The Inquisitr » economic crisis

Salvation Army In Canada Reports 75 Percent Rise In Food Bank Demand The Past Year

AHN — Thu, 08 Oct 2009 22:00:50 +0000

The recession has spurred a higher demand for food amid a decline in donations received by relief and charitable organizations. According to the Salvation Army in Canada, demand for food service has jumped by almost 75 percent the past year.

As a result, the organization has served more than 25,000 people and more than 65,000 meals the past 12 months in 275 locations across the country. The 72.6 percent rise in food request, was however accompanied by a 40.4 percent dip in donations.

Hardest hit by the slower pace of donations were Salvation Army units in Ontario and British Columbia. The report, released Wednesday, observed that despite Canada slowly recovering from the global financial crisis, more Canadians are seeking the assistance of social service institutions.

Salvation Army territorial secretary for public relations and development Graham Moore said in a statement, “As a national trend, it appears that our food services and programs are taking a hit from the prolonged effects of the recession. We’ll continue to do more with less, hopeful that the generosity of donors and volunteers will answer the needs of those shaken by economic hardship”

With Thanksgiving fast approaching, Moore said the Salvation Army will improve its efforts to boost stock and supply, as it called on Canadians for more food and other kinds of donations.

He added, “Thanksgiving is one of our busiest periods for food service and distribution. We remain committed to serving Canadians in need with warm meals and groceries, but we also need the public’s commitment to help meet this year’s heightened demand.”

Hopes Rise As New Jobless Claims Drop

AHN — Thu, 08 Oct 2009 17:11:27 +0000

New jobless claims dropped by 33,000 in the week ended Oct. 3, according to data released Thursday by the Labor Department.

The seasonally adjusted 521,000 filing initial claims for state unemployment benefits is the smallest level since the first week of January. The four-week rolling average of new claims also fell, down 9,000, the lowest since the first of the year. For the week of Sept. 26, 6.04 million were continuing to claim jobless benefits, a drop of 72,000.

The numbers raised hope that hiring might be increasing. Economists had predicted first-time claims would be about 540,000, nearly 20,000 higher. It’s difficult to understand what the numbers truly mean, however. Employers could be hiring more, or jobless workers could have exhausted their initial 26 weeks of payments.

Initial claims are up 13 percent from a year ago, and continuing claims are up 70 percent. Last month, the jobless rate reached a 26-year high of 9.8 percent.

Bank Failures Prompt Near Record Amount Of Mortgage-Related Closings

AHN — Mon, 05 Oct 2009 21:11:53 +0000

Driven by 100 bank failures so far this year, mortgage-related failures and closings have already exceeded the total for last year’s and are within two failures of a record, according to the Mortgage Graveyard — a journal of failed lenders maintained by MortgageDaily.com.

Through Oct. 2, 164 mortgage-related firms have either collapsed or been shut down, the journal found. During 2008, 124 mortgage-related firms either failed or were closed down.

The increased activity is directly correlated to the rapid succession of bank failures, the report said.. As of Friday, 98 federally insured institutions have failed this year–marking a 300 percent increase from 2008.

The number of mortgage-related closings in 2007 was a revised 165, the highest level since MortgageDaily.com began tracking in 1998. But 2007’s activity included only three banks.

Among this year’s biggest failures have been BankUnited, FSB, which failed in May; Guaranty Bank, which was seized in August; and Taylor, Bean and Whitaker Mortgage Corp., which collapsed after it was suspended by FHA, Freddie Mac and Ginnie Mae in August.

This year’s mortgage-related closings will rise to more than 200 firms by the end of the year, predicted MortgageDaily.com founder and publisher Sam Garcia. He attributed this calculation to the rising number of regulatory orders being issued against financial institutions.

Last month, the web site tracked more than 100 regulatory actions against U.S. financial institutions, including 56 cease-and-desist orders and 27 removal-and-prohibition orders.

