Economy, foreclosures, lending, medical costs

Accordingly, as closely as we can, we monitor stories and studies about bankruptcy itself, of course–but also these core subjects: economy and unemployment; foreclosures and housing starts; lending (mortgages and credit-card); and the health-care system (including medical bankruptcies).

Our latest three posts are as follows:

• “Jumping the gap from Wall Street bonuses to cornbread mix,” about the differing effects of the recession on different sectors and people who have decided they can’t wait for the government formulate an effective jobs policy.
• “Against din of housing slump and unemployment, credit-card reform loophole exploited: subprime, pre-account fees,” showing how banks begin to exploit gaps in reform legislation almost before the ink is dry on the bill.
• “Despite new credit laws, young adults can still fall into traps: Don’t let them–know your options for them and for you,” listing alternatives to risky credit cards for hard-pressed households and for those with college-age children.

Origins of ‘Plutonomy’

Today we’ll look at a relatively new term: plutonomy,apparently first used by Citigroup analyst Ajay Kapur in a 2005 paper for clients. An October paper, also crediting two other Citigroup analysts, refers to a September paper but then expounds on the term, although somewhat scattered in and among pitches to potential clients. Some of the paper reads like working notes, but following are selected, crucial excerpts, with some of our own reformatting for clarity’s sake :

• The World is dividing into two blocs–the Plutonomy and the rest. The U.S., U.K. and Canada are the key Plutonomies–economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
• In plutonomies the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers like savings rates, current account deficits, consumption levels, etc.
• [T]he world is dividing into two blocs–the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S.
• What are the common drivers of Plutonomy?
  1. Disruptive technology-driven productivity gains,
  2. creative financial innovation,
  3. capitalist-friendly cooperative governments,
  4. an international dimension of immigrants and overseas conquests invigorating wealth creation,
  5. the rule of law,
  6. and patenting inventions.
• Often these wealth waves involve great complexity, exploited best by the rich and educated of the time.

How to participate

The idea for the analyst team, of course, was to sell a method by which their clients could prosper–in other words, trading strategies to exploit the wealth-gap economy.  One way, they wrote, was to buy equities in general. But better yet, buy stocks of companies that cater to the really wealthy–hence, the “Plutonomy basket”: a mix of equities issued by companies that cater to the very rich. In the pre-recession era the team was writing, they offered a basket of “luxury stocks” that had returned an enviable “an annualized return of 17.8%, handsomely outperforming indices such as the S&P500.”

And why not? After all, the team reasons, “Perhaps one reason that societies allow plutonomy, is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Why kill it off, if you can join it?”

In short, a plutonomy seems merely an embodiment of the old adage, “The rich get richer, and the poor get poorer.” To a certain, the adage holds true.

Of and by the wealthy

But the rich/richer, poor/poorer framework aphoristically glosses over the middle class. In that sense, plutonomy is a portmanteau, blending economy with plutocracy: an economy driven by the wealthy, of and by the wealthy.

It is in that sense that a Wall Street Journal blogger admonishes us in an Aug.5 “Wealth Report” to face the “surprising” recognition of “just how much or our consumer economy is now dependent on the rich, and how that share has increased as the U.S. emerges from recession.”

Blogger Robert Frank notes that, “According to new research from Moody’s Analytics, the top 5% of Americans by income account for 37% of all consumer outlays . . . .

“By contrast, the bottom 80% by income account for 39.5% of all consumer outlays.

“It is no surprise, of course, that the rich spend so much, since they earn a disproportionate share of income. According to economists Emmanuel Saez and Thomas Piketty, the top 10% of earners captured about half of all income as of 2007.”

A question of stability

To his credit, Frank also recognizes the inherent problem:

“The data may be a further sign that the U.S. is becoming a Plutonomy–an economy dependent on the spending and investing of the wealthy. And Plutonomies are far less stable than economies built on more evenly distributed income and mass consumption. ‘I don’t think it’s healthy for the economy to be so dependent on the top 2% of the income distribution, [Moody's chief economist Mark] Zandi said. He added that, ‘In the near term it highlights the fragility of the recovery.’ ”

However, Frank stops short on two fronts, the evolving recognition that:

1. the economy already has become a Plutonomy, and
2. some experts believe the parameters “of and by” have been transcended, such that what we have now is an economy “of, by, and for” the wealthy.

[EDITOR'S NOTE--To be continued in Part Two.]

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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

Housing, unemployment, bankruptcy

“Housing sales in July plunged to their lowest level in more than a decade, exceeding even the grimmest forecasts.”

That’s from The New York Times, Aug. 24.

Here’s another, also from the same edition of the Times: “The Dow Jones industrial average and the Standard & Poor’s 500-stock index ended lower Tuesday for a fourth consecutive day, unable to rebound from a disappointing report on existing-home sales.”

This one’s from the Wall Street Journal, Aug. 5: “More Americans filed for bankruptcy protection in July, reversing a trend of declining filings over the previous three months and highlighting the continuing financial struggles of many consumers.”

Highest rates since ‘reform act’ of ‘05

“Long-term unemployment and small-business failures continue to propel personal bankruptcy filings,” reports an Aug. 22 article in the Tenneseean (our emphasis added), “with Tennessee in step with a national trend that shows the number of cases spiking in July for the first time after declining for three months.

From the Aug. 18 Economist, we get the following brief (and the following chart, as well, based on data from the Administrative Office of  the US Courts): “Bankruptcy filings rose 20% in the year to June 30th compared with the previous 12-month period, according to statistics released on August 17th by the Administrative Office of the US Courts. This takes quarterly filings to their highest point since tougher bankruptcy laws were introduced at the end of 2005. That change brought a spike of bankruptcies, as companies and individuals rushed to declare themselves broke under the more lenient old regime. The data suggest that an older trend is reasserting itself. This is could be more bad news for America—or it could just mean that creative destruction is alive and well.”

