in the coming weeks on permanent modifications.

“We’re seeing some early indications that the servicers haven’t done enough to get all the documents in,” said Michael Barr, an assistant Treasury secretary..

    U.S. Says Mortgage Help Is Reaching More Homeowners, NYT, 11.11.2009, http://www.nytimes.com/2009/11/11/business/11mortgage.html

Retailers Report Healthy Sales Increases

November 6, 2009
The New York Times
By STEPHANIE ROSENBLOOM

The nation’s stores on Thursday posted a second consecutive month of sales increases, the retailing industry’s best monthly performance in more than a year.

Results at chains as varied as Costco and Saks were clearly helped by easy comparisons to the dismal results of a year ago, but also by October’s cool weather and Columbus Day sales. Retailing analysts said sales might also have been driven by pent-up demand.

Over all, the industry reported a 1.8 percent increase at stores open at least a year, according to Thomson Reuters. Retailers have not reported a sales increase that large since June 2008, when the industry’s sales rose 2 percent. Nearly every sector had sales gains in October, with the exception of teenage-clothing retailers and department stores.

In a statement on Thursday, Michael P. Niemira, chief economist and director of research for the International Council of Shopping Centers, an industry group, called the results “further evidence of retail recovery.” Clothing chains selling designer names at bargain-basement prices were the top performers. Sales at TJX stores open at least a year, a measure of retail health known as same-store sales, increased 10 percent. TJX, which owns stores including TJ Maxx, Marshall’s and Home Goods, has been on a roll for months as consumers shop for bargains.

Carol M. Meyrowitz, the company’s chief executive, said in a news release that “customer traffic continued to drive sales throughout the month, boding well for the holiday season.”

A TJX competitor, Ross Stores, also thrived, turning in a 9 percent sales increase.

Other discounters reported healthy numbers, including Costco (up 5 percent) and Kohl’s, the value-priced clothing chain, which had its fourth consecutive month of positive sales. October sales increased 1.4 percent at Kohl’s, though that was lower than what analysts were expecting.

Kohl’s also reported some signs of broader recovery, saying in a news release that its strongest year-over-year gains were in the home goods category, a retailing sector hit hard by the recession. The company said same-store sales increases were notable in the Southwest, a region that was hurt more by the recession than other parts of the country.

Sales at BJ’s Wholesale Club declined 1.1 percent, though customer traffic was up 4 percent year-over-year. Sales at Target also decreased slightly, by 0.1 percent, yet its same-store sales of clothing were slightly stronger — a sign that consumers are beginning to spend some discretionary dollars.

“We are entering the holiday season with very clean inventories,” Gregg W. Steinhafel, chief executive of Target, said in a news release, “and we believe we are positioned to perform well in what continues to be a challenging economic environment.”

Wal-Mart Stores, the nation’s largest chain, stopped reporting monthly sales figures in April.

Same-store sales at department stores — a group that was struggling even before the recession — declined slightly, falling 0.9 percent, according to Thomson Reuters. Even so, some department stores had sales growth for the first time in months. Same-store sales increased even at the upscale chains like Nordstrom (up 6.5 percent) and Saks (up 0.7 percent). Nordstrom was one of the industry’s top performers. And Saks said in a news release that it experienced “relative strength” in some of its merchandise categories, like women’s designer sportswear, its e-commerce business and its outlet stores, Saks Off 5th.

At Bon-Ton, sales rose 3.1 percent. “We are encouraged by the sustained improvement in our sales trend, which began in August,” Tony Buccina, vice chairman and president for merchandising at Bon-Ton, said in a news release.

Other department stores did not fare as well. Sales declined at Dillard’s (down 8 percent), Neiman Marcus (down 6 percent), Stein Mart (down 4.9 percent), JC Penney (down 4.5 percent) and Macy’s (down 0.8 percent).

Teenage retailers posted the weakest results, with same-store sales declining 5.8 percent, according to Thomson Reuters. That was much lower than analysts’ estimates. Sales fell at Abercrombie & Fitch (down 15 percent), Zumiez (down 8.9 percent), American Apparel (down 6 percent), American Eagle Outfitters (down 5 percent), Limited Brands (down 4 percent), Hot Topic (down 2.6 percent), Children’s Place (down 2 percent) and Wet Seal (down 1.3 percent).

Of course some teenage clothing chains bucked the trend as they have for the last several months, including Buckle (up 4.3 percent) and Aéropostale (up 3 percent). The Gap, which is in the midst of a turnaround, posted a 4 percent increase.

For November, the first month of the crucial holiday shopping season, the International Council of Shopping Centers is forecasting a 5 to 8 percent same-store sales increase.

    Retailers Report Healthy Sales Increases, NYT, 6.11.2009, http://www.nytimes.com/2009/11/06/business/economy/06shop.html

In October,

Signs of Life at Retailers

November 4, 2009
The New York Times
By STEPHANIE ROSENBLOOM

October was far and away the best month American retailers have had since consumers put the brakes on spending last autumn. Major categories had robust sales growth for the first time in more than a year, new figures show.

On Thursday, when individual chains report their October sales, the industry is expected to post its strongest sales figures yet in this recession. Contrary to predictions made only a few weeks ago, the nation’s stores could be poised for a merrier Christmas this year than last.

To be sure, the enthusiasm of industry professionals is tempered. A major reason the latest numbers look so good is that they are being compared with figures from October 2008, the first full month of a brutal nationwide spending freeze.

“Things are better than they were a year ago,” said Michael McNamara, vice president for research and analysis at SpendingPulse, an information service by MasterCard Advisors. “But we’re still below where we were two years ago.”

The latest sales figures come from his organization, which estimates sales for all forms of payment, including cash, checks and credit cards. They show, for example, that sales of women’s apparel increased 0.6 percent in October, the first positive figure since August 2008.

However, women’s apparel sales are still 12.2 percent lower than in the heyday of consumer spending, in October 2007. That theme — up compared with last year, but still down compared with the height of the boom — played out across several retailing categories, including jewelry and luxury goods.

Nonetheless, the signs of recovery were unmistakable in the sales numbers that MasterCard Advisors released late Tuesday.

One sign was that retailers were able to drive sales in October without offering the kinds of deep margin-eroding discounts they dangled last year. “That’s generally a positive,” Mr. McNamara said. “Even though the number of purchases may not be spiking, it could be an indication that inventory and demand are more lined up.”

Another positive sign is that retailers and analysts are beginning to see some stabilization in California, one of the places hit hard by the recession. Big chains like Mervyn’s and Gottschalks went belly up there. Recently, though, major retailers with a presence in California — Target, Costco, J.C. Penney and Kohl’s — have said to varying degrees that they were seeing improved sales and customer traffic.

Mr. McNamara said apparel sales on the West Coast increased 2.2 percent in October. “We are showing a positive comparison for the first time in the last year,” he said.

In a research report last week titled “Christmas in Southtown: California Dreamin’,” Bill Dreher, a senior research analyst with Deutsche Bank Securities, said companies like Costco and Nordstrom were “seeing solid results in California,” and underscored that Kohl’s has had sales growth for several months now. (Kohl’s has also gained significant market share in California, having snapped up 36 Mervyn’s stores on the cheap.)

“With this earnings acceleration going into Christmas,” Mr. Dreher said, “it looks like early predictions of flat-to-down Christmas sales will turn out to be stale.”

Many analysts, economists and the National Retail Federation are forecasting holiday sales to be the same or slightly worse than last year. But more bullish analysts, at Deutsche Bank and Citi for instance, think sales for the industry will rise 1 to 2 percent.

Over all for the industry in October, apparel sales increased 3.4 percent compared with the period a year ago, luxury goods rose 6.5 percent, jewelry increased 7.2 percent, and department store sales declined 1.5 percent, according to SpendingPulse.

E-commerce was the most robust sector, increasing 18.7 percent — the third consecutive month of double-digit growth — because of strong sales of small, low-price goods.

October is typically a clearance month, though some industry professionals consider it an early indicator of Christmas sales. It appears the month started off strongly. Analysts think stores benefited from cool weather, Columbus Day discounts, and last-minute back-to-school shopping. Halloween may have hurt sales slightly, though, because this year it fell on a Saturday, typically a shopping day, Mr. Dreher said.

Even so, analysts at Standard & Poor’s Equity Research said in a report on Monday that “consumers appear to be shopping again for apparel and some home fashions.”

Whether there will be enough merchandise to go around this Christmas remains to be seen. Mike Moriarty, a partner at A.T. Kearney, a management consultancy, said many retailers were intentionally low on inventory. “They’re going to have an unhappy but maybe a safe holiday,” he said.

    In October, Signs of Life at Retailers, NYT, 4.11.2009, http://www.nytimes.com/2009/11/04/business/economy/04shop.html

U.S. Consumer Spending

Slipped in September

October 31, 2009
The New York Times
By REUTERS

WASHINGTON (Reuters) — Consumer spending in the United States fell in September for the first time in five months as the increase from the cash-for-clunkers auto rebate program faded, data showed on Friday, adding to fears that consumers may be pulling back as they head into the last quarter of the year.

The Commerce Department said spending fell 0.5 percent, the largest decline since December, after an upwardly revised 1.4 percent increase in August. Consumer spending in August was previously reported to have advanced 1.3 percent.

September’s decline was in line with expectations. Consumer spending, which normally accounts for over two-thirds of economic activity, in August was bolstered by the popular “cash-for-clunkers program that gave discounts on some new motor vehicle purchases.

The program, which ended in August, contributed to a jump in consumer spending in the third quarter and helped to pull the economy out of its worst recession since the 1930s.

Spending adjusted for inflation fell 0.6 percent in September, also the largest decline since December, after rising 1 percent the prior month, the Commerce Department said.

Personal income was flat last month after rising 0.1 percent in August. That was also in line with market expectations.

Real disposable income fell 0.1 percent in September. Despite the fall in income, Americans saved more money last month. Savings increased to an annual rate of $355.6 billion, lifting the saving rate to 3.3 percent from 2.8 percent in August.

Commerce Department data also showed the personal consumption expenditures price index excluding food and energy, a key inflation gauge monitored by the Federal Reserve, was up 1.3 percent from a year ago in September, matching the August increase.

