Author: Megan Carpentier

In the giddy, post-electoral haze in 2008, many people hoped and believed that the election of President Obama would herald a new, “post-racial” America. But a look at some recent economic statistics tells a different story.

While overall employment in March stood at 9.7 percent, some 16.5 percent of African-Americans were unemployed. A staggering 41.1 percent of African-Americans between 16 and 19 years of age are unemployed, based on the March numbers, while 19 percent of adult African-American men and 12.4 percent of adult African-American women are facing unemployment. With the exception of the unemployment rate for teenagers, those seasonally adjusted numbers were up over February statistics, even as white unemployment stayed the same.

Image by: Matt Mahurin

The numbers weren’t much better among Hispanics.

Latinos face a 12.6 percent unemployment rate overall, while Latino teenagers face a non-seasonally adjusted 30.1 unemployment rate and Latino men and women are unemployed at rates of 12.8 and 12 percent, respectively

Meanwhile, seasonally adjusted white unemployment stood at 8.8 percent (and non-seasonally adjusted unemployment declined from 9.7 to 9.3 percent). While unemployment in the general population — and the white population — seemingly peaked last October, it didn’t peak for African-Americans or Latinos until January 2010 and has already nudged back up. Latino women, in fact, continue to see an expansion in their rates of unemployment.

But the Obama Administration has done little, so far, to target higher rates of unemployment in communities of color as a result of the recession — let alone the existing conditions that lead to ongoing disproportionately high unemployment rates, specifically within African-American communities.

The jobs bill passed by the Senate doesn’t contain even the money for youth employment programs — like the ones mentioned approvingly by the president in 2009 — passed by the House, and it doesn’t contain provisions pushed by African-American lawmakers to make sure that at least 10 percent of the budget for each section of the bill goes to communities where 20 percent of the population is low-income. It has been criticized by African-American lawmakers like Rep. Elijiah Cummings (D-Md.), a member of the Congressional Black Caucus, for not focusing on the unique problems facing the African-American community and, in particular, hard-hit urban communities facing chronic unemployment. Cummings spokesman Paul Kincaid said, “The congressman and the CBC are really focused on the need for expanding job training as a way to combat these issues.”

Dean Baker, co-director of the Center for Economic Policy and Research, agrees with Cummings that the president hasn’t gone far enough, saying “[The administration has] been way too meek on it. One thing in particular they could have pushed employment programs targeted to areas of high unemployment. They could focus on areas where unemployment rates are above 20 percent or something, and get money for job creation to areas like Detroit, which employment is just falling through the floor.” If the administration focused on communities disproportionately affected by unemployment, even if it didn’t specifically target African-American communities, its efforts would have a disproportional impact on those communities suffering most from unemployment, including African-Americans, he said.

Baker noted that such statistics have, unfortunately, been typical for years. “African-Americans suffer a disproportionate impact to their employment at every downturn, in part because they have a disproportionate rate of unemployment to start with,” he said. Unemployment in the African-American community was in the double digits prior to the economic downturn and continued, as it always does, to climb up to disproportionately high rates; no one expects it to achieve parity with white unemployment rates as part of the stimulus or jobs bills, let alone because of the recovery.

When asked in 2009 about the African-American unemployment rate — which economists expected could hit 20 percent by the end of the year — and why he hadn’t yet targeted programs at the African-American community, Obama said: “We know that the African-American unemployment rate, the Latino unemployment rate are consistently higher than the national average. And so, if the economy as a whole is doing poorly, the African-American community is going to be doing poorly, and they’re going to be hit harder. The best thing that I can do for the African-American community, the Latino community, the Asian community, whatever community is to get the economy as a whole moving.” The president then went onto the describe some existing programs that target urban teenagers with job skills training, and how the administration might duplicate those programs eventually, in a roundabout way of answering what the administration might do if African-American employment rates did not improve. At the time, reports indicated that if unemployment in the African-American community continued to get worse, the administration would look at more targeted programs.

The National Urban League, in a report issued March 24, suggested a similar program: $150 million in grants to cities, states, non-profits and universities based on local unemployment rates to create three million jobs in the hardest-hit communities. Urban League president and CEO Marc Morial said, “The first thing that needs to be done is direct job creation to put people to work, because fixing structural problems can’t happen while so many people are out of work. What we did in the 30s, what we did in the 70s, with the government hiring people directly, is a good place to start. Congressman Miller’s bill, which would give money to cities to hire people, with 25 percent allocated to community-based organizations to help put people to work.” He also suggested that one way for the president to resolve the criticisms that funding infrastructure projects disproportionately puts white people back to work is to invest heavily in construction training programs in urban areas, where those skills are often in short supply and unemployment is highest.

Economics professor and author Boyce Watkins of Syracuse University thinks a jobs program needs to go much further than that: “Put in place $80-100 billion to a direct effort to create jobs in urban centers around the country, with a disproportionate amount of resources targeted at cities with the highest unemployment. Then you can have a dramatic impact on unemployment very quickly. It would be more effective than giving tax credits to small businesses to hire people,” Watkins said in an interview. The president, he added, “doesn’t have to have a black agenda, he can simply have a strong urban agenda,” but he’s concerned that, with Larry Summers and Tim Geithner at the helm of economic policy, the president won’t hear much about an economic agenda that addresses poverty issues, let alone economic issues of concern to African-Americans or other people of color, because, he says, neither man has any background or apparent intellectual interest in those areas. “If people’s hearts aren’t in the right place, then their intellects won’t be,” he said.