One recent blog mentions that the return to pre-2005 levels may “merely be” a statistical “reversion to mean.”

Election fodder?

That would be some mean-dang revertin’, all right, given that the credit-card lobby’s pure intent in getting the “reform act” of ‘05  was to make it harder for people to file for Chapter 7 protection. They did, and it is–yet, Chapter 7 filings far outnumber Chapter 13 filings.

Perhaps cheekily, the blog ends with the admonition to watch for this chart as the election nears–with the rejoinder to see how many times it appears with the pre-2005 years left off the chart. But, really, that’s a good suggestion: Any candidate from any party who monkeys with the data should be immediately suspect.

Reform fail? Credit-card company hits loophole

Speaking of credit-card companies, it looks as though at least some are definitely reverting to mean. The credit-card reform legislation passed last year was supposed to rein in the heinous practices of the industry. But as this Aug. 21 piece in the St. Louis Post-Dispatch demonstrates, loopholes already are being exploited.

“When Congress passed the credit card reform act last year, it took aim at the sort of high-fee card that sat in Lynne Fischer’s purse until recently. There’s now some evidence that Congress missed.

“Lynne Fischer, 64, lives in St. Louis Hills on about $1,700 a month from a small pension and a disability check. She’s had problems paying some bills. ‘My credit history is not well,’ she says.

“Still, she wanted a credit card for emergencies: ‘What if my car breaks down?’ she asked. When the mail last fall brought an offer from First Premier Bank of South Dakota, she applied.

“It was a costly decision. . . .”

The article describes First Premier as using this business model: The company “offers cards for people with bad credit, and they charge significant up-front fees. They pitch the card as a way for customers to rebuild their credit by making on-time payments.”

The article also says that consumer advocates label such practitioners as predatory “fee harvesters,” a term we will probably see more often in the months to come. At any rate, and perhaps needless to belabor, she finally realized it was a stinky deal: “Fischer sometimes made only the minimum payment, and so she ended up paying interest on those fees. When she called to cancel the card this summer, she says the bank’s representative insisted that she pay $253 — an amount consisting mainly of the fees.”

Oh–but there’s more. The quote next at bat really, truly exhibits the depths of the ether-soaked depravity in which these companies are willing to traffic.

“As of last week, First Premier was offering a card with an annual fee of $75. That’s 25 percent of the $300 credit limit. But it also has a $95 ‘processing fee’ that must be paid before the customer gets the card.

“It’s perfectly legal, says First Premier. ‘The credit card act does not preclude fees charged prior to the account being opened,’ says Darrin Graham, the bank’s vice president for marketing. So, the $95 fee doesn’t count.”

Holy moly and Great Winged-Leaping Lizard-Bats! and whatever other mythical creatures that defy reason. Let’s look at that statement again, with emphasis added:

“The credit card act does not preclude fees charged prior to the account being opened.”

Just imagine if this becomes a trend: Utility companies guess where we’re going to move, then start billing us before we move in; Redbox and Netflix get predictive software, and charge us for movies before we select them. And on and on…

Perhaps First Premier is simply running interference for the rest of the industry, trying an end-around to see how much trouble such tactics will attract. Or perhaps they really are the junkies they appear to be, addicted to cash flow they pump from the least sophisticated, most vulnerable consumers they can bag. We’ll keep following and let you know what we find.

[Next time: Using credit cards under the new law and credit for college-age children.]

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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

Seems to be going be well–if you work in the neighborhood where the Great Recession was engineered.

According to an Aug. 13 article in MarketWatch, “Bonuses in the financial services industry will increase slightly this year as the sector outpaces the recovery of the broader economy, according to a forecast published by Johnson Associates Inc. Thursday.”

Supposedly, it’s a big deal among legislators, too. Apparently some of them see problems with bonuses for those in the sector that caused the problems that nearly drove the economy off the cliff.

“The increase in bonuses would come at a time when rising compensation in the sector has become a hot issue for lawmakers in the wake of the financial crisis.”

Of course, bonuses were off the charts during the boom leading up to the crisis. Trouble is, nothing changed during…

Cuomo’s report

“But when the financial crisis hit in 2008, compensation stayed at these levels even as bank earnings plummeted. According to an investigation by Attorney General Andrew Cuomo’s office, at Bank of America net income fell to $4 billion from $14 billion, but total payouts still remained at $18 billion. Citigroup and Merrill Lynch, now owned by Bank of America, lost $54 billion in 2008, but still paid out about $9 billion in bonuses. Read more about Cuomo’s [2009] report here. [" According to the 2009 article, "Attorney General Andrew Cuomo's office analyzed 2008 bonuses and earnings at the nine financial institutions that were the first to receive government money from the Troubled Asset Relief Program, or TARP."

Another bailout beneficiary, GM is doing pretty well, although fellow bailee Chrysler is still struggling. Ford, not a bailee, is doing OK, too. Other big corps are reeling in the dough, like say, Disney (riding blockbusters Toy Story 2; Alice in Wonderland; and Iron Man 2).

The 'new abnormal'

And people aren't just buying downsized cars and going to the movies. Describing a "bifurcated market," this July 29 BusinessWeek article says bewildered-and-bewildering consumers are scrimping on soap and other basics in order to blow money on luxuries.

"The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo. Companies such as Cupertino, California-based Apple, whose net income jumped 94 percent in its last quarter, and Starbucks Corp., which saw a 61 percent increase in operating income over the same time frame, are thriving.

