We keep hearing that the Fat Lady has sung and exited, stage right. That, of course, would be the Fat Lady of the 1) Great Recession 2) Great Panic 3) economic crisis, or 4) however you like to refer to run-amok unemployment, home-value crashes and ongoing waves of bankruptcy filings.

However, we still don’t hear much convincing news about the Phat Lady of the Recovery.

Sustainable for whom, exactly?

From a June 11 Dow Jones’ piece in The Wall Street Journal, “With a sustainable economic recovery now underway, policy makers will soon have to start thinking about pulling back their monetary stimulus to ensure inflation stays low and inflation expectations remain well-anchored, Philadelphia Federal Reserve President Charles Plosser said Friday.

“While complete healing from the deepest downturn since the Great Depression will take time, Plosser said the recovery is becoming more ‘broad based,’ which should leave the economy to grow by around 3.5% this year and next, somewhat stronger than the underlying trend growth rate of the economy, which he believes to be about 2.75%.

” ‘I believe the economic recovery is on a sustainable path, and I expect further progress even as we unwind the accommodative monetary and fiscal stimulus put in place during the crisis,’ Plosser said.”

He said he expects the business sector to begin buying both equipment and software and looks for improvement in consumer spending, residential investment and hiring–although employment “will take some time to return to its long-run level.”

He makes some other prognostications about Fed policy, financial problems in Europe and fed-funds’ interest rates–all with an eye toward keeping “uncomfortable and costly” inflation at bay.

Late in the story, he is credited with at least acknowledging the continued, bleak unemployment rates.

May numbers ’somewhat disappointing’

“Plosser called May’s employment numbers ’somewhat disappointing,’ as all but 41,000 of the 431,000 jobs added in the month were government jobs, mostly reflecting the hiring of temporary census workers. While he doesn’t give one month’s number that much weight, Plosser said, developments must be watched closely in the coming months, which could be marked by more big swings in the numbers before a more accurate picture of the underlying employment prospects emerges.”

This June 10 report from The Washington Independent seems to have a better grasp of the situation than Plosser does.  Using an ex-employee of  J.P. Morgan Chase as a focal point, the piece describes the plight of a class of the unemployed known as “99ers.” These are “the long-term unemployed who have exceeded the maximum number of weeks of benefits,” and Cindy Paoletti, it says, is merely one in a million of them. The 58-year-old woman worked in payroll at the megabank for 23 years. “In December 2007, Paoletti was let go in a wave of layoffs that eventually shuttered the entire Syracuse operations center. ‘My job went to India,’ she sighs.”

Ezra Klein, blogging for The Washington Post, weighs in on Paoletti’s story with an observation about the relation between her mortgage and her income:

“There’s a lot going on in Paoletti’s story, but I’d note one part in particular: She’s underwater on her mortgage. That is to say, the drop in housing prices means she now owes the bank more than her house is worth. So there’s no upside to selling. And that means that unless she’s willing to walk away from her mortgage, there’s no real way for her to leave her economically-depressed town and move to a place where jobs are more plentiful.”

99ers beset on all sides

But as the Independent points out: “Paoletti and other 99ers are afflicted by a constellation of problems.” Chief among those problems, of course, is the unprecedented depth and length of unemployment.  “Of the 15 million unemployed in America, over 7 million have been out of work for more than six months, nearly 5 million for a year and over 1 million for two years — the worst statistics since the government started keeping count in 1948. The proportion of the unemployed out of work for more than six months has doubled in the past year, to more than 46 percent. The jobseekers-to-jobs ratio, which tells how hard positions are to get, remains around 5.6 to 1.”

Bright spots, dim bulbs

The seekers-to-jobs ratio, however, is among the few bright spots in this picture. At 5.6 to 1, the ratio has improved since its high point in November 2009, when it was 6.2 to 1. By way of comparison, in December 2000, the ratio was 1.1 to 1, according to this report from the Economic Policy Institute.

Another bright spot might seem to a casual reader to be the rate of bankruptcy filings.  Here’s the headline from a June 2 report in The Wall Street Journal: “Decline in Bankruptcy Filings May Be Temporary.”

Except, whoops–there’s no meaningful decline.

Sure, the numbers fell about 6 per cent from April to May of this year. But the May filings are still higher than those from this time last year.

But here’s the lede from the actual report: “The 136,142 consumer bankruptcies filed in May represented a 9 percent increase nationwide over the 124,838 filings recorded in May 2009, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). NBKRC’s data also showed that the May consumer filings represented a 6 percent decrease from the 144,490 consumer filings recorded in April 2010. Chapter 13 filings constituted 26 percent of all consumer cases in May, a slight increase from April.”

To be fair to the WSJ, their article quotes the bankruptcy institute’s director and qualifies the month-to-month improvement: ” Despite the improvement, ‘I think the overall arc is up,’ said Samuel Gerdano, the Bankruptcy Institute’s executive director, and he predicts they will continue to rise.”