Like the Joint Education Committee report, Morial and Watkins also highlighted the need for significant investments in job training and adult education over the coming years to address the larger structural problems in the African-American community and resolve the apparent mismatch between skills and available jobs. Morial said, “People with long term or structural unemployment generally have high school education or less, and we need a significant, sustained investment in job training, community-based job training and adult education programs to even begin to think about changing the structural problems.” But at this stage, neither a targeted jobs program or a significant investment in targeted job training appears to be on the president’s agenda.

For those with a basic grasp of (non-political) economics and a keen memory for how massive consumer fraud and non-transparent financial products helped cause the current economic crisis, it’s an obvious proposition: Helping consumers avoid fraud, usury, overly powerful banks and fee-hungry brokers is good for the economy. But a motley coalition that includes, of course, banks and Fed and — until today — the Office of the Comptroller of the Currency has continually suggested that there is an overall economic benefit to allowing massive financial companies to utilize their market power to the detriment of their customers.

Today, the OCC’s deputy comptroller for public affairs Robert Garsson jumped off the train of government officials suggesting that protecting consumers’ rights would be bad for the economy. Acknowledging that the OCC had played a role in the blocking the president’s plan to create a consumer protection agency independent of other government agencies, Garsson acknowledged the stupidity of the idea that an informed, protected consumer base was bad for an economy made up of those consumers.

“It’s unlikely there will be any meaningful conflicts between safety and soundness and consumer protection,” Garsson said. “The potential for conflicts is very rare.”

That’s right, a government official finally acknowledged that protecting consumers from predatory companies or deliberately non-transparent contracts and relationships might be good for the soundness of an economy still recovering from a tailspin caused by fraud, a lack of consumer understanding, non-transparent markets and financial instruments so complex that even traders didn’t understand them.

Garsson continued.

“It’s hard to say in the abstract what sort of conflicts could arise, though I don’t think there will actually be many instances in which there is a genuine conflict,” he wrote.”But where a conflict does arise, I don’t think that a consumer protection regulator should be allowed to prescribe a standard that reduces the safety and soundness of an institution. And I’m not talking about consumer protection provisions that simply reduce a bank’s profitability — that’s not something I would characterize as conflicting with safety and soundness, and a statutory provision could say so.”

That’s right, someone in the government acknowledged that a bank’s profitability wasn’t the sole standard for safety and soundness of the economy! That is some change to believe in.

If you thought that the health care reform bill was so expertly thought through as to prevent health insurance companies from engaging in the same end run around regulation practiced by the credit card companies, then Dan Froomkin has some news for you: You’re naive. Far be it from insurance companies to spend the next four years until the implementation of health care reform begins figuring out how to operate under a new regulatory framework; instead, they’ll use their massive profits to figure out as many ways as possible to screw their customers before the rules go into effect, and as many ways as possible to get out of complying with the new rules. Let us count the ways.

1. Raising premiums
There is absolutely, positively no prohibition on companies raising premiums at outrageous rates until 2014 — so they’re not going to stop. And politicians in Washington might scream, but the volume will be far less next year because the President won’t have a reform bill to pass.

2. Kicking people out for pre-existing conditions
The insurance industry may have relented about using pre-existing conditions to determine children’s eligibility, but they’re not about to let adults with pre-existing conditions qualify for insurance coverage one minute sooner than 2014 — and the way they floated the idea that the law didn’t really totally require them to accept children with pre-existing conditions is a hint that they’re desperately looking for a similar loophole in 2014 and beyond.

3. Changing your insurance plan
Remember how President Obama said that if you liked your insurance plan, you wouldn’t have to change? Well, the health reform bill won’t make you, but your insurance company might. They’re busy shutting down and restricting access to managed care plans (HMOs) and pushing current customers into high-deductible plans, where customers have to pay all expenses out of pocket before the insurance company picks up a dime. In other words, customers pay a (relatively) small premium each month and then the first $2,500 of their health care each year before the insurance company begins to cover a percentage of the costs of their medical care.

4. Making life more difficult for doctors
One great way to reduce insurance company payouts is to make it more difficult for doctors to file claims, which insurance companies are already planning on doing.

5. Tightening up internal practices
That’s a euphemism for giving patients and doctors enough of a run-around trying to get bills paid to convince them to give up asking for reimbursements.

6. Marketing only to healthy people
Healthy people are the cheapest to insure, and people tend to gravitate toward marketing materials that look like them. But if they make certain drugs hard (or impossible) to find on pharmaceutical formularies, or put up physical barriers to obtaining the insurance, they can (and likely will) keep more elderly and sick people from even applying for their insurance.

7. Re-label current overhead expenses at health care
When the reform finally takes full effect in 2014, insurance companies will have to spend 80 percent of their premiums on care for their customers. Thus, in order to make more money, they’ll have to increase the money you spend on care, or figure out a way to classify expenses currently deemed “overhead” as “health care for you.” Luckily, they’ve got an army of lawyers and accountants more than willing to assist.

