The Treasury this week effortlessly raked in $64 billion by selling long-term debt, and mortgage markets stayed about the same, just under 5 percent.
The outside world may choke on our paper someday, but not when its economies are failing faster than ours. German orders for manufactured goods in January fell 38 percent from the prior year, its exports down 21 percent. China is trying domestic stimulus but lives on exports, which are dropping at a 40 percent annual pace, its trade surplus down 87 percent.
Here we got a bounce in oversold stocks and retail sales flattened, but last week another 650,000 people filed for unemployment benefits. In January, bellwether California’s unemployment reached 10.1 percent.
The absence of signs of bottom is not so troubling — everyone knows that it will take a while — it is the absence of evident bottoming mechanism that bugs people.
Under the government blanket a lot of wrestling is going on, but damned if I can tell who is on top or even who is under there.
President Obama appears completely preoccupied by his out-year social agenda, sent forth by handlers or his own still-developing instinct to say peculiar things, and yesterday persisting that we overreact to daily news: "A little bad, and, ‘Ooohh, we’re down on the dumps.’ Things are not as bad as we think." Does he really believe that, or think he can make it so by saying so, or is he playing for time?
David Smick, the well-connected non-ideologue author of "The World Is Curved," wrote in the Washington Post that Geithner has "a three-pronged approach: delay, delay and delay in the hope that somebody comes up with a breakthrough."
The New York Times’ David Brooks and Tom Friedman, "righty" and "lefty," respectively, both wrote this week to remark on the bipartisan failure to notice an emergency.
Federal Reserve Chairman Ben Bernanke this week spoke of the "worst financial crisis since the 1930s," and for the third time in two weeks: "Until we stabilize the financial system, a sustainable economic recovery will remain out of reach." To whom is he speaking? To us? To Congress? To the president? Got me, but evidently the system is not stable.
Larry Summers, the administration’s economic eminence grise, spoke today without any sense of urgency: "Secretary (Timothy) Geithner will be detailing in the weeks ahead." Weeks? How many, now? Then with his best, soft, I’m-smarter-than-all-of-you smile suggested this unpleasantness will pass with normal, cyclical return of demand.
He expressed faith in assistance by the mortgage GSEs (government-sponsored enterprises, which include Fannie Mae and Freddie Mac), apparently unaware of their stingy dysfunction. Bright as he is, it is odd not to perceive and touch the anxiety out here.
Some Democrats are already floating "Stimulus II," prepared to test the outer limits of American credit. Our representatives this weekend will hector Europeans to borrow and spend along with us — Germany and France are not buying, steadfast that resolution to financial breakdown rests on government and citizens living within their means.
The Fed is active, very much so, and it may be that the Obama administration has all its chips on developments there. Two fronts: the Term Asset-Backed Securities Loan Facility (TALF), $1 trillion or more as necessary to finance securitization of credit, jump-starting the "shadow banking system"; and the Public-Private Investment Fund (PPIF), the Fed-financed public-private auction of toxic assets from banks.
Patience is appropriate. It’s not easy to design a new financial system that must reward risk-taking, Congress always at the ready to punish any reward it deems excessive. TALF has just been postponed again and will begin with undetectable volume; PPIF awaits bank stress-test results and Geithner details "in the weeks ahead."
Meanwhile, one bank CEO after another announces that he doesn’t need federal help and intends to return TARP money he never wanted, thereby to avoid federal interference and to avoid making loans.
Bank of America’s Lewis and Morgan-Chase’s Dimon could not have made more plain their self-importance over the needs of the society that insures their deposits. The values of the franchises must be preserved, but I still hope that one of Geithner’s details will involve settling the hash of the imperial banker.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
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