    U.S. Consumer Spending Slipped in September, NYT, 31.10.2009, http://www.nytimes.com/2009/10/31/business/economy/31econ.html

U.S. Economy Started to Grow Again

in the Third Quarter

October 30, 2009
The New York Times
By CATHERINE RAMPELL

Ending a year of contraction, the United States economy grew in the third quarter, the Commerce Department said on Thursday. But even if a recovery is technically in the offing, job seekers likely will not begin to feel the benefits for months to come.

The nation’s gross domestic product expanded at an annual rate of 3.5 percent in the three months ending in September, a significant spike from a somewhat shrunken base. The economy had contracted at annual rates of 0.7 percent and 6.4 percent in the second and first quarters of this year, respectively.

Much of the growth can be attributed to the billions in federal aid devoted to economic renewal, including policies that encouraged consumer spending on cars and housing.

“That alters the dynamic of a recession and a recovery, and what you’re left with, to some degree, is an artificial recovery,” said Dan Greenhaus, chief economic strategist at Miller Tabak, an investment research firm. “Over the next several quarters, the support for the economy on the part of the government wanes and the economy has to find its own footing.”

The cash-for-clunkers program helped boost consumer spending on durable goods, which grew by an annual rate of 22.3 percent in the third quarter compared to a decline of 5.6 percent in the previous quarter. Similarly, economists say the $8,000 federal tax credit for first-time homebuyers helped revive spending on housing, which increased 23.4 percent in the third quarter, in contrast to a decrease of 23.3 percent in the second quarter. The economic growthcame without a major surge in inflation. The price index for gross domestic purchases, a broad measure of prices that Americans pay for goods and services, increased at an annual rate of 1.6 percent in the third quarter, compared with an increase of 0.5 percent in the second, the department said. Excluding food and energy prices, the inflation index rose 0.5 percent in the third quarter, compared with an increase of 0.8 percent in the second.

The stock market surged in reaction to the news, with major indexes up about 1 percent in mid-morning trading.

Thursday’s report will likely provide ammunition to both advocates and opponents of additional federal spending to stimulate certain parts of the economy, as mutually reinforcing pessimism among consumers and employers continues to fester.

On the one hand, the poor job market is discouraging Americans from increasing their spending by too much. Consumer spending on nondurable goods like food and clothing, for example, increased 2 percent in the third quarter, compared to a decline of 1.9 percent in the second.

Likewise, stagnant consumer demand and withering consumer confidence have left companies wary of hiring more employees — or, for that matter, taking any expensive risks. The jobless rate reached 9.8 percent in September, its highest rate in 26 years. According to Thursday’s report, business investment in buildings and other structures fell at an annual rate of 9 percent in the third quarter.

“At some point firms will have to begin to bring some of their workers back, but it may not be anytime soon,” said Joseph Brusuelas, director of Moody’s Economy.com. “That means 2010 may be a year of growth in the economy, but it’s likely to be characterized as jobless growth.” Initial jobless claims fell 1,000 in the week ending Oct. 24 to 530,000, according to a Labor Department report also released Thursday. The number has been trending downward, but is still “well above the level of claims that is historically associated with net job creation,” according to a report by RDQ Economics.

Such forces may pressure Washington to look for targeted interventions into the labor market, in addition to last winter’s broader $787 billion stimulus package, which continues to work its way through the economy. Proposals on the table include another extension in unemployment benefits and various job creation programs.

A slower drawdown in inventories was one bright spot in Thursday’s report, as it indicated that businesses have largely sold out their current stock and may rev up orders in the coming months to replenish supplies.

“Everybody had been dealing with a just-in-time status quo,” said Sandra Westlund-Deenihan, president and design engineer for Quality Float Works, a plant in Schaumburg, Ill., that manufactures metal float balls and valve assemblies. “They were living off inventories they’d built up over the last several years. Now they’ve drawn that down and reached a point where they may have to have it ready and back on the shelf again.”

Like many American manufacturers, Ms. Westlund-Deenihan says that international business has helped keep her company afloat. United States exports overall grew at an annual rate of 14.7 percent in the third quarter, while imports grew 16.4 percent.

“We’re seeing a strong rebound in trade simply because global trade had collapsed before,” said Robert Barbera, the chief economist at ITG.

 

Javier C. Hernandez contributed reporting.

    U.S. Economy Started to Grow Again in the Third Quarter, NYT, 30.10.2009, http://www.nytimes.com/2009/10/30/business/economy/30econ.html

Editorial

Ongoing Agony of the Banks

October 29, 2009
The New York Times

It is hardly surprising that GMAC is circling back to the government for a third helping of taxpayer money. GMAC is struggling under the double whammy of bad car loans and the fallout from its misguided foray into mortgage finance at the height of the housing bubble. After the government applied stress tests to the banks last May, it was the only big bank that could not raise the capital it was deemed to need.

Still, GMAC’s return to the public trough — where it expects to get up to $5.6 billion on top of the $12.5 billion it has received since December — should serve as a reminder that much of the American banking system is nowhere near where it needs to be despite hundreds of billions of dollars doled out by the Treasury.

If the federal government’s strategy to save the banks was meant to get them back into the business of lending to American consumers and businesses, it has not worked yet.

GMAC’s sorry state is bad enough news for Main Street. It is the main source of financing for General Motors and Chrysler dealers around the country. That means it is virtually assured to get the additional money it needs for the same reason that the government bailed out the automakers and then gave them the windfall profits of the cash-for-clunkers initiative: too many auto-sector jobs are on the line.

But GMAC is hardly the only hobbled financial institution in the country. Bank of America reported a $1 billion loss in the last quarter and is still limping along, dragged down by its bloated portfolio of bad loans. Citigroup relied on accounting gymnastics and a dubious decision to stockpile few reserves against potential loan losses in order to make a $100 million profit.

The mere fact that these banks are still going concerns is because of the government’s willingness to ply them with cash. But neither is lending much.

The banks that do have the financial wherewithal — like Goldman Sachs and JPMorgan Chase, which made combined profits of nearly $7 billion in the third quarter — are not making their money through lending. They are making it from trading complex financial products that few people understand.

Meanwhile, sectors of the economy are being starved of credit. Consumer credit by commercial banks stood at $834 billion in August — about $45 billion less than at the end of last year. Business financing is doing no better. Banks’ outstanding commercial and industrial loans fell to $1.411 trillion in September, $170 billion less than a year earlier. Commercial paper issued by nonfinancial businesses has plummeted 40 percent over the last year.

This will not do. It is nigh impossible for economic recovery to take hold when credit is sputtering as it is. For the Obama administration’s financial strategy to be a success, the banks must do more than survive. They must lend again.

    Ongoing Agony of the Banks, NYT, 29.10.2009, http://www.nytimes.com/2009/10/29/opinion/29thu1.html

China to Resume

Imports of U.S. Pork

October 29, 2009
Filed at 6:14 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

HANGZHOU, China (AP) -- Chinese officials said Thursday that Beijing will lift a ban on imports of U.S. pork that was imposed last spring due to swine flu fears.

China's agriculture minister and commerce minister, speaking after a day of trade talks with U.S. officials, emphasized that the decision was based on scientific analysis.

"Since this is a new disease, it takes time to understand it," said China's agriculture minister, Sun Zhengcai.

"This decision was based on scientific analysis and assessment," he told reporters.

"It is my hope the U.S. side will follow the Chinese requirements to safely resume export of pork products to China," Sun said.

The ban has cost the U.S. hog industry millions of dollars every week. It had continued despite insistence by international health officials that pork is safe and the country's hogs are not to blame for the epidemic.

    China to Resume Imports of U.S. Pork, NYT, 29.10.2009, http://www.nytimes.com/aponline/2009/10/29/business/AP-AS-China-US-Pork.html

Denver Water

Approves Rate Increases for 2010

October 29, 2009
Filed at 12:43 p.m. ET
The New York Times
By THE ASSOCIATED PRESS

DENVER (AP) -- Denver's Board of Water Commissioners has approved rate increases that will raise the typical Denver residential customer's water bill by about $40 per year.

The new rates will take effect Feb. 3.

Typical suburban customers of Denver Water would see an increase of about $51 per year.

The rate hikes will help fund a $1.3 billion 10-year plan for infrastructure upgrades and expansion to make sure the utility can meet future demand.

In the next decade, Denver Water plans to expand its recycled water system, enlarge one of its reservoirs, finish developing gravel pits that store reusable water, and explore ways to work with other water providers to bring more supplies to its system.

Denver Water serves about 1.3 million people.

    Denver Water Approves Rate Increases for 2010, NYT, 29.10.2009, http://www.nytimes.com/aponline/2009/10/29/business/AP-US-Denver-Water.html

Billionaire Madoff Investor Found Dead

October 25, 2009
Filed at 4:29 p.m. ET
The New York Times
By THE ASSOCIATED PRESS

PALM BEACH, Fla. (AP) -- Palm Beach police said Sunday that Jeffry Picower, a Florida philanthropist and a friend of Bernard Madoff for decades, has died. He was 67.

Picower was the former New York lawyer and accountant alleged to have extracted billions of dollars from the Bernard Madoff investment scheme.

In a statement, the Palm Beach Police Department said Picower was found at the bottom of his Palm Beach home's pool Sunday afternoon by his wife and could not be revived by Palm Beach fire rescue workers. Picower was transported to Good Samaritan Medical Center where he was pronounced dead at about 1:30 p.m.

The police department said it is conducting an investigation into Mr. Picower's death, as is standard operating procedure in any drowning. The residence has been secured and detectives remain on the scene at this time.

An operator at Good Samaritan said the hospital wouldn't be making any statements.

In the initial aftermath of the Madoff scandal in December 2008, the foundation Picower and his wife started in 1989 said it would have to cease grant-making and would be forced to close. The Picower Foundation had given millions to the Massachusetts Institute of Technology, Human Rights First and the New York Public Library. It also funded diabetes research at Harvard Medical School. The foundation, whose assets were managed by Madoff, said in its 2007 tax return its investment portfolio was valued at nearly $1 billion.

But Picower was later sued by the trustee recovering Bernard Madoff's assets for jilted investors. Irving Picard labeled the Florida philanthropist as the biggest beneficiary of Madoff's multibillion-dollar fraud and demanded he return more than $7 billion in bogus profits.

In court filings, Picard's lawyers have said Picower's claims that he was a victim ''ring hollow'' since Picower withdrew more of other investors' money than anyone else during three decades of investing with Madoff and should have noticed signs of fraud.

