Home

Posts Tagged ‘economy’

« Older Entries
Wednesday, October 28th, 2009

GMAC May Get Third Bailout

GMAC Financial Services,the former financing arm of General Motors Corp., may be in talks with the U.S. Treasury to receive a third financial lifeline, according to the Wall Street Journal.

GMAC has received $12.5 billion in bailout funds since December, 2008, and could receive an additional $2.8 billion to $5.6 billion in a third injection.

As part of the initial bailout, GMAC, which finances three-fourths of General Motors car loans and provides mortgages, insurance and other services, transformed into a bank holding company, which enabled it to receive Treasury aid. After the May, 2009 bailout, the U.S. government became the majority shareholder in the company.

Because GMAC backs so many new auto loans, it plays a vital role in revitalizing the auto industry, in which the government has already invested $25 billion.

General Motors, which filed bankruptcy this year, began selling off its interest in GMAC in 2006. The automaker maintained a small interest in GMAC before transferring many of its assets to the "new GM" as part is its Chapter 11 filing.

Tags: , , ,
Posted in Bankruptcy and the Economy | 3 Comments »

Sunday, September 13th, 2009

Federal Reserve Survey: Economy Stable or Improving

The results of the Federal Reserve’s Beige Book business survey, reported earlier this month, suggest that the U.S. economy has stabilized or begun improving.

This assessment comes from a survey of the 12 regional Federal Reserve Banks, 11 of which reported “signs of” an improved economic situation.

The Findings: Faint Praise?

Overall, the report isn’t exactly parade-inspiring; in fact, the anecdotal evidence provided in it may only seem positive in comparison to the dreary numbers and figures we’ve grown accustomed to seeing. For example:

  • Retail sales were generally described as “flat,” which suggests a lack of growth – but no shrinking, either.
  • Labor markets were described as “weak.”
  • Gross Domestic Product (GDP) shrank by only one percent between April and June – a consoling number only when compared to its 6.4 percent decrease from January to March.

These are the so-called “positive” findings of the survey, which is perhaps more an indicator of how badly the U.S. economy has been doing for a while than anything else.

The Exceptions

The Federal Reserve of St. Louis was apparently the only district that did not declare outright improvement in the economy; rather, the St. Louis district noted that the pace of economic contraction “appears to be moderating.”

And not every economic sector showed even hints of recovery: the commercial real estate market is apparently still suffering “very low levels” of construction and continued weak demand for space.

What About Unemployment?

The economy’s gradual recovery is expected to be tough on those looking for work, according to the opinions of several economists. Many are predicting peaks in unemployment in the next few months and slow returns to pre-recession levels.

Indeed, the most recent release of data from the Bureau of Labor Statistics shows that job openings in the U.S. have dropped by 2.4 million, a 50 percent decrease since June 2007.

These numbers have remained fairly consistent for the past several months, and show no indications of drastically changing in the near future.

And of course, the number of Americans filing bankruptcy shows little sign of slowing down, with figures from August, 2009, slightly below July's high and well above last year bankruptcy rate.

Additional Resources

Federal Reserve: Summary of Commentary on Current Economic Conditions (PDF)
Bureau of Labor Statistics: Job Openings Report (9/9/09) (PDF)

Tags: , ,
Posted in Bankruptcy and the Economy | No Comments »

Wednesday, August 26th, 2009

This Week in the U.S. Economy: Bernanke Second Term, Consumer Confidence & Home Prices Rise

The past seven days have been fairly significant for the United States, economy-wise.

Here’s a brief summary of three major stories you should know about.

Ben Bernanke: Nominated for a Second Term

President Obama took a break from his vacation on Tuesday to announce his re-nomination of Benjamin Bernanke as Federal Reserve Chairman.

If approved by the Senate, Bernanke will serve his second four-year term.

Since the economy hit the skids in 2007, Bernanke has:

  • Lowered the main interest rate to near zero and funneled almost a trillion dollars into U.S. banks to mobilize credit
  • Handled the financial crisis with “calm and wisdom,” according to Obama
  • Been criticized by legislators for reacting too slowly when early warning signs of trouble in the mortgage market showed themselves.