"Mercedes-Benz is having a record sales year; deliveries of new vehicles in the U.S. rose 25 percent in the first six months of 2010. Lexus and BMW were also up. Though luxury-goods manufacturers such as Hermes International SCA and Burberry Group Plc are looking primarily to Asia for growth, their recent earnings reports suggest stabilization and even modest improvement in the U.S."

Well, who can blame the American consumer for being at least a little crazy?

As the Aug. 17 Detroit Free-Press says, "The U.S. lost nearly 3 million jobs in the second half of 2008.

A 'deep hole'

"The hole was so deep that even with the 620,000 private-sector jobs that the Economic Policy Institute reports were added over the last seven months, it doesn't feel like a recovery to many.

"Charles Ballard, a Michigan State University economist, agrees that the recovery is very slow, but not ending.

" 'We're coming out of the worst economic downturn in our lifetimes,' Ballard said. 'Given that a sledge hammer was taken to the economy when Lehman Brothers failed, we're lucky the damage hasn't been worse.' "

Foreclosures still raging

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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

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

The Associated Press reports today: “New claims for unemployment benefits fell more than expected last week as layoffs ease and hiring slowly recovers.”

A “seasonal adjustment” to the stats is involved, though, as Marketwatch reports, also today: “Initial claims fell 14,000 to a seasonally adjusted 442,000 in the week ended March 20, the Labor Department said Thursday.

“The latest figures reflect annual revisions using new seasonal factors, and put claims 10,000 lower than they would have been under the previous assumptions, a Labor Department official said. Without the annual revision, claims would have totaled about 453,000. Economists surveyed by MarketWatch predicted claims would drop to 450,000. See our complete economic calendar.”

The AP explains that the seasonal adjustment addresses such factors as jobs ending for temporary holiday-workers.
“The department updates its seasonal adjustment methods every year, and revises its data for the previous five years. Seasonal adjustment attempts to filter out expected changes in employment such as the layoff of temporary retail employees after the winter holidays. The goal of seasonally adjusted figures is to provide a more accurate picture of underlying economic trends.”Excluding seasonal adjustment, initial claims fell by more than 30,000 last week to 405,557.”

The ‘cusp’ of a jobs upturn?

The AP account also quotes one economist as saying we’re on “the cusp of a hiring recovery,” but also that “Carl Riccadonna, senior U.S. economist at Deutsche Bank, said claims need to fall below 400,000 before the economy will consistently create jobs. Claims will likely fall below that level sometime in April, Riccadonna wrote in a note to clients.”

Earlier in the month, a Reuters’ report–based on January data–described a bleak picture in “[n]early 200 metropolitan areas [where] reported jobless rates . . . [were] at least 10 percent in January, showing that unemployment problems persist at the local level.”

Perhaps to be expected, given the high rates of foreclosure and bankruptcy filings, California was singled out as particularly hard hit. But so was one area in Illinois: “Rockford, Illinois, had the largest increase in unemployment from a year earlier, of 5.8 percentage points, primarily due to manufacturing job losses, said the Labor Department.”

Reuters said the largest gains in hiring were in an area of Washington state (3,000 jobs) and one in New Jersey (1,900).

Of particular interest during tax season might be this quirkily headlined March 22 post from the Contra Costa Times, via Philly.com:

Unemployment can be added wrinkle at tax time

It’s a thorough introduction to the vagaries of the tax code that face any number of folks without jobs, regardless of  “whether you got laid off, fired or took a buyout package . . . .

“Some who received a hefty severance or voluntary buyout package could end up in a higher tax bracket and owing taxes. Conversely, taxpayers whose income took a big hit may now qualify for tax breaks.”

That seems like common sense. But here’s a nugget many may not know:

Unemployment benefits are taxable: Form 1099-G

“Surprising to many,unemployment benefits are considered taxable income. The feds began taxing unemployment payments starting in 1979. But for tax year 2009, the first $2,400 of unemployment payments are not taxable at the federal level due to stimulus legislation passed last year.”

Apparently, if you have obtained unemployment benefits during 2009, you should have already received a form 1099-G, “showing the amount of taxable unemployment benefits paid in the prior year.” If you haven’t received yours, you can download one here (it includes IRS contact info).

Here’s some more highlights from the article:

• Taxpayers who itemize can deduct job-hunting expenses under the category of miscellaneous itemized deductions.
• People who have seen a steep drop in income should be aware of the little-known Savers Credit . . . a federal income tax break that rewards low- and moderate-income taxpayers for contributing to an IRA, 401(k) or other qualified retirement plan.
• The stimulus plan significantly increased the Earned Income Tax Credit.
• If you were laid off and got a big severance package, your income level could go up as could your tax bracket. The same scenario could happen if you took a voluntary buyout package.
• Taxpayers should also aware they could get hit with penalty taxes when making early withdrawals from retirement accounts.

There’s also separate sections for “TAX TIPS FOR THE UNEMPLOYED” and “TAX CREDITS TO WATCH.”

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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, please know the laws have changed recently. For bankruptcy basics, please see:

Principles of bankruptcy

Basics of bankruptcy

Introduction to Chapter 7

Introduction to Chapter 13

Ran across this from the Philadelphia Business Journal, headline “A New Chapter in Bankruptcy.”

The thrust of the piece is that the personal bankruptcy rate is not so bad, given the state of the economy.

Jeff Blumenthal writes in his lede: “With the U.S. economy experiencing its worst downturn in more than half a century, one would think that personal bankruptcy filings would be through the roof. But that has not been the case.”

Good grief. Can we beg to differ?

Bankruptcy filings directly reflect the economic pain 0f  any given region, allowing for regional/cultural differences.

If you’re not following bankruptcies, foreclosures, or credit default swaps, it might be easy to buy into Blumenthal’s thesis.

