Stocks enter the final hour about even. Another 4-banks went to the receivers Friday bringing the total for 2010 to 26. Consumer Credit snapped a string of 12 consecutive declines to increase 5 billion in January as consumers spent more on non-revolving purchases like cars. Credit card or revolving debt continued to slip.
The FDIC holds a growing asset collection from all of the bank closures and the process of liquidating these assets in the open market is likely to promote further bank losses and write downs as it will provide for price discovery of impaired assets, a.k.a. toxic assets. Of course the banks are less than happy that their regulator would expose them to further losses, then again when you play games with asset value accounting and avoid mark to market and instead mark to fantasy or the banks opinion of what something is worth, what did they expect. It should be noted that various regulators not only encouraged but also promoted the use of creative accounting by the banks.
Which brings us to the looming crises with mortgage modifications, a program that just isn’t working. Still the need to cure the related bad debts remains hence the growing push to facilitate short sales. Hopefully this strategy will meet with more success as if all parties can agree, the big problem is junior, primarily second, lien holders as they frequently get nothing in a short sale. Nonetheless the primary lender and mortgage holder usually suffer lower loss rates and other negative consequences, primarily credit score related for the borrower and asset value preservation for the lender, with a successful short sale as compared to an actual foreclosure.
California recently revised its job loss figures for 2009 increasing the total by 338,400 to a little less than a million. Reading between the lines and that means the original number was roughly 600,000 but grew to nearly a million meaning that the job loss figures statewide were revised upward by some 50%. I complain about the BLS and there shoddy national jobs reporting, perhaps I should be quiet as California’s data is just plain terrible and it is no wonder the budget is such a disaster. As 50% more people than originally figured, didn’t earn money or pay taxes in 2009 and that is a lot of aggregate economic activity. Which serves to highlight growing problems with the reliability and accuracy of economic data as the fudging of numbers has become extensive.
There has been substantial debate on the Fed’s role in the current credit bust, some claim it is simply regulatory imprudence, essentially weak rules that allowed this fiasco to develop. Others figure it was a failure to regulate or enforce existing regulations, commonly known as nonfeasance or a failure to do ones job effectively. Clearly at this juncture it was a failure to enforce existing regulations or nonfeasance because the job just was not done effectively, there were plenty of regulations.
Which brings me back to California’s 50% upward revision to 2009 employment losses and growing problems with other economic data sets. Revisions to the numbers are to be expected and required in the interest of accuracy and reporting but when the methodology is retuning data that is grossly inaccurate as shown through substantial revision or considerable anecdotal data suggesting otherwise. It is either deliberate policy to further an agenda or nonfeasance in the data collection process, analysis or reporting.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
