Ward on Words

Bank of America has posted its third consecutive quarterly loss. Apparently, the double whammy of paying back TARP and defaults on consumer loans has packed quite a punch to the firm's bottom line. From Bloomberg : "'Economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth,' [Bank CEO Brian] Moynihan said in a statement. 'We are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer business.'" Specks of sun are breaking through, perhaps, but clouds of high unemployment and sluggish consumer spending remain heavy and dark everywhere you look. Given the gloom surrounding the current economic outlook for consumers outside of Wall Street, why would BoA consider taking the hit now to repay TARP? Wasn't TARP designed to help struggling, massive banks recapitalize? More from Bloomberg: ...

The man reluctant to cut his vacation short to help Katrina victims is working with Bill Clinton to help Haitian earthquake victims? Is this a dream or the transformation of George W. Bush into a philanthropist? From a story in the Washington Post : "Bush said that his heart, and that of former first lady Laura Bush, 'are broken when we see the scenes of little children struggling without a mom or a dad or the bodies in the streets.' He pledged to work alongside Clinton to encourage Americans to dig into their pockets. In the near term, he urged people to avoid donating blankets or other items but to just 'give your cash' to aid organizations that can spend it wisely. (Just had a flashback to those pallets filled with $12 billion in cash that vanished in Iraq in 2003 - 2004. Is Halliburton involved in anyway with the relief effort?) Strange that a man who failed to mobilize the FEMA forces during the worst natural disaster to hit America has found himse...

GM predicts a profitable year in 2010. Now that IS bold! The company, clawing its way out of bankruptcy. The economy, still shedding jobs by the tens of thousands each month (down from the hundreds of thousands shed in a few months ago - leading many to predict the beginning of the jobless recovery.) And a prediction unprecedented in optimism. The Wall Street Journal characterized GM's statement as a "bold and surprising forecast," and noted the company has not seen a profitable year since 2004. The WSJ also noted that "significant hurdles remain to repairing GM's bottom line, namely winning back tens of thousands of customers and improving the profitability of vehicles sold." And the newspaper gives us another curious statement: "When GM started piling up billions of dollars in losses in 2005, Rick Wagoner, its CEO at the time, stopped offering financial guidance." Does this mean the CEO shut down from stress? Failed to steer the shi...

The Edge of the American West blog has a wonderful post on Teddy Roosevelt. It's a lovely post with a lovely conclusion: "It is always easier to explain why Washington, Jefferson, and Lincoln belong on Mount Rushmore. Lincoln is America’s Christ. And Washington plays God the Father to Lincoln’s martyred savior. Which leaves to Jefferson the role of Holy Spirit: just so, as the author of the Declaration of Independence, the deeply flawed Jefferson nevertheless carried enough divine fire to channel into words the nation’s enlivening ideal of equality and natural right. With such an established trinity, what need for a fourth figure? If we can see elements of the godly in each of Washington, Jefferson, and Lincoln, what can we do with the rather thoroughly earthly Roosevelt? But perhaps that is the point. Alongside gods humanity also has a place, and a man who did so much to make daily life in America a little better, and to create the expectation that daily life in Ameri...

I will be the first to admit that I am a CDO ignoramus. After a year of research, I still can't figure out how collateralized debt obligations work or why we need them. What I find mystifying is the opacity of the offering. And from what I understand, we have not only CDOs that we can buy, but synthetic CDOs, which, as far as I can tell, function as a sellable mirage of the original CDO, which is itself a bunch of debt lumped into various tranches of different risk classes. But apparently we need this kind of innovation - regulations for the financial sector would squash this kind of innovation, so we're told, and then the market for Ferraris would drop significantly. (JUST KIDDING about those Ferraris!) In my search for knowledge, I find myself exploring all sorts of econ blogs - enjoying the journey while remaining mystified by the CDO conundrum. So I read with interest the latest post on the Economics of Contempt blog - " On Goldman and synthetic CDOs." ...

Mark Thoma shares an article written by David Cay Johnston of Tax Analysts that compares 1961 income taxes with what we have now. Johnston's goal is to analyze if our tax system is helping us create wealth. What do you think the data shows? That the vast majority of Americans have seen only a modest rise in income in the last 45 years. In a span of years that stretches longer than a traditional career, the average income of the bottom 90% of wage earners has risen almost $9300, from an average of $22,366 in 1961 to $31,642 in 2006. In the last 45 years, GDP has grown - up 227 percent. Average income for the top 400 taxpayers has also grown from $13.7 million to $263.3 million. That's nearly 20 percent growth in 45 years. If you've felt a financial squeeze over the years, there's a big reason why. David Cay Johnston explains: But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were...