Here’s some more from Blumenthal:

‘Filings have not skyrocketed’

“Local consumer bankruptcy lawyers said filings have not skyrocketed — though they have increased in each of the past three years — because of a combination of factors. Chief among them are the more stringent law, which makes it harder to file, and new mortgage remodification programs introduced in response to the recession, which have given many would-be filers a reprieve.”

Maybe it’s simply a matter of which end of the telescope you’re using, but looking at some recent headlines from press releases of  the American Bankruptcy Institute, one wonders what it would take for Blumenthal to detect a skyrocket:

• CONSUMER BANKRUPTCY FILINGS INCREASE 32 PERCENT IN 2009, MOST SINCE 2005
• JANUARY CONSUMER BANKRUPTCY FILINGS DECREASE 10 PERCENT FROM DECEMBER
• FEBRUARY CONSUMER BANKRUPTCY FILINGS UP 14 PERCENT OVER LAST YEAR
• TOTAL BANKRUPTCY FILINGS INCREASE 32 PERCENT IN 2009, APPROACH PRE-BAPCPA LEVELS

Bankruptcy rates about the same as before reform act

Blumenthal seems to hang his argument on the rate of bankruptcy filings before the so-called reform act of 2005. He writes:

“In the decade leading up to the 2005 law’s enactment, annual U.S. consumer bankruptcies hovered between 1.1 million and 1.6 million filings. Those numbers rose to 2 million in 2005 as people rushed to file before the law was enacted that fall. With so many people having already filed, there was a 70 percent drop off in 2006 consumer filings (597,965). Then, with the mortgage crisis hitting in 2007 followed by the 2008 stock market collapse, filings began to jump again — by 40 percent in 2007, 33 percent in 2008 and 32 percent last year. But the 1.4 million filings in 2009 was still only on par with the numbers prior to the law’s enactment.”

Dumbfounding.

Rates dropped 70 per cent after law changed

Let’s get this straight. After the credit card lobbyists succeeded in making it tougher for people to file for bankruptcy protection (and a rush to beat the new law’s deadline), “there was a 70 percent drop off in 2006 consumer filings. . . .” OK, so isn’t that the new baseline?

In other words, the lobbyists won. Which gave us a new landscape, which even Blumenthal seems to concede is a harsh environment for those who most need protection. Here he mentions an authority on bankruptcy law in Pennsylvania (emphasis added): “Henry Sommer, the dean of the Pennsylvania consumer bankruptcy bar, estimated total costs of filing have gone up from about $900 or $1,000 to about $2,000, which he said is too big of a burden for many low-income people. He said lawyer fees are also higher because more paperwork is required. Debtors must provide salary history and bank and tax statements. Sommer said some people who used to be able to tap into more equity or 401(k) plans to stave off filings can no longer because those funds have been eaten away by the recession.

“It used to be simple to prepare,” Sommer said. “Now, it’s a lot more complex.”

Recession-era rates soar to pre-reform levels

So really what we’re seeing is that despite the stricter requirements, higher fees, built-in delays and increased complexity of the “reform,” the number of people seeking bankruptcy protection rose “40 percent in 2007,” another “33 percent in 2008″ and then another “32 percent last year.”

Perhaps the March 2 PR from ABI says it best: “While Congress and the Obama administration continue to consider measures to reduce high unemployment and mortgage burdens, families with increasing debt loads have little choice but to continue to turn to bankruptcy for financial relief,” said ABI Executive Director Samuel J. Gerdano. “Consumer filings this year will likely surpass 1.5 million filings, or the same number of annual filings averaged in the years leading up to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.”

In other words, the Great Recession is so bad that the consumer bankruptcy rate has soared back to pre-reform levels, and now there’s more people who need the relief but can’t afford it.

Not much of a “new chapter,” is 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

The rise in "cloture votes" since the 1950s, spiking in the 110th Congress (from "Our Broken Senate," The Journal of the American Enterprise Institute).

Editor’s note: This is the second of a two-part discussion of how one recent election has topsy-turvied Team Obama’s legislative advantage. Taking the seat of longtime Democrat Teddy Kennedy a day after Part I posted, Scott Brown (R-MA) provides the GOP with the critical 41st vote that ends the Dems’ so-called “super-majority.” By the 1970s, Mike Mansfield (D-Mont.), the senate’s longest serving majority leader, recognized the filibuster and other delaying tactics as serious roadblocks to conducting Senate business. Cited in Sen. Bayh’s Feb. 20 op-ed in The New York Times as an “abusive practice,” it is a topic for today’s beleaguered consumers, who wonder what’s wrong in Washington, D.C.

The problem is the modern filibuster has morphed into a much different procedure than the one originally envisioned, which was a method to ensure the potential for debate against hasty, ill-conceived measures and a way to prevent an overzealous majority from trampling roughshod over a hapless minority. Delaying tactics have been used in legislative bodies at least since ancient Rome, notably in Parliamentary procedure in Great Britain and again in defiance of Woodrow Wilson’s effort to arm merchant marine ships before World War I. The most famous “talk ‘em to death” filibuster may be Strom Thurmond’s record setting 24-hour, 18-minute opposition to a 1957 civil rights bill.

But when we commonly speak of such tactics–notably Thurmond’s marathon, or, say, Huey Long’s recipe-infused “pot-likker” rants in reaction to bills he regarded as bad for “the little guy”–we’re talking about (1) often passionate but always tiring and tiresome efforts for everyone involved and (2) more important, efforts that were very much out in the open. Back then, everyone in the Senate could see (and, of course, hear) who was holding the floor. And when “tag-team” efforts (such as the 57-day unsuccessful battle against the 1964 Civil Rights Act) were mounted, they took on the logistics and personnel requirements of a Broadway production.