Bernanke is a Republican. Read his statement of acceptance.

Consumer Confidence Rises Above Expectations

The Conference Board published numbers showing that consumer confidence in August is up substantially from July. Specifically:

  • The Consumer Confidence Index currently stands at 54.1 ---  in July, it was 47.4 (a level of 90 is required for consumers to be considered “optimistic”)
  • The Present Situation Index rose from 23.3 in July to 24.9 this month
  • The Expectations Index rose from 63.4 last month to 73.5.

Economists look to these numbers in part because the United States has a very consumer-driven economy, meaning that long-term recovery will depend largely on the behavior of the average shopper.

Home Prices Jump in First Quarter

The latest report from the S&P/Case-Schiller Home Price Index shows a 2.9% increase of housing prices in the first three months of the year.

Though a small gain, the move is an important landmark: the first increase in home prices in three years.

This is good news, but not great: home prices are still down 14.9 percent from the second quarter of 2008, but that’s better than where they stood three months ago, at 19.1 percent below.

The rise could be a sign that bad times are over, but may just be a temporary upswing.

--Even though there's some good economic news to report, many Americans are still hurting. If you're having trouble making ends meet, it may be time to think about filing bankruptcy.

Tags: , , ,
Posted in Bankruptcy and the Economy | 6 Comments »

Wednesday, August 5th, 2009

Treasury Secretary Has Good News; but Tax Increases to Come?

According to the Treasury Secretary, the United States’ economy has pulled away from the edge of collapse.

Timothy Geithner made this evaluation after watching a week of positive economic indicators, according to CNN.com, and he believes the country can expect continued economic improvement for the rest of 2009.

Less Job Loss, More Jobs To Come?

Job losses should slow, and job creation could begin as early as 2010.

To bridge the gap between the end of the recession and the end of the recovery, Geithner says the government plans to extend unemployment benefits that are currently keeping millions of Americans out of poverty.

Some Economic Reality, Too

The news was not all good. Geithner acknowledged in an interview on ABC’s “This Week” that due to the recent emergency measures that seemingly saved the economy, the same economy is now significantly vulnerable to expanding deficit levels.

“We will not get this economy back on track, recovery will not be strong and sustained, unless we…can convince the American people that we’re going to have the will to bring these deficits down once recovery is firmly established,” the Treasury Secretary said on CNN.

Tax Increases?

Geithner did not rule out future tax increases as one possible strategy to address the deficit issue.

He reported that the President’s administration was dedicated to fixing the problem, and would not take anything off the table.

The next day, during a briefing with the press corps, Press Secretary Robert Gibbs clarified, stating that the President had already ruled out any tax increases on the middle class (those making under $250,000 per year).

Some Republicans have begun to acknowledge some improvement, but are not eager to give Democratic policies credit.

Rep. Mike Pence (IN) says that progress has happened "in spite of the prescriptions of Washington".

“I think what we’re seeing in the economy now is the inherent resilience of the American economy and the American people.

"This piecemeal approach—government handouts through a government bureaucracy—is no substitute for broad-based tax relief and fiscal discipline in Washington,” Pence told CNN.

Republican Sen. John McCain (AZ), who has spent more time opposing Obama than most of his colleagues, acknowledged that the $787 billion economic stimulus has had an effect, but voiced continued criticism that the cost was probably not worth the benefits in the long run.

“I think it’s very clear that the stimulus has had some effect,” McCain said. “But we have put trillions of additional debt on future generations of Americans. The long-term consequences, I think, are going to be, unfortunately, devastating unless we do something about it.”

Successful Cash for Clunkers Program Running on Fumes

Another stimulus-based proposal, the so-called “Cash for Clunkers” program that provides rebates to people trading in old cars for more fuel-efficient models, symbolizes the current debate.

The program, which was initially budgeted for $1 billion, has already exhausted its cash reserve, as car buyers flock to mostly American companies to trade in their vehicles.