Balky Senate schedules one hearing

Back to Paoletti and the question of  getting the U.S. Senate to help the 99ers, the Independent says “. . . the Senate as a whole is less than willing. Sen. Max Baucus (D-Mont.), the chairman of the Senate Finance Committee, has indicated that he will not vote for a fifth tier [of unemployment benefits], as have others. ‘You can’t go on forever. I think 99 weeks is sufficient,’ Baucus told Bloomberg News. Sen. Byron Dorgan (D-N.D.) likewise dismissed the idea. ‘There’s just been no discussion to go beyond [99 weeks],’ he said. And the Senate leadership, without explicitly shooting down a fifth tier, has nodded in agreement.”

Paoletti, perhaps naively, is pinning at least some hope on a hearing scheduled for this Thursday.”Rep. Jim McDermott (D-Wash.), the head of the subpanel on income security and family support for the House Ways and Means Committee, is holding the first hearing on policy responses for long-term unemployment. ‘Our first step to respond to long-term unemployment is obvious — continue the emergency federal unemployment programs to prevent millions of workers from losing their benefits,’ McDermott said in a [June 3] statement. “If we can afford wars, tax cuts and bank bailouts, then we can certainly afford to maintain programs for workers who have lost their jobs through no fault of their own. An increasing number of Americans who have worked hard and played by the rules are now finding themselves with no job, no savings and no support. We must not abandon these workers and their families.”

Astonishingly, the biggest slap is not the palliative (”We must not abandon these workers. . .”). No, the big slap is the delay in working out a solution. The Senate, who arguably dragged the entire country through a tortuous year of health-care pain, not only blew a chance last year to help consumers with reform of the bankruptcy reform act but also took two recent breaks rather than work on the jobless crisis.

And now we learn that Thursday’s hearing is “the first hearing on policy responses for long-term unemployment”? Makes you wonder what it is they do work on, doesn’t it?

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The bankruptcy reform act of 2005 increased the complexity of the law, but if you are overwhelmed by debt, filing for bankruptcy protection may be your most pragmatic alternative. If you are facing foreclosure of your home (sometimes referred to as your “primary residence,” as opposed to a second home, or “vacation home”), bankruptcy protection may be your best route to saving the home. If you are struggling with medical bills, you may be in a special category for setting debt aside, and if you have problems with credit-card debt, you should be aware that some of those laws have changed recently, too. Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. For bankruptcy basics, please see:

Principles of bankruptcy

Basics of bankruptcy

Introduction to Chapter 7

Introduction to Chapter 13

With mixed-news noise dominating any clear signal of a consumer-level recovery from The Great Recession, at least one Senator is still hoping to make the bankruptcy code more useful to individuals filers.

On the slightly brighter side of recent announcements, the big consumer-credit players are saying that even though credit-card delinquencies rose in October, out and out defaults fell more than expected–which is a good sign.

And as Bloomberg reported Nov. 17, “Wholesale prices in the U.S. increased in October for just the second time in the past four months, indicating inflation will not be a concern for the Federal Reserve.”

(Of course, although that’s another good sign, one presumes that the inflation news applies to only the  near future: who knows what inflationary surprises lurk in the long haul?)

“The decrease in prices excluding food and energy last month was the biggest since July 2006. The core measure was forecast to rise 0.1 percent after a 0.1 percent drop a month earlier, according to the Bloomberg News survey.

“Compared with a year earlier, companies paid 1.9 percent less for goods today’s report showed. Core costs were up 0.7 percent from a year earlier, the smallest 12-month gain since March 2004.”

And for families who are planning menus for the festivities later this month,  CNBC reports good news re: the “Turkey Price Index,” in a slide show called “The Cost of Thanksgiving Dinner 2009,” with the conclusion that “the average cost of this year’s turkey dinner and all the fixings will take a smaller bite out of your wallet.” Despite CNBC’s humor–and the fact that the savings aren’t huge–it’s nice to see that not all food costs are going up.

Back at the Team Obama ranch house, meanwhile, unemployment news remains grim. Traveling in Asia, the president announced via the White House that he “will hold a forum on job creation with U.S. business leaders on December 3 and then embark on a cross-country tour to discuss economic recovery,” according to a Reuter’s Nov. 17 report.

With the national unemployment rate now in double digits, Reuters said, the “conference aims to bring chief executives, small business owners and financial experts to the White House to exchange ideas on putting unemployed Americans back to work.

” ‘We have a responsibility to consider all good ideas to encourage and accelerate job creation in this country,” Obama said in a statement.’ ”

On Nov. 16, Fed boss Ben Bernanke “predicted that the unemployment rate will get worse before it gets better,” according to the Huffington Post.

