Stocks fell in early trade despite generally positive data. Personal Income increased .2% in July, wages gained .3% and both series have increased nicely over the last year or so. On an annualized basis Personal Income is up 3%, factoring in transfer payments, unemployment, food stamps etc. and it drops to just +1.2% while the inflation measuring PCE Deflator is up just 1.5%. The savings rate slipped to 5.9%, which increased consumption to 3.4% both annualized.

Recent data on real estate has taking a significant turn for the worse. Bucking recent trends short-term delinquencies are increasing yet again. Worse the rate of foreclosures still trails Notice’s of Default meaning that the “shadow inventory” of unsold homes in the foreclosure pipeline continues to increase. As to does the amount of time between actual default and foreclosure which has reached 469 days or 15.4 months a figure that has been steadily increasing and provides a strong financial incentive to pursue strategic default.

Some other notable highlights, or perhaps lowlights is a better term. 14% of foreclosed properties vacant as per Freddie Mac. 11% of California Mortgages are delinquent, banks are clearly extending the foreclosure process in an attempt to control losses and remain solvent in violation of banking rules. While Fannie Mae and the other GSE’s have gotten much more aggressive of late regarding foreclosure they are still below the rate necessary to reduce their backlog of 4.5 million shadow inventory homes, worse private investors are starting to slow down their foreclosure process.

Given the back drop of plunging sales, mathematically and logically it doesn’t take much to figure out that substantial additional downward pressure on prices will be the result. Current estimates figure real estate prices will fall another 10-15% over the next year or so. Based on the current data additional declines of as much as 25% would not surprise me as I think 10-15% is a little optimistic.

The rich become richer at the expense of the poor and middle class. Gross income inequality breeds societal instability, insurrection and depression, just like it did in 1929 and like it most probably will again. Because when people lose their job, home, car, savings, retirement plans and dreams they have precious little left and tend to lose”it”.

Excerpts below, the original article by JimQ posted on the The Burning Platform has some great graphics and is well worth a read.

Caleb Lawrence

“Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.” – Mobs, Messiahs and Markets

The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

Never have so few, done so little, and made so much, while screwing so many.

In 2005, the top 25 hedge fund managers “earned” $9 billion, or an average of $360 million. One year after a financial collapse caused by the financial innovations peddled by Wall Street, the top 25 hedge fund managers paid themselves $25 billion, or an average of $1 billion a piece. For some perspective, there were 7 million unemployed Americans in 2006. Today there are 14.6 million unemployed Americans. While the country plunges deeper into Depression, the barbarians pick up the pace of their plundering and looting of the remaining wealth of the nation. Bill Bonner and Lila Rajiva pointed out a basic truth in 2007, before the financial collapse.

“On the Forbes list of rich people, you will find hedge fund managers in droves, but no one who made his money as a hedge fund client.” – Mobs, Messiahs and Markets

The parallels between the period leading up to the Great Depression and our current situation leading to a Greater Depression are revealing. When you examine the facts without looking through the prism of party politics it becomes clear that when the wealth and power of the country are overly concentrated in the clutches of the top 1% wealthiest Americans, financial collapse and depression follow. This concentration of income and wealth did not cause the Stock Market Crash of 1929 or the financial system implosion in 2008, but they were a symptom of a sick system of warped incentives. The top 1% of income earners were raking in 24% of all the income in America in 1928. After World War II until 1980, the top 1% of income earners consistently took home between 9% and 11% of all income in the country. During the 1950′s and 1960′s when average Americans made tremendous strides in their standard of living, the top 1% were earning 10% of all income. A hard working high school graduate could rise into the middle class, owning a home and a car.

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The disgustingly rich Wall Street wheeler dealers who live in Greenwich CT and NYC and summer in the Hamptons have created nothing. Their immense wealth has been created through draining the economic system of its lifeblood. Their financial innovations have created no lasting benefit for our society. Wall Street knowingly created no documentation (liar loans) mortgage loans, Option ARM loans, and subprime loans. You do not create products that beg for fraud unless you want fraud. The packaging of these fraudulent mortgages into CDOs and CDSs by Wall Street’s crime machine benefited Wall Street only. Those who got the loans defaulted, lost the homes, and had their credit ruined. Wall Street financiers have lured the American public into debt with easy credit and a marketing machine geared to convince the average Joe that he could live just like the rich. Simon Johnson explained the phenomena in a recent article.

