The Recession Will End… Wait, It Already Did

Says who: Christopher Rupkey, the New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ

“Consumers and businesses have postponed purchases for six months, the population is still growing about 1.2% per year, and if the unemployment rate is close to peaking, then growth may be firmer than expected in the second half of 2009.” [Rupkey] points to a series that in the past has proven a remarkably good indicator of business cycle troughs: weekly claims for unemployment benefits, [which] … peaked in the week of March 28. (via WSJ)

Why it might be crap: Sounds a little like the aftermath of 9/11, no? “I encourage you all to go shopping more,” George W. Bush said in 2001. Looking at the indicators themselves, there’s disagreement over when Americans will return to the malls in force, or when housing starts will improve, or even whether unemployment has bottomed out — considering how much of a surprise last month’s number was, and the fact that many are predicting the rate will move comfortably into the double-digits…

How to Prevent the Next Crisis

The following is a section from Mark Zandi’s book Financial Shock.

As this is being written, the financial and economic crisis rages on. While progress has been made in quelling the panic in the financial system, it remains far from normal and the global economic downturn remains intense. The global economy will likely continue to shrink in 2009; the last time that occurred was during World War II. The subprime financial shock thus continues to reverberate.

Policymakers understandably have had little room to consider how to ensure that something like this never happens again. The crisis hit its apex when the Bush presidency was winding down and the Obama presidency was getting off the ground. Both were very short- staffed at a time when an army of policymakers would have had an impossible time keeping up with events. But after the panic subsides and the crisis is quelled—and it will—policymakers must quickly refocus their attention to preventing the next crisis.

What follows is four of the most pressing of my “top ten” list of what I believe needs to be done…

Obama Financial Oversight Plan mini-FAQ

President Obama has just released plans for regulatory oversight of the creaky financial system. The bulk of it focuses on bringing more of the system under fewer agencies, and on requiring less-regulated or unregulated entities like hedge funds to adhere to new rules and regulations. All are important proposals aimed at creating a more sound financial framework that keeps everyone’s money safe and capital flowing through the economy. But in the short-term, it will mainly be high-level, focused on whupping Wall Street’s excesses into shape. Here’s a little FAQ on a few of the plan’s key points. (We recommend this package at the Wall Street Journal for more in-depth look at the proposal.)

* Abolish the Office of Thrift Supervision. What’s this about? One argument for its abolishment was the oversight for the savings and loan industry, which had troubles since the 1980s. So it transforms, more like, into the National Bank Supervisor. It follows, given all the consolidation in the financial sector in the last two decades.

* Create a Consumer Financial Protection Agency. What the heck is this? This is the stuff that matters. This agency would work with state regulators to better control swindling by mortgage lenders and credit card companies.

* Give the Federal Reserve broader oversight. What does that mean, exactly? Will they be printing personalized money? Almost, but no. The Fed will now oversee parent companies, bank holding companies, as well as economic and monetary policies. But we can safely assume that we’ll all trade in the same currency, for now, and that the faces will remain the great presidents, not BSB (Ben S. Bernanke).

But it’s all just a plan, for now, and some of it over-broad and ambitious. Next up, it will be worked up into legislative language and put before Congress. By then, who knows where the financial system will be. Ah, government.

Here’s Barack Obama talking about the plan on Bloomberg: