News Cut Category Archive: Economy

An economy-to-English translation

Posted at 10:57 AM on November 19, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Minnesota officials today said the unemployment rate rose to 7.6 percent in October, while 2,200 jobs were added. As with most economic stories, this one, too, is long on numbers and short on English.

Treasury Secretary Tim Geithner is one of the few people in Washington who speaks English when it comes to testifying before Senate and House committees. He's also one of the few cabinet members who appears to have little stomach for the niceties of politics.

So today's Geithner testimony before the Joint Economic Committee held a lot of potential for fireworks. It includes Senate and House members with similar dispositions. It did not disappoint.

Republicans came out looking for blood, and Geithner was more than happy to oblige. It was not only great theater, the two sides provided a clear picture of where two economic philosophies collide.

Take this exchange between Geithner and Rep. Michael Burgess (R-TX):

Burgess: TARP (the bailout) is supposed to expire. Why won't we let it die a natural death rather than letting it painfully linger?

Geithner: We are looking to put the TARP out of its misery, and nobody will be happier than I am to see that program terminated and unwound. I want to point out that we are moving very aggressively to close down and terminate the programs that defined TARP at the beginning of the crisis.

Burgess: It looks like the money is going out with little or no oversight.

Geithner: That is absolutely not true. The Congress established three separate oversight committees...

Burgess: Your own inspector general on the Troubled Asset Relief Program has got several concerns. Why not just stop spending on the TARP funds and why not repeal the program? We don't need it anymore. People never liked it, let's just do away with it... If you just get the heck out of the way, the American economy will recover, as it has always done.

Geithner: That broad philosophy helped produce the worst financial crisis and the worst recession we've seen in generations. We had a pretty good test of that philosophy, pretty good test of those policies, it did not serve the country well...

Burgess: When I came here in 2003, we were in a jobless recovery. Tax relief was passed in May 2003 and as a consequence, by July of that year we were adding jobs at a significant rate. It seems to have worked fairly well. I don't think you should be fired, I thought you should never have been hired. And I objected when the hearings were going on over in the Senate; I thought there were too many question marks about things that had occurred in the past, and it did not leave the American people with a good feeling about the person who was going to be responsible for this economic recovery. What can you say today... I'll tell you my folks, they're not just anxious, they are mad; they are fighting mad about what is happening in the economy. They are fighting mad about the stimulus. They are fighting mad about how many jobs we created in Arizona's 9th District, do you know the congressman in Arizona's 9th District? They won't have a 9th District until after redistricting; they only have 8 right now. This kind of nonsense is what the American people are seeing and that's why they're so upset. (Bob notes: See my post here on the mystery districts)

A few moments later, the committee chair asked about the gap between the "haves" and "have-nots" in America.

"We've had a decade-long increase in inequality in America; it did not start in this decade," Geithner replied. "It really started a long time ago. But in the '90s, we had a long period with budget surpluses, rapid growth in private investment, rapid growth in productivity across the American economy, with broad-based gains in income for middle-class Americans. That record should make one optimistic about this country, and what's possible if we get the basic policies right. But you can see from the state of this economy, looking back just a year ago, what happens when you get those broad judgments wrong. It's unfair and unjust because the people who bear most of the burden of those crises are the people who are the most vulnerable."

A few minutes earlier, Geithner sparred with another Texas Republican congressman:

Minnesota Sen. Amy Klobuchar ran the latter part of the hearing but had little to offer. But, then again, what was left to say?

Comment on this post

The third world of the U.S.

Posted at 1:15 PM on November 12, 2009 by Bob Collins (4 Comments)
Filed under: Economy

Per chance, you've seen the occasional news story of a U.N. trip to a third-world country where investigators probe squalid living conditions.

Now there is here, according to the Guardian. The U.N.'s Raquel Rolnik is preparing a report on the U.S. housing crisis. The U.N. special rapporteur had been blocked from touring the U.S. by the Bush administration.

"I was shocked when I realised that the US, and countries in Europe - England - as well, had a solid housing policy for many years that worked pretty well. That was dismantled and the situation became worse throughout the nineties. Then we had this financial crisis and a real crisis in housing. It's all tied together," she said.

"But I didn't expect to see what I have seen. In some ways the situation is worse than I expected."

She traveled to New York, Chicago, New Orleans, South Dakota, and Los Angeles to chronicle housing woes.

Rolnik admits there's nothing she can do about the problem other that to publicize it in hopes someone will pressure the U.S. government to change things.

Comment on this post

A letter to my loan shark

Posted at 9:27 AM on November 7, 2009 by Bob Collins (7 Comments)
Filed under: Economy

This week the House closed the barn door as the horses galloped over the horizon, voting to freeze interest rates until a credit card law passed 8 months ago kicks in. The credit card companies have been wallpapering consumers' homes with notices of increased rates.

Many credit card companies, which had offered no-annual-fee accounts, are now slipping in charges. In many cases, the card companies are trying to "test" how much you love your credit card, and how much money you're willing to fork over to keep it, according to Marketwatch.

And this week, Pew's Safe Card Card Project released a study showing credit unions as a far more logical source of credit cards than commercial banks:

In July 2009, median advertised interest rates on cards from the 12 largest credit unions were between 9.90 and 13.75 percent annually, depending on a consumer's credit profile approximately 20 percent lower than comparable bank rates. Meanwhile, credit union penalties were generally less severe than those of banks.

That was all I needed to hear to write letters to the half dozen credit card companies, whose notices arrived in the mail this week:

To whom it may concern:

Thank you for your notice of the above date informing me that you're raising the APR on my Discover (Account #XXXXXXXXXXXX) card to 22.9%, raising the APR for cash purchases to 25.9%, increasing the penalty for APR to 29.9%, and the late payment fee up to $39.99.

As you probably know, I pay my balances every month, and am not foolish enough to get cash advances from this account. That should suggest to you that I manage my finances relatively conservatively. I wish you had.

As I understand it, your industry is not raising your fees to confiscatory levels because of new credit laws. That's just a coincidence. Your industry says you're trying to recoup massive losses from your customers.

Whatever the reason, during these difficult economic times, I'm sure you understand that I cannot enter into any business agreement with financial institutions that are so clearly in peril. For that reason, I am rejecting the changes per the terms of this account, which we agreed to when you were a more solvent institution.

You are certainly free to close the account, although I can't say I understand why you'd want to. Customers who use your card, allow you to skim the purchase price from merchants. Customers who pay their bills on time do not seem to be the people responsible for bringing you to the apparent precipice of bankruptcy.

No doubt, when that occurs, you'll be seeking a bailout from me - the taxpayer. So this letter is to inform you that when that time comes, you will immediately be charged 25.9% for the cash advance, and 22.9% for any outstanding balance each month. Trust me, you don't want to know the late payment fee. On the other hand, I will offer you the same reward your credit card statement offered me this month: A discount on Beano tablets. Enjoy!

Please be sure I'm taken off the mailing list for your daily solicitations for me to become an account holder again. You had your chance.

Sincerely,

Robert B. Collins

Comment on this post

Rising by Degrees

Posted at 12:04 PM on November 6, 2009 by Bob Collins (1 Comments)
Filed under: Economy, Schools

I'm calling your attention to an American RadioWorks documentary, airing at this hour on MPR's Midday program. Rising by Degrees looks at a developing problem. The fastest-growing segment of our society -- young Latinos -- are the least likely to graduate from college. What does this mean for the future of the country?

You'll meet Veder Garcia, who spoke no English when he arrived in the U.S. from El Salvador as a high school junior, and is now completing his Ph.D. in plant biology at UC Berkeley. Community college was a critical step along the way. And the program introduces us to Mike Carvalho, who "always knew he would attend community college. What the 20-year-old didn't know is that he would drop out two years after he started."

If you can't listen, you can find the Web site for the project here.

Comment on this post

Help for the struggling homeowner

Posted at 3:32 PM on November 5, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Lost in the breaking news of the day was an announcement out of Fannie Mae in Washington that most certainly will be of interest to those struggling with the possibility of foreclosure, including many of the people, perhaps, whom I've profiled on the The Unemployed series.

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Some of the qualifications can be found here.

Borrowers cannot have 12 or more past-due payments on their mortgage. And they must have made at least three payments since the loan was first taken out--or since the last time it was modified. Borrowers can't be in the process of declaring bankruptcy.

People in danger of foreclosure should call their lender. If you do, please let me know how it works out for you.

And while I'm at it, I'm looking for more people who are struggling with unemployment (or unemployed but not struggling, even). Contact me here.

Comment on this post

Your overdraft stories wanted

Posted at 1:24 PM on October 30, 2009 by Bob Collins (5 Comments)
Filed under: Economy

"Don't do favors for people without asking them," said Rep. Barney Frank, D-Mass., said at a House Financial Services Committee hearing at which he unveiled a bill preventing banks from enrolling you in a high-fee overdraft plan without your permission.

Most banks automatically allow customers to overdraft their accounts, then charge them $25 to $35 per "infraction." It's either that or suffer the embarrassment in public of being told your debit card is no good, banks say. Most banks don't allow checks to bounce anymore. They pay the check amount and then charge you for it.

But with regulators heading toward new regulations, many banks -- Wells Fargo is one -- are allowing customers to opt out of the plan.

The legislation also would prohibit banks from imposing more than one overdraft fee a month, or six per a year.

If you knew banks could only charge you one overdraft fee a month, would you be more inclined to bounce a check?

Banks have a habit of coming up with new ways to make up for fees that are outlawed. Free checking, for example, could disappear, the New York Times reported this week.

What's your experience with bank fees, including overdrafts? Answer below.

Comment on this post

For many in Congress, it's not the economy

Posted at 9:24 AM on October 29, 2009 by Bob Collins (7 Comments)
Filed under: Economy, Politics

At this hour, an utterly amazing exchange is taking place on Capitol Hill on an issue that is clearly the most important and fundamental issue facing the nation.

It's a brutally honest discussion between Tim Geithner, the Secretary of the Treasury, and the few members of the House Financial Services Committee who showed up for work today.

Geithner is, basically, calling out Congress for its inaction on closing loopholes that led to financial meltdown in the first place

It's a rare honest debate in which both sides are speaking frankly.

For example, Geithner was incredulous when one member of the committee suggested the "too-big-to-fail" banks should not be subject to the same regulation that smaller, community banks are.

"The important thing to recognize is -- and it's just worth going back to what it was like last fall -- without the ability for the government to step in and manage the failure of a large firm, to contain the risk of the fire spreading, we will be consigned to repeat the experience of last fall. It's a stark, simple thing. And there is no... I know of no person who has stood in my seat -- this is true of (Fed) Chairman Paulson -- in any central bank in any major country that would say the country should be run with no authority to step in and act in that case."

"They are getting into the fundamental issue of regulatory reform and that is the issue of pre-emption by the authority; do they have the right to go in and tell a bank they can't do a certain business, what is the right to take over a certain company if there's deemed to be a systemic risk?" a CNBC analyst noted. "This whole concept of prevention has been out there for, really, decades, that Congress has decided not to do because of these issues that have just been brought up."

Is that an important discussion -- the fundamental philosophical on the role of government -- for the people who were elected to Congress to hear? Not for many of them.

I count at least seven empty chairs. Even the committee chair, Rep. Barney Frank, left after his opening statement, in which he defended Congress by saying the committee has passed legislation that further regulates the banking industry. In fact, however, that legislation has not become law.

Three Minnesotans -- Rep. Michele Bachmann, Rep. Keith Ellison, and Rep. Erik Paulsen -- sit on the committee.

Comment on this post

Twin Cities real estate market is now among country's hottest

Posted at 8:54 AM on October 27, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Comment on this post

Has 'the media' told the economic story from Main Street?

Posted at 12:21 PM on October 5, 2009 by Bob Collins (2 Comments)
Filed under: Economy

The Pew Center's Project for Excellence in Journalism is out with a report on coverage of the recession today. It finds that "the media" has largely ignored covering the economic woes from the perspective of anyone or anything other than big banks, big companies, and politicians:

Three storylines have dominated: efforts to help revive the banking sector, the battle over the stimulus package and the struggles of the U.S. auto industry. Together they accounted for nearly 40% of the economic coverage from February 1 through August 31. Other topics related to the crisis have been covered much less. As an example, all the reporting of retail sales, food prices, the impact of the crisis on Social Security and Medicare, its effect on education and the implications for health care combined accounted for just over 2% of all the economic coverage.

It's an interesting report that -- at least for those of us here in flyover country -- is bound to flunk the "smell test," depending on how you define "the media."

Network news, which mostly comes from New York and Washington, is bound to focus on things in New York and Washington, a city a relative always described as "12 square miles surrounded by reality."

But for the most part, Minnesota media -- and I'll define that by the local papers and public radio -- have covered the recession's effect on people. The Star Tribune today, for example, published an insightful look at how the banks are calling the shots on whether homeowners get any mortgage assistance. MPR, like other media, has beaten the drum on the Rosemary Williams story, News Cut is profiling the lives of The Unemployed and earlier this year took a generational look at the economy.

Is it enough? Probably not. Is it non-existent? Certainly not.

Comment on this post

Capitol showbiz

Posted at 10:05 AM on October 1, 2009 by Bob Collins (1 Comments)
Filed under: Economy, Politics

Congress hasn't done much in the last year to close some of the loopholes in the nation's banking system that led to the worst economic crisis in America since the Great Depression, and it's not hard to figure out why. They're not that interested in the subject.

Today, Federal Reserve Board Chairman Ben Bernanke testified before the House Financial Services Committee, which is "considering" changes in regulations.

Bernanke did something, however, that a lot of members of the committee didn't do: He showed up. Here's the revealing image off CNBC this morning:

What's the point of being on an important committee, if you don't show up -- preferably for the entire hearing -- to listen and participate in the discussion?

But discussions are rarely part of these hearings. Congresspeople show up for a few minutes when it's their turn to ask questions, then use most of their time to make a speech, and leave.

Rep. Michele Bachmann, R-Minn., for example, had five minutes to quiz Bernanke this morning, but used all but 3 seconds of her time to read a statement criticizing the possibility of the dollar not being the international standard, criticizing President Obama for saying he 'inherited' the financial mess, and wondering whether a new regulatory agency would regulate funding to ACORN. She then invited Bernanke to respond.

That earned her a rebuke from committee chair Rep. Barney Frank, D-Mass. "I've asked you before... there's only 3 seconds left in your time.... This practice of going right up to the end and then taking another minute or two is unfair to the other members."

Frank gave Bernanke 30 seconds to answer Bachmann's "questions," and said the dollar is in danger and punted on the question of funding for ACORN.

People watching on TV tend to get more information about the state of the economy and the options for fixing it than people who are elected to fix it. That might explain why it's broken.

Comment on this post

The amazing shrinking airline business

Posted at 10:22 AM on September 30, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Back when the Northwest-Delta merger was announced, a lot of the questions being posted on News Cut were from pilots of the regional carriers involved -- Mesaba, Pinnacle, and Comair.

A few years later, it's becoming clear: More business for the regional airlines.

The blog Things in the Sky has noticed that some of Mesaba's jets have been moved to Atlanta. Some former Northwest and Delta routes are being flown by the regional carriers now (the planes are all gussied up to look like Delta , but they're not Delta.

Many of the flights from Minneapolis St. Paul to the Northeast are also now being flown by regional carries, using smaller jets.

But it's still not a great time to be an airline pilot (or any other airline employee) whether you're flying for a legacy carrier, a regional, or a no-frills airline, according to the Department of Transportation. The agency reports a 5.9% decline in employment at the airlines. The number jumps to 6.9% at regional carriers.

Comment on this post

When is good news bad news?

Posted at 8:54 AM on September 29, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Comment on this post

Recession-proof jobs: Crop duster

Posted at 12:22 PM on September 21, 2009 by Bob Collins (3 Comments)
Filed under: Economy

If the cubicle-bound day job doesn't work out, maybe you can be a crop duster. The Associated Press reports today the demand for crop dusters has -- ummm -- taken off this year.

"Some new products came out to control disease in corn and soybeans, and those are applied when crops are mature, so the demand has been tremendous," said 56-year-old crop duster Tim Steier, of Blue Earth, Minn.

The surge in demand is largely because of corn and soybean crops.

Comment on this post

Will a tax/fee cost jobs? 'Yes,' Minnesota DFLers say

Posted at 12:15 PM on September 18, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Comment on this post

The Unemployed: Moira Webster-Larranaga

Posted at 11:03 AM on September 17, 2009 by Bob Collins (0 Comments)
Filed under: Economy, The Unemployed series

Comment on this post

The white-paint index

Posted at 2:47 PM on September 15, 2009 by Bob Collins (2 Comments)
Filed under: Economy

A few weeks ago, men's underwear was cited as an economic indicator. Today we have a new category: White paint.

Here's the theory:

The price of Titanium Dioxide, a key ingredient of white paint, fell 7.3 percent over the 12 months ending in August, the Labor Department reported today. That would indicate that the demand for white paint -- used on cars and many consumer goods, of course -- is softening.

"I think the white paint index is signaling that the manufacturing recovery may be short-lived," said Richard Yamarone, economist at Argus Research.

It also spells bad news for real estate. When people are buying homes, one of the first things they do is paint the walls white.

As with everything else, economists appear to be surprised by the falling index. Just a few months ago, an increase in the price had them projecting a significant recovery.

In other economic news, Federal Reserve Board Chair Ben Bernanke says the recession is likely over.

Photo credit:

Comment on this post

Eyes on Jobs

Posted at 3:10 PM on September 9, 2009 by Bob Collins (3 Comments)
Filed under: Economy

There may be no company more dependent on the health of its CEO than Apple. Today, Steve Jobs appeared at a company event in San Francisco, his first appearance in one year to the day.

He unveiled new iPod Nanos with video cameras and lower prices, and iPod Touches with more storage.

But people were more focused on how Jobs looked. He's suffered from several health problems since revealing he had pancreatic cancer in 2004. He had a liver transplant last year.

For many pundits, however, there was rejoicing that he was on the stage at all. Investors, however, were not impressed, sending the stock price lower on fears that an Apple without Steve Jobs and his intellect is a different investment.

Here's a look at him at company appearances over the last decade and how the company's stock price performed the same day. The numbers have been adjusted to reflect stock splits and dividends.

January 5, 1999 - Up $.52

July 17, 2002 - Up $.33

September 10, 2002 - Down $.02

January 6, 2004 - Down $.04

October 12, 2005 - Down $2.24

September 9, 2008 - Down $6.24

September 9, 2009 - Down $1.79

Comment on this post

Happy days are...

Posted at 2:07 PM on September 9, 2009 by Bob Collins (2 Comments)
Filed under: Economy

I guess I thought the end of the recession would be announced with a bigger deal. But there it was buried in a stack of wire copy, just another story.

Fed findings indicate recession may be over, the Associated Press declared today in a story about a Federal Reserve Bank survey of the country's regions.

In the new survey, all but one of the Fed's 12 regions indicated that economic activity was "stable," showed "signs of stabilization" or had "firmed." The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be "moderating."

The full Federal Reserve report -- called The Beige Book -- is available here.

The Minneapolis region's report, however, is hardly the stuff that leads to cartwheels.

On consumer spending:

Overall retail spending remained soft, except for auto sales, which were boosted by the cash-for-clunkers program. A major Minneapolis-based retailer reported that same-store sales in July were down 7 percent compared with a year earlier. Same-store sales at two Minneapolis area malls were down 4 percent and 8 percent, respectively, compared with last year.

On construction:

Commercial construction activity mostly decreased, with some bright spots noted in public construction projects.

On agriculture:

... lenders expect overall agricultural income and spending to decrease in the third quarter

On employment:

In Minnesota a defense contractor laid off over 300 workers, a boat manufacturing plant also cut over 300 workers, about half of its labor force, and a medical device manufacturer announced plans to reduce staff by 200 companywide. A meatpacker in South Dakota laid off 30 workers. Competition for seasonal work was much greater this summer compared with a year ago in many areas of the District.

But, the Fed says, some month-to-month employment gains have occurred.

Reuters, however, wasn't quite as upbeat as the Associated Press, noting only that there are some signs of improvement.

Wall St. seems to be siding with that sort of shoulder shrug. At mid-afternoon, the Dow was up an uninspiring 33 points.

Aside: Be sure to spend some time with American Public Media's Marketplace program. It's just launched an impressive series about people who've started over in the recession.

Comment on this post

The Unemployed: Rick Miller

Posted at 12:01 PM on September 8, 2009 by Bob Collins (3 Comments)
Filed under: Economy, The Unemployed series

Comment on this post

The job search

Posted at 8:02 AM on September 7, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Comment on this post

The new economic indicators

Posted at 11:51 AM on August 31, 2009 by Bob Collins (0 Comments)
Filed under: Economy

You know we're near the depths of recession when men's underwear is used to gauge the nature of the economy.

The Washington Post says the economy, apparently, is turning around:

Here's the theory, briefly: Sales of men's underwear typically are stable because they rank as a necessity. But during times of severe financial strain, men will try to stretch the time between buying new pairs, causing underwear sales to dip.

"It's a prolonged purchase," said Marshal Cohen, senior analyst with the consumer research firm NPD Group. "It's like trying to drive your car an extra 10,000 miles."

It's a theory first publicized by former Federal Reserve chairman Alan Greenspan with NPR science correspondent Robert Krulwich.

Other consumer staples have been variously portrayed as the coalmine canaries of the economy:

Lipstick - The theory was that when times are hard because women who cut back on clothing purchases will turn to buying lipsticks for a relatively inexpensive pick-me-up, according to the Wall St. Journal.. It's a theory, however, that has now been dismissed.

Cardboard boxes -- Makes sense, right? If people are buying things, more cardboard boxes need to be produced. Earlier this month, industry analysts said cardboard box sales have risen to a level not seen since last October.

Scrap metal prices -- Greenspan was fond of tracking scrap metal prices, the Wall St. Journal said, because it indicated higher industrial production. Prices have risen only slightly over the last year, but the indicator may not be valid this year since Cash for Clunkers is flooding salvage yards with scrap metal.

Comment on this post

A bank goes belly-up

Posted at 9:01 AM on August 29, 2009 by Bob Collins (0 Comments)
Filed under: Economy

At the Mainstreet Bank branch in Woodbury on Saturday morning, it was a far cry from the scene in It's A Wonderful Life when depositors stage a run on the Bailey Savings and Loan. The FDIC took over the failing bank on Friday night and sold it to Central Bank of Stillwater.

But there was a hint of slight tension.It didn't take more than a couple of seconds of photographing the FDIC notice on the bank's front door, before Central Bank President Scott Faust emerged -- a Minnesota State Patrol trooper watching from just inside the lobby. He said it'll be a few days before the Mainstreet Bank signage is wiped away, and the bank will open only a half-hour late on Saturday morning. Good news, perhaps, for a couple of people sitting in their cars in the parking lot waiting for the bank to open.

"But I shouldn't be talking," Faust said as he handed me the phone number for the bank's CEO, Larry Albert.

Here's what the notice on the door said:

*Central Bank, Stillwater, Minnesota, Assumes All of the Deposits of Mainstreet Bank, Forest Lake, Minnesota*

*FOR IMMEDIATE RELEASE

Mainstreet Bank, Forest Lake, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Central Bank, Stillwater, Minnesota, to assume all of the deposits of Mainstreet Bank.

The eight branches of Mainstreet Bank will reopen on Saturday as branches of Central Bank. Depositors of Mainstreet Bank will automatically become depositors of Central Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until Central Bank can fully integrate the deposit records of Mainstreet Bank.

This evening and over the weekend, depositors of Mainstreet Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30, 2009, Mainstreet Bank had total assets of $459 million and total deposits of approximately $434 million. Central Bank will pay the FDIC a premium of 0.10 percent to assume all of the deposits of Mainstreet Bank. In addition to assuming all of the deposits of the failed bank, Central Bank agreed to purchase essentially all of the assets.

The FDIC and Central Bank entered into a loss-share transaction on approximately $268 million of Mainstreet Bank's assets. Central Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-405-7869. The phone number will be operational this evening until 9:00 p.m., Central Daylight Time (CDT); on Saturday from 9:00 a.m. to 6:00 p.m., CDT; on Sunday from noon to 6:00 p.m., CDT; and thereafter from 8:00 a.m. to 8:00 p.m., CDT. Interested parties can also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/mainstreet-mn.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $95 million. Central Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. Mainstreet Bank is the 83rd FDIC-insured institution to fail in the nation this year, and the second in Minnesota. The last FDIC-insured institution to be closed in the state was Horizon Bank, Pine City, on June 26, 2009.

# # #

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,195 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars - insured financial institutions fund its operations.

Friday night is close-a-bank-night at the FDIC. Banks were also closed last night in California and Maryland. Eight-four have failed this year, mostly because of rising defaults on loans.

Hundreds more are expected to fail in the next few years largely because of souring loans for commercial real estate, the Associated Press reported.

The insurance fund has been so depleted by the epidemic of collapsing financial institutions that some analysts have warned it could sink into the red by the end of this year, the AP said.

Watch CBS Videos Online

Comment on this post

Cash for Appliances?

Posted at 10:50 AM on August 28, 2009 by Bob Collins (2 Comments)
Filed under: Economy

We got this note from a listener today following this morning's Midmorning broadcast about the Cash for Clunkers program:

A comment on Kerri Miller's guests discussing cash for clunker appliances. I totally disagree with their comments-- I have been hoping and waiting for a cash-for-appliances program. We have not been able to take advantage of any of the house or car programs, but we are limping along with an ancient stove and fridge. News flash for your guests-- people do wait and get along with crummy, old appliances and even get them fixed if they can't afford to go out and buy new, even though they know new appliances would be much more energy efficient. I only hope ours keep working until a cash for appliance program begins.

It may not be long. Such a program is coming this fall, though it won't be anywhere near as impressive. Rebates will only be in the $50 to $200 range, according to reports. It's also not apparent whom the program is intended to help. Many of the appliance makers moved their jobs overseas years ago.

St. Cloud's Electrolux, for example, closed down its small chest freezer production in 2004 and moved the jobs to China. The company still employs about 1,200 people in the city, but that's down by about 650 jobs since 2004.

While the Cash for Clunkers program proved popular, a poll out today says most Americans do not favor a rebate program for appliances. Almost half of those surveyed disapproved, according to Rasmussen Reports. Only 39 percent favor such a program.

Support -- or lack of it -- for both the appliance program and the cars program appears to break down along party and generational lines, the poll said.

Comment on this post

Are haycations the answer to struggling farms

Posted at 11:53 AM on August 26, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Two "farm" stories in the news this week -- one bad, one good.

Bad: A survey of farm management instructors in the Minnesota State Colleges and Universities system suggests the state's farmers are facing a difficult couple of years. The report finds 40 percent of the farmers enrolled in the farm business management program expected to lose money this year, and projections suggest many farmers be forced out of business in 2010.

Good: Some enterprising farmers have figured out how to make a buck. Tourists will pay to do the work some farmers may consider drudgery, the New York Times reports.

These new farm stays are profitable. For three years, Scottie Jones has been subsidizing her small lamb and turkey business by renting out a cabin on her 60-acre Leaping Lamb Farm, about two hours from Portland, Ore. For $125 a night, visitors can feed the animals, bring in hay and learn the basic rule of farming: closed gates stay closed and open gates stay open. It now brings in seven times what she makes on her meat business, plus a little free labor.

"Even those people sitting on the porch drinking a glass of wine will come help me feed eventually," she said.

It's a haycation!

Comment on this post

Verdict is in on Cash for Clunkers

Posted at 11:11 AM on August 26, 2009 by Bob Collins (7 Comments)
Filed under: Economy

Earlier this month, I wrote that it was difficult to find a standard by which Cash for Clunkers, the government giveaway program to help people buy new cars, would be judged. First it was funded with $1 billion, then when it became a hit, another $2 billion was added. In both cases, there didn't seem to be firm economic analysis ahead of time on what the payback to the economy would be.

In a subsequent conversation in the comments section, I said:

Why don't we commit to programs that DO have a meaningful measure of success? Because we don't WANT to because then someone might say we failed. So now we don't even try.

We just keep things open-ended. Maybe after we see the "results," we'll come up with the standards for measuring so we can say, "Yep, it was a success all right."

The program ended Monday evening. Today, it was declared a success according to this release from the White House:

The CARS program came to a close Tuesday night with nearly 700,000 clunkers taken off the roads, replaced by far more fuel efficient vehicles. Rebate applications worth $2.877 billion were submitted by the 8 p.m. deadline, under the $3 billion provided by Congress to run the program.

Cars made in America topped the most-purchased list, from the Ford Focus to the Toyota Corolla to the Honda Civic.

"American consumers and workers were the clear winners thanks to the cash for clunkers program," said U.S. Transportation Secretary Ray LaHood. "Manufacturing plants have added shifts and recalled workers. Moribund showrooms were brought back to life and consumers bought fuel efficient cars that will save them money and improve the environment."

"This is one of the best economic news stories we've seen and I'm proud we were able to give consumers a helping hand," Secretary LaHood said.

According to a preliminary analysis by the White House Council of Economic Advisers, the CARS program will:

Boost economic growth in the third quarter of 2009 by 0.3-0.4 percentage points at an annual rate thanks to increased auto sales in July and August.

Will sustain the increase in GDP in the fourth quarter because of increased auto production to replace depleted inventories.

Will create or save 42,000 jobs in the second half of 2009. Those jobs are expected to remain well after the program's close.

Ford and General Motors recently announced production increases for both the third and fourth quarters as a result of the demand generated by the program. Honda also said it will be increasing production at its U.S. plants in East Liberty and Marysville, Ohio and in Lincoln, Alabama.

In addition, the program provides good news for the environment. That's because 84 percent of consumers traded in trucks and 59 percent purchased passenger cars. The average fuel economy of the vehicles traded in was 15.8 miles per gallon and the average fuel economy of vehicles purchased is 24.9 mpg. - a 58 percent improvement.

"This is a win for the economy, a win for the environment and a win for American consumers," Secretary LaHood said.

With the end of transactions under the program, the Department of Transportation is augmenting a team that already includes more than 2,000 people processing dealer applications for rebates

LaHood makes an odd prediction in that release; that the program will "sustain the increase in the GDP in the 4th quarter."

According to the Bureau of Economic Analysis at the Department of Commerce, the latest data is for the 2nd quarter of the year and it dropped 1 percent. Car sales added only .2 percent to the GDP in the 2nd quarter.

The third quarter results won't be released until October. If LaHood is right, the Cash for Clunkers program will be responsible for ending the recession. Now that's a yardstick!

Some of the consumers may be having "buyer's remorse," according to a study in USA Today:

A survey of nearly 1,000 participants in the program found 17% say they have some doubt or serious doubts about having bought a new car, says CNW Market Research. Most said they regret now having a $275 to $350 per month car payment that didn't have before the purchase. Typically, buyers' remorse hits roughly 6% to 8% of new-vehicle buyers within a month. But dealers don't have any regrets.

Comment on this post

Housing prices on the upswing in Twin Cities

Posted at 10:48 AM on August 25, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Comment on this post

Unemployment bright spot

Posted at 8:45 AM on August 20, 2009 by Bob Collins (0 Comments)
Filed under: Economy

The state has released its unemployment figures for July, and like the national figures (released a few weeks ago), it's being hailed as a bright spot.

"Minnesota Employers Add 10,300 Jobs in July", the press release's headline from the Department of Employment and Economic Development said. The unemployment rate fell .3 percent in July, to 8.1 percent (seasonally adjusted).

235,167, however, are out of work in the state. That's 17,000 fewer than June, according to the data, but it's 6,000 more than May, when the unemployment rate was also 7.8 percent. It's possible this signals a turnaround. Of course, it was possible May signaled a turnaround, too.

Here's the release:

Minnesota employers added 10,300 jobs in July, the state's first monthly employment gains since August 2008, according to figures released today by the Minnesota Department of Employment and Economic Development (DEED).

The state's unemployment rate fell 0.3 percent from June to a seasonally adjusted 8.1 percent. The U.S. unemployment rate in July was 9.4 percent.

"This is encouraging news, particularly because the job gains were widespread across industry sectors," said DEED Commissioner Dan McElroy. "We are hopeful that this is the beginning of an upward trend for our economy. As always, we continue our efforts to help businesses grow and to help people find jobs in Minnesota."

Eight of the state's 11 industry sectors gained employment during the month, led by leisure and hospitality, which added 3,900 jobs. Other gains were posted by government (up 2,800), manufacturing (up 1,700), professional and business services (up 1,700), education and health services (up 1,200), construction (up 700), logging and mining (up 200), and financial activities (up 100).

Job losses occurred in trade, transportation and utilities (down 1,300), information (down 500) and other services (down 200).

Over the past year, education and health services added 13,600 jobs and government added 6,000 jobs.

Jobs losses occurred over the past year in manufacturing (down 38,900), professional and business services (down 31,900), trade, transportation and utilities (down 20,600), construction (down 17,000), other services (down 3,900), financial activities (down 3,600), information (down 3,000), logging and mining (down 2,200), and leisure and hospitality (down 600).

In the state's Metropolitan Statistical Areas, over-the-year job losses occurred in the Minneapolis-St. Paul MSA (down 3.5 percent), Duluth-Superior MSA (down 4.4 percent), Rochester MSA (down 1.6 percent) and St. Cloud MSA (down 2.7 percent).

The agency also announced the results of its second quarter job vacancy survey, which showed 31,400 job vacancies in the state between April and June 2009, down 39.4 percent from the same period a year ago. The survey showed that there were 7.7 unemployed people for each vacancy statewide during the quarter. The survey also indicates that over 95 percent of Minnesota employers expect to increase or maintain current employment levels through the end of the year.

I'm still soliciting people who are unemployed to tell me their stories for News Cut's The Unemployed series. Contact me here.

Comment on this post

The Unemployed: Rhoda Quick

Posted at 1:52 PM on August 18, 2009 by Bob Collins (14 Comments)
Filed under: Economy, The Unemployed series

Comment on this post

Live-blogging Midday: St. Paul and Minneapolis budgets

Posted at 11:04 AM on August 14, 2009 by Bob Collins (2 Comments)
Filed under: Economy, Politics

Both Minneapolis and St. Paul mayors have released their budget updates. Both call for increases in property taxes and reductions in some services. Mayor R.T. Rybak and Mayor Chris Coleman are Gary Eichten's guests on Midday. Listen to the program here. React below.

11:07 a.m. - Coleman says the city is "relatively strong," and looking at doing things "more efficiently." Says the city is focusing on "what really matters," which brings up the obvious question: "What doesn't matter?"

11:09 a.m. - You can watch Rybak's budget message here.

11:10 a.m. - Coleman says St. Paul is "down 40 officers." Gives props to Obama for stimulus. Rybak gives props too, and criticizes state cuts to cities and says stimulus money will go away. "Every budget I've presented in five years has been balanced, which is in sharp contrast to the state."

Rybak says more than 100 positions were eliminated yesterday.

11:12 a.m. - Gary plays sound bite of Pawlenty says some good things in Minneapolis wouldn't have happened without him. He cites Guthrie, Northstar, Twins stadium, light rail, and "all of the money pumped into the University of Minnesota."

11:14 a.m. - "I wish he'd stick around because I'd love to have him come on this program,' Rybak countered. He says spending in Minneapolis increased 1 percent, during Pawlenty's term, state spending jumped 12 percent. "I don't need a lecture." He says Pawlenty sat on his hands for Twins stadium. Rybak says he led initiatives and Pawlenty 'was there for the signing.'

11:17 a.m. - Coleman says Pawlenty did not solve budget problems this year. "He just pushed it into the future."

"This whole country has been engulfed in this negative tone where people get up and scream. I wish we could have a dialog about where we need to go and stop blaming everyone for our problems," Coleman said.

Q: Are you running for governor?

A: Coleman: I've made no secret I'm exploring that?
A: Rybak: "I'm likely to do that."

QUESTIONS AND ANSWERS

Q: Have you laid off more firefighters? (Question from wife of firefighter)

A: Everyone is taking a cut, public safety taking less of a cut. Didn't accept grant for firefighters because it required us to spend more money.

Q: To Coleman: How can you call a 6 percent hike in property tax, "more service at a better price"?

A: We have merged departments, invested up-front money to save money in the long run. We're making long-term investments in which we'll see huge paybacks. We're asking employees to do more with less. Layoffs after the first of the year.

Q: Caller: In 1967 the Legislature passed first sales tax. 100% were to go to reduce property taxes. That was the purpose. Now the state is fighting increases in sales tax and has no regard for local property taxes.

A: Rybak: Correct. We should say "let's have the sales tax but earmark it for property tax relief."

Q: Without Gang Strike Force, will gang activity increase?

A: Coleman; We have great anti-gang cops. "Unfortunate that the sideshow has taken away from what our officers are doing."

Rybak: "Doesn't have a significant impact on what we're doing in the city." Says Minneapolis cops have lots of intelligence (informers?)

11:29 a.m. - Coleman just mentioned the Harlem Children's Zone as a model. Here's the Web site.

Q: (Caller to Coleman) I live in Highland Park. We can save money by not cleaning the streets in the summer. They're not dirty.

A: Coleman: You're going to get your wish; it's one of the things we're going to have to clean the streets (Ah, but will there be towing on days you're not going to clean anymore?). It's not all about aesthetics; it ends up in the river.

11:36 a.m. - Why do the cities have different policies on things like trash collection?

Rybak: There's a whole long history of garbage in Minneapolis. It works well for us. St. Paul's works well for them. Same with snow plowing.

(Of course, this brings up an old question: Why do we need two big cities? Why not just be like businesses and merge)

Q: Does downtown St. Paul have a future?

A: Coleman: "It's unbelievable. I'm so excited it's impossible to contain (bob: Is a lunch joint staying open after 2 p.m. downtown?). Cray is coming downtown. Microsoft wants to be a part of downtown. Light rail is a critical piece of that. High-speed rail is a critical part of that.

Q: Block E has reputation for intimidation and violence. When is the mayor going to do something?

A: Crime in downtown is dramatically down, Rybak says. Putting more people on the street -- via the Twins ballpark -- will help. So does all the residential properties "we've built."

Q: Re: Central Corridor light-rail. There are still a lot of critics. Businesses are worried on University Ave., etc. Are these problems going to be resolved?

A: Coleman: "This line is going to be built. We've all but begun construction. I've sat through mitigation meetings at the University of Minnesota. Communities along the corridor have deep concerns and we are taking proactive steps -- adding money for parking mitigation and beautification of University Ave., and another stop on Western Avenue. How we get there is an open question.

It's like the 7 minute blackout when a rocket ship is coming back from space.

Rybak: We have to figure out how to get Uptown connected. We're doing bus rapid transit on 35W. None of these will be easy. Everyone needs to bring their points to the table, but stay at the table.

Wrapping up, Gary asked how they thought Obama is doing. Surprisingly, they both think he's doing great.

Comment on this post

Consumers aren't buying the idea of an improved economy

Posted at 8:55 AM on August 14, 2009 by Bob Collins (14 Comments)
Filed under: Economy

Today's item from "the economy doesn't make sense" file:

The University of Michigan consumer sentiment survey released today shows American consumers were less confident in July than June, when they weren't all that snappy, either.

According to the press release:

Consumer confidence slipped in July as consumers anticipated that their personal finances would improve more slowly than they had anticipated several months ago. "While consumers believe the economic free-fall is now over, consumers see little reason to believe that the economic stimulus package will improve their finances anytime soon," according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Financial reversals were reported with equal frequency across all income subgroups, as was the expectation that joblessness would continue to increase. "It is difficult to determine whether the recent loss in confidence simple reflects the impatience of consumers or the sprouting of changed assessments of the effectiveness of the stimulus policies," noted Curtin. In either event, "economic apprehensions can be expected to increase along with rising unemployment and stagnant incomes during the months ahead," according to Curtin. Although consumer spending will improve during the balance of 2009, total personal consumption expenditures will post an lackluster increase of 1.5% during 2010.

What's the confusion? Cash for Clunkers brought tens of thousands of Americans out of their shell to buy new cars, thanks to the government handout. And while it's true "free money" is attractive, many of those consumers also committed themselves to five (or more) years of loan payments. If you were apprehensive about the economy and your status in it, why would you do that?

The survey also said that buying plans for homes and vehicles declined in July.

Consumers also had less faith in the government's handling of the economy in July. Those holding an unfavorable view increased from 28 to 32 percent.

The "recession is almost over" narrative, and the one that says things are looking up, are increasingly getting attention in the media. But the public isn't buying it. At least, not yet.

Comment on this post

The Unemployed: Thomas Schunk

Posted at 2:10 PM on August 13, 2009 by Bob Collins (1 Comments)
Filed under: Economy, The Unemployed series

Comment on this post

Subsidizing corporate travel

Posted at 11:27 AM on August 12, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Let's jump into the minefield of corporate executive travel.

When the big automakers needed a Washington bailout, they arrived in their corporate jets, to the scorn of the public and the politicians. The public, they reasoned, shouldn't be subsidizing such excess.

"[When] corporate executives use the company aircraft for personal business, I think that rubs the public the wrong way," Rep. James Oberstar said.

But the taxpayer was already subsidizing corporate travel through the Essential Air Service program, which is intended to provide air service to small communities. Alaska is the big winner in the 1980s-era legislation, which was only supposed to last for 10 years.

It doesn't cost that much in the big scheme of things, $123 million this year.

Today, Oberstar announced a third commercial flight is being added to the Hibbing-Chisholm area, subsidized under the program.