Because of the rapid pace of bank failures, the Federal Deposit Insurance Corporation, which insures bank deposits, is proposing to collect three years of risk-based assessments in advance this year so that its Deposit Insurance Fund has enough capital to handle upcoming failures.

YouTube user gets B of A to respond with calls for “debtor’s revolt”

Kim LaCapria — Mon, 28 Sep 2009 22:02:15 +0000

YouTube user Rockerchic4God, also known as Arlene from True Blood Ann Minch, couldn’t get any Bank of America employees pay attention to her when she had problems with her account.

So she turned to YouTube. After being laid off, Ann had her interest rate jacked up from 12.99% to 30%. Bank of America refused to negotiate the rate that she said would have been more reasonable if offered from a loan shark. Accusing the bank of “raping and pillaging” American public and destroying the middle class, Minch calls for a debtor’s revolt. Ann gives the CEO of Bank of America two choices: restore her interest rate or make her a payoff offer she can’t refuse.

The strategy worked. The video, now at nearly 350K views, got the attention of Bank of America’s senior VP of “existing credit card accounts”- as well as media outlets like Fox and Friends. The man, Jeff Crawford, allowed her to say her piece and allowed her to “negotiate some sort of agreement.” Crawford said that he blamed the high interest rates on two late payments, although one was in response to the rate hike. He tried to get her to agree to 16.99%, but Minch angrily pointed out that the Fed is giving the banks a 0% interest rate, so 12.99% is more than enough for her to be paying.

Minch reports that as of the second video, her interest rate is showing online as 23.99%. She also notes that Crawford didn’t even request that she stop her media assault. Minch says in her follow-up video that she will continue in her efforts, starting a website called Debtor’s Revolt to help people who are currently being overburdened by skyrocketing interest rates.

Watch Ann’s videos, below:

Bernanke: World Beginning To Emerge From Financial Crisis

AHN — Sat, 22 Aug 2009 18:51:30 +0000

Washington, D.C. (AHN) – Federal Reserve Chairman Ben Bernanke was in Wyoming on Friday to address an annual economic symposium. Acknowledging that there are still more problems to face, Bernanke nonetheless asserted that the global economy has begun to turn around.

“The world has been through the most severe financial crisis since the Great Depression,” Bernanke told the summit. “The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge.”

“When we met last year, financial markets and the economy were continuing to suffer the effects of the ongoing crisis,” Bernanke explained. “We know now that the National Bureau of Economic Research has determined December 2007 as the beginning of the recession. The U.S. unemployment rate had risen to 5-3/4 percent by July, about 1 percentage point above its level at the beginning of the crisis, and household spending was weakening.”

In the past year, the American economy saw several major setbacks. Americans watched first hand as Lehman Brothers failed and AIG was bailed out with an $85 billion loan from Washington. Commercial bank Wachovia was sold and the two largest free-standing investment banks, Morgan Stanley and Goldman Sachs, were stabilized with help from the Federal Reserve. In October, Congress approved a $700 billion TARP plan to remove “toxic assets” from the U.S. housing market.

Nonetheless, with help from the Obama administration and foreign assistance to stabilize banks based overseas, Bernanke believes the world economy has begun to climb out of its hole.

“Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal, and financial policies around the world have been aggressive and complementary. Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk,” Bernanke said.

“We must work together to build on the gains already made to secure a sustained economic recovery, as well as to build a new financial regulatory framework that will reflect the lessons of this crisis and prevent a recurrence of the events of the past two years,” Bernanke added.

The new “ghost towns”

Kim LaCapria — Mon, 06 Jul 2009 15:34:33 +0000

Far from the kind that bring madcap Brady Bunch adventures, the NY Times recently commissioned a series on “the ruins of the second gilded age.”

Since the real estate market began tanking in the US, tales of modern “ghost towns” have buzzed through the media intermittently. Subdivisions and McMansions lay abandoned and often unfinished, a sadly silent illustration of a country full of homes no one can afford to live in.