Costless, painless–anonymous

But not so today, hence the term “stealth filibuster.” When Mansfield resolved to streamline the process, what resulted was a method to let filibusters occupy morning sessions but to reserve afternoons for “pressing business.” But as Roy Ulrich explains, Mansfield’s two-track system may have been expedient in the short term, but “over the long term it has proved to be disastrous.”

Why? Not only has the use of the filibuster increased alarmingly but also it increasingly is used as a tool for gridlock–and it can effectively be employed anonymously.

Too often it is now used as a dry, routine block of anything the “other side” wants.

Ulrich writes: “Boston College historian Julian Zeliger puts it this way: ‘Mansfield’s measure, which was intended to promote efficiency, inadvertently encouraged filibusters by making them politically costless and painless.’

“One way for a senator to let her colleagues know that she intends to pursue a filibuster is to place a ‘hold’ on a bill, thereby letting her colleagues know she will not accede to unanimous consent. Congressional scholar Norman Ornstein has noted that in the modern Senate holds ‘are routinely employed–often anonymously–against bills or people the senator has nothing against, but wants to take as hostages for leverage on something utterly unrelated to the hold itself.’

“If members actually had to hold the floor as in the days of Senators Long and Thurmond, most filibusters would end quickly. The reason is that we live in an age where this public disgust over partisan gridlock. Public airing of the old-fashioned filibuster on C-Span and elsewhere would not be something most Senators would want the public to see. In the current climate, it would be sound political strategy for Senate Majority leader Harry Reid to force the Republicans to engage in extended debate on a major issue such as health care reform. Best of all, no change in Senate rules would be required.”

Options for reform

Remedies exist, including the so-called “nuclear option,” which, according to a Feb. 10 piece in “Political Animal,” would require in today’s Senate that VP Joe Biden (as Senate President) declare current rules unconstitutional and, in effect, craft an on-the-fly workaround of Senate Rule 22. The “Political Animal” piece points out that this is not the brainchild of frustrated Democrats–the GOP (namely Trent Lott [R-Miss.] ) thought it up back in 2005, when they were fed up with Dems blocking judicial nominees.

The piece also quotes a few lines from Tim Noah, writing Jan. 25 at slate.com, but we’ve included a few more lines: “The first step in exercising the nuclear option, then, is for the president of the Senate (i.e., Vice President Joe Biden) to state, in effect, ‘Previous Congresses can’t tell this Congress what to do. Senate Rule 22 has no force because it was never agreed to by the current Senate.’ Biden would then state, ‘Under Article I, Section 5 of the Constitution, this current Senate may “determine the rules of its proceedings.” I say we change Rule 22 to eliminate the filibuster.’ Or modify it, if he wanted to opt for an intermediate reform such as a proposal by Sen. Tom Harkin, D-Iowa, to subject filibusters to a series of cloture votes that begin with a 60-vote requirement and gradually work their way down to a 51-vote requirement. Biden would then put the new rule to a simple-majority vote. After that passed, he would put the health reform conference report (or any number of other Obama initiatives currently stalled in the Senate) to a simple-majority vote.

In other words, the Senate got itself into this mess, and by the Constitution, it can take internal, procedural steps to get itself out. (For instance, the House–with so many more members–long ago dropped the filibuster.) Or the Senate could act on Harkin’s bill.

Whatever the Senators decide, clearly this gridlock begs for remedy. Here’s a quick snapshot of the increase of “cloture votes” since the 1970s, from a 2008 piece called “Our Broken Senate”: “In the 1970s, the average number of cloture motions filed in a given month was less than two; it moved to around three a month in the 1990s. This Congress, we are on track for two or more a week. The number of cloture motions filed in 1993, the first year of the Clinton presidency, was 20. It was 21 in 1995, the first year of the newly Republican Senate. As of the end of the first session of the 110th Congress, there were 60 cloture motions, nearing an all-time record.”

Implications for those facing unemployment, bankruptcy, foreclsoure

Now, why do we as consumer-members of a hard-pressed, foreclosure-riddled, unemployment-shackled economy care about stealth filibusters?

Although an argument might be made that the current GOP minority has taken obstructionist cloture/filibuster methods to unprecedented, Draconian levels, the truth is that both sides have used the tactic, and it’s evolved into a kind of arms race. And it’s become one of the chief methods to simply cut off any chance for meaningful progress during this financial crisis. It’s a quandary that Obama alluded to in his recent State of the Union address. On the one hand, why didn’t the Democrats’ “super-majority” get more done before losing Teddy’s seat to Scott Brown? (”But, [Obama] also chastised Congressional Democrats, saying, ‘I would remind you that we still have the largest majority in decades, and the people expect us to solve some problems, not run for the hills.’ “)

And in what appears to be a direct reference to heavy-handed stealth filibustering, he chided the GOP for “incessant opposition” and said “Saying ‘no’ to everything may be good short-term politics, but it’s not leadership…. We were sent here to serve our citizens, not our ambitions. Let’s show the American people that we can do it together.”

Sounds good–let’s hope he gets that “jobs on his desk” that he demanded. Otherwise, doesn’t it sound hollow to hear reports that recession is over?

OK, true: the economy is finally showing some growth. In fact, Reuters reported on Oct. 12 that the National Association for Business Economics took “a survey” and quoted NABE President-Elect Lynn Reaser: “The great recession is over.”

Which is weird, because it’s actually the similarly sounding National Bureau of Economic Research who is charged with designating the officially recognized beginning and ending of economic dowturns. Yet, as of this posting, the NBER still has question mark on its Web site, indicating the end of this recession remains unknown. See the right-hand column, second hed. To be fair, the Reuters report also says that the NBER, “which does not define a recession as two consecutive quarters of decline in real gross domestic product, often takes months to make determinations.” So maybe Reuter’s stance is that NABE “scooped” the NBER and some day we’ll wake up and read that NBER has decided the Fat Lady of the Recession bowed out months ago and we simply missed it

Regardless of any official word, though, we know the Phat Lady of the Recovery hasn’t even begun warming up.