The primary beneficiaries, according to Oberstar, will be mining executives.

One fallout from the program, however. The program from the government's left hand kicks in a wave of new bureaucratic regulations from the government's right hand. Once commercial air service comes to a smalltown, private pilots and the business who operate at the airports -- the ones who mostly use and benefit smaller airports and their communities -- are slapped with new security regulations.

A new Department of Homeland Security directive, which the agency refuses to make public, "puts undue burden on rural airports and general aviation personnel" and "stifles rural aviation, which is a lifeblood for many of these smaller communities," one activist wrote.

In Minnesota, that applies to Bemidji, Brainerd, Duluth, International Falls, St. Cloud, Rochester, and Thief River Falls.

In rural Minnesota, the government gives, and the government taketh away.

Comment on this post

The return of customer service

Posted at 5:11 PM on August 10, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Any business school worth its money has taught its students that attention to customer service can get your company through some lean times. In recent years in the U.S., it seems, this simple point has been lost on most students.

Now, in the face of a crippling recession, some corporations are starting to "get it." Some aren't.

Act 1: A writer on the blog AdMelee hasn't been in a Ford automobile in years, he writes. But he's been hearing more testimonials on Twitter lately about Ford, so when he lease is nearing an end, he test drives one.

Now Ford, like many companies, is on Twitter and the writer sent a "tweet" to the Ford account.

"I'm test driving an Edge for the second time this week. Have Alan Mulally (Ford CEO) call to tell me I'm not crazy."

You can probably guess what happened next:

If you know me you know that was me just joking around like "ha ha I know you and Alan are hanging at a BBQ this weekend so why don't you guys ring me up when you have a few in you?". Something funny happened. Scott send me a direct message on Twitter asking for my phone number that following Saturday morning. "Hmm" I said. "That can't be. He's not going to have Alan call me". I honestly figured Scott was going to call to give me some insight into the Edge. When my phone rang with a Michigan number during my daughter's birthday party I let it go to voicemail. I would call Scott back after. When I finally checked the voicemail it was not from Scott Monty, but rather Alan Mulally. He was singing the praises of the Edge and what I thought was looking like a cute PR stunt ended up being a sincere message with the request to call him back. Let's pause for a second and process this...

Read the whole story here. (h/t: @tbrunelle via Twitter)

Act 2: A couple of weeks ago, my wife had to fly back to New England to visit her ailing father. She flew Northwest Airlines (actually, Pinnacle, but you know it's all one happy family, right?).

She got stuck in a smaller jet next to a large man who spilled over into her seat, and had to jam one of his legs under the seat in front of hers. She got to fly for three hours in half a seat.

When she got back to Minnesota, she wrote a letter to Northwest (dubbed "Northworst" by many over the years). Last week she made reservations for another trip (for the same reason, unfortunately) back East and referenced her letter to a more-than-helpful Northwest reservations agent. A voucher for half a round trip showed up in the mail and when she checked in on Sunday, she didn't get charged to check her baggage.

"What's up with that?" I asked the customer service agent.

"She has 'elite status,'" she said, whatever that is.

She also ended up with an aisle seat in an emergency exit row.

But her biggest prize was the opportunity to spend the five minute walk to the security checkpoint, reminding her husband that he rolled his eyes when she said she was going to complain, and suggesting she "pick her battles" better.

Act 3: A swift reaction doesn't always save your bacon, however. As I indicated in this morning's Five at 8 (you read that, right? I'm not wasting my time with that?), Continental Express left passengers sitting in an aluminum tube in Rochester for 9 hours, in defiance of all common sense.

Unlike Northwest, Continental initially took little responsibility for the actions of its little-brother airline, referring all questions to the little-brother airline, though it offered a too-little,too-late refund.

Much of the revitalized attention to customer service parallels the rise in social media, according to Aaron Strout, writing on Multichannel Merchant.

For starters, so many products and services have become commoditized, other than price - which is not an insignificant factor. Customer service is one of the last things left that differentiates one company from another. Do it poorly, and your customers will leave.

On the flip side, when done well, customer service can actually increase loyalty. And if you've ever read Fred Reichheld's manifesto titled "Leading with Loyalty" you know that companies that enjoy the "loyalty effect" grow at better than twice the average for their industry.

With Twitter and Facebook providing immediate details of great -- and poor -- customer service, the importance to corporations has never been higher. You haven't booked a flight today on Continental Express, I assume.

Have you found great examples of customer service that have made you a loyal customer of a company in these tough times? Tell me about it.

Comment on this post

The Unemployed: John Armstrong

Posted at 1:01 PM on August 10, 2009 by Bob Collins (7 Comments)
Filed under: Economy, The Unemployed series

Comment on this post

What's the measure of success for Cash for Clunkers?

Posted at 8:29 AM on August 8, 2009 by Bob Collins (15 Comments)
Filed under: Economy

Philip Greenspun, the MIT prof and computer sciences guru, asks an interesting question today. If the U.S. didn't spend billions on Cash for Clunkers, what could it have spent its money on?

37 percent of Americans don't have broadband Internet at home (source). If we spent the Cash for Clunkers money on Let's Try to Catch up with Korea (95 percent of households with broadband, typically much faster than ours (one source)) a lot of Americans might not have needed to make so many trips in their cars because (1) they could work from home, (2) they could shop from home, (3) they could get information from home, (4) they could find out, from home, that some place they were planning to go was in fact closed.

Cash for Clunkers has been hailed as either an environmental program (generally discredited by most environmentalists) or an economic boost, the effects of which are far from clear.

Some analysts have suggested people who bought cars under the program, probably would've bought them anyway soon. In Annie Baxter's story, Scott Lambert, of the Minnesota Automobile Dealers Association, disagrees:

"Most of the dealers think these are just conservative people who had hung onto their cars for a long time and took advantage of this, and probably would not have come in if not for this program," said Lambert.

The problem is we don't know and never will know. If the unemployment rate drops over the next few months, does that mean it worked? If it goes up again, does that mean it doesn't? If Minnesota's sales tax collections go up, perhaps that's attributable to new cars, but what if it stays flat or goes down? We know that consumers have paid down their debt in recent months and that's now a bad thing. But now they've got car loans, a big sales tax bill, and higher auto insurance payments. Does the injection of cash into the economy now offset their inability to spend more later? Will the number of auto jobs saved/created, offset the number that are on a pace to be eliminated?

In the unemployment figures released Friday, factory employment in the U.S. dropped by 52,000 but some auto workers didn't get laid off for summer retooling. Considering that some union contracts call for them to get paid -- fairly generously -- during layoffs, there may not be an economic bounce from that fact unless jobs were going to be eliminated permanently. And that's still the plan for struggling U.S. auto industry. How do we factor in the big boost in advertising cash to radio and TV stations and newspapers?

What exactly will be the measurement for success of the program?

"There's no real way to calculate it without making a bunch of assumptions," Lee Schipper, a researcher at the University of California, Berkeley, and at Stanford said in a New York Times' attempt to measure the program.

... Seven years from now, when cars have to average 39 miles a gallon, what will we think of a government program that enticed hundreds of thousands of consumers to buy vehicles that got 30 miles a gallon (and that in 2016 will be middle-aged)? Had the program not existed, some of those buyers might have waited until 2012, when the new mileage rules begin to be phased in.

But in the end, "cash for clunkers" may help undo a previous government program: for years, small businesses got a tax break for buying S.U.V.'s, but only if they were the very largest -- at least 6,000 pounds.

Comment on this post

Consumer debt by the numbers

Posted at 3:05 PM on August 7, 2009 by Bob Collins (0 Comments)
Filed under: Economy

The Federal Reserve today reported that consumers have paid down their credit cards and reduced debt for the fifth straight month. The cut is much steeper than what analysts had expected. In June, the Fed says, Americans cut outstanding consumer debt by $10.3 billion.

Let's go behind the numbers on that one.

There are 304,059,724 million people in the U.S. On a per-capita basis, consumer debt was reduced by a little over $33.

Not everyone has consumer debt, of course, but almost every household does. There are an estimated 111,161,226 households. On average, households reduced their total debt in June by about $92.65.

How much more to go before we have this debt paid off? There's $2.5 trillion in consumer debt still out there, or $22,514 per household.

If we reduce that at the rate of $96 a month, we'll be good to go in about 20 years.

Comment on this post

Dealers running out of cars to sell

Posted at 3:44 PM on August 6, 2009 by Bob Collins (13 Comments)
Filed under: Economy

There's nothing about the Cash for Clunkers program that's going to come easy, apparently.

First, the program was so successful that the government ran out of money to give to people to buy new fuel-efficient cars. The Senate, after days of negotiations, has come up with another $2 billion.

Now there's a shortage of cars.

"Everything's gone," Jerry Haas, the sales manager at Sugarloaf Ford in Winona told me this afternoon when I asked him about the odds of getting a Ford Focus, the second-most-popular car in the Cash for Clunkers program. "We have none and there are no Focuses at any dealer within 100 miles of me."

Haas said one reason for the problem is the "poor timing" of the programming, coming at the end of a model year when dealers were trying to get rid of the older models and the new models haven't arrived at showrooms yet.

"We're trying to move (customers) into other units, but we're all sold out in the first wave of the program. If they allotted more money, we don't have enough cars to sell," he said.

Ford, maker of the Focus had only a 25-day nationwide supply of cars. And only one plant in the world makes them.

"Car production is not something that you can snap your fingers and all of the sudden all the components and materials show up on your loading dock from your suppliers," George Pipas of Ford said.

Toyota says it still has a decent supply of Corollas, at 37 days, according to the Associated Press. But there are shortages of the Prius gas-electric hybrid,
with a 13-day supply.

"It's frustrating," Haas acknowledged. He also can't sell the cars in anticipation that Ford will deliver it later. "Without an MSRP sticker (manufacturer's suggested retail price), I can't sell the car."

Comment on this post

Newspapers without the paper

Posted at 11:15 AM on August 5, 2009 by Bob Collins (4 Comments)
Filed under: Economy, Media

In a world of a 24-hour news cycle, If you're not publishing daily, are you still a newspaper?

The Red Wing Republican Eagle announced today that it will publish only two days a week starting in September.

"We will deliver more local news to subscribers -- but twice a week in larger newspapers instead of in five smaller papers. This change will allow our staff to concentrate only on the local market," publisher Steve Messick said on the Web site today.

It's another attempt to save money but right off the bat, revenue from subscriptions will drop by about $50 per subscriber.

It's not a new concept, of course. The Capital Times of Madison switched to a twice-a-week print schedule more than a year ago, also promising to put more energy into its Web site. The Detroit Free Press publishes only three times a week.

More than 100 newspapers nationwide have made the cut, according to Editor & Publisher magazine. So far, nobody's died because of it, and most of the problems the move causes seem generally to involve the comics and Friday night high school football scores.

Comment on this post

Is high-speed rail for St. Paul a safe bet?

Posted at 3:32 PM on August 4, 2009 by Bob Collins (17 Comments)
Filed under: Economy

Comment on this post

Death row

Posted at 1:25 PM on August 4, 2009 by Bob Collins (3 Comments)
Filed under: Economy

Comment on this post

Cash for Clunkers boosting foreign automakers.

Posted at 12:17 PM on August 4, 2009 by Bob Collins (4 Comments)
Filed under: Economy

The Associated Press is trying to find out if the Cash for Clunkers program is working.

In the era of "transparency," it's having a hard time getting any help from the Obama administration.

According to the AP, the Department of Transportation reports it's "too busy" to provide information that car dealers are providing to it about the program.

But from what little data has been released, it appears it's been a gold mine... for "foreign" car companies:

The limited information shows most buyers are not picking Ford, Chrysler or General Motors vehicles, and six of the top 10 vehicles purchased are Honda, Toyota and Hyundai. The Associated Press has sought release of the data since last week. Transportation Secretary Ray LaHood said Sunday the government would release it.

It's true that many of the popular models are made in the U.S., but the Prius -- one of the popular cars in this deal -- isn't one of them. It's only made in Japan.

The Honda Accord, on the other hand, is made in Marysville, Ohio. The V6 model comes from Alabama. Seventy-six percent of Hondas sold in the United States are made in the U.S.

So far, the Ford Focus is the top-selling vehicle under the government's program. It's made in Wayne, Michigan.

But not all fuel efficient car models are benefiting from the program. Sales of the Chevy Cobalt, GM's most fuel efficient car, tanked in July.

Comment on this post

Will 'clunkers' program deliver an environmental impact?

Posted at 2:11 PM on August 3, 2009 by Bob Collins (12 Comments)
Filed under: Economy

Supporters of Cash for Clunkers have suggested the program is both a floor wax and a dessert topping - it's both good for the environment and a boost to the economy. Good mileage automobiles use less fuel. Less fuel is less pollution. It's hard to argue with that logic.

But a study a few weeks ago raises more of a question about the drivers of fuel-efficient vehicles.

Quality Planning, a consultant to the insurance industry, studied the habits of drivers of hybrid vehicles. It found they drove their vehicles 25 percent more than drivers of non-hybrids.

"The additional miles driven by hybrid vehicle owners would seem to offset the net ecological benefit of owning a fuel-efficient vehicle. After all, a gallon of gas is a gallon of gas, no matter which type of engine is burning it," Dr. Raj Bhat, president of Quality Planning said on a posting on the firm's Web site.

Bhat says he doesn't know, however, if the lower per-mile cost encourages people to drive more miles each day or take more trips.

But why wouldn't it? It's an established fact, of course, that the cost of fuel changes our driving habits. As the price of gasoline went up last year, people combined trips and drove fewer miles. Why wouldn't a reduced per-mile cost similarly affect drivers' behavior?

A good question, perhaps, but one that doesn't have an answer. We'll have to do this anecdotally. If you've bought a hybrid -- or other "fuel efficient" vehicle -- in the last year or so, what was the bottom-line impact on the total amount of fuel you purchased? Did you change your habits from your gas guzzler days?

Update 3:03 p.m. - The Transportation Department released data on Monday showing the vehicles traded in so far averaged 15.8 miles per gallon, compared with 25.4 miles per gallon for the new purchases, or a 61 percent improvement. That's a lot of extra driving you can do and still be ahead of the game.

Update 3:41 p.m. - Here's the link to the Christopher Joyce piece on how long you have to wait to offset "new car carbon." Audio should be available by 6 p.m. The story runs this afternoon on All Things Considered.

Update 3:47 p.m. - MPR's Curtis Gilbert sends along this e-mail from Friends of the Earth:

Based on calculations done by colleagues of ours at CalCars (www.calcars.org), replacing an older, lower-mpg vehicle with a new, higher mpg vehicle reduces CO2 only if the replacement vehicle provides more than twice the fuel economy of the vehicle it replaces. This is why Cash for Clunkers is not an ultimately environmentally progressive program: the emissions avoided from transitioning to a 22 mpg vehicle from an 18 mpg vehicle does not, over the lifetime of the vehicle, make up for the energy embedded in the older car that is destroyed before its useful life is over, as well as the energy involved in manufacturing the new car--unless the mpg of the new car is double that of the old.

An important alternative to Cash for Clunkers is an idea that a colleague of ours, Felix Kramer of CalCars, has developed--i.e. to dedicate the cash that consumers would have put towards a new car to convert their older vehicles to electric vehicles. Please see more on this below and at the following link: http://www.calcars.org/scrap-or-retrofit.html

Comment on this post

Bezos business

Posted at 5:42 PM on July 22, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Amazon announced today it's purchased Zappos.com, an online shoe store. That news is of little consequence to 99 percent of the world. But in announcing the sale today, Amazon's Jeff Bezos provided more in 9 minutes than -- it's obvious -- most business schools provide in four years.

Comment on this post

Airline that promised cheap fares folds

Posted at 4:58 PM on July 20, 2009 by Bob Collins (1 Comments)
Filed under: Economy

The apparent pent-up demand for cheap flights from the Twin Cities to Toledo will remain pent up.

Jet America, the firm that announced $9 fares to Toledo when it announced (to the disbelief of this blog) service to the Twin Cities earlier this year, has given up the idea.

The airline is promising refunds to customers who bought tickets.

A Northwest/Delta flight for Toledo is going for $365.

Comment on this post

The sin of wages

Posted at 4:01 PM on July 16, 2009 by Bob Collins (2 Comments)
Filed under: Economy

The recession is getting so deep, younger adults are cutting back on bar hopping. Booze and cigarettes are the items people 18-29 say they're giving up in deference to the economy.

A third of those surveyed by Pew say they've changed to a cheaper cellphone plan. One in five say they've moved in with a friend. The thing you can do when you're young!

The generation also is more hopeful than old-timers...

... which leads to the obvious question: Do the younger people know something the old timers don't? Or do the old-timers know something the younger people don't?

Comment on this post

Unemployment by the numbers

Posted at 9:45 AM on July 16, 2009 by Bob Collins (2 Comments)
Filed under: Economy

We figured the June unemployment numbers in Minnesota would be bad, especially considering the national figures -- released a few weeks ago -- took economists by surprise.

How bad? 8.4 percent bad, Minnesota's Department of Employment and Economic Development said today.

That's 16, 740 jobs that disappeared in June. Based on a 40-hour week, that's 95 jobs disappearing per hour for the entire month. Imagine the boss calling in three people every two minutes for an entire month to tell them they're losing their jobs. That's how bad.

The sectors that added jobs in June were trade, transportation and utilities, which gained 800 jobs, and financial activities, which added 600 positions.

The job losses appeared to occur right where the economic stimulus was aimed: Construction (down 3,900) and manufacturing (down 3,700).

"Government" added 2,500 jobs during the month year. It takes a lot more than a recession or a hemorrhaging state budget to slow down the growth of government.

Over the course of the year, the Duluth-Superior area was the hardest hit, with more than 4 percent of the jobs disappearing. By contrast, Rochester lost only 1.3 of its jobs; a testament, perhaps, to the axiom that health care weathers recessions.

The statewide map -- provided by DEED -- shows the extent to which Minnesota is a have/have not state when it comes to unemployment. This is based on the county breakdown, the latest numbers for which are May's:

Comment on this post

Window closing on new state park, Pawlenty says

Posted at 11:22 AM on July 10, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Is the time still right for Minnesota to be buying land for a new state park?

Gov. Tim Pawlenty today said the window is closing for one of his pet projects -- a new state park around Lake Vermilion in northeastern Minnesota. The land is owned by U.S. Steel, which wants more money and thinks it can get it from developers anxious to build luxury homes.

That's business. Housing. Jobs. All the things that Gov. Pawlenty has been saying for 6 1/2 years should trump just about everything else in the state. But he says the plan could help save small campgrounds in the region. Back in 2005, however, some of those campgrounds said the problem is state regulations around the lake.

The Legislature appropriated $20 million to buy up the land during the 2008 session.

Who's the biggest landowner in St. Louis County now? The state of Minnesota.

"Our only request back to the DNR, which is a very reasonable request, is that they would sell other properties within St. Louis County," county commissioner Keith Nelson told MPR's Stephanie Hemphill back in 2007. "Waterfront properties that they hold presently, that would be of equal value to this new proposed park."

Of course, times were better back when Pawlenty came up with his idea. The economy hadn't yet tanked, and social services to people -- many of whom had no chance of using the new state park -- weren't yet being unalloted.

Comment on this post

How to get weatherization help

Posted at 12:33 PM on July 9, 2009 by Bob Collins (0 Comments)
Filed under: Economy, Energy

Comment on this post

Stimulus roundup

Posted at 11:02 AM on July 9, 2009 by Bob Collins (5 Comments)
Filed under: Economy

The economic stimulus program doesn't appear to be working yet. Depending on whom you talk to, it's either because the money is going to the wrong places or is being misused at the right ones.

In Washington, officials point out that most of the stimulus money hasn't been spent yet so it's too early to conclude it isn't working. But official Washington is also abuzz with the suggestion that a second stimulus is needed. So, which is it?

Mere mortals cannot understand these things. "Obama not talking about second stimulus," the Washington Post says. "Top Obama Aides: Second Stimulus "Might Eventually Be Needed," is the headline at USNews.com today. Same source, different headlines.

USA Today's headline is "Billions in aid go to areas that backed Obama in '08." The suggestion is obvious, isn't it?

The reports show the 872 counties that supported Obama received about $69 per person, on average. The 2,234 that supported McCain received about $34.

It's not until well into the story we get the punch line:

Investigators who track the stimulus are skeptical that political considerations could be at work.

With a few exceptions, Obama won the more populous states. And even in states he didn't win, the population centers of those states -- that is, big cities -- showed strong support. Shouldn't the stimulus money go where people are?

The reason no one can say for certain that the stimulus is or isn't working is because months after its passage we still can't agree on what it was supposed to do.

"States aren't using money as intended," USA Today said this week.

Under pressure to spend stimulus money quickly, many states are using the federal funds for short-term projects and to fill budget gaps rather than spending on long-term improvements, according to a report by congressional investigators.

The assertion comes from no less than the General Accounting Office (read the full report).

Minnesota used the money to help plug its massive budget deficit. It shouldn't come as a surprise to anyone. Officials said that's what they were going to do last February. Minneapolis used the money to keep some cops employed, and that got a shout-out from Obama.

In Minnesota, stimulus money is supposed to create (or save) 66,000 jobs.

Minnesota arts groups are getting about $1 million in economic stimulus, MPR's Elizabeth Baier reported this morning. MPR is getting $50,000. "We will primarily use the funds to restore the position of assistant producer for Performance Today and for content support for Performance Today and Symphony Cast," according to Christina Schmitt, public relations manager for American Public Media.

The Weisman Art Museum is getting $50,000 in stimulus funs. It'll hire an assistant curator. Perhaps that's how the stimulus will work if it's going to work: One assistant at a time.

Comment on this post

Dispatches from the economic front lines

Posted at 2:19 PM on July 7, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Embed | Help

Copy and paste the HTML below to embed this audio onto your web page.

Audio player code:
<script type="text/javascript" src="http://minnesota.publicradio.org/www_publicradio/tools/media_player/js/swfobject.js"></script><div id="minnesota_general_features_2009_07_07_midmn_econ_20090707_64s_player"></div><script type="text/javascript">/*<![CDATA[*/var so = new SWFObject("http://minnesota.publicradio.org/www_publicradio/tools/media_player/s_player.swf", "minnesota_general_features_2009_07_07_midmn_econ_20090707_64s_player", "319", "83", "8", "#ffffff");so.addParam("quality", "high");so.addParam("menu", "false");so.addParam("wmode", "transparent");so.addVariable("name", "minnesota/general/features/2009/07/07/midmn_econ_20090707_64");so.write("minnesota_general_features_2009_07_07_midmn_econ_20090707_64s_player");/*]]>*/</script>

sponsor:

Comment on this post

The sound of one person not working

Posted at 3:01 PM on July 6, 2009 by Bob Collins (0 Comments)
Filed under: Economy

"The first thing I noticed when I went to work at the Mine was the noise," the writer of Mesabi Misadventures says at the beginning her outstanding post on the recession's effect on her slice of the Iron Range. We don't know her name, but we can determine she works at Hibbing Taconite because she notes her mine's shutdown has been extended into 2010, something that was announced last week.

And just like parents get nervous when their kids get too quiet because it usually means something resulting in a spanking is going to happen, it's hard not to get nervous when the Mine becomes this quiet.

I love to hear the birds in the morning at home. Or the squirrels when they yell at my dog for getting too close to their tree.

I don't want to hear birds and squirrels at work. And I do now.

What's the sound of a recession? Birds and squirrels.

(h/t: Aaron J. Brown)

Comment on this post

Being Denny Hecker

Posted at 1:08 PM on July 2, 2009 by Bob Collins (9 Comments)
Filed under: Economy

No matter how difficult your financial condition, reading the U.S. Bankruptcy Court filing for Twin Cities auto dealer Denny Hecker may make you feel comparatively lucky. Here's the filing.

Hecker owes millions to banks and automobile makers, as well as hundreds of thousands to Las Vegas casinos and credit card companies.

Hecker has $24,000 in cash in the bank. He's got $766,000 $766 million in debts.

Here's what the filing reveals about the lifestyle of Denny Hecker:

>> He has $35,000 worth of watches, including three 18k gold Rolex watches.

>> His wedding ring is worth $24,000.

>> He has seven snowmobiles, three scooters, and six four-wheelers, two pontoon boats, seven Jet-Skis and a yacht (which has been repossessed).

>> He owns $25,000 worth of clothing.

>> He owns three condos in Two Harbors, a home in Medina, a home in Crosslake, two condos in Bayport, a condo in Plymouth

>> He owes $450,000 in gambling losses at the Mirage, $400,000 at the Bellagio, and $100,000 at the Hard Rock in Las Vegas.

It doesn't appear that he personally owns a car.

Comment on this post

What's Plan B?

Posted at 11:19 AM on July 2, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Comment on this post

Sharing the blame

Posted at 10:51 AM on June 30, 2009 by Bob Collins (2 Comments)
Filed under: Economy

After listening to most of today's Midmorning interview with New York Times economics reporter Edmund Andrews, the biggest question isn't "how can an economics reporter for the New York Times be so clueless when it comes to assuming a mortgage." The real question is "how can someone so financially clueless get a gig as an economics reporter for the New York Times?"

Give Kerri Miller credit for being tough on Andrews, who has written a book on how he fell into "a catastrophic binge on overpriced real estate and reckless mortgages. "

How could it have happened?

"The answer to that question takes you into the financial system and the recklessness that pervaded the financial system over the last few years," he said.

Well, maybe, but we also learned during a fabulous interview that Andrews never made any calculations on his $400,000 mortgage; a serious dereliction of duty by a homeowner even if the lender never asked for proof he could afford it. He also admitted he let the house become critical in his mind to making his second marriage work. Understandable, perhaps, but unbelievably ignorant.

It wasn't until well into the hour that Andrews strayed from his insistence -- which, for the record, has plenty of validity -- that the fault for his problems lay with mortgage-lending practices. "It was a stupid loan that never should've been taken and never should have been made," he said.

The meltdown in the nation's economy -- the meltdown that's taken hundreds of thousands of jobs from hard-working people -- clearly has its foundation in the lending practices of financial institutions. But there's also plenty of blame for people who couldn't be bothered "running the numbers" for the biggest purchase of their lives. Andrews is proof of that.

"In spite of people making poor decisions, it never happened in the past... because the mortgage lender wouldn't have let them," a Realtor called in to say. Clearly true. But if there's no one to save us from ourselves, who can we turn to besides... ourselves?

"Human beings make good decisions and bad decisions all the time, but there's nothing we've ever seen before where millions and millions of borrowers went over the cliff at the same time, " Andrews said. True, perhaps, but Andrews makes it entirely too easy to blame the victim. And that's the tragedy here. That people who did their due diligence and lost homes because of lender fraud, won't be able to get past the "how can you be so stupid?" questions that people like Andrews make all too easy to ask.

"There's no one out there who's as financially literate as you are," Miller said near the end of the show.

On that, she couldn't have been more incorrect.

Comment on this post

Signs suggest housing has hit bottom

Posted at 8:36 AM on June 30, 2009 by Bob Collins (9 Comments)
Filed under: Economy

"What impresses me no matter how you look at it... the story comes up again and again: there is some serious improvement. We've taken the first step toward beginning to turn this around," said David Blitzer, who runs the Case-Schiller Index. He fairly gushed today over the April results of his survey, which tracks resale price of homes around the country.

The index showed a .6% drop in home prices, which these days qualifies as great news.

In Minneapolis, the drop in resale prices mirrored the nationwide average (-.66%), the ninth consecutive month of declining prices, but the lowest drop during that period in which home resale prices dropped here about 16 percent. They've dropped 22 percent in the last year. Good times, indeed.

"In 13 of the 20 cities the decline is less than last month," Blitzer said this morning. "Some people out there are feeling a touch better and are willing to go out and look at a house and in some cases are willing to buy a house."

House resale prices in April 2009 are roughly the same here as they were in August 2000.

Meanwhile, another report today shows consumer confidence has dropped.

Comment on this post

How college kids can get a job

Posted at 10:05 AM on June 26, 2009 by Bob Collins (5 Comments)
Filed under: Economy

The Curse of the Class of 2009, the Wall St. Journal headline screamed last month. Grim job outlook for new college grads, the Minnesota Public Radio News story echoed.

"If I were a college graduate right now, it'd be enough to make me hide under the covers for the rest of my life, " Lindsey Pollak, a career columnist, told Kerri Miller on MPR's Midmorning this morning.

Got it. It's bad. But grads are getting jobs. We know that because many of them called in today.

Here are the tips we learned today:

Pay your dues
"You have to realize the path you thought you would take isn't the path you can. We're going back to the olden days when you have to pay your dues and some kids don't want to hear that," Pollack said.

Consider unpaid internships or waiting tables, said Steven Rothberg, the president and founder of CollegeRecruiter.com, based in Edina. "My parents did that, I don't see why this year's graduating class should feel they shouldn't have to do that," he said.

Nick, a recent college graduate, is one of the few who got a job. He called into the show to say he had an unpaid internship program with GE and was told all he had to do was work hard and he'd have a job. He's got a job.

Network with alumni

Caller Steve said he'd hand out business cards to everyone, including friends and other people he'd meet. He starts a job on Wall Street next week. "I had a list of 25 alumni and every month I'd make sure I'd go through the list and drop each a note."

"It's about taking the people you know and the people they know and talking to them about your career prospects. If you tap into the network of people who know you... that works," Pollack said.

"Networking isn't about asking people what they can do for you," Rothberg said, "it's what you can do for them." He said an accounting major, for example, may tell a friend in business, "I see you have a stack of bills to get out, what do you think about me coming in and helping you do it for free?"

An engineering student said his "network dried up with hiring freezes." Rothberg said he's networking incorrectly.

Use your summer jobs to get experience in your field

A business owner said most of the resumes he gets have summer jobs listed that have nothing to do with what career they want to pursue. "They're working as roofers because it pays more," he said.

"Talk to professors who may know of businesses who may need some help through the summer," Pollack said. "And just getting a sense of how a professional office works gives you a leg up."

A caller who graduated from law school, disputed that. She worked at Menard's for eight years. "If you can last at a job for eight years, you can do anything," she said.

Don't assume nobody's hiring. Take advantage of the college's career services

A St. Cloud State College career services pro said surveys sent out to area businesses
showed that while there are companies who don't plan to hire until fall, several have indicated they've got jobs to fill.

Rothberg said students aren't taking enough initiative to work with their college career services department. "You have to act like an adult," he said.

"Students drop a resume off at a career fair and they're shocked they didn't get a job," said Pollack. "The days of mailing in a resume and expecting to get a job are so over."

Rothberg said he's not much of a fan of college job fairs. He said many companies send "introverts" to them who don't like shaking hands and meeting people.

Be memorable in interviews

"You can look great on paper and have all the experience in the world," one young caller, Duncan, said. "But personality and humor is important in an interview, too."

"Actors are good because they prepare and practice and a lot of students walk in and just wing it," Pollack said. "It's important not to just say 'I'm great, I have a great personality or I have experience,' you have to explain why you're the best person for the job."

"Role play," said Rothberg. "Get your college roommate to pretend he/she's the hiring manager and practice. Get prepared for the stupid questions."

Remain optimistic

Find job-search support groups and don't let yourself get isolated. "You cannot put your eggs in one basket. A lot of students get all worked up about one or two job possibilities and sit by the phone. You've got to cast a wider net," Pollack said.

Go work with kids or volunteer at a hospital. It'll make you feel better about yourself.

It's great to hear success stories. If you've got some tips, add them below.

(Photo: Getty Images)

Comment on this post

Pork spending

Posted at 2:12 PM on June 25, 2009 by Bob Collins (9 Comments)
Filed under: Economy

Maybe this is a time when Washington pork really is pork.

This week, Republican Gov. Tim Pawlenty's agriculture commissioner, Gene Hugoson, and his Iowa counterpart, Bill Northey (Democrat), are asking that federal funds be used to buy pork, and then direct it to federal food programs, according to the Associated Press.

What's the problem? Swine flu has scared people from pork, even though it has nothing to do with the meat, and the name has since been changed to the H1N1 flu. The recession also has people eating less meat.

Like the big automakers, there's also the comparative inefficiency of small farms. "Producers that aren't efficient will be hit first," Shane Ellis, a livestock economist at Iowa State University in Ames said. "Those are the operators that we will see exit the market. Not the big operators." And farmers are raising more hogs than the consumer demand requires.

Republican opposition to federal spending and intervention in private business tends to soften when things turn tough for farmers -- a traditional Republican constituency. But is there a difference between an autoworker and a hog farmer? On scale, there's a big difference. But what about philosophy?

Consider Gov. Pawlenty's view of the government intervening in the banking and auto industries. "It's headed in the wrong direction in terms of government micromanaging or intervening, and, worse yet, funding and subsidizing and taking over entire parts of our economy," he said earlier this month.

When should the market prevail? And when should the government step in?

Comment on this post

Life after the recession

Posted at 12:30 PM on June 12, 2009 by Bob Collins (7 Comments)
Filed under: Economy

When the recession ends, how long will it take for U.S. businesses to recover from the way they survived it?

Lane Wallace of the Atlantic considers that question today:

A friend of mine who runs a management and innovation consulting business recently told me that almost all of his clients were responding to the recession by making drastic cuts in budgets and personnel, including innovation, R&D, product development and marketing efforts. "The problem with that," he said, "is that when the economy recovers, it's going to take them another two years to ramp up again. They won't even have the right personnel or teams in place anymore. They'll be way behind."

To explain risk vs. uncertainty, she uses the metaphor of a sailing race in a storm, in which the sailor who let out sails takes advantage not only of a favorable wind, but also of the sailors who trimmed their sails.

We forget that sometimes, in our canonization of the innovative heroes of America. Or ... maybe we don't forget it. Perhaps the reason we give such great lip service to taking innovative risks but don't, as a market whole, tend to follow suit ... especially in tough economic times ... is precisely because we understand quite clearly the risks involved. As the saying goes, "Nobody ever got fired for buying IBM." Playing it safe may not win the race, but it's less likely to end up with you going down in flames.

On the other hand, as the former CEO of Continental Airlines once said, if you're in the pizza business and you just keep cutting one topping after another, pretty soon, all you have is crust. And it's hard to sell crust.

I'm not asking you to reveal your company's secrets here, but what did your firm stop doing that was strategically important before the recession, but was deemed worthy of sacrifice once it started?

Comment on this post

What the TARP payback means

Posted at 11:46 AM on June 9, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Ten banks have been allowed by the federal government to pay back the government's investment in their banks. What does this mean?

Q: Why are banks in such a hurry to pay back the TARP funds?

A: Because of the restrictions and stigma that come with taking them in the first place. Banks that accepted TARP money also were limited on the number of foreign workers they could hire, and had executive compensation restrictions placed on them. Richard Davis, the CEO of US Bancorp called it "a lousy program" last February and said the rules kept changing.

Keep in mind the original goal of the money was to purchase bad mortgages that led to the financial collapse last fall. Banks are still sitting on the toxic, mortgage-backed assets, however.

Q: Do these 10 banks now have a competitive advantage over banks who took the TARP funds?

A: Yes, some "industry experts" say. Those banks have to pay a high dividend on the government's shares that the 10 banks don't. And they could lose high-priced execs to banks that don't have restrictions on their compensation now.

Q: If the TARP money was meant to loosen credit, will paying it back tighten credit?

A: Possibly, although some of the banks are publicly saying they'll continue to lend money. The proof, however, will be in who can borrow. Have you tried to get a loan from a bank lately? How'd it go?

"We fully expect to continue to vigorously offer lending opportunities to our credit-worthy consumer, small business, corporate and institutional customers, invest for future growth and support the U.S. government's overall efforts to stimulate the economy," Richard K. Davis, chairman and CEO of U.S. Bancorp, said in a statement.

Q: Does this mean the banks are safe?

A: Not according to Elizabeth Warren, who administers a TARP oversight panel for Congress. "The notion that you can get out from under some restrictions but still want some government benefits, seems to me to have a foot in both boats, " she said today. She released a report today suggesting the government keep conducting "stress tests" of the nation's 19th largest banks to ensure their viability.

Even without TARP money, the banks are still getting their debt guaranteed by the Federal Deposit Insurance Corp. and credit lines are guaranteed from the Federal Reserve.

"None of this means that we're out of the woods yet; there's a lot of work that the banks have to do and the regulators have to do," Richard Spillenkothen, a director at Deloitte & Touche LLP in New York, told Bloomberg news.

Unemployment is still rising. More people are defaulting on loans because they've lost their jobs. Banks are poised to lose more money.

Q: What happens to the money the banks are paying back?

A: It goes into the Treasury to be used again if the economy gets worse. It's almost as if the Treasury Department isn't sure the recovery is taking hold.

Q: What do the stock markets tell us about today's action?

A: That it's not exactly the financial equivalent of VJ Day. At midday, the Dow industrials are about even. The stock of some of the banks -- including US Bancorp -- drifted lower after the announcement.

Comment on this post

The left-hand, right-hand economy

Posted at 5:28 PM on June 8, 2009 by Bob Collins (3 Comments)
Filed under: Economy

Two -- technically unrelated -- news stories this week have got us wondering what's wrong with this picture?

(1) The Treasury Department this week is going to announce which banks will be allowed to repay bailout money. The New York Post reports the banks shedding the "TARP" funds include Goldman, JPMorgan, American Express Co, Morgan Stanley, State Street Corp and U.S. Bancorp.

One goal of TARP -- Troubled Asset Relief Program -- is to encourage banks to resume lending to businesses and to each other, thereby getting the economy humming again.

So if the banks are repaying the Treasury Department, they must be loosening credit, right? Let's shift to #2.

(2) In Pipestone, as I wrote this morning, 160 people will be out of work by September because the India-based windmill manufacturer, Suzlon, can't get credit, according to MPR's Mark Steil, who writes:

Renewable energy consultant Martin Pasqualini with CP Energy Group says money is tight throughout the wind industry. He says some of the biggest financial backers of the wind energy industry were also some of the biggest firms to collapse in the credit crisis.

"Lehman had been a tax equity investor. AIG had an ambitious program in place to do large scale investing when they virtually came unwound. We also effectively lost Wachovia," says Pasqualini.

Wachovia struggled and was eventually purchased by Wells Fargo. The financial sectors problems meant plans for many wind farms were shelved. Pasqualini says he excepts construction this year of new wind turbines to fall significantly.

The "other side" of the story:

The layoffs are said to be "devastating" to Pipestone, but the Worthington Daily Globe says it depends on who loses their jobs.

Though Suzlon's manufacturing facility is in Pipestone, the company has also been busing in employees from Sioux Falls, S.D., Worthington, and other area cities.

The impact on Pipestone would be smaller if most of the workers who lost positions came from other cities -- though the impact on southwest Minnesota and the tri-state area would be the same.

That the company had to bus in workers from outside the area suggests a shortage of a trained workforce in Pipestone. And, indeed, the unemployment rate in the county in April -- the latest month for which data is available -- is far below the national and state rate.

Still, the windmill manufacturer's credit woes, and the banks' desire to give the money back to the federal government, makes one wonder whether TARP has really served its purpose?

MPR's Midmorning will attempt to answer that question on Wednesday morning at 9.

Comment on this post

Defense spending and the recovery

Posted at 2:40 PM on June 8, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Apparently, this is "map day" on News Cut.

Vice President Joe Biden is out with another stimulus update, this time it's called "Roadmap to Recovery," that documents projects that have been funded to date.

The accompanying map -- above -- shows how heavily the Democrats' stimulus plan relies on military spending. They're the green dots. (Update: And, the Justice Department are also green dots. A News Cut reader with better ability to differentiate shades notes the projects may be directed to police departments)

Comment on this post

Riding the rails

Posted at 11:17 AM on June 5, 2009 by Bob Collins (3 Comments)
Filed under: Economy

One of the reasons I don't mind getting stuck at railroad crossings is it helps remind me that the economy isn't completely stuck. And sometimes you see interesting cargo, like today in South St. Paul.

There were dozens of them. They're windmills from Suzlon, a company based in India with no manufacturing facilities in the U.S. So by the end of the train, I realized it's the economy in India that's not entirely stuck, and I found myself wondering what the unemployment rate in this country would be if we still manufactured things here. For all the talk about "green jobs" from alternative energy in this country, a lot of them aren't jobs based here, apparently.

Comment on this post

Still sinking

Posted at 8:28 AM on June 5, 2009 by Bob Collins (10 Comments)
Filed under: Economy

The nation's unemployment rate was released this morning. It's now at 9.4 percent, higher than economists (who never seem to get it right) had expected. Add in all the people who've given up looking for work (question: who has this luxury? If you give up looking for work, what your plan?), and the rate is 16.4 percent.

The worse the economy gets, the better for Wal-Mart.

Meanwhile, Wal-Mart announced this morning it's going to add 22,000 jobs. The giant retailer is holding its annual shareholders meeting today. It's available via Webcast and should be particularly enjoyable for anyone who regularly follows Up With People.

Comment on this post

The same old

Posted at 12:41 PM on June 3, 2009 by Bob Collins (5 Comments)
Filed under: Economy

A little more fallout from All Things Considered host Robert Siegel's interview last evening with Wharton's Jeremy Siegel, in which Siegel (the Wharton Siegel) urged people to get into the stock market.

"Even in December of 1930, where you were 50 percent down from that all-time high in 1929, your five-year return was more than seven percent after inflation. The world looks different once you're down as much as we have been down," he said.