Demand has exceeded supply, and now some Democrats want to extend the program, at a cost of $2 billion.

Some Republicans say the results aren’t clear enough to justify an additional expenditure.

Still, the program has lowered the miles-per-gallon rating of its participants’ vehicles by nearly 10 miles on average and Ford Motor Company reported some of its best sales numbers in years after the program went into effect.

Source: CNN.com

Tags: , , , , ,
Posted in Uncategorized | No Comments »

Monday, July 13th, 2009

Great Depression Number Two? Experts Give Honest Answers

A tally of financial gurus and bloggers were given a chance to pronounce their opinions of where the country stands in this economic strife.

The group includes:

  • a popular blogger dedicated to giving readers the deals not otherwise known by the general public
  • a Washington D.C. based corporate mogul who runs a billion dollar HP company and is seen as a visionary in the world of finance and economic reform
  • a Chicago-based real estate expert who aids his consumers daily in the plight of real estate purchasing, financing and recovery
  • a Wall Street broker and top blogger
  • a San Francisco-based financial guru with a leading blog
  • leading hedge fund managers

The prevailing thoughts were that of tension, apprehension and uncertainty by all who were a part of this informal questioning.

Along the same lines, the impressions of where the country stands were similar, with a new moniker being placed on our economic status: “The Great Depression 2”.

Whether this characterization is true still remains to be seen and might only come to fruition in hindsight.

However, one thing is clear: Relief is long from being in sight and life as the general consumer knows he or she will not see full recovery for as much as 10 years.

Experts State Their Views On Current Economy

The first of the five questions asked of our financial experts was that of a more simplistic one.

With little frill or extravagance those being questioned were given the short task of offering their opinions on the current economic status of the country. Simply stated,

How would you describe the current status of the economic climate within our country?

While the responses by all the respondents were of similar nature, with similar tone and rhetoric, there were certain responses that defined a tenure in our society, thus producing a billboard effect for the voice of our country’s consumer.

David Hochberg, President of Townstone Financial a Chicago-based Mortgage company, is seen throughout the home loan industry as an expert in loan services as well as a viable source of accurate information as it pertains to the common consumer of home loans, was plain in his response to the question.

We’re in a “State of Peril”

Hochberg states that Illinois, in particular, is in a state of peril not seen for decades.

With the home loan industry under heavy constraints and more and more debtors facing the bankruptcy cycle, Hochberg feels it will be many years before the lending institution recovers.

Even then, Hochberg continues, “the composition of the typical home loan applicant will be much different as will their needs.”

Taking on more of a bird’s eye view of the nation’s economic status while simultaneously drilling deep into the overall perception of where our economy sits is David Morris who is the Director of Mergers & Acquisitions for EDS Corporation (a Hewlett-Packard company).

Mr. Morris is a Georgetown alumnus who sits high a perch one of the country’s largest companies, and is relied upon to help orchestrate the company’s economic prowess amongst its competitors.

Injections of Liquidity Are Not Enough

This in turn serves to provide a certain benchmark for the typical consumer to work from.

David had this to say about where the US economy sits:

“No bubble of any kind in our history has been solved on the first try or in an abridged manner. Pick up any piece of historical analysis by Robert Shiller for a glimpse of what to expect.

Injecting liquidity into the system only holds the doors open long enough for those in charge to execute their contingency exit strategies. A washout of failed participants is the only proven way to eradicate prior excess and cleanse the system.

We are simply in a synthetic environment that buys our government time to deal with the real problems at hand. Any upside in the stock markets between now and the end of the year should be looked at as a gift to exit long positions and reposition for the markets heading south into 2010."

In a similar breath of displeasure and lack of short-term promise is the reply from John Thomas, a senior blogger for the site Seeking Alpha, which is widely considered to be the premier financial blog site—even earning top honors from Time Magazine.

Great Depression Number Two

Thomas who works under the title Mad Hedge Trader (Thomas also works as a Hedge Fund Manager in his ‘day job’) was very clear in his opinion:

“We are now full faced in the great depression number two. With that, there is sure to be a 5-10 year gap for recovery with real estate finding itself more towards the 10 year mark.”