Obama knows that, too. He said in August that “we will not have a recovery as long as we keep losing jobs,” and reiterated that message in the State of the Union address and again Feb. 11.

But the jobs bill is not on Obama’s desk, and given the current Congress, no meaningful jobs bill is likely any time soon. Neither is a bankruptcy reform bill, which was killed by the Senate in April 2009, then snubbed again by the House, when it was omitted from a larger financial reform measure that passed in December.  On the stump in Nevada for Harry Reid on Friday, Obama unveiled a $1.5 billion plan to help with foreclosures in five of the hardest hit states, but when will Congress follow his lead with programs for the rest of the country?

Senator Bayh’s insights: ‘Congress must be reformed.’

The back-biting and divisiveness is so bad in Congress that Senator Evan (D-Ind.), well-known son of famous Senator Birch Bayh, recently announced he’s resigning at the end of his term next fall because he simply can’t take it anymore. He told Charlie Rose that he believes he can serve the nation better “by being in the private sector, either with a university, a philanthropy, or helping to create jobs by expanding a business.”

In an op-ed at The New York Times published Saturday, Bayh flat out says, “Action on the deficit, economy, energy, health care and much more is imperative, yet our legislative institutions fail to act. Congress must be reformed.”

He says there are “many causes for the dysfunction” on Capitol Hill: “strident partisanship, unyielding ideology, a corrosive system of campaign financing, gerrymandering of House districts, endless filibusters, holds on executive appointees in the Senate, dwindling social interaction between senators of opposing parties and a caucus system that promotes party unity at the expense of bipartisan consensus.”

What’s really telling is his disgust with the filibuster, as misused today: In a nearly 1,800-word piece, Bayh devotes almost 400 words specifically to the filibuster, calling it “a practice increasingly abused by both parties . . . ”

The full piece is well worth the read, given the insight from someone with such a rich family history in U.S. politics, but here’s some of the highlights from his section on the filibuster:

• “Historically, the filibuster was employed to ensure that momentous issues receive a full and fair hearing. Instead, it has come to serve the exact opposite purpose — to prevent the Senate from even conducting routine business.”
• “Last fall, the Senate had to overcome two successive filibusters to pass a bill to provide millions of Americans with extended unemployment insurance. There was no opposition to the bill; it passed on a 98-0 vote. But some senators saw political advantage in drawing out debate, thus preventing the Senate from addressing other pressing matters.”
• “The minority has a right to voice legitimate concerns, but it must not employ this tactic to prevent progress on everything at a critical juncture for our country.”
• “. . . under current rules just one or two determined senators can stop the Senate from functioning. Today, the mere threat of a filibuster is enough to stop a vote. . . .”

Critics are sure to chime in with remarks about “quitting on the job” or “giving up and giving in,” but maybe he just gave out. One thing’s for sure: when somebody like Bayh packs it in, it’s a sure sign that dysfunction reigns, and those of us huddled down in trenches are gonna have to make some tough decisions on our own.

We can hope, of course–but evidently we can’t wait on Congress.

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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, please know the laws have changed recently. Whatever you do, before making major, life-changing  financial decisions, please 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

The rise in "cloture votes" since the 1950s (from "Our Broken Senate," The Journal of the American Enterprise Institute).

As reported by CNN Obama said “he wants to give small businesses tax breaks for new hires and equipment purchases. He also wants to expand American Recovery and Reinvestment Act programs and spend some $50 billion more on roads, bridges, aviation and water projects.

“Obama did not give a price tag for his proposals but pointed out that there is more wiggle room in the federal budget since the 2008 financial system bailout program will cost $200 billion less than expected.”

Perhaps to be expected, some top Republicans are resistant to the idea–remember, it was the Senate where the bankruptcy “cram-down” provisions stalled after intense lobbying by the lending industry–saying any extra room in the recovery-stimulus funds should go toward the national deficit. To that, Obama responded, “”There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other–but this is a false choice.”

The timing could not be better–with all the gushing over the November jobs data, you’d think the jobless crisis has passed.

But, no, until major change takes hold, it’s still a matter of the same ol’, same ol’: We’ve merely been shedding jobs more slowly than we were.

But you wouldn’t know it by following  the mainstream media; here’s how The New York Times reported the data on December 5: “In the strongest jobs report since the recession began two years ago, the nation’s employers all but stopped shedding jobs in November, the government reported on Friday, and they appeared to be on the verge of finally rebuilding the work force.

“The sudden and unexpected improvement surprised even the most optimistic forecasters. Instead of yet another six-figure job loss, only 11,000 jobs disappeared last month and instead of another rise in the unemployment rate, it went down, to 10 percent from 10.2 percent in October.”

Of course, it is nice that the nation’s job loss is slowing down.

The bad news is that “official” unemployment’s going to 10 percent really means the “total” unemployment rate is 17.2 percent.

Yup, as it turns out, when unemployment was reported to have reached double-digits, at 10.2 percent, that figure applied only to out-of-work folks who are actively looking for jobs.

As explained December 1 at MoneyNews.com, ” It’s bad enough that the official unemployment rate hit a 26-year high of 10.2 percent in October.

“But if you count people who have given up looking for a job – those who are really the most unemployed – and those who are working fewer hours than they would like, the jobless rate registers 17.5 percent.”

“That’s a record since the government began tabulating the statistic in 1994.”

This all comes from a table maintained by the Bureau of Labor Statistics, right there in row “U-6,” in two data sets, four columns each, showing the grim rise, in data “Not seasonaly adjusted,” and four more columns of data that has been “seasonally adjusted,” the numerals just sort of laying there like shameful secrets in an unlocked but forgotten diary–row U-6 which is labeled, “Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.”