8. Taking full advantage of the unhealthy behavior premium
In the reform, insurers are allowed to makes premiums 50 percent more expensive for consumers who engage in “unhealthy” behaviors, which was intended to allow them to continue charging smokers higher premiums. But there are lots of behaviors deemed “unhealthy.” Have more than one sexual partner? Neglect to get 30 minutes of cardiovascular exercise a day? Love sweets? Drink carbonated, caffeinated sodas? All those behaviors, and many more, are considered risky by the medical profession and could make your insurance far more expensive than you think.

9. Charging old people as much as they can
The law allows insurers to charge people between 55 and 65 (the current age of Medicare eligibility) three times more than people 54 and under. So on their fifty-fifth birthdays, some customers could get new, higher insurance bills that put readjusted mortgage bills to shame — and there won’t be anything remotely illegal about it.

10. Lobbying to make the most of the loopholes that exist and create others
It likely goes without saying that all the money and lobbying time that went into watering down health care reform and trying to keep it from passing aren’t just going to stop flowing to Washington. Rather, as the Department of Health and Human Services spends its time promulgating rules to govern the various reforms in the bill, lobbyists will simply switch their focus from the Hill to HHS. We know what they want — to limit the effect reform will have on their bottom line — and they know how they’ll get it: through the regulatory process.

Despite predictions that the Labor Department will announce Friday that the American economy, as a whole, added 200,000 jobs, that’s not necessarily completely good news. According to a report from payroll processor ADP, all those jobs are government jobs — and mostly temporary ones from the Census Department. They say that the private sector actually lost 23,000 jobs in March.

The latest ADP report showed large businesses with 500 employees or more shed 7,000 and medium-size businesses lost 4,000 workers in March. Small businesses that employ fewer than 50 workers cut 12,000 jobs. Service-sector jobs added 28,000, while factory jobs fell by 9,000 in March.

The president signed into law a much-heralded jobs bill on March 18th that will give private-sector employers a break on payroll taxes for the rest of 2010 if they hire people who are already unemployed. These data shows that getting businesses to stop laying people off might still be as important as convincing them to hire.

While Greece’s public debt — which the Goldman currency swaps were designed to help hide — amounts to 113 percent of its GDP currently, it turns out that Greece and its EU partners aren’t the only one keeping debts off the books and using complex accounting techniques to hide them. Mary Williams Walsh reports in The New York Times that many states engaged in the same behavior and, like Greece, are about to face a major reckoning.

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

New Hampshire and Colorado attempted to use program-specific pots of state money to plug holes in their general treasuries; Connecticut wrote its own accounting rules; Hawaii reduced the length of its school week; and California made its businesses pay their 2010 taxes earlier to make the budget appear more balanced than it is. But one thing every state is doing, including Alaska, is camouflaging its debts by not releasing how much its state employee pension funds will owe — or how far behind it is on its contributions to said pension funds.

Less than a year after then-Gov. Sarah Palin (R-Alaska) quit the government to pursue other projects, Alaska leads the way in its debt-to-GDP ratio when its unfunded pension obligations are taken into account, followed by Rhode Island, New Mexico, Ohio and Mississippi. And although Alaska’s ratio is far lower than Greece’s, it does give the state a debt-to-GDP ratio similar to that of Jordan and Palin’s favorite health care resource, Canada, and a higher ratio than Ghana, Cote d’Ivoire, India, the Philippines or Uruguay.

A federal judge on Monday struck down the patent, held jointly by the University of Utah and Myriad Genetics, over BCRA1 and BCRA2, two human genes in which mutations can cause breast and ovarian cancer. The case was filed in 2009 by the ACLU, which argued not just that the BCRA1 and BCRA2 gene patents were invalid, but that a 1979 Supreme Court decision upholding patents on engineered organisms did not apply to existing parts of the human genome and that such patents were unconstitutional. The judge agreed that the patents were invalid, but did not rule on the larger institutional question.

Myriad and the University of Utah argued that the technique used to find the specific genes made the genes they found patentable, but the judge didn’t buy it.

Judge Sweet, however, ruled that the patents were “improperly granted” because they involved a “law of nature.” He said that many critics of gene patents considered the idea that isolating a gene made it patentable “a ‘lawyer’s trick’ that circumvents the prohibition on the direct patenting of the DNA in our bodies but which, in practice, reaches the same result.”

Lawyer’s tricks, apparently, work on patent application examiners but not federal judges.

The ACLU notes that more than 2,000 human genes are currently under patent based on the legal idea, now overruled, that just discovering the existence of a gene means one can claim ownership over it.

Approximately 20 percent of all human genes are patented, including genes associated with Alzheimer’s disease, muscular dystrophy, colon cancer, asthma and many other illnesses.

The Myriad and University of Utah patent over the BCRA1 and BCRA2 genes allowed Myriad to charge $3,000 for a screening exam to detect cancerous mutations to the genes, and forbade other organizations from developing alternative tests. Researchers interested in any type of research on the BCRA1 and BCRA2 genes — which are associated with a 500 percent higher risk of developing breast or ovarian cancer — had to get (and often pay for) the company’s permission to perform their research.

Companies that patent the building blocks of human life (and non-profit educational institutions that clearly make money from these arrangements) claim that the legal ruling, which may still be appealed, will stifle research: one researcher indicated that it will make it difficult for companies pursuing medicines targeted at individuals’ DNA from patenting individuals’ DNA profiles, as though that’s a bad idea. Of course, the Myriad test for the BCRA1 and BCRA2 gene will still be patented: They just can’t prevent competitors from patenting a different test that could find the same mutations any longer.