Big time CEOs are rock stars. Outrageous pay packages are a medal of honor in a world where humility and true honor don’t exist. The Depression that currently is engulfing the nation was 30 years in the making. The criminal Wall Street financiers are the modern day John Dilingers. They have mastered the art of stealing from the masses while convincing these same people that they should admire them because they are rich. This is the oddity about Americans as pointed out by Bill Bonner and Lila Rajiva.

THE AGE OF MAMMON

JimQ, 29th August 2010

A detailed look of the banks deliberate promotion of the sub-prime lending fraud and other credit bubble blowing strategies that ultimately precipitated the housing crash and financial crisis we have today.

Caleb Lawrence

An interesting article by the folks over at ProPublica it can be found here and is well worth a read.

Banks’ Self-Dealing Super-Charged Financial Crisis

Excerpts Below

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created — and ultimately provided most of the money for — new CDOs.

An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds. By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier.

There were supposed to be protections against this sort of abuse.

Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million — about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.

But the strategy of speeding up the assembly line had devastating consequences for homeowners, the banks themselves and, ultimately, the global economy. Because of Wall Street’s machinations, more mortgages had been granted to ever-shakier borrowers. The results can now be seen in foreclosed houses across America.

The incestuous trading also made the CDOs more intertwined and thus fragile, accelerating their decline in value that began in the fall of 2007 and deepened over the next year. Most are now worth pennies on the dollar. Nearly half of the nearly trillion dollars in losses to the global banking system came from CDOs, losses ultimately absorbed by taxpayers and investors around the world. The banks’ troubles sent the world’s economies into a tailspin from which they have yet to recover.

Over time, these risky slices became increasingly hard to sell, posing a problem for the banks. If they remained unsold, the sketchy assets stayed on their books, like rotting inventory. That would require the banks to set aside money to cover any losses. Banks hate doing that because it means the money can’t be loaned out or put to other uses.

By mid-2006, the housing market was on the wane. This was particularly true for subprime mortgages, which were given to borrowers with spotty credit at higher interest rates. Subprime lenders began to fold, in what would become a mass extinction. In the first half of the year, the percentage of subprime borrowers who didn’t even make the first month’s mortgage payment tripled from the previous year.

That made CDO investors like pension funds and insurance companies increasingly nervous. If homeowners couldn’t make their mortgage payments, then the stream of cash to CDOs would dry up. Real “buyers began to shrivel and shrivel,” says Fiachra O’Driscoll, who co-ran Credit Suisse’s CDO business from 2003 to 2008.

Faced with disappearing investor demand, bankers could have wound down the lucrative business and moved on. That’s the way a market is supposed to work. Demand disappears; supply follows. But bankers were making lots of money. And they had amassed warehouses full of CDOs and other mortgage-based assets whose value was going down.

Rather than stop, bankers at Merrill, Citi, UBS and elsewhere kept making CDOs.

and it was downhill from there…..

A very interesting paper by the Networks Financial Institute authored by R. Christopher Whalen co-founder and managing director of Institutional Risk Analytics.

A lengthy and detailed discussion of the roles played by the Federal Reserve, Congress, the banking sector and others in the current crises. Essentially they new it would end badly, deliberately promoted and fostered it and now squander our Tax Dollars in an attempt to clean it up and preserve the status quo. While demonstrating that the too big to fail or jail banks call the shots.

