January 14th, 2009 Admin
Predictions for 2009 Job Losses
How many jobs will be lost in 2009? No one knows for sure. But, there are some pretty scary predictions out there.
An estimated 2 million more jobs could be lost in 2009. 2.6 million jobs were lost in 2008. The Conference Board issued a report that showed exactly where its Employment Trends Index fell to. The index recently fell to 99.6 (down 1.6% from just last month).
Gad Levanon, the Conference Board senior economist said, “The continued deterioration in the Employment Trends Index signals that no turnaround in the labor market is expected in the near future.”
The Employment Trends Index has continued to decline for the past 17 months. It has dropped more than 1.6 percent in the past six months.
Many Americans wish the index would change, but the truth is that it just isn’t getting better. Wachovia’s chief economist John Silvia said, “I know that this is frustrating for a lot of people because they would like to see a change in the trend. But what we’re seeing is the same as before.”
Silvia predicts that the worst is already behind us. He continued, “A lot of companies have already cleared the decks in 2008. Given that we’ve already claimed a loss of 2.6 million jobs, we can probably expect to see another million and a half.”
However, things don’t look so good for those who are out of work. The job market continues to decline as more and more companies resist hiring. In fact, “the jobs hard to get component” of the Employment Trends Index went from 37.1 percent in November to 42 percent in December.
It is getting harder and harder to become employed as millions of Americans look for work. Silvia said, “We can expect to see a further decline in the next six months, but we’ve probably already seen the biggest number we’re going to see.”
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January 13th, 2009 Admin
The Truth About the Bailout
Millions of Americans were against the idea of a ‘bailout plan.’ Millions more were in favor of the plan. Once the bailout plan was passed, it seemed as though Americans counted on this as the way to save the economy.
The bailout plan was passed in a matter of only 10 days. The bailout plan was passed to treat symptoms, not the disease. The bailout plan is merely a way for the government to apply band-aids to a large, open wound.
The government promised that the bailout plan would remove the cancer caused by the failure of Fannie Mae, Freddie Mac and the insurance-giant, AIG. However, all it did was prolong the illness.
Billions of dollars will be spent fixing the balance sheets of banks around the country. However, this does not fix the root of the problem. The root of the problem is that millions of homes around the nation are worth a considerable amount less than the outstanding balance of the homeowner’s mortgage.
These billions of dollars are “destroying Main Street’s balance sheet.” This money is obliterating the value of home-based securities that American Taxpayers are about to start purchasing.
Simply put…the government is trying to fight home foreclosures with an extremely inefficient tool. The tool? Loan modification programs that cover up the problem instead of treating it. As long as the problem is masked instead of fixed, foreclosures will continue to set record numbers.
Todd Harrison of MSN.com wrote, “Defaults become delinquencies, which become foreclosures, which become evictions, which become repossessions, which flood the market, depressing prices as supply outstrips demand.”
It used to be that home prices only went up. Not in this market. Home prices have plummeted and the bailout plan really isn’t doing anything to treat the problem.
Here are a few things for the government to keep in mind…
Teach the American people to simply live within their means. Less is more. Simplistic living could solve this crisis better and faster than the bailout plan ever could. Bigger is not necessarily better.
These principles may be the only way to get America out of the mess it has created…not the bailout plan.
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January 12th, 2009 Admin
Only One Bank?
Doesn’t it seem wrong to you that banks don’t have to track exactly how they used bailout money? The government has handed millions of dollars out to banks around the country with no strings attached. They didn’t say, “Here’s some money to get you back on track, but how you spend it needs to be itemized and recorded.”
No, instead the government passed out this money like candy. There weren’t any rules about how the banks should use the money. And, the banks don’t have to report how they used the money. Doesn’t that seem a little sketchy to you?
The U.S. Treasury has undergone a lot of scrutiny for not making bailout banks account for the money they received. On the flip side, it does learn from its mistakes. 200 or more banks were not required to keep a log of how they used their money. Only 1 was.
Citigroup was given about $20 billion in bailout money. It promised that it would use “its reasonable best efforts to track the money and will send the government quarterly reports.” But, has the U.S. Treasury really learned from its mistake?
Seven other banks were given money the same day Citigroup was. However, these banks were not required to keep a log or track how they spend the bailout money. Why Citigroup? Why is Citigroup the ONLY bank being required to track how its spends government money?
The U.S. Treasury says that it doesn’t want to “impose a burden on institutions it deems healthy.” Surely Citigroup isn’t the only unhealthy bank in the nation. Why are ‘healthy’ institutions getting government money anyways? Why is the U.S. Treasury handing out our taxpayer money and not requesting these banks to track how they spend it?
Neel Kashkari, a Treasury official, gave this shocking defense…”It’s not going to be perfect. And as you know, you put $1 into an institution, it’s impossible to follow where that $1 goes.”
Shocking and ridiculous. What will it take to get government officials to be honest and responsible when it comes to spending our money?
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January 6th, 2009 Admin
Forgiving Your Debt
Nowadays, lenders are much more willing to work with you if you come across a financially hard time. It wasn’t always this way. In fact, there was a time period when lenders wouldn’t work with you if you couldn’t pay. In order to avoid lawsuits, foreclosures and repossessions, lenders have changed their stance when it comes to working with you.
It used to be that lenders wouldn’t “work” with you because it was cheaper for them to just “write-off” delinquencies as bad debt. Default rates have recently soared to new heights. The economy has become extremely weak. Credit is much harder to come by. Because of this, the “rules” of working with the consumer have drastically changed.
Here are some interesting statistics to consider.
-During the second quarter of 2008, credit card lenders “charged off 5.47% of the total amounts owed on cards as bad debt.” Last year (during 2007), the charge-off rate was at only 3.85%
-Consumer bankruptcy filings experienced a 40% increase from last year during the month of October. During October of this year, more than 100,000 bankruptcies were filed. This is the highest number of filings since October 2005 when the Federal Bankruptcy Reform Law took effect.
-When it comes to being more than 60 days past due on mortgages, more than 2.2 million homeowners fall into this category.
-One in six homeowners owes more on their home than it is worth.
-”With home prices plummeting, every foreclosure now represents a loss of 44% of the original loan amount, up from 29% a year ago,” according to data from LPS Applied Analytics.
Can’t you see why lenders are more willing to work with consumers now? The more lenders work with financially-troubled consumers, the more revenue they are able stop from being lost. Some of the biggest relief programs are as follows:
-Fannie Mae and Freddie Mac will begin paying mortgage service companies $800 for every loan that is modified. This helps out the borrower in several ways. 1) Interest rates would be reduced 2) The borrower wouldn’t spend more than 38 percent of their “gross income on housing expenses.” 3) Home loan terms would be moved from 30 years to 40 years
-Citigroup also announced that it would suspend foreclosures for people who lived in their own homes, who had a good chance of making full, lower payments and who had decent incomes
-JPMorgan Chase also modified about $70 billion in home loans. This modification program could aid as many as 400,000 homeowners.
-Bank of America announced that it would modify 400,000 mortgages.
Yes, if you are upfront and honest with your lenders, chances are that you will end up just fine in this whole mess. Lenders are more willing to work with borrowers than ever before. Whether your loan is modified by your lender or your payment options are a little more flexible, it is certainly worth it to talk to your lender about your current situation.
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