There it is, with one row of seasonally adjusted data (mislabeled as “Nov. 2008,” when it should be “Oct. 2008″), when total unemployment was 12.2 percent, having risen to 12.6 percent a month later. By Oct. 2009, it was 16.3 percent and by last month, up again to 16.4 percent.

The seasonally adjusted data look even worse, rising monthly from July through October: 16.3, 16.8, 17.0, to 17.5 percent; then it fell in Novemeber to 17.2 percent.

Perhaps the best signal of all was discussed in another piece from The Times, a December 4 “Economy” post that discusses an un-named indicator that “is part of the monthly survey done by the Institute for Supply Management, in which manufacturing companies are asked if their business is getting better or worse.”

Described as having proven “reliable in all 10 previous recessions since World War II,” the indicator is part of the I.S.M.’s “November results, showing that for the fourth consecutive month, more companies thought business was getting better than believed it was getting worse.

“A part of that survey asks whether companies are adding or subtracting workers. It showed more companies hiring than firing in both October and November,” so if “the I.S.M. indicator is right, that means that the 10.2 percent rate in October was the cyclical high.”

So that is good, right? Finally a drop in the rate…whew.

Still it’s staggering to learn that instead of the improvement from 10.2 to 10 percent, in fact total unemployment is actually closer to 20 percent…

Some newspapers have caught onto this, but don’t seem to be bothered, as evidenced by the many headlines like this one in the Fort Worth Star-Telegram, by two AP reporters:  “Unexpected drop in jobless rate sparks optimism.” From there, it’s pretty much the same info that The Times’ would detail the next day.

For some, the route to a new job may very well entail a move to a different part of the country, as some areas, in various sectors, are coming back more quickly than others. At cnbc.com, you can watch a slideshow of the “Best U.S. Cities to Find a Job,” which not only lists the metro area but also includes the best sectors for each city.

For job stability, it looks like automobile repo work may be doing OK.  According to a December 7 Daily Finance report, “The ratio of U.S. auto loan borrowers who were 60 or more days past due on their payments increased in the third quarter over the second quarter from from 0.73% to 0.81%, according to Trans Union. The year-over-year delinquency rate at the national level increased by 1.25% in the third quarter.”

Although TransUnion expects the default rate to continue rising–projecting 0.9 percent by end of the year–to a 7.5 percent increase over the past year,  some data suggest that seeing a silver lining even here is warranted.

“Peter Turek, automotive vice president in TransUnion’s financial services group, believes the increased delinquency rate is indicative of a cyclical pattern. The good news is that seven states experienced a drop in their quarter-to-quarter delinquency rates while 22 showed a drop on a year-over-year basis. ‘The drop in delinquency is an indicator that some states could emerge from the recession sooner than others,’ Turek said in a statement released with the report.”

What it really sounds like is that the hard hit areas have been really, really hit hard, because nearly half the states have shown improvement: “So essentially, the market is shifting back to a pattern dependent on local economic conditions, with some states faring better than others. At least with 22 states seeing a drop in delinquencies over last year we can see there is some economic improvement in almost half the states.”

Still, the most encouraging sign amid all the bad news/good news is Obama’s public recognition: “Even though we have reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who have been swept up in the flood,” Obama said. “And it speaks to an urgent need to accelerate job growth in the short term while laying a new foundation for lasting economic growth.”

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In this tough economy, sometimes filing for protection under the federal bankruptcy code is a consumer’s last, best defense from creditor harassment and a chance to start over with a clean slate.  If you don’t have enough income to make payments under Chapter 13 protection, the relief offered by Chapter 7 may be your best bet–and may protect more assets than is commonly perceived.

Here’s a starting point for the basics of bankruptcy.

If you’d like to schedule a free appointment to evaluate your situation, click here.

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.

In fact, foreign observers may have a better feel for the plight of the U.S. consumer than do many domestic pundits and measures that just don’t seem to get it.

For example, an Oct. 26 report from MarketWatch tells us, “A broad gauge of U.S. economic activity rose above the level that typifies recessions, the Federal Reserve Bank of Chicago reported Monday.”

But here’s an account from Oct. 28…from Ireland, mind you, showing a better grasp of the situation:

“The US recession is expected to be declared over tomorrow but economists insist that it is still too early to start celebrating.

“When gross domestic product (GDP) estimates for the third quarter are released at 8.30am local time (12.30 Irish time), they are likely to report that the economy is growing again, ending one of the deepest slumps since the Great Depression.”

Of course, that report did not materialize, but even if it had,  imagine the bitter taste and hollow comfort “to the millions of people left unemployed or who have lost their homes as a result of prolonged economic downturn–especially as economists suggest that more jobs and houses are to go before real improvement is realised.”

And here’s this…from The Globe and Mail, in Canada: “Fresh figures due out Thursday are widely expected to show that the U.S. economy grew in the third quarter for the first time in more than a year – long-awaited confirmation that the recession is over and recovery has begun.”

But a few grafs down, here’s the kicker: “But temper the enthusiasm: The main driver of the economy – U.S. consumers – are still in a deep funk, relying heavily on temporary government incentives to get them to spend.”

At least the president seems to have a grasp.

As we know, the recession’s end was not announced Thursday, but still the AP reported, “Helped in large part by federal support for spending on cars and homes, the economy grew at an annual rate of 3.5 percent from July through September, the government said Thursday.”

Although Obama called the numbers “welcome news,” he also said, ” ‘The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well.’ “

So, maybe the numbers are simply saying that the recession is over for the Big-Shoe Boys on Wall Street, where business continues as per usual?