The Wall Street Journal's MarketBeat blog isn't buying it. "After the crash 1929, the Dow didn't return to its high of that year until 1954," it said.

The Motley Fool carried a Siegel quote worth considering:

Mr. Jeremy "Wizard of Wharton" Siegel apparently agrees, saying in a recent interview: "You are now investing when stocks are down 50% from their peak. ... Once you're down 50% from the peak there are almost no bad outcomes going ahead 10 years."

I'm not an equity market expert; I'm just a guy with a fraction of the retirement account I used to have. But the Siegel-on-Siegel interview suggests to me the American media is ready to make the same old mistake again -- using economists as predictors.

Economists make good analysts of what's happened, but for the most part they make lousy predictors of what's going to happen.

Take Siegel, for example.

July 4, 2005 - "I think stocks return is going to be somewhere between, say, 7, 9 percent per year over the next five years. I think real estate is high, and I don`t think real estate is going to compete with stocks, either." In fact, there was a link between real estate and the stock market that Siegel failed to recognize or acknowledge.

August 10, 2007 - "There are good values out there in equities -- especially in financial stocks -- and you will be rewarded in the long run if you start dollar cost-averaging now." At the time he recommended General Electric, Citigroup, and Bank of America.

October 17, 2008 - "I think these prices will be viewed as extremely cheap even a year from now. People will wish they'd had the guts to go in." The Dow is 247 points lower at midday today than it was then.

Comment on this post

Changing industrials

Posted at 12:05 PM on June 1, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Traveler's -- the St. Paul-based (sort of) -- insurance company has made the big time. It has been added to the vaunted Dow Jones 30 industrials. It and Cisco have replaced the bankrupt General Motors and the teetering Citigroup.

Here's are the current "members" of the industrials:

3M
Alcoa Inc
American Express Company
AT&T Inc
Bank of America Corporation
Boeing Co
Caterpillar Inc.
Chevron Corp
Cisco
E.I. du Pont de Nemours and Company
Exxon Mobil Corp
General Electric Company
Hewlett-Packard Co.
Intel Corporation
International Business Machines
Johnson & Johnson
JP Morgan & Chase & Co
Kraft Foods Inc.
McDonald's Corporation
Merck & Co., Inc.
Microsoft Corporation
Pfizer Inc
The Coca-Cola Company
The Home Depot, Inc.
The Procter & Gamble Company
Travelers
United Technologies Corporation
Verizon Communications
Wal-Mart Stores, Inc.
Walt Disney Company

There are no longer any automakers on the list.

Compare it to the 30 Industrials of 1979, with an abundance of oil and steel.

Allied Chemical
General Foods
Owens-Illinois Glass
Aluminum Company of America
General Motors Corporation
Procter & Gamble Company
American Can
Goodyear
Sears Roebuck & Company
American Telephone & Telegraph
Inco
Standard Oil of California
American Tobacco B
International Business Machines
Texaco Incorporated
Bethlehem Steel
International Harvester
Union Carbide
Du Pont
International Paper Company
United Technologies Corporation
Eastman Kodak Company
Johns-Manville
U.S. Steel
Exxon Corporation
Merck & Company, Inc.
Westinghouse Electric
General Electric Company
Minnesota Mining & Manufacturing
Woolworth

Comment on this post

What's your American dream?

Posted at 12:17 PM on May 29, 2009 by Bob Collins (1 Comments)
Filed under: Economy

If you're a Midday listener, you've probably been hearing the American RadioWorks series, "A Better Life: Creating the American Dream."

Here's a video the ARW team produced on the subject:

On one segment earlier in the week, a commentator said the American Dream is still alive only because few enough people achieve it to keep them talking about it and keep others dreaming, sort of like Powerball.

In the first hour of today's Midday, Chris Farrell considered whether the recession is killing -- or has killed -- the American Dream.

Comment on this post

Deferring retirement

Posted at 2:56 PM on May 28, 2009 by Bob Collins (0 Comments)
Filed under: Economy

A survey from the Pew Center this afternoon says over half of adults 50-64 are thinking about delaying retirement. Sixteen percent say they expect to never stop working.

The Pew Research survey also finds that it may not be how much you earn but how much you lost in the investment market meltdown that determines whether you are re-thinking your retirement plans. Among the Threshold Generation as well as among other age groups, higher-income earners are only slightly less likely than lower-income adults to have considered postponing retirement. But regardless of income or age, those who have lost 40% or more of their investment nest eggs are roughly twice as likely as those who haven't lost money in the market meltdown to say they have thought about delaying their eventual exit from the workforce.

More women than men are thinking about delaying retirement.

Comment on this post

The battle for Target

Posted at 11:04 AM on May 28, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Comment on this post

Half full/Half empty (cont'd)

Posted at 12:01 PM on May 22, 2009 by Bob Collins (2 Comments)
Filed under: Economy

I listened to and read the coverage yesterday of Minnesota's unemployment rate and the math made no sense to me.

Minnesota employers shed 9,500 jobs in April, which is about half as many jobs as the state lost in March, MPR reported. "Minnesota employers shed fewer jobs in April than in the prior month," the Business Journal said. "Fewer Minnesota Jobs Cut," the Fox9 News headline said.

According to the Department of Employment and Economic Development, there are 13,389 more people with jobs in April, than had them in May. The number of officially unemployed dropped by 3,781 people.

True, there's no putting lipstick on this pig. It's the worst job market since 1984.

Comment on this post

Credit card regs

Posted at 4:38 PM on May 20, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Congress has passed the new credit card law that imposes restrictions on rate increases the banks can charge customers. The president will sign it Friday.

Marketplace reports, however, that if you've got good credit, and don't carry a balance, you might get dinged in the deal. We might return to the old days of annual credit card fees of, say, $30 or so. Rewards programs might also disappear.

Perhaps, then, some good might come from the legislation if it convinces people to wean themselves off revolving credit. But somebody must be using those checks the credit cards company send; the ones that come with a big fee for using them, usually to pay off other credit card bills. But the bill isn't aimed at consumer habits; it's aimed at the financial institutions who've done pretty well with an assortment of fees and gimmicks.

The industry argues that the good customer will end up subsidizing the deadbeat. "This industry will start looking more like a one-size-fits-all pricing approach which dominated in the '80s -- 18 percent interest and a $20 annual fees," David Robertson, publisher of the Nilson Report, told the Washington Post.

But Washington Post blogger Ezra Klein says it's wrong to separate credit card customers into good and bad. Some have lost their jobs or lost their bills, he says. The bill "forces the credit card companies to return to treating you like a responsible card holder if you return to acting like a responsible card holder," he says.

Perhaps the best consumer protection for credit card customers is a pair of scissors.

The issue is of great concern in South Dakota, which became the credit card company capital of the world because of favorable banking legislation that made the state an attractive place for financial firms to call home. The governor says up to 5,000 jobs are in jeopardy because of the legislation and South Dakota accounted for 2 of the five votes against the bill in the Senate.

Comment on this post

Half full or half empty?

Posted at 12:22 PM on May 20, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Major financial news sources had two decidedly different ways to headline Minneapolis-based Target Corp's earnings report today.

HALF FULL
Bloomberg: Target First-Quarter Profit Tops Analysts Estimates

HALF EMPTY
New York Times: Revenue Flat, but Target's Profit Falls 13% (the headline was later changed)

MPR (AP): Target posts 13-percent drop in 1st quarter profit

Which is more accurate? You decide. Target made a half-billiion-dollar profit in the first quarter.

Meanwhile, the company is imposing a near news blackout on its annual shareholder meeting next week, when it has a showdown with hedge fund manager William Ackman. The proxy fight for four seats on the board of directors has become one of the nastiest business stories lately.

In an advisory to news reporters, Target officials said it will ban electronic devices at its meeting at an unfinished store near Milwaukee next Thursday. There will be no question-and-answer session with company officials at the meeting, nor will it be Webcast. Reporters will be able to cover it the old-fashioned way -- with a pencil and a notepad. I had asked if live-blogging would be allowed. No.

The restrictions will also apply to shareholders. It will be interesting to see if anyone with an iPhone and a Twitter account slips through.

How do they do things at WalMart? Differently. WalMart Watch was able to live-blog and take pictures at last year's annual meeting, although the biggest controversy appeared to be whether Miley Cyrus would appear . She didn't.

Comment on this post

Why are people so chipper about the economy?

Posted at 11:22 AM on May 19, 2009 by Bob Collins (9 Comments)
Filed under: Economy

According to people who know, consumer confidence has reached a high point for 2009, driven by an improving short-term outlook.

Now the question. Why? Is it because there is genuinely good news about the economy? Or is it because if you tell people something often enough, they'll believe it? In the wake of the collapsing economy, there was pushback against the media for telling "too much bad news." The assertion, not without merit, was that the media was making it worse.

Since then, politicians have done their best to put a happy face on things by viewing a declining economy as good news because it isn't declining as fast as it was. And the media have picked up on the "improving economy" narrative in many of their stories.

But where's the evidence that things are improving?

Today, for example, Medtronic announced it's going to slash 1,500 jobs, 600 of them in the Twin Cities.

Everyone is waiting for the real estate market to bounce back, and while there have been a few stories documenting an increase in home sales, I tend to pay attention to clued-in people like Teresa Boardman, who writes the St. Paul Real Estate blog and yesterday suggested that it's a stretch to say things are brightening.

In the last couple of weeks I have been reading that we have hit bottom and things will get better. I want to believe it but I don't.

Activity has picked up in the housing market but the prices have gone down, there are too many foreclosures and there are two many people who want to sell but can not because they owe more on their homes than they can sell them for.

On Monday, the stock market jumped 3 percent on "brightened" housing news. But today, reports show a steep decline in housing starts for apartments and condos.

The auto industry has just ordered many dealerships in Minnesota to close. And on Midmorning today, legislators reminded us that the tide of job losses in Minnesota aren't expected to ebb until next year... maybe. And in the wake of the mess at the Capitol, hospitals are laying off people already.

Maybe things are getting better for people. How about you? Are you more optimistic? Why or why not?

Comment on this post

Tales from the 'Threshold Generation'

Posted at 3:25 PM on May 14, 2009 by Bob Collins (0 Comments)
Filed under: Economy

From the things you don't have to tell me department: Who's suffered the most in the economic collapse? It's not the kids graduating college. It's not the people living off their retirement savings. It's people like, ummmm, me, according to the Pew Research Center:

... adults ages 50-64 are living through what feels to them like much harder times. Three-quarters of this so-called Threshold Generation say that the nation's current economic problems will make it more difficult for them to afford retirement. Two-thirds of younger adults and 56% of older adults share the same concern.

Far fewer people in other generations report losing money in stocks and retirement funds as this age group.

The report also suggests we can forget about the inheritance:

The survey also finds a sharp inheritance expectations gap between older adults and their adult children. About three-quarters of all adults 65 or older say they plan to leave an inheritance to children or family members. By contrast, less than half (43%) of all adult children with older parents say they expect to receive an inheritance

Comment on this post

Gap-toothed rural Minnesota landscape?

Posted at 2:22 PM on May 14, 2009 by Bob Collins (5 Comments)
Filed under: Economy

Through the miracle of Google street view, let's visit some of the small cities of Minnesota, which seemed to bear the brunt of Chrysler's decisions to close dealerships. Will it leave large, gaping holes in the fabric of rural Minnesota? You decide.

Boe Chrysler in West Concord, Mn.

Salmon Motors in Tracy, MN.

Sonju Two Harbors...

Denny Hecker's Jeep Pine City

Comment on this post

Chrysler's list

Posted at 12:43 PM on May 14, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Here's the list of all the Chrysler dealerships that the company intends to close.

I count 19 Minnesota dealerships and two in the Twin Cities -- in Stillwater and Lake Elmo.

Dealers, start your lawyers!

Comment on this post

The last gasps of Bear Stearns

Posted at 10:42 AM on May 12, 2009 by Bob Collins (1 Comments)
Filed under: Economy

The Los Angeles Times today has an interesting review of 'Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street' by Wall St. Journal reporter Kate Kelly, which purports to show the extent to which federal officials -- mostly then Treasury Secretary Henry Paulson -- orchestrated the first domino in the country's financial collapse.

No paragraph is more compelling than this one:

"Regulators may never know what really happened. But one thing is clear: Once confidence in a company falls away on such a grand scale, it can never recover. Bear started that week with more than $18 billion in capital, its largest cash position ever. Three days later, negative headlines, a stock drop, lender reticence and big withdrawals from client accounts had cut those capital levels in half. Eight hours later, it was nearly dead."

Another YouTube video says Kelly's book reads nothing like the newspaper stories that were coming out at the time of the collapse. You decide. Here's Kelly's lengthy blow-by-blow account in the Journal a year ago.

Comment on this post

Asleep at the wheel?

Posted at 4:23 PM on May 11, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Were business reporters asleep at the switch when it came to covering the financial industry over the last few years? NewsHour posted video late this afternoon of a forum held by the business press a few months ago in Denver.

Larry Ingrassia of The New York Times said maybe the readers were asleep, "but the New York Times definitely wasn't." But most of the people in the video appeared to disagree.

In an assessment of the panel in a Colorado Independent story last month veteran TV journalist Allan Dodds Frank blamed an old reportorial whipping boy: editors.

"Fannie and Freddie were not covered on TV because there's no visual," he said.

Comment on this post

What are you entitled to?

Posted at 9:20 PM on May 7, 2009 by Bob Collins (28 Comments)
Filed under: Economy

A few months ago, when I finished the News Cut on Campus "tour," I wrote this piece: Optimism, pessimissm, and the college graduate.

A writer I very much admire, Lane Wallace of The Atlantic, wrote about that piece today on her online column.

Perhaps Minnesotans are particularly good at accepting life in all its uncertainty and challenge. This is a place, after all, where it's been known to snow in every month of the year, and people have to shovel their roofs as well as their walks. I'm not kidding. I've done it, myself. If you want an easy ride in life, with palm trees and year-round sunshine, you don't settle in Minnesota. But whatever the reason, Collins' advice is a valuable reality check--not only on the current economic situation, but on how all of us, media included, can or should respond to it.

But it was a comment from -- I presume -- a young 'un that got my attention:

Sure the challenges of adulthood are nothing new, but who over 50 graduated college with $50k in student loans and credit card debt? When you're starting out with that kind of burden, never mind the recession, of course there's anxiety. It has nothing to do with the abstract future or achieving your dreams. It's the present, and working for $110 a week or its modern-day equivalent won't cut it. Collins' advice and this post basically ignore that for a lot of recent graduates, there's no time not to be conservative and risk averse. But if you're 50, established and debt-free, well I guess it's fair to look back and wonder if you could have been more care-free, too.

.. and so I responded...

Let's do the math on that. Let's see, I graduated (1976) with $4,000 in debt and a job that paid $5,720 a year. My debt was 69% of my annual salary.

The average student loan debt last year was not, in fact, $50,000, it was $21,899. The average income for graduating seniors in 2007 was $60,000 $46,000, making the total debt 36.5% 47.6% of annual salary.

Are there exceptions? Of course there are. But my point is a simple one to today's kids: You're not the exception you think you are. It's the last thing you will likely learn as part of your college education: Some people do know what they're talking about. The best way to get ahead of the game, is to listen.

But you're right, $110 in today's dollars -- which would be $400 a week -- isn't going to cut it. But here's what you don't understand: It didn't cut it then, either.

That's the point: We weren't entitled then. You're not entitled now.

Go forth, work hard, experience life. Make yourself special.

Graduating seniors: What are you expecting the world owes you starting next month?

Comment on this post

How much is the Web worth?

Posted at 1:52 PM on May 7, 2009 by Bob Collins (11 Comments)
Filed under: Economy, Media

Would you pay for content on the Web?

Rupert Murdoch, the money behind Fox and the Wall St. Journal, expects to start charging you for access to his Web sites within a year.

"We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning," he says.

It's the sort of thing newspaper owners dream of during periods of REM sleep. But it's been tried a few times, with fairly mixed results. People will pay for porn; they won't pay for news.

Is there any scenario that you'd pay for news on the Web?

Comment on this post

GM's losses

Posted at 12:07 PM on May 7, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Things didn't get any better for General Motors in the first quarter of the year, according to results released by the company today.

It posted a $6 billion first-quarter loss and spent $10.2 billion more cash than it took in during the first three months of the year.

How much is the $10.2 billion in cash the company burned in the quarter?

Is it a time to forgive?

Posted at 8:27 PM on May 5, 2009 by Bob Collins (10 Comments)
Filed under: Economy, Politics

Should taxpayers pay for a hockey arena in St. Paul?

That's the question facing Gov. Tim Pawlenty, a professed hockey nut, now that the Legislature has sent him a political grenade -- a bill that forgives $33 million of a no-interest loan the city got from the state to lure professional hockey back to Minnesota by building the Xcel arena.

The city really doesn't need the money, except that it wants to build another hockey arena across the street for the benefit -- primarily -- of the Minnesota Wild, who need a hockey facility.

A hotel planned for the site has been dropped, according to St. Paul councilman Dave Thune on the the St. Paul Issues Forum. "The ice sheet would provide a base...(surrounded) by a really exciting retail component befitting historic seven corners. The pond would host world class figure skating, public skating, wild hockey practice, curling and youth hockey," he said.

Perhaps. But wasn't one benefit of the Xcel Center to be a boost to business in St. Paul? A few restaurants have benefited, there's more business for parking ramps, but other than that, not much. And while it attracted the Republican National Convention, that week was a disaster, even for businesses a teargas cannister's throw from the arena.

Back when then-mayor Norm Coleman was trying to cut the arena deal, some people in St. Paul objected to the city getting stuck with pricetag for an arena that would attract hockey-loving suburbanites. Perhaps this is one way they can pony up their share.

But what about people in Marshall, for example. Its representative, Marty Seifert, the House Minority Leader is, predictably, no fan of the bill. "Go back to your coffee shop. Go back to your hardware store ... and ask people if you think this is an opportune time for us to be forgiving over $30 million that's owed to the state of Minnesota, from a deal that was struck in the 1990s, when we are $6 billion in the hole," said he said.

What say you?

Comment on this post

Target vs. Ackman

Posted at 4:16 PM on May 5, 2009 by Bob Collins (2 Comments)
Filed under: Economy

A battle is intensifying between Minneapolis-based Target and hedge fund boss William Ackman, who has a history of fighting with the companies in which he becomes an investor.

It will come to a head later this month when stockholders meet to vote on a board of directors. Ackman wants to replace four of them with four of his own.

Target has selected an unfinished store in Waukesha, Wisconsin as the site for the meeting and Ackman is suggesting it's an attempt to make it difficult for his sympathizers to get to the meeting.

"This is another Pershing Square (Ackman's hedge fund) sideshow," a Target
spokesman told Reuters.

But Ackman has some reason to be suspicious. When his hedge fund got into a proxy fund against the railroad CSX, the company held its stockholder meeting in a difficult-to-get-to railroad yard.

Here's Ackman's filing with the SEC in which he complains about the Target location.

Comment on this post

Are tighter lending practices a good or bad thing?

Posted at 1:18 PM on May 4, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Isn't the nation's banking system a chicken-and-egg situation?

The housing crisis which started the economic meltdown was partially due to banks making loans to people who shouldn't have had them to buy things they couldn't afford. When the house of cards collapsed, banks stopped making loans, which led to the U.S. government to throw billions of dollars at them to try to get them to start issuing credit again.

How's that going? Not so well, the quarterly report from the Federal Reserve says today. Its quarterly survey says about 50 percent of U.S. banks tightened their lending standards on prime mortgages, up from about 45 percent in the survey issued in early February. Sixty-five percent of the banks tightened lending standards on "non-traditional" mortgages, such as ARMs.

This comes at a time when demand for mortgages is starting to increase, helped along by lower mortgage rates.

Find the survey here.

Comment on this post

A clean slate for the city

Posted at 11:28 AM on April 22, 2009 by Than Tibbetts (2 Comments)
Filed under: Economy

The New York Times reports on a plan — and from what you'd gather from the article, a surprisingly non-controversial plan — to effectively wipe out entire blocks and neighborhoods in chronically depressed Flint, Mich.

The population would be condensed into a few viable areas. So would stores and services. A city built to manufacture cars would be returned in large measure to the forest primeval.

Michigan's laws afford local governments a lot of leeway when it comes to dealing with tax-delinquent properties.

The numbers, here, tell a powerful tale of boom and bust in the last half century.

Nothing will happen immediately, but Flint has begun updating its master plan, a complicated task last done in 1965. Then it was a prosperous city of 200,000 looking to grow to 350,000. It now has 110,000 people, about a third of whom live in poverty.

The story ends with the reporter meeting a woman, her pristine house about the only thing left on the block, contemplating whether she would abandon her home if the city offered her a spot in a more stable neighborhood.

Would you?

Update: Bob from the comments recommends this Harper's article: "Detroit Arcadia - Exploring the post-American landscape" (pdf).

Comment on this post

History is history

Posted at 3:26 PM on April 16, 2009 by Bob Collins (5 Comments)
Filed under: Economy, Politics

The Minnesota Historical Society is announcing huge proposed budget cuts. According to a news release, more than 90 people would lose their jobs, fewer books would be published and three sites would close.

You know my penchant for aviation, so I'll weep silently for the the Charles A. Lindbergh Historic Site in Little Falls. It, along with Historic Forestville in Preston, and North West Company Fur Post in Pine City would be closed to the public.

Lindbergh, for the record, was good enough for Gov. Pawlenty to invoke in his 2008 State of the State address. "When Charles Lindbergh emerged from the plane, he said just what you might expect a Minnesotan to say, 'Well ... I made it,'" It's easier to fly solo to Paris than it is to keep history alive in Minnesota, however.

Historic Fort Snelling would close for two days each week.

The Oliver H. Kelley Farm in Elk River, Mille Lacs Indian Museum and Trading Post in Onamia, Forest History Center in Grand Rapids, and Jeffers Petroglyphs in Comfrey would only be open weekends.

Maybe nobody cares about these particular cuts, the governor's spokesman suggests.

"If you weren't able to go to the Historical Society Library when you thought you' might be able to, some people might notice that. It doesn't seem like the Historical Society is trying to go overboard. I think their attempt here is one that presents a realistic approach as they seems like they look at the budget situation," said Brian McClung.

But wasn't the "Legacy Amendment" -- that's when you voted for a sales tax increase last fall -- supposed to be a boon to cultural programs in the state?

Comment on this post

Another shoe drops

Posted at 11:58 AM on April 16, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Today marked the biggest real estate bankruptcy filing ever in the United States when General Growth Properties filed Chapter 11. The mall developer is best known, perhaps, for owning Quincy Market (note: some news organizations say the developer owns Faneuil Hall in Boston. Not true. They own the tourist trap next to it.) and South Street Seaport in New York.

There is a local angle here, too. The developer owns Eden Prairie Center. It also owns the Ridgedale Mall as well as the River Hills Mall in Mankato, the Apache Mall in Rochester, and Knollwood Mall in St. Louis Park.

Here's a copy of the bankruptcy filing.

Comment on this post

Long bombs

Posted at 10:48 AM on April 16, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Comment on this post

Can anyone here play this game?

Posted at 10:17 AM on April 14, 2009 by Bob Collins (0 Comments)
Filed under: Economy

During the famed 1962 debut of the New York Mets, a frustrated Casey Stengel said, "Can't anyone here play this game?" It was a rhetorical question; the Mets lost 120 of their 162 games that year.

Wall St.is channeling Casey today. It. rises and falls on expectations and so far today a report on retail sales has disappointed the market into another dive.

"Retail sales fell unexpectedly in March, decreasing by 1.1 percent," the Associated Press reported.

Who could possibly have expected anything but a disaster where retail sales are concerned? Analysts. They had expected an increase. They have not learned the law of diminished expectations: expect nothing, and you'll never be disappointed. Maybe it's time for new analysts.

One can almost feel Fed Reserve Chairman Ben Bernanke trying to get a "we're recovering" narrative going. "Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding, and consumer spending, including sales of new motor vehicles," he said in a speech today. "A leveling out of economic activity is the first step toward recovery.

In other words, we're not free-falling, but we're still falling. And that's what passes for good news these days.

President Obama, in a speech today, went with the half-empty strategy, an apparent attempt to diminish expectations. "By no means are we out of the woods just yet," he said, an odd admonishment since nobody with an ounce of common sense is saying we are.

But, he said, there's a glimmer of hope.

If the economy itself could give a speech, it, too, would cite a Stengelism. "If anyone wants me tell them I'm being embalmed."

Comment on this post

Live-blogging Midmorning:

Posted at 9:06 AM on March 23, 2009 by Bob Collins (8 Comments)
Filed under: Economy

I'm in the studio with Kerri Miller of Midmorning this morning to talk about the nature of outrage in the wake of the AIG bonuses. "I won't govern out of anger," President Barack Obama said over the weekend, suggesting he'd likely veto the tax on the bonuses passed by Congress last week.

Writing in the New York Times, Joe Nocera says people have gone a little overboard, what with death threats and all. He also notes that the people who put the screws to AIG are living a good life in retirement and nobody seems much interested in getting their money back.

Our discussion about Wall St. features Daniel Gross, the senior editor and columnist at Newsweek, who also writes the "Moneybox" column for Slate; Kate Jennings, a former Wall St. speechwriter (Wall St. had speechwriters? Let's see you write one for this mess!) and Michele Boldrin, chair of the department of economics at Washington University in St. Louis.

As usual, I'll have a parallel conversation in this parallel universe, and will drop in your comments on the air during the hour, which begins at 9. If you've got some comments now you'd like me to pass along, post them in the comments section below.

Comment on this post

Deficit data

Posted at 12:29 PM on March 20, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Surveys and trivia

What is the main effect the economic meltdown and subsequent bailout efforts have had on America? It makes giant numbers that used to make our jaws drop, now make our shoulders shrug.

Example? Today some congressional economists reportedly whispered that the nation's deficit will hit $1.8 trillion this year. That shatters the previous record of $459 billion, a number which once sounded like something other than the change you pull out of your pocket and throw on the dresser at night.

How much is 1.8 trillion?

>> It would take 57,077 years for you to count that high, assuming you don't sleep. That doesn't include leap days.

>> It's 882,352,941 pounds of $100 bills. That was about the total weight of one tower of the World Trade Center.

>> You could walk around the earth 72,284,656 times, and you'd still be about 20,000 miles short of 1.8 trillion.

>> At its current rate, AIG could give bonuses to 4.4 million employees.

>> It could close the Minnesota budget deficit 331 times.

>> 51,385,994 people could take a backpacking trip around the world. (h/t: Daniel Konold via Twitter)

Comment on this post

The only thing we have to fear is not knowing what to be afraid of

Posted at 11:06 AM on March 20, 2009 by Bob Collins (2 Comments)
Filed under: Economy

You don't have to watch The Daily Show and its occasional snips of CNBC's poor prognostication to marvel at the economists' ability to confound us. You need only look at some of the headlines this week alone.

Let's take deflation and inflation, for example, and the occasional reports of what we should fear. We'll start today and work our way back.

March 20
Fed announcement spurs inflation concern. (Bloomberg)

March 19
So long, deflation (Globe and Mail)

March 18
Deflation: Too late to stop it when we experience it (American Enterprise Institute)

U.S. inflation rises (Reuters)

March 17
Lengthy deflation ahead (American Daily)

Deflation a threat to U.S. economy (Wall St. Journal)

March 16
Paul Krugman: U.S., Europe fear deflation risk (Forbes)

March 11
Pimco predicts inflation (Bloomberg)

Comment on this post

Unemployment by the numbers

Posted at 12:22 PM on March 19, 2009 by Bob Collins (0 Comments)
Filed under: Economy

The Minnesota Department of Employment and Economic Development reported today Minnesota's unemployment rate for February was 8.1 percent -- dead even with the national average.

Earlier this month, however, the department released data on the counties for January that shows the varying degrees of which Minnesotans are struggling. In Clearwater County, for example, the unemployment rate is over 21%. It's over 17% in Kanabec County.

Counties in the far southwestern part of the state, on the other hand, have unemployment rates under 6 percent. April 1983 was the last time the unemployment rate was this high (yes, now it's 1983), although the last time the state had this few people working was around 2000. And the number of unemployed here may now be the highest in the state's history, although the data only goes back on the department's Web site to 1976.

Politics in Minnesota notes that the rate of unemployment increases is among the highest in the nation. State officials predict the number of lost jobs in 2009 should hit 70,000. That figure could be hit by next month since the number of unemployment has increased by 56,000 32,000 this year alone.

Update 1:42 p.m. - Interesting chart at the Minneapolis Fed's Web site on the depth of the recession compared to other recessions.

Comment on this post

The Twitter experience

Posted at 8:25 PM on March 16, 2009 by Bob Collins (0 Comments)
Filed under: Economy, Tech

On Monday, John Moe, doing a great job filling in on MPR's Midmorning, jumped into the mainstream media hot tub with Twitter. There's only been about 100 stories about Facebook and Twitter in the Twin Cities in the last week,so while I enjoyed the show, I declared myself a conscientious objector to any more infatuation with Twitter.

But that's before I saw the blog, New Media Chatter, in which a guy stranded at an airport, issues a call for help to the airline that stranded him.

It's a good lesson about what Twitter is and what it isn't where business is concerned. Twitter won't rescue you if you have lousy customer service, so there's no reason to use it just so you can say you're one of the cool kids now. If you have poor customer service without the latest gadget, you'll probably have poor customer service with it.

The guy's airline never helped him, so he issued a call -- via Twitter -- to see if Southwest Airlines could help him. In the end, it couldn't, but it tried; it tried a lot.

The message from all of this? The blogger says:

(Twitter) is not about posting links all the time, cool videos or such. It is about dealing with your customer and creating positive brand awareness at that moment. If you are a company, you see an unhappy customer out there, you need to move quick and communicate! @JetBlue could of said "got your tweet, will follow up soon" something to let me know they were working on it. Something..just let me know you have not forgot about me. Cause if you do not your competition will do this:

My take-away? People are getting hung up on Twitter and missing the more basic picture.

How do we get this deep into a recession and how do some companies still not understand that just showing the customer you care about them doesn't cost you a dime, and probably will keep you in business? You can't lay off people fast enough to offset the lost business from poor customer service.

Comment on this post

Local banker to Citi's board

Posted at 7:53 AM on March 16, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Jerry Grundhofer, the brains behind US Bank, is wading into the CitiGroup mess, it was announced this morning. He's one of four independent candidates for the troubled bank's board of directors.

The four new directors are the trade-off Citi made in exchange for the government taking a a 36% stake in the company.

Grundhofer has made a career of turning around failing banks.

Comment on this post

Do you really want more positive financial news?

Posted at 7:31 PM on March 15, 2009 by Bob Collins (9 Comments)
Filed under: Economy, Media

Clark Hoyt, the editor of the New York Times, is the latest big-name journalist to try to respond to complaints that the news media is overemphasizing bad economic news, depressing consumers confidence and prolonging the recession.

Consumers and their media are in a "you go first" staredown on the subject.

In Hoyt's words:

This is an old argument between a newspaper and its readers: journalists see their job as reflecting the world as their reporting tells them it is, but many readers want reporters to look harder for good news to balance the bad. Ellenson said he wants news organizations to go even further. "Tell consumers not to worry," he said. "Go out and spend as if there is no recession."

Maybe there are more opportunities to emphasize silver linings. The demise of flower shows in the recession was front-page news; Broadway's surprisingly strong box office was not. But The Times is not about to do what Ellenson suggests -- and should not. As David Leonhardt, a business columnist, told me: "The problems we have are not psychological. They are hard, real problems. None of them can be resolved by waking up tomorrow and thinking we're going to be happy about them."

Of course the Times shouldn't do what Ellenson suggests. There's plenty of reason to worry. I know it. You know it. The '27 Yankees know it. And so do many of the consumers who are asking the news media to step back from the brink. So why respond to the extreme?

A few weeks ago, Don Shelby similarly overreached in describing the request:

But, the old story of the ostrich comes to mind. It sticks its head in the sand believing that if it cannot see a threat, the threat cannot see the ostrich. We could just keep the bad news to ourselves, but then, people who would like a little warning of approaching danger, would rightly say, we didn't do our jobs

What are people really saying when they voice their complaint? It's not that they want the news media to ignore reality or pretend something is what it isn't. It's that they want the news media to take just as seriously, the stories about what people are doing to overcome the tough times. To tell the story without the constant numerical equivalent of hand-wringing.

AIG handing out big bonuses? Unemployment at record levels? A state budget deficit widening faster than the politicians ability to close it? Of course that has to be -- and should be -- reported.

So what are people asking for? A little hope. A little inspiration. Perhaps a few stories every now and again like those President Obama told in his address to a joint session of Congress a few weeks ago:

But in my life, I have also learned that hope is found in unlikely places; that inspiration often comes not from those with the most power or celebrity, but from the dreams and aspirations of Americans who are anything but ordinary.

I think about Leonard Abess, the bank president from Miami who reportedly cashed out of his company (note: see a story ABC did on this guy a few days later), took a $60 million bonus, and gave it out to all 399 people who worked for him, plus another 72 who used to work for him. He didn't tell anyone, but when the local newspaper found out, he simply said, ''I knew some of these people since I was 7 years old. I didn't feel right getting the money myself."

I think about Greensburg, Kansas, a town that was completely destroyed by a tornado, but is being rebuilt by its residents as a global example of how clean energy can power an entire community - how it can bring jobs and businesses to a place where piles of bricks and rubble once lay. "The tragedy was terrible," said one of the men who helped them rebuild. "But the folks here know that it also provided an incredible opportunity."

And I think about Ty'Sheoma Bethea, the young girl from that school I visited in Dillon, South Carolina - a place where the ceilings leak, the paint peels off the walls, and they have to stop teaching six times a day because the train barrels by their classroom. She has been told that her school is hopeless, but the other day after class she went to the public library and typed up a letter to the people sitting in this room. She even asked her principal for the money to buy a stamp. The letter asks us for help, and says, "We are just students trying to become lawyers, doctors, congressmen like yourself and one day president, so we can make a change to not just the state of South Carolina but also the world.

We are not quitters.

My colleague, Julia Schrenkler, was following the conversation on Twitter during that portion of the speech last month and noted that it was at that point when the most snarky comments were posted. "See, I think it is interesting that folks snark a bit at these individual stories...but also complain that the news media only reports bad news. Isn't this a version of positive experiences?" she said on the live blog I ran that night.

It was a great observation. Do people really want the "positive" stories they say they want? Is the media convinced they don't? Does "positive" news have to be synonymous with "fantasy?"

Comment on this post

Why are we good?

Posted at 9:34 AM on March 14, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Science

The Boston Globe jumps on the theme we discussed the other night (and was broadcast on Midday on MPR on Friday): the job outlook for graduating college seniors.

It found the same thing I picked up (and wrote about) during the News Cut on Campus tour: that more students are turning toward working for the social good.

Fourteen percent of this year's senior class at Harvard applied to Teach for America, a nonprofit organization that sends graduates to work in low-income urban and rural public schools. The proportion was 9 percent last year.

"There's always that push to make money and be comfortable, but the financial crisis made me think that there's a lot more in life than going to get that corporate job," said Matthew Clair, a Harvard government major who will spend the next two years teaching at an Atlanta primary school. "It gave me a good excuse to take some more time off to do what I'm really passionate about."

But the situation brings up another question: To what extent are graduating seniors heading off in this direction out of a sense of altruism, and to what extent are they heading in that direction because that's where the jobs are?

All of which brings me today to this week's News Cut pick of the week of all the offerings that came out of your radio. It's Thursday morning's Midmorning appearance by Dacher Keltner, the professor of psychology at the University of California at Berkeley, and the author of "Born to be Good." Pay no attention to the misnamed headline on the page ("The science of emotional survival") because the heart of the show (zip ahead about halfway through the audio), was the discussion of altruism, and why we're good (mostly).
It even took on last week's appearance by Richard Dawkins.

Comment on this post

Victims or accomplices?

Posted at 6:43 PM on March 13, 2009 by Bob Collins (4 Comments)
Filed under: Economy

Last month, in the now-famous Chicago Tea Party diatribe, CNBC's Rick Santelli said the people who would be in line for some government help with their mortgages are "losers."

Yesterday,an anchor at the same network suggested Bernie Madoff should be "waterboarded" and pointed out that his victims "did nothing wrong."

Is there a parallel?

Yes, according to Joe Nocera of the New York Times. He writes today that Madoff had accomplices -- his victims:

"These were people with a fair amount of money, and most of them sought no professional advice," said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. Mr. Hedges said: "It's like trying to do your own dentistry. It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances."

And that's the point. People did abdicate responsibility -- and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don't bail them out, and they shouldn't start now. Did the S.E.C. foul up? You bet. But that doesn't mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn't looking.

Sound familiar? It's victims as partial contributors of their demise.

Under Nocera's theory, are those of us who've lost our retirement savings victims, too?

(Recommended reading: Tonight's NewsHour on PBS looked at the role of the business press in covering the meltdown, including the assertion that stories were covered, but ignored.)

Comment on this post

Selling the things you love

Posted at 4:59 PM on March 12, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Michael Caputo, who helps run Minnesota Public Radio Public Insight Network, is looking for stories about whether you'd sell the things you'd love to pay the bills.

Here's his story:

Okay, money doesn't buy happiness. And accumulating stuff shouldn't make us whole.

But there are some possessions that have value greater than the pricetag. And yet, in a recession, when the times get tough ... you sometimes have no choice but to part with these sentimental items.

Take the case of Jonathan Stimes. More than 20 years ago his father gave him several gold coins. They were a gift of labor, Stimes said, for work that father and son did on a family farm in Illinois.

But Stimes, of Burnsville, has lost his sales job and needs to keep the house paid for. So he decided to part with those gold coins. He tells the story from here.

"My stoic Norwegian Dad would have just shrugged and said, 'well, this is what we put it away for.' But when I handed (the coins) over in exchange for the check, I became rather emotional and had to leave the shop quickly. There are tears in my eyes as I write this now because I still miss him and I know deep down he would have rather that money gone for something more special than a mere two house payments."

Stimes wrote this in response to a question Minnesota Public Radio news posed: Have you considered selling something to boost your income?

What we heard was illuminating -- not only because of the reasons that people sell items, but because of what these items meant to them.

Some have peddled (or contemplate peddling) beer can collections, amphibious ATVs or fluke scopemeters (I had to look that one up). Some sold items to increase cash flow, to get out of debt problems or to stockpile money for the rocky road ahead.

Others, like Chris Carlson of Mound said that initially he sold stuff to pay the bills. But now the business owner says he's peddling possessions as a lifestyle choice.

"I continue to sell my good unwanted items as an alternative to the land fill. Its amazing with the exposure you can get with online listing services there is always someone out there that wants whatever it is. I typicaly list for 1 cent or 99 cents to ensure it gets bought. I now do it for the environment I even keep the packaging peanuts from work that would normaly be discarded and box them up and sell them"

So is anything possessing you to part with your possessions? Are you needing to suppliment your income? Is it a lifestyle choice? Are you parting with something that means a whole lot to you?

What are you willing to part with to make ends meet?

Comment on this post

The Obama Industrial Average?

Posted at 4:48 PM on March 12, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Politics

Comment on this post

Tracking the stimulus: Transportation projects

Posted at 4:31 PM on March 12, 2009 by Bob Collins (3 Comments)
Filed under: Economy

The mailbag reveals that the Minnesota Department of Transportation has decided how to spend the economic stimulus money heading this way.

The list of projects for outstate (aka "greater") Minnesota can be found here. They include such things creating "living" snow fences in Monticello (I-94) and Atkinson Bridge to installing traffic lights in Fergus Falls. (See pdf)

Comment on this post

Optimism, pessimism, and the college graduate

Posted at 10:13 PM on March 11, 2009 by Bob Collins (5 Comments)
Filed under: Economy, News Cut on Campus, Schools

On Wednesday night I participated in a roundtable with some soon-to-graduate college students. It was the final chapter of the News Cut on Campus project in which we focused on how the economy is affecting the outlook of students.

The roundtable will be broadcast on MPR's Midday one of these days, but I don't believe it's been scheduled yet. Find the broadcast here.

I was asked to provide some observations about what I learned during the project. Here's a few I tossed in along with a few I didn't.

Star Tribune may not be #2

Posted at 4:15 PM on March 11, 2009 by Bob Collins (0 Comments)
Filed under: Economy

There was a lot of link love yesterday for a Time Magazine ranking that appeared to suggest the Star Tribune is the second-mostly-likely big city newspaper in America (The Philadelphia Inquirer was first) to go belly up.

Not so fast.

Shocked that the Boston Globe was on the list, media watcher Dan Kennedy (who, by the way, writes a must-read blog), points out the writer was a blogger who might not have the best information in the world:

In fact, the source of this rather startling prediction is Douglas McIntyre, a blogger for 24/7 Wall Street -- not exactly the ghost of Henry Luce. Time just happens to run the feed on its Web site. (Here's a look at the site's syndication service.) I've interviewed McIntyre. He's a smart, knowledgeable guy, but it's fair to say that he likes to be a provocateur.

You will notice, too, that McIntyre repeats that bit about the Globe's being worth only $20 million. In fact, as the Boston Business Journal reported recently, a more logical number is a shade under $200 million -- far short of the $1.1 billion that the New York Times Co. paid for it (in 1993 dollars, no less), but a lot more than $20 million. I know of no one who ever thought the $20 million figure was credible.