Caleb Lawrence

Excerpts below, the article while lengthy is well worth a read and can be found here:
am Superman: The Federal Reserve Board and the Neverending Crisis

During the 2007-2009 financial markets crisis, the Fed seemingly left behind the mandate to conduct monetary policy in such as way as to achieve price stability and full employment. Specifically, the decisions taken during the financial crisis seem to be an effort to placate political constituencies by bailing out private sector banks and, earlier, by not exercising appropriate prudential supervision of Fed members banks and bank holding companies (BHCs). It needs to be said that nowhere in the Federal Reserve Act (FRA) or the various employment acts passed by Congress over the past half century is the central bank charged with maintaining sound money. Enlightened self interest, however, suggests that a central bank that overtly embraces the use of inflation through mechanisms such a quantitative easing to subsidize the issuance public debt by the Treasury and various government sponsored entities (GSEs) is in political terms signing its own death warrant.

The focus by the Fed on credit expansion, as opposed to price stability and interest rates, and a lack of attention to choices being made with respect to market structure and the regulation of Fed member banks served to make the crisis of 2007-2009 far more difficult than ought to have been the case.

In short, there seems to be operating at the Fed, on the one hand, a belief that financial institutions can be managed from on high, in the same top-down fashion as is used in the execution of monetary policy. On the other hand, there is also an unwillingness among the leadership of the central bank to admit when they are wrong, especially when it comes to the development or recognition of systemic risks in the financial system and for the reasons discussed.

In a 2008 interview, Roger Kubarych described how officials of the Federal Reserve Bank of New York were told by a respected market participant as early as February 2007 that the failure of New Century Financial was the start of a larger contagion in the private market for subprime asset-backed securities (ABS), yet the warnings were ignored.9 More, this author has personally interviewed scores of bank supervisory personnel over the past eight years who knew that subprime originators such as Washington Mutual (WaMu) and Countrywide were in trouble as early as 2006. Indeed, WaMu had begun to shrink assets and show signs of distress as early as the end of 2005.

Had Chairman Greenspan and the FOMC raised interest rates sooner, the bubble in the housing market might not have been nearly as large, but the U.S. economy might well have weakened rapidly because of a basic lack of economic strength, a problem that continues to the present day. Henry Kaufman, among others, has warned for decades about the connection between monetary “gradualism” and instability in financial markets. Given the dramatic increase in Fed monetary intervention in the most recent crisis, the warnings of Kaufman that a low rate environment allows “credit creation to flourish, and its deflationary and destabilizing impact on the system is only recognizable with a delay” seem more important than ever.

By, on the one hand, encouraging extreme swings in economic performance through overly accommodative monetary policies, while on the other encouraging the expansion of unregulated over-the-counter (OTC) markets for complex assets and derivatives, the Fed orchestrated many of the factors that contributed to the financial crisis.
In addition to the political conflicts that arise between the Fed’s role as monetary authority and prudential regulator, the more narrow issue of regulation must be considered. While some people claim that the Glass-Steagall Act law dividing banking and commerce has been repealed, the Bank Holding Company Act of 1956 and, in particular, the 1970s amendments to that law that truly separated banking from commerce, particularly insurance, are still extant.15 This law makes the Fed the protector of a cartel of semi-monopolies known as bank holding companies and with particular emphasis on the largest banks, financial houses which are dealers in U.S. Treasury and agency debt.

The Fed’s enforcement of the cartel among the largest U.S. banks is illustrated by the fact that, subsequent to the crisis, the top four BHCs and broker-dealers, such as Merrill Lynch, Bear Stearns, Countrywide and Washington Mutual, were merged with other large BHCs, instead of being sold to other entities. The financial reform legislation that was pending in the Congress as this paper was written provides the Fed more authority over financial institutions than ever before, but with no accountability for its increasingly destructive behavior.

Specifically, merging large troubled banks and dealers is hardly a way to enhance the safety and soundness of the financial system and arguably works against ending “too big to fail.” Yet the Fed seems incapable of liquidating large banks for fear that it will undermine confidence in the Treasury’s debt markets and the dollar. Fed officials will no doubt find such comments distasteful. The fact remains, however, that the Fed, by placing systemic priorities ahead of enforcing prudential rules, is the enabler for many of the problems affecting the American political economy. This particularly applies to the increasingly unstable financial behavior of the largest banks. But it must be said that the same is true of the other regulators, especially in the European Union (EU).

