Monday, November 9, 2009

A possible FHA bailout and the stimulus’ effect on the jobless rate

The Federal Housing Administration was expected to make public its objective audit determining the soundness of the organization. Several have doubted its security because, as of Oct. 1, its reserve fund fell beneath the required 2% of the agency's unsettled loans for the first time in its history. What’s more, the agency unexpectedly canceled the publishing of that audit report, citing difficulties with the risk scenarios.

Clearly, the FHA’s problems come from the details that the independent auditors ascertained that the risks to the agency were greater than FHA Commissioner David H. Stevens has acknowledged publicly. What's being considered now is whether or not the FHA can re-establish its cash reserves without a government bailout as the agency has faced a growing number of defaults as its loan volume extended.

Unease continues to abound around the national economy as the jobless rate jumped up 0.4 percentage points to 10.2% – the highest level since April 1983 – while the broader U-6 measure shot up even more, rising half a point to 17.5%, a measurement that peaked in 1982 at 14.3%.

The economy lost another 190,000 jobs in October, taking the overall job losses to 3.5 million since January. While the average hours worked in a week remained at 33.0, which means that millions of part-time workers will have to develop into full-time employees before employers start hiring new workers.

With examples such as these in both the public and private sectors, it is difficult to conceive of a starker, definitive, negation of Keynesian stimulus. President Bush’s February 2008 $160 billion-dollar inducement and President Obama’s $767 billion dollar stimulus are proof positive that government spending does not translate into stabilizing the job market nor keep unemployment from rising.

As the accompanying chart shows, Team Obama calculation of keeping the jobless rate below or at 8% has not only not happened, it has actually made worse the situation had they done nothing at all. Once again, testaments to the fact that an entity, such as the government, is not a producer and therefore can only spend what it confiscates from the private sector – the idea that infusing money into failing companies does nothing more than delay the inevitable.

Americans know this to be the case, which is why a clear majority oppose a health care reform that is a precursor to government run health care. It is also why a microcosm of those same American’s chose to change the political tract in two states last week.

-- Killswitch Politick

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