“Unusually Uncertain” Enters the Lexicon of the Recession
- Jul 22, 2010
July 22, 2010
By Dees Stribling, Contributing Editor
Federal Reserve Chairman Ben S. Bernanke memorably summed up the recovery as “unusually uncertain” in testimony before the Senate Banking Committee on Wednesday, very shortly after President Obama signed the financial reform bill. Mostly, though, the chairman didn’t point out anything not generally understood about the economy: growth is slow, and it will be a long time before unemployment eases–the Fed expects to see 7 percent to 7.5 percent unemployment by the end of 2012, for instance.
His assessment of CRE was a tad more gloomy than that: “Spending on nonresidential structures–weighed down by high vacancy rates and tight credit–has continued to contract, though some indicators suggest that the rate of decline may be slowing,” the chairman noted.
Wall Street took the not-altogether optimistic tone of the chairman’s remarks to heart–that, or there was profit-taking–and after a so-so beginning of the day, the indices declined steeply as the chairman spoke. The Dow Jones Industrial Average dropped 109.43 points, or 1.07 percent, while the S&P 500 lost 1.28 percent and the Nasdaq retreated 1.58 percent.
Barofsky, Warren Berate Home Loan Modification Programs
Meanwhile, elsewhere on Capitol Hill on Wednesday, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, took the U.S. Department of Treasury to task for its handling of mortgage modifications. Mainly, he called for the government to adjust its goals to be more realistic.
“Treasury’s continued indications that this is a successful program without identifying these goals and benchmarks is simply not credible,” Barofsky told the Senate Finance Committee. “I fear that the growing public suspicion that this program is an outright failure will continue unless and until Treasury… comes clean with what its goals and expectations are.”
Elizabeth Warren, who heads the Congressional Oversight Panel and who’s on the short list to run the new consumer protection agency, was likewise unimpressed by Treasury’s efforts to stem residential foreclosures. “The program is based on the assumption that we will pay the servicers a bribe to make a deal between the homeowner and the investor who’s still holding the paper, and it has not worked well,” she said.
SoCal on the Mend?
On a more hopeful note, one of the regions hit hardest by the recession, Southern California, seems to be (slowly) turning around economically, according to a report by the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp. released Wednesday.
A number of important sectors in the regional economy are now expanding, though that might not mean much job creation in the near term, the report noted. International trade is expected to grow in the region in 2010 and next year, as is technology, tourism and television and film production. Downward drivers for 2010 and into 2011, however, include both commercial and residential real estate, and local and state spending.
“We are seeing a measured recovery under way,” said the Kyser Center’s chief economist and report co-author, Nancy Sidhu, in a statement. “Measured” beats “unusually uncertain” any day.