One of the greatest and least remarked upon failures of the Fed and other global regulators during this period was allowing the banks, in effect, to set their own rules.
The era of financial innovation under Chairman Greenspan was a time when the Fed Board and their counterparts at the Bank for International Settlements loosed themselves from the bounds of earth and embraced relativity in assessing bank safety and soundness. When you add the opacity of the financial products in the OTC markets and the poor methods for managers or regulators to gauge the credit and market risks of these securities, the scenario for the 2007-2009 market disaster was perfect.

Specifically, AIG was not reporting its sales of CDS contracts to Fiserv or the New York clearing house. Thus neither the Fed nor the other regulatory agencies were aware of the exposures being created in the front office of AIG. Meanwhile, Goldman Sachs, Deutsche Bank, JPMorgan and other dealers essentially looted AIG and then forced the Fed to bail out their client!

Despite public comments by the Fed regarding the need to reduce systemic risks, the Fed’s support for highly destabilizing asset classes such as OTC derivatives remains unchanged.

The use of VaR type models, including the version imbedded in the Basel II agreement, involves a number of assumptions about risk and outcomes that cannot be effectively hedged, yet public officials such as Chairman Bernanke and other Fed official pretend otherwise.

As early as 2004 with the publication of the policy statement on “Interagency Statement on Sound Practices Concerning Complex Structured Finance Activities,” the Fed, prudential regulators and SEC all publicly recognized that there were legal and reputational risks to banks dealing in OTC derivatives. Yet nothing was done to rein in this activity.

The source of systemic risk in the financial markets is fear born from the complexity of opaque securities for which there is no underlying basis. And yet the Fed’s Washington staff, in their arrogance, believe that OTC derivatives, which have no observable cash markets, may be substituted for cash securities and that to do so is consistent with safe and sound banks.

If investors cannot price a security without reference to subjective models, then the security should be banned from the U.S. markets as a matter of law and regulation.

Keep in mind too that when Alan Greenspan, Robert Rubin, Phil Gramm and Larry Summers were attacking U.S. Commodity Futures Trading Commission head Brooksley Born more than a decade ago for suggesting that OTC derivatives ought to be better regulated, Fed staffers like Parkinson were on Capitol Hill laying down a supporting barrage of barnyard debris for the big banks. And instead of being disciplined for his more than decade long role in encouraging this fiasco, Parkinson was promoted to head the Fed’s key DS&R by Chairman Bernanke.

And the Congress supports and encourages the Fed even as that agency’s policies undermine the safety and soundness of our financial markets.

The result of our overly generous tolerance for economists dabbling in the real world of banking and finance is a marketplace where some of the largest U.S. banks are in danger of insolvency, because their balance sheets are laden with illiquid, opaque and thus toxic OTC instruments which nobody can value or trade.

Despite the observable decline in risk-adjusted returns by large U.S. banks, the economists who populate the Fed continue to believe that current policies of supporting OTC cash and derivatives markets and other “innovations” are helping bank profitability and soundness, in nominal if not real terms.

We can place considerable blame on the Fed for the subprime crisis, but it must be said that an equally important factor was the tendency of Congress to use financial regulatory and housing policy to raise money and win elections. Members of Congress in both parties have freely used the threat of new regulation to extort contributions from the banking and other financial industries, often with little pretense as to their true agenda.

Likewise, the Congress has been generous in providing the banking industry with new loopholes and opportunities for regulatory arbitrage, enabling the very unsafe and unsound practices in terms of mortgage lending, securitization and the derivatives markets that has pushed the global economy into a deflationary spiral. But during most of the past decade or more when the Congress was creating new opportunities for “innovation,” Fed officials were either supportive of such liberalization efforts or silent as to the risks.

Fed officials have known for more than a decade that the largest money center banks are not truly profitable without the supra-normal profits generated by OTC derivatives.

Yet on a risk adjusted basis, many of the largest U.S. banks often display negative returns even with the OTC derivatives flows factored into the mix, suggesting that, on net, the operation of the OTC derivatives markets is actually a drain on the real economy.

