WTF

... is wrong with these people:

Senator Mitch McConnell of Kentucky, the Republican leader, quickly went to the Senate floor and declared Mr. McCain’s proposal "an outstanding idea."

An outstanding idea? McCain has no clue what is going on. His stunt of suspending his campaign is just that - a cheap stunt to try to get out of the debates, especially the VP debate. But McConnell is just warming up:

“Americans want to know that their home values and college funds and retirement accounts are safe. In other words, that the problems on Wall Street are not going to spread to Main Street. So I appreciate my colleague’s proposal and I hope that it is given serious consideration.”

Hey Senator, the problem is on main street, i.e. record foreclosures - and is headed back to Wall Street in the form of MBS and other toxic paper they invented - to supposedly avoid the very such problems they are in - not the other way around.

Do they just let anybody who is rich become a senator?

The financial markets are working

Knowing that there is nothing this administration won't try, you really have to start to wonder about this plan's timing. Did Paulson really think he could make Chuck Schumer crap himself and sign over a trillion dollars over a weekend?

The plan as it emerges is terrible - it is simply a bailout of the people/institutions holding these MBSs and other pieces of toxic paper.

I have a pretty plain observation about the whole mess - the financial markets are working - not melting down. Credit is tighter, the TED spread is exploding, treasury yields are low, etc. etc. because the market - the market in, of, and for these things - knows that there is no "there" there. There is no credit to be offered, because there are no assets to back it up. The market is trying to tell people to stop borrowing - this is exactly what it is supposed to be doing.

Let the housing market come to rest where it should, let thousands of housing starts stop, let hundreds or thousand of CRE developments grind to a halt, let unemployment rise - and let these banks/brokerages/hedge funds/etc. fail if they have to. They made the mess - they invented it, participated in it, feed slovenly from the trough of it. And when it still wasn't enough, they forced the game all the way down to the lowest of consumers and convinced damn near everyone in the entire United States that they had to own a home (or two or three) and two cars and a 60 inch TV, etc. etc. and that we could all just pay for everything later.

Well you can't. You can't leverage everything up 30 times - it just doesn't work. This has just been proven - and all this bailout seems to want to do is to return things to the way they were a couple of years ago. Instead of seeing the housing market as a bubble, Paulson is talking about a housing recovery. What recovery? Is he insane?

Some links:

Pigs at the Trough TPM

Getting real — and letting the cat out of the bag Krugman

The Bailout

The new bailout as it stands this morning is a crock of crap. This is not a liquidity crisis - it is a solvency crisis. Wall Street is about to be bailed out by the taxpayer, plain and simple. More of these institutions should be allowed to fail. Home prices should adjust to where they have to on their own. When I hear Paulson talk about a housing "recovery" it shakes me to the bone. There is no recovery coming. There was a bubble, it burst, get over it. The fact that there are so many lucid comments all over the web, but that none of those quotes are coming from the government should tell you something. Here are a couple:

Cash for Trash from Paul Krugman:

"Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us."

From a commenter on TPM:

"As a Wall Street guy I am sort of glad that this bailout is being organized. However, what seems unfair to me is that there are absolutely no provisions for homeowners. Moreover, this morning on Stephanopulous I saw Hank Paulson talking about homeowners taking out mortgages that were higher than they could afford and about them needing to live up to their obligations.

I find it incredible that he would use language like that while asking taxpayers to send a trillion dollars to Wall Street because investment banks made irresponsible investments and aren't able to live up to their obligations."

And whatever your opinion of Shedlock at Global Economic Trend Analysis, he has been all over this mess forever. As has Calculated Risk.

19,000 Workers Accept Buyout at G.M.

Wow:

DETROIT — General Motors on Thursday said that 19,000 hourly workers — a quarter of a unionized work force that already has been dramatically pared down — have accepted buyouts.

Most of the workers will depart within the next month, as G.M. formulates a plan to deal with plummeting demand for sport utility vehicles and pickup trucks while gasoline prices climb above $4 a gallon. The proportion of G.M. workers who took a buyout is more than triple the acceptance rate at Ford, where 4,200 of 54,000 workers took deals offered as part of a similar program.

Though G.M.’s 74,000 workers are on average older than Ford’s, the size of the exodus at G.M. signals deteriorating confidence among members of the United Automobile Workers union in their employer and the industry.

Many who remain — particularly workers at truck plants who were laid off for much of the spring because of a strike at a parts supplier — face what is sure to be a summer filled with plant idling and an uncertain future after that. G.M. said in April that it would eliminate one shift at each of four truck plants in Michigan, Wisconsin and Ontario.

But gasoline prices have risen 35 cents since then, making big vehicles even more unattractive and suggesting that Detroit automakers will need to cut deeper.

“While too early to tell definitively, indications are that the shift in buying preferences may, as in the late ’70s/early ’80s, persist for several years, even if oil/gas prices retrench,” Brian Johnson, an analyst with Lehman Brothers, wrote in a note to clients.

Ford last week responded to falling sales by saying it was reducing production in North American by 15 percent, ramping up cost-cutting efforts and abandoning its long-held goal of returning to profitability by next year.

Ford is also planning a considerable reduction in salaried positions, according to a person with direct knowledge of the plan. The cuts would be achieved through layoffs, rather than buyouts or early retirement offers, and reportedly could number as many as 2,000, though this person, who is not authorized to speak publicly about the plan, would not confirm that figure.

“They’re finally recognizing that there’s a sea change in the vehicles people are going to buy,” said Greg Gardner, an analyst with the Oliver Wyman Group, which publishes the Harbour Report on automotive manufacturing.