Portuguese born photographer Edgar Martins said in the piece:

“The sudden shift in the economy unmasked such excess. People are present in these images, but not physically. You trace their action, the destruction they left behind.”

Click here for a slideshow.

Matt Taibbi on the Great American Bubble Machine

Kim LaCapria — Fri, 26 Jun 2009 16:43:33 +0000

In what can almost be described as an “Economic Meltdown For Dummies,” Matt Taibbi’s article “The Great American Bubble Machine” in the latest issue of Rolling Stone is a great primer on the machinations behind the current financial crisis that reads like a good novel.

You may remember Taibbi’s recent, almost viral ranty response to AIG bigwig Jay DeSantis’ New York Times letter of resignation. Taibbi got internet-wide props for the scathing piece, which gave voice to the lack of sympathy and palpable rage felt by many Americans when reading DeSantis’ sob story. An excerpt:

DeSantis has a few major points. They include: 1) I had nothing to do with my boss Joe Cassano’s toxic credit default swaps portfolio, and only a handful of people in our unit did; 2) I didn’t even know anything about them; 3) I could have left AIG for a better job several times last year; 4) but I didn’t, staying out of a sense of duty to my poor, beleaguered firm, only to find out in the end that; 5) I would be betrayed by AIG senior management, who promised we would be rewarded for staying, but then went back on their word when they folded in highly cowardly fashion in the face of an angry and stupid populist mob.

I have a few responses to those points. They are 1) Bullshit; 2) bullshit; 3) bullshit, plus of course; 4) bullshit. Lastly, there is 5) Boo-F***ing-Hoo. You dog.

Taibbi is now making waves with “The Great American Bubble Machine,” crafting an argument that Goldman Sachs “has engineered every major market manipulation since the Great Depression” and that they’re already planning their next heist. Taibbi breaks it down into five major bubbles, five huge market manipulations preying on the American public, hedging wild bets against our futures and better interests.

According to Taibbi, here’s the scam template:

Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased.

And the heartwarming history behind Goldman’s first major con during the Great Depression:

Beginning a pattern that would repeat itself over and over again, Goldman got into the investment-trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund – which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah – which, of course, was in large part owned by Goldman Trading.

Getting deja vu yet? The next round of looting, according to the piece, didn’t occur until the dot-com bubble of the late 90s. Wild speculation and IPOs of never-profitable net properties were small potatoes compared to what came next.

Bubbles #3 & #4 were the housing bubble and gas-price gouging . As Jon Stewart famously skewered at Jim Cramer, Goldman Sachs and their ilk hedged their bets against us again in banking on their own shady mortgages defaulting and cashing in on the fallout. Speculation on the oil market soon after lead to gas costing upwards of $4 a gallon in the summer of 2008, but most Americans were too busy freaking out about their impending homelessness to notice the connection.

Bubble #5 was looting the bailout, but according to Taibbi, the next bubble will be even bigger- energy futures and carbon credits, and “groundbreaking new commodities bubble, disguised as an ‘environmental plan,’ called cap-and-trade.” Taibbi caps it off with a kind of acceptance- the “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” will keep on sucking- but at least now we know about it.

Ken Karpman: from Hedge Fund CEO to Pizza Driver

Duncan Riley — Sat, 21 Mar 2009 00:17:37 +0000

Meet Ken Karpman. The UCLA MBA graduate is a former hedge fund CEO earning $750,000 a year. During his glory days, he traveled the world, purchased a huge house, and spent up big. One small problem though: he forgot to save for a rainy day. In 2005, wanting even more money, he tried to set up his own hedge fund using equity in his house, and then lost it all as the market crashed.

People losing their jobs and homes isn’t a big story in the United States today, but as Ken Karpman told ABC, its what he was willing to do next that has gained attention.

