Recently in Economic Depression Category

StarTribune.com

How much is a noble idea worth? A new state law prohibits cities, counties, the state and other "public employers" from buying uniforms or safety equipment made outside the United States. The idea, said the man behind the measure, Rep. Tom Rukavina, is to send a message about protecting American jobs and revenue. An admirable goal, say city officials and the League of Minnesota Cities, but the problem is that cash-strapped local governments have never been in a worse position to devote scarce resources to a philosophical ideal, even if they agree with it.

Dec. 28 (Bloomberg) -- A one-page proposal gaining traction in Congress could turn back the clock on Wall Street 10 years, forcing the breakup of banks, including Citigroup Inc.

Lawmakers in both parties, seeking to prevent future financial crises while soothing public anger over bailouts and bonuses, are turning to an approach that's both simple and transformative: re-imposing sections of the 1933 Glass-Steagall Act that separated commercial and investment banking.

Those walls came down with passage of the Gramm-Leach- Bliley Act of 1999. A proposal to reconstruct them, made by U.S. Senators John McCain and Maria Cantwell on Dec. 16, would prevent deposit-taking banks from underwriting securities, engaging in proprietary trading, selling insurance or owning retail brokerages. The bill could also force the unwinding of deals consummated during the financial crisis, including Bank of America Corp.'s acquisition of Merrill Lynch & Co.

Hat Tip: Susie Madrak via C&L

(Star-Tribune) Last month, officials attributed the dropping rate partly to a large number of people who gave up looking for work. The state labor force has seen a net reduction recently.

(NYT) With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers -- 17.5 percent -- were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

"We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," Brian Griffiths, who was a special adviser to former British Prime Minister Margaret Thatcher, said yesterday at a panel discussion at St. Paul's Cathedral in London. The panel's discussion topic was, "What is the place of morality in the marketplace?"

Amid the flap over bonuses at American International Group Inc. two of the company's top managers in Paris have resigned. Their moves have left the giant insurer and officials scrambling to replace them to avoid an unlikely but expensive situation in which billions in AIG trading contracts could default.

Representatives of the Federal Reserve, AIG's lead U.S. overseer, are talking with French regulators and AIG officials to deal with the consequences of a complicated legal scenario in which the departures of the managers in Banque AIG, a subsidiary of AIG's Financial Products unit, could trigger defaults in $234 billion of derivative transactions, according to people familiar with the situation and a document AIG provided to the U.S. Treasury.

The New York Times

Wall Street may have panned the broad outlines of the Obama administration's plan to fix the financial system when the proposal was sketched out six weeks ago, but on Monday, investors seemed like they were warming up to its finer points.

Stock markets in New York were heading for a higher opening, and most markets in Europe were higher as the Treasury Department began to release details of a public-private partnership to purchase troubled assets from banks. Shares in Asia also closed higher.

The government hopes that the plan will loosen credit markets and restore normal lending conditions by allowing banks to deleverage billions of dollars in mortgage-related debt sitting on their balance sheets.

The claim here is that a weak economy has already left strapped consumers with fewer places to obtain traditional loans, which in turn means that people are increasingly likely to cash in their life insurance policies in order to scrounge up a bit of ready cash.  That's bad enough, but if AIG were to fail -- or if there were even a rumor of failure -- everyone would start lining up to cash in their policies at once.  This would cause a panic and customers of other insurance companies would start lining up too.  Since reserves aren't big enough to pay off everyone at once, this would cause massive, cascading failures in the entire life insurance business.

CNN Money

NEW YORK (CNNMoney.com) -- The U.S. economy continued to hemorrhage jobs in February, bringing total job losses over the last six months to more than 3.3 million, and taking the unemployment rate to its highest level in 25 years.

The government reported Friday that employers slashed 651,000 jobs in February, down from a revised loss of 655,000 jobs in January. December's loss was also revised higher to a loss of 681,000 jobs, a 59-year high for losses in one month.

"It's a dismal report. We thought we'd have another month like this, and I think we have a couple of more coming," said Tig Gilliam, chief executive of Adecco Group North America, a unit of the world's largest employment firm. "We've got a lot of layoffs being announced that haven't been implemented."

Gilliam said he expects the unemployment rate to rise to 9% within the next few months.