Elizabeth Warren warned in February that commercial real estate was the next recovery-killer, and since nothing improved by March, Tim Geithner yesterday took to CNBC to acknowledge the problem with commercial real estate and push the administration’s program to incentivize small banks to lend to small businesses as the solution.

One way to help manage the commercial loan distress, Geithner said, is through the $30 billion fund proposed by President Barack Obama to provide money to midsize and community banks if they boost lending to small businesses.

He did not clarify how giving money to some banks for an entirely unrelated purpose would solve a commercial real estate crisis.

Earlier in the day, TARP Congressional Oversight Panel chair Elizabeth Warren warned that more than half of commercial real estate would be underwater by the middle of 2010.

“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending.”

In February, Warren noted that $1.4 trillion in commercial real estate loans would need to be refinanced between 2011 and 2014 when the shorter-term commercial real estate mortgages end, and a significant proportion of those are underwater already. More than $50 billion in commercial real estate mortgages are already in default or foreclosure — both figures are far larger than Geithner’s $30 billion plan to extend credit to small businesses. Sheila Bair, the chair of the FDIC, expects that commercial real estate defaults and losses will be the number-one factor that drives small and medium-sized banks into failure this year at a higher rate than they experienced in 2009. Extending credit to small businesses to the tune of $30 billion doesn’t seem like the best solution to the coming commercial real estate crisis or its downstream effects on businesses or the banks holding the loans.

The administration today announced an expansion of its Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets program, which uses TARP money to provide states in the worst economic straits with block grants. In the first round, five states whose housing stock lost more than 20 percent of its value — California, Nevada, Arizona, Florida and Michigan — split $1.5 billion. In this round, the five states with the highest concentration of people living in counties in which unemployment was over 12 percent in 2009 — North Carolina, Ohio, Oregon, Rhode Island and South Carolina — will split an additional $600 million.

The grants for the first round of funding were awarded in this fashion:

• California received $699.6 million
• Florida received $418 million
• Michigan got $154.5 million
• Arizona got $125.1 million
• Nevada got $102.8 million

In the new round, the awards are generally smaller, though the administration says they are “equivalent on a per person basis to the $1.5 billion awarded in the first HFA Hardest Hit Fund.”

• Ohio gets $172 million
• North Carolina gets $159
• South Carolina gets $138 million
• Oregon gets $88 million
• Rhode Island gets $43 million

As with the previous program, states have to submit their plans for review to the Treasury Department, which encourages them to focus on unemployment and distressed homeowner programs but doesn’t limit its assistance to just those ideas.

In this month’s trickle of economic data comes a little good news for the market, even if it’s perhaps not great news for people’s bank accounts: Consumer spending was up even as incomes were flat in February. Spending wasn’t up by much — just .3 percent — but the fact that it rose even as wages remained flat indicates that people feel more secure spending money they don’t necessarily have.

Economists have long said that consumer spending needed to rise to encourage businesses to invest in new employees.

In somewhat less heartening data that may belie the idea that consumer confidence rose with spending, consumers spent that extra money on food and clothes rather than durable goods like cars or appliances. Worse yet for consumers, the good economic news sent oil prices up, which could drive inflation up for March.

Although unemployment figures for March won’t be available until later in the week, economists expect the unemployment rate to hold steady at 9.7 percent despite the addition of up to 200,000 jobs. There may or may not be pent-up demand in the market causing the rise in consumer spending, but that demand has yet to be reflected in the labor market.

Subprime and even prime adjustable rate mortgages were one of the many triggers of the collapse of the housing market because, when the introductory rates ended, lenders often significantly and suddenly raised rates and thus monthly payments for many borrowers. Economists have been predicting that a new raft of rate adjustments in 2010 — when people with 5/1 ARMS initiated in 2005 at nearly the apex of mortgage activity would experience their first rate adjustment — could send the yet-to-recover housing market into a tailspin. But new figures, first reported in The Wall Street Journal, shows that the Fed’s work to keep interest rates low, combined with the already-high rate of default among some borrowers with ARMs, mortgage modifications and traditional refinancing, may mean that the housing market will continue limping along with few fresh wounds.

The majority of option ARMs are set to recast over the next two years. But the volume of outstanding loans has fallen sharply because many borrowers, prior to facing higher payments, received modifications, refinanced or defaulted.

There are only slightly more than half the number of outstanding ARMs today as were in existence in March 2006, when 1.05 million such mortgages were on the market.

In addition, those ARMs in which any adjustment is tied to the Fed’s interest rate may adjust downward in 2010, as the interest rate is lower today than it was in 2005. Some people whose ARMs adjusted in 2008 or 2009 already experienced this effect, which caused their interest rates and monthly payments to decline.

While the Congressional Black Caucus (among others) pushed unsuccessfully for a major investment in job training to be included in the stimulus package, new data on the long-term prospects for a labor market recovery highlight the ongoing need for the president and Congress to put job training back on the economic recovery agenda. Matthew Scott of Daily Finance has the sobering statistics:

Unemployment is expected to remain above 9% for at least the next two years, according to Christopher Woock, research associate for The Conference Board, and other economists. That’s because many of the estimated 4 million jobs lost in the construction and manufacturing industries during the recession may never come back. That’s what happened after the 2001 recession in sectors such as data processing, computer and electronics manufacturing, and textile manufacturing.