According to the lawyers, Picower's accounts were ''riddled with blatant and obvious fraud,'' and he should have recognized that since he was a sophisticated investor.

Picower had asked that the lawsuit be dismissed, saying it is unsupported by the facts. Messages left for Picower's lawyer, William Zabel, and his wife's attorney, Marcy Harris, weren't immediately returned Sunday.

Madoff is serving a 150-year prison sentence after he admitted losing billions of dollars for thousands of clients over a half-century career that saw him rise to be a Nasdaq chairman.

    Billionaire Madoff Investor Found Dead, NYT, 26.10.2009, http://www.nytimes.com/aponline/2009/10/25/business/AP-US-Madoff-Associate-Death.html

65 and Up and Looking for Work

October 24, 2009
The New York Times
By STEVEN GREENHOUSE

It is well known that during the nation’s gale-force recession, many older Americans who dreamed of retirement continued to work, often because their 401(k)’s had plunged in value.

In fact, there are more Americans 65 and older in the job market today than at any time in history, 6.6 million, compared with 4.1 million in 2001.

Less well known, though, is that nearly half a million workers 65 and older want to work but cannot find a job — more than five times the level early this decade and this group’s highest unemployment level since the Great Depression.

The situation is made more dire because of numerous recent trends: many people over 65 have lost their jobs as seniority protections have weakened, and like most other Americans, a higher percentage of them took on debt than in previous generations.

The expectation once was to pay off your 30-year mortgage before you retired, or come close. Instead, the level of indebtedness among older Americans has risen faster than in any other age group, partly because so many obtained second mortgages to take money out of their homes.

This financial squeeze is one reason President Obama has proposed giving a special $250 one-time payment to all Social Security recipients.

Many out-of-work older Americans complain that they face foreclosure or have had to give up their car.

“It’s a big deal for a lot of these people not to find a job,” said David Certner, legislative policy director for AARP. “That so many of them are still trying to find work shows how bad the economic situation is. A lot of people normally give up at that age.”

The unemployment rate for older Americans is still much better than for others — 6.7 percent compared with 9.8 percent in the general population. But 6.7 percent is more than double the level of two years ago — and far higher than the minuscule 1.9 percent rate early this decade.

And unemployed older workers stay out of work longer — 36.5 weeks on average, 40 percent longer than for the unemployed in general.

Patricia Warmhold, who has worked as a translator and telemarketer, would love to retire, but at age 67, she says that is out of the question.

Her mortgage payment is nearly $1,500 a month, and her car payments and auto insurance are another $350. She receives $1,071 a month in Social Security and $918 in pension.

“I have very little after the mortgage,” she said.

Ms. Warmhold, who speaks German, French and Creole, was laid off a year ago from her job as an interpreter for a law firm. “I’ve been looking for jobs ever since,” she said. “I applied to Nassau County and Suffolk County, and they don’t call back.”

A divorce worsened her financial situation, although her mother, who is in her 90s, helps by sometimes sending her $100.

“In a month’s time, I sent out 101 job applications,” she said, including more than 50 to school districts, to no avail.

The recession has battered young, middle-aged and old, although several modern trends have left older workers more vulnerable than in the past — for instance, the shift toward 401(k)’s and away from traditional pensions that give retirees a monthly stipend for life has pressured many Americans to continue working well past 60.

Another force pushing Americans to delay retirement is that the percentage of companies that provide health coverage to retirees is half what it was two decades ago. Moreover, the age to obtain full Social Security benefits has increased to at least 66 for people born after 1942, from its traditional 65.

The median income for those 65 and over was just $18,208 in 2008 — a quarter of them had incomes under $11,139, according to Patrick Purcell, an expert on older workers and pensions with the Congressional Research Service.

The average Social Security recipient age 65 and over receives just $12,437 in annual benefits, he said, and among individuals 65 and older who received income from financial assets, half received less than $1,542 last year.

While Social Security keeps most seniors above the poverty line, there are a substantial number near poverty “who are just getting by,” said Richard W. Johnson, a senior fellow at the Urban Institute. Many economists say it is good that Americans are working later in life — many are living longer and able to contribute longer.

Still, many older job seekers insist they are losing out because of age discrimination. Last year, nearly 25,000 workers filed age discrimination complaints, a 29 percent jump over 2007, according to the Equal Employment Opportunity Commission.

“I often get told that I’m overqualified,” said Barbara Brooks, 71, who retired in 2003 after 30 years as an administrative assistant at the University of California, Los Angeles. She said being told that is code language for “you’re too old.” But Ms. Brooks said she wanted to work — and needed to — citing her monthly mortgage of $1,500, which eats up half her monthly pension.

“I would like to be able to treat myself to a couple of dinners, maybe a movie,” Ms. Brooks said. “I think as long as people have excellent skills, and they can get around like a 40-year-old — I’ve been told I look 40 or 50 — why shouldn’t I work?”

For years, unemployment among older Americans was largely ignored because so few of them were jobless. But now more than a million Americans over age 60 are unemployed, two-and-a-half times the level two years ago.

And at least jobless workers 65 and over are guaranteed health coverage through Medicare. Workers laid off before that age often have to fend for themselves to obtain health insurance, which is often prohibitively expensive for those over 60.

One such worker is Michael Husar, 62, a former engineering manager who spent 38 years with General Motors and then its Delphi auto parts spinoff. Mr. Husar, a resident of Scottsdale, Ariz., retired in 2003 at age 56, but as a result of Delphi’s bankruptcy, he now has to purchase his own health insurance. He pays $1,600 a month, which translates to $19,200 a year.

Despite two engineering degrees, his search for consulting work has come up empty in recent months.

“There are two reasons I feel a need to continue working,” he said. “One, I still have a lot to offer, and two, I need the money.”

Alicia H. Munnell, director of the Center for Retirement Research at Boston College, says older workers have fared better by and large than younger workers in this recession. The percentage of workers ages 25 to 54 with jobs has fallen to 75 percent, from nearly 80 percent two years ago, while the percentage of older Americans with jobs has risen slightly, to 16.3 percent.

But that is fewer than the number who want to work.

Patricia Piazza, 66, who worked for Chrysler for 30 years as an analyst, knows that all too well.

She and her 72-year-old husband, a longtime employee at General Motors Acceptance Corporation, had planned to retire by now, but she is hunting for job, and he recently landed one with the local transit system.

Their home in Warren, Mich., has dropped $100,000 in value, Ms. Piazza said, while their pensions, as former nonunion employees, will be far less than anticipated because of the auto company bankruptcies.

Chrysler recently took away her life insurance policy and optical coverage, she said.

“It’s like the bottom fell out of everything” she said. “This isn’t the way we planned retirement.”

    65 and Up and Looking for Work, NYT, 24.10.2009, http://www.nytimes.com/2009/10/24/business/economy/24older.html

$13 an Hour?

500 Sign Up,

1 Wins a Job

October 22, 2009
The New York Times
By MICHAEL LUO

BURNS HARBOR, Ind. — As soon as the job opening was posted on the afternoon of Friday, July 10, the deluge began.

C.R. England, a nationwide trucking company, needed an administrative assistant for its bustling driver training school here. Responsibilities included data entry, assembling paperwork and making copies.

It was a bona-fide opening at a decent wage, making it the rarest of commodities here in northwest Indiana, where steel industry layoffs have helped drive unemployment to about 10 percent.

When Stacey Ross, C. R. England’s head of corporate recruiting, arrived at her desk at the company’s Salt Lake City headquarters the next Monday, she found about 300 applications in the company’s e-mail inbox. And the fax machine had spit out an inch-and-a-half thick stack of résumés before running out of paper. By the time she pulled the posting off Careerbuilder.com later in the day, she guessed nearly 500 people had applied for the $13-an-hour job. “It was just shocking,” she said. “I had never seen anything so big.”

Ms. Ross had only a limited amount of time to sort through the résumés. While C. R. England has not been immune to the downturn, it has added significantly to its stable of drivers and continued to hire office staff members to support them. Ms. Ross was also trying to fill more than two dozen other positions.

The 34-year-old recruiter decided the fairest approach was simply to start at the beginning, reviewing résumés in the order in which they came in. When she found a desirable candidate, she called to ask a few preliminary questions, before forwarding the name along to Chris Kelsey, the school’s director. When he had a big enough pool to evaluate, she would stop. Anyone she did not get to was simply out of luck.

She dropped significantly overqualified candidates right away, reasoning that they would leave when the economy improved. Among them was a former I.B.M. business analyst with 18 years experience; a former director of human resources; and someone with a master’s degree and 12 years at Deloitte & Touche, the accounting firm.

Over the course of four days, Ms. Ross forwarded 61 résumés to Mr. Kelsey, while rejecting 210 others. The remainder never even got a look. Many were, in fact, never uploaded to the company’s internal system because there were too many.

Just before the advertisement was removed, a standard one-page résumé arrived from Tiffany Block, 28, who lived in nearby Portage and had lost her job four months earlier as an accounts receivable manager at a building company when it closed its Indiana office.

Someone she knew had applied for the job and had said so on Facebook. Ms. Block went to the company’s Web site and filed an application online, which many others had not. By doing do, her application went directly into the company’s system. She was hardly optimistic, since she had not had an interview in months.

Ms. Ross, however, passed it on the next day to Mr. Kelsey.

Attendance at Mr. Kelsey’s school has surged during the recession. Mr. Kelsey, 33, had just promoted one of his three administrative assistants, who handle the paperwork needed for drivers to hit the road. He needed a replacement quickly.

The overwhelming response astonished him. He asked Cheree Seawood, one of his current assistants, to go through the résumés and help pick out several to interview. To make the task easier, he decided they should be even more rigorous in ruling out anyone who appeared even slightly overqualified. Mr. Kelsey, an ardent New England Patriots fan, compared his personnel strategy to the team’s everyman approach.

“We like to get the fair and middling talent that will work for the wages and groom them from within,” he said.

In other words, he said, he did not want the former bank branch manager Ms. Ross had sent, or the woman who had once owned a trucking company, or even the former legal secretary.

He also realized that in this climate he could afford to be extra picky and require trucking industry experience.

The company eventually settled on eight people to interview, inviting in the first two just five days after the job was posted.

In the past, Mr. Kelsey had mostly ad-libbed interviews, but this time he asked his company’s human resources department for help. They sent him a list of 13 questions, as well as an eight-page packet with 128 questions grouped under 50 “competencies.” He decided he would ask them all.

At the end of each hourlong interview, he and Ms. Seawood each jotted down a rating for each applicant and then compared them.

Invariably, the candidates’ job search travails came up. One woman who lost her job had started working as a waitress and confessed she had come directly from her job on the overnight shift.

But Mr. Kelsey resolved to keep his personal sympathies at bay. “If you start judging applicants on want or need, eventually that want, or need, will go away when they get the job and their financial situation stabilizes,” he said. “Then you’re left with whatever skills they have.”

Before Ms. Seawood called Ms. Block to schedule an interview, she had been getting increasingly depressed.

“I felt like, I’m 28 years old, and I don’t have a job,” she said. “What am I doing with myself?”

But Mr. Kelsey was immediately impressed when she came in on the second day of interviews. Dressed in a conservative business suit, Ms. Block patiently answered all of the 100-plus questions. Mr. Kelsey liked that she remained consistent in her answers and showed independence.

Afterward, Mr. Kelsey gave Ms. Block a 9; Ms. Seawood rated her at a point lower.

The next week, however, Ms. Seawood gravitated to a different candidate. The woman had just had nose surgery and came in wearing a protective mask. Besides her qualifications, the fact she had not tried to postpone impressed Ms. Seawood.

But when Mr. Kelsey invited the woman back, the interview was a disaster. She grew visibly irritated amid his battery of questions.

Mr. Kelsey immediately called Ms. Block to ask if she could come in for a second interview.

Was an hour from now too soon?

Momentarily panicked, Ms. Block quickly assented.

Mr. Kelsey marched through many of his questions again. Then, trying to gauge her ability to be assertive among truck drivers, he added a new hypothetical: if she were in the stands at a baseball game and a foul ball came her way, would she stand up to try to catch it, or wait in her seat and hope it fell her way?

The other finalist had said she would wait. But Ms. Block said immediately that she would jump up to grab it.

Mr. Kelsey decided he had found his hire.

    $13 an Hour? 500 Sign Up, 1 Wins a Job, NYT, 22.10.2009, http://www.nytimes.com/2009/10/22/us/22hire.html

Editorial

Last-Minute Credit Card Tricks

October 17, 2009
The New York Times

The Credit Card Accountability, Responsibility and Disclosure Act, signed into law in May, gave credit card companies a leisurely timetable — as long as 15 months — to phase out predatory practices used to bleed consumers. Not surprisingly, the companies have exploited this generosity by driving already outrageous interest rates still higher and imposing fees that are pushing struggling families further into debt.

Congress can end this injustice by moving up the deadline, accelerating reform and helping consumers.

Some of the worst (and most common) abuses are now scheduled to be outlawed in February. These include the practice of arbitrarily raising interest rates, penalizing customers when they are late paying a bill unrelated to the credit card — so-called universal default — and charging customers interest on debt that they paid off a month or more earlier.

The banks claimed that they needed the long lead time to rework their computer processing system. Consumer advocates warned that this would invite banks and credit card companies to wring as much as possible out of consumers before the law finally took effect.

They were right.

A forthcoming study from the Pew Charitable Trusts’ Safe Credit Cards Project shows that credit card interests rates — already too high — rose by 20 percent in the first two quarters of this year, even though the cost of lending went down as a result of low federal interest rates. In testimony before Congress earlier this month, one consumer advocate cited case after case of struggling consumers who had seen their credit card rates more than double for no apparent reason, even when they had faithfully paid on time.

A House bill introduced by Representative Carolyn Maloney, a Democrat of New York, and Representative Barney Frank, a Democrat of Massachusetts, would halt this exploitation by making the act effective on Dec. 1. The Senate needs to take the same approach.

    Last-Minute Credit Card Tricks, NYT, 17.10.2009, http://www.nytimes.com/2009/10/17/opinion/17sat3.html

The Tech Sector

Trumpets Signs of a Real Rebound

October 16, 2009
The New York Times
By STEVE LOHR

The calendar says we are well on our way to winter, but for many technology companies, orders are starting to bloom like flowers after a spring rain.

Strong and steady improvement, economists say, would suggest that the United States is truly emerging from the Great Recession. Yet if tech spending fades, it would mean that recovery is further off.

So far, there are many encouraging signs. The technology giants Intel, I.B.M. and Google delivered better-than-expected quarterly financial results this week, and their executives expressed confidence that the worst was over and a rebound under way. Top executives at Dell, Cisco Systems and other tech companies have also been optimistic recently.

“The worst of the recession is clearly behind us and because of what we have seen, we now have the confidence to be optimistic about our future,” Eric E. Schmidt, Google’s chief executive, told analysts Thursday after the company’s strong earnings report.

Much depends on how the nascent revival in the technology sector plays out. Computer hardware and software are building blocks of the modern economy, as basic as iron ore and coal were to the industrial era. Together, technology products represent about half of all business spending on equipment.

Microchips and clever code animate consumer technology goods, like personal computers and Apple iPhones. Larger computers in data centers power e-mail, electronic commerce and the Internet.

“This will be a technology-led recovery,” said Edward Yardeni, an economist and investment strategist. “And the improvement we’re seeing from the technology companies suggests the recovery has legs.”

Paul S. Otellini, chief executive of Intel, the world’s largest semiconductor maker, pointed to his company’s solid third-quarter performance on Tuesday and said it showed that “computing is essential to people’s lives, proving the importance of technology innovation in leading an economic recovery.”

Computer chips like those made by Intel are a key ingredient of technology goods, and spending on the equipment used to make semiconductors is projected to rise by 47 percent in the second half of this year, according to Gartner, a research firm.

On Thursday, I.B.M., a leader in software and technology services sold to companies, reported profits and revenue that surpassed Wall Street’s expectations.

The company’s net income rose 14 percent from a year earlier to $3.2 billion, or $2.40 a share. I.B.M. lifted its guidance for full-year profits by 15 cents a share from its previous projection, and added that it expected year-on-year revenue to grow in the current quarter. Revenue in the third quarter fell by 5 percent, adjusted for currency movements, to $23.6 billion.

“We’re seeing more stability in the economy,” Mark Loughridge, I.B.M.’s chief financial officer, said in an interview. “That’s a big improvement over the relentless declines we had been seeing.”

The strongest markets for technology suppliers have been in developing nations, like China, India and Brazil. In the United States, much of the technology spending so far has been by consumers, especially buying personal computers and smartphones.

But analysts caution that it is too early to tell whether the spending pickup will carry through to a key market: corporations.

“We’re seeing glimmers of improvement, but it would be premature to say we’re on a strong recovery path,” said Richard Berner, an economist at Morgan Stanley.

Managers who make technology purchase decisions have yet to really open their wallets, although recent surveys of their intentions have become far more positive. Corporate buying tends to trail an economic recovery because companies routinely take several months to budget and plan technology projects.

“We’re seeing corporate budgets stabilize, and with greater clarity on budgets, companies are able to plan better and move ahead on technology projects,” said Peter Sondergaard, senior vice president for research at Gartner.

Tech industry executives say corporations are preparing to replace their aging personal computers — purchases that were put off during the depths of the recession. There are already some signs that companies are buying new PCs again, executives say, and that could well accelerate after the introduction of the Windows 7 operating system, a Microsoft product that will be released next week.

Companies typically buy new PCs six months or so after Microsoft introduces a new operating system, after they have the chance to test the software and plan their rollout.

“I think there is a very powerful refresh cycle that is coming,” Michael S. Dell, chief executive of Dell, said in a speech this week. “We are seeing the planning and early stages of this from the clients we serve, which would be about 85 percent of the organizations in the United States that have more than 500 people.”

John T. Chambers, chief executive of Cisco, was even more bullish recently, predicting a substantial increase in productivity at American companies driven by investments in Internet software and hardware. “I think we are entering a period very similar to 1997 to 2004, where you’ll see a decade run of productivity increases,” he said in an interview.

Rising confidence and investment eventually translate into stepped-up hiring. That phase has just begun.

Google, for example, began hiring again in August in response to a pickup in the company’s search and Internet advertising businesses, according to its chief executive, Mr. Schmidt. He said the company was also scouting for acquisitions again.

“I can’t prove it,” Mr. Schmidt said, “but I would hope we’re a leading indicator.”

Infosys, an Indian technology services and outsourcing company, plans to hire 1,000 workers in the United States over the next year. The move is part of its strategy to hire more locals as it expands in the American market. An improving economy would accelerate the program. “We are gaining momentum and will speed up the hiring,” said Nandita Gurjar, a senior vice president at Infosys.

The steady march of digital technology, in industry after industry, is pushing the demand for information technology. The recession curbed spending for a while, and forced organizations to improve the efficiency of their data centers and technology operations. But that goes only so far. In health care, for example, rising demand is being driven by the push for computerized health records, the adoption of digital radiography, digital pathology techniques and telemedicine.

“There is this huge growth in digital data coming in health care, and it is only going to add to the need for computing resources of all kinds,” said Daniel Drawbaugh, chief information officer of the University of Pittsburgh Medical Center, a large hospital and physician group.

Yet the pervasive spread of computing across industries and society, analysts say, also means the long-term growth trend in the tech sector is as much a mirror of the economy as an engine.

“It is a reflection over all of how the economy is performing,” said Stephen Minton, an analyst at the research group IDC.
 

Ashlee Vance contributed reporting.

    The Tech Sector Trumpets Signs of a Real Rebound, NYT, 16.10.2009, http://www.nytimes.com/2009/10/16/technology/16compute.html

Bank of America Chief

Forgoes Pay for 2009

October 16, 2009
The New York Times
By LOUISE STORY and ERIC DASH

Bowing to pressure from Washington’s pay czar, Kenneth D. Lewis agreed on Thursday to forgo his salary and bonus as chief executive of Bank of America, as new legal questions emerged about the troubled takeover of Merrill Lynch that led to his downfall.

Two weeks after abruptly announcing his resignation, Mr. Lewis promised to return the pay he received this year to avoid a confrontation with Kenneth R. Feinberg, the Obama administration’s overseer of executive compensation. Mr. Lewis, who plans to retire on Dec. 31, still stands to collect a $53.2 million pension, which will fall under Mr. Feinberg’s purview.

The move came as new details emerged about the role of a prominent law firm in Mr. Lewis’s star-crossed acquisition of Merrill Lynch at the height of the financial crisis.