Finding conjoining thoughts with both Morris and Thomas is famed economic blogger Mike ‘Mish’ Shedlock.

Shedlock who has a vast knowledge of the trends and incubus of the nation’s economy offered a profound opinion on the US economy and bankruptcy.

Shedlock offers that we, as a nation, are now amidst a ‘secular attitude change” which is from a dismal “credit event similar to the great depression.”

Considering the overwhelming popularity of Mish’s blog, the nation seems to be taking notice of his perceptions, consequently Shedlock’s response to the question of where our economy stands in worth heavy consideration. As does those of the rest of the respondents.

Cliché No More: Economy is Truly Affecting Us All

Overall, anyone who resides within the US has felt the strains of economic uncertainty, financial unfamiliarity and personal debt shock.

For what comes next in this evolution remains to be seen.

No amount of forecasting, prophesy or analysis will completely tell the story of our nation’s newest economic collapse.

However, one particular aspect to this will remain constant, as it was in the 1930’s. The resolve and ingenuity of the American consumer to fare well in troubled times will far outlast a lack of funding or rickety financial flooring.

The Filing Bankruptcy Option

Filing bankruptcy is a decision not to be lead into lightly.

Although it was created to be a legal avenue to support the financial rebound for those who travel down its path, it is not meant to be—nor should it be—seen as a ‘quick fix’.

The tasks for such financial declaration are laborious and heavy handed, with numerous ramifications resulting from the process.

The ideological change which abounds from a successful navigation of bankruptcy, if followed as the process is intended to be, is such a reformation that most who chose bankruptcy resurface from it far better suited for financial freedom than those who succumb to the far less successful products of financial distress:

  • foreclosure
  • repossession
  • lack of housing
  • unemployment
  • divorce
  • illness, injuries or death

Consequently, filing bankruptcy can often be a prescription for financial remedy far better suited for the current economic status we Americans are knee-deep in.

Tags: , , ,
Posted in Bankruptcy and the Economy | No Comments »

Friday, June 12th, 2009

Can You Get Money from Your Car? Cash for Clunkers Bill

In another attempt to stimulate the flagging economy, both the Senate and the House are considering what are being called Cash for Clunkers bills – in other words, legislation that would give consumers cash rebates for trading in gas-guzzling vehicles for new, fuel-efficient models.

Both versions of the bill work on the principle that getting Americans to buy greener cars is good for both the environment and the auto industry – but the details vary somewhat in the two houses of Congress.

The House Version: Buy New

The House of Representatives has already passed its version of the bill, which includes the following provisions:

  • Drivers of larger vehicles (minivans, trucks and SUVs) could get a $3,500 voucher for trading in vehicles with 18 MPG or less for ones with at least two MPG more.
  • People driving passenger cars would receive a voucher for $3,500 when they traded in a car getting less than 18 miles per gallon (MPG) for one getting at least 22 MPG.
  • Drivers of larger vehicles (18 MPG or fewer) could get a $4,500 voucher for an increase of only five MPG.
  • Passenger car drivers could get the voucher for $4,500 for exchanging a car with 18 MPG or less for one with a minimum 10 MPG improvement.
  • A $3,500 voucher would be available for those who purchase large trucks (vans and pickups between 6,000 and 8,500 pounds) with an MPG of at least 15.

In order to qualify for the voucher, your car must be a 1984 model or newer, drivable and insured continuously to you for at least a year.

The vouchers would be available electronically through participating dealers when you bought or leased a new car.

The Senate Version: New or Used

The Senate’s version of the bill is slightly different and includes a provision for Americans who are interested in buying a used vehicle rather than a new one.