Even in strong sectors, the projected 3-4 percent annual economic growth won’t be enough to entice employers back to pre-recession hiring levels.

So what are out-of-work construction workers or auto workers going to do if their jobs don’t come back? Many of them are going to need to be trained to work in an industry that isn’t floundering.

“If we have substantial structural change,” says Woock, “then that’s going to require a significant reallocation of workers across various industries and that is going to make for a very slow and drawn out labor market recovery.”In other words, as industries shift and jobs vanish forever, some workers may be forced to retrain to find work in a different industry.

And yet, the latest version of the jobs bill offers tax credits to employers to hire workers — but it doesn’t give credits to workers enrolled in retraining programs, let alone help state and local governments or non-profits fund the establishment or expansion of such programs. Yet the sectors that economists expect to grow over the next few years require skilled labor more often than not.

Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University, predicts that within the next eight years, 2.4 million job vacancies could appear in the U.S. in the education, health care, government and nonprofit sectors.Jagadeesh Gokhale, an economist at the Cato Institute, says demand from aging baby boomers will drive job growth in health care and other related service industries.

The transition from an automotive assembly line to the health care industry might not be an obvious choice, but for people unwilling to give up on working, it could be exactly the transition they need — and they may well need help from the government to make it happen.

President Obama today unveiled his administration’s fourth attempt to stave off the worst effects of the mortgage and housing crisis, the latest in a series of efforts that started with the Home Affordable Modification Program and now includes special assistance for the hardest-hit states and incentives for banks to allow buyers to sell their underwater homes short. The new program does resolve one major problem with the HAMP: its lack of incentives for lenders to forgive any of a borrower’s principal on underwater mortgages. According to The Wall Street Journal:

Lenders are to receive 10 to 21 cents of federal subsidies per dollar of loan principal reduced, depending on the degree to which the borrower is underwater.

That has the potential to be a larger incentive for some lenders than even allowing a short sale on a property that is underwater. The principal would be reduced over the course of three years, though many mortgage modification participants default within a year, and only borrowers who owe more than 115 percent of the value of their home will be eligible. The average homeowner in America today owes 114 percent of the current market value of their home.

Additionally, the FHA will try to convince lenders to refinance current loans with FHA-backed loans at something resembling market value — but that program will be entirely voluntary. For homeowners to get an FHA-backed loan, the lender must forgive at least 10 percent of the outstanding mortgage and allow homeowners to refinance at 97.75 percent of a home’s current value. For the average homeowner today, that means a lender would have to forgive 16.25 percent of the current mortgage of their own free will. For people who have second mortgages, the FHA will allow them to refinance for a total value on both mortgages of up to 115 percent, but that would require that two lenders agree out of the kindness of their hearts to forgive substantial portions of a homeowner’s debt. The only incentive for lenders will be good PR and potentially fewer immediate foreclosures.

The remaining helpful part of the new program will subsidize unemployed homeowners’ mortgage payments for three to six months until they find a new job. Of course, as the jobless recovery continues, more and more people are employed for longer than three to six months, so this might or might not be helpful for anything more than staving off foreclosures for three to six months — which, as many people are discovering, is the main result for most people. As it is, the administration admits that it expects another 10 to 12 million foreclosures over the next three years while these programs help no more than three to four million homeowners remain in their homes.

As everyone already knows, 2009 was a terrible economic year for a lot of Americans, but some people had it worse than others. A handy table in today’s Wall Street Journal allows us to break down the five states that had the biggest declines in per capita income, and the rugged four that saw an increase — and what the rest of their financial pictures look like.

The Worst

5. Idaho
Although few outside of Idaho talk about Idaho now that Larry Craig isn’t toe-tapping in a wide stance in the Minneapolis airport, times were tough in Idaho last year! The Spud State was more of a dud state, with a 4.1 percent decline in per capita income, an 8 percent average unemployment rate (better than the national average!) and a 6.6 percent decline in home values.

4. Arizona
John McCain’s home state didn’t see an end to its troubles in 2009, as the Copper State’s per capita income went down by 4.1 percent even as actual copper prices went up. Housing prices were down 13 percent and the unemployment rate was 9.1 percent.

3. South Dakota
Although no one is loudly contemplating the addition of Ronald Reagan to Mount Rushmore anymore, the Mount Rushmore State had bigger problems in 2009, as per capita income fell by 4.4 percent. Somewhat protected from the unemployment plaguing much of the rest of the country, an average of only 4.4 percent of South Dakotans were unemployed. Better yet, it was one of 18 states that didn’t see a decline in housing prices, as they went up by 1.6 percent in 2009. Still, it’s a fair bet that the winter was miserably cold.

2. Nevada
What happens in Vegas stays in Vegas, as the saying goes, but neither money, jobs nor housing prices stayed in Vegas in 2009. Unlucky Nevadans saw per capita income drop 5.8 percent, the unemployment rate skyrocket to an average of 11.8 percent and housing prices fall like a lead balloon a grand total of 17 percent. Lady Luck apparently found a new watering hole.

1. Wyoming
Per capita income in Wyoming dropped by 5.9 percent and housing prices plummeted by 6 percent. The average unemployment was only 6.4 percent, but the state’s most famous jobless resident — the ex-VP — decamped for a secret bunker elsewhere.