The firm, Wachtell, Lipton, Rosen & Katz, initially advised Bank of America to withhold information about the perilous state of Merrill from the bank’s shareholders, but later advised it to alert federal officials to the growing losses, according to four people with direct knowledge of the matter.

The developments thrust Wachtell, a white-shoe adviser to corporate America, into one of the most troubled and closely watched deals of the financial crisis. Bank of America maintains that it did not mislead investors. But its disclosures are now the subject of several state and federal investigations. The legal snarl, and shareholder ire over the deal, prompted Mr. Lewis to resign. Legal experts say the ultimate responsibility may lie with Bank of America, not its lawyers.

Bank of America plans to turn over documents Friday that are expected to shed new light on the deal and on Wachtell’s role in it. The bank could face greater scrutiny if the documents show that executives knowingly misled investors or government officials.

Wachtell also advised Bank of America that it probably could not back out of the deal, even if it tried, according to the people with knowledge of the matter. And Wachtell kept Merrill’s bonuses hidden from investors, without consulting the bank’s management, the four people said. That, however, is often standard practice in preparing merger agreements.

A spokesman for Wachtell declined to comment on the legal advice it provided Bank of America. The bank also declined to comment. The New York attorney general, Congress and the Securities and Exchange Commission are looking into why the bank did not tell shareholders that Merrill had suffered huge losses and had made large bonus payouts just before the deal. The bank has said it does not believe it misled investors.

According to another person briefed on the matter, Edward D. Herlihy and Nicholas G. Demmo, top lawyers at Wachtell, have received subpoenas from the attorney general of New York, Andrew M. Cuomo.

Wachtell was intimately involved in the Merrill merger from the start. The negotiations took place in the law firm’s Midtown Manhattan offices. Mr. Herlihy, a 25-year veteran of the firm who had long worked with Bank of America on other deals, was already close with Mr. Lewis.

In early November, a team that Bank of America put in place to oversee Merrill’s transition spotted large losses as they grew on Merrill’s books. Alarmed, bank executives held marathon meetings on the weekends around Thanksgiving. They contacted Mr. Herlihy with a pressing question: should Bank of America executives disclose Merrill’s gaping losses to shareholders?

As the vote on the merger approached, Wachtell told the bank’s executives that shareholders did not need to know about Merrill’s losses, and needed to be notified only if the losses would be far worse than the fourth-quarter results at Goldman Sachs, Morgan Stanley and other peers, said the four people briefed on the matter.

Some of the documents the bank will submit on Friday will show communications between the bank and Wachtell in which they discussed analysts’ expectations for other investment banks.

Mr. Lewis and his chief financial officer, Joe Price, conferred with Merrill executives, and they determined the losses were likely to be of the same scale as those at the other investment banks, these people said. In the wake of that conclusion, the bank did not send out a warning to its shareholders.

But there was some dissent within Bank of America, according to a person with knowledge of executives’ discussions. Some deputies believed the bank should disclose Merrill’s predicament before the shareholder vote anyway.

Legal experts said they were surprised at the advice Wachtell gave Bank of America about Merrill’s losses.

“I’m taken aback by the advice,” said Donald C. Langevoort, a professor at Georgetown Law. “When shareholders are asked to vote, they deserve a fine-tuned picture and are not to be expected to piece together pieces of public knowledge, public awareness and economic awareness in order to make the right decision.”

Charles Elson, a bank shareholder and professor of corporate governance at the University of Delaware, found Wachtell’s advice defensible but disturbing.

“I think the shareholders are entitled to know everything that management knows on a vote of this size.” he said. “Let the investors decide. The losses might have been in line with Goldman and Morgan, but Bank of America wasn’t acquiring Goldman or Morgan.”

Several weeks after the shareholder vote, Goldman and Morgan Stanley reported their quarterly earnings. It then became clear that Merrill was performing far worse than its peers, these people said. It is unclear whether Bank of America at that point considered disclosing Merrill’s losses, given that the shareholder vote was already over and the deal was just weeks from closing.

On Dec. 17, Mr. Lewis and Mr. Price flew to Washington to meet with officials from the Federal Reserve and the Treasury Department. They traveled with talking points in hand that had been prepared by Wachtell. The first item on the page was a note suggesting that the executives should tell the government officials that Bank of America was considering backing out of the deal, said one of the people with knowledge of the matter.

That talking point flew in the face of legal advice that Wachtell had earlier given the bank, that it was unlikely that Bank of America could get out of the merger given the terms of the deal. In particular, the law firm told the bank it probably could not end the deal even though the value of Merrill’s assets were more degraded than first thought, the people said. The bank also considered trying to undo the merger based on concerns about Merrill’s liquidity.

Since the deal closed early this year, Mr. Herlihy has continued working with the bank, which has since hired two other law firms. The bank had kept the details of Wachtell’s advice under wraps, and did not agree to send the investigators documents reflecting the advice until a few days ago, when it gave up its right to keep conversations between clients and their lawyers private.

Even as the bank waives that right, Wachtell has not given investigators its own in-house documents to investigators. Because Wachtell never provided its own internal documents to the bank, the law firm argues, it owns the documents, the four people familiar with the matter said.

“We have not refused to provide any documents or information to the bank,” said Mr. Anders, a partner at the firm.

Legal experts said the law firm’s advice would either make a case against Mr. Lewis and the bank, or weaken it. While Mr. Lewis relied on his lawyers’ advice, corporate responsibility generally rests with the chief executive.

“It’s hard to overstate how important it is knowing what they were told by their lawyers,” said David Skeel, a law professor at the University of Pennsylvania. “It will make it much easier to isolate who knew what, and who was on board with the decisions, and who wasn’t.”

 

Jack Healy contributed reporting.

    Bank of America Chief Forgoes Pay for 2009, NYT, 16.10.2009, http://www.nytimes.com/2009/10/16/business/16lewis.html

Foreclosures Rise 5 Percent

From Summer to Fall

October 15, 2009
Filed at 12:30 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

WASHINGTON (AP) -- The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.

The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.

Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate -- now at a 26-year high of 9.8 percent -- isn't expected to peak until the middle of next year.

Mortgage companies sometimes allow unemployed homeowners to defer three to six months of payments while they are looking for a job. But there's little else they can do.

''The sheer scale of the problem is preventing the loan modification programs from having the kind of impact we'd all like'' said Rick Sharga, RealtyTrac's senior vice president for marketing.

Last week, the Obama administration hailed a milestone in its mortgage relief effort, reporting that 500,000 homeowners have received help since the program was launched in March. But new defaults are still exceeding the number of borrowers getting help.

Mortgage companies have slowed down the pace of foreclosures as they evaluate whether borrowers qualify for the administration's program. Analysts, however, forecast that many of those homeowners won't qualify, and foresee a new wave of foreclosed properties hitting the market next year. That's likely to further depress home prices.

Some homeowners are in such a massive financial hole that it's hard to design a modification that will actually provide lower payments. And some have avoided paying their monthly bills for a long time.

Carlos Estrada, 57, of Tulare, Calif., for example, hasn't made a mortgage payment since February 2008. The construction jobs that kept him working more than 40 hours a week during the housing boom have all but vanished.

Earlier this year, he turned down a modification offer from Bank of America because it would have incorporated his unpaid balance and raised his monthly bill. But a bank spokeswoman said Wednesday that Estrada's foreclosure sale had been postponed until late next month while the bank reviews whether he can qualify for help.

''I'm still here waiting for them to help me resolve this situation,'' Estrada said in Spanish.

According to the RealtyTrac report, there were nearly 344,000 foreclosure-related filings last month, down 4 percent from a month earlier but still the third-highest month since the report started in early 2005.

It was the seventh-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes.

Banks repossessed nearly 88,000 homes in September, up from about 76,000 a month earlier.

On a state-by-state basis, Nevada had the nation's highest foreclosure rate in the July-September quarter. Arizona was No. 2, followed by California, Florida and Idaho. Rounding out the top 10 were Utah, Georgia, Michigan, Colorado and Illinois.

----

AP Real Estate Writer Alex Veiga contributed to this report from Los Angeles.

    Foreclosures Rise 5 Percent From Summer to Fall, NYT, 15.10.2009, http://www.nytimes.com/aponline/2009/10/15/business/AP-US-Foreclosure-Rates.html

Dow,

for First Time in Year,

Breaks 10,000

October 15, 2009
The New York Times
By JACK HEALY

The Dow Jones industrial average, one of the most watched barometers of the financial world, closed above 10,000 points on Wednesday, a milestone of the stock market’s recovery from the depths of the financial crisis.

The rally carried over into Asian markets Wednesday morning, with Japan’s Nikkei index rising more than 2 percent after the opening before sliding back some. Other key markets in Asia also showed more modest gains.

At the market close Tuesday in the United States, baseball caps declaring “Dow 10,000 2.0” circulated on the floor of the New York Stock Exchange. CNBC scheduled a special report to commemorate a level that Wall Street had not reached for a year, after the Dow fell below five digits last October as Washington rushed to head off an all-out collapse of the financial system.

“The last time we saw 10,000, we were going the wrong way,” said Doreen Mogavero, president of the brokerage Mogavero, Lee & Company, who was on the trading floor Wednesday afternoon. “This is a little bit nicer feeling.”

The Dow has recovered about 3,450 points since bottoming out in early March. But it and other major stock indexes are still shadows of their former selves, and many investors are a long way from whole. The Dow is some 4,000 points off its record high, and broader measures of the market are down 30 percent from their peaks. And the companies that constitute the stock indexes are still grappling with shaky revenues, credit losses and huge uncertainties about the American economy’s long-term growth.

In Washington, the market move became political fodder. Representative John A. Boehner of Ohio, the House Republican leader, played down the gains and said more Americans were concerned with jobs and “putting food on the table,” NBC reported.

On Wednesday, shares pushed higher after JPMorgan Chase reported a $3.6 billion third-quarter profit, earnings rose at the chip maker Intel and retail sales held up better than expected.

Investors went on a buying spree after the reports, lifting stock markets from London to New York to Mexico City.

The Dow gained 144.80 points or 1.5 percent, to end at 10,015.86, while the broader Standard & Poor’s 500-stock index rose 18.83 points, or 1.75 percent, to 1,092.02, and the Nasdaq composite climbed 32.34 points, or 1.5 percent, 2,172.23.