Adam Reilly at the Boston Phoenix's Don't Quote Me Blog (another must-read blog), unearths the nugget that the list wasn't in order -- it may not be #2.

None of which matters to the pressmen's union at the paper. Today in New York, the Star Tribune's lawyers told a judge it needs $3.5 million in concessions from the union as part of $20 million more in cuts its seeking from its employees.

Comment on this post

Where's home?

Posted at 1:35 PM on March 11, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Is St. Paul going to lose Travelers?

In Annie Baxter's story about the former St. Paul Companies now listing New York City as its official home, company spokesman Shane Boyd says:

"It's just a designation. It's in the documents. It's just to designate where his primary office is. He still has an office here as he does in Hartford," Boyd said. "It's not like he's in any one location all the time. But of the three executive offices, that's the one he spends more time in."

But it's a word in the last line of her story that jumps out:

Boyd says there are no immediate plans to shift any St. Paul workers out of state.

The affirmation that Travelers is now New York-based confirms a story Baxter aired in 2006 that suggested that the company was operating a "decoy headquarters" in Minnesota.

State officials have been concerned for some time that the state would lose jobs after it lost its St. Paul identity. They may be hoping the company's philanthropy is an indicator, however. In January, the company's charitable foundation dropped $1.4 million on St. Paul schools.

Still, it's hard to look at the St. Paul skyline and wonder what would happen if the company were to head East.

Comment on this post

Should government workers accept a wage freeze?

Posted at 6:35 AM on March 11, 2009 by Bob Collins (29 Comments)
Filed under: Economy

Has your salary been frozen?

MPR's Tim Pugmire has a story today with union reaction to Gov. Tim Pawlenty's call for a wage and benefit freeze on state workers and teachers.

"What's crazy about that kind of a statement, any compensation savings when we're in as much financial trouble as the state of Minnesota is in, will not protect personnel," Jim Monroe, who heads one of the several unions in Minnesota state government said. "Those savings will then be diverted to another area of the budget to plug that hole in the dike."

According to a recent report in unemployment, government work was a comparatively safe place to be during this period of massive job losses. But in January, the unemployment rate among people associated with state government dropped 2.1%.
But the government "industry" is projected to lose only .6% of its jobs in the state (2,642 jobs) in 2009.

But, unlike private industry, the CEOs of state government are proposing a wage freeze that could extend for years. A bill at the Capitol would prohibit and wage increases for any government workers until the middle of 2011.

If this all sounds familiar, Gov. Pawlenty proposed the same wage freeze during the last budget 'crisis' in 2003.

Comment on this post

An image of America

Posted at 8:38 PM on March 10, 2009 by Bob Collins (4 Comments)
Filed under: Economy

A tent city of homeless people is starting to fill up in Sacramento. It got some publicity last week on Oprah, and now several social service agencies are telling people not to "cater" to the homeless, according to MSNBC.

"It's really not a very good thing to do," says Sister Libby Fernandez, the executive director of Loaves & Fishes. "For one thing, you have to have trash pickup. You bring things out there like clothing, suitcases food, water ... it just builds up an accumulation of trash."

As many as 50 people a week are turning up and the authorities estimate that the tent city is now home to more than 1,200 people, the Daily Mail reported.

What are people and cities supposed to do? The city is thinking about providing some services on the site -- portable toilets, for instance -- but a TV station looked into another tent city in Ontario, California and found as soon as the city did that, people from out of the area moved in.

(Photo via Getty Images)

Comment on this post

Have we hit bottom?

Posted at 2:26 PM on March 10, 2009 by Bob Collins (1 Comments)
Filed under: Economy

Is it still possible to make money in this economy? Apparently so.

The price of a share of General Electric has shot up 32 percent in less than a week, and in the process gave some hope to people wondering if we've hit bottom.

"The rundown due to finance exposure has been excessive. It is still a very large, well operated industrial company and I think the pessimism about the finance sector has hurt the value of the stock much beyond reason," Peter Jankovskis, co-chief investment officer at Oakbrook Investments in Lisle, Illinois, told Reuters.

That's his take, financial writer Terry Keenan looks at the same stock and sees this:

"Having lost 48 percent of its value just since Obama took office, GE shares traded at 16-year lows this week and its very survival is being questioned. The stock, once a store of savings for millions of retirees, has lost $380 billion in value in the past 18 months, the greatest wealth destruction by any stock in history."

So which is it? A company on life support or a company coming back? It's a microcosm of every conversation surrounding the economy.

GE is still down 30% from Inauguration Day, but that's still an 18% climb back.

And it's not as if there aren't a few positive news nuggets about the markets:

The 'mommy track'

Posted at 1:48 PM on March 10, 2009 by Bob Collins (8 Comments)
Filed under: Economy, Life

I'm not sure exactly what to say about this story that crossed the Associated Press a few minutes ago. Plus, it's a minefield. The story? Women being laid off are getting to know their kids better.

Lucas and other laid-off women like her are involuntarily experiencing the life of a stay-at-home mom, and they are getting to know a lot more about the details of their children's daily existence. They are also discovering some of the things they have
been missing.

Couldn't the same be said of men getting laid off?

Comment on this post

Tough times for lawyers, too

Posted at 11:21 AM on March 10, 2009 by Bob Collins (0 Comments)
Filed under: Crime and Justice, Economy

How long could the United States continue to crank out lawyers at the rate it has? About this long, according to a story in the Washington Post.

The recession has taken its toll on the industry that once was -- and still is, really -- synonymous with a way to make a ton of money.

But corporations no longer have a ton of money to spend on lawyers, the big law firm model is failing, and even "globalization" is hitting the business.

"We have 300 people in India. We've added 50 people" in recent months, said Michael J. Dolan, chief executive of the Tusker Group in Austin. Dolan said his lawyers charge $25 an hour, compared with $150 to $300 an hour billed by paralegals and associates doing the same work at law firms. "We're in the process of adding another 30 people."

Across the country, lawyers are being axed from law firms in favor of either lower-priced offshore lawyers, or those graduating from law school who'll work for cheap. "Cheap" in the business, however, is about $130,000 a year.

"Everything you hear is a horror story [but] it's hard to grasp how bad it is," John McBeain, a student at William Mitchell College of Law told Minnesota Lawyer last month.

Comment on this post

Tracking the stimulus

Posted at 3:34 PM on March 9, 2009 by Bob Collins (1 Comments)
Filed under: Crime and Justice, Economy

I wrote early today about the difficulty anyone is going to have keeping track of where all of the stimulus money is going, despite the stated best intentions of many of those involved.

So this afternoon, I've been calling around the state, asking communities how they intend to spend the $29 million coming into the state from the Justice Assistance Grants announced by President Obama last week as part of his stimulus package.

This is "small potato" money in the big scheme of things, but the exercise has revealed how stimulus money gets absorbed into budgets at the lowest levels of government and is probably going to take someone with enough time and resources to call and e-mail every city in the state literally hundreds of times to be able to determine how it's spent.

Some cities and counties know how they'll spend it already. Some don't know how the'll spend it, and some don't even know they've got it. Most are scrambling to figure out what strings -- if any -- are attached. In many cases, the communities just found out today that it's available to them. Only a small handful of the more than 50 communities I contacted responded.

Here's a sample of how some of it is going to be spent in Minnesota.

Dakota County - $11,168
According to Chief Deputy Sheriff Dave Bellows, they're trying to determine if it can be used for equipment. The county has recently been upgrading camera systems in squad cars.

Woodbury - $21,804
"Woodbury is a first-time recipient of this funding. As a result, we need a little time to review the specifics of the program and determine what types of expenditures are eligible," city communications director Julie Lahr said in an e-mail. "Once we do that, the public safety director will make a recommendation to the city administrator regarding what he believes would be the best use of the grant money."

Rosemount - $10,104
The Byrne grants have been used for joint ventures with other government agencies in such things as investigations of gangs and drugs, asscording to Jeff May, the city's finance director. He says he's not sure, however, whether this is "new" money that will allow additional programs or whether it's "old money under a new name."

Apple Valley - $46,001
"Our police chief, Scott Johnson, is currently evaluating a number of different options for these funds. Given the one-time nature of the funding, it is most likely these funds will be used to purchase capital equipment items," Apple Valley's city administrator Tom Lawell said.

Inver Grove Heights - $34,301
"The money you refer to would come to Dakota County and not directly to the City of Inver Grove Heights. In that case, I have not heard from the County on any of their plans for receipt of that funding," responded Joe Lynch, the city administrator.

Brooklyn Park - $245,693
Our police chief is busy working on figuring out what the eligible expenditures would be for so I can't tell you specifically what we'll use it for," city manager Jamie Verbrugge said.

South St. Paul - $19,411
"We have not made decisions about where it would be used. The Governor's initial 2009 budget proposal would reduce our Local Government aid - an integral part of our revenues - by about $400,000 in 2009 and another $1 million in 2010. If that becomes reality, there will be lots of uses for the $19,411," wrote Stephen King, the city administrator.

My favorite response, however, came from Tammy Omdal, the chief financial officer of Burnsville, which is receiving $75,250. "I have no idea what you're talking about," she said.

Incidentally, Kerri Miller will have the two mayors in the house on Midmorning on Tuesday (9 a.m.) to talk about the stimulus money.

Comment on this post

Morality and the economic crisis

Posted at 11:02 AM on March 9, 2009 by Bob Collins (0 Comments)
Filed under: Economy

John Redwood, a member of Parliament, asks a salient question on his blog today: If it was wrong for banks to lend, why wasn't it wrong for people to borrow?

If lending too much was greedy and wrong, wasn't it also wrong for so many people to borrow so much, especially if they cannot now repay it and are going to walk away from their obligations? Who was more guilty - the lender or the borrower?

If the bankers who did the lending were greedy and wrong, weren't the shareholders in the banks similarly guilty as they were happy to receive the dividends from all that excessive lending? Didn't that include most people in the country? The Church Commissioners who pay the clergy salaries doubtless owned lots of bank shares, as did practically every pension fund in the country. I don't remember them speaking out at Bank shareholder meetings asking for the banks to grow less and pay smaller dividends.

What's interesting is the assertion that the economic crisis, formerly known as a "banking crisis" is an issue of morality. Is it?

Related reading suggestions from MPR: Recovering from a layoff, one step at a time, and The 90 second job interview.

MPR's Midmorning also discussed the fallout from layoffs today, although the subject of morality did not come up.

Comment on this post

Transparency

Posted at 9:35 AM on March 9, 2009 by Bob Collins (2 Comments)
Filed under: Economy, Politics

A year or so ago, I tried to find the number of people employed by the state of Minnesota. It took more than a dozen phone calls to find an agency of state government that knew, and even then the data was more than a year old.

So it's no surprise that Minnesota is one of the 19 states that hasn't set up a Web site to track how federal stimulus money is going to be spent, according to the Web site, ProPublica, which tracks these things.

At the same time, it's also not surprising to read in today's Star Tribune that one of the governor's policy advisors (why can't people who run the state agency's on behalf of the governor be his policy advisors?) is actually paid through the budget of seven state agencies.

What is surprising is that anyone could figure it out. Minnesota is not a candidate for "transparent state of the year."

The Minnesota Office and Management and Budget, formerly the Minnesota Department of Finance, posts -- for example -- salary information on its Web site, with information for eight different unions. As long as you're on the union's bargaining team and understand 11 different "step ranges" (or even know what a step range is) and 16 different "comp codes" (and what they are) you can figure out how much an information technology specialist makes. But you can't find out how many there, what they do, or whether we need so many of them.

A total compensation report is somewhat more illustrative of our budget dollars in the executive branch, but not for mere humans who want to figure out whether (a) money is being well spent and (b) how.

"Transparency" is the new buzz word in government. it's meant to provide all the details of where the money goes. It's mostly a dodge. Transparency isn't just throwing a blizzard of numbers at you for you to sort out, transparency is making it easy to sort out.

President Barack Obama's recovery.gov Web site is a good example. It intends to follow how the economic stimulus money is being spent, but there's no indication that it will. It's "news" section is simply puffed-up press releases to tout components of the plan. A section on "justice grants," for example, tells us about money being thrown at anti-crime programs, but it doesn't tell us that while the president promoted a graduating class of police recruits as evidence the stimulus plan is working, it doesn't mention that subsequent classes for potential recruits have been canceled.

A link on the page sends us to the Justice Department to find out how much each state will get. There, we download a spreadsheet for Minnesota and learn, for example, that $19,000 of the $2 billion is trickling down to South St. Paul. How is it going to be used? Call South St. Paul (Note: I did. I had to leave a message.). Now repeat that for every line item in the stimulus package and you've got your transparency. More likely? People trying to figure out will give up.

Is there a better way to do this? ProPublica thinks so; it points to Missouri's Web site to track how stimulus money will be spent. It lists only $223 million received for Medicare reimbursement, so far. But it provides e-mail alerts and RSS feeds as the money is spent.

It also has an area for people to make suggestions on how the money can be spent but, unfortunately, like the Minnesota Legislature's "submit your idea about the budget," it keeps the suggestions to themselves. Why?

How will we know whether the money is being spent correctly? The Boston Herald reports today that the feds are planning to go undercover to "monitor whether unqualified applicants try to obtain stimulus funds." That must be under the "spies" line-item.

Don't look for it on a Web site, though.

Comment on this post

An escape to fashion

Posted at 2:12 PM on March 6, 2009 by Bob Collins (6 Comments)
Filed under: Economy, Things that are puzzling

There was an interesting segment on APM's Marketplace the other night on how the recession is affecting the way we dress. You'd think that we'd be slobbing it up a bit, but actually -- the story goes -- we're dressing up for the down economy.

"It's time to really make an effort, you can just sink down into, you know, the depths and think about this gloom and doom. And fashion is something that, you know, traditionally is an escape for people, and I think no more so than right now, people will look to it as an escape," said Kate Betts, a fashion editor.

She also said she was shocked -- shocked -- when she was in Milan the other day and heard there were stores that went an entire day without anyone showing up. "And remember Italians are big consumers of fashion and luxury," she said.

Did she say Milan? Milan, where it's fashion week this week?

This is what they're turning out for people to wear in Milan these days:

Of course, it was another cruddy day in the economy. Unemployment numbers for February showed nearly 700,000 lost their jobs, and your retirement plan tanked again.

The good news. Things haven't gotten bad enough to make you want to "escape" to that. Have they?

Comment on this post

Minnesota's mortgage meltdown

Posted at 8:33 PM on March 5, 2009 by Bob Collins (0 Comments)
Filed under: Economy

How bad is the mortgage foreclosure and delinquency problem here? Bad, but not as bad as the rest of the country, according to a report released Thursday by the Mortgage Bankers Association.

In the West North Central area -- Minnesota, Iowa, Kansas, Nebraska, Missouri, and the Dakotas -- 6.7% of all mortgages were past due in the last quarter of 2008, that's the lowest of all the geographical regions. Six percent of mortgages in Minnesota were past due. Just 3 percent of mortgages here were in foreclosure.

Nationally, almost 8 percent of mortgages were past due.

But the situation gets much worse for subprime mortgages -- the mortgages given primarily to people with low credit ratings. Twenty percent of those mortgages in Minnesota were past due in the 4th quarter; 15 percent were in foreclosure.

Comment on this post

Bank pushback and sports stadiums

Posted at 11:59 AM on March 5, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Sports

This week, TCF Bank announced it's giving back the federal bailout money that it didn't want in the first place.

Theirs is not the only "pushback" to the government money and the accompanying nosing around that politicians are doing.

On the Web site, The Biz of Baseball Pete Toms well captures the sentiment that sports marketing is the new "whipping boy" of the recession. The subject? Naming rights for stadiums.

As far as I know, TCF did not get much political grief for its deal with the new University of Minnesota Football stadium naming rights, for which it paid $35 million. But it appears to be one of the few that have escaped.

Two major banks (other than TCF) with homes in Minnesota are in the naming rights business, including those who have accepted bailout money, according to the Sports Business Journal.

Wells Fargo & Co.
$25.0 billion in bailout funds
Wells Fargo Arena in Des Moines, Iowa ($11.5). Wells Fargo Arena at Arizona State University ($5 million). Also has marketing deals with five MLB clubs; five NBA clubs; San Francisco 49ers and Seattle Seahawks; Minnesota Wild; multiple minor league teams; Western Athletic Conference; deals at approximately 15 colleges, including Arizona, Southern California and Texas

U.S. Bancorp
$6.6 billion in bailout money
Naming rights at U.S. Bank Arena in Pittsburgh ($3 million). U.S. Bank Arena in Cincinnati. Also sponsors PGA U.S. Bank Championship Milwaukee; Seattle Mariners; Minnesota Timberwolves; Utah Jazz; Denver Broncos; Minnesota Vikings; Big Ten and Pac-10 conferences; six college athletic programs

The pressure to pull back from sports marketing is affecting the already-questionable math used by proponents of publicly financed sports stadiums.

Less than one year ago, professional sports was anticipating a group of stadium naming rights deals which would command unprecedented dollars. The Mets deal remains in place (at least temporarily) but has generated vast amounts of negative attention for the sponsor. The Yankees deal collapsed. Interest in the naming rights for the Cowboys and Giants/Jets stadiums appears slight. On a smaller scale, the Washington Nationals will soon begin their second season of play in Nationals Park, still with no naming rights sponsor.

BofA sponsorship chief Ray Bednar was quoted in SBJ, "We may have seen a sea change in the acceptable way to develop and nurture and maintain and grow relationships using client B2B entertainment."

Whether or not that change is temporary or permanent will have an enormous impact on professional sports.

It all adds up to increasingly unlikely sell for a new stadium for the Minnesota Vikings, whose lease at the Metrodome expires in 2011, thanks to a lousy economy, the disappearance of naming rights money, and a Legislature that has little interest in asking taxpayers to pony up a dime for a new stadium.

Comment on this post

Surprise!

Posted at 8:00 AM on March 5, 2009 by Bob Collins (11 Comments)
Filed under: Economy

Why are economists so constantly surprised? It's becoming the tag line for just about every economic story lately: "... than economists expected." As in -- mostly -- "worse than economists expected." They're supposed to be the smartest people in the room.

Today's invocation, as cited by the Associated Press:

The number of laid-off workers receiving unemployment benefits has jumped to an all-time high near 5 million while new jobless claims remain well above 600,000. Both figures were worse than expected and new projections from the Federal Reserve show unemployment rising for the rest of this year.

Three days ago the government released the monthly report on consumer spending. Economists got it wrong... again:

The Commerce Department says consumer spending rose 0.6 percent in January, even better than the 0.4 percent gain that economists expected.

This comes on top of last week's bombshell that the economy shrank at the end of 2008 more than...well, you know...

The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.

"Analysts" (economists who drive nicer cars, basically) don't get off the hook, either. Take today's earnings report from Target:

Discount retailer Target Corp. says its same-stores sales fell 4.1 percent in February. That was better than analysts had expected.

Granted it's not sound economic theory, but since when has that been a problem?

Comment on this post

The deficit

Posted at 9:59 AM on March 3, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Highlights of the budget forecast, from Tom Stinson, the state economist: Here's the entire budget forecast.

The budget turnaround

Posted at 5:30 AM on March 3, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Pawlenty

When Gov. Tim Pawlenty took office, he inherited a $4.5 billion two-year budget deficit. Four years later, he claimed some credit "for the biggest financial turnaround in state history." The occasion in November 2006 was a projected $2.2 billion surplus. "We just climbed out of a big hole, and I am going to make sure Minnesota doesn't get thrown back in by overspending," Governor Pawlenty said at the time.

If the projected budget deficit hits $7 billion when it's announced today -- and some legislative leaders say it likely will -- that previous "biggest financial turnaround in state history" will be replaced by a new "biggest financial turnaround in state history." In this case, a U-turn.

When the governor last had a huge budget deficit, it constitutes about 15 percent of the previously passed two-year budget. If the projected budget deficit for the next two-year cycle hits $7 billion, that will climb to 20% of the size of the previous budget.

This time, however, there are few accounting gimmicks and shifts left to use to erase it.

We will, of course, have coverage of the announcement during the day. Be sure to check the archive of Monday's Midday broadcast, during which former Republican Gov. Al Quie and former DFL Sen. Majority Leader Roger Moe offered their ideas of how to clean up the mess.

Though I haven't seen the show's plans for today, yet, I'm presuming they'll tackle the issue once again.

MPR will provide live coverage of the governor's news conference on Midday, followed by analysis with former lawmaker Phil Krinkie and former Capitol reporter -- now head of Growth & Justice Committee -- Dane Smith.

By the way, later today on All Things Considered, Marty Moylan looks at whether people are trying to gamble their way out of this. Are people gambling more?

Comment on this post

Generation Debt

Posted at 4:27 PM on February 27, 2009 by Steve Mullis (0 Comments)
Filed under: Economy

In following up with Bob's News Cut on Campus series and the discussion about the increasing use of credit cards on college campuses, MPR's Molly Bloom sent in this series of responses:

It's no doubt that the job market is tough out there. So we asked students how the changing employment landscape is leading them to change their plans. We expected to hear from students who were shifting majors or changing career paths in hopes of finding a decent job once they graduate.

Instead, we heard from students who are staying in school, signing up for service projects or pursuing special certifications, waiting for the job market to improve.

Ariane Laxo, 22, is double majoring in Interior Design and Music and minoring in Sustainability Studies. She's studying for the LEED AP exam in hopes that it will make her more attractive to employers. Still, she worries about digging herself into an even bigger hole.

"The largest effect the economy is having on students is rising tuition costs. Student loans are still available, but some students have to take out more private loans (with outrageous interest rates) than before. Between my husband and I, we have close to $75,000 in student loan debt and are always scrambling to cover the cost of tuition that isn't covered by grants and loans. Plus, as tuition costs go up and we take out more loans, our loan interest payments go up. If it's difficult to pay interest payments now, what will it be like when we're paying off our loans?"

Like many students we heard from, Ariane and her husband are buried under a mountain of student debt. But with the job market in such dire straits, staying in school - even if it means taking out more loans - is their most attractive option. They say a graduate degree is necessary to set themselves apart, even if it means they'll be that much more in the hole when they do find a job.

Sarah Winikoff, 22, is about to graduate with a degree in freshwater ecology. She wanted to get a job with the Forest Service or Conservation Corps., but now she thinks she needs to go to graduate school to be competitive.

"More of us feel like graduate school is the only way we will be marketable to employers. Most of us have no idea if we will be able to get a job after graduation and there is more anxiety than ever around paying off student loans."

If Samantha Oxborough, 21, can get the loans she needs, she'll be going to law school at the University of Virginia in the fall. While she's taking on more debt, she sees her peers trying to defer that first payment by joining AmeriCorps or other government-funded organizations.

Senah Sampong, 24, a student a Minneapolis Community and Technology College, writes that even with increasing debt and a shaky economy, he and his peers have little choice but to continue their schooling. For his generation, debt is simply a fact of life:

"We expect to be poor. That's really the thing. WE expect to be strapped with heavy debt, and more so once the budget is completed. It is hard to accommodate forces over which one has very limited control. The sense of powerlessness drives the blindness I see at my school, I think. I go to a two-year school. A lot of people have kids to think about, a full-time job to think about. You can't really let something like this stop you from acting in the present. When you're up to your turtle neck in debt, stopping isn't going to help anything. It's like trying to pull back a bet, when the only way to stem your losses is to keep raising."

Share your story with MPR's Public Insight Network.

Comment on this post

Rocky down for the count

Posted at 12:16 PM on February 27, 2009 by Than Tibbetts (6 Comments)
Filed under: Economy, Media

It was shocking to read of the sudden closure of the Rocky Mountain News. The writing, presumably, was on the wall, but to come to work to find out that the institution you work for — and the Rocky was an institution (the paper was shuttered 55 days before its 150th birthday) — will cease to exist tomorrow.

The paper's staff put together a documentary of sorts that seems to be directed more to the paper's owner, The E.W. Scripps Co., than to its Colorado audience.

Twin Cities readers and writers might see the words of Scripps President and CEO Rich Boehne as an omen: "Denver can't support two newspapers any longer."

Update: I left this in a comment but it seems worthy of noting in the entry itself.

Apparently the Rocky folks wanted -- and tried -- to continue on as an online-only 'paper' but the company's joint operating agreement with the Denver Post wouldn't allow it.

Comment on this post

Credit card blues

Posted at 2:31 PM on February 26, 2009 by Bob Collins (4 Comments)
Filed under: Economy

Michael Caputo, one of the icons of Minnesota Public Radio's Public Insight Journalism initiative, and I have been talking in the past week or so about how people are paying -- or not paying -- their bills.

On Wednesday, during the News Cut on Campus listening tour stop in Moorhead, I was set up not far from a group from a bank who were trying to sign students up for credit cards.

Coincidentally, Michael sent me this today on the subject of students trying to balance their credit card debt:

As if paying for college was not rough enough... now that plastic in your pocket is getting into the act.

Philip Novak of Minneapolis thought it made sense to put about $8,000 on his credit card. The rate was good and he needed to buy books and supplies, like a laptop, while pursuing his engineering degree at the University of Minnesota.

Then he heard that Citicard's rate was being doubled to 14 percent. For a returning student, not relying on support of parents, this is a factor that is helping to make his fifth year of school quite costly.

"I've tried to find other cards onto which I can transfer balances, but because I'm a student with a low income, I'm having trouble qualifying for $8,000 in credit," Novak said.

He's one of many college students getting caught up in the recent rate hikes by credit card companies.

You may remember that university's were encouraging students to use credit cards for tuition and books costs.

A Minnesota State Colleges and Universities survey in 2005 on student financing said 25 percent of students use credit cards to pay part of tuition or fees... 37 percent use them for books and supplies. That's only going up, said the MnSCU Student Association advocate Shannah Moore.

The reason: Rising tuition, the cap on federal student loans and the tightening of the private credit market.

In many ways, we saw this coming. In this 2004 story, MPR's Elizabeth Stawicki called attention to the increasing role of credit cards in funding college.

If you're caught up in the credit card interest rate-raising, we'd love to hear from you. Please comment below.

Comment on this post

The help at the end of the phone

Posted at 11:28 AM on February 25, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Pat, whose last name I'm not using to guarantee privacy, is another one of the people who can tell how the economy is doing, even if she closes here eyes. Her ears tell the story.

She's a volunteer crisis counselor for Crisis Connection, which has experienced a noticeable increase in calls since the economy tanked. She's trying to help, one caller at a time.

During a typical four-hour shift each week, she told me yesterday, anywhere between 8 and 20 people will call looking for help. Most are people "at the end of their rope" these days, she says. And most seem to be women. "It's just the culture we're raised in," she says.

People tell their problems to Pat, and she puts them in touch with resources, whether it's a place to get food or shelter. "A lot of them are 15, 16, 17 year old girls who've lost their boyfriend."

She became a crisis counselor two years ago as a grad student in psychology at Bethel University. "It's wonderful," she said. "It's fascinating and frustrating at the same time." Fascinating because of the "things that people get themselves into." Frustrating because many times people don't listen to the solutions she offers. That's when she uses the psychology. She asks the callers what they think they should do. Then they listen up.

Though she says she leaves the job behind when she leaves, she acknowledges that she occasionally thinks about particular callers -- the woman with too many kids at too young an age, for example. She says she's gotten burned out a couple of times, but says she can't walk away. "They're my tribe," she says of her fellow counselors, a few of whom work the phones 8 hours a day 5 days a week.

Occasionally, some people helped by the Crisis Connection volunteers call back to report success, but not too often. "I like to think I've helped someone," she says.

Here's Crisis Connection's profiles of some of the counselors.

Comment on this post

Live-blogging the presidential address

Posted at 7:12 PM on February 24, 2009 by Bob Collins (8 Comments)
Filed under: Economy

We'd like to get your feedback and observations as the president speaks to a joint session of Congress about the economy. Afterwards, react to Gov. Bobby Jindal's response.

Comment on this post

Live-blogging: John Ydstie on Midday

Posted at 10:58 AM on February 24, 2009 by Bob Collins (6 Comments)
Filed under: Economy

NPR's John Ydstie has been NPR's "roving national correspondent," but he covered the economy for a couple of decades. Maybe he can make sense of this mess and also answer some questions about the challenges of covering the economy without contributing to its collapse.

He's on with Gary Eichten on MPR's Midday and I'm live blogging the conversation. By the way, he's a Minneapolis native.

11:09 - The Dow is up 53.21 as Gary and John start their discussion. Let's see if the market is listening to the lads.

11:11 a.m. - John says he's flying back to Washington to cover the president's speech tonight. Obama, by the way, previewed his speech. In a sound bite during the 11 a.m. NPR news, he said he would be honest and convey the enormity of the problem. Ugh. Raise your hand if you don't understand how bad the economy is.

11:12 a.m. Ydstie says he thinks the experts "know what they're doing." As he's speaking, Fed Chair Ben Bernanke is speaking to a Senate committee. He said if the stimulus stabilizes things, the recession could end this year. The market jumped, but now it's lost all of those gains.

QUESTIONS AND ANSWERS

Q: "There's so much negativity from the Republicans," a caller says. Says the country is in "an economic war with each other."

A: What you're witnessing is the Republicans trying to figure out how to come back after November's election. They're going back to "core values." It's fraught with political risk. A new poll shows people back Obama. Meanwhile, consumer confidence is at record low levels.(This would be the part where I bring up the media's role in this. Are people reacting to the economy? Or are they reacting to the media's coverage of the economy? Are the two the same?)

>> It's a pledge break. If you follow me on Twitter, you know how I'd do this. Alas, it was rejected. (Disclaimer: It was a joke.)

11:26 a.m. Back to business.

Q: Should banks be nationalized?

A: "I'm not sure it's a good description. We've nationalized many banks over the years. They clean it up and sell it off back to the private sector." It might take longer to deal with a bank like Citi or Bank of America, but it's not impossible. There's nobody who thinks the government should take over the banks and run them forever. It's a tough political sell.

Aside -- Chicago Tribune: Nationalizing banks poses risk but other options look worse.

"If the banks don't start lending again, the stimulus will go to waste. Whatever it takes, is my view," he said.

Q: What if banks fail the "stress test."

A: Unless the feds find a bank is insolvent, not much will happen. If U.S. stock in Citi is converted to common stock, the government will own 80 percent. If banks fail the stress test, they'll try to convert some of that stock. "We can't afford to have zombie banks that aren't lending that the government is propping up."

Q: We're ignoring people who deal with behavior, that the emotional part of this is bigger than the qualitative part of this. Why aren't we hearing from psychologists?

A: Behavioral economists are gaining status as a result of this crisis. It's easier to quantify numbers than quantify emotions and the tendency is to crunch the numbers.

Q: Given the steady drumbeat of bad news. Is there a point when MPR and other media outlets overcover this?

A: John says he had the same question at a breakfast this morning. It's difficult because as a reporter you report what happens and if the market falls because investors don't have confidence, you have to do that. Maybe we should have a bank holiday and a media holiday.

(Bob aside: Look, this is the problem with answers like this. Nobody is suggesting the media not cover this. But the answer suggests that everything the media covers is in context and it simply isn't. Editors and reporters are not asking the question of what every economic story serves before throwing it on the air. If a company announces it's laying off 25 people, it gets on the air simply because every layoff story gets on the air. But consider the placement a few weeks ago of Traveler's financial results and its investment in schools. Hint: It wasn't on the front page.

So Ydstie answered the question, ignoring why behavioral economists are getting a bigger voice today. The media is dismissing the emotional part of the economy and prefers instead to just crunch the numbers. And he unwittingly, perhaps, answered this caller's question in the previous answer: "It's easier to crunch the numbers." That's true. But that's simply not good enough. I was similarly disappointed that the new Star Tribune columnist also dismissed the validity of the point.)

11:40 a.m. - Pledge break (here, kitty!)

11:44 a.m. - Tangent time: MPR's Tom Weber sends this link to a CNN.com on Minneapolis people handling the economy.

Q: Should the government buy out CEOs and banks and put someone in there who can run things properly?

A; Some people think so. The pool of people to run large financial institutions has gotten quite thin. A lot of people have already been dismissed and finding people -- untainted -- is difficult.

Q: Can Obama marshall elected representatives to work on Social Security and Medicare for real?

A: With 401Ks cut in half, people will depend more on Social Security. He'll try but it'll be like Nixon to China. It'll be easier for a Democrat than a Republican. But SS and Medicare are very different. Cost of health care is rising rapidly and those costs need to be controlled. There is a demographic issue with Social Security but there are multiple ways of solving that problem. The size of the Social Security problem is about 1 percent of GDP. The ability to solve it is much easier than for Medicare.

11:51 a.m. - Pledge break. Back after the top of the hour.

12:07 p.m. - We're back. Down in the comments section, join the "what should the media have known and when should they have known it" thread.

Q: What has to happen before people see a light at the end of the tunnel?

A: Getting the banking system stabilized. Ydstie says he thinks the Obama administration will come up with a plan soon because then the markets will grow as businesses think they can make some profit again (Tangent: Target's profit dropped a lot, but it made a ton of money.) Says if 401k's started to come back, that would help.

Q: Do you see a moratorium on the use of IRA funds without a penalty?

A: No.There is some help for college students in the economic stimulus package (Bob notes: You might want to read how that's getting neutered here.)

Q: What if the stimulus doesn't work?

A: They'll do another one. Until consumers and businesses start spending.

12:19 p.m. - Pledge break. Hearing that Gary Eichten was Ydstie's first editor when he worked at KCCM in Moorhead. Kate Smith is noting the number of people who've come through MPR's doors, "and then gone on to great broadcasting careers" somewhere else. Hmmmmm....

In another thread, Tom Sweeney writes:

1. People are drowning in econ crisis coverage but little (none?) of the information is actionable. What would John have me do in reaction to the reports? I was laid off last March 4 and am still looking.

2. Is the crisis likely to boost US productivity and global competitiveness by enabling companies to pay people way less and by causing employees to work way harder for the good fortune of having a paycheck? I'm a certifiable workaholic with sweet references and 25 years in publishing but have yet to land after declining a transfer to NYC.

>> I don't know if Gary will take either one of those questions. But #1 sounds familiar.

Q: People are framing "economic recovery" in the context of where we are a couple of years ago. That's the problem. We got away from real values, to speculative values.

A: "You make an interesting point. Scott Simon interviewed a demographer on Saturday and compared the situation to the Great Depression. When he looked at them, they were a 'reset' to the economy. We were living in a fantasy world. He suggested that instead of thinking of them as recessions/depressions, they are resets. The problem is unless you get the economy moving along again, you're going to have people losing their jobs and losing their homes. We can have a theoretical discussion about what the economy and values ought to be, but if you're about to lose your job or your home, you need something fast. You need a program that tries to keep you employed. The poison that got us into this is the medicine that will get us off our backs, and then we need to have a conversation about consuming less or saving more. The problem is that everyone is saving now."

Q: Why don't you correlate market action to government action? The market knows wasteful spending.

A: It's more about the banking system.

Q: Were banks forced to make bad loans?

A: No. We all think home ownership -- along with motherhood and apple pie -- is a good thing. But it's not a good thing if you can't afford the payment.

12:38 p.m. - Pledge break. None of the people joining/renewing appear to be listing News Cut as a reason. What's the matter with you people? There's a guy trying to eat here!

Q: Any relief for large student loans?

A: You're unlucky because your parents made more money and you had to take out the loan. If you had a home and had an "exotic loan," you may be able to get help under the housing plan. But for people who are "highly leveraged," you probably just want to take the $10 a week tax cut and put it toward debt retirement.

12:51 p.m. They're close to wrapping it up. the Dow is up 164.15. What does this mean? It means the Dow went up 110 points while Ydstie and Eichten were talking, and went down 30 when Federal Reserve Chairman Ben Bernanke was speaking earlier today. Perhaps we've unwittingly identified our way out of this mess.

Comment on this post

The housing market basket case: It's us

Posted at 8:27 AM on February 24, 2009 by Bob Collins (17 Comments)
Filed under: Economy

The resale price of homes is dropping faster in Minneapolis than in almost any other U.S. city.

The Case-Schiller housing price index has just been released for December and it shows a massive drop in the resale price of homes here -- 4.6 percent -- in one month. It is the largest single-month decline since Minneapolis was added to the index in 1989, and puts the region right up there with Phoenix on the list of basket-case cities.

The price of a home is now at spring 2002 levels.

It's hard to say what this means because at the same time, the sales of homes is increasing -- albeit slightly -- according to MPR's Jess Mador.

"I think we need at this point is a certain amount of patience," David Blitzer, the chairman of Standard & Poor's Index Committee told CNBC this morning. "Right away there's a lag in any numbers that come out a month, a month and a half... there's a lag in people getting going. Mortgage rates have come down. It's very difficult for people to qualify for loans. The banking system, now that the horse is out of the barn, has locked the barn up very tight. This is also the slow period. You gotta hang on 'til late in the second quarter in the summer before all the stars are aligned."

Only Phoenix (-5.1%) and Las Vegas (-4.8%) dropped more than Minneapolis in the month.

For the year, Minneapolis housing prices dropped 21.1% 18.4%, about the same as the entire country. The pace of the price drop is not changing much increasing slightly, however. In the last six months of the year, Minneapolis prices dropped a little more than 10%.

At 11, NPR's John Ydstie, will join Gary Eichten on Midday to answer questions about the economy. I'll live-blog it here.

Update 9:31 a.m. - In response to a question from a reader asking for a comparison between the current rapid drop in home prices compared to the rapid increase in home prices during the "boom years," I played with the spreadsheet and found these factoids:

Sun spots

Posted at 7:37 AM on February 24, 2009 by Bob Collins (0 Comments)
Filed under: Economy

It was a gorgeous sunrise across the frozen tundra of flyover country this morning. Against the backdrop of a collapsing economy, we caught ourselves singing "the sun will come up tomorrow," before we recalled another famous sun-phrase: "Red sky in morning, sailor take warning."

Tonight, Barack Obama gives his speech to a joint session of Congress and we'll figure out which he's going with. I'll live blog it here at 8 p.m.

Comment on this post

Body language

Posted at 6:17 PM on February 23, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Politics

It was another horrible day in the equity markets. The last time the market was this low -- 1997 -- Brad Radke was winning 20 games as a 24-year old for the Minnesota Twins. Yeah, that long ago.

Usually, stories about rough days on Wall Street are accompanied by the cliche picture of a stock exchange trader.

Today, however, let's look at the body language of the nation's governors and the president and vice president as they met in Washington.

Where have I seen this expression before?

(Photos via Getty Images)

Comment on this post

The prison economy

Posted at 11:28 AM on February 23, 2009 by Bob Collins (2 Comments)
Filed under: Crime and Justice, Economy

At least one business made money and doesn't foresee any layoffs. MINNCOR Industries, the "company" that uses prison labor. The company was created by the state during the economic slowdown of the early '90s, to encourage prison industries to operate in a more business-like fashion.

According to a report from the Legislative Auditor, that presents some challenges because most businesses don't have to take a headcount in the middle of the day to make sure nobody has escaped, and some inmates not only don't have skills for the job, but often aren't all that interested in showing up to work on time or putting in a full day of work. (Fill in joke about your workplace here.)

But the economy is putting a squeeze on MINNCOR in its own way, according to today's report. The number of inmates is increasing so rapidly, it's getting difficult to find jobs for them.

The company also has a turnover problem. The majority of "employees" have less than a year remaining on their sentence, the report said.

Comment on this post

Reversal of fortune

Posted at 9:10 AM on February 23, 2009 by Bob Collins (2 Comments)
Filed under: Economy

It's a small step; a very, very small step. But US Airways announced today they're bringing back free drinks. US Airways was one of the few airlines to charge $1 for coffee and $2 for soft drinks and water, but there was always the danger other airlines would follow suit.

Now, about those checked baggage fees...

Comment on this post

Where are the economists?

Posted at 7:00 AM on February 23, 2009 by Bob Collins (9 Comments)
Filed under: Economy, Media

Conservative and liberal groups don't agree on much, but they agree on this: TV did a very questionable job covering the economic stimulus bill signed by President Obama last week.

The liberal Media Matters for America said of the 681 people who appeared as guests on cable news and Sunday TV talk shows, only 6 percent, were economists, said the Associated Press.

While Media Matters didn't survey the network evening news shows, the conservative Media Research Center did, and found that only 13 percent of those interviewed were economists.

The rest were the usual suspects -- reporters, political "experts" and talking heads.

The producer of ABC's This Week said the guest selections mirror the need for news shows to have verbal battles between contrasting viewpoints.

Comment on this post

Waiting for instructions

Posted at 8:47 AM on February 22, 2009 by Bob Collins (6 Comments)
Filed under: Economy, Politics

"I don't want to pretend that today marks the end of our economic problems. But today does mark the beginning of the end," President Barack Obama said on Tuesday when he signed the economic stimulus bill. It was a rare message of hope from a president who campaigned his way to the White House on the theme.

Has the president, who has got a big speech to give on Tuesday, become too much of a downer? Are we in such denial that we need to be told how bad things are... again?

Writing in the New York Times this weekend, Frank Rich chronicles Americans' ability to deny bad news and accept the enormity of the economic crisis. What is a president to do?

Pity our new president. As he rolls out one recovery package after another, he can't know for sure what will work. If he tells the whole story of what might be around the corner, he risks instilling fear itself among Americans who are already panicked. (Half the country, according to a new Associated Press poll, now fears unemployment.) But if the president airbrushes the picture too much, the country could be as angry about ensuing calamities as it was when the Bush administration's repeated assertion of "success" in Iraq proved a sham. Managing America's future shock is a task that will call for every last ounce of Obama's brains, temperament and oratorical gifts.