Benjamin M. Friedman, writing in The New York Review of Books on May 28, 2009, “The Failure of the Economy & the Economists,” describes the market for credit defaults swaps in a very concise way and in layman’s terms.
The most telling example, and the most important in accounting for today’s financial crisis, is the market for credit default swaps. A CDS is, in effect, a bet on whether a specific company will default on its debt. This may sound like a form of insurance that also helps spread actual losses of wealth. If a business goes bankrupt, the loss of what used to be its value as a going concern is borne not just by its stockholders but by its creditors too. If some of those creditors have bought a CDS to protect themselves, the covered portion of their loss is borne by whoever issued the swap. But what makes credit default swaps like betting on the temperature is that, in the case of many if not most of these contracts, the volume of swaps outstanding far exceeds the amount of debt the specified company owes. Most of these swaps therefore have nothing to do with allocating genuine losses of wealth. Instead, they are creating additional losses for whoever bet incorrectly, exactly matched by gains for the corresponding winners. And, ironically, if those firms that bet incorrectly fail to pay what they owe—as would have happened if the government had not bailed out the insurance company AIG—the consequences might impose billions of dollars’ worth of economic costs that would not have occurred otherwise.

The dirty little secret that the Fed does not want to reveal is that the market for OTC derivatives is a tax, a form of gaming such as a lottery that effective subsidizes the largest banks in the world. The Fed accepts and even encourages this situation because it knows that without the excess profits from OTC derivatives, many of the largest U.S. banks would wither and gradually die, as has been the case with the banking sector in Europe.

By encouraging and facilitating the fiscal excesses of Washington, the Fed has not only set a bad example for the banks and companies that make up the real economy, but it has poisoned the proverbial pond for all of the citizens of the world economy with a consistent policy tolerating growing inflation and debt. In such an environment, talking about sound banks or stable financial markets is absurd.

Richard Alford, who worked in the foreign exchange function of the Federal Reserve Bank of New York at the same time as the author, commented in the crisis of 2007-2009 from a risk management and public policy perspective:
Policymakers would like everyone to believe that the recent crises were random unpredictable Black Swan events. How can they be blamed for failing to anticipate a low probability, random, and unpredictable event? If on the other hand, the crises had observable antecedents, e.g. increased use of leverage, maturity mismatches, near zero default rates, and spikes in housing price to rental rates and housing price to income ratios, then one must ask: why policymakers did not connect the dots, attach significant higher than normal probabilities to the occurrence of severe financial disturbances, and fashion policies accordingly? Ultimately, that is a question that Ben Bernanke and the rest of the federal financial regulatory community still have yet to answer.

It goes on and on, but is well worth a read.

Caleb

The Profit Motive August 27 

Better than expected economic data and some encouraging words form Fed Chairman Ben Bernanke sent markets higher in late trading. The ECRI Weekly Leading index improved to 120.9 as the smoothed annualized growth rate gained .2 points to –9.9%, just below the recessionary threshold of –10%. Revised 2nd quarter GDP came in better than expected at +1.6% following downward revisions to private inventories, imports, and non-residential structures, personal consumption expenditures and investment in equipment and software increased.

With the Fed again monetizing debt after being forced to admit that the economic recovery is failing. Mr. Bernanke remains convinced that GDP growth will continue in the 2nd half compliments of consumer and business spending. Well business spending continues to expand, though the rate of expansion has slowed dramatically of late. Consumer spending is doing fine if you look at same store sales data. But that is not the same as aggregate sales. Same store sales are increasing because retailers are aggressively closing under performing stores, hence all the vacant commercial space. Retail sales as per the Census Bureau have increased on average .34% per month this year, an anemic figure if ever there was one. While ahead of the CPI, which has averaged just .03% per month over the same period, real retail sales growth of .31% per month on average is not going to support an economic recovery or employment growth, which is why we have neither.

Mr. Bernanke went on to pledge that the Fed would do what it can to ensure continuation of the economic recovery including another round of quantitative easing, aka the Fed purchase’s its own debt, also known as monetization. Certainly the Fed wants to keep interests rates as low as possible in an attempt to stimulate lending.
While rates are at record lows a grossly over indebted consumer sector in the process of being crucified at the stake through foreclosure and bankruptcy is also in the process of an epiphany that will lead to the shunning of debt for many years to come just like Japan over the last 20-years and the US following the Great Depression of 1929, because it isn’t possible to borrow ones way to prosperity.