“Each time it crosses one of these levels, more of the bears get flushed out,” said Cleve Rueckert, research analyst at Birinyi Associates. “They’re more apt to change their tune. It makes it that much more clear that the market is pushing higher.”

The Dow first closed above 10,000 in March 1999. It retreated in the years after the dot-com bubble deflated, then retook 10,000 in late 2003 and peaked above 14,000 in October 2007.

Still, many investment specialists dismiss the significance of such big, round benchmark numbers, and say that no sophisticated investors or hedge funds make investment decisions based on whether a stock index’s total value can be measured in four or five digits.

“It’s psychological,” said Tom Fitzpatrick, chief technical analyst at Citigroup Capital Markets.

The major stock indexes have rebounded by 50 percent or more in a scorching rally that began in early March and galloped higher through the summer and early autumn, as the economy stabilized and once-bleeding companies began to report better profits and rising revenue.

Investors rushed to take positions in companies and commodities that could benefit from a broad upturn in the global economy. Crude oil prices hit their highest levels since last October, topping $75 a barrel. Safety bets like the dollar and government bonds got clobbered.

Financial stocks surged after JPMorgan Chase announced a third-quarter profit that outstripped expectations. JPMorgan was the first major financial company to announce earnings for last quarter, and the sight of rising revenue and stabilizing losses at one of the most powerful banks lifted expectations that the financial sector was again back on its feet, a year after its near-implosion.

Shares of JPMorgan climbed 3.3 percent, and its rising tide lifted shares of other banks like Goldman Sachs, Wells Fargo, Bank of America and Citigroup, which are all scheduled to report their own quarterly results in the days ahead.

Investors swept up shares of computer companies, search engines and software makers after Intel reported profits that surpassed Wall Street’s expectations. Shares of Intel, which issued its earnings report after markets closed on Tuesday, rose 1.7 percent.

The Treasury’s 10-year note fell 18/32, to 101 24/32. The yield rose to 3.41 percent, from 3.35 percent late Tuesday.

    Dow, for First Time in Year, Breaks 10,000, NYT, 15.10.2009, http://www.nytimes.com/2009/10/15/business/15markets.html

Intel’s Profit and Revenue

Top Forecast

October 14, 2009
The New York Times
By STEVE LOHR

Intel, the world’s largest semiconductor maker, offered further evidence on Tuesday that the global economy was indeed on the mend.

The company reported a third-quarter profit that easily surpassed Wall Street’s estimates, and its revenue was well ahead of the projection that Intel offered investors at the end of August.

The current quarter looks promising as well, Intel said, and the company lifted its revenue forecast to about $500 million above analysts’ estimates.

Intel is a bellwether for trends in the technology industry and the economy as a whole. Its computer chips are the logic engines in most personal computers and in larger computers in data centers that power e-mail, electronic commerce and the Internet. So Intel’s performance suggests that economic prospects are brightening, analysts said.

“Technology should benefit first and foremost in a global economic recovery,” said Edward Yardeni, an independent economist and investment strategist.

Intel, based in Santa Clara, Calif., reported third-quarter revenue of $9.4 billion, well ahead of the analysts’ consensus of $9 billion, as compiled by Thomson Reuters. Still, Intel’s sales remained 8 percent below last year.

Yet Intel executives emphasized the unfolding trend. The third quarter’s revenue was 17 percent higher than in the second quarter, the largest rate of improvement over those quarters in more than 30 years.

Net income was nearly $1.9 billion, or 33 cents a share. The Wall Street estimate was 28 cents a share, and that was after analysts had steadily lifted their earnings forecasts in recent months. In July, the consensus estimate was 15 cents a share, according to Thomson Reuters. In the year-earlier quarter, Intel reported earnings of $2 billion, or 35 cents a share.

Intel’s recovery has been most robust in fast-growing, developing economies like China. But even the mature economies of the United States and Western Europe are showing signs of real improvement, with America slightly ahead of Europe, Stacy J. Smith, Intel’s chief financial officer, said in an interview.

The personal computer market is decisively recovering, although consumers, not companies, are doing most of the buying, Mr. Smith noted.

The upbeat third-quarter report is the latest evidence of growing optimism at the big chip maker. In July, Intel reported that its second-quarter results were stronger than it had expected, even though sales were down 15 percent from the previous year. Yet the downward trend seemed to be broken, cheering both Wall Street and the technology industry.

Then, at the end of August, Intel pointed to stronger demand for its microprocessors and chipsets and raised its revenue projection for the third quarter by $500 million, to about $9 billion.

Investors anticipate that technology companies, led by Intel, will lead the way out of the recovery. Earnings estimates for all the companies in the Standard & Poor’s 500-stock index are projected to be down 25 percent in the third quarter, compared with a year earlier, according to Thomson Reuters. But technology company profits are expected to be down only 14 percent. In July, analysts had expected technology sector profits to be off 20 percent in the third quarter.

Intel, according to some analysts, may have enjoyed a bump in demand in the quarter as major PC makers ordered chips to build machines equipped with Microsoft’s new operating system, Windows 7, which will be officially released Oct. 22.

Typically, analysts say, PC makers like Hewlett-Packard, Dell and Acer accelerate chip orders somewhat later in the year as they prepare for the year-end holiday shopping season. “The PC build cycle is probably earlier this year,” said David Wu, a semiconductor analyst at GC Research.

But with the market strengthening, Intel expects no let-up in the fourth quarter. It projected fourth-quarter revenue of $10.1 billion, plus or minus $400 million, which would be a 7.6 percent increase from the third quarter. That, Intel said, is in line with its typical seasonal increase in sales.

    Intel’s Profit and Revenue Top Forecast, NYT, 14.10.2009, http://www.nytimes.com/2009/10/14/technology/companies/14chip.html

Still on the Job,

but Making Only Half as Much

October 14, 2009
The New York Times
By LOUIS UCHITELLE

MECHANICSVILLE, Va. — The dark blue captain’s hat, with its golden oak-leaf clusters, sits atop a bookcase in Bryan Lawlor’s home, out of reach of the children. The uniform their father wears still displays the four stripes of a commercial airline captain, but the hat stays home. The rules forbid that extra display of authority, now that Mr. Lawlor has been downgraded to first officer.

He is now in the co-pilot’s seat in the 50-seat commuter jets he flies, not for any failure in skill. He wears his captain’s stripes, he explains, to make that point. But with air travel down, his employer cut costs by downgrading 130 captains, those with the lowest seniority, to first officers, automatically cutting the wage of each by roughly 50 percent — to $34,000 in Mr. Lawlor’s case.

The demotion, the loss of command, the cut in pay to less than his wife, Tracy, makes as a fourth-grade teacher, have diminished Mr. Lawlor, 34, in his own eyes. He still thinks he will return to being the family’s principal breadwinner, although as the months pass he worries more. “I don’t want to be a 50-year-old pilot earning $40,000 a year,” he said, adding that his wife does not want to be married to a pilot with so little earning power.

In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.

State workers in Georgia are taking home smaller paychecks. So are the tens of thousands of employees in California’s public university system. The steel company Nucor and the technology giant Hewlett-Packard have embraced the practice. So have several airlines and many small businesses.

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau, “is that the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed.”

Bryan and Tracy Lawlor, who is also 34, have hidden their straitened circumstances from their four young children, mainly at his insistence. But as their savings dwindle, Christmas, a key indicator in the Lawlor family, will mean fewer presents this year. The Lawlors have made a practice of piling on toys and new clothes for their children at Christmas, buying relatively less the rest of the year. That will make a cutback noticeable this holiday season, and the parents are concerned that their children will begin to realize why.

“You don’t want to see disappointment on their faces; that makes me feel horrible,” Mr. Lawlor said. “You can be the best pilot in the airline and make the best landings, and in their eyes, I am not going to be as important as I was.”

A Dream Come True

Bryan Lawlor was five years out of Virginia Tech before he turned to aviation, his first love as a boy. His mother still cherishes a photo of her son, age 5, seated in a cockpit. But Mr. Lawlor studied chemistry in college and he used that skill, taking jobs as a chemical technician, to support his growing family. Layoffs marred those early years and in 2003 Mr. Lawlor made the “crossroads” decision to become a commercial pilot, borrowing $24,000 to learn to fly and to acquire the necessary licenses.

His current employer, ExpressJet Airlines, is a spinoff from a feeder operation for Continental Airlines. It brought passengers to Delta hubs as well, mainly in the West, and to help handle that traffic, Mr. Lawlor was promoted to captain from first officer in July 2007. His pay rose to $68,000, with the prospect of reaching $100,000 — roughly triple a first officer’s pay.

That is not so much money by the standards of an earlier era. Even senior captains on legacy airlines rarely earn above $200,000 today, as they often did in the past. Mr. Lawlor says pilots’ pay these days fails to recognize the training and skill involved in transporting passengers even more safely than in the past.

But Mr. Lawlor felt he was headed in the right financial direction until the economy, and the airline business, took a tumble. It is a setback that worries his wife, who wants her husband back on the income path that was interrupted one year ago this month. “I certainly don’t earn enough to make up for what he lost,” she said, adding that to make matters worse, “teachers didn’t get a raise in our school this year.”

Still, as her husband’s ordeal drags on, Mr. Lawlor in some ways has risen in his wife’s eyes. “I have more respect for him,” she said. “I can see he is angry and upset, but he does not show it very often, and never to the kids.”

That is less and less true, Mr. Lawlor said, amending his wife’s appraisal. One year into his downgrade, “never” has turned to “rarely” and, in recent weeks, “not so rarely.” He blew up last week at his 3-year-old son, Shayne, for refusing to take a nap, and sent the child whimpering to his room. Then, after arranging with another pilot to delay a flight so he could “dead-head” home in the early afternoon instead of having to wait for the next flight, he blew up at his wife for failing to appreciate the effort he had made and the stress involved.

“My mind is always on 20 different things,” Mr. Lawlor said. “What do I need to get done? How much will it cost? Is it necessary? Can I do it cheaper if I do it myself? Can I make the earlier commute home? Rush, rush, rush, and then suddenly someone makes the wrong comment and I become uncorked.”

A Different Kind of Provider

As a captain for ExpressJet in calmer times, Mr. Lawlor commuted across the country to Los Angeles, his home base, for each three- or four-day trip. Now, as a first officer, his base is Newark, a far shorter commute from the Lawlor home in this Richmond suburb. So he is home more. He spends that time caring for the two youngest children, Shayne and Jackson, 16 months, while his wife takes the two oldest, Zachary, 7, and Kelley, 10, with her to the elementary school where she teaches and they are enrolled as students.