More than half of America now fears unemployment, one in 10 homes are in foreclosure, retirements are now unattainable. Minnesota courts are about to let scofflaws run amok, and the nation is running out of rich people. The economic recession was felt out here in the working world long before it reached the cubicles of the New York Times or, most certainly, the Oval office.

We get it. The economy is bad. Really bad.

While Rich wonders whether Americans will "get it," his op-ed page colleague, Maureen Dowd, wonders whether it's Washington that fails to grasp the reality of the situation.

President Obama disdains sound bites, and he does not have Bill Clinton's talent for reducing the abstruse to aperçus. We wanted someone smart to gather a bunch of smart people around him to get us out of this fix. But Mr. Obama's egghead manner has failed to soothe a nation with the jits. Maybe he has been so intent on avoiding the stereotype of the Angry Black Man, as he wrote in his memoir, that it's hard for him to connect with and articulate public anger about our diminishment.

Though he demonstrated in the campaign that he has a rare gift for inspiring the country with new belief in itself, Mr. Obama has not yet captured either the grit the moment requires or the fury it provokes. He has not explained in a compelling way why Americans who followed the rules need to sacrifice more to help those who flouted the rules.

Part of the problem, perhaps, is that politicians use speeches to us, not to talk to us, but to send messages to each other. When the president tells us how bad things are, he's talking to Republicans who don't support his proposed his solution. Here in Minnesota, the DFL, for example, is engaged in "listening sessions" around the state to come up with ideas for closing the state's budget gap. When they heard the first one the other night in St. Cloud, that was one more than the DFL has presented, since it's yet to propose an alternative to the governor's budget. Lawmakers, no doubt, have their own ideas how to do it, but the "inner cynic" can be forgiven for thinking they want the political cover of full meeting rooms in small towns across Minnesota first.

Meanwhile, Minnesotans -- and most Americans -- wait for instructions on what we are supposed to do now about the situation, the extent of which we know only too well.

What is the one message you want to hear from the politicians and pundits now?

Comment on this post

Timewasters: Ma and Pa Kettle explain the economic stimulus plan

Posted at 12:31 PM on February 20, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Or maybe not.

(h/t: Bill Hibbler)

Comment on this post

Is there enough time for a comeback?

Posted at 10:26 AM on February 20, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Perhaps you've seen this New York Times tool by now. It helps you calculate what would have to happen for your retirement fund to get back to where it was at its zenith.

According to the various scenarios I entered, in my case I would have to get a 5.2% annual return -- starting today -- to get back to my 2006 state by the time I retire. To get to the point where I'd calculated the resources I'd need to retire, I would need roughly a 10 percent return.

If I were much younger, this isn't a problem. But it's here where the usual financial advice isn't making sense and doesn't apply to a significant number of Americans -- essentially those who are within 10-15 years of retirement. Sure, historically the market comes back given the right amount of time. But there isn't enough time left for these people. They are looking at a significantly reduced standard of living, and there's virtually nothing they can do about it.

It's that reality that few economic experts are addressing or acknowledging. Might it soon be time to warn them that they need to accept a lower standard of living? Is that politically wise for them? Should younger people plan on having mom and dad move in?

(h/t: Marty Moylan)

Comment on this post

Who should get help?

Posted at 8:26 AM on February 20, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Gold passed the $1,000 an ounce mark a few minutes ago, which is the economy's version of a hurricane flag.

Today, apparently, is going to be another horrible day in the equity markets. Fear of bank nationalization is being blamed for pre-market jitters. And the rhetoric surrounding Wednesday's unveiling of a housing assistance plan by President Obama is starting to sink in, and not just among the talk-radio crowd.

"The government is supporting bad behavior," said CNBC's Chicago Board of Exchange analyst Rick Santelli as he organized a "revolt" on the floor of the exchange on Thursday morning. "You can go down to -2% on a mortgage and they still can't afford the house."

It was such a display of economic petulance, that this morning, the Today Show brought Santelli in for a repeat.

A few people have moved past the "why should I help someone who bought too much house?" stage and are concentrating on some interesting questions. For example, if someone gets help with their mortgage, and the economy rebounds and home values go up again, does that person who got help give something back?

Comment on this post

Retirement is not an option

Posted at 3:50 PM on February 19, 2009 by Bob Collins (7 Comments)
Filed under: Economy

If you're over the age of 50, you can probably relate to my colleague, who took a look at the closing Dow average today and proclaimed,"someone wants me to die here at my desk."

To paraphrase: "Retirement is not an option."

The Dow closed at its lowest level in the last six years.

What's our next benchmark? If the Dow drops another 180 points, it'll be at the lowest level since October 28, 1997, the day the "Asian flu" halted trading on the New York Stock Exchange for the first time... ever.

Comment on this post

Picture of the year

Posted at 12:44 PM on February 17, 2009 by Bob Collins (0 Comments)
Filed under: Economy, Media

I'm prohibited by copyright law from showing you the winner of the contest for the best news photograph of the year as chosen by the World Press Photo. Lots of online sites appear to be ripping the photographer off, but I'm not going to be one of them. You'll have to look for yourself here.

It is a chilling image of a Cleveland police officer, gun drawn, making sure the people who lived in a foreclosed-upon home are out of it.

It's a sign of the times in the journalism industry, too, that the world's best news photo ran only online, and that the photographer who took it is having trouble finding work.

Another online site -- The Raw File -- won first place in the "stories" category for its photographs accompanying a profile of Troy, New York.

I couldn't find the photographs on the Web site, but did find this photographic story about Troy which further documents the declining economy.

Upstate Girls - What Became of Collar City from The Raw File on Vimeo.

Comment on this post

The search for the recession-proof job

Posted at 9:20 AM on February 16, 2009 by Bob Collins (3 Comments)
Filed under: Economy

In December, I wrote about jobs that may be recession proof. It came on a day when hospitals announced large cutbacks, exploding the notion that health care was recession-proof. It's not.

"Mortician," a reader volunteered, a suggestion that seemed perfect for the times.

But MPR's Tom Robertson pokes that bubble with a needle today, too. It's not that people aren't dying, Tom points out in his story today, it's that when they go, they're going more cheaply. The big caskets aren't selling.

So let's scratch "mortician" off the list, too. What's left?

A TV station in Oklahoma went searching for some last week. "Health care" was #1 on their list. It was an odd conclusion, all things considered, but if you look at the job listings for area medical centers in Minnesota, there are jobs posted despite the announced layoffs.

The Boston Globe today profiles a young couple, victims of the economy who have been looking for work and identifies "career management counselor" as a recession-proof job. How does one break into that business?

Lawyers once were considered recession proof. Those days are gone.

On the other side of the coin, however, heating and air conditioning repair, barbers and hair stylists. And the biggest growth industry is government.

Comment on this post

What is Sylvia going to do?

Posted at 5:47 PM on February 13, 2009 by Bob Collins (8 Comments)
Filed under: Economy

I drove up -- and back -- to Moorhead today, which gave me plenty of time to listen to Minnesota Public Radio along the way. In between, I heard details of an estimated 14-percent budget cut at the University of Minnesota Morris. It's amazing, really, how every moment of my day these days is somehow consumed with the economy. I find it difficult to end the day with the same hope with which I start it. How about you?

Some excerpts from MPR's broadcast day are worth considering:

KEEP HOPE ALIVE

The first is the Midday rebroadcast of the Commonwealth Club speech by journalist and former Clinton administration adviser Matt Miller. He discussed his new book "The Tyranny of Dead Ideas: Letting Go of the Old Ways of Thinking to Unleash a New Prosperity."

What got me yelling back at the radio was his claim that we have overemphasized -- or at least overvalued -- the power of the individual to change his or her life; that the "you can grow up to be whatever you want to be if you work hard enough" mantra is dead or dying.

I come from New England with an overdose of the Protestant work ethic so it's virtually impossible for me -- DNA wise -- to accept the premise, although I find it an intriguing one worthy of discussion.

But it requires the dissolution of hope and I, personally, can't let that be an early casualty of this economy. I'm not talking about the black, former drug-using, kid who grows up to be president, I'm talking about the people I've met on the News Cut on Campus tour. To accept Miller's premise is to say the very heart of those kids' endeavors -- and there's a lot of heart involved -- is a charade.

WHAT HOPE?

And that idea lasted me from Pelican Rapids to Maple Grove, and then I heard the story of Silvia Martinez on All Things Considered. I tried to get at the emotional toll of the economy earlier this week in this post. And Brandt Williams gave it a similar go.

But nothing that's been said about the economy for the last year anywhere put a human face on the desperation like her story did. She loved her job. She was the sole provider for her family, and she got laid off. She was too ashamed to tell her children. She not only feels unemployed; she feels worthless.

"I would start thinking about it and my heart would start racing and I would start sweating and [having] chest pains," she says. "And, of course, at that point I would try to hide, because I didn't want my children to know what was going on with me. So I would go to the bathroom and just stay in there. Just go through it in the bathroom."

In the three months since she was let go, this sense of panic and fear has not improved.

"I apply for jobs and apply for jobs and no one calls. Nobody. I've even gone as far as applying at fast-food places; I've applied at Wal-Mart, at Kmart, at Target," she says.

Be sure you listen to the audio.

I thought to myself, "someone with a job will hear this story and offer her a job," but I quickly realized those days are probably gone, too.

During the drive out, I listened to two state senators talk about transportation and the best way to jumpstart the economy. They disagreed on most things. Lots of talk about numbers and each uttered the usual talking points of their party, but they never really talked about what it's like for people who don't have a guaranteed job through at least November 2010.

On the drive back, I heard the House approved a stimulus bill and heard our local delegation arguing about whether it was too much.

But there's something I didn't hear from any of the politicians: What is Sylvia -- and no doubt, the tens of thousands just like her -- going to do? Where is she going to live? How is she going to take care of her children? Now that her kids can't go to community college, how are they better off?

I don't have an answer, either. But after listening to her story "just work harder" seems insulting.

What would you do?

Comment on this post

Worthington redux

Posted at 6:01 PM on February 12, 2009 by Bob Collins (0 Comments)
Filed under: Economy, News Cut on Campus

Each week, after the Wednesday News Cut on Campus stop, either All Things Considered or Morning Edition graciously invites me to stop in and share what I've learned from the most recent stop. And each week I'm more and more impressed with the producers' ability to edit my rambling dissertation into a less-rambling one. MPR is an iceberg. You see (hear) the very tip of an active organization that is primarily underwater. Well, perhaps that wasn't the best analogy in these economic times.

Here's this week's version, based on my stop on Wednesday at Minnesota West Community and Technical College's Worthington campus (hat tip for the picture to MWCTC).

Embed | Help

Copy and paste the HTML below to embed this audio onto your web page.

Audio player code:
<script type="text/javascript" src="http://minnesota.publicradio.org/www_publicradio/tools/media_player/js/swfobject.js"></script><div id="minnesota_news_features_2009_02_12_atc_mwctc_20090212_64s_player"></div><script type="text/javascript">/*<![CDATA[*/var so = new SWFObject("http://minnesota.publicradio.org/www_publicradio/tools/media_player/s_player.swf", "minnesota_news_features_2009_02_12_atc_mwctc_20090212_64s_player", "319", "83", "8", "#ffffff");so.addParam("quality", "high");so.addParam("menu", "false");so.addParam("wmode", "transparent");so.addVariable("name", "minnesota/news/features/2009/02/12/atc_mwctc_20090212_64");so.write("minnesota_news_features_2009_02_12_atc_mwctc_20090212_64s_player");/*]]>*/</script>

sponsor:

Here's the whole list of profiles of students I've met over the last month. Perhaps you have learned something from them, too.

Next week I'll be at Lake Superior College in Duluth. On Friday, I'm driving up to Moorhead to visit with the people who are helping me set up at Minnesota State Moorhead in two weeks, so posting (at least from me) will be light.

Comment on this post

Hospitals in a squeeze

Posted at 5:03 PM on February 12, 2009 by Bob Collins (2 Comments)
Filed under: Economy, Health

It's no secret that hospitals in the area are hurting. During the economic downturn, people are putting off elective surgery. The state has cut $73 million in funding for health care and human services. And with people losing their jobs and health care coverage, they're showing up in emergency rooms for free care, which the hospitals have to absorb.

Even people with health insurance are costing the hospitals money, however. I was checking out a rumor that North Memorial had eliminated more nursing positions (they hadn't) today, when Robert Prevost, a spokesman for the hospital, told me about the rapidly rising rate of delinquent accounts by people with health insurance.

In 2007, he said, the hospital had over $1 million in unpaid bills by people who had health insurance coverage. In 2008, that number has risen to $8 million.

No interest is added to medical bills, Prevost said, so people who have insurance but may be having financial difficulty, are putting medical bills last in line to be paid. And quite often they're not paid at all.

Comment on this post

Economic Armageddon?

Posted at 6:19 PM on February 10, 2009 by Bob Collins (13 Comments)
Filed under: Economy

If you've listened closely to top economic officials in the last few months, perhaps you -- like me -- got the impression that there was something -- something serious -- they weren't telling us. Why else would so many politicians be so quick to pass legislation they hadn't really read, giving so much unchecked power to the treasury secretary?

True, they were hinting at it, but they wouldn't come right out and say it.

In the last few days, a video has raced around the Internet (which was actually made in January) at a fever pitch which appears to reveal what that something is: A run on the nation's banks that allegedly brought the nation within hours of collapse.

The details came in a C-SPAN interview with Rep. Paul Kanjorski, D-PA.

Here's the facts and we don't even talk about these things: On Thursday (September 18) at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of moneymarket accounts in the United States, to the tune of $550 billion. It was being drawn out in the matter of an hour or two. The Treasury opened up its window to help. They pumped a $105 billion into the system, and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account, so there wouldn't be any further panic out there and that's what actually happened.

If they had not done that, their estimation was that by 2 o'clock that afternoon, $5.5 trillion would've been drawn out of the money market system of the United States, would've collapsed the entire economy of the United States, and in 24 hours, the world economy would've collapsed.

We talked at that time about what would happen if that happened. It would've been the end of our economic system and our political system as we know it. That's why, when they made the point, 'we've got to act and do things quickly,' we did.

Here's what we don't know: We don't know if any of that is true. Kanjorski hasn't elaborated on it since, and today he had only this to say during a hearing with Federal Reserve Chair Ben Bernanke (as quoted by a New York Times live blog).

Paul Kanjorski, a Democrat from Pennsylvania, says he thinks "All of you," including the chairman and the current and previous presidents and Treasury secretaries, "have failed for all of us, particularly the general public, to enunciate what the problem is." He wants to know what "we can do to facilitate" the explanation of the problem to the American public.

So on the one hand he says he describes what the problem was and on the other hand he complains that nobody is saying what the problem was (and, apparently, still is.)

Rep. Brad Sherman, D-CA., took to the House floor a week or so later and, without citing too many specifics other than the prospect of martial law, suggested it was all a con to get the bailout passed.

Still, Motley Fool adds it up by comparing it to a confirmed run on the banks in London, and concluded that, yes, we were within 3 hours of economic disaster.

Comment on this post

The emotional toll of a bleak economy

Posted at 7:03 AM on February 10, 2009 by Bob Collins (3 Comments)
Filed under: Economy

There's been a significant jump in the number of people calling crisis hotlines in Minnesota.

"We've had a 27 percent increase from the first quarter of 2008 to the last quarter of the year," according to Linda Schmid, clinical director of Crisis Connection, which operates the Twin Cities crisis line, the Suicide Prevention Lifeline in Minnesota, Men's Line Twin Cities and Minnesota Link Vet. " We're seeing a higher proportion of men calling. I can only speculate anecdotally that these calls are about employment and financial issues and men are particularly distressed."

Calls to the Minnesota suicide hotline are up 35 percent, she said.

Overall calls doubled in October, when the stock market crashed and the first large waves of layoffs were made.

"I can't say that there's a typical caller. Some people call for a referral (for help). Most want to talk; sometimes they just know they're distressed and want to talk," Schmid said.

The organization recorded 9,300 calls in the first quarter of 2008, and 11,500 in the last three months of the year. About 90 percent of the calls come from the Twin Cities, according to Schmid.

The experience of the Minnesota crisis organization is mirrored throughout the country. In Pennsylvania, calls to a crisis hotline have doubled, Oregon officials say more victims of domestic abuse are calling, a hotline in Tennessee reports they're getting more suicide calls in a week than they used to get in a month, and Illinois has seen a significant increase in calls from people who are losing their homes.

(MPR file photo: Tim Boyle/Getty Images)

Comment on this post

The 'man' factor

Posted at 7:44 AM on February 9, 2009 by Bob Collins (16 Comments)
Filed under: Economy

Until I heard American Public Media's Marketplace on Friday evening, I had no idea that the economic downturn and the resulting unemployment is falling disproportionately on men.

Men make up 82 percent of the total number of people eliminated from the country's workforce and for the first time, women are poised to pass men in the majority, according to the New York Times.

"Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labor force in the beginning of this recession, women are now bearing the burden -- or the opportunity, one could say -- of being breadwinners," says Heather Boushey, a senior economist at the Center for American Progress, told the newspaper.

It is a huge societal shift with changing roles.

"Oh yeah, of course. For a while there we were calling him the man maid, because he was doing all the house work while I worked," Michelle Tully, whose husband, Stephen, is laid-off.

As recently as 2005, the unemployment rates for men and women were about equal, according to the Bureau of Labor Statistics. Only in the early '80s have they varied much.

Still, women are likely to make less money, work fewer hours, and have no benefits in their soon-to-be workplace majority.

The situation, meanwhile, is setting up an interesting political debate as Congress considers President Obama's stimulus package. If men are bearing the brunt of unemployment, should the economic stimulus favor men?

"Absent efforts to increase worker diversity in infrastructure-related jobs -- this could lead to a shift of hundreds of billions of dollars of wealth from women to men," Rep. Jared Polis, D-CO. said in a letter to President Obama last month.

Comment on this post

The stimulus challenge

Posted at 3:00 PM on February 6, 2009 by Bob Collins (15 Comments)
Filed under: Economy

Should money from President Obama's economic stimulus bill be used to pay down an operating deficit in the metro area transit system? Or should it be used to expand that system along with whatever jobs that theoretically could provide?

The answer from the Met Council today? Pay off the bills.

Peter Bell, the head of the Met Council, told a legislative committee on Thursday that he'd favor using the $87 million targeted for transit, to pay off his agency's operating deficit.

Says Finance & Commerce

Bell conceded Thursday that "at present," those dollars aren't intended for covering deficits in regular operational expenses. But he suggested a workaround -- some federal block grant dollars currently targeted for Met Council capital costs could be moved to cover operating costs, while stimulus dollars could go toward "what we originally intended those capital dollars be used for."

Bell's suggestion for how the money could be used for something it isn't intended for, illustrates a dilemma facing stimulus supporters -- that money will be moved from account to account to keep everything legal, but in the end nothing gets done that wasn't going to get done anyway.

Bell said he'd be reluctant to use stimulus money to expand transit programs while the agency is running a deficit. On Wednesday, he indicated he's reluctant to raise fares or reduce service.

Comment on this post

Lawmakers target ethanol subsidies

Posted at 5:10 PM on February 5, 2009 by Bob Collins (3 Comments)
Filed under: Economy, Politics

As I mentioned at the time, one of the things that jumped out from Gov. Pawlenty's proposed budget is that he didn't touch the state subsidy to ethanol producers. In 2007, the state paid $15 million to ethanol producers, and in the last big budget deficit, the state delayed the payments. Pawlenty, who has become an evangelist for ethanol, tried to eliminate the then-$27 million subsidy in his first year in office.

Today, seven House DFLers -- mostly city slickers -- introduced a bill that would repeal the state subsidy. The state sends checks to farmers who own ethanol plants four times a year.

In a recent interview, legislative leaders didn't appear warm to repealing the subsidy:

As the session continues, the possibility increases of the city vs. rural legislative feuds reigniting. Within the last week some rural lawmakers filed legislative to divert transit funds to school transportation budgets.

Comment on this post

Furloughs at local newspaper

Posted at 4:07 PM on February 5, 2009 by Bob Collins
Filed under: Economy, Media

The spreading economic woes in the newspaper industry have reached a new level at the St. Paul Pioneer Press. Members of the paper's Newspaper Guild will vote tomorrow on whether to accept one-week unpaid furloughs

The paper's corporate parent, Media News, has ordered the furloughs for non-union employees and management at its newspapers, and is asking its unions to accept them as well.

According to a memo to Guild members, the union asked the newspaper for assurances the furloughs "will prevent or even delay layoffs," but the request was denied.

At other Media News newspapers, the furloughs are to be completed by March 30, but the union asked for -- and received -- a delay for their completion until the end of April.

The company says it's following the lead of Gannett, the giant media company that is forcing thousands of its employees to take the one-week furlough.

Update 4:46 p.m. - Here's how the furlough works:

1. This is a one-time agreement that is intended to apply only to this furlough (Feb. 9, 2009-April 30, 2009).
2. Seventy (70) percent of the furloughs in the Guild bargaining unit will be accomplished by March 31, 2009.
3. Employees will sign up for five (5) furlough days on or about February 9, 2009.
4. The furlough is five days for full-time employees. Part-time employees are required to take a proportional furlough (for example, an employee who works four days per week is required to take four days). Furloughs can be taken in increments of one day, or in consecutive days.
5. All furloughs shall be unpaid. Employees may not use paid vacation or sick leave during furloughs.
6. Operational considerations will be taken into account when approving furlough days/schedules. Employees and their managers should work together in scheduling furlough days. In the event a plan cannot be agreed upon, the employee, a Guild representative, a representative of Human Resources and the manager will immediately meet to develop a schedule for the employee. Any scheduling conflicts between employees in selecting furloughs will be determined by seniority.
7. Employees can, with management approval, take additional unpaid time and donate time to a coworker, assuming that the employees’ pay is comparable and it does not create an operational hardship. Management approval for such donations will not be unreasonably withheld.
8. Employees can convert previously scheduled vacation time to furlough time.
9. Employees on furlough will continue to accrue vacation and sick leave and will continue to be eligible for all healthcare and related benefits.
10. During their furlough, employees shall not perform any work on behalf of the Company. Furloughed employees shall leave an outgoing message on their voicemail stating they are not at work, their return date, and that any matters needing immediate attention should be forwarded to an active employee to be named by their manager. The same procedure shall be followed for email.
11. Employees who are salaried exempt must take their five (5) days in one week.
12. Certain departments, at the discretion of the Company, may be exempted from the furlough program due to operational considerations. No individual exemptions within departments will be made.
13. Any covered employee who is laid-off from employment during the term of the furlough shall be paid for any and all unpaid furlough days taken on behalf of him/herself during the furlough period. Unpaid days taken on behalf of another employee (see item # 7 above) shall not be converted to paid days as would otherwise be provided by this provision.
14. If called to work while taking a scheduled furlough day the employee will be paid a full day for working and will not be required to reschedule an additional furlough day.
15. Freelancers will not be used to displace bargaining unit work while bargaining unit members are on furlough.

Update 4:48 p.m. - David Brauer has some union reaction and background.

Turning to the tools

Posted at 12:42 PM on February 2, 2009 by Bob Collins (0 Comments)
Filed under: Economy, Politics

The Obama administration has turned to its giant database of supporters (and others), which it assembled during the campaign, to garner support for the economic stimulus plan.

In an e-mail this afternoon, the administration is organizing meetings this weekend for people to watch a video from Virginia Gov. Tim Kaine, answering questions about what the stimulus plans means for you. You can submit questions here.

Obama assembled an impressive technological array of tools to get elected, and this is the first time it's been deployed in support of legislation which has very little Republican support.

Comment on this post

Job hunting

Posted at 11:10 AM on February 2, 2009 by Bob Collins (4 Comments)
Filed under: Economy

Amy Lindgren was on MPR's Midday today, offering advice on job hunting. She also shared a few how-not-to-lay-people-off tales.

"I can't get over all the wrong ways I run across. I'm not a big fan of the walk-the-person-out-the-door-practically-in-handcuffs model. Suddenly people who have been entrusted with the company secrets, can't be trusted for another five hours. I would think the right way would be to give people some time to say goodbye," she said.

She said she knows of one person who was told by his landlord he lost his job. It happened when the landlord was doing a reference check. 'They just told me you don't work there anymore,' the landlord said.

I've heard of a similar story of a former classmate who was a disc jockey at a New Hampshire radio station. He was in the shower, getting ready to go to work and listening to his radio station, when he heard the announcer telling people to tune in and hear another announcer on his show.

Here's a few other questions-and-answers from the show:

Q: I was recently laid off and given a three-week severance package. Is there a standard?
A: The common formula is a month for every year of service but there's no standard. There is a standard for mass layoffs in Minnesota.

Q: If you're required to sign something that says you can't speak about the company in order to get your severance pay, should you?
A: Generally, they usually say you can't speak in a negative way. I'd consider bringing the notice to an attorney to get it pared down a bit. (Bob notes: I'm sure the questioner meant "speak negatively," which makes the severance "hush money.")

Q: I was employed for 12 years, and now the searching parameters seem to be online. There, they ask for salary requirements. What should I do?
A: You've lost much of your negotiating power because you've already identified what you will or won't work for. Try filling in all zeros or all ones. But if they're employing a screening program to eliminate all applicants above or below a certain number, that won't work.

Q: I was fired while on vacation. Does that happen often?
A: I'm aware of someone who made the mistake of answering his cellphone while on vacation. A shoe salesman, driving all over North Dakota, got back to his home office and the doors were locked. He had no idea the company had closed. "All I have is a bunch of business cards and a trunkfull of left shoes."

Q: Is there a difference between being fired and laid off?
A: I don't know if people care as much about the distinction. Fired is a word we use when someone causes their own demise. Laid off is the term we use when it's due to an economic situation that isn't framed as the fault of the employee.

The distinction is significant. You'd be hard-pressed to find people who haven't been laid off. Fired is another story.

Comment on this post

Context is everything

Posted at 8:30 AM on February 2, 2009 by Bob Collins (3 Comments)
Filed under: Economy

A few years ago, when the economic experts were lamenting Americans' unwillingness to save money, this news today would've been greeting with smiles.

Personal savings surged in December to 3.6 percent of disposable income from 2.8 percent in November, the largest rate since May 2008.

But context is everything:

The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November.

The report from the Commerce Department also said Americans' personal income is dropping, even as we save more of less of it.

Wall St. opened lower.

Comment on this post

What do you want me to do?

Posted at 9:50 AM on February 1, 2009 by Bob Collins (20 Comments)
Filed under: Economy

Back when I used to be an editor, my favorite question was a simple one: "Who cares?" It was the way I tried to separate those stories that have some meaning from those stories that are done simply because we've always done them. If a press release comes into a newsroom tomorrow announcing 10 layoffs at the Layoffs 'r Us store, it'll get a fair amount of attention because we need to tell you just how bad the economy is. As if you didn't already know.

At what point does the news do you no good if all it does is tell you what you already knew?

These days, I ask myself a new question: "What do you want me to do about it?" It's one of the reasons behind the News Cut on Campus effort. Documenting what some people are doing about it, shows that people are...doing...something... about.... it.

From what I can tell from all of the economic stimulus package coverage last week, lots of money is heading our way, but only a few pennies are coming to us directly. The state has its hands out. The cities have their hands out. The counties have their hands out, and all of them are in no mood to do any more than they're already doing and, in many cases, less than that.

So it's unclear what I'm supposed to do now as a member of the U.S. economy.

The front page of the Star Tribune tells me today that nurses, recently in short supply in Minnesota, are now being laid off because the state is cutting reimbursements to hospitals (again), and people are putting off elective surgery. It's enough to make me feel I'm not pulling my weight because I feel fine today. It's a terrible thing -- nurses being laid off and all -- but what can I do about it?

MPR tells me that Duluth is bracing for local government aids cuts, but I already figured that because there've been stories for three weeks that local government aid was going to be cut under Gov. Tim Pawlenty's plan. Most cities that get LGA are cutting back. What am I supposed to do? I'm not the governor, I'm not a legislator, I'm not a mayor. It's the reality that leads people to throw shoes.

"You know what you people can do?" a man said to me as he picked up chairs last week at Minneapolis Community & Technical College. "You can stop telling me how bad things are: It's just making it worse."

It's an opinion that is gaining some traction and it doesn't mean people want the news media to pretend everything is great. It means people want people like me to stop telling you how bad things are, and start telling people what they can do about it?

Nobody is telling me what that is.

Susan Brown of St. Paul had a suggestion in her letter to the Star Tribune today:

Here's a request to all those whose jobs are secure: Don't pretend to be hurting if you're not, or hold back on spending because it seems like you ought to. It doesn't have to be lavish or extravagant, but go out for lunch, shop at Target, check out the skyways, go to the mall, go to a play or concert, consider a spring break vacation, throw a dinner party and maintain your charitable giving. It's the right thing to do!

Is she right?

Comment on this post

Where is everybody?

Posted at 6:48 PM on January 30, 2009 by Bob Collins (3 Comments)
Filed under: Economy

PBS NewsHour's Ray Suarez produced an informative and compelling report for Friday evening's broadcast on how the financial mess came to be a financial mess. In it, Elizabeth Warren, the chair of the Congressional Oversight Panel said three simple regulations would've prevented it.

Her panel blamed "complacent policymakers for missing warning signs of a looming financial crisis and called for tighter regulations to prevent it happening again."

But what stuck me was the image above. A near-empty hearing room where Warren (in the foreground) appeared. Where was everybody?

Comment on this post

Will the economic stimulus work?

Posted at 7:34 AM on January 29, 2009 by Bob Collins (3 Comments)
Filed under: Economy

President Obama's economic stimulus package has passed its initial test in the U.S. House of Representatives. So, prepare for stimulation!

The average worker will see an additional $12 to $13 a week, thanks to lower withholding, according to an analysis by the New York Times. The unemployed will see a continuation of unemployment benefits.

Republicans want more tax cuts, and they all voted against the package, a factoid that is being headlined this morning by a media that is infatuated with political good and bad guys rather than an analysis of what's in the bill.

The Tax Policy Center has issued a report card on all of this. It gave generally high grades to provisions that puts money in the hands of low-income people, because they're more likely to spend it. Obama's plan calls for a $500 tax credit for individuals and $1,000 for couples. A letter-writer in today's Star Tribune suggests that people who make more than $105,000 should be taxed higher in Minnesota, revealing a shortfall in the calculations of how effective the package is going to be: Of the money being sent our way, how much will be siphoned by increases state, county, or city taxes and fees?

Are you thinking about buying a home? There may be some incentive coming along, CNN reports.

The cost? About $6,000 per taxpayer or $2,800 for every person in America.

Will it work? At the heart of the stimulus philosophy: No matter how you benefit, you have to spend it. Will you?

Comment on this post

The governor's budget

Posted at 2:10 PM on January 27, 2009 by Bob Collins (34 Comments)
Filed under: Economy, Health

The governor has unveiled his budget proposals to close the large state deficit. A couple of things stand out.

Corporate employees are Target's target

Posted at 12:06 PM on January 27, 2009 by Bob Collins (4 Comments)
Filed under: Economy

It wasn't too long ago that Target was eating WalMart's lunch. Those days are over. WalMart is now doing spectacularly well, given the poor economy. Target is not.

Today there are unconfirmed reports that up to 15 percent of the Minneapolis-based discounter's workforce is being fired.

"Like many other companies, Target is taking actions to manage payroll and non-payroll expense in the current economic environment," Target said in a statement. "We believe the decisions we are making, though difficult, represent appropriate actions to manage our business and maintain our competitive advantage going forward."

In 2007, the company said it had 366,000 employees.

Update - A person commenting below, who was one of those let go, says 1,063 employees are affected.

Update 4:30 p.m. Here's Target's press release:

Target (NYSE:TGT) today announced a workforce reduction at our headquarters locations which affects 9 percent of our headquarters population. This includes the elimination of approximately 600 employees and 400 open positions, primarily in the Twin Cities area. The majority of these changes are effective today. In addition, the company announced it will close its Little Rock, Ark. distribution center, which currently employs 500 people, later this year.

The company has recently undertaken other actions to manage expense and capital investment and minimize the number of affected employees. These actions include suspending salary increases for senior management, suspending share repurchase activity, tightening credit card underwriting and credit granting, implementing initiatives to improve store productivity, reducing planned new store openings, and cutting outside contractor support, travel, entertainment and other headquarters operating expenses.

"We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions to ensure Target remains competitive over the long-term," said Gregg Steinhafel, President and CEO of Target Corporation.

In recent months, Target has experienced weaker-than-expected sales, which is pressuring earnings performance. Combined with the outlook for continued difficult economic conditions well into 2009, the company is taking a more conservative approach to business planning.

Headquarters employees affected by the announcement will continue to receive their full pay and benefits through April 1, after which they will receive a comprehensive separation package based on their years of service. As part of that package, Target also will provide these employees with 12 months of continued Target health care benefits in addition to 12 months COBRA benefit, and outplacement support to assist them in transitioning to their next position. Little Rock distribution center employees will be offered positions at other Target distribution centers, or will receive comparable severance.

As a result of these actions, the company expects to record a charge of approximately 3 cents per diluted share, the majority of which will occur in the company's 2008 fourth quarter. The company believes the annualized benefit resulting from these actions will exceed the charge.

Target Corporation's retail segment includes large general merchandise and food discount stores and Target.com, a fully integrated online business. In addition, the company operates a credit card segment that offers branded proprietary and Visa credit card products. The company currently operates 1,682 stores in 48 states, 34 distribution centers and employs approximately 350,000 people worldwide.

Update 5:38 p.m. - This blog, written by a Target employee, has the details of an understandably somber meeting.

Comment on this post

Find the fee

Posted at 9:32 AM on January 27, 2009 by Bob Collins (20 Comments)
Filed under: Economy

I'm going to go on a "find the fee" hunt when the governor releases his budget proposal this afternoon. With cutting alone not enough to plug the gap, fee increases -- not taxes -- are usually part of the mix.

Given the reality that fees will go up, what fees would you consider raising?

One of the top of my head: Vanity plates. I've never really understood the allure of vanity plates, but apparently they're quite important for those who can afford them. The initial cost is $100 (with an $8.50 filing fee) in this state with a $14 renewal charge. Should it be more?

Divorce fee - The current filing fee is about $250. If $500 were enough to discourage someone from filing for divorce, is the marriage really over?
Manicurist fee - Currently, it's $60. Raising it would bring in some revenue, or perhaps limit the number of "nail" salons in strip malls.

Scale fee -- Currently, there is no fee to test whether a gas station's pump is actually delivering a gallon of gas. But there is a fee -- $10 -- to check the accuracy of the scale at a grocery store to be sure a pound of hamburger is really a pound of hamburger.

You're on.

Comment on this post

Housing prices still dropping

Posted at 8:22 AM on January 27, 2009 by Bob Collins (1 Comments)
Filed under: Economy

The Case-Schiller housing price index has just been released. The survey tracks repeat sales of the same houses. Eleven of 20 metros areas continue to show record decline in housing prices.

"The numbers (for November) didn't completely fall off a cliff (from October)," said David Blitzer, the chairman of Standard & Poor's Index Committee, in what passes for a sliver lining these days. "Before you go up, you've got to stop going down."

The prices in the Minneapolis area dropped 2.1%, a much shallower decline than October's 3.4% decline, which was only worse in Detroit and San Francisco.

We're a little farther down the list this month:

Phoenix -3.60%
Las Vegas -3.40%
Detroit -3.20%
San Francisco -3.10%
Chicago -2.90%
Tampa -2.80%
Atlanta -2.70%
Boston -2.70%
Seattle -2.50%
Washington -2.40%
Los Angeles -2.30%
San Diego -2.30%
Portland -2.30%
Miami -2.20%
Minneapolis -2.20%
Charlotte -1.90%
Dallas -1.90%
New York -1.60%
Cleveland -1.20%
Denver -1.10%

In Minneapolis, the housing price index is at its lowest level since July 2002. In the last year, the price index has tumbled 16.2% here, which puts us in the middle of the pack. Phoenix had the biggest drop (-32.9%)

Comment on this post

The mysteries of economic stimulus

Posted at 7:51 AM on January 27, 2009 by Bob Collins (3 Comments)
Filed under: Economy

There's been plenty of outrage in the last 24 hours since the NY Daily News reported that CitiGroup, a recipient of about $45 billion in bailout money from the taxpayers, has ordered a spiffy $50 million jet to haul its execs around.

"To permit Citigroup to purchase a plush plane -- foreign-built no less -- while domestic auto companies are being required to sell off their jets is a ridiculous double standard," said Sen. Carl Levin, D-Michigan, yesterday.

Who's responsible for allowing companies that receive taxpayer-funded bailouts to spend it on luxury business jets? The U.S. Senate.

Two weeks ago, the Senate removed a provision that would bar companies receiving bailout cash from buying new jets, and the reason shows the left-hand-doesn't-know-what-the-right-hand-is-doing nature of economic stimulus.

Kansas is the center of the domestic general aviation industry. It, too, is hurting. If the companies there don't sell business jets, people lose jobs. Cessna, for example, cut 2,200 people last week. The Kansas senatorial legislation lobbied -- hard -- to get the provision removed from the TARP package.

This morning, Citi announced it would not buy the French-made jet afterall.

Granted the foreign-made component of the issue is part of the outrage, but in general it's based on buying a jet at all. So on the one end, economic stimulus is intended to help businesses build business jets, and on the other end, other companies -- also receiving taxpayers funds -- are criticized for buying the product the other soon-to-be-government-subsidized business sells. It's not in the best interest of taxpayers, they say.

Comment on this post

Life in small business

Posted at 7:22 AM on January 27, 2009 by Bob Collins (3 Comments)
Filed under: Economy

Today, as you probably know, Gov. Pawlenty is going to reveal his budget plan for Minnesota. On MPR's Midday yesterday, the governor talked about cutting corporate taxes and making Minnesota a more business-friendly state. I asked on yesterday's post why a corporation would move here to do business and fell into an old trap -- thinking of the 3Ms and the Cargills rather than the small business. If I had, I'd already have my answer: Minnesota is where they already live.

An article in today's Wall St. Journal about an Ohio tile company reaffirmed the notion.

Big corporations aren't the source of new jobs. In fact, 60-80% of new jobs are created by small firms, the newspaper indicated. Half of the jobs in the country are at companies of fewer than 500 people.

Small business is also the place where the boss also has a better -- if not entirely complete -- clue about the lives of the employees.

Let's hear from those of you who either own a small business in the state or work for a small firm. Check in and describe your biggest challenges.

Comment on this post

Wash. Rinse. Repeat

Posted at 4:41 PM on January 26, 2009 by Bob Collins (6 Comments)
Filed under: Economy, Politics

Does it ever seem to you like you've heard all the news before about the state budget quagmire? Much of the talk surrounding the present situation focuses on "the future." So it seems like a good time to go into the News Cut Wayback Machine. Setting: Fourth Monday in January 2003.

Here's the MPR newscast scripts from that date:

* * * *

House DFLers are calling a Republican budget balancing plan too harsh to the state's most vulnerable. The House is scheduled to begin debate today on a budget balancing bill. House Republicans are proposing a 468 million dollar budget balancing plan that includes spending cuts and one-time money. DFLers are urging House members to adopt a budget balancing plan that passed the Senate last week. The smaller Senate package uses spending shifts, cuts and one time money. DFL Representative Carlos Mariani says the House plan unfairly targets the poor.

* * * *

Governor Pawlenty continued his tour of greater Minnesota today to promote tax-free zones. Pawlenty and members of the Minnesota House have offered the plan as a way to stimulate business and job creation. Pawlenty told an audience in Luverne that tax-free zones are the "mother of all economic development incentives." He says a particular area or collaboration of counties would be encouraged to come together and develop regional or theme-based tax-free zones.

* * * *

Senate Republicans are proposing a two-year pay freeze for all public sector employees in Minnesota to help reduce the state deficit. They say keeping salaries constant could produce one billion dollars or more in savings. The plan would affect state workers as well as employees in cities, counties, school districts and universities. State allowances to all government entities would be reduced to account for the lack of pay raises. By the Senate GOP's estimate, Minnesota has 350-thousand public sector employees. Senate Minority Leader Dick Day of Owatonna says a freeze is a more compassionate way to cut costs than layoffs. But he won't guarantee that everyone would keep their job.

* * * *

Governor Pawlenty says he'd prefer to continue full subsidies for Minnesota's ethanol industry -- but the state's budget crisis will force tough choices. The governor spoke in Luverne yesterday. His short-term deficit reduction plan includes a proposal to eliminate almost 27 (m) million dollars in subsidies to ethanol plants. But Pawlenty says most ethanol facilities will continue to be profitable even without the subsidies. On a tour to support his plan for out-state tax-free zones, Pawlenty said he's open to the legislature reinstating some of the ethanol subsidy reductions in his budget proposal -- as long as lawmakers find the money to solve the budget deficit somewhere else.

Comment on this post

Looking for optimism in all the wrong places

Posted at 8:27 AM on January 26, 2009 by Bob Collins (5 Comments)
Filed under: Economy

The scariest hours in the day are the one before the stock market opens and the one after it closes. That's when companies announce their layoffs. Today was no exception. Home Depot slashed 7,000 jobs. Caterpillar is whacking 20,000. Caterpillar -- is it worth mentioning? -- had record sales last year and made a profit of $3.6 billion dollars, which counts for nothing in today's economy. Heads must roll.