Remember the teeth-grinding despair in certain circles when the gummint “turned its back” on Lehman Brothers while bailing out everybody else? Well, have a look at Kevin White, one of Lehman’s “architects” of the so-called “securitized” debt that helped create the Recession. In a Fortune report via CNNMoney.com, we learn that White was “head of the global structured finance syndicate at Lehman Brothers ([before being]  . . . promoted to a different job in 2006), [when he] created the kind of collateralized debt securities that fueled the financial bubble–and still bedevil many bank balance sheets.

“Now White runs a firm that’s doing a nice business in cleaning up the mess: Spring Hill Capital Partners specializes in buying, selling, deconstructing, and investing in structured finance products.”

And get this–he sounds proud of it: ” ‘The securitization process locked a lot of assets into mortgage-backed securities or CDOs,’ says White. ‘As the underlying collateral ran into trouble, the complexity of securitizations has paralyzed investors, lenders, and borrowers.

But we made a lot of these products, and we’re skilled at taking them apart, valuing them, and in some cases restructuring them.’ “

Kinda sounds like Stanford Kurland, who spent nearly 30 years at Countrywide before leaving in 2006, then subsequently starting PennyMac (along with a cadre of other Countrywide alumnae)–and to do what? Why, to specialize in distressed properties…

As might be expected Kurland puts distance between his role at Countrywide and its riskier business practices, as shown in this March 2008 account at MSNBC.com: “Kurland, who left Countrywide in late 2006, said he wasn’t to blame for problems faced by the company as a result of subprime loans made to people with shaky credit histories.

“ ‘My leaving Countrywide has a lot to do with having a different strategic view,’ Kurland said. ‘I have a reputation in the market that, unfortunately, is tainted by things that transpired after I was gone.’ ”

Not everybody bought into that, according to MSNBC:

“The irony was not lost on analysts.

“ ‘He won’t be the first or the last person trying to make money on both sides of a trade,’ said Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc. who covers Countrywide [since absorbed by Bank of America].

“ ‘On the one hand you could make the case that he was (with) the company that made all these loans. On the other hand, what we need right now is to find some buyers for these assets,’ Cannon said. ‘Is it fair? Hard to say.’ ”

(CNBC has an interesting slide show here, a “where-are-they-are-now?” update on (in)famous figures from the financial crisis, including Countrywide founder Angelo Mozilo, who is fighting the SEC in a civil suit alleging fraud and “misleading investors.”)

By the way, it’s these guys who will “officially announce” the end of the recession; as you can see as of 10-30-09 (on the right-hand side of the page), the current recession has no end date, but merely a question mark. Meanwhile, as end-of-Recession talk buzzes, unemployment, foreclosures and filings for bankruptcy protection continue unabated.

This, from Oct. 28 The New York Times, “Unemployment is Higher Almost Everywhere”:

“Unemployment rates were higher in September than a year earlier in 371 of the 372 United States metropolitan areas, according to the Bureau of Labor Statistics.”

Not too long ago, the concern was that unemployment might blow past 10 per cent. In some areas, the new concern is it may breeze on 20 per cent. “The greatest increase in unemployment over the last year was in  Detroit-Warren-Livonia, Mich., where joblessness grew 8.4 percentage points to a total rate of 17.3 percent in September 2009. The second-greatest year-over-year increase was in  Muskegon-Norton Shores, Mich., where the rate rose 6.8 percentage points to 16 percent.”

And it gets worse: in a couple of areas, 20 per cent is in the rear-view mirror: “In September 2009, the overall highest metropolitan rates of unemployment (again, not seasonally adjusted) were in  El Centro, Calif., and  Yuma, Ariz., where rates touched 30.1 and 24.2 percent, respectively. These two areas, which both border Mexico, are highly agricultural.”

On the foreclosure front, perhaps the worst hardest-hit areas have bottomed out, but the damage seems to be spreading according to RealtyTrac data reported by American Banking News.” ‘Rising unemployment and a new variety of mortgage resets continue to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,’ said James J. Saccacio, RealtyTrac’s CEO in the Metropolitan Foreclosure Market Report. “Per the report, filings for foreclosures rose five percent in the third quarter, and 23 percent over last year. This includes auctions, bank repossessions and defaults. Taking into account the unreported abandonment by homeowners of their houses by banks so they don’t have to include it as an accounting event, and the numbers are even more staggering, to say the least.”

Consumers seeking relief via bankruptcy petitions are filing in waves, unmatched since the rush to beat the “reform” deadline in 2005.

Google “personal bankruptcy news” and the results read like a fill-in-the-blank: numbers rising in _____________  (Massachussetts, Connecticut,  Georgia).

An Oct. 2 Wall Street Journal post sums it up simply as “Personal Bankruptcy Filings Soar”: “Consumer bankruptcies topped one million for the first nine months of this year, the highest point since the system was overhauled in 2005.

“The number of personal bankruptcy filings for the nine months rose to 1,046,449 as of Sept. 30, the American Bankruptcy Institute, an organization made up of attorneys, accountants and other bankruptcy professionals, said Friday, using data from the National Bankruptcy Research Center. There were 773,810 personal bankruptcy filings for the same time period in 2008.

“September’s filings reached 124,790, 41% higher than the same month last year.”

Looks like the Phat Lady of the Turnaround has even left the dressing room and headed home–if she still has one.

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Bankruptcy protection offers a chance for a new start, as well as methods for protecting certain assets–and even improving one’s credit score over time. To asses the value of bankruptcy for your individual situation, you should seek counsel from a trained, experienced bankruptcy attorney.

Here’s some online resources:

U.S. bankruptcy court

Federal Trade Commission, consumer credit

Bankruptcy Corner, overview portal

Bankruptcy Corner, principles of bankruptcy