“A lot of my friends say their husbands would not stay home with the kids on their days off, even to save money,” Mrs. Lawlor said, “but Bryan feels that if he is going to be home more that is what he should do, and he is doing it.”

Mrs. Lawlor praises her husband’s adeptness in the routines of child care. But money also drives him. Each day that Jackson and Shayne are not delivered to the home of the baby sitter is $50 that can be spent elsewhere. That wasn’t a priority while Mr. Lawlor was captain. In the 14 months that he held that rank, his $68,000 in pay and Tracy’s $40,000 as a fourth-grade teacher were enough, as Mr. Lawlor put it, for the family — for the first time — to spend freely and still save money.

He purchased a white gold 10th anniversary band for his wife and a bright yellow Harley-Davidson motorcycle for himself, imagining that he would take it for spins on his days off, the wind blowing in his hair as he raced along the sparsely populated roads in Richmond’s semi-rural suburbs. “It was a present to myself when I upgraded to captain,” he said.

The $10,000 Harley sat for months in the garage before it finally sold, with only 175 miles on the odometer. Mr. Lawlor had never ridden it much. His wife objected that he would exclude the family unless, as she pointedly put it, he could “find some way to strap the kids on the motorcycle.” Now the desire to ride the eye-catching hog is gone. If he ever makes another vanity purchase, Mr. Lawlor says, it will be something the family can use.

His mother, Patricia Lawlor, anguishes over this scaling back of his exuberance and the psychological effect of the pay cut.

“Let me put it this way,” she said of her only son, the oldest of her three children. “When we went out to dinner and he was a captain, with a captain’s pay, he for the first time picked up the check. He would say, ‘I’ll get it, Dad,’ instead of letting his father pick it up. It gave him a great deal of pride to do that. ‘Let me buy, Dad, for once.’ And now he does not say that anymore.”

While Mr. Lawlor was still a captain, his parents decided to move into smaller quarters, and the son and daughter-in-law bought their five-bedroom house, getting a break on the price but increasing their mortgage payment to $2,000 a month from the $1,200 they had paid for their smaller home nearby.

They closed on the house in August 2008, on the eve of the downgrade, and soon there were regrets. “We would not have bought the house on a first officer’s salary,” Tracy Lawlor said. She had considered giving up teaching to be a stay-at-home mom. “We felt we had some breathing room for the first time in our 11 years of marriage,” she said, “and that went out the window with the downgrade.”

She was sitting at her kitchen table, and her husband, across from her, winced, but did not disagree. Even if his captain’s rank and pay are restored she will continue to teach, she said. His pay could be cut again. They are convinced of that and, in preparation, they made certain there would be no more children. Their fourth, Jackson, was just 4 months old when the downgrade came, and soon after, Mr. Lawlor underwent a vasectomy.

“We could not take the risk of having another child,” he said.

Silver, and Dark, Linings

The West Coast assignment, while representing a promotion, meant long, often overnight commutes, with Mr. Lawlor sleeping fitfully in the jump seat of a FedEx cargo jet or in a sleeping bag rolled out in the cargo area. His first day home, he often spent dozing on the living room couch. His wife hated the time taken from the family, and her husband’s exhaustion.

“He was totally worn out the first day back, and tired the whole time he was home,” she said.

One year later, even after such a big pay cut, Mrs. Lawlor sees her husband’s shorter commute to his new base at Newark as a blessing she is reluctant to give up. Her husband says that moving back up to captain, with a captain’s pay, might mean commuting again to California. “If that is what it takes, I’ll do it,” he said, and this time his wife winced.

“I would probably not be happy,” she said. But she “wouldn’t trade him for another husband,” as she put it, and while she had never wanted her husband to be a pilot, at this point she would be alarmed if he left aviation in an attempt to please her.

“He likes what he does,” she said, “whereas before he did not like what he did. That has made him easier to be around, whereas before he became a pilot, he wasn’t happy at all.”

Mr. Lawlor is vice chairman for contract enforcement for the ExpressJet unit of the Air Line Pilots Association. He had volunteered some months ago for the unpaid role, and now his fellow pilots seek his help in resolving scheduling disputes, pay issues, meal reimbursements. The calls and e-mail messages come in on his cellphone. When he is home, minding his sons, he lets the children migrate to the living room to watch a cartoon on the family’s big-screen TV while he sits nearby, at the kitchen table, absorbed in mediating appeals.

That is not the same as commanding an airliner — walking through the airport wearing the captain’s hat — but it brings him part way back. “My point would be that being in the captain’s seat made me feel in command, and capable and powerful,” Mr. Lawlor said, “and that has been taken away, and through the union, I can still experience some of that, in the admiration of my peers for being able to step up and help them. Maybe psychologically that fills a void; maybe that is why I don’t feel as bad as I would otherwise.”

So the Lawlors soldier on, with plenty of family help. Their sisters have pitched in with baby-sitting, gratis. His parents bought their kitchen table, the dining room table, a playpen, a living room sofa and the deck furniture. His father’s two unmarried sisters, both retired teachers, insist on helping their only nephew — the one family member perpetuating the Lawlor name not only in this generation but, through his three sons, the next generation.

The aunts offer a subsidy. They insist, for example, that Bryan Lawlor eat healthy meals when he is on the road, even if that means spending more than his airline-allotted per diem. They’ll pay, and Mr. Lawlor says he does now eat properly. The aunts also paid $200 to rent “moon bounce” equipment for a Lawlor child’s birthday party last month. The birthday boy had asked for the party entertainment, and the Lawlors obliged, with the aunts’ help, not wanting the father’s loss of income to translate into constraints on the children’s lives.

Still, their savings, built up in the good years, have dwindled to $10,000, from $28,000 last fall, and Mr. Lawlor said the next rung down, to four figures, is in his mind a crisis level. “I am beginning to feel like, what if something happens to me, where does that leave Tracy?” he said.

He called in sick recently, suffering basically from fatigue. “I think the reason I felt fatigued is the stress,” he said. “It is always there.”

    Still on the Job, but Making Only Half as Much, NYT, 14.10.2009, http://www.nytimes.com/2009/10/14/business/economy/14income.html

Tax Evaders Face Choice:

Pay or Pray

October 13, 2009
The New York Times
By LYNNLEY BROWNING

Many Americans dread April 15, the deadline for filing their income tax returns. But some well-heeled people are trembling over another looming tax day: Oct. 15.

Thursday is the deadline for Americans to come clean about the money they have hidden offshore, in places like Swiss bank accounts. No one can say with certainty how much money is out there — the accounts are secret — but the hoard may be tens of billions of dollars.

Several thousand wealthy people have come forward, hoping to avoid large fines or possibly even prison. But many others are still weighing their options. The choice is stark: They can confess and pay the penalties, or gamble that they will not get caught. With the deadline only days away, tax lawyers say they are being inundated by anxious clients.

“We’re seeing a flood of people,” said Scott D. Michel, a tax lawyer in Washington. His firm, Caplin & Drysdale, has 350 clients who are preparing to report their offshore accounts to the Internal Revenue Service. The firm has 14 lawyers handling their cases, one of which involves a tax bill of hundreds of millions of dollars.

The deadline is part of a broad crackdown on Americans who use offshore accounts to evade federal taxes. As part of the effort, United States authorities have challenged the long tradition of banking secrecy in Switzerland, and, in particular at UBS, that nation’s largest bank.

The I.R.S. is offering tax dodgers some leniency. Penalties will be reduced for people who come forward by Oct. 15. They will be assessed fines equal to 5 to 20 percent of their tax bills, rather than the usual 50 percent. They also will pay that penalty once, based on the highest balance in their offshore accounts over the last six years, rather than for each of those six years.

At least 4,000 clients of UBS and other private banks have come forward in recent months, a government official who had been briefed on the matter said.

One of those clients was Bruce Krasting. Last December, UBS, under sharp scrutiny from federal officials, told him that the bank was closing his offshore account and mailing him a check for the balance: $830,000.

Mr. Krasting, 59, realized that if he didn’t own up to the I.R.S., he had just two other options: Find another offshore bank in Switzerland or the Caribbean — and risk being discovered — or leave a trail for the I.R.S. by depositing his money into a United States bank.

“I knew I was walking into a buzz saw that was going to cost me and my family half a million dollars, and that it was triggered by UBS,” Mr. Krasting, a former Wall Street trader, said in a telephone interview from his home in Westchester County, N.Y. Worried about steeper penalties and potential prosecution, he decided in the spring to disclose his identity to the I.R.S.

But scores of other UBS clients hope the I.R.S. will not catch them, tax lawyers say. The bank divulged the names of 4,450 wealthy American clients to federal authorities, but some clients bet that their names were not on the list.

It is a big gamble. Once the deadline passes, tax cheats will face stiffer penalties and, if caught, will have a far greater chance of being prosecuted. Prosecutors are already building criminal cases against 150 bank clients. UBS turned over the names of many of those people in February, when the bank admitted to having defrauded the federal government and agreed to pay $780 million to settle the matter. Six wealthy American clients of UBS have pleaded guilty to tax evasion in recent months.

“A lot of people remain in denial and remain willing to take their chances,” said Robert F. Katzberg, a white-collar criminal defense lawyer in New York, who has nearly 20 clients with hidden accounts.

Some people who hold offshore accounts are trying to file amended returns for previous years, pay their ordinary tax bills — minus the steeper penalties — and hope that the I.R.S. does not detect that those taxes cover money that was hidden offshore.

“The numbers are much larger on the amended returns side,” said a second government official briefed on the matter. “It’s a high-stakes poker game.”

The whole issue has become a minefield for some wealthy families. Many offshore accounts are held in the names of several family members, who do not always agree on what they should do.

Bruce Zagaris, a tax and criminal defense lawyer in Washington, said that in some instances, one family member was pushing to disclose an offshore account, while another wanted to keep the money hidden. One of his cases involves parents with an offshore trust for their three children, only two of whom had disclosed the assets. If the parents want to disclose the accounts, “they have to rat on one of their kids,” he said.

The I.R.S. disclosure program is also creating headaches in the hush-hush world of private banking. It requires people to disclose the names, addresses and telephone numbers of bankers, lawyers, accountants, tax advisers and trust officials who helped them evade taxes.