These days, we'll take optimism wherever we can find it. It's been a tough search today but we found a little today in Caterpillar chairman Jim Owens' assessment of what's ahead:

"We are optimistic that economic conditions in the United States will stabilize later in the year and may show some signs of recovery."

Granted, the next sentence was the announcement that 20,000 people would lose their jobs, but when's the last time you heard someone say there may be some recovery later this year?

The CNBC anchor this morning made a big deal about that, noting that Owens is usually a pessimistic guy "who nailed the recession."

Really? This was his comment one year ago:

I think I'm considerably more optimistic than the mood here in Davos," CEO James Owens said Friday.... Owens said he expects "either a mild recession or a soft landing" on tap for the U.S. economy.... Issues surrounding subprime mortgages "have been with us for a while," and the correction in the wake of the housing bubble is already under way, Owens said.... Owens said he expects to see "a bit of decoupling" between the world economy and the United States, pointing to extremely strong growth in the Middle East, Russia, and other emerging economies, where the commodity boom has fostered strong balance sheets.

Two months later -- March 2008 -- he was described as "a financial whiz" because he claimed the U.S. was already in recession, which it was.

"The U.S. economy is probably in recession now but will likely have real growth this year of around 0.5 percent, so very very slow growth and probably a couple of quarters of negative growth," Owens said.

Update 10:02 a.m. - These additional layoffs were announced today:

Pfizer - 8,000
Sprint - 8,000
ING - 7,000

The consumer confidence survey will be released on Wednesday. We're all on the edge of our seats.

Update 3:56 p.m. - The post stock-market-close layoffs:

Texas Instruments - 3,400 jobs

Comment on this post

A flight to safety

Posted at 8:46 AM on January 25, 2009 by Bob Collins (3 Comments)
Filed under: Economy

Would you take less money in exchange for a guarantee you'll have a job? How much?

Those are questions that many American workers are facing and answering "yes" and "plenty," according to the New York Times.

America is on the hunt for a secure job.

Profiling workers in Wisconsin, the Times reports, for example, that people who've worked in a paper mill, are now training to be truckers and welders -- two jobs thought to be relatively safe. In many cases, they're not trying to replace lost wages. Behold, the declining standard of living!

"Two of my classmates just this week applied at a trucking company advertising for tractor-trailer drivers," Mr. Geneen said. "They were hired on the spot and told to report for work on Feb. 1. They didn't even meet with the personnel people."

Mr. Geneen says he plans to drive a truck, preferably within Wisconsin. But with his wife, Kathy, earning $40,000 a year as a certified public accountant and with enough severance from his mill job to help care the family for a while, Mr. Geneen has enrolled in a yearlong course to qualify as a welder. It is another occupation chronically short of qualified people, even in a recession. At $40,000 a year or so, welders' work would not match his old pay but would provide a backup plan for the future.

Which brings up another question. Can people afford to train for new jobs if they don't have a working spouse making $40,000 a year and a fat severance package to help bankroll it?

Comment on this post

Today's layoffs

Posted at 1:27 PM on January 23, 2009 by Bob Collins (9 Comments)
Filed under: Economy

I read in the newspaper a few weeks ago that the worst day to lay someone off is Friday, because the person has two days before they can do anything about it. Not everyone read that, apparently, for it was a hefty day in the layoff-notice printing business.

Here are today's

Andersen Windows -- Bayport. 160 more employees have been laid off through the first quarter of the year. That's in addition to 450 who were laid off at the company earlier this month.

Hutchinson Technology - Its Sioux Falls plant is being closed and 300 current employees are being turned out. The company announced in December it planned to cut over 1,100 people.

Polaris - Medina. The company is cutting 460 jobs.

Recognizing that some of these jobs are in South Dakota, the total number of employees laid off today is almost 10 percent of the number of people who were laid off in Minnesota in the entire month of December.

All of these cuts are because of lower consumer -- and company -- demand for the products being made. One wonders how this spiral can ever end since increasing layoffs increases the number of people who can't buy products, which leads to more layoffs, which leads to...

Comment on this post

Rooting for the banks?

Posted at 8:40 AM on January 23, 2009 by Bob Collins (0 Comments)
Filed under: Economy

There are days one wonders whether the meltdown in the financial sector would lead to cheering and dancing in the streets, were it not for the fact that it's taking the rest of us down with it.

Thursday was one of those days that the banking industry reminds us that it often has as much Snidely Whiplash in it as George Bailey. Two stories provide an example.

Former Merrill Lynch chief executive John A. Thain has "resigned" his job. He's the one who arranged the sale of his firm to Bank of America in the darkest days of the meltdown. But just before the sale, he allegedly made sure that huge bonuses were paid out to execs. And he reportedly lobbied for a $10 million bonus for his good work arranging the sale of the company he drove into the ground.

Thain spent $1.2 million last year redecorating his office, including $87,784 on area rugs and $18,468 on a George IV chair, according to CNBC.

During a photo opportunity this morning, President Obama denounced the spending.

Closer to home, today the Star Tribune has the story of TCF Bank, which is doing better than many banks because its loan losses aren't mounting as quickly as other banks. The report said real estate in areas where TCF does business has "stabilized."

But we're reminded how banks make much of their money and why they're not making as much these days:

... TCF still faces significant headwinds. It's a consumer-oriented bank that generates about a quarter of its revenue from fees and service charges. As unemployment has increased and consumer spending has declined, the bank's fee income has also fallen, because people are writing fewer checks and overdrawing their accounts less frequently, the bank said.

Today the stock market is tanking again, partly on fears of the viability of banks. I should go bounce a check.

Comment on this post

Help wanted

Posted at 2:44 PM on January 22, 2009 by Bob Collins (2 Comments)
Filed under: Economy

Al Tompkins of the journalistic think tank, the Poynter Institute, writes a daily list of suggestions for stories newsies can pursue. I usually don't pay much attention to it because I figure if I need someone else to come up with ideas of what is newsworthy, I need to find another line of work.

But today he talks about WHAS in Louisville, which airs programs with help wanted announcements. His column reminded me that on the drive down from Cloquet this morning, I listened to a radio station in St. Cloud (there's about a 5-mile stretch of I-35 in which you can't get an MPR station) which was doing the same thing.

Partly out of general interest, and partly out of personal interest, I turned the volume up to hear what's available:

Unemployment by the the numbers

Posted at 12:53 PM on January 22, 2009 by Bob Collins (11 Comments)
Filed under: Economy

The state's unemployment rate jumped to 6.9 percent in December. What does this mean?

Star Tribune woes may claim carrier jobs

Posted at 10:28 PM on January 19, 2009 by Bob Collins (13 Comments)
Filed under: Economy

I wrote a few months ago about the people who work hard delivering the morning paper.

A bunch of them may have just lost their jobs, with the announcement the Pioneer Press carriers will now start delivering the Star Tribune.

If you're a carrier keeping his/her job,it'll be a massive change. Your one or two hour route delivery probably just went to three or four. Your Sunday delivery will probably require an extra vehicle and another two hours to put together.

Who knows? If the East Metro combination works out, it wouldn't be hard, perhaps, to start printing the paper using Pioneer Press facilities. And what's next after the operations are combined? We'll see.

Comment on this post

Are you optimistic? Why?

Posted at 8:51 AM on January 18, 2009 by Bob Collins (4 Comments)
Filed under: Economy

There's a fair amount of argument in the country about just how bad the economy is, but a new poll shows that a significant number of people don't think it's bad at all, apparently.

The Washington Post-ABC News poll today shows the most negative assessment of the country since the two started polling decades ago.

Nearly eight in 10 of those surveyed say the country is headed seriously off course. Seven in 10 worry about their family's finances, and 94 percent say the country's economy is in "not so good" or "poor" shape, the most negative assessment in more than 23 years of Post-ABC polling.

Six percent say, apparently, that the economy is at least "okee dokey." Who are these people and what do they do? Is it the very rich big boss type? First, how did they reach them by telephone? Second, how did they reach them by telephone when they were out on the ledge?

Seventy percent of those surveyed worry about the economy's effect on their family's finances. But 30% don't? Who are these people?

The poll also shows that Barack Obama is taking popularity as the most popular president. Want to guess who had the highest popularity ratings during a term in the history of polling? George W. Bush.

A separate New York Times CBS poll today says most Americans do not expect real progress in improving the economy, reforming the health care system, or ending the war in Iraq.

And, yet, 80 percent say they're "optimistic" about the next four years, even though they don't think much will change on the major issues.

Why?

Comment on this post

The Star Press?

Posted at 8:37 AM on January 17, 2009 by Bob Collins (1 Comments)
Filed under: Economy, Media

Maybe the bankruptcy of the Star Tribune newspaper means the end of the Pioneer Press brand. Maybe not.

MPR's Martin Moylan's story on this week's bankruptcy filing of the Minneapolis-based Star Tribune documents the likelihood of this two-newspaper town becoming a one-newspaper town:

"Bankruptcy is often used to effectuate a sale. That is not out of the realm of possibility. I'm not too sure if those arrangements have been explored. But I can assure you the lenders have given it thought," (bankruptcy attorney george singer said. The most logical buyer of the Star Tribune would seem to be Media News, which runs the smaller Pioneer Press.

If that happens, which name lives? The Pioneer Press? The Star Tribune? The Star Press? The Pioneer Tribune? The Pioneer Press Star Tribune?

Of course, that's a big if. The company that owns the Pioneer Press -- Media News -- has its own financial struggles. And its competition in another two-newspaper town may be drawing its immediate attention.

Any combination of the two local papers would most certainly result in some lost jobs at both locations. It may well be that hopes for a healthy Star Tribune, may be highest in the cubicles at its local competition.

Comment on this post

Banking 101

Posted at 8:11 AM on January 16, 2009 by Bob Collins (0 Comments)
Filed under: Economy

Why is it so difficult to understand the big banking bailout and the financial situation that makes it "necessary?" Because it's a different reality from one mere mortals live in.

American Public Media's Marketplace took a look at Bank of America's sudden fall from grace. It was one of the survivors of last fall's big meltdown (making a ton of money), so much so that it gobbled up on of the slower fish -- Merrill Lynch.

On Thursday, the banking giant, which practically had to be forced to take some bailout cash at gunpoint last year, reported its earnings for the third quarter of 2007:

The banking giant, which moved up its quarterly report from Tuesday, reported a net loss of $1.79 billion, or 48 cents a share, compared with year-earlier net income of $268 million, or 5 cents a share. Revenue increased 19% to $15.98 billion. Analysts' estimates were for per-share earnings of eight cents on revenue of $20.71 billion, according to a poll by Thomson Reuters.

Take your current salary. Increase it by 20 percent. Are you better off or worse off now, financially? If you're better off, you're not Bank of America.

You're also not likely to get an amount more than your total income for a second time in three months in the form of a bailout and still have financial experts tell you that may not be enough.

Comment on this post

On Campus: The police officer

Posted at 10:56 PM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, News Cut on Campus

Corey Anorve-Andress, 19, of St. Paul wants to be a police officer, and that may come as bad news for his cousin, who runs in a St. Paul gang.

He's been at Century College since last summer, taking some general classes, including forensics and biology. He plans to get a degree there, then attend Metro State University to learn more about the psychology of juveniles.

He might be able to teach the class. "Where I grew up there are a lot of negative influences and a lot of bad things and I've seen how it looked on the other side of law and it wasn't good. So I started to help people out and I figured out I'm a leader and people started to listen to me. (I was) saving them from a lot of things," he said.

"Most kids were African American and they wanted to do what everyone else was doing in St. Paul, which is fighting and drugs and all that crap," he said. So he organized football games instead.

He says he talks to cops, even when he gets pulled over for a broken taillight, and asks what they like about being a cop, "and they say it's the best job ever. I always get their card and then I call them."

Economic worries? "Right now there's a lot of people trying to be a cop," he says, suggesting that may be because of the economy.

He's not thrilled by the idea of wearing a gun, and he realizes the nightmare scenario of living his dream. He might face his gang-member cousin. "I told him, 'if I catch you at the wrong time, I'm going to have to do what I'm supposed to do, but I said, 'if you need help, if you need help getting out of it, or you need some kind of protection, I'm there for you; I'm not going to just ditch you.'"

Listen

Comment on this post

On Campus: The veterinarian

Posted at 10:24 PM on January 14, 2009 by Bob Collins (3 Comments)
Filed under: Economy, News Cut on Campus

Can the Appalachian Trail be a metaphor for life? Let's ask Sarah Anderson of St. Anthony Village, who told me on Wednesday that she hated high school in Roseville and she didn't want to go to college. "Then all of my friends moved out of state because I hung with really smart people and they were going to private colleges."

So Anderson went to Georgia with a friend, to hike the Appalachian Trail. That's the 2,175 mile Appalachian Trail. "Two nights into the trail... I called my mom and I was bawling, and I was, like, 'I want to come home. Come and pick me up! I don't want to be here.' And my mom said, 'We're not coming for you. You still have 2,170 miles to go. Get moving.'"

She made it to Maine. Her days of not following through on anything she started were over.

When she got home, she admits, she had nothing else to do, her parents were willing to pay for school, so she went to Century College, where she's now working on her general courses before transferring to the University of Minnesota veterinary school. "It's a lot of school, and I hated school, but the whole AT experience really put things in perspective for me. I'd rather work hard now for something I'll enjoy 20 years down the road, than be lazy now and have something 'meh, whatever' 20 years down the road," she said.

"I'm a completely different person. School is nothing (difficulty wise). For the first time in my life I actually care about tests and I'm getting good grades. Now I actually want to get A's and get a good GPA. It's stressful to do so, but I'm like 'meh, whatever.'"

"You get out of it what you put in and it's as hard as you make it. If you put in a lot of work, sure it'll be hard, but you're going to get the A grade back and you'll be a smarter person for it in the end. It's just going to take a lot of time," said Anderson, who describes herself as "a pretty chipper pessimist."

She's less chipper about the economy. "The government is lazy. They don't care about the people out here in the middle class. They're not progressive, they just recycle old ideas. We need something new. We need something fresh, and I don't see that happening."

Listen

Comment on this post

On Campus: The priest

Posted at 9:45 PM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, News Cut on Campus

If there's such a thing as a recession-proof career, David Crawford, 20, of Owosso, Michigan may be on track for it. He wants to be a priest.

On Wednesday he started the first day of classes in art history, music, and Spanish at Century College. He's a seminarian at the University of St. Thomas, sent here by the Lansing diocese.

He felt like he was called to the priesthood since about 4th grade in public school. "I was about to get expelled; I was the class clown and I was raising hell," he said. Thus began his education in parochial school. "I grew in my faith, buckled down. In high school is where I really felt the call."

He knows what you might be thinking.

"If I'm walking down the street and someone asks me what I want to be and I answer, 'a priest,' what is the number-one thing they say? A child molester or someone that's going to manipulate people. Fifty years ago it wasn't like that. Morality and the family and celibacy, people mock it. Living in a marital relationship faithfully, those things are less and less important to our society," he said.

He acknowledges, though, that perhaps the recession-proof nature of the priesthood has some cracks. Many churches are empty, or struggling to survive. "The economic dimension of the church, you see at once the church controlled art and politics and a lot of the wealth and it's because people entrusted what the church stood for, and still stands for but has been manipulated in the eyes of the public."

But he says the priesthood is not a career, "it's something you are."

Listen

Comment on this post

On Campus: Miss You Can Do It

Posted at 9:20 PM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, News Cut on Campus

When you're talking to the reigning "Miss You Can Do It," about the economy, you can pretty much scratch the whole "are you pessimistic or optimistic?" question.

Last summer, Alexandra Schmitt of New Brighton won the competition for people who've proven people wrong by proving people wrong. She has mild Cerebral Palsy. She and her twin sister were born three months premature. "We had a 50-50 chance of survival. I weighed in at 1 pound 11 ounces and they thought we weren't going to make it through the night," she told me.

Alexandra is now attending Century College, working on her general courses. She wants to pursue a career working with kids. "Whether it's teaching or working on advocacy for people with disabilities, especially in college. Once you get past high school, the IEP (individual education plan) is no longer valid, but I think it should be."

"I like to try new things and since I won the pageant, I'm not afraid to try something new. A couple of years ago I would never have gone on this radio station to talk to you, I would never have done the TV interviews that I have done. I would never have been able to do speeches. So I think it's boosted my confidence that I can do things," she said.

This weekend, she's going to Washington to attend the Disabilities Power & Pride Inaugural Ball at the National Press Club. She may meet the incoming president.

Listen

Comment on this post

On Campus: The dentist

Posted at 8:52 PM on January 14, 2009 by Bob Collins
Filed under: Economy, News Cut on Campus

Zach Rossow of Osceola needs two more biology classes at Century College before he can transfer to either Texas A&M or the University of Minnesota on his way to becoming a doctor of dental surgery. That's another six years of work before he starts his own practice.

That's not just a lot of time. It's a lot of dollars. How does he pursue his dental dreams? He sells knives.

That took our conversation about the economy in an entirely different direction and I asked him to tell me about his favorite sales calls. "In our business we remember the lady or gentleman who had Cutco 55 years ago and they're, like, 'Oh my gosh I haven't seen Cutco in 50 years.' And then they tell you a million stories about their one paring knife."

Nothing perks up a day like a good paring knife story.

He made $35,000 in the last year selling knives 5 to 10 hours a week to finance his education, but he's quick to point out that a friend of his who's graduating from Mankato State University made $180,000.

He figures it's a recession-proof business in the bad economy "until grocery stores stop selling food that's bigger than your mouth."

"You've practiced that line, haven't you?" I asked.

"I've used it before," he admitted.

If you can make that much money selling knives, why become a dentist? "To help people," he said.

It's not a long-standing dream. He was pursuing a career in economics until September when the economy collapsed. He realized the market is going to be flooded with people with financial experience, "and I like school, and human anatomy was my favorite class so it's always been in the back of my mind. So I just chose to change now while I'm still young. I'll still be in my 30s, so what?"

Listen

On Campus: The nurse

Posted at 8:18 PM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, News Cut on Campus

A bad economy takes away, and a bad economy gives back. Lucy Elmbald of Osceola, Wisconsin is going to be a nurse, a profession which is in short supply, and for which there's a waiting list. She's been meeting the academic requirements to get into Century College's nursing program.

Up until 2007, nursing wasn't in her future. That's when Anderson Windows permanently laid her and about 500 others off. "It was, 'OK, here's a struggle, here's a bump in the road. You have to just come up with some ideas and figure where to go after that," she said.

"At 32 years of age, thinking that Anderson was the promised land, it was almost a blessing because now I can get my degree and move on with life. Otherwise I'd be a manufacturer until I was 60 or 65 and I wasn't looking forward to that. When I was let go from Anderson, my husband looked at me and said, 'it's either law or it's medical, which one do you want?'"

Up until recently, nursing seemed a recession-proof career. But "right now, people go to hospitals and clinics, they're going because of an emergency," she said. They're putting off other procedures to save cash and that's requiring fewer nurses.

Elmbald doesn't see the overall economy picking up for 5 or 10 years. "It's slim pickings out there and that's why people are going back to school," she said. "Every day is a struggle. Until I get my degree, I don't know where things are going to go but I am bound and determined, even if I'm living in a cardboard box, to get this done."

Listen

Comment on this post

On Campus: The child protection worker

Posted at 7:48 PM on January 14, 2009 by Bob Collins (0 Comments)
Filed under: Economy, News Cut on Campus

Mary Bowlin figured she wanted to be a child protection worker right around the time she "had a bad experience with a child protection worker," she said during my visit to Century College on Thursday. "I was living with my mom and then my mom died and my sisters kicked me out. They told child protection I was being irresponsible because I was. I was doing crack. My life got more and more depressing and then my kids got taken away by child protection and it was a nightmare," she said, adding it took five years to get one back.

She stopped drinking, stopped doing crack and she realized there was money available to go to college when a friend of hers told her he was buying cars with financial aid money. "I was just looking for a job and I was doing banquet serving forever. With the economy and stuff, it just goes down, down, down. But you only get $10 an hour , you only get 4 hours and you have to drive out to Plymouth. It's not worth it."

The idea of going into human services popped up at her daughter's 9th grade career fair. She says she'd be good at it because she knows what it's like from the other side. "One thing I would do is having empathy for the people. If they're drinking, I'd tell them to go to AA every day. Don't cut them down. Don't degrade them," she said.

The poor economy and the foreclosure crisis could help her, she figures. The house she's living in is in foreclosure, so she's trying to buy a house. She interested in a duplex that available for $35,000 and she thinks a tenant could help pay the mortgage and her way through college.

When she's not at school, she often talks to women in recovery groups.

Listen

Comment on this post

On Campus: The advocate

Posted at 7:20 PM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, News Cut on Campus

You don't often hear about motivational speakers getting laid off, a fact Kary W. Bowser might keep in mind in the difficult economy. He's working on general courses at Century College with an eye on a career in advocacy and leadership.

Some of Bowser's 31-year-old track records still stand at Roosevelt High School. Between then and today he flew missions with the Air Force to Grenada, was assigned to President Ronald Reagan's support team on a visit to China in the '80s, and had a 15-year career in the Postal Service in North Carolina.

He had a track scholarship waiting for him in Mankato but took his route because he wasn't ready for college, he said. Timing is everything. When he returned to Minnesota in 2005, he wanted to enroll in the two-year pharmacy program at Century, which Century was phasing out in a year. Just as well, his mother wanted him in pharmacy. He wanted to go into radiology.

But now he says he's into helping other students. "After they graduate from high school, there's a crossroads: They can turn down a bad road or they can look at other avenues and turn it up a notch. I didn't have that in the inner city but I had the drive and determination to go another way."

"I like helping people; it's just blessings all the way around," he said, adding that he's turned some kids' lives around. "I see myself working in higher education field, dealing with children, pushing a lot of things."

Listen

Comment on this post

On Campus: The prosthetic and orthotic technician

Posted at 6:22 PM on January 14, 2009 by Bob Collins (0 Comments)
Filed under: Economy, News Cut on Campus, Schools

Nathan Green, 33, a Nebraska native, says he saw the economy collapsing five years ago when he was working in a parks and recreation department. Bond issues for swimming pools kept getting put off, he said during News Cut's stop at Century College today.

"I wanted a profession that I could be proud of," he said. He wanted to get into orthotics and prosthetics and said the Minnesota campus is the only program in the country for both.

For three years, he and his then-girlfriend-now-wife maintained a long distance relationship. After they got married, she got a job in New Ulm and they had a less-long-distance relationship for three months.

"I needed to make a clean break so I didn't fall into the same old situation, hanging out with the same old friends trying to scrounge out part-time jobs here and there," he said. He's been working in the practitioner program working with patients, and now he's starting to check out possible residency programs.

"It's looking a little bleak right now because the bigger not-for-profit hospitals maybe had their donors in the stock market. They're getting kind of tight and aren't willing to take the students. Taking a resident costs them money. The benefits of them taking new students might become a little daunting when they need to do what they can to keep the lights on in their facilities," he said.

"I'm a little nervous with Medicare and the different outlooks on reimbursement for insurance," he said. It's cost him about $3,000 per semester and he's not altogether sure that won't go up. He expects MnSCU (Minnesota State Colleges and University System) schools to be the first to get hit with budget cuts at a time when the economy is requiring more people to go back to school.

"(People) worked in the airline profession and are coming back to be different technicians and stuff. These are people who had a life, they're starting a brand new career, how long are they going to be in school before they actually get out in the work force and how long do they have to be out in the work force before they get established in the field?"

Most of the money Green stockpiled for school is gone and he's found it difficult to get a job while going to school because employers don't think he'll be around long-term and they won't give him a long-term job while he's in school.

Green's original degree was in education and therapeutic recreation, working with adaptive aquatics, "saw a lot of people post-op or amputation, special needs children."

"I have a very positive outlook; I know everything will work out and things happen for a reason," he said. "My wife stuck with me so I know there's something there. I don't know if anybody knows what the right answers are right now. You may worry yourself into a hole. Yeah, a job is a big part of that but you've got friends and family, too."

He and his wife are expecting their first child in June, right around the time he'll be starting a residency program. Somewhere.

"I'm not going to live in the kind of house my parents do, with the cars and things like that. I'm not entitled to that. That's something I'm going to have to work for it. I'm hoping I'm prepared for that."

Listen

Comment on this post

On Campus: The nurse and the biochemist

Posted at 5:36 PM on January 14, 2009 by Bob Collins (5 Comments)
Filed under: Economy, News Cut on Campus

When I asked Elaine Burns of Minneapolis what her outlook for the future looks like, her answer hit me like a bucket of slush.

"Our outlook for the future is we want to get the heck out of here," she said, bouncing one youngster on her knee as another begged for her attention nearby.

"Out of Minnesota?" I asked.

"Out of the United States," she said. "We're looking very seriously at moving to Canada after we both graduate. We're kind of fed up, especially with the health care situation. We feel completely abandoned. We've been in and out of coverage by the state or by the companies my husband's worked for and we just can't do it. When we graduate, we'll be in a much better position ... but we're, like, just forget it, we're not going to participate in the system anymore; we want out."

Her husband is a PhD candidate in biochemistry at the University of Minnesota. He graduated from Mankato State University after six years, went to work, then went back to school. Elaine went back to school after her youngest child was born,

They're scraping by, she says. "My husband worked while he was in school. He was in construction. His dad has been able to help us out a little bit. Student loans, which with the current economic situation, is on our minds. Student loan money might not be there. He gets a small stipend, but we also worry about money from NIH (National Institutes of Health) drying up -- research money for programs he's in."

"The health care is really scary. We're covered by the U of M, but it's still expensive. We don't have dental. It's always something; you always wonder what's going to be the next thing that happens. When you're living week-to-week, it only takes one catastrophe to put you under."

She's taking Spanish at Century College at the moment, hoping it will be the "golden ticket" to break into the nursing field. She wants to work somewhere -- in Canada, apparently -- with kids.

What does 5 years from now look like? "We're hoping things will settle down for us and we have a regular life. A little house somewhere that we won't have to move out of sometime in the near future," she said.

In a typical day, she says her husband is gone 10 or 12 hours working in the lab, "and then doing classes. I go to school in the evening and then it's midnight and I'm working on online courses and I'm, like, 'We can't do this for four more years.' Then other days you just think about what it'll be like when it's over."

Here's a second helping of slush:

"There are people at this school that are doing way more than what we're doing. Single parents with parents to take care of, working two jobs, and going to school; so I know it can be done," she says.

Listen

Comment on this post

On Campus: The information technology pro

Posted at 4:50 PM on January 14, 2009 by Bob Collins (2 Comments)
Filed under: Economy, News Cut on Campus, Schools

My hand-scrawled sign at the table I set up at Century College in White Bear Lake on Wednesday said conversations 25 cents. Terrence McBride, 24, of Inver Grove Heights was one of the first in line. He put 25 cents down. I put 25 cents down. "Whichever one of us enjoys the conversation more, the other one gets the money," I said.

"Anybody's life can get out of whack when they're looking at the peak of a mountain," McBride said when I asked him about looking at the challenge he faces in a bad economy. He's one of thousands of students across the state who are pretty sure better times are ahead, because in some ways, they've already arrived. In a challenging economy, he's biting off a daunting task in small bits.

McBride, who admits he "screwed up" when he was a teenager, was working at an auto dealership, performing oil changes when he saw which way the economy was heading. "There were firings and I have a six-month-old daughter and I wanted more job security," he said.

He wants to become an information technology specialist and he talks "when," not "if." He goes to school fulltime and works fulltime.

"How hard is that?' I asked.

"Not hard enough to keep me from doing it," he said. "If something is really important to you, there's nothing that can stop you." His girlfriend is a nursing student and they get by by cutting expenses. "We don't go to movies, we buy movies on demand, we don't go out to eat. I study and I go to work. In the long run, I'm relatively sure it's going to pay off."

Despite the bad economy, McBride says the work will pay off. "You can have any perspective on this whole economy that you want to, but people still have jobs. No journey is impossible if the first step is belief."

That's when I gave him the quarters.

He says two years from now he hopes to be doing an intership in "some sort of conglimerate, slowly working my way up the ranks. I've been down and out myself and I bring more maturity than a normal 24-year old." He says his girlfriend will be in nursing, and his daughter will be in preschool "to get a head start on her education."

"I don't want to raise my daughter as a statistic. I want her to have a choice as to which school she goes to. I want her to have me in her life. I'm a black guy with a daughter and there's so many prejudices about that. I want her to have as good of a life as anybody else," he said.

And what will he says to the kid in the auto dealership when he needs his car's oil changed? "Stay in school. Get into school if you can. Apply for financial aid if you need to. Set a small goal each day. That's what I did. I broke it down to tasks. Check out a school, pick a school, apply for financial aid, get books, arrange my schedule and work schedule, then all the pieces start fitting together."

Listen

Comment on this post

On Campus: Century College

Posted at 10:00 AM on January 14, 2009 by Bob Collins (1 Comments)
Filed under: Economy, Schools

I'm at Century College in White Bear Lake, the first stop in an every-Wednesday initiative to visit MnSCU campuses to talk about students' outlook and also to hear some of their stories about their journey to the here and now. I'll start at 10:30 and here's how it'll work: I'll just quickly blog about who I'm talking to and indicate something about them that I find interesting.

update 3:04 p.m. - I couldn't get a wiFi signal out of the campus so I couldn't live blog. However I'll be posting a few dozen profiles over the next few hours.

Comment on this post

DTV assistance

Posted at 11:17 AM on January 13, 2009 by Bob Collins (2 Comments)
Filed under: Economy, Tech

I wrote last month about an initiative to provide assistance to low-income people for converting their analog TVs to ones capable of receiving digital transmission signals. At the time, the people putting the effort together, could not say where in the Twin Cities (One of seven cities in the country targeted) such people could get help.

Now they have:

Lao Assistance Center
503 Irving Avenue North, Suite 100A
Minneapolis, MN 55405
(612) 374-4967

Main Street Project
2104 Stevens Avenue South
Minneapolis, MN 55405
(612) 879-7578

The official opening is tomorrow afternoon. It's a bit of a pity a center couldn't have been opened in St. Paul.

Coincidentally, I got my "coupons" for discounts on converter boxes yesterday. They're not really coupons at all, actually. They're ATM style cards. Initially, I ordered the cards because I've been thinking about getting rid of Dish Network and going back to the old days of sticking an antenna on the roof, and pocketing the cash I'd save.

Instead, however, I'm going to donate them to people who need help and for whom TV is important.

Comment on this post

The 'tour' starts tomorrow

Posted at 7:10 AM on January 13, 2009 by Bob Collins (2 Comments)
Filed under: Economy, Schools

I'm kicking off a three month experiment on News Cut tomorrow when I visit Century College in White Bear Lake to hear the personal outlook by some of the students there and -- I hope -- hear about their journey on the road to the future.

MPR Morning Edition host Cathy Wurzer asked me about it this morning on her program. Listen

Comment on this post

These are the good old days

Posted at 6:51 PM on January 11, 2009 by Bob Collins (2 Comments)
Filed under: Economy

What can we conclude from two unrelated-but-related stories out today?

Reports the Associated Press:

Hybrid sales plunged 43 percent in December and 50 percent in November, according to the auto Web site Edmunds.com, surpassing the industry's overall sales decline of 36 percent in December and 37 percent the month before.

Toyota watched sales of the Prius, the top-selling hybrid in the U.S., tumble 45 percent in December, while sales of Nissan Motor Co.'s Altima hybrid fell a whopping 70 percent.

Meanwhile, you've probably noticed that gasoline prices are on the way up again, thanks to the violence in the Middle East::

Crude oil prices increased by 30 percent in the last seven days, according to information posted by the New York Times, causing the wholesale price of gasoline to increase by 40 percent since Dec. 24.

"A lot of people are talking about dollar-a-gallon gasoline, when the wholesale market seems to be pointing to $2 a gallon," said Tom Kloza, chief oil analyst at the Oil Price Information Service (OPIS).

All of this on a day when Ford unveiled its all-electric plans.

Comment on this post

The best and worst jobs

Posted at 8:48 AM on January 11, 2009 by Bob Collins (7 Comments)
Filed under: Economy

Eat your vegetables and do your math homework, kids. It's where the good jobs are. So says the Web site, Careercast, which has ranked the best and worst jobs in today's economy.

See the common thread in the top ten?

1. Mathematician
2. Actuary
3. Statistician
4. Biologist
5. Software engineer
6. Computer systems analyst
7. Historian
8. Sociologist
9. Industrial designer
10. Accountant

And the worst jobs...

1. Lumberjack
2. Dairy farmer
3. Taxi driver
4. Seaman
5. Emergency medical technician (EMT)
6. Roofer
7. Garbage collector
8. Welder
9. Roustabout
10. Ironworker

The ratings are, we're told, based on a number of factors including salary, stress, and physical demands.

Some other rankings in the list of 200 include federal judge (69), newscaster (75), airplane pilot (116), newspaper reporter (140), undertaker (164), photojournalist (167), and bricklayer (180).

"Blogger" did not make the list. Again.

For you old-timers, if you had to do it again, would you take the same career path? Me? My first career choice was airline pilot. These days, either road would've led to a dead end.

Comment on this post

How to survive at work when everyone else is getting laid off

Posted at 1:30 PM on January 9, 2009 by Bob Collins (9 Comments)
Filed under: Economy

I wrote -- briefly -- the other day that the people who are left behind after company layoffs are under their own brand of stress. I was hoping for some individual stories from News Cut readers but, alas, life is full of all sorts of disappointments.

Coincidentally, Fortune Magazine has an article on how to be the person still employed with 10 tips for success.

Here's the one that seems most controversial to me:

For now, forget about work-life balance. A major preoccupation when the economy was humming along nicely, "having time for outside interests has to go right out the window now," says Bright. "You need to concentrate on doing whatever it takes to make yourself indispensable."

Just as we are now being told massive budget deficits aren't to be worried about, we are finding that we're now not supposed to give a rip about life outside of work.

Coming in the next issue, perhaps: Ten ways to survive divorce and look for work.

The Web site Lifehacker.com tackles the list and a reader confirms the notion that, at least in his case, getting left behind may be a more miserable outcome than being let go:

I got laid off in November, along with most of my engineering team. My biggest concern (ok, second biggest, I do have kids to feed) was for the engineer that was left behind. My first call was to him, and since I knew his skills well I sent him the offers I spotted that I thought might be a good fit. We all took a break over the holidays, but I've got to catch back up with him and do a more focused effort on getting him out of there, he's miserable.

Let's hear your story.

(h/t: Julia Schrenkler)

Comment on this post

The last-minute nation

Posted at 8:03 AM on January 9, 2009 by Bob Collins (6 Comments)
Filed under: Economy

In his speech about the economy on Thursday, President Barack Obama had never sounded so presidential, if you define "sounding presidential" as already sounding frustrated by the glacial pace of Congress.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years," said the president-elect, appearing to predict inaction on a plan he hasn't even sent to Congress yet.

Today, the president-elect got even more evidence that it's getting worse before it gets better. Unemployment has reached a 16 year high.

But a glance at the morning papers proves that Congress is hitting the ground running on threats to our country's survival.

The economic Catch 22

Posted at 9:26 AM on January 8, 2009 by Bob Collins (6 Comments)
Filed under: Economy

How does the country turn around the housing market? Start bulldozing some of them, according to one expert.

David Rosenberg, chief North American economist at Merrill Lynch, says the country is "attacking the symptoms" instead of the problem.

"It's pretty foolhardy to believe anything is going to reach any sustainable low until we put in a firm bottom on residential real estate prices," he said today, which is economist-speak for create a supply problem to create a demand.

If the Treasury Secretary can tell bank officials, "you're going to take this bailout money no matter what," then maybe municipalities need to stop issuing building permits.

He made a similar suggestion this week in the Financial Times:

What we probably need is a supply-side resolution, either creating regional land banks to ring-fence the inventory or a moratorium on new housing starts to prevent further corrosion in residential real estate values. Supply-demand divergences are likely to persist through 2009, in our view, and will require even further contraction in construction activity before balance is restored in the real estate market.

It is a frugal future, indeed, but we believe the US economy will endure nonetheless and will inevitably emerge all the stronger.

The negative wealth effect will subside and, along with that, the savings rate should start to level off - likely near its pre-bubble normalised level of 8 per cent.

"I'm flabbergasted we're seeing housing starts at all," he said today.

What would the effect be of a moratorium on housing starts around here? Probably property tax increases. Look at Woodbury, one of the fastest-growing communities in Minnesota over the last decade. It financed city operations largely on the strength of the money it made from housing permits. It issued only 14 permits in December, and is now trying to slash its budget to account for the lost income. The city doesn't take local government aid from the state.

And therein lies a significant part of the economic problem: One hand doesn't know what the other hand is doing. Some cities are depending on money from a policy -- if you believe Rosenberg -- that is only making the economic situation worse. In this regard, efforts to boost the housing sector are only making matters worse.

Comment on this post

The people left behind

Posted at 8:36 AM on January 8, 2009 by Bob Collins (1 Comments)
Filed under: Economy

In the -- entirely appropriate -- focus on people who are losing their jobs, one area that's being ignored are the people who aren't.

In many cases, companies are cutting people, but not production, leaving the people still employed to pick up the slack. Is that happening to you? Tell me about it, making it clear if you want your name to be withheld.

Comment on this post

The magic is gone

Posted at 8:25 AM on January 8, 2009 by Bob Collins (8 Comments)
Filed under: Economy

Macy's announced today that it will close 11 stores, including one in Brooklyn Center at the Brookdale Mall, which is fast becoming an economic basket case.

The store, of course, is a former Dayton's, a store that every company once wanted in their mall -- the name was that magical. The magic is gone.

Is it too early to start thinking about what St. Paul will do when Macy's closes its downtown St. Paul store?

Taxpayers guaranteed a $6.3 million loan for renovations to the store in 2001. The loan would be forgiven if the store stays open until December 2012. One gets the impression that Macy's executives fall asleep at night to dreams that it's almost January 2013.

Comment on this post

Burning through the DTV money

Posted at 9:29 AM on January 6, 2009 by Bob Collins (8 Comments)
Filed under: Economy

Julio Ojeda-Zapata's excellent story in the Pioneer Press noting that the government has run out of coupons for digital TV converters could hit the Twin Cities area particularly hard.

Minnesota is among the lowest participating areas of the country, according to the agency that was handling -- and apparently botching -- the coupon program. Many people who received coupons, aren't aware that they have expiration dates, and may now be worthless. (Note: Some places will accept an expired coupon at a fraction of their value.)

Last month, the agency had a conference call with reporters, and mentioned nothing about running out of money and coupons, noting only that people should order their coupons by December 31 to get them in time for the February switchover from analog to digital TV transmission.

Meredith Baker, acting administrator at the National Telecommunications and Information Administration (NTIA), an office of the U.S. Department of Commerce, said the agency had issued 41 million coupons to 24 million households. But only 29 million of the coupons are still good (either already redeemed or still "active").

Baker is asking for $250 million to $325 million more in government money to provide 2.5 million more coupons.

What's happening to the analog broadcast spectrum being vacated by TV broadcasters? The government auctioned it off for an estimated $4.8 billion. The money was supposed to be used to ease the federal deficit, although that plan was in dispute.

(This post has been corrected. The original math showed a per household cost to the government rather than a per-coupon cost).

Comment on this post

News Cut on campus

Posted at 4:57 AM on January 5, 2009 by Bob Collins (9 Comments)
Filed under: Economy, Schools

Starting next Wednesday and continuing every Wednesday into March, I'll be visiting a campus of the Minnesota State Colleges and University System to talk to students about their outlook. The economy certainly paints a bleak picture, but young people usually tend to have hope. Is hope still alive? And what journeys have brought people to their particular campus?

I'll have multiple postings each Wednesday evening on what I find.

Here's the schedule. If you're on one of these campuses, I look forward to talking to you. You can find me at the campus cafeteria or student center.

January 14 - Century College. White Bear Lake
January 21 - Vermilion Community College. Ely
January 28 - Minneapolis Community and Technical College. Minneapolis.
February 4 - Winona State University. Winona.
February 11 - Minnesota West Community and Technical College. Duluth.
February 18 - Lake Superior College. Duluth
February 25 - Minnesota State University. Moorhead
March 4 - Hennepin Technical College. Eden Prairie.

I'll be in each location from about 10:30 a.m. to noon.

Meanwhile, posting will be a little light today. I'm on my way to Winona to talk to a school official about the Feb. 4 visit.

Comment on this post

Thud

Posted at 11:18 AM on December 30, 2008 by Bob Collins (1 Comments)
Filed under: Economy

This isn't the day we notice a turnaround in the housing market.

The Case-Schiller housing index for October was released today. It measures home prices based on what homes sold for the last time they changed hands vs. the most recent transaction.

Housing prices fell by a record 18 percent from October last year, the largest drop since the survey's inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.

But enough about 10 other cities. What about Minneapolis? It's not good. The prices fell 3.4% from a year ago. There was only one other time when the drop was this steep -- February 2008. It's the lowest home price benchmark since September 2002.

Measured by one-month declines, we're more Detroit than New York.

Meanwhile, local expert Teresa Boardman analyzes other local housing market numbers "designed to show the relationship between how many new listings are put on the market each week and how many homes get offers from buyers that are accepted by sellers each week."