The Best

4. Maryland
Terps fans might not have a lot to cheer about, but in this economy, a 0.3 percent increase in per capita income was cause for celebration. Housing prices are down 5.5 percent, but average unemployment at 7 percent was under the national rate.

3. Vermont
Vermonters were able to crack a smile over something other than delicious ice cream or flavorful cheddar: Per capita income was up a whole half percent in 2009. As in Maryland, average unemployment was under the national average at 7 percent, and housing prices dropped by only 1.3 percent. Looks like it’s time for a little spoonful of celebration.

2. Maine
Residents of the Pine Tree State had reason to smile in 2009: a 1 percent increase in per capita income and a 1 percent increase in home values. At 8 percent, unemployment, too, was slightly below the national average.

1. West Virginia
Although West Virginians are not often at the top of lists, they are when it comes to income increases in 2009, and their 1.8 percent increase in per capita income won out. Housing prices were down 2.7 percent — hardly the steepest decline — and unemployment was under the national average at 7.9 percent. Not a bad showing for the Mountain State!

While America’s older workers are taking longer and longer to find work, spending, on average, 35 weeks between jobs, America’s youngest working generation is having trouble finding any jobs — and sometimes dropping out of the rat race completely. Tony Pugh of McClatchy reports:

Frustrated by a lean job market, nearly 1.3 million workers ages 16 to 24 have left the labor force since the recession hit in December 2007. That’s about 6 percent of them, and it’s nearly three and a half times the exodus rate of workers ages 25 to 54.With a jobless rate of 18.5 percent for 16- to 24-year-olds, some have gone back to school, some are volunteering, some are joining the military and some are just chilling at home until the economy heats up again.

In fact, the unemployment rate for 16- to 19-year-olds is currently 25 percent, and it’s even higher for African-American (42 percent) and Latino teenagers (31 percent).

Overall, labor market participation (which doesn’t include military service, college attendance or volunteer work) is down to 55 percent of 16- to 24-year-olds as compared to the pre-recession years, when 59.1 percent of people that age were working — a 7 percent decrease. In the mean time, the labor market participation of people over 55 is up by 9 percent, due to economic pressures including retirement savings losses and spousal unemployment.

Although a 60-year-old woman is likely not competing for the same jobs as a 19-year-old woman (and statistics show that older Americans have more trouble finding new jobs after losing old ones than younger people), the combined high unemployment rates and duration on either end of the work cycle add to the pressure on the government to do something to help all Americans find work.

The Comptroller of the Currency’s new report on the mortgage market in the fourth quarter of 2009 also sheds light on some of the problems reported by borrowers accepting all temporary and permanent HAMP modifications (including ones in HAMP) — problems which, left unchecked, will likely lead to higher delinquency rates. In the fourth quarter of 2009, 21 percent of HAMP participants those with modified mortgages saw their monthly payments go down by less than 10 percent, nearly 5 percent saw no change to their monthly payments and nearly 13 percent saw their payments increase as a result of participating in HAMP modified mortgage programs. While these numbers are better than a year ago, when nearly 25 percent of borrowers saw no change to their monthly payments and another 25 percent saw an increase in their payments, they’re still not helpful for reining in delinquencies or foreclosures.

How could this be so bad? Although 84.2 percent of modifications in the quarter involved some kind of rate reduction, 82.3 percent involved the capitalization of missed payments and fees — which means that the payments and fees were added to the principle and began to accrue interest. Only 6.8 percent of mortgages involved a principle reduction, despite the fact that the average American homeowner owes $1.14 on a mortgage for every dollar of the house’s assessed market value. Another 6.1 percent involved a principal deferral — which means borrowers would only be making interest payments, not payments on the mortgage itself, which was a key feature of many subprime and predatory loans.

And although the report notes that most modifications involve some combination of actions, 8.7 percent of modifications in the fourth quarter of 2009 involved only capitalization, 4.3 percent involved only a rate and not a single bank offered only a principal reduction. Most combination plans included only the capitalization of missed payments and a rate reduction; about half involved an extension of the life of the loan. Suffice it to say, government subsidies or not, banks aren’t poised to lose a dime on modifications that don’t default.

Since the federally-managed HAMP program requires that people getting modified mortgages have their monthly payments lowered, people participating in the HAMP generally saw their payments lowered by more than 20 percent. Only 6.4 percent of participants had their payments lowered by less than 10 percent. The kinds of modifications HAMP participants received had similar patterns to the aggregate, with approximately 95 percent of borrowers receiving missed payment capitalizations and rate reductions, and around half getting term reductions. Unlike in the broader program, only 0.1 percent of HAMP modifications included a principal reduction, and a rather astonishing 26.8 percent of participants are getting a principal deferral. Modifications made under HAMP accounted for just over 17 percent of all mortgage modifications undertaken by the servicers in the study.

As Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program, pointed out in his testimony this morning before the House Committee on Oversight and Government Reform, the large percentage of capitalizations and rate reductions is due to the design of the HAMP itself, in which those are the first steps that lenders have to undertake. In effect, by capitalizing missed payments and fees, the HAMP may well be contributing to the sheer volume of underwater mortgages by adding on principal to mortgages on homes that have decreased in value.