In the mean time we seem bound to continue the charade of extend and pretend, which will produce ever larger deficits as the bad debts are steadily transferred from the private sector to the public sector. Just like Japan as our politicians lack the political will to admit that this crises is caused by too much debt and to actually take the hard, painful necessary steps to correct it because they are to busy worrying about their political careers and cozying up to the lobbyists to truly represent the best interests of both the republic and their constituents. With the failure so far of financial reform to prevent this type of crisis from happening again, it is most likely just a matter of time before it does so. They didn’t learn from the LTCM crisis in 1998, nor did they learn from the S&L Crises of late 80’s and early 90’s. So far they haven’t learned from this crisis either. From a logical perspective one of two things is true, either they are just plain dumber than posts or the lobbyists own our elected representatives and have hijacked our democracy for their own selfish ends. Which is by definition fascism.

The Profit Motive August 26 

Stocks opened higher and slipped late on little real news and enter the final hour with small losses. Initial claims for unemployment fell below 500,000 last week but the 4-week moving average hit a 9-month high of 486,750. Continuing claims slipped to 4,456,000 as more exhaust their benefits.

The FHFA or Federal Housing Finance Agency reported that home prices fell 1.6% in the 2nd quarter from a year ago, as foreclosures became an increasing percentage of available inventory. Following a record 269,962 seized by lenders in the second quarter as per a report from RealtyTrac dated July 15th, it went to state that foreclosures are expected to exceed 1-million this year. This follows a 3.2% price decline recorded in the first quarter. The report serves to highlight one of the primary drivers of lower real estate prices, foreclosures and distressed sales. The others are record high months of inventory and of course employment, or more specifically lack of, along with excessive levels of debt. All this despite the 30-year mortgage rate hitting an all time low of 4.42% this month as per Freddie Mac who’s records date to 1971.

The Investment Company Institute reports that equity funds recorded a 16th consecutive week that saw withdrawals. In fact the retail, or individual investor, exodus from Wall Street is leading to lower trading profits for the big firms along with trading desk layoffs. Something that is increasingly showing up in there quarterly reports, the natural result of their failure to treat their customers fairly.

The Profit Motive August 25 

Stocks slipped early as the DOW flirted with 10,000 on mixed economic data. Durable Goods orders gained .3% in July, a volatile series that has drifted more or less sideways for 3-months. That said the business spending proxy Nondefense capital goods ex. Aircraft increased 10.6% a seventh consecutive solid gain, nonetheless the reports shows slowing demand. Mortgage activity increased 4.9% last week as both purchases and refi’s gained ground, the 30-year contract rate was unchanged at 4.6% as per the MBA. Despite historically low interest rates sales remain moribund.

New Home Sales for July came in at 276,000 units annualized, a big miss just like yesterdays existing home sales data, and for similar reasons. This is the first sub 300,000 reading in the Index’s 47-year history. The 12.4% drop in sales pushed the months of inventory to 9.1 as the median price fell by 7.6% to $201,600. This marks the 2nd consecutive monthly decline and makes 4 declines in the last 6-months. The Western region was hit particularly hard as sales plunged 25.4% to just 40,000 units annualized, just over 1/3rd the rate seen in April.

Recent estimates from the CBO peg the economic effects of the various stimulus programs at +1.7 and 4.5% added to GDP. Using the low end of the range, for the Second Quarter the estimate is +1.7% or more than total GDP as currently calculated for the quarter. The 3rd quarter estimate is +1.5% will be added to GDP. Today’s Durable Goods orders report puts 3rd quarter GDP down to about –1%. So again the stimulus is the economy at this point. Definitely better than nothing and this is after all the whole idea behind economic stimulus. The CBO went on to point out that with out stimulus another 1.4 to 3.3 million would have been unemployed. That 2 to 4.8 million full time equivalent jobs were created and that the unemployment rate is .7 to 1.8% lower than it would have been otherwise.