The middle sadness

July 29, 2011

The middle sadness

Paul Mason, the economics editor of the BBC’s Newsnight program, recently retraced John Steinbeck’s footsteps during America’s Great Depression.  What he found was a broad swath of sadness as he observed many citizens who have lost jobs and homes. It’s the invisible America. From the BBC:

I drop down into Albuquerque, into Joy Junction, which in the red dusk looks like a scene from Steinbeck. There are 300 homeless people staying here, all families.

Jeremy Reynalds, an expat Brit who runs the place, tells me frankly that the mainstay of the place are people with drug, alcohol and domestic violence issues. But as the years of crisis have dragged on, there is a new phenomenon – the homeless middle-class.

I meet some of them on the floor of an old gym, strewn with about 80 mattresses.

Sonya and Tim – he was a manager at McDonald’s but the branch closed and she worked at Subway but they cut her shifts – lost their home and moved into a small apartment, but when the unemployment money ended they lost that too.

“We slept in our car, it was scary,” says Sonya. “Then we came here.”

The other muni bankruptcy

There is massive attention on Jefferson County, but the other long-running bankruptcy — Vallejo, California — was finally concluded yesterday. From Bloomberg:

Vallejo, California, the biggest U.S. city in bankruptcy, won approval of a plan to exit court protection by cutting interest payments to its bank and reducing benefits to retirees.

The approval comes on the same day that elected officials in Jefferson County, Alabama, agreed put off for at least a week a decision on whether to file the largest municipal bankruptcy in U.S. history in order to negotiate with state officials and creditors.

Bankruptcy saved Vallejo tens of millions of dollars in reduced labor costs, said attorney R. Dale Ginter, who represented retirees in the case who were forced to accept reduced benefits.

“At the end of the day the city did save more than they spent,” on legal and other fees on the case, Ginter said in an interview.

SEC field hearing on muniland

From the SEC:

The Securities and Exchange Commission will hold a municipal securities market field hearing in Jefferson County, Ala., on July 29. Topics will include distressed communities, small issuers, disclosure, derivatives and pre-trade price transparency.

The hearing will last until 5:00 pm EST.  Check out the webcast link to watch online.

Just a reminder

I’ve read a fair amount of commentary that assumes the Federal Reserve or federal government will bail out failing states. But, as Reuters reported earlier this year, Federal Reserve Chairman Bernanke explicitly said in January that the Fed would not do this:

Federal Reserve Chairman Ben Bernanke on Friday once again said he opposes providing financial aid to the many states still reeling from the economic recession.

Bernanke firmly said “No” after being pressed by Democratic Senators to consider a lifeline from the central bank for states where economic recovery remains elusive.

“They should not expect loans from the Fed,” Bernanke said while testifying before the Senate Budget Committee. “It’s going to be difficult, but on the other hand there is some improvement in the economy and tax revenues have actually picked up.”

Twitter Talk

@JustinWolfersIt’s a per capita recession: Real GDP per capita fell in the first half of 2011.

@EKaiserReutersFiscal drag: Non-defense gov’t spending -7.3 pct for Q2. State/local -3.4 pct. Gives new meaning to government spending problem.

@jbarroPeople who are asking when we’ll see panic in the Treasury markets: falling yields = panic

@CrownThomas RT @NotStevieCohen Financial relativity: If everyone is downgraded, there really is no downgrade in absolute terms.

@munilass: @MikeStanton1891 Not much sensible commentary in MSM about how munis are connected to Treasuries or ratings cycles. Probably confusing.

@IpreoMuni: Despite looming debt crisis, munis’s resiliency continues.See next wk’s muni new issue deal calendar: #muniland #munis

@StatesideAssoc: #WA State Treasure reports that state can pay bills for only 6-8 weeks if Congress fails to raise debt ceiling

@data4all: Hope Gov. Christie recovers soon. His situation graphic reminder of dangers of #obesity.|| Go Michelle Obama! “Let’s Move” rocks.

Good links

Ipreo: Muni Deal Calendar (w/o August 1, 2011)

New York Times: Just Before Deadline, County in Alabama Delays Bankruptcy Move

Bloomberg: McGraw-Hill Profit Advances as Debt Issuance Boosts Demand for S&P Ratings

Washington Post: Washington municipalities could lose top credit ratings

Delta County Independent: Cedaredge gives green light for West Main construction

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