Ken Karpmans new job: pizza driver at $7.29/ hour plus tips. Although the media attention seems to be more a look at me, I want a better job ploy, you’ve got to hand it to the guy, swallowing your pride is something he has most definitely mastered. ABC News has the full interview here.

Depression Cooking with Clara a hit on YouTube

Duncan Riley — Fri, 27 Feb 2009 23:58:38 +0000

Youtube may have created its oldest star.

91 year old great grandmother Clara Cannucciari has started Depression Cooking with Clara, an instructional cooking series focused on recipes from the Great Depression. The pitch is simple: American has fallen on hard times, and there’s a need for these simple and cheap recipes to feed the nation once again.

Some of her recipes include Clara’s Poorman’s Meal, Pasta With Peas, Peppers & Eggs.

Here’s Clara’s first episode with the recipe for pasta and peas. Here YouTube channel, with the rest of her recipes can be found here.

Interesting: Amex paying card holders to close their accounts

Duncan Riley — Mon, 23 Feb 2009 23:55:49 +0000

Need to get higher risk clients of your books? One way is to pay them to leave, and that’s exactly what American Express is doing.

Amex is paying a number of card holders $300 to close their accounts.

“We sent the offer out to a select number of card members,” a company spokeswoman quoted by Reuters said. “We are looking at different ways that we can manage credit risk based on the costumers overall credit profile.”

Card holders must accept the offer by the end of February, and have to close their accounts in March or April. On successfully meeting the requirements, the now former card holders receive a $300 pre-paid American Express card.

Amex was once the domain of the rich, but in recent years has expanded aggressively into consumer credit. That exposure has left Amex, like its competitors with a growing amount of bad debt given the broader economic climate.

$300 to get rid of your credit card sounds like a great deal, and is probably the only time you’re ever likely to see a credit card company pay users as opposed to just raping them taking from them.

Rick Santelli flips out over foreclosure relief (video)

Duncan Riley — Thu, 19 Feb 2009 23:06:47 +0000

CNBC’s Rick Santelli isn’t a happy man.

In a cross to the trading floor of the Chicago Mercantile Exchange, Santelli, backed by a cheersquad of traders rallied against President Obama’s plan to not immediately foreclose on homeowners behind on their mortgages because it rewards bad behavior.

“You know,” Santelli said “Cuba used to have mansions and a relatively decent economy. They moved from the individual to the collective. Now they’re driving ‘54 Chevys.”

Strangely I don’t disagree with a thing he said, but only on the grounds that the banks shouldn’t have been rewarded for behavior far worse than any average homeowner to begin with. If the money is going to be spent, it’s only fair that it gets shared around.

Here’s Rick Santelli flipping out on CNBC:

GM Viability Plan: 47,000 jobs to go, Saab, Hummer and Saturn for sale, may close

Duncan Riley — Wed, 18 Feb 2009 02:44:01 +0000

General Motors (GM) will slash 47,000 jobs and attempt to sell off prime brands as part of a viability plan submitted to the US Government.

GM was required to submit the viability plan as a condition of receiving an additional $8-$12 billion in bailout loans.

The job cuts will come from the closure of five additional plants on top of the nine plants it had previously announced would close. The locations of the plants have not been disclosed. The plant closures will be accompanied by a reduction in model lines.

GM Dealerships will be reduced from 6,246 in 2008 to 4,700 by 2012, and to 4,100 by 2014.

GM will also attempt to sell, or failing a sale close three prime brands as part of the plan: Saab, Hummer and Saturn.

Reports suggest that Saab will survive, with the Swedish Government negotiating to inject $3 billion into the division, and for all intents and purposes taking over the company.

Hummer looks like it may be in trouble, with rumors of a possible Chinese buyer not confirmed. The Hummer product, popular with the US Army, struggled last year as oil prices pushed the gas price higher, driving down demand for the large gas-guzzling SUV’s Hummer is famous for.