Ford posted a surprising $100 million profit in the first quarter but warned that it would lose money in the rest of the year.

Meanwhile, G.M. lost $3.3 billion in the first quarter. It said second-quarter income would be reduced by $1.8 billion because of strikes at two of its plants and by the 87-day strike at its supplier, American Axle & Manufacturing, all of which recently ended.

But much of that amount would have been lost even without the American Axle walkout, because G.M. still has more than four months’ worth of inventory of the vehicles produced in the factories that had to be shut down.

“Demand has deteriorated so fast that inventory units haven’t declined much and inventory days remain at record high levels,” Mr. Johnson wrote. “We believe that very sharp production cuts will be required throughout the rest of the year.”

G.M. is expected to discuss its plans to cope with declining sales at its annual shareholder meeting Tuesday in Wilmington, Del. The plans are believed to call for further reductions in truck production but not additional plant closings.

The company said it would hire new workers, under a significantly lower pay scale created by the contract G.M. signed with the U.A.W. last fall, to replace many of those who leave through the buyout program. G.M. could decide to slow production by hiring fewer replacements or by hiring them more slowly than originally intended.

“Despite significant challenges in the U.S. market, we continue to reshape our business for long-term success,” Troy Clarke, the president of G.M.’s North American operations, said in a statement. “This attrition program gives us an opportunity to restructure our U.S. work force through the entry-level wage and benefit structure for new hourly employees.”

The number of workers leaving G.M. through the buyouts is at the high end of the range that the U.A.W. president Ronald Gettelfinger estimated in February. But after Ford only managed to persuade half as many workers to leave as it wanted, many thought G.M.’s acceptance rate would be much lower.

Retailing Chains Caught in a Wave of Bankruptcies

The NY Times has an article out today about companies across the country going out of business. I think it sounds a little too sympathetic to the business side - there is a lot of "retailing is so hard" and "we have to borrow to pay bills and salaries", etc. That just doesn't sound like a good business plan to begin with. If these businesses are so weak and rely so much on debt, then losing them is probably a better long term solution. My sympathies are with the people who work there more than the corporate/equity firm owners. There is just something about America that makes everyone think you have to have 500 stores in all 50 states, and leverage yourself up to the gills to pay for it all, blah, blah, blah. Maybe one thing this recession and global credit crisis will change for the better will be a shift to more small, family owned, sustainable businesses, a revival of some downtowns, and the realization that bigger and cheaper is not always better. It would be a nice silver lining to this mess.

Shoppers scrimp as food prices rise

That is a Reuters headline.

SECAUCUS, New Jersey (Reuters) - Patricia Norris' family is feeling the one-two punch of higher fuel and food prices.

Her husband works as messenger, driving around to deliver packages. But the job is not as profitable as it once was because rising fuel prices are eating into his earnings.

With money tight and food prices rising, Norris can no longer afford to buy beef and chicken on a regular basis.

"We buy meat only for special occasions. Like for Easter, we had a ham," she said after a shopping trip at her local Wal-Mart in Romeoville, a mixed blue- and white-collar suburb of Chicago.

Norris must purchase only what is on her shopping list, to avoid spending more than she can afford.

"Sometimes I cry," she said, when she passes items on store shelves she can no longer buy.

Overdue Consumer Debts Highest Since 1992

There are a lot of not very good signs out there - this is one of them:

"Consumers fell behind on car, credit- card and home-equity loans at the highest level in 15 years, another sign the U.S. economy is slowing, according to the American Bankers Association's quarterly survey."

This is another:

"The Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000 to 407,000 for the week ending March 29. The increase left claims at their highest point since Sept. 17, 2005, following the blows of the devastating Gulf Coast hurricanes."

I get this fleeting feeling sometime that this is as bad as it gets - that all of this money pumping by the Fed and the tax payer assisted rescue of the Robber Barons of our day has started to kick in and will have some soothing effect - but then I remember that we are still in this terrible, three trillion dollar war, that inflation is raging, real wages are falling, gas is pushing $4.00 a gallon, and that people are pretty gloomy about this whole mess - and the feeling goes away.

A change in the zeitgeist?

It is only one article "Thinking the unthinkable: what if it's not that bad" - but - could the tide already be shifting?

I don't think so - not yet. The stock market may have stabilized, but does that really mean anything for the overall economy? Housing news supposedly looks better? Who are we kidding - maybe month to month some things are improving - but these are still bad numbers overall and YOY they are TERRIBLE (DOWN 23.8% below February 2007 levels). There is a lot of inventory to work off, and many bad loans out there. It is going to take some time. Maybe the market panic is over - but the real work on the economy has hardly started.

Carlyle Capital says unable reach deal with lenders

More humor:

"The credit angst is back," said Tim Condon, head of Asia research with investment bank ING."

How long was it gone for - one day?!? What is wrong with these people... can we at least get serious reporting on this mess?

Home loan demand drops as rates near 5-month high

It is really amazing that everything the Fed does, timing wise, seems to be because how the stock market is acting, and is actually having no effect on the real world. I know it isn't that simple, but it really seems to be. Check out this headline: Home loan demand drops as rates near 5-month high.

The cutting of interest rates was supposed to... lowere interest rates, right? Instead, real mortgage rates are going UP!

Some other recent headlines: Unemployment rate rises in 27 states in January, Consumer bankruptcies leap in February, Subprime crisis and poverty hand-in-hand: study. And yet many economists are still saying that technically there will not be a "real recession". At this point, who cares? The pain seems real enough. The country is convulsing in a leaderless vacuum.