Those Unemployment Figures

The figures that the maladministration is giving out for unemployment are bad enough, at around 6%, but that doesn't take into account the many employed workers whose hours are being cut back. Last night, the discussion on Newshour shone a light on that figure, which is the underemployment so often encountered.

NARIMAN BEHRAVESH: ... before the big sort of financial crisis hit in September, the recession could have been characterized as mild. Well, we can now banish that term from our vocabulary, because what the financial crisis did was it turned this recession into a much deeper one.

And so, indeed, we're headed for a recession that's probably at least as bad as the 1990-91 recession and possibly -- although probably not -- but possibly as bad as the worst recession in the postwar period, which occurred in 1982.

JEFFREY BROWN: Lisa Lynch, today's report also had some numbers on average hourly wages. What did we learn there?

LISA LYNCH: So we saw some other things. Average hourly wages increased 2.9 percent on a weekly basis. Now, that's running below inflation, which is rising right now at 4.9 percent.

So people that are fortunate enough to have a job are seeing their weekly wages not keeping pace with inflation. And part of that is a reflection of another dimension of the softening in the labor market that's not captured by the unemployment rate, and that is a lot of people are in work but are working a lot fewer hours, either because they could only find part-time employment or their employers have reduced their hours.

So if we come up with a broader measure of unemployment that includes people that are out of work, people who've given up looking for work because they know there's nothing around them, and people that are working part time for this sort of economic reason, the unemployment rate would be 11.8 percent.

So more than one in 10 workers out of work or severely stressed with respect to the softening in the economy. (Emphasis added.)

During conversation about this earlier this morning, trifecta mentioned that his own family had experienced this, and his own father had been cut back twice on the hours he works, and therefore the money he earns. His dad would still count as employed in official figures. The employment, however, doesn't any longer give him the spending power he once had. Of course, for each worker losing his ability to support himself and family with diminished earnings, the economy suffers because consumption is diminished.

The failure of corporate interests to realize that by diminishing earning power they were cutting into profits has always astonished me. This morning I had to be somewhat amused to see that the originator of the mortgage-backed security, a major culprit in our present economic crisis, has become the victim of his own invention.

Briefly, the mortgage-backed security- when it was used to bundle subprime loans - became the source of those toxic debts, investment bundles that were rated AAA but all the time had worthless loans along with perfectly good loans.

Lewis Ranieri, who helped create the mortgage-securities market in the 1980s while at Salomon Brothers Inc., became a victim of its collapse after his Houston-based bank was seized.

Franklin Bank Corp., formed by Ranieri in 2002, was taken over by the Federal Deposit Insurance Corp., and its deposits handed over to Prosperity Bank, the FDIC said in an e-mailed statement yesterday. The failed bank's 46 offices will open as branches of Prosperity, the FDIC said.

Ranieri, 61, a former Salomon Brothers vice chairman, formed Franklin in 2002 and over the next four years expanded the bank's lending operations. While Franklin avoided the subprime mortgage market, his firm was burned by loans to builders in California, Arizona, Florida and Michigan, where foreclosures are among the highest in the U.S. In November 2006 and again a year later, he predicted the market would get worse.

``The subprime crisis has spread to other sectors of the housing market,'' Ranieri said in a conference call a year ago. It's ``having a significant effect on housing and builders.''

The very regulation that the financial community fought so hard against would have protected this inventive banker from the disaster he encountered yesterday. It would be nice if we could expect the business community to learn that it has been wrong, and like the rest of us would have been better off, if it had been regulated. Somehow I don't see very many of the corporate world learning the lesson. This morning on Wall Street Journal Report Maria Bartiromo tried really hard to get reporter John Harwood to confirm her proposition that President-elect Obama by increasing taxes would cause economic disaster. Of course, she avoided the obvious conclusion that keeping them low on business, punitively high on individuals, while reducing income and jobs, actually has created disaster. He declined to agree. Instead, he praised Obama's deliberative approach.

Eight years of imposing ideology that has failed simply hasn't gotten through to the representatives of business. They have to be regulated because they will continue being self-destructive, as even libertarian Alan Greenspan has admitted. It's that destruction that has put us into the trough where we find ourselves, with effectively 11.8% unemployment. Wise business sense dictates that regulation was needed, that without it our economy failed, and that now it has been shown to be absolutely necessary.

The lesson this country learned the hard way before it just has learned again. Sound leadership at the helm is the choice it has made. We can't afford any more corporate welfare.