“Bernanke on Monday blamed banks for slowing the recovery and keeping unemployment high,” according to HP, quoting the chairman as saying, ‘Banks’ reluctance to lend will limit the ability of some businesses to expand and hire. Because smaller businesses account for a significant portion of net employment gains during recoveries, limited credit could hinder job growth.’ ”

One hates to wax sarcastic, but, dang, Mr. Bernanke–it sure does seem like widespread, restricted credit could hurt job growth, especially given CIT’s troubles and that lender’s importance to small business.

Bernanke managed to find one glimmer of hope: “The best thing we can say about the labor market right now is that it may be getting worse more slowly.”

Echoing the labor market, the housing market has shown improvement, but the number of “underwater mortgages” is hardly cause for holiday cheer. According to Diana Olick,“Home prices are improving, but there is a lot of government stimulus behind that improvement. The extension and expansion of the home buyer tax credit, as well as artificially low mortgage rates backed by the Federal Reserve’s purchase of GSE loans and securities, will all expire by the middle of 2010, so it remains to be seen whether the very tenuous recovery we are now seeing in housing can endure on its own.”

Quoting a recent survey from Zillow.com, Olick says that “even in those markets where investor competition has returned and prices on the low end are beginning to stabilize, homeowners still owe far more on their mortgages than their homes are currently worth.”

The most troubled states (click here for a slideshow showing the worst cities) include California, Arizona, Florida and Nevada–a staggering piece of data, according to Olick, is that “Las Vegas leads the way with 81.8 percent of borrowers underwater on their loans in the third quarter of this year, down barely one percent from the second quarter but still up 10 percent from the first quarter.”

Olick reminds us that various government programs “do allow for modifications and refinances on homes with up to 25 percent negative equity. . . “  and that some market observers “argue that ‘underwater’ borrowers are no different than any other borrowers, as long as they continue to make their monthly mortgage payments, and as long as they continue to want to live in their homes, knowing they will have to wait out the market for home equity to gradually return.”

“But,” says Olick, “the danger is for those that need to sell, or for those who can no longer afford their monthly payments and don’t qualify for a loan modification.”

Olick also pints out that “. . . many homeowners, especially in the hardest hit regions, don’t think they will ever see equity again, and therefore see no reason to continue making payments on their loans, whether they are able to or not.

“Many are simply sitting in their homes, rent-free, as banks struggle to catch up and contact them. Others are vacating the homes, mailing in the keys, and choosing a credit hit, rather than be strapped to a home that will only ever be a liability.”

Of course, we’ve shown that granting “cramdown” powers to federal bankruptcy judges would be the most efficient method for dealing with the housing crisis. But the banks and mortgage-lending lobbies have so far been able to stymie such commonsense legislation.

But in lieu of being able to address the housing crisis, at least one Senator is challenging his cohorts to play fair with consumers who need bankruptcy protection because of catastrophic medical bills.

As reported in the Providence Journal on Oct. 21, a subcommittee of the Senate Judiciary Committee, led by Senator Sheldon Whitehouse (D-RI), convened Oct. 20 “to consider his legislation to make it easier for those burdened with medical bills to go into bankruptcy.”

Whitehouse indicated he may pursue a different tack than the preceding efforts on cramdown legislation, by working the medical-debt relief into pending health-care legislation. His main idea is that “bankruptcy filing would be permitted for anybody who owes more than $10,000 or 10 percent of his or her income in medical bills.

“Whitehouse would also exempt those with high medical debt from meeting the income tests required of other debtors seeking bankruptcy protection.”

Testimony included remarks concerning a couple, Patrick and Kerry Burns, whose 4-year-old son died in March following a long illness.

Even though the couple had insurance, they could not cover their portions of the medical expense and wound up in “financial ruin,” losing their home in the process.

Another highlight of the testimony was an interchange between recent Senate addition Al Franken (D-MN) and Hudson Institute Senior Fellow Diana Furchtgott-Roth, who wrote a commentary piece for Forbes about the incident, saying that “At a recent Senate Judiciary Committee hearing, where I was a witness, Sen. Franken disagreed with my testimony that pending health care ‘reform’ bills would lead to more bankruptcies, because higher taxes and health insurance premiums would cause more job loss, a major cause of bankruptcy.”

In tart response, Franken asked  Furchtgott-Roth about the number of medical bankruptcies last year in Switzerland, France and Germany. Forchtgott-Roth, a former chief economist at the Department of Labor, said she didn’t know but could find out and get back to Franken. He told her in each case the number is zero, then said, “The point is, I think we need to go in that direction, not the opposite direction.” A piece of the interchange is available here as well as video clip.

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Even though legislation may bring needed change to the bankruptcy code–such as the so-called “cramdown powers,” and catastrophic medical-cost relief–the laws already in place do provide strong protection for hard-pressed Americans.  To learn more about getting a new start in your financial situation, read more about “Bankruptcy Basics,” or Chapter 7 or Chapter 13 filings. If you’d like to schedule a free consultation or evaluation of your situation, click here.