The report also highlights the ongoing problem of redefaults by HAMP modified mortgage program participants: Of the first wave of participants from the third quarter of 2008, more than 60 percent have again fallen behind on their payments — about the same percentage of people whose payments either went up, stayed the same or went down by less than 10 percent. Almost 58 percent of those who entered into a HAMP modification plan in the fourth quarter of 2008 are in the same situation, and those who because modifications in the early part of 2009 appear on track to default at a similar rate. The rate of default starts to slow somewhat for those who started modifications in the second quarter of 2009, though one-third of participants are already in default, that’s significantly lower than the more than 40 percent of older modifications that were in default after the same duration. Only 15 percent of those who began modifications in the third quarter went back into default in the fourth quarter, which is a lower percentage than at the programs inception but still roughly equivalent to the percentage of people (16.4 percent) of people for whom modification brought a higher monthly payment.

But even homeowners that get modified mortgages that lower their monthly payments, like the ones required by HAMP, don’t fare spectacularly well. Nearly 40 percent of modified mortgages given in 2008-2009 in which monthly payments were lowered by more than 20 percent are in re-default after 12 months; 49.5 percent of modified mortgages with monthly payments lowered between 10 and 20 percent are in re-default in the same period; and 55 percent of those with payments lowered less than 10 percent go back into redefault after 12 months. While not broken down by HAMP and non-HAMP participants, it does indicate that modifying mortgages, particularly when they don’t involve principal reductions, tend to only temporarily hold off default and foreclosure.

There is some good news for some borrowers, though: The report shows that more than twice as many prime as subprime mortgage holders were newly enrolled in HAMP mortgage modification trial programs, and almost three times as got many permanent modification plans. Borrowers in both groups were more likely to have banks agree to some sort of modification plan enrollment than initiate foreclosure proceedings.

Correction: Some imprecise language about commercial versus government-subsidized modifications was corrected at the request and with the help of the Comptroller of the Currency’s office, and additional information about government-subsidized modifications was added.

The Comptroller of the Currency keeps an eye on the mortgage market, and the results continue to be terrible. They monitor 64 percent of the mortgages in the United States, or 34 million loans, from most of the mortgage servers in a portfolio representing the larger market: About two-thirds of the mortgages they monitor are “prime” mortgages, or mortgages issued to people at favorable rates based on their relatively high credit scores (which are, of course, a measure of people’s statistical credit-worthiness). But while most of the attention has been paid to the delinquencies from subprime mortgages, the Comptroller’s report on mortgages through 2009 sheds a sobering light on the largest group of borrowers who are behind on their mortgages: prime mortgagees.

Before the fourth quarter of 2008, there were always more subprime than prime mortgages in severe delinquency, defined as more than 60 days past due for regular mortgages or more than 30 days overdue for mortgages held by bankrupt borrowers. While delinquencies were and remain a larger percentage of the much smaller subprime portfolio (which is, after all, why those borrowers are considered subprime), in the fourth quarter, the sheer volume of prime mortgage delinquencies overtook subprime for the first time. The newest report shows that 2009 was not kind to prime mortgage holders, as nearly one million of them were in severe delinquency. That represents a 76 percent increase over just a year before, and is more than double the number of subprime mortgages in severe delinquency.

While the mortgage crisis — and the efforts to find solutions for it — has often revolved around the subprime market, the subsequent economic crisis, unemployment and plummeting home values have taken a severe toll on even the borrowers judged most credit-worthy only a few years earlier. Severe delinquencies lead to bad marks on one’s credit report, lowering credit scores and driving more people into subprime credit territory.

President Obama’s mortgage modification program, known as the Home Affordable Modification Program or HAMP, was supposed to be the fulfillment of Obama’s promise to take care of Main Street more than Wall Street. Yet, just over a year into his presidency, Wall Street is on the rise and Main Street — or at least the homes that line it — remains on the decline. Not only has Obama’s $75 billion program failed to secure permanent mortgage modifation for more than 116,000 homeowners (while 3 million went into foreclosure) and not only does the Administration now say it won’t help more than 1.5 to 2 million homeowners overall, there’s actually more bad news: it seems to actively discourages lenders from loan forgiveness.

Shahien Naisiripour of the Huffington Post reports that, despite the fact that the average homeowner owes $1.14 for every dollar in current value (and that’s not strictly HAMP-eligible homeowners, that’s overall), mortgage holders are less likely than ever to forgive underwater homeowners.

Mortgage servicers forgave principal on less than two percent of HAMP trial loans, the report notes. But before HAMP, 10 percent of servicer-sponsored mortgage modifications forgave principal, according to the report. Servicers are incentivized to lower monthly payments by getting cash for every sustainable mortgage modification.”HAMP allows principal reduction, but it is not typically implemented in practice,” the report states.

Mortgage holders receive money for modifications — even those that don’t amount to more than a pittance to homeowners — but they don’t get money for principle reductions, so they no longer look at that as an option. The administration’s newest program to incentivize mortgage holders to agree to short sales, or sales worth less than the outstanding value of the mortgage, likely won’t help, as it will encourage lenders to engage in debt forgiveness only if people give up their homes, rather than engaging in loan forgiveness that allows people to stay in them.

Notably, in the long term, mortgage holders would make more money by forgiving the portion of a mortgage that is more than the market value of a home and continuing to collect payments, rather than accept something less than market value and forgive everything above the eventual sales price — but the Administration’s programs aren’t designed to incentivize that behavior. But if banks take the government payout to do short sales in any significant number, they will end up further driving down housing prices, putting more homeowners underwater and creating a snowballing problem.