  • Old cars must get 17 MPG or less and new cars must get 24 MPG or more to qualify for a voucher.
  • The voucher amount is graded, based on the MPG increase: for passenger car drivers who increase the MPG by 7, a $2,500 voucher; an increase of 10 MPG would yield a $3,500 voucher; and an increase of 13+ would yield a $4,500 voucher.
  • A used car getting 24+ MPG or a used larger vehicle with 20+ MPG would qualify the buyer for a $1,000 voucher.
  • Larger vehicles with 17 MPG or less traded for those with 20+ MPG would qualify for a voucher. The grading system works here, too: for an increase of 3 MPG, a $2,500 voucher; for an increase of 6 MPG, a $3,500 voucher; for an increase of 9+ MPG, a $4,500 voucher.
  • Large trucks would also be eligible for the graded voucher amounts.

If you're looking to save money on a new car, this program could be great.

But, if you're struggling to make it month to month, it's probably not best to buy new right now.

If you are having difficulty making ends meet, consider the filing bankruptcy option.

Learn about cars in bankruptcy.

Tags: , , ,
Posted in Bankruptcy News and Events, Bankruptcy and the Economy | No Comments »

Monday, May 18th, 2009

Bad Economy = Good Deals on Apartment/Condo Rentals?

A recent BusinessWeek article suggests that some tenants may actually benefit from the weak economy right now.

Rent costs are apparently dipping in major U.S. cities, including Manhattan, which is notorious for high rent costs.

But the savings aren’t limited to just the Big Apple – landlords across the country are reportedly looking for ways to fill their units, whether that means offering freebies or reducing rates for current tenants.

Negotiating Your Rent

So how can you take advantage of this trend to save some cash every month? Try these negotiation tips:

  • If you’re looking for a new apartment: Before signing a lease, put on your bargain shoes. Ask for a rent reduction, a security deposit waiver, free access to available amenities, or whatever else makes sense for your area. Landlords would rather fill an apartment or house for a little less money than normal than lose money by letting it sit empty.
  • If you’re getting ready to renew a lease: If you’ve stayed current on your rent and generally been a good tenant, you may be in a position to negotiate. Consider asking your landlord to lower monthly payments, waive rent increases or spring for new appliances. Decide what you want most and then ask for it: a landlord looking to hang on to tenants likely won’t let you go.
  • If you’re worried about losing your job: Consider asking for a “layoff-proof” lease, which some landlords have begun offering to get people to sign. These agreements come with the understanding that, should you lose your job, you can break the lease with no penalty. This offers you a sense of security about the future and allows the landlord to pick up at least a month or two of rent.
  • If you’ve taken a pay cut recently: Again, many landlords would prefer to keep their units filled – even for less money per month – than let them sit empty. If you’re worried about making your rent, contact your landlord and explain your predicament. Ask for a rent reduction or shortened lease.
  • If your neighbors are moving out: If you’ve noticed moving trucks carting away your neighbor’s belongings, consider asking for a free upgrade. Maybe other apartments in your building have nicer features than yours – you could request to be moved to one of those apartments for no price change.

Remember, negotiating can be fun and rewarding–and the worst anyone can say is “no!”

--With the tough economy, many folks are filing bankruptcy. If you're struggling with bills, talk to a bankruptcy lawyer today.

Tags: ,
Posted in Bankruptcy and the Economy, Financial Literacy | No Comments »

Thursday, May 7th, 2009

Consumer Credit Shrank Again in March

Recently released numbers from the Federal Reserve show that consumer credit in the United States contracted again in March.

According to a recent Bloomberg article, consumer credit fell by $1.11 billion in March, after an $8.1 billion plummet in February.

This figure isn’t jaw-dropping, but is significantly higher than the $4 billion drop predicted by many economists.

At a time when the jobless rate is higher than it’s been in 25 years,  a decrease of this magnitude isn’t entirely surprising, but March’s drop was the largest since records were first kept in 1943.

Here’s a quick summary of some of what the report found:

  • Both revolving and non-revolving debt went down by more than $5 billion in March.
  • Because most banks and lenders are expecting more delinquencies and financial losses this year, many are tightening lending standards, making loans harder to come by.
  • Car sales decreased 37 percent in March of 2009 compared to March of 2008; however, sales incentives were up about 30 percent to approximately $3,169 per vehicle.
  • Consumer spending was up at a rate of about 2.2 percent in the first quarter, a potentially promising figure, since it represents an increase over last year.