Saturn will live on until 2011, the end of the current model cycle. GM said that it was willing to consider a buyout for the brand, but experts believe this is unlikely to happen. The Saturn brand was launched in 1990 and has never made money for GM.

GM also said that it was in negotiations to reduce costs in Canada, and had already found $1.2 billion in savings in its European operations. Of its Asia-Pacific operations, which include Daewoo in Korea, and Holden in Australia, GM only said that “some of the proposed capacity expansion projects and product programs in the region are no longer financially feasible and will not proceed without financial support from either the respective governments or from other partners.”

Just Do It: Nike Layoffs will see 1400 people go

Duncan Riley — Wed, 11 Feb 2009 02:27:52 +0000

Shoe companies aren’t immune to the global recession, with Nike set to announce layoffs of 4%, of 1400 people of form its 35,000 strong global workforce.

Nike is headquartered in Portland, Oregon and employs 7,000 people in the city. There is no announcement yet as to where the jobs would be cut.

Nike previously instituted a hiring freeze and cut travel spending late last year.

Nike said in a statement that it would consult with employees on where cuts would be made, with a final announcement on which jobs would go to be made before the end of the financial year.

Win: Obama caps executive salaries at $500,000

Duncan Riley — Wed, 04 Feb 2009 22:25:43 +0000

President Barack Obama announced Wednesday that companies receiving Government assistance under the $700 billion bailout will be restricted to a $500,000 salary cap for top executives.

“We all need to take responsibility” said the President, and that people are sick and tired of seeing Wall Street executives come to the government “hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses.”

“This is America, we don’t disparage wealth. We don’t begrudge anybody for achieving success. And we certainly believe that success should be rewarded.”

But Americans begrudge “executives being rewarded for failure,” especially if their earnings are subsidized by taxpayers, “many of whom are having a tough time themselves.”

The new restrictions come in two forms, according to the NY Times. Companies getting “exception assistance” wanting to pay executives more than $500,000 will have to do so by using stock that cannot be sold or liquidated until the government money is paid back. More healthy companies that get government help will also be under the $500,000 cap, but can waive it more easily providing that they do so with full public disclosure.

(img: NY Times)

Recession Causes Car Thefts To…..Decrease

Duncan Riley — Wed, 21 Jan 2009 16:04:50 +0000

The ruling orthodoxy on socio-economics is that difficult times drive a rise in crime, but maybe as a sign of how bad things may have become, at least one crime is decreasing: car theft.

In Baltimore, the number of cars stolen went from 6,662 in 2006 to just over 5,100 last year, and through Jan. 10, car theft dropped 35 percent this year, compared with the same period in 2008.

According to the Baltimore Sun, one reason is improved security in later model cars, but the other driving factor is demand: like the rest of the car industry, people aren’t buying cars, and that includes stolen ones.

“If no one can buy a car, no one can buy a car,” Baltimore County Police Sgt. Robert Jagoe told the paper “if you can’t afford to buy a Corvette off the lot, you can’t afford to buy one from a criminal. With no place to sell their goods, thieves have stopped stealing as many cars.”

See, there is a positive side to a recession.

States Now Want A Government Bailout As Well

Duncan Riley — Sat, 03 Jan 2009 20:00:06 +0000

Government isn’t immune from wanting a bailout, with the Governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin calling on the Obama Administration to provide a $1 trillion bailout for cash poor states.

Ohio Gov. Ted Strickland said that the situation in his State was so dire, that they’d have to cut every item in their budget by 25% just to make ends meet. New York Governor David Paterson said that “there are states that are talking as California has of not being able to meet their financial obligations in the coming months.”

While tax takes are down across the board as the recession bites, the ineptitude that has put America in the position it’s in is now being shown at the top. That the States can’t pay the bills says more about extremely poor budgeting during the good times, and an inability to save for a rainy day. Well…given many State Representatives come from big business, it’s really not that surprising either.