As it if weren’t enough that Greece and Lehman Brothers were caught shifting their debts off the books with the help of a variety of irregular accounting measures, today’s news is that Bank of America has likely been doing it, too. John Hempton of Bronte Capital discovered that, in the same way Lehman used its Repo 105 transactions to move bad debts off its books overnight (and thus appear more sound) for regulatory authorities, Bank of America was relying on similar transactions to move its debts off its financial statements at the end of every quarter. In looking at their 2006 Annual Report, Hempton found something funny:

You will notice that the end period assets were always lower than the average assets. Moreover it was not obvious unless you really looked because the quarterly earnings releases did not include average assets (but you could work it out because they stated return on average assets). It was not just 2006 either – this had been happening for a while. Bank of America was parking its assets off balance sheet at the end of every quarter for some time and had been obscuring the fact.

Hempton speculates that BofA parked those assets (in effect, securitized debts) with the Mitsubishi UFJ Financial Group, though he has yet to confirm that information.

Marian Wang at ProPublica asked BofA whether that was true, and received this response:

“Efforts to manage the size of our balance sheet are routine and appropriate, and we believe our actions are consistent with all applicable accounting and legal requirements.”

In other words, they were doing exactly that, but it was completely legal. Somehow, I doubt that makes BofA’s customers or investors feel any better about either the bank or the SEC’s vaunted disclosure requirements, which are supposed to protect investors from companies manipulating their annual reports.

Anyone who still believes that Sarbanes-Oxley resolved the accounting issues and loopholes that led to the collapse of Enron is probably fooling themselves.

After months of whining, a resignation letter delivered on the op-ed page of The New York Times and warnings of a massive corporate brain drain, only 16 executives have left bailed-out companies amid pay caps in the past two years. Pay Czar Kenneth Feinberg set pay rates for a grand total of 104 super-rich guys in that time, but — despite the hue and cry — the vast majority of them stayed at their companies even as they pointed to massive external competition for their services.

Perhaps alternate employers without salary caps — because their companies didn’t require a massive government bailout after failing to manage risk, understand complex derivatives and stay afloat — didn’t think the best hiring bets were a bunch of whiny guys who tried to bail on their failing companies after determining that failure might mean lower salaries? That’s just a layperson’s guess, though.

It’s not as though Feinberg is taking it easy on them, either.

Pay for top earners at [the 5 companies that received multiple bail-outs and haven’t paid them back], on average, is expected to fall by 11 percent from 2009, to $1.62 million, according to people briefed on the situation. Compensation is down nearly 77 percent from 2008. And this year, more than 70 percent of all approved compensation is expected to be given in the form of stock instead of cash.

Ouch. Only an average salary of $1.62 million? That might be going a little easy on them, it’s true. Unemployment — in New York State at least — pays $405 a week, though, regardless of how much you earned before your company went under.

Feinberg also doesn’t take kindly to whiners.

Officials at some of the companies had fiercely insisted that they needed to pay hefty salaries to retain senior executives and allow them to maintain a comfortable living standard, according to people close to the talks. Mr. Feinberg countered by lowering cash payments and awarding more stock. His rulings will take effect immediately, with amounts retroactively adjusted for any money paid in the first few months of 2010.

That will teach anyone to complain, I guess. Michael Carpenter, the new CEO of GMAC, was offered a $9.5 million salary, rejected by Feinberg — and, in response to arguments from GMAC that they needed to pay him more, Feinberg allowed them to give him $8 million worth of stock that he can’t sell for three years … and not a penny of salary.

Well, we knew that SEC employees weren’t policing the Lehman Brothers or sharing information on its collapse with the Fed and they weren’t getting Goldman to disclose how much money Tim Geithner got AIG to pay them from the U.S. Treasury in a timely fashion, and they certainly weren’t issuing rules to allow them to enforce the 2003 settlement with investment banks over deliberately skewed market analysis. But today, we finally know what SEC employees were doing for the last couple of years. They were viewing pornography.

According to John Cook at Gawker:

Now we’ve obtained reports of 16 investigations into porn-surfing by SEC employees and contractors (one of them is a woman!), including one man who said his daily porn viewing at work was limited to “no longer than an hour and a half a day.”

And that’s only 16 of the two dozen caught over the last two years.

Firewalls designed to keep employees from accessing porn didn’t stop them, according to an earlier Washington Times story.

The work computer of one regional supervisor for the U.S. Securities and Exchange Commission showed more than 1,800 attempts to look up pornography in a 17-day span: “It was kind of distraction per se,” he later told investigators.

Outside of the efforts to look at those 1,800 pages, the man still managed to “look at” actual pornography at least twice a day, he reportedly told investigators. Other employees reported using their computers to look at pornography multiple hours a day, or even a few times a week.

Sites accessed by SEC employees included everything from AdultFriendFinder.com (a dating site dedicated exclusively to sexual encounters) to Megarotic and YouPorn (well-known video porn sites often dedicated to amateur exhibitionists) to fetish sites catering to a variety of distinct interests. One staffer used loopholes in the content filter to download child porn, and his case was referred to the FBI for investigation. Otherwise, employees were reprimanded and sent back to their desks and their computers.