One client of Martin Press, a tax lawyer in Fort Lauderdale, Fla., hid money in Panama, another offshore tax haven. The client — a Florida surgeon, who spoke on the condition he not be named, given his tax troubles — said his accountant never told him he had to disclose the assets to the I.R.S.

“I really was convinced that the money was sitting somewhere legally and wasn’t taxable,” the doctor said. But after reading about the crackdown, he entered the I.R.S. disclosure program in July.

    Tax Evaders Face Choice: Pay or Pray, NYT, 13.10.2009, http://www.nytimes.com/2009/10/13/business/13irs.html

Two Americans

Share Nobel in Economics

October 13, 2009
The New York Times
By LOUIS UCHITELLE

In a departure from prevailing economic theory, the Nobel Memorial Prize in Economic Science was awarded Monday to two social scientists for their work in demonstrating that business people — co-workers as well as competitors — often find ways to mutually resolve problems that arise from free-market competition.

The prize committee cited Elinor Ostrom of Indiana University “for her analysis of economic governance, especially the commons,” and Oliver E. Williamson of the University of California, Berkeley, “for his analysis of economic governance, especially the boundaries of the firm.”

Ms. Ostrom becomes the first woman to win the prize for economics. Her background is in political science, not economics.

“It is part of the merging of the social sciences,” Robert Shiller, an economist at Yale, said of Monday’s awards. “Economics has been too isolated and these awards today are a sign of the greater enlightenment going around. We were too stuck on efficient markets and it was derailing our thinking.”

The prize committee, in making the awards, seemed to be influenced by the credit crisis and the severe recession that in the minds of many mainstream economists has highlighted the shortcomings of a unregulated marketplace, in which “economic actors,” left to their own devices, will act in their own self-interests and in doing so, will enhance everyone’s well-being.

The committee, in effect, said that theory was too simplistic and ignored the unstated relationships and behaviors that develop among companies that are competitors but find ways to resolve common problems. “Both scholars have greatly enhanced our understanding of non-market institutions” other than government, the committee said.

“Basically there is a common understanding that develops even among competitors when they are dealing with each other,” Mr. Shiller said, adding “when people make business contact, even competitors, they can’t anticipate everything, so an element of trust comes in.”

That is what the Nobel committee recognized, he said, in citing Mr. Williamson and Ms. Ostrom.

In its announcement, the committee said Ms. Ostrom “has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories.”

Mr. Williamson’s research, the committee said, found that “when market competition is limited, firms are better suited for conflict resolution than markets.”

Ms. Ostrom, 76, was born in Los Angeles, and received her Ph.D. in political science in 1965 from the University of California, Los Angeles. She is the Arthur F. Bentley professor of political science at Indiana University, Bloomington. She is also co-director of the Workshop in Political Theory and Policy Analysis. Mr. Williamson, 77, was born in Superior, Wis., and received his Ph.D. in economics in 1963 from Carnegie Mellon University in Pittsburgh. He is the Edgar F. Kaiser professor emeritus of business, economics and law and a professor at the graduate school of business at the University of California, Berkeley.

The economics prize was created in 1969 by the Swedish central bank in honor of Alfred Nobel, the inventor of dynamite who established the awards for achievements in physics, chemistry, medicine, peace and literature in his will in 1896.

The winners will share 10 million Swedish kronor ($1.4 million), and each receive a gold medal and diploma from the Swedish king on Dec. 10, which is the anniversary of Nobel’s death in 1896.

Last year’s winner was Paul Krugman, a professor at Princeton and an Op-Ed page columnist for The New York Times. Mr. Krugman won the prize for his research that explained patterns of trade among countries, as well as what goods are produced where and why.

    Two Americans Share Nobel in Economics, NYT, 13.10.2009, http://www.nytimes.com/2009/10/13/business/economy/13nobel.html

Editorial

Another Kind of Foreclosure Crisis

October 9, 2009
The New York Times

The foreclosure crisis is being made substantially worse by a shortage of lawyers for people whose homes are at risk.

According to a new study, an overwhelming number of homeowners who face foreclosure do not have legal help in protecting their rights. As a result, people are losing their homes who do not need to.

In 2008, more than three million foreclosures were filed, and the number keeps growing. By one estimate, more than eight million families may lose their homes in the next four years. Having a home taken away is devastating for the families involved. This churning of people out of their houses, and in some cases into homeless shelters or out on the streets, is also expensive and disruptive for the nation as a whole.

The Brennan Center for Justice at New York University School of Law found that 86 percent of people facing property foreclosure last year in economically challenged Stark County, Ohio, lacked counsel. In Queens County, New York, 84 percent of defendants lacked full legal representation in proceedings involving foreclosures on “subprime,” “high cost” or “non-traditional” mortgages — ones disproportionately targeted to low-income and minority populations.

The law of mortgages and foreclosures is complicated even for many lawyers. It is hard to imagine what it must be like for a poor person with little legal knowledge to have to fight on his or her own to keep a home.

Homeowners often have legal defenses, but laypeople are unlikely to know what they are or how to use them. A lawyer can also persuade lenders to slow down foreclosure proceedings, or to renegotiate terms, by invoking the appropriate federal, state and local laws.

Foreclosures should not be allowed to go forward until, as the Brennan Center recommends, homeowners are at least given enough counseling to know whether they have viable legal claims.

Although budgets are tight these days, Congress and the states need to come up with more money for foreclosure legal assistance.

Class actions can be a powerful tool in challenging practices, like predatory lending, that affected large numbers of homeowners. Right now the Legal Services Corporation, which provides essential civil legal services to low income Americans, is barred by law from representing clients in class action suits. Congress should lift that and other unwarranted restrictions on legal service providers. Too many Americans urgently need help.

    Another Kind of Foreclosure Crisis, NYT, 9.10.2009, http://www.nytimes.com/2009/10/09/opinion/09fri2.html

Jobless Report Is Worse Than Expected;

Rate Rises to 9.8%

October 3, 2009
The New York Times
By JACK HEALY

The American economy lost 263,000 jobs in September — far more than expected — and the unemployment rate rose to 9.8 percent, the government reported on Friday, dimming prospects of any meaningful job growth by the end of the year.

The Labor Department’s monthly snapshot of unemployment dashed hopes that the pace of job losses would continue to slow as the economy clawed its way back from a deep recession. Economists had expected 175,000 monthly job losses.

“People have been celebrating that we’re through the financial crisis, but the underlying issues are all still there,” said Dean Baker, co-director of the Center for Economic and Policy Research. “We’ve lost trillions of dollars in housing wealth, and consumption’s going to be weak. It’s not the ’30s, but there’s really nothing to boost the economy.”

Despite help Washington’s $787 billion stimulus, state and local governments slashed 47,000 jobs in September in the face of shrinking budgets. And auto dealerships, which added jobs in August as business picked up because of the “cash for clunkers” rebate program, cut 7,100 positions last month.

In one bright spot, fewer jobs were lost in August than originally reported — with 201,000 positions gone instead of earlier figures of 216,000.

But overall, the report offered little good news for the 15.1 million unemployed people in the United States. The number of hours worked stagnated. Overtime hours slipped in many industries. And temporary help companies — typically, among the first to rebound after a recession — shed 1,700 jobs.

Indeed, while many businesses are making money again and seeing new orders trickle in, most are not ready to hire back the workers they laid off, even part-time.

To economists, that suggests that unemployment could remain at historically high levels through next year, if not longer.

“It’s a little bleak,” said Marissa Di Natale, senior economist at Moody’s Economy.com. “We’re not going to see job growth until the second half of next year. And even when it does start to grow, it’s going to be slow.”

The economy has been bleeding jobs every month, without interruption, for nearly two years. More than 15 million people in the United States are now unemployed, and more are working part-time jobs for less pay, or have given up looking for work altogether.

“This is still severe,” said Andrew Stettner, deputy director of the National Employment Law Project. “It’s not going to be turning around as fast as people want.”

At the same time, other measures of the economy are beginning to waver, signaling that the initial phase of the recovery — a sharp rebound from a deep bottom — may be giving way to a long grind higher, marked by uncertainty and pain for many.

For Democrats, a slow recovery — and an unemployment rate at a 26-year high — could quickly become a liability, if businesses are not hiring by next year’s mid-term elections.

The Obama administration has said job losses would be even worse without the tax credits and spending projects from the billion stimulus, but Republicans have pilloried the programs as ineffective.

In Elizabeth, N.J., Stephanie Wheeler has been watching her savings and unemployment benefits run out. A year after she lost her job at a data processing company, she has $800 left in her savings account and six more weeks of $379 unemployment checks. After that, she said she does not know what to do.

“It’s terrifying,” Ms. Wheeler, 56, said. “I have an apartment. I’ve been here for eight years. I don’t know what’s going to happen. I’m petrified of being set out on the street.”

She said she has been applying for work as an administrative assistant, receptionist and in customer service, and resorted to paying an online agency $206 to update her résumé, after she said she was guaranteed a job or her money back. So far, she has gotten neither. She said she has been paring back her expenses as best she can, starting with meals.

“I try to eat less,” she said.

Some 52 percent of unemployed people have exhausted state jobless benefits, and some are reaching the end of the makeshift strands of emergency extensions. The House of Representatives has passed a bill that would provide another 13 weeks of benefits, but a similar bill has stalled in the Senate over questions of whether it should only cover people in the hardest-hit states.

On Thursday, Ben S. Bernanke, the Federal Reserve chairman, nodded at the problems that long-term unemployment creates for workers, saying that they risk losing skills and becoming less employable if they detach from the labor force.

As a construction worker, Richard Hall, 44, of Winter Springs, Fla., spent two decades pouring concrete, framing buildings and helping to erect glittering high-rises, but it has been a year since the company he worked for him shut down. He said he has found no other building jobs in Florida, and his final unemployment check, for $235, arrived on Wednesday. Now, he said, he and a friend drive around in a pickup truck and pick up old washing machines, ovens and loose metal from the street and sell it for scrap.

“They pay you by however many pounds,” he said. “It’s better than sitting around doing nothing. That gets old real quick.”

Jobless Report Is Worse Than Expected; Rate Rises to 9.8%, NYT, 2.10.2009, http://www.nytimes.com/2009/10/03/business/economy/03jobs.html