Friday, April 24, 2009

News so fast you'll freak!

Both my sons have at some time worked for a sandwich shop with the advertising, "sandwiches so fast you'll freak." Lately the news, and I mean BIG news just keeps coming. Often it is old before it is even released and reverses thinking on a dime.

This week as pundits spoke of the "green shoots" of economic recovery everyone seemed to grasp for positive spin on news, even selective spin.

Today March's durable good report was released and was just such a green shoot. While by no means great, orders fell by only half what was expected. But..uh, what about the news yesterday that General Motors will completely shut down for the balance of the second quarter? I think it might put a crimp in the next couple months' durable goods reports. Including parts suppliers this could be a reduction of payrolls of about 140,000 workers.

The U.S. economy needs approximately 100,000 new jobs per month to move the unemployment rate lower. By May we can expect to see 9% and 10% by June or July.

In other news, the Bernanke, Paulson, Bank of America saga looks about to get deeper, wider and more despairing. That laws were broken seems clear. That there will be consequences to any of them is less clear. But we're getting used to that.

The issue in question is that Mr. Lewis, BOA's CEO, wanted to step out of the deal to purchase Merrill Lynch as details came to light that the company was crumbling fast. Secretary of the Treasury Paulsen and Fed Chairman Bernanke threatened to remove Lewis and the board of BOA if the deal were not completed.

The bank had a fiduciary responsibility to alert shareholders of material events, such as the mounting losses at Merrill Lynch which would have given them the opportunity to stop the deal. Lewis told investigators, "it wasn't up to me."

It sure is up to you buddy. You don't work for the regulators you work for the shareholders. If your actions result in your removal from office by a regulator, tough. You followed the law.

Until consequences are felt at the HIGHEST levels, our system will grind ahead very slowly at best. With no clarity of policy or even law to guide commerce we are dead in the water. It's time to take a deep breath cut out the rot.

John Barnyak