The (Potentially) Good News About the Economy

The results of the Federal Reserve’s stress tests for banks could improve consumer and investor confidence, according to some sources.

These tests, designed to determine how well suited many large banks are for difficult economic times, are expected to show which banks need to raise capital and which ones do not.

Preliminary figures show that several major banks, including JPMorgan Chase & Co., American Express Co., Goldman Sachs Group, Bank of New York Mellon Corp., MetLife Inc., Capital One Financial Corp. and State Street Corp. have been assessed as not needing to raise any more capital.

Some news outlets have speculated that some of these banks may try to repay TARP money lent by the federal government.

How You May Be Affected

Overall, if you’re looking to take out a loan or open a new credit card account, you may still find serious roadblocks in your way.

Banks are apparently still holding back on offering consumer loans.

This may not bring enough good news to all-- people are still in financial turmoil and filing bankruptcy.

Tags: , ,
Posted in Bankruptcy and the Economy | 1 Comment »

Thursday, January 29th, 2009

Media Speculation: Britain Filing Bankrupty?

Recently there's been much speculation about the financial security of Great Britain.

One trigger for the alarm is the rapidly declining value of sterling; however, financial journalist Nils Pratley says there's no real cause for panic just yet.

Britain Filing Bankruptcy? It's a Premature, if Not Absurd, Idea.

Pratley points out that sterling was widely overvalued and is now in the midst of a correction that will take years. He says that the talk of Britain filing bankruptcy is dramatically premature, if not absurd.

British Banks

Others agree with Pratley and say that the growth of British banks was out of proportion for the economy, and has made them more vulnerable.

Other Euro Countries are Worse Off

David Wighton of the Times says that actually, many European countries such as Germany and Spain are in similar or worse shape than the UK.

So, What's the Cure?

Some economists say that the answer to the financial crisis is to nationalize more banks in Britain to restore confidence in the economy and allow the government to open up lending.

As in the U.S., many deem the banks in the UK as "too big to fail" and call for full nationalization and a coordinated attempt to rebuild British capitalism.

Tags: , ,
Posted in Bankruptcy and the Economy | 1 Comment »

Friday, January 23rd, 2009

China’s Not Digging Our Debt & It Could Affect You

Suffering economies are not exactly news anymore as we come to terms with the recession rocking most corners of the globe.

But it does appear that the shifting impact of the crisis will continue to show itself in new ways.

Take, for example, China’s decreasing interest in buying U.S. debt.

Like much of the rest of the world, China is having its share of economic troubles. According to The New York Times, the Chinese government is planning a $600 billion stimulus package to recharge the national economy.

This may have long-term benefits for the Chinese people; however, the move could mean bad news in the United States.

China is reportedly the largest foreign holder of U.S. debt, currently holding more than $1 trillion.

But since the economic downturn, China has shown less interest in buying our debt – partly because it needs money for its own stimulus projects.

So What Does China's Debt Disinterest Mean for Americans?

The more buyers interested in holding our debt, the lower the returns received by the holders.

So, when China was frantically gobbling our debt, returns fell to near-zero levels.

As China’s interest wanes, fewer entities will hold American debt and those groups will likely expect greater returns on what they have.

This could force the U.S. government to raise key interest rates in an effort to generate more income to pay off debt holders.

And, as you may have guessed, an increase in those interest rates could translate to increased interest rates for all borrowers, including individuals looking to buy a car or a home.

This may seem like more gloomy news in a season of plenty of economic gloom, but, according to the NYT, there may be a bright spot in the future.

Apparently, America could benefit long-term from having its debt spread more evenly among debt holders.

However, if the shift happens too quickly, the short-term effects could outshine any potential long-term gains.

This may not be the worst news from the global recession, but it certainly isn’t the best, either.

Tags: , ,
Posted in Bankruptcy and the Economy | No Comments »

« Older Entries