My question though: Whatcha going to do when the money runs out? No matter how much the outgoing and incoming Administrations, along with Congress promise to spend on bailing out every last remaining bank, car company, business of just about any sort, and even States, the US Government does not have a bottomless pit of money either. With a massive debt issue already, somewhere in the next 12 months the money has to run out if the Government keeps offering bailouts by the hundreds of billions and trillions, and then worse times may would be ahead. I can’t say I disagree with some who argue it’s better to deal with the issues now and let companies go bankrupt so it’s quicker to recover from the mess, where as now the US Government seems to be only prolonging the very practices and people who put the global economy into the position it is today, while increasing debt that will take even longer to pay off.

Obscene: Chrysler Spending Bailout Money on Ads Thanking America for Bailout Money

Duncan Riley — Thu, 01 Jan 2009 02:13:36 +0000

While polls showed the majority of American’s did not support a bailout of the auto industry, The Bush Administration acted anyway, ~~throwing away~~ loaning the industry some $17 billion. So what’s the first thing Chrysler does with its share of the money: a nation wide advertising campaign thanking America for the money.

The obscene nature though isn’t surprising given the industry is in the mess it’s in because of a long track record of ineptitude. Remember folks: GM and Chrysler were losing money 4 years ago, the economic crisis didn’t cause them to fail, their complete inability to run a business successfully did.

Now Real Estate Developers want a Bailout

Duncan Riley — Tue, 23 Dec 2008 06:08:31 +0000

Once the door is open, everyone wants a cut. Add Real Estate developers to the list of groups asking the US Government for a bailout, with loans due this year unable to be refinanced due to the credit crunch.

Developers are warning that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies due to $530 billion of commercial mortgages will be coming due for refinancing in the next three years with $160 billion maturing in the next year.

According to reports, commercial mortgages are usually underwritten for five, seven or 10 years with big payments due at the end. At that point, they typically need to be refinanced. A borrower’s inability to refinance could force it to give up the property to the lender.

A letter sent to Treasury Secretary Henry Paulson, and signed by a dozen real-estate trade groups, paints a bleak scenario: “Right now, we believe there is insufficient systemic capacity to refinance expiring, performing commercial real-estate loans,” said the letter. “For many borrowers, [credit] simply is not available.”

I could ask when will this madness stop, but we know the answer: when the US Government runs out of money.

Senate to Auto Industry: No Bailout for You

Duncan Riley — Fri, 12 Dec 2008 06:02:58 +0000

The American auto industry may be on the edge of collapse with the US Senate set to reject the proposed $14 billion auto bailout, the last opportunity to approve the bailout until the new year.

The formal vote is still to be had, and Democrats said that they would present it anyway, but talks with minority Republicans failed to find support.

The White House said in a statement that it would evaluate its options, but declined to say what those options may be. Democrats have previously asked that some of the $700 billion bailout package approved in October be used to prop up the auto industry, an approach President Bush has so far rejected.

Oh well, they can always sell their corporate jets, that might cover GM and Chrysler for a day of two until they file for Chapter 11 bankruptcy.

NPR job cuts: 85 positions to go

Duncan Riley — Thu, 11 Dec 2008 03:56:51 +0000

National Public Radio (NPR) has announced that it will lay off 7% of its workforce and cut expenses due to broader economic climate.

A total of 64 filled positions have been eliminated and 21 open positions not filled for a total cut of 85 positions. The cuts come across the board including editorial and production areas, station services, digital media, research, communications and administrative support. NPR currently employs 889 people.

Included in the cuts are two programs, Day to Day and News & Notes, although both programs will remain on the air through March 20, 2009.

Despite record numbers listening to its programs, including 26.4 million people listening to NPR each week and 8 million people visiting NPR.org each month, NPR has been in a tight position, not helped by its unique set up. In July, NPR projected a $2 million deficit for fiscal year 2009 but is now projected to run a deficit to $23 million due to a sharp fall in corporate sponsorships.