She notes that prices have come down 30% on bank-owned homes, and 2% on non-bank-owned homes that are ready to move.

Comment on this post

The half-empty economy

Posted at 9:07 AM on December 26, 2008 by Bob Collins (7 Comments)
Filed under: Economy

The true meaning of Christmas, the steady drumbeat of news stories suggests, is the bottom line for retailers. The writers are running out of adjectives to describe the 5-8% drop in seasonal sales.

"Gloomy," Marketwatch says today. "Rotten," says the Canadian Press. Huffington Post says retailers are "desperate" to salvage the season with post-Christmas sales. "Retailers get coal in their stockings," NPR says.

What if sales had equaled or exceeded last year's? Would analysts and retailers still be so down?

Let's hit the News Cut "Wayback Machine," and set the date for "any Christmas but this one."

So here we are in 2007, where the MPR story described things as "bleak."

But big sales will mean lots of red ink for retailers. Many retailers have gone out of business or closed stores already. Analysts warn that deep price cuts could kill even more retailers or drive them to close stores.

Even back in 2005, the stories warned of the danger of people spending less. In 2002, we told you things were "grim."

The end-is-near. Again.

Comment on this post

The transit riddle

Posted at 3:17 PM on December 22, 2008 by Bob Collins (15 Comments)
Filed under: Economy

We must delve into the causes of Metro Transit's problems as detailed this afternoon by MPR's Dan Olson.

Money for transit from the motor vehicle sales tax is down because of slumping auto sales. The latest numbers show Metro Transit is short $72 million over the next two and a half years, according to Dan.

I wrote a few weeks ago about the wisdom of financing things by taxing things you want to have less of -- cigarettes or gas taxes in that post. Ideally, a proper public transit model would have everyone riding it, and getting rid of cars. But if you're financed by the sale of automobiles, can you do both?

Ridership on Metro Transit has increased, but the system imposed a fare hike this year nonetheless. One solution for the current revenue shortfall? Another fare hike. At what point do you force people off mass transit?

More Twin Citians are riding public transit, getting squeezed in the wallet, and squished on the ride.

Comment on this post

Minnesota money

Posted at 2:44 PM on December 22, 2008 by Bob Collins (0 Comments)
Filed under: Economy

A friend told me the other day that Minnesota was so concerned about the stability of the economy during the Great Depression, that it printed its own money. I'd never heard such a claim, and for good reason. It isn't true.

But even wading into the subject revealed how different times were in the Great Depression than in the Great Recession.

I learned this from Shawn Hewitt, to whom I turned today to find out if what my friend said was true. Hewitt is the author of A History & Catalog of Minnesota Obsolete Bank Notes & Scrip .

The claim of your colleague is incorrectly stated. In the 1930s, there were two main types of notes issued by entities from Minnesota. One is National Currency, or National Bank Notes. These were issued since the 1860s by National Banks, bearing the name of the issuing bank on the face. An example is shown on my web site

They were introduced by the Union during the Civil War as a means to finance the war and to bring about a more uniform currency. They were discontinued in the 1935 at the close of the Great Depression as part of broader government efforts to shore up the financial system.

The other type is known as Depression Scrip. An example can be found here. The notes were not issued out of fear of government collapse, but due to the scarcity of money.

There were four main types of issuers of Depression Scrip from Minnesota:

1) Bank Scrip, in the form of denominated cashier's checks. These were issued by banks during the Banking Holiday of 1933 and served as a currency substitute until banks were permitted to resume the normal course of business.

2) Municipal Scrip, issued by towns to fund unemployment relief projects.

3) Company Scrip, issued by companies for payrolls and commodities, or by merchant associations.

4) Barter Scrip, issued by unemployment relief organizations.

Most notes were issued in 1932-1933 as a measure of necessity, not one of fear.

Comment on this post

The secret bank bailout

Posted at 8:46 AM on December 22, 2008 by Bob Collins (5 Comments)
Filed under: Economy

The Associated Press is out with a survey that says banks that are getting taxpayer bailouts gave their bosses $1.6 billion in salaries, bonuses, and other benefits last year. $1.6 billion. That was once considered a lot of money.

Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.

John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.

Meanwhile, another AP story today says the banks won't say how they're spending the money.

Comment on this post

An industry's death rattle

Posted at 8:26 AM on December 22, 2008 by Bob Collins (5 Comments)
Filed under: Economy

2009 will likely be the year the Twin Cities becomes a one-newspaper town. The closest thing to us is, perhaps, Denver where the Rocky Mountain News and the Denver Post (owned by Dean Singleton, who also owns the St. Paul Pioneer Press) are slugging it out to be the last newspaper standing.

The Rocky isn't going down without a fight, and it's willing to shed its dignity in the process.

The newspaper has created iwantmyrocky.com to rally support for the newspaper. In the process, its employees get to publicly beg for their jobs.

Comment on this post

Detroit myths

Posted at 4:07 PM on December 19, 2008 by Bob Collins (8 Comments)
Filed under: Economy

CBS/CNET does a "reality check" on the auto industry, including the myth it says that Detroit was out of touch with the auto market by making trucks and SUVs.

Around the urban United States you find hostility toward Detroit because it makes so many trucks and large SUVs - 5.35 million in 2007. But they didn't just make that many, they sold that many. We snapped them up. Should we have bought all of those? Probably not, but these are Wall Street-driven companies and the margins on trucks & SUVs were great business. For the consumer populace to wash its hands of any involvement in Detroit's product plans is disingenuous.

Comment on this post

MPR cuts

Posted at 3:31 PM on December 19, 2008 by Bob Collins (10 Comments)
Filed under: Economy, Media

I blogged about NPR dropping two shows because of budget cuts last week, so I can't very well ignore an MPR press release today.

American Public Media™ is cancelling weekly production and distribution of Weekend America® as a result of the current economy's impact on station carriage and sponsorships. The final broadcast will be January 31, 2009. Thirteen full- and part-time positions will be affected. Weekend America is carried on 134 stations with a weekly audience of about 657,000 listeners.

American Public Media is proud of the many accomplishments of Weekend America's talented staff. They have produced personal, thoughtful, funny and challenging journalism that you couldn't hear anywhere else. The program topics ranged from in-depth reporting on the fallout from the Iraqi war, multi-part series on foreclosure and immigration, and the lessons of racism. The hosts and reporters also engaged people all across America on their weekends, skydiving or dancing or giving concerts or celebrating the diverse cultures and festivals of our country.

MinnPosts's David Brauer reports more cuts are coming:

Margaret Ann Hennen, APM's VP of Corporate Communications, says, "Yes, there will be further reductions, but we don't know when or what. This is part of the alignment of revenues and expenses ... that has been going on for the last year. We continue to make very methodical decisions."

As Linda Ellerbee used to say, "and so it goes."

Comment on this post

The auto bailout

Posted at 8:00 AM on December 19, 2008 by Bob Collins (10 Comments)
Filed under: Economy

The White House caved in this morning when President Bush announced a plan to bail out the auto industry.

Chrysler, for one, turned up the heat on Mr. Bush by announcing all of its plants would close for a month.

In a statement a few minutes ago, Bush said in normal times "this is the price failed companies must pay." But he said allowing the auto industry to collapse "is not an appropriate course of action." He said bankruptcy is not an option because American consumers won't buy cars from a bankrupt automakers.

Under the plan, autoworker pay and wages must be "competitive" by the end of next year. The federal government will grant billions of dollars in "loans."

Automakers are getting 3 months to put reorganization plans into effect. If it can't be accomplished outside of bankruptcy, the federal money will give the companies more resources to organize bankruptcy proceedings. Retirement plans will also have to be cut back.

CNBC referred to the loan as the "bridge to Obama" loan. It also noted that the private company that owns Chrysler -- Cerberus Capital Management LP -- isn't putting any money into the deal.

Republicans who scuttled legislation in Congress on an auto bailout last week "shot themselves in the foot," says John Harwood, CNBC's chief Washington correspondent. "The situation that we're left with now is instead of having the force of law, the terms of these loans can immediately be changed by Barack Obama when he takes office." He says even the White House thought the Republicans were posturing last week.

Comment on this post

Changes at Cirrus

Posted at 8:54 PM on December 18, 2008 by Bob Collins (0 Comments)
Filed under: Economy

I've noted here before that Cirrus Design up in Duluth, which makes airplanes, is one of the true Minnesota success stories. Alan Klapmeier -- its boss -- may be one of the most influential people in general aviation. Yet he's unknown to most Minnesotans.

Today, however, Klapmeier stepped down as the CEO of the company.

You never know in these announcements how much of the reasoning is true, and how much is just corporatespeak for something more dire. Klapmeier acknowledges times have been tough for the industry (is there an industry for which times haven't been tough?) but says he thinks Cirrus "has gotten a handle on that."

Comment on this post

Exports are one of few economic bright spots in Minn.

Posted at 10:37 AM on December 16, 2008 by Bob Collins (0 Comments)
Filed under: Economy

Perhaps a little good news won't kill us. Says a news release from the Department of Employment and Economic Development:

Manufactured exports set another record in the third quarter of 2008, growing 8.6 percent from the same period a year ago to $4.5 billion. It was the second straight quarter that state manufacturers broke the record for export sales.

So far this year, Minnesota exports have grown 9.5 percent to $13.1 billion. The state is on pace to break last year's export record of $16.2 billion

Computers and electronics are the #1 export. Canada is the state's biggest trade partner.

Comment on this post

Can Best Buy survive?

Posted at 8:20 AM on December 16, 2008 by Bob Collins (4 Comments)
Filed under: Economy

Just a few years ago, they were practically printing money at the Richfield headquarters of Best Buy.

Despite lower sales, MPR's Marty Moylan reports, Best Buy is poised to become even more dominant in the electronics field. Still, 4,000 employees at the company headquarters in Minnesota are being offered deals to become unemployed.

The Wall Street analysts generally love misery of working people, fairly gushing this morning that the company is "right-sizing." And the stock opened higher after the firm reported its earnings, prompting a wave of "half empty" vs "half full" news coverage.

"Best Buy tops profit forecasts" said CNN Money. "Best Buy 3Q Net Plunges 77%, To Slash New-Store Openings," the same Web site reported 10 minutes later. The bottom line? Best Buy made a profit; just not a big profit -- only $52 million.

So it was surprising to hear CNBC tease an interview with an analyst this morning by asking, "Can Best Buy survive?" A company makes $52 million in three months and it's on death's doorstep? It is, indeed, a "new" economy.

That analyst, Stacey Widlitz of Pali Research, said the good news is "it wasn't a total disaster." She also described the cuts in employees as "good news." Best Buy's problem, she said, is electronics are 10-percent cheaper at WalMart, a company analysts seemed to be burying a year ago.

The CNBC hosts tried mightily to do the same to Best Buy this morning, but Widlitz wasn't biting. "No, I'm not worried about their viability," she said. "With cost cutting in the organization... they have plenty of time before there's a real issue here."

The soon-to-be unemployed may not be able to say the same.

Comment on this post

Where were the regulators?

Posted at 3:43 PM on December 15, 2008 by Bob Collins (1 Comments)
Filed under: Crime and Justice, Economy

I watched It's a Wonderful Life the other night at the end of another bad week of worry about the economy, hoping for a reminder about perspective. It didn't work, but not for the reasons you might think.

I'd driven up to Ely and back on Friday and so I spent much of the day hearing about the economy. Have you heard? It stinks and it's only a matter of time before it swallows all of us, the narrative seems to suggest.

I couldn't get the day's bad news out of my head as I watched the movie. Here's why: In the course of one afternoon, Uncle Billy misplaced the credit union's receipts, Mr. Potter stole the envelope with the cash, the state banking investigator showed up to audit the books, a warrant was issued for George's arrest and the investigator and cops showed up at the Bailey household a few hours later. All in one afternoon!

Boy, those were the days.

Bernard Madoff ran a Ponzi scheme that ripped off $50 billion (including $100 million from Twin Cities investors) and nobody who was supposed to notice noticed. Bloomberg reports today that the Securities and Exchange Commission never inspected Madoff's books, even though it was required to:

Given what the SEC claims is the magnitude of the fraud, this is something you would hope an inspection would have uncovered," said Mercer Bullard, a University of Mississippi law professor and former mutual-fund attorney at the SEC. "It's hard to imagine a fraud of this alleged size not being accompanied by significant and pervasive compliance problems."

On National Public Radio today, Jim Zaroli reported that a securities industry official warned the SEC in 1999 that Madoff's returns were too good to be true.

Congress doesn't seem to be in too big of a hurry to find out what's going on at the SEC, according to the Wall St. Journal:

A spokesman for Rep. Barney Frank, the chairman of the House Financial Services Committee which will be the key in writing the new regulatory structure for the financial industry, said that "in due time" the committee would work with the SEC to see "what if any, failings of policy" were revealed from the alleged Madoff fraud. He said Frank hasn't been in touch with the agency.

On NPR's All Things Considered this afternoon, a former SEC official said there aren't enough people to keep up with the crooks (although he didn't use that word). It's a view shared by Columbia Law School professor John Coffee, who told the Journal that the agency is overworked and typically only examines 10% of the new funds that are registered.

The Madoff story, of course, is huge. Even the Dow's drop today is being pegged on it. But Matthew Goldstein, writing in BusinessWeek, suggests it's no bigger than Tom Petters' alleged scam in Minnesota:

Consider how little national coverage a similiar alleged Ponzi scam involving Minnesota businessman Tom Petters has generated. Sure, the alleged damages in the Petters affair are smaller--but a $3.5 billion loss isn't chump change. Some six-dozen hedge funds and their hundreds of individual investors suffered huge losses when federal prosecutors alleged that Petters was borrowing money for several companies that existed on paper only. At least a few of the victims include wealthly widows in their 90s, living in Florida, who invested in one of the hedge funds.

If there's anything to salt away from the Petters and Madoff cases (and the economic meltdown in general) it's this: If you're making money with an investment, find out why.

Comment on this post

Cities wait for possible LGA cuts

Posted at 2:25 PM on December 15, 2008 by Bob Collins (0 Comments)
Filed under: Economy, Politics

Not everyone is sweating the possible loss or reduction of local government aid in Minnesota. The League of Minnesota cities has released a city-by-city estimate of LGA payments due on December 26th. These cities don't accept the state aid:

Albertville
Andover
Arden Hills
Baxter
Blaine
Bloomington
Brooklyn Park
Burnsville
Champlin
Chanhassen
Circle Pines
Corcoran
Cottage Grove
Dayton
Eagan
East Bethel
Edina
Farmington
Forest Lake
Golden Valley
Ham Lake
Hugo
Inver Grove Heights
Lake Elmo
Lakeville
Lino Lakes
Mahtomedi
Maple Grove
Maplewood
Mendota Heights
Minnetonka
Minnestrista
Monticello
Mound
New Brighton
Oakdale
Orono
Otsego
Plymouth
Prior Lake
Ramsey
Rogers
Rosemount
Roseville
Sartell
Savage
Shakopee
Shoreview
Shorewood
Spring Lake Park
St. Anthony (JT)
St. Louis Park
St. Michael
Vadnais Heights
Victoria
Woodbury

Many cities, of course, depend on local government aid (St. Paul has $28 million riding on this issue. Ely has $777,000 to think about.), but others probably don't. Can Chickamaw Beach live without the $438 it's due to receive later this month? What about Funkley, Minnesota? It gets $73. The population of Funkley as of June 2007: 16.

Comment on this post

Who needs the police?

Posted at 1:47 PM on December 15, 2008 by Bob Collins (2 Comments)
Filed under: Economy

Who needs police? Not Cook, Minnesota which has voted to get rid of the department in a wave of budget cutting.

The Cook News-Herald has the play-by-play of the decision, written in the no-nonsense ways of the Iron Range.

Council member Storm added, "It's nice to have police in town," but then said, "Is it a luxury?"

Pastor Reuben Rosnau, who is a member of the Cook Volunteer Fire Department and the Ambulance Squad, spoke of the need for law enforcement at fires and with the ambulance and how the local police usually were there.

Arlee Olson... He spoke of Highway 53 going through Cook and the 10 roads coming onto it with the potential for accidents. He spoke of Cook having a pharmacy and the hospital and the drugs they hold. He told the council they were making a mistake dropping the police department.

Council member Dan Manick spoke of speeding, dangerous intersections and added they should "take into fact the human factor."

Mayor Edblom said it was strictly "dollars and cents."

Police Officer Dan Nylund told the council they could not enforce city ordinances since they didn't have a badge and the county wouldn't do it. Mayor Edblom said they would have to live with that. The elimination of the police will take place March l, 2009, after Nylund is given 60 days' notice.

Until then, Cook will have one police officer, and six people who serve on the "police committee." A final decision will be made after Cook finds out more about possible cuts to local government aid (LGA). According to the League of Minnesota Cities, Cook would lose $5,300 if LGA and/or the homestead credit is cut by $25 million, $28,000 if the Legislature cuts the program by $100 million.

Sperling's Best Places lists crime in Cook as a "4" on a scale of 1 to 10.

Cook, MN, violent crime, on a scale from 1 (low crime) to 10, is 3. Violent crime is composed of four offenses: murder and nonnegligent manslaughter, forcible rape, robbery, and aggravated assault. The US average is 3.

Cook, MN, property crime, on a scale from 1 (low) to 10, is 4. Property crime includes the offenses of burglary, larceny-theft, motor vehicle theft, and arson. The object of the theft-type offenses is the taking of money or property, but there is no force or threat of force against the victims. The US average is 3.

Comment on this post

Ethanol subsidy may be a target

Posted at 12:18 PM on December 10, 2008 by Bob Collins (16 Comments)
Filed under: Economy

When he unveils his plans for closing the projected $5.2 billion budget deficit, Gov. Tim Pawlenty will be hard-pressed to leave one of the state's sacred cows unscathed -- ethanol. And few of its backers will talk about the possibility today.

Ethanol, of course, has been hailed in Minnesota as the economic future for rural Minnesota farmers, and an answer to an evolving energy crisis. And the state has been among the leaders in supporting it, not only with a mandate for ethanol in gasoline sold in the state, and tax-free zones where ethanol plants are likely to be built, but also direct -- and somewhat controversial -- payments to ethanol producers.

In 2007, Minnesota paid over $15 million to ethanol plants as part of a per-gallon subsidy. Gov. Pawlenty has argued that it's a worthy investment with a large return. The state, however, cut the payments during the last budget crisis in the state (although it cut sizeable checks more than a year ago to make up for the cut), and seems likely to target the subsidy again. Nobody in the State Agriculture Department today, however, would speak to the possibility.

If the subsidy is targeted, it couldn't come at a worse time for rural Minnesota. Because the demand for gasoline is down, so is the demand for ethanol. Last month, one of the largest ethanol producers -- VeraSun -- declared bankruptcy after betting the price of corn would keep going up. The price of corn fell sharply, though, and VeraSun is out of cash. The producer payments can help secure private lending, but the tight credit markets remain in a deep freeze.

Last week, an ethanol plant in Iowa closed up. "We were still chewing through $6 corn (recently) and ethanol was around $1.50," Pine Lake Corn Processors president Larry Meints Meints said. "Hedging, that did not go well... It's very disappointing."

Comment on this post

What's recession-proof?

Posted at 5:58 AM on December 9, 2008 by Bob Collins (10 Comments)
Filed under: Economy, The jobs we do

Two stories today remind us that these are not normal times, and not even normal downturns. In a normal economic "downturn," there are recession-proof jobs, jobs that are so critical, or fill a need of the times so perfectly, they can't possible be eliminated.

Health care is one such historical recession-proof job. But two large area health care organizations have announced cutbacks. Park Nicollet Health Services and North Memorial Health Care will trim 613 jobs.

"My colleagues thought health care was recession proof," Lawrence Massa, president of the Minnesota Hospital Association, told the Star Tribune. "We're seeing that's not the case."

Meanwhile, the New York Times reports today, another recession-proof gig is endangered -- prostitution.

Big Sister is not the only brothel suffering the effects of a battered global economy. While the world's oldest profession may also be one of its most recession-proof businesses, brothel owners in Europe and the United States say the global financial crisis is hurting a once lucrative industry.

Egbert Krumeich, the manager of Artemis, Berlin's largest brothel, said that in November, usually peak season for the sex trade, revenues were down by 20 percent. In Reno, Nev., the famed Mustang Ranch recently laid off 30 percent of its staff, citing a decline in high-spending clients.

An article on Yahoo Jobs earlier this year suggested education is a recession-proof job. Teaching? Have you seen the size of the state's projected budget deficit?

Forbes says there's always jobs for salespeople, although now they're called "business development specialists."

What about you? Are recession-proof? If so, I'd like to talk to you about your job for News Cut's "The Jobs We Do" category. Use this form or e-mail me.

(Posting here will be very light today. I'm driving to Worthington today to meet with officials at Minnesota West Community and Technical College. It will be on of the stops on the News Cut on Campus tour starting next month. Each Wednesday I'll be at a different college/university in Minnesota, talking to students about their journey and their outlook. Stops will include, White Bear Lake, Ely, Duluth, Worthington, Winona, and Moorhead. Everybody has an interesting story to tell and if you're in college, I'd like to tell yours. So stay tuned for more information.)

Comment on this post

Is the media making the economy worse?

Posted at 1:56 PM on December 8, 2008 by Bob Collins (11 Comments)
Filed under: Economy

Weeks after the massive -- and so far unsuccessful -- bailout of some financial institutions and days after Congress took another whack at the auto industry, New York Times columnist David Carr today identified the boogieman behind the country's economic woes -- the media.

Every modern recession includes a media séance about how horrible things are and how much worse they will be, but there have never been so many ways for the fear to leak in. The same digital dynamics that drove the irrational exuberance -- and marketed the loans to help it happen -- are now driving the downside in unprecedented ways.

The recession was actually not officially declared until last week, but the psychology that drives it had already been e-mailed, blogged and broadcast for months. I used to worry that my TiVo thought I was gay -- doesn't everyone enjoy a little "Project Runway" at the end of a long, hard week? Now I worry that my browser knows I am about to lose my job.

"When everyone is talking about recession, we all feel like something has to change, even if nothing has changed for us," said Dan Ariely, author of "Predictably Irrational," a book that explains why people do things that defy explanation. "The media messages that are repeating doom and gloom affect every one, not just people who really have trouble and should make changes, but people who are fine. That has a devastating effect on the economy."

Carr's riff isn't all that different from a similar one in the '70s. Only then, the subject was the Vietnam War. We really weren't losing it, the media was just focusing on the bad news.

But increasingly, the message behind Carr's prose is being amplified. A Business and Media Institute writer said today:

The barrage of constant bad news can affect people who don't find themselves in financial trouble, Carr noted, citing Dan Ariely, the author of "Predictably Irrational."

"When everyone is talking about recession, we all feel like something has to change, even if nothing has changed for us," Ariely said. "The media messages that are repeating doom and gloom affect every one, not just people who really have trouble and should make changes, but people who are fine. That has a devastating effect on the economy."

It sounds plausible, but who are these people for whom "nothing has changed?" People still may have jobs, but their plans for retirement are in ruins. Not everyone is 30 with a lifetime to get back what's been lost.

And Carr doesn't say the media is making it up; only that the bad news these days can be collected and disseminated far more quickly than ever before. But what are we supposed to do about that? In fact, that's a question that media critics have specifically not answered.

Here's today's economic news: The Tribune company filed for bankruptcy, 3M cut its earnings outlook and announced more job cuts, many borrowers who have their mortgages restructured are defaulting a second time, and auto magnate Denny Hecker closed some more businesses.

In non-economic news, the Timberwolves fired a coach, the Fergus Falls band is going to march at an inauguration, and a truckload of reindeer slid off an icy road in Freeport. So it's not as if other stories aren't being reported.

"The media are only doing what they always do eventually: They get it right, way too late to make a difference," said the Center for Citizen Media's Dan Gillmor, who hasn't had a nice thing to say about mainstream media, it seems, since savings accounts paid 5 percent.

Gillmor said, however that "people who save their money today are not being irrational, even though this is exactly the time you hope that enough people will spend to keep the economy from an absolute crater."

So there we are. A gloomy economy, a gloomy media, and a handful of critics who don't know the solution to either problem.

Comment on this post

The secrets of failure

Posted at 11:25 AM on December 7, 2008 by Bob Collins (1 Comments)
Filed under: Economy

The same technology that affords us the luxury of reading blogs and exchanging e-mails is creating a nightmare for business. It's easier for internal spies to steal corporate secrets.

Nowhere is that nightmare being played out more publicly now than in the battle between Airbus and Boeing. Boeing is trying to compete with Airbus' new A-380 jet with the Boeing 787 Dreamliner, a jet on which the American company has a share of its future based. It's also a jet that's behind schedule and over budget.

What popped up on the Internet this week was a 46-page critique of the Boeing project by Airbus, which has led to suggestions the European competitor got its information the old-fashioned way: it stole it.

Says the blog FlightBlogger:

Competitive intelligence is a standard practice in the aerospace industry, but the information revealed in the Airbus analysis reveals a scope and specificity of the data collected.

The document includes what appear to be seven slides labelled BOEING PROPRIETARY with a format style used in Boeing presentations, including two that appear to have been photocopied, raising questions about the methods and sources the European consortium utilizes to collect its data.

Airbus claims the presentation, as well as its competitive intelligence gathering methods, fully comply with all laws. Though when approached about how the information was gathered, Airbus declined to address it specifically, suggesting that a lot of data labelled BOEING PROPRIETARY is freely available online. Airbus added that not all documents labelled BOEING PROPRIETARY are in fact proprietary. A spokesman emphasized that Airbus closely watches the market to draw its own conclusions, as do its competitors.

Regardless of how Airbus got Boeing's secrets, its report details what surely is a mess for Boeing, and a continuation of a long assembly line of bad news for America's manufacturing base.

Comment on this post

Giving up

Posted at 12:45 PM on December 5, 2008 by Than Tibbetts (5 Comments)
Filed under: Economy

Economists are abuzz over the numbers behind the big number of the day. While non-farm labor employment fell by a staggering 533,000 jobs, ticking the national unemployment rate to 6.7% from 6.5%, the Times' Economix blog offers a much darker perspective.

According to the Labor Department, the number of unemployed workers rose by 251,000 in November. But the number of people who were outside of the labor force -- that is, neither working nor looking for work -- rose by much more: 637,000. These people aren't counted as unemployed in the government's statistics, because they are not looking for work. Many of them, presumably, have stopped looking for work because they didn't think they could find a good job.

That's roughly the equivalent of every man, woman and child in the cities of Minneapolis and St. Paul throwing up their hands and saying, "I give up."

The report from the Bureau of Labor Statistics has a few more interesting nuggets. The place to be appears to be in health care. It looks to be the only major sector to add a significant number of jobs over the last year.

Health care employment grew by 34,000 in November. Over the past 12 months, health care has added 369,000 jobs.

When the numbers show that 1 in 5 teenagers can't find work, it adds to sense that college is becoming unaffordable.

If you have a job, you're likely to be spending less time physically at work.

In November, the average workweek for production and nonsupervisory workers on private nonfarm payrolls fell by 0.1 hour to 33.5 hours, seasonally adjusted--the lowest in the history of the series, which began in 1964.

In other words, welcome to The Recession!

Update: Of course, Wall Street takes these numbers and runs up 3 to 4 percent.

Comment on this post

The really big number

Posted at 11:53 AM on December 4, 2008 by Than Tibbetts (12 Comments)
Filed under: Economy, Pawlenty, Politics

So, elected officials of Minnesota, you've got come up with $5.2 billion in additional revenue and/or cuts to balance the state's budget. Where do you start?

Oh, and by the way, your 10 percent down payment on that deficit is due in June, by way of a $436 million shortfall in the current budget session.

If you're a budget nut, here's the PDF of the November financial report.

Inside the report, you'll find this nugget:

Spending projections for FY 2010-11 and FY 2012-13 do not include estimated inflation. Inflation, based on the CPI, is forecast to be 0.2 and 3.1 percent for FY 2010 and FY 2011 respectively. At these levels, the cost of inflation would be $650 million in the next biennium.

Inflation aside, the deficit works out to approximately $1,014 for every Minnesotan (based on 2007 population estimates) and $2,063 for every Minnesota taxpayer.

How do you plan to contribute? Higher health care costs? Higher local property taxes? Denser classrooms?

1:33 p.m.: It seems as though Californians and their $11.2 billion budget deficit have it easy. The Sacramento Bee says every adult in the Golden State needs to pony up $429 to cover the state's shortcomings.

Trivia: Total box office gross of movies in which California Gov. Arnold Schwarzenegger appears: $1,621,940,362
Minnesota Gov. Tim Pawlenty: Negligible

1:55 p.m.: The newsroom passes along this press release from the National Conference of State Legislatures.

States, which already have closed $40 billion in fiscal year (FY) 2009 budget gaps, face at least an additional $97 billion they must close over the next 18 to 24 months, according to a national report issued today by the National Conference of State Legislatures.

Fifteen states are forecasting double-digit gaps in FY 2010. The largest are in Arizona (24.2 percent), New York (20 percent), California (18 percent), Wisconsin (17.2 percent), Minnesota (14.7) and Kansas (14.5 percent).

2:10 p.m.: Pawlenty's plan is starting to take shape. Here's what won't be happening, according to the governor.

• - New taxes
• - A stadium for the Vikings
• - Raising revenue with gambling money
• - Using money from the voter-approved outdoors/arts sales tax amendment to help fill the gap

3:02 p.m.: Gov. Pawlenty is apparently Twittering the budget crisis.

4:02 p.m.: Gov. Pawlenty is apparently not Twittering the budget crisis anymore. More on this here...

Comment on this post

How quickly a boom can bust

Posted at 10:23 AM on December 3, 2008 by Than Tibbetts (2 Comments)
Filed under: Economy

It's been a whirlwind of a year for many folks on the Iron Range.

Yesterday, U.S. Steel announced it was laying off 400 people at its taconite plant in Keewatin. Just 10 months ago in February, the company announced a $300 million expansion at the plant.

A quick trip through the headlines shows how quickly things can change.

June
Range boom triggers housing concerns

July
Mining giant Cliffs gets bigger with merger - The proposed $2.7 billion merger was called of a few weeks ago.

September
Essar Steel breaks ground on Nashwauk plant

Renewable fuel plant would create jobs, coal alternative

October
Furnances at two taconite mines idled by downturn in steel market

November
Iron Range sees hope in Chinese stimulus plan

Cliff's (Hibbing Taconite and Eveleth's United Taconite) warns of possible layoffs

Of course, there are still plenty of projects silently moving forward and many city councils and economic development agencies working hard to create new jobs up north. But as the taconite industry goes, so goes prosperity for many people on the Range.

Comment on this post

The cure?

Posted at 4:24 PM on December 1, 2008 by Bob Collins (5 Comments)
Filed under: Economy

Could this nondescript piece of land be the answer to a moribund retail economy in downtown St. Paul? Maybe.

Lund's announced today it's going to build a supermarket here at the corner of 10th and Robert in downtown. It's on the site where the Penfield tower was going to be built -- a 30-story condo project that collapsed when the housing market did. Now, the Penfield is back. "The $88 million development also is expected to include an upscale apartment complex and a Hyatt Place Select Service hotel. Construction is slated to begin in the fall of 2009," according to a city news release today.

It's no secret that retail downtown has been a losing proposition, despite an increase in condo development.

"With a rising population and a lack of full-service supermarket options in downtown Saint Paul, we know there is a real need for a Lunds in this area," said Tres Lund, chairman and CEO of Lund Food Holdings. "We're eager to provide the residents and businesses in downtown Saint Paul with a selection of products and a level of service that will exceed their expectations."

Though the city has given its blessing, apparently there's no financing for the huge project yet. Construction is scheduled to begin next fall. But, huge signs still stand on the site announcing the Penfield opening in the fall of 2007.

Comment on this post

He told you so...

Posted at 11:55 AM on December 1, 2008 by Bob Collins (18 Comments)
Filed under: Economy

State economist Tom Stinson is probably too nice of a guy to say "I told you so" to Gov. Pawlenty. Besides, he's got his hands full finishing up what's reported to be a bleak Minnesota revenue forecast, which he'll deliver later this week.

But last February, Stinson said, "We're in a recession."

"Tom Stinson tends to be a bit on the pessimistic side of things, to put it charitably...I don't think it's helpful - unless it's clearly justified by the data - for people to get overly pessimistic or overly scare people, either," Gov. Tim Pawlenty said at the time.

Today, nine months later, the National Bureau of Economic Research has reached a conclusion that Stinson figured out nine months ago. The U.S. has been in a recession since December 2007.

Comment on this post

Can a tax do two jobs at once?

Posted at 10:49 AM on December 1, 2008 by Bob Collins (9 Comments)
Filed under: Economy

I'm in no position to hold my own in an economic discussion with Robert J. Samuelson, The Newsweek and Washington Post columnist was one of Kerri Miller's guests in the first hour of Midmorning on Minnesota Public Radio today. But something he said about taxes this morning didn't make sense to me.

Kerri prodded Samuelson for an answer about an obvious shortfall in Social Security benefits for now-retiring baby boomers. "The tax increase that is required will have to be massive," he said. He might've also used the word "inevitable." He said the retirement age would have to be raised and benefits cut for wealthy retirees. Nothing much you haven't heard before.

"But Barack Obama wants to provide a middle class tax cut," Kerri pointed out. Samuelson responded that an incoming president ought to be able to enact the main part of his platform but opined that what he would do is raise the gas tax a penny a gallon each month for the next three years to help raise necessary funds.

OK so far, if that's what he wants to do. But then he added this:

"Plus, it would send a message to automakers to start making, and consumers to start buying more fuel-efficient vehicles."

Can a tax -- any tax -- be both a way to raise revenue and an incentive to change behavior? How?

Gov. Pawlenty proposed his cigarette tax (I refuse to call it a health impact fee) during the lean budget years of his first term. And he noted it would be an incentive for people to quit smoking. What would happen if half of the cigarette tax's mission was fulfilled? It would be unable to fulfill the other half.

It's not as though the state isn't trying to squeeze as much as possible out of the sale of cigarettes. It quietly raised the sales tax on distributors by a penny in August.

Cigarette taxes are now "a lousy way to fund your government," David Brunori, said last year in an Associated Press story predicting a drop in revenue in Minnesota and other states. He teaches tax policy at George Washington University.

True, it's a small slice of the overall budget pie here. But the 2007 projected $449 million cigarette taxes raised in Minnesota isn't much to sneeze at. And according to the February budget forecast, tax revenues from tobacco products, which pulled in $407 million in fiscal year 2006, are projected to raise $36 million less this year, with another $8 million drop next year. A statewide smoking ban also is a factor, of course. This week's forecast, from all accounts, may make those numbers look robust. The cigarette taxes are doing one job so well, it can't do the job for which it was originally intended.

Why wouldn't the same thing happen with an increase in the gasoline tax? Samuelson's plan -- I figure -- would cost each driver about $120 a year. Getting 5 miles-per-gallon more would neutralize the tax. Sure, it'd be a great way to push more fuel-efficient vehicles, but can it do that (which obviously leads to lower consumption of gasoline) and still be a solution to the revenue ills of the U.S. government?

I'll hang up and listen.

(Photo by Getty Images)

Comment on this post

Left hand: Meet right hand

Posted at 11:51 AM on November 30, 2008 by Bob Collins (1 Comments)
Filed under: Economy

By now, perhaps, you've seen the video of the embarrassing moment for auto company executives when they went before a Congressional panel, asking for a $25 billion bailout of their industry a few weeks ago. Members of Congress upbraided the officials for using company jets to fly to Washington.

"There's a delicious irony in seeing private luxury jets flying in to Washington, D.C., and people coming off of them with tin cups in their hands saying that they're going to be trimming down and streamlining their businesses," said Rep. Gary L. Ackerman (D-N.Y.) "There's a message there."

"Those type of symbolic things, they really matter, they set a tone," said Rep. Peter Roskam (R-Ill.).

"I'm going to ask you to raise your hand if you are planning to sell your jet in place now and fly back commercial. Let the record show, no hands went up," said Rep. Brad Sherman, D-California

True enough, and why would they? Who provided the incentive for businesses to make money via tax breaks for buying the jets in the first place?

Ackerman, Roskam, Sherman, and 382 other members of the House who voted for the Economic Stimulus Package of 2008, which carried this section:

(a) In General- Subsection (b) of section 179 of the Internal Revenue Code of 1986 (relating to limitations) is amended by adding at the end the following new paragraph: `(7) INCREASE IN LIMITATIONS FOR 2008- In the case of any taxable year beginning in 2008-- `(A) the dollar limitation under paragraph (1) shall be $250,000, `(B) the dollar limitation under paragraph (2) shall be $800,000, and `(C) the amounts described in subparagraphs (A) and (B) shall not be adjusted under paragraph (5).'. (b) Effective Date- The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

Company officials, like the auto industry ones, can expense a new jet up to $250,000 and can also take a 50-percent bonus in depreciation in the first year of ownership. That's a big pile of cash.

At least in this case, the business practices members of Congress criticize are the ones they encouraged in the first place in the name of economic stimulation.

Comment on this post

Poverty: It's not just for the cities anymore

Posted at 2:06 PM on November 28, 2008 by Bob Collins (0 Comments)
Filed under: Economy

A study from the Federal Reserve says poverty in America is spreading to the suburbs.

"It shows that concentrated poverty is still very much with us, and that it can be found among a much more diverse set of communities and families than previous research has emphasized," Bruce Katz, a director Brookings Institution Metropolitan Policy Program, told Reuters. "Poverty is spreading and may be re-clustering in suburbs, where a majority of America's metropolitan poor now live."

The report was put together by all 12 Fed regions, including Minneapolis, and is posted on the Fed's San Francisco site. It's called "The Enduring Challenge of Concentrated Poverty in America: Case Studies from Communities Across the U.S."

The experts visited 16 communities around the country. The closest to the Twin Cities was Milwaukee, which falls under the Chicago Fed. In the Minneapolis district researchers looked at the Blackfeet Reservation in Montana.

Comment on this post

Obama's news conference

Posted at 9:46 AM on November 26, 2008 by Bob Collins (0 Comments)
Filed under: Economy

Given a choice of who's words to hang on -- President-elect Obama or the State Canvassing Board -- I've chosen the president-elect.

He's underway with his third news conference and repeats -- for a third time -- that we face a historic economic challenge, something just about every working stiff in America knows. He's announcing the "President's Economic Recovery Board," which is a throwback to the Eisenhower administration.

9:47 - Mark. The Dow is down -62.85 at the start of the news conference.

9:40 a.m. - Obama says one of the reasons for the board is that in Washington, these sorts of things result in "group think" and there's little knowledge of whether policies are actually working on main street. He names Paul Volcker to head the board. The financial world seems to love this pick, but Volcker isn't exactly Mr. Main Street America. But Obama says he likes Volcker because he's not afraid to say what he thinks. Obama has clearly intended to surround himself with people who won't tell him simply what he wants to hear.

One interesting sidenote to how the economy ripples. Just a few days ago, Volcker gave Major League Baseball an update on the economy.

QUESTIONS

Does your saying you want a new way of thinking indicate a frustration with the way the crisis has been handled so far?

No. I think what it speaks to is a frustration to eight years in which middle-class income has gone down. And frustration of the incapacity of Washington to take bold steps to deal with our economic problems. (Isn't that actually a "yes" answer?)

We're two days away from the biggest shopping day of the year and retailers are worried it'll be a disaster. Any shopping advice and are you going to go shopping?

We're going to do some Christmas shopping and the daughters have put their list together. It's mostly for Santa but we may do some extra shopping. "I think families are understandably nervous about their economic situation. The economic statistics have been bad. There is no doubt that during tough economic times, family budgets are going to be pinched. It's important, though, for the American people to have confidence."

We have the best workers in the world, the most innovation in the world, we're in possession of extraordinary resources that if we harness properly, we'll get the economy moving over the next couple of years and decades. People should understand that help is on the way and as they think about this Thanksgiving shopping weekend and the Christmas season, I hope everyone understands we'll get through these difficult times but they're going to have to make good choices.

(Nice try, New York Daily News reporter, but he didn't take the obvious "just go shopping" bait. Things have changed in Washington.)

Are you worried about the latest Bush administration bailout and the continued printing of money. What federal programs would you cut to actually pay for your stimulus package. You talk about change but Paul Volcker has been around a long time. You talked about John McCain would come to Washington and put the same people in different chairs. You've got Tom Daschle, Hillary Clinton....

Obama interrupts and says "you hear that. First of all that's not the topic. We're not talking about my cabinet because I haven't made those appointments yet..."

"Sir, we're talking about Paul Volcker...he's been around a long time. He knows the way of Washington, but what do you say to your supporters who are looking for change?"

Actually, Paul Volcker hasn't been in Washington for quite some time and that's a reason he can provide a fresh perspective. (University of Chicago economist) Austan Goolsbee (he'll be the economic board's director), this is about as fresh a face as you can get.

With respect to the details of the economic plan, we'll work over the next few weeks to put the framework together. We'll have a strong stimulus/economic recovery plan to put people back to work. It'll be large enough to jump-start the economy. On Tuesday I talkd we'll have to pare back on programs that do not work. We can hardly be expected to provide you a detailed list right now. We'll identify programs that don't work and make sure they are eliminated and put the money into programs that do work, like health care modernization.

When it comes to the people we've pulled together -- I know there's been a conventional wisdom floating around Washington that there's been a recycling of people who were in the Clinton administration, the last Democratic administration that we had was the Clinton administration, so it would be surprising if I selected a treasury secretary who had no connection to the last Democratic administration because that would mean the person had no experience in Washington whatsoever. And I suspect you would be troubled -- and the American people would be troubled -- if I selected a treasury secretary... at one of the most critical economic times of our history who had no experience in government whatsoever.

We're going to combine experience and fresh thinking. Understand where the vision of change comes from. It comes from me.

Do you support the latest bailout?

What I've said is we have to do whatever is required to be sure our economic system can give credit to the markets. It's important for the federal government use the authority in a forceful fashion. The latest attempts by the Treasury to make sure we have a housing market in which credit is falling, that is a positive sign.

(That's all the questions he took, but he did a good job defining what "change" is. It's not different faces, it's efforts that work.)

10:02 a.m. - Mark. The Dow is down 12 points at the end of the news conference -- and falling -- after briefly going positive during Mr. Obama's news conference.

Comment on this post

Hard times hit Cirrus

Posted at 7:21 AM on November 26, 2008 by Bob Collins (0 Comments)
Filed under: Economy

The rough economy took a toll on Tuesday on one of Minnesota's biggest economic success stories -- Cirrus Design in Duluth, a maker of light aircraft.

The company is going to furlough about 500 production workers in staggered segments for 30 days, according to AvWeb, an aviation news publication. The company is taking the action with a heart, however. It's using furloughs instead of layoffs and will top the unemployment benefits pool and continue health insurance benefits while it tries to clear excess inventory of airplanes. Cirrus has facilities in Minnesota and North Dakota. About 300 of the furloughs will come in Duluth.

The move comes as one of Cirrus' competitors in the light-jet business, Eclipse Aviation, has filed for bankruptcy.

Comment on this post

Making sense of bailouts

Posted at 8:50 AM on November 25, 2008 by Bob Collins (9 Comments)
Filed under: Economy

Nobody likes to admit he's the stupidest guy in the class, so I'll go first.

The economy is tanking. We all get that now because we can understand things like a talk with the boss who says "I'm letting you go." But how did this happen? Why didn't the media tell us the financial system was failing us? Where were the regulators?

I submit, based on my view from the back of the classroom, that we were told, we just didn't understand what they were talking about and we didn't want to admit we didn't understand what they were talking about.

Case in point: This morning CNBC ran a segment that the prime -- as opposed to the "subprime" market, which I still don't understand -- may be the next big problem in the United States. And to prove it, they put up this graphic:

Yes, that's certainly something to make us all sit up and take notice because -- as everyone knows -- when prime jumbo securitizations have only 3% subordination to Aaaa tranche, well, do I really have to point out the obvious?

But even if business journalists were required to speak English to us -- or we were all required to get a business degree -- it doesn't make common sense.

Case in point: An Associated Press story today says, "Government plans new program to aid credit issuers." Treasury Secretary Henry Paulson apparently intends to give a slice of the $700 bailout to the companies that jam your mailbox with credit card offers.

Interesting timing because last night I came home to this:

They're getting better at this. Now they make these mailings look like your bill, so you have to open it. And, sure enough, there were checks inside:

Now, let's say I wanted to write a check for $100. It will cost me a minimum $10 fee and an interest rate of 28.99%. Last month, I paid off a credit card bill in full and this month I got a bill for another $2.18 finance charge on my zero balance. Keep in mind, too, the credit card companies get a piece of the action from the merchant when a sale is made. If you're a credit card company, how do you not make money with these things? Moreover, how do you tell an autoworker, his industry is too messed up to get help and tell the credit card company theirs isn't?

Here's a way to help the American consumer. Buy each household one of these:

And make us pay cash.

Update 9:12 a.m. Secretary Paulson is having a news conference at this hour and says the government is stepping in to help credit card companies -- a $200 billion bailout -- because consumers are having a difficult time getting credit.

The central bank also launched a $200 billion facility to back consumer loans, including student, auto, and credit card loans and loans backed by the federal Small Business Administration.

Have you had difficulty getting credit or purchasing anything on credit? Or is you reason for not buying that you didn't want to take on any debt right now? Tell me more. This might be one of those times when "helping" the economy and "helping" the consumer are not the same thing.

Comment on this post

Hanging in with retirement plans

Posted at 11:59 AM on November 24, 2008 by Bob Collins (3 Comments)
Filed under: Economy

Americans are still putting money into their 401Ks, despite the dwindling returns, a survey by Hewitt Associates released today shows.

An analysis of 2.7 million U.S. employees found the average 401(K) has dropped 14 percent so far this year, down to $68,000 from $79,000 at the start of the year.

"Some have lost more than 30 percent," the report said. Gosh, it's almost like they were talking directly to me on that one.

Only about half of the 401(K)s are invested in the stock market, according to the survey, and more than 6 percent of those surveyed cashed out, a move that runs contrary to most financial advice these days.

Comment on this post

Live-blogging Obama's economy news conference

Posted at 11:00 AM on November 24, 2008 by Bob Collins (0 Comments)
Filed under: Economy

Listen

We're waiting for the start of the president-elect's news conference, and silently praying that nobody will ask questions about puppies. NPR is stressing Obama's insistence that "there's only one president." That president this morning said more Citi-type bailouts are possible.

11:07 a.m. - We're underway. In his opening statement Obama says "we're facing an economic crisis of historic proportions." He announces the nomination of four individuals, including : Tim Geithner as secretary of treasury; Larry Summers as head of the economic council; Melanie Barnes as head of the domestic policy council.

11:12 a.m. - Dow up 305.13 as Obama begins.

11:13 a.m. - Obama says one of his nominees -- Melody Barnes -- is "an expert at determining whether a recession has started." He needs someone to tell him that? On the other hand, he didn't mention that she was name done of the "best dressed women in Washington." Matthew Yglesias takes a more intellectual approach.

11:17 a.m. - It doesn't sound like we're going to hear many specifics today on Obama's solutions. The Dow is dropping slightly from its high.

11:18 a.m. -- How bad is the economy and, in particular, the auto industry. While Obama was talking, GM announced its ending its endorsement deal with Tiger Woods.

Questions

Q: What about the stimulus package?
A: Obama says he doesn't want to get into numbers right now. "We have a consensus, which is pretty rare, between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape." Dow gains continue to evaporate. Now up 250.

Q:Will you let Bush tax cuts expire?
A: Says the tax cuts were disproportionately targeted to the wealthiest. "It is important if we're going to help pay for some of these expenditures to get our economy back on track, then it's important for those who can pay more do so." He then avoided answering the question about whether those tax cuts would be repealed immediately or allowed to expire.

Q: Can you give us a range of the size of stimulus package you're considering?
A: No.

11:24 a.m. - The Dow has shed 100 points since the president-elect started talking.

Q: Can you describe how your team's approach might differ from the approach we've had in the last year?
A: "I don't want to look backwards. I'm sure there are some things that Secretary Paulson has done that he wish he'd done differently." He then punts the question and lapses into the stump speech about a strong Main Street is as important as a strong Wall Street.

Q: Do you think the automakers made a convincing case for a bailout?
A: "We can't allow the auto industry simply to vanish. We've got to make sure it is there and that the workers and suppliers ... stay in business. I've also said we can't just write a blank check to the auto industry."

So is that a "yes" or a "no"?

"I was surprised they didn't have a better thought-out proposal."

So, that's a "no," I guess.

Q: How and when should the second half of the rescue money be spent?
A: Obama said he spoke with President Bush and Fed Chair Bernanke today. I will make further assessments about whether it's necessary to draw down additional (bailout) money as the administration and treasury secretary provide me with more real-time information. We are united in making sure the financial system operates the way it was mean to.

11:33 a.m. We get the trademark, "thank you, guys."

Another very short Obama news conference with very little insight.

The Dow is up 205 183 at the end of the news conference. It bent but did not break.

Comment on this post

The state's budget deficit

Posted at 10:59 AM on November 24, 2008 by Bob Collins (0 Comments)
Filed under: Economy, Politics

President-elect Obama reportedly is going to keep the tax cuts on the wealthy around until they're scheduled to expire in 2011 (We'll find out more at 11 when he holds a news conference on the economy, which I'll live blog here). But a Minnesota budget expert sees a tax increase on wealthy Minnesotans as a solution to an estimated $4 billion state budget deficit.

"The deficit we're hearing about would be about 11 percent of the general fund," says Nan Madden, director of the Minnesota Budget Project. That's slightly less than the size of the deficit that greeted Gov. Tim Pawlenty when he took office in 2003. (Listen)

Madden says lawmakers need to understand "that programs that help people get and keep jobs, and make ends meet, those things should not be cut. We shouldn't pile on folks who are already suffering from the economic downturn. Second thing to understand is cutting state spending is a drag on the state's economy. State spending largely goes to people's salaries, to buying goods and services in Minnesota. So when we cut spending, that's actually taking dollars out of the state economy."

Madden says a targeted tax increase to people with high incomes won't have a detrimental effect on the economy because "that's money that people would save rather than money that would be spent on consumption."

Are there enough wealthy people left in Minnesota? "The size of this problem means you can't take anything completely off the table but we would argue we need a balanced approach. We can't take revenue increases off the table. And when you have a budget deficit that's 11% of the general fund, you can't close it only through spending cuts."

Madden expects some delays in payments to Minnesota school districts "and some things that are on the gimmicky side." She says she hopes lawmakers take a long-term view of the state budget, using spending cuts and delayed payments as "a short term bridge."

Comment on this post

The Citi deal

Posted at 9:49 AM on November 24, 2008 by Bob Collins (5 Comments)
Filed under: Economy

Part of the big Citibank bailout (by the way, did you notice the White House said it "didn't know anything about weekend rescue talks? Entirely believable, unfortunately) calls for the government to buy "toxic mortgages." So, now we -- the taxpayer -- are back to buying bad mortgage instruments? Let's recap. The initial big bailout bill was to be used mostly for buying up "toxic mortgages." But when the Treasury Department experts got a look at things, they realized that was an unworkable solution, so they started buying stakes in banks instead. That led to uncertainty (a nice way of saying "calamity" in stock market-speak) in the market because the feds were sending the signal that they really didn't know what they were doing. The Citibank bailout -- a partial return to Plan A -- has cheered the market, which is up 300 points at midmorning.

And we haven't even figured out yet whether the taxpayers are now on the hook for the $400 million Citi is paying the New York Mets.

Bailouts and the economy defy explanation by mere mortals.

Which is why my colleague, Preston Wright, has formulated his own economic plan. I'll let him tell it:

Yes, this is a real solution. It's kind of like daylight savings.

Extend the number of days in a month to 42.

That way, everyone paid every two weeks would suddenly get an extra paycheck per month to pay off debt and mortgages.

Financial institutions would take the brunt of it because it would be like refinancing all loans, yet people would suddenly have extra cash to spend, save and pay back debt.

The economy would be jump-started because everyone would feel like they had gotten a 50% raise.

If I follow this correctly -- a dubious assumption at best -- we'd still have 12 months in the year, thus adding 84 to our year. Under this plan, the first day of summer could also be New Year's Day at least once.

Comment on this post

Wait a minute!

Posted at 10:08 AM on November 23, 2008 by Bob Collins (0 Comments)
Filed under: Economy

Three different perspectives on the economy that gives one pause:

Depression will cure our obesity
Philip Greenspun posits that if we have less money to spend, we're less likely to spend it on junk food snacks. Wait a minute! Has anyone told this to the Heart Attack Grill?

Boomtimes in Jackson
Wait a minute. What? A Minnesota community is doing well? Did they not get the memo? It's Jackson. An agricultural manufacturer is looking for 150 people to hire. A technical services company is looking for a dozen more. The Worthington Daily News says the city's secret is they have employers who aren't subject to the whims of the economy. There are businesses that aren't subject to the whims of the economy?

Homeless shelter goes homeless
A pastor in a Pennsylvania town sheltered homeless people until locals got wind of it and booted the shelter. Some townspeople, according to the New York Times, objected to having a homeless shelter so close to the downtown. Wait a minute! There are towns that still have downtowns?

Comment on this post

The Big Three (or Two, or One)

Posted at 9:27 AM on November 18, 2008 by Than Tibbetts (18 Comments)
Filed under: Economy

Suppose the government "allows" one of Detroit's big automakers to fail — and at this point, it might happen, as it is still not clear Congress will pass a rescue plan.

What happens next?

GM appears to be the first in line to fall.

GM burned through $6.9 billion during the third quarter, leaving it with only $16 billion on hand as of Sept. 30. But it needs $11 billion to $14 billion to continue normal operations.

The basic bailout scenario is this: The government provides a large sum of cash to keep the companies afloat long enough for savings from renegotiated autoworkers contracts to kick in and slumping sales to rebound. Only one of those is a sure thing. (The NYTimes' story on the failed bailout of British automaker Leyland is also worth a read for some historical context.)

The prospects aren't good for an automaker that heads into Chapter 11 bankruptcy. Would you buy a new car from a company that had publicly declared its insolvency? Then again, who's buying cars from the Big Three when they've put their collective hands out and declared the virtual inevitability of their bottom lines bottoming out?

The CEOs of GM, Chrysler and Ford have been making a case that the auto industry is the linchpin of the American economy, and without a quick cash infusion, mass financial ruin is just beyond the horizon. For millions, it's a devastating scenario.

Nearly 2 million Americans get their health insurance directly from one of the Big Three automakers. Most of them would lose that coverage if their company goes out of business. A failure of one of the Big Three could also cause a string of bankruptcies among suppliers.

...

The Center for Automotive Research, a Michigan think tank that supports the bailout, estimates that between 1.4 million and 1.7 million jobs indirectly tied to the Big Three would be lost in the first year following widespread auto failures.

The question that many ask is -- how do you turn around a company in three months when it has lost $20 billion already this year?

So, let's suppose the Big Three's biggest battle now is ostensibly for the hearts and wallets of the American consumer. My perception of my (loosely defined) generation — I'm 24 — is that for the most part, what loyalty is left in our bunch is to whatever car is going to get us where we need to go.

I'm a two-time Honda Accord driver — one passed down from my parents and one purchased used with cash. If I had to buy a vehicle today, I would be more inclined to purchase a Honda as both vehicles have made it past 200,000 miles, with the current one pushing 250,000, but I'm not wedded to the brand.

So, do the Feds prop up the Big Three, or should they let the companies run their course and deal with the fallout? And would you buy a car called Ka?

Comment on this post

On Spam

Posted at 12:03 PM on November 17, 2008 by Than Tibbetts (7 Comments)
Filed under: Economy

The New York Times gave a shout-out of sorts to Spam — the much-maligned meat product made by Austin-based Hormel Foods — along with several humorous, half-hearted attempts at endorsing the product as the great supper savior during tough times.

Through war and recession, Americans have turned to the glistening canned product from Hormel as a way to save money while still putting something that resembles meat on the table.

...

"People are realizing it's not that bad a product," said Dan Johnson, 55, who operates a 70-foot-high Spam oven.

... and ...

Because it is vacuum-sealed in a can and does not require refrigeration, Spam can last for years. Hormel says "it's like meat with a pause button."

And in case you were wondering what former Minnesota congressmen do with their time, the Times ran into Gil Gutknecht in the Spam Museum's gift shop, buying a Spam tie, sweatshirt and earrings.

Mr. Gutknecht recalled that he once served as a judge in a Spam recipe contest.

"The best thing was Spam brownies," he said, with more or less a straight face.

Perhaps the only positive economic indicator in the story is that the New York Times can still afford to dispatch a stringer to camp out in the canned goods aisle at Cleveland Wal-Mart for 63 words of Average Joe's James' analysis.

So, has the economic slowdown led you to start eating more 'food' that resembles other food? Feel free to share a favorite Spam recipe in the comments.

Comment on this post

Let's bail!

Posted at 2:13 PM on November 14, 2008 by Bob Collins (2 Comments)
Filed under: Economy

So many different angles to take on the continuing saga of "the bailout generation."

Let's start here. Coming on the heels, as it does, of the Legislature's hearing into the bailout of Northwest Airlines yesterday, St. Paul Mayor Chris Coleman's letter to members of the Minnesota congressional delegation seems poignant. Coleman's letter says if the feds bail out Ford, maybe -- maybe -- the Twin Cities Assembly Plant can stay open.

Dear Senator Klobuchar, Senator Coleman, and Congresswoman McCollum:

As the debate has progressed regarding the proposal to infuse the U.S. auto industry with federal aid, I am writing to explain what economic relief would mean for the City of Saint Paul and encourage you to support such a plan.

Saint Paul has been the proud home of the Ford Twin Cities Assembly Plant for more than 80 years. It is one of the best performing plants in the Ford Motor Company. Despite its performance, though, Ford officials announced in 2005 that it would shutter the plant as the company moves away from producing the Ford Ranger truck. As you know, Ford announced an extension of operations at the plant earlier this year, and I thank each of you for your strong support in that effort. But as the plant is now scheduled to close in 20II, we need to take advantage of this important opportunity to support Ford and encourage new innovations in the auto industry that will allow for the permanent
operation of the Saint Paul plant.

Since the initial announcement, the City has worked closely with Ford to determine the future use of the site. We need to do everything we can to keep the plant - providing more than 2,000 well-paying jobs at its peak - open.

The value of this plant cannot be understated. The Ford plant has provided generations of our residents the ability to own a home, pay for college, and live the American dream in Minnesota. We are also fortunate to have a strong workforce at this plant, which continues to set the standard for innovation and efficacv at Ford.

Providing economic relief to Ford could create the opportunity for significant job growth in Saint Paul and the region. If we can incentivize Ford to innovate and expand their operations by retooling our plant, we can spawn green industry that could boost the local, state, and regional economy. Since 2006, we have actively promoted the potential for building a green-collar economy in the region, and retooling the Ford plant would boost Minnesota's effort to take a leading role in such manufacturing. With the University of Minnesota's research in altemative fuels, our available land for supportive industry, and a statewide commitment to provide new opportunities for job growth in green manufacturing, we are uniquely poised to take full advantage of the federal investment
and provide tangible economic retums.

Saint Paul has a well-educated, creative, world-class workforce and a long history of partnership with Ford. Ford has been a good neighbor and a good corporate citizen in our city. To be clear, our priority has always been to keep the plant open, and we used every tool available to us to that end.

The possibility of economic relief represents a new tool and a great opportunity and I urge you to consider it as the City and nation look to Washington for help in solving our economic crisis. I have appreciated our partnership in working to find the best alternative for the Ford plant and keeping it and the jobs it provides in Saint Paul. As always, I will continue to make myself and any of my staff available to meet with you on this issue. I now look to your leadership on the federal level to help us and Ford take full advantage of the opportunity to build a new manufacturing economy that will employ families for generations to come.

Sincerely,
Christopher B. Coleman
Mayor

On Thursday evening, MPR's Tom Crann, the host of All Things Considered, looked at the changing face of the big financial market bailout (noted here several days ago, but who's counting?) with two members of the Congressional delegation.

Sen. Amy Klobuchar said there was "a clear need for a change of course." She says Congress needs to examine how the money spent so far -- $250 billion -- has been used. Asked about Congress giving Paulson powers without oversight, Klobuchar said Congress couldn't "micromanage" the bailout. Listen

Rep. Collin Peterson, the oft-forgotten member of the Minnesota delegation, was more direct. Peterson, who voted against the bailout, left the distinct impression the people in charge of hundreds of billions of dollars, have no idea what they're doing. "Now he's (Treasury Secretary Henry Paulson) changing his mind every couple of days again," he said. "They're bungling this whole thing beyond belief, which is kind of what I figured they were going to do." Listen

Today on Capitol Hill, the man administering the bailout was called on the carpet to explain what's going on. Rep. Dennis Kucinich held up the original bailout bill and read from the section that said the Treasury Department should do all it can to "keep homeowners in their homes." What happened to that section?

So, we have the financial institutions bailout and the auto industry bailout. What's coming? Big cities. Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix -- all mayors -- have sent a letter to Paulson asking for a piece of the action.

Comment on this post

Piling on

Posted at 5:10 PM on November 12, 2008 by Bob Collins (2 Comments)
Filed under: Economy

The stock market tanked again and the former chair of Goldman Sachs said on Wednesday that the economic problems could be worse than the Great Depression, according to Reuters:

"I think it would be worse than the depression," Whitehead said. "We're talking about reducing the credit of the United States of America, which is the backbone of the economic system." Whitehead encountered plenty of crises during his 38 years at the investment banking firm and was a young boy during the 1930s.

Politicians are debating an economic stimulus package for the U.S., with a figure of $150 billion being tossed around. Can this work?

At Harvard, Philip Greenspun says an economic stimulus package likely won't work from a consumer perspective because people will just pay down debt. And from a corporate viewpoint, well, why would you build a business in the U.S. anyway?

Based on tax rates, education, and costs, the U.S. is not looking competitive right now. Corporate tax rates are among the highest in the world. The quality of our high school graduates is stagnant or slipping while other countries have enjoyed big improvements. Our workforce is expensive to employ if only because employers are required to pay for health care costs that are now certainly the highest in the world.

Meanwhile, banks are jacking up credit card rates while (a) receiving a government infusion of cash and (b) their costs to borrow are coming down... further strangling consumers trying to pay down debt.

All of this poses a grave challenge to American journalism: Tell the story in visual ways other than stock exchange workers with headaches, who are mostly losing money that's not theirs.

Over the next few days, be alert for everyday images that portray the economic mess, and send it in. I saw one today but didn't have a camera with me: A full parking lot at a pawn shop in Crystal.

Comment on this post

About that bailout

Posted at 11:06 AM on November 12, 2008 by Bob Collins (7 Comments)
Filed under: Economy

Remember that rush to pass the largest bailout in the history of the United States, in which Congress agreed to hand over $700 billion to the treasury secretary without any oversight? Remember how it had to be wrapped up right away so that the government could begin buying up the "toxic mortgages" of teetering banks?

Never mind. Treasury Secretary Henry Paulson today confirmed the government has given up on that idea, and will stick instead with Plan B, buying ownership stakes in banks.

Says the BBC:

However, many analysts said he was right to backtrack on the plan to buy up the bad debts, saying it was difficult to see it being workable, and that simply buying up more banking stock was more straightforward.

But if it's difficult seeing it workable now, why wasn't it seen as difficult working when the plan was passed by lawmakers, anxious to get out of town before the election?

The Newark Star Ledger editorial today tackles that question:

Fairly or unfairly, the impression was one of haste by Bush administration refugees from Wall Street looking out for their former (and perhaps future) colleagues in the battered financial industry. It's an impression reinforced now by news that the bailout process has produced a little-advertised tax windfall of up to $140 billion for U.S. banks.

And, yet, history seems about to repeat itself, but this time the Democrats are in charge. They're calling for emergency aid to automakers. Workers in the auto industry are to the Democrats what bankers and stock brokers are to Republicans.

Paulson appeared to rule an auto bailout out, today. Last night on Charlie Rose's show, Bill Ackman, the hedge fund manager who seems on the verge of trying to take Target Corp. apart, made some interesting arguments for forcing the automakers into bankruptcy. He said taxpayer money would just be spent paying the interest on debt the companies acquired six years ago, money the automakers have long since lost. Bankruptcy would turn the company over to the banks (which essentially own it already) and allow a mechanism for it to survive in better long-term shape.

Unfortunately, Rose's Web site hasn't posted the video yet. It was a fascinating dissection of the economic crisis. Equally unfortunate, Rose ran out of time just as he was about to turn to Ackman's intent with Target.

Comment on this post

The definition of pain

Posted at 7:25 AM on November 11, 2008 by Bob Collins (17 Comments)
Filed under: Economy

We were talking in a newsroom meeting yesterday -- briefly -- about the differences between the Great Depression and the still-unnamed-current-economic-meltdown. Back in the day, people sold apples on the street corner. Clearly there's some pain now, but many have kept the wolf at the door at bay while silently worrying that the cable TV tier would have to be halved.

The morning read of the New York Times story on a California town where most houses now have more debt than value started off well enough for me today, but it didn't take long before the definition of "pain" became clear.

From one couple:

No more family bowling night. No more dinners at Chili's or Applebee's. No more going to the movies.

Another homeowner, a data security specialist, is really feeling the pain:

He has cut his DVD buying from 50 a month to perhaps one, and is waiting until the Christmas sales to buy a high-definition television. He does not indulge much anymore in his hobbies of scuba diving and flying. "Best to wait for a better price, or do without," Mr. Rogers, 52, said.

And a third....

"My house is underwater, so I'm not doing too much impulse shopping or any renovation. But I'm not cutting back on this," said Ray Lopez, a database administrator, as he placed a $24 petite sirah on the counter. "Life's too short."

It's a veritable Dust Bowl out there.

Here's the Times' interactive map of places where home values are less than the amount of the mortgage. In Minnesota, that amounts to about 12 percent of the homes.

Comment on this post

Tax credits for a 'green economy'?

Posted at 12:48 PM on November 10, 2008 by Bob Collins (6 Comments)
Filed under: Economy, Pawlenty, Politics

Gov. Pawlenty today proposed an economic incentive plan for "green businesses" in Minnesota, but he invoked a component of the plan that may make the DFL see red in the coming session: JOBZ, Pawlenty's program that aimed to bring some business to the most distressed areas of the state.

Part of the governor's program would provide tax breaks -- $3.65 million worth immediately and another $82 million after his term is up in 2011.

Qualifying renewable-energy projects would receive an array of tax breaks in a green version of the Job Opportunity Building Zones program. JOBZ is designed to spur job growth in economically distressed regions of Minnesota. Green JOBZ would be open to qualifying renewable energy businesses anywhere in the state for up to 12 years, costing the state $3.65 million in the 2010-11 budget years and another $6.6 million in 2012-13.

But JOBZ has some problems, according to a report earlier this year from the Office of the Legislative Auditor.

Here were the major points:

Twin Cities holiday season forecast

Posted at 10:21 AM on November 10, 2008 by Bob Collins (0 Comments)
Filed under: Economy

Deloitte's 23rd annual holiday survey of the Twin Cities holiday shopping season is out today. Fifty-two percent of consumers surveyed say they're pessimistic about the economy. That's a big headline, of course, but if Forty-eight percent are not, that may be a bigger one.

But most people are not worried about their jobs, according to the survey. Eighteen percent are concerned about a job loss, but that's only up 2 percent from a year ago. Nonetheless, 60 percent of Twin Cities consumers expect to reduce spending for the holidays.

Twelve percent are still paying off last year's holiday spending debt, but most of those surveyed say they'll spend the same amount on gifts this year (average $461) as last year. The average person buys 22 gifts.

Here's the national survey.

In September, the National Retail Federation predicted a meager 2.2-percent increase in holiday spending, but that was before the bottom fell out of the economy in October.

Comment on this post

Unemployment by the numbers

Posted at 8:03 AM on November 7, 2008 by Bob Collins (4 Comments)
Filed under: Economy

The latest unemployment figures came out this morning. They're bad. Read bad. Worse than professional pessimists thought.

The U.S. economy has lost more than 1 million jobs so far this year, the statistics show. The rate edged up to 6.5 percent, the highest in 14 years.

But here's the startling figure in today's report: In the past year, 2.8 million jobs have vanished.

How many is 2.8 million? Fifty-nine thousand less than the total number of people who voted for the three main candidates in Tuesday's election in Minnesota. Imagine every person voting being out of work.

Other data:

Dire straits

Posted at 5:43 PM on November 3, 2008 by Bob Collins (3 Comments)
Filed under: Economy

New data out this afternoon says the U.S. auto industry suffered its worst month of car sales in more than 17 years last month.

"This is clearly a severe, severe recession for the U.S. automotive industry and something we really can't sustain," said Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis who said the government should speed up actions to thaw out frozen credit.

Tucked in the analysis, however, is a factoid contributing to the problem: The cars being built these days are too good.

Emily Kolinski Morris, Ford's senior economist, told a conference call with reporters that because automobiles are more durable than in the past, people can wait without buying a new vehicle until they feel more confident in the economy.

In the past, perhaps, the auto industry could pull the economy out of a slump if people had no choice but to buy cars. Those days are gone.

Comment on this post

Like old times

Posted at 3:00 PM on October 28, 2008 by Bob Collins (1 Comments)
Filed under: Economy

We interrupt the steady drumbeat of bad news for this message.

Whooo hooooo!

The Dow closed almost 900 points higher today. And it all happened in the final hour of trading. It was the second-largest point gain in history -- the largest was just two weeks ago.

According to the Associated Press, bargain hunters were buying "in anticipation of a Federal Reserve rate cut, (and) grabbed stocks that have been pounded lower in recent sessions."

Is that a bottom?

Comment on this post

Economic ripples

Posted at 12:15 PM on October 28, 2008 by Bob Collins (2 Comments)
Filed under: Economy

The sales price of homes has fallen again. The Standard & Poor's Case/Schiller Index for August was released today, showing home prices falling about 1 percent in 20 metropolitan cities.

"The downturn in residential real estate prices continued, with very few bright spots in the data," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in the statement.

The index is particularly fascinating because it measures the sales price of a home, compared to the last time it was sold.

Minneapolis is one of the metro cities measured, and registered a 14% drop in home prices from a year earlier, but declined only 1% from July to August. According to the index, home resale prices had been rising since April. Home resale prices are now about what they were in May 2003. By comparison, home resale prices in America's basket case -- Detroit -- are what they were in 1999.

Here's the spreadsheet if you'd like to play.

Teresa Boardman has a chart on her blog today showing a closing gap between the number of houses being listed, and the number selling.

The sour economy has hit northern Minnesota today with the announcement from Cleveland Cliffs that three taconite furnaces on the Iron Range are being shut down, as the demand for steel has waned.

Little wonder, given the news of the last month, that a survey of consumer confidence has revealed it is at its lowest ever.

Comment on this post

Target a target?

Posted at 8:23 AM on October 28, 2008 by Bob Collins (0 Comments)
Filed under: Economy

A press release from a hedge fund owner has ignited some debate over the future of Minneapolis-based Target Corp.

"Pershing said it will present details on Wednesday about a potential transaction that the firm reckons 'will build long term value for Target,'" the release said.

Since Pershing first disclosed its stake in Target, there's been speculation that the hedge fund firm may try to find a way to unlock the value of Target's large real estate holdings, according to Marketwatch.

Target owns its stores, while chains like WalMart lease their space.

It's probably worth remembering that when KMart was sold off years ago, it was to get at the value of the real estate.

Pershing already has a 10-percent stake in Target. Here's an old Star Tribune profile of Pershing's boss, Bill Ackman, who -- the Star Tribune notes -- doesn't always play nice.

Comment on this post

The housing business

Posted at 1:43 PM on October 27, 2008 by Bob Collins (0 Comments)
Filed under: Economy

What's this? Good news in the housing industry?

With home prices at their lowest in four years, the Commerce Department reported today that home sales rose 2.7 percent in September. That's compared to the August rate.

In the Midwest, however, the news isn't as cheery. Sales dropped 5.8% in September, compared to August, and are down nearly 38% from a year ago.

Local Realtor and blogger Teresa Boardman has a post up today, however, that suggests things may not be as grim as we've come to believe.

Comment on this post

CBS: The bet that blew up Wall Street

Posted at 11:13 AM on October 27, 2008 by Bob Collins (1 Comments)
Filed under: Economy, Politics

CBS' 60 Minutes did a pretty fine job explaining the underpinning of the financial crisis now hitting Wall Street. It explained the "side bets" that were allowed into law in 2000.

Think of it for a moment as a football game. Every week, the New York Giants take the field with hopes of getting back to the Super Bowl. If they do, they will get more money and glory for the team and its owners. They have a direct investment in the game. But the people in the stands may also have a financial stake in the ouctome, in the form of a bet with a friend or a bookie.

"We could call that a derivative. It's a side bet. We don't own the teams. But we have a bet based on the outcome. And a lot of derivatives are bets based on the outcome of games of a sort. Not football games, but games in the markets," Partnoy explains.

Watch CBS Videos Online

The show focused on a vote in Congress in 2000 to remove credit derivatives -- credit default swaps -- from regulations. It's the The Commodity Futures Modernation Act of 2000. On the last vote, on the last day, of the 106th Congress in 2000, the Senate passed the bill -- unanimously -- removing the derivatives from a law regulating gambling.

Here's what 60 Minutes didn't say. The bill in the Senate (S.3283) and the companion bill in the House (H.R. 5660). The combined bill was put into an omnibus budget bill without ever being examined in committee.

Every Minnesota representative -- except Rep. Jim Oberstar, who didn't vote -- voted for the final bill. At the time, they were Gil Gutknecht (R), David Minge (D), Martin Sabo( D), Bill Luther (D) and Collin Peterson (D). Rep. Bruce Vento died several months before the vote. (See the full House vote)

But the Senate passed the bill on a voice vote, so no record was kept of the individual senators' positions. In an earlier vote on the bill, however, both Sen. Rod Grams and Sen. Paul Wellstone voted against it.

All in all, however, it was a bipartisan failure of good government.

Comment on this post

The house loses

Posted at 3:07 PM on October 24, 2008 by Bob Collins (1 Comments)
Filed under: Economy

Maybe gambling wasn't the answer afterall.

Canterbury Park today announced that 10-percent of its employees are being cut, citing the reduction in revenue in a bad economy.

"The downturn in the nation's economy has had a significant adverse effect on our card room and pari-mutuel revenues," stated Randy Sampson, Chief Executive Officer of Canterbury Park said in his news release. He also blames illegal Internet gambling.

Betting on horse racing in the nation was down 10 percent in the third quarter compared to 2007, according to an industry trade group. One racing wag says the impact will be felt in state coffers.

In 2005, some state legislators wanted the state to partner with Canterbury to build a "racino," a combination horse track and casino.

Comment on this post

Greenspan: It'll get worse

Posted at 9:16 AM on October 23, 2008 by Bob Collins (1 Comments)
Filed under: Economy

"I cannot see how we can avoid a significant rise in layoffs and unemployment," former Federal Reserve chairman Alan Greenspan told a congressional panel this morning. Greenspan was the poster boy for the boom times of the market, at least until he gave his "irrational exuberance" testimony earlier in the decade.

"What went wrong with global policies?" he asked this morning, and then answered. "Subprime mortgages served as securities became subject to explosive demand around the world." He said as long as home prices were rising, the risk from foreclosure was "deceptively modest."

A lot of people blame Greenspan for not speaking out about mortgage-backed securities when he had the job, although he insisted this morning, he did. "We are in the midst of a once-in-a-century credit tsunami," he said.

Hopeless? Apparently not. Greenspan said, "this crisis will pass" and we will be stronger for it. Still, that may be cold comfort to the tens of thousands of people who Greenspan expects will lose their jobs first.

Questions and Answers

Q: (Henry Waxman) You were a leading proponent of deregulation. Were you wrong?
A: Partially. He defended "derivatives," which he says transferred risk from those who couldn't afford it to those who could. "I made a mistake in presuming that the self-interest of organizations -- banks -- was such that they were best capable of protecting their own shareholders and the equity in their firms," he said, saying loan officers at banks knew "far more than even our best regulators."

Q: Paul Krugman in 2006 said you shared some of the blame for the sub-prime crisis. Do you share any blame?
A: Greenspan denied that he didn't listen to officials who alerted him to the building mortgage crisis. He blamed a subcommittee of the Fed Board would "move forward and present to the board as a whole, recommendations to be made. That didn't happen."

Q: Did you ideology push you to make decisions you wish you didn't make?
A: "I found a flaw ... in the model that I perceived in the critical functioning of how the world works." (Is that's "fed" talk for 'yes?').

During Greenspan's initial testimony, the Dow jumped about 150 points.

Comment on this post

A fine mess

Posted at 1:04 PM on October 20, 2008 by Bob Collins (7 Comments)
Filed under: Economy

"Right now would not be the time to balance the budget."

That's the kind of economic analysis that usually goes in one ear and out the other. And it did today, until I saw who said it to the New York Times: Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Consider that just over a week ago, she was throwing up her hands because neither Barack Obama nor John McCain would name a single sacrifice he would ask of Americans to help the country through the coming -- or already here -- recession. "They don't make any of the tough choices," she said. "Not even close."

But now, MacGuineas is advocating worrying about a balanced budget... later. The message seems to be that right now a balanced federal budget is not a responsible one.

Start spending.

And that's OK with Ben Bernanke, the architect of the Wall St. bailout package. Bernanke told the House Budget Committee the country's economic weakness could last for a while and it was the right time for Congress to consider a new package, something along the lines of the rebate checks we got -- and spent -- earlier this year. President Bush gave it lukewarm approval without flat-out rejecting the idea.

"This is a fine mess," Oliver Hardy used to say. Up until fairly recently, we were supposed to be concerned about the debt we're leaving our children. Now, kids, you're on your own. We gave you the Internet. What more do you want from us?

If you only had two choices: A harder struggle now, but a budget deficit that would be less crushing to the next generation or an easier economic time of it now, causing a harder struggle for the next generation, which would you choose?

Comment on this post

Airline math

Posted at 10:40 AM on October 16, 2008 by Bob Collins
Filed under: Economy

What's the old joke? The best way to make a small fortune in the airline business is to start with a large fortune. Southwest Airlines, until today, seemed to buck the trend of losing money. But today it reported its first quarterly loss in 17 years, mostly because of the dropping cost of jet fuel.

Company officials are conducting a conference call with analysts and reporters at this hour, and attempted to put a happy face on things. It said that it posted its 70th consecutive quarterly profit. Welcome to the world of financial disclosure. The company subtracted the cost of a hedge fund portfolio it uses to lock in fuel costs. The hedge practice has saved the company millions over the last year, as prices for jet fuel skyrocketed, but when the price of oil drops, the company actually loses money on the practice. Take that away, the company said, and it made an operating profit, it's 7th straight quarterly operating profit.

The company also said it would tap a $400 million line of credit. "You get cash when you can, not when you have to have it," Gary Kelly, Southwest's boss said.

The airline's plans to move into the Minneapolis market next March came up briefly. " It's not an aggressive move," he said. "We're only flying to Chicago Midway, a route on which one-way fares are as high as $400." But he didn't hold out much immediate hope for adding more routes out of the Twin Cities. He said the airline may cut capacity in 2009, the first time it's done so.

While Southwest fees is a "good way to differentiate ourselves from other airlines," Kelly said, he didn't promise that Southwest wouldn't ever follow airlines like Northwest in tacking on charges for previously-free services.

Meanwhile, the soon-to-be-former hometown airline -- Northwest -- will report its third-quarter results next Wednesday.

Public: What? Me worry?

Posted at 3:16 PM on October 15, 2008 by Bob Collins (4 Comments)
Filed under: Economy

Wall Street suffered its second-worst, one-day drop ever. Not that most Americans care.

The Pew Research Center reports today the public is worried, but not panicking over the economy.

But viewed here from the cheap seats, this is the bombshell:

There has been no decline in people's perceptions of their own financial situations. Looking ahead to next year, Americans are more confident than they were in July about an improvement in the national economy and in their own personal finances

The Pew experts say this doesn't mean the public has been spared the effects of the economic meltdown, with many people saying they're learning to live with less. But a review of the numbers shows almost no difference in how people viewed their personal finance situation in October, compared to July.

The survey also says we're more optimistic about the economy than we were in 2004, and more people have confidence in the government to fix problems. The #1 cause of the the financial crisis, the survey said, is too many people taking on debt and comparatively view said it was because of lack of oversight.

There's also been no change from July in how people view the presidential candidates' ability to handle economic issues.

Comment on this post

The price of gasoline

Posted at 9:48 AM on October 15, 2008 by Bob Collins (9 Comments)
Filed under: Economy, Energy

Anyone who was in the middle of sipping a cup of coffee last June when Rep. Michele Bachmann said just signaling an intention to drill for oil could bring back the days of $2 a gallon gasoline, probably spit most of the java out. It was that crazy a prediction at a time when the average price for gasoline was over $4 a gallon and, apparently, heading higher.

This morning, one energy analyst predicted the rapidly falling price of crude oil would yield a further drop of 60 cents a gallon at the gas pump. With the low end of gas prices in Minnesota today around $2.57, you don't have to be Paul Krugman to do the math correctly.

Voila! Two-dollar-a-gallon gasoline.

In politics, it doesn't matter whether you're right by accident or by design, you get to still say you were right. Politicians did nothing more than talk about drilling, and the price of gasoline is headed for $2 a gallon.

Of course, gas prices are falling because of a worldwide recession that's put enough people out of work, shuttered enough factories, and cut the demand for oil. The law of supply and demand still works. The cure for high oil prices, as the saying went, is high oil prices. Never mind the consequences or the collateral damage.

The situation illustrates a different truism: Economic predictions are almost as worthless as a TV weather forecast.

Comment on this post

Selling the good china

Posted at 1:40 PM on October 14, 2008 by Bob Collins (5 Comments)
Filed under: Economy

If you fell on hard times and needed some quick cash, what is the most valuable thing you have that you'd sell, despite what your heart might be telling you?

Duluth has taken its choice -- a Tiffany window -- off the market because "experts expressed skepticism at its $2.9 million appraisal. But nonetheless, it was close to selling off a piece of itself.

I'll go first. I have a life insurance policy that's worth several thousand dollars. It was sold to me in 1963 by my father, who died in 2004. Presently, I can't bring myself to cash it in, but if times got desperate, I'd have to.

Your turn.

Comment on this post