Maybe It's Time The Fed Takes its Beige Book and Sticks it.

From Bloomberg News;

The Federal Reserve said 11 of its 12 regional banks reported signs of a stable or improving economy in July and August, adding anecdotal evidence that the worst U.S. recession in seven decades is over.

Five districts, including San Francisco, home to the biggest regional economy, “mentioned signs of improvement,” the Fed said today in its Beige Book business survey, published two weeks before officials meet to set monetary policy. The exception was the St. Louis district, which said the contraction’s pace “appeared to be moderating.”

The central bank survey indicates that while the worst of the downturn may be past, the economy has yet to show broader growth. The outlook among many business contacts was “cautiously positive,” and some auto-industry contacts told the Fed the sales increases from government “cash-for- clunkers” subsidies may be temporary.

“Consumer spending remained soft in most districts,” the Fed report said. “Loan demand was described as weak, and many districts reported that credit standards remained tight.”

Excuse my language but WTF are they talking about??  In the last few weeks we have learned that:

U-6 unemployment for August was 16.5%

Consumer Credit contracted by  $21.6 billion in July

4-5 banks are closing every week and amazingly when they are seized, the examiners are finding the carrying value of many assets 30 to 40% too high

Over 5% of Prime residential mortgages are now either delinquent or in default (second quarter)

Bank loan charge-offs have crossed 2%

Cure rates on residential mortgages (delinquent borrowers bringing themselves current) is 6% when just two years ago it was 45%

I can go on and on, and I haven't even gotten to corporate defaults or commercial real estate.  It's great that factories are stirring after nearly $1 trillion of global stimulus but year-on-year orders are off 23%!! The only activity that seems to be going on is from government spending.  Housing?  Our friends in the housing trade tell us that the FHA, the new subprime mortgage lender, is the only game in town.  It's great that we are moving homes but if we are just making crappy loans that will default in a year, what's the point other than to screw up our federal finances even more than they already are?  Moreover, the tremendous amount of mortgage loans that are in default, yet held on bank balance sheets at PAR is one of the worst kept secrets around.  Notice that no one from the White House is yelling at mortgage servicers anymore about modifications (loan principal reductions)?  That's because the banks told the President the truth, "We modify, we die!"

Speaking about finances, the Treasury is in the middle of ANOTHER $70+ billion auction week, not to be confused with last month's $70+ billion 3-yr, 10-yr and 30-yr auction.  Meanwhile, we have the Fed quietly buying nice chunks of every auction a week or two after a primary dealer takes the bonds down, which means they are monetizing our debt, something we used make fun of countries like Argentina for. I guarantee you that this week the Fed is in buying mortgages to offset all the duration the new Treasuries are hitting the market with.  Oh, and the FDIC announced today that they want to issue a "six month emergency extension" on their bank debt guarantee program that was set to expire at the end of October.  It should be interesting how the market treats that guarantee when the FDIC announces any day that their fund is now....empty.

"Stable and improving."  Ass-hats.

Comments

[Snoop-Diggity-DANG-Dawg]

Liars, every damn one.

[williambanzai7]

A 1 a 2 a 3....

http://www.youtube.com/watch?v=jHPOzQzk9Qo

[RPB]

They'll keep buying so long as the Fed is giving them money at 0.5% and they are earning 3 and change. I'd take all of that I could.

[fletch]

monopoly money, d

[divvyman]

better question ? how are we in midst of a recovery and the longest maturity TBills ( year bills ) closed at .38% today which my trusty Bloomberg says is the low print for 2009 ........

anybody ?

[eric]

It really scares me though D-Man. I'm short home builders, Wells, CAT and long gold. I'm in it for the long haul, unless I get bot in or they outlaw short selling again, but I wonder how long they can just keep outright lying and manipulating. Probably longer than I can stay in the trade.

[divvyman]

how in f*ck do these dunces suggest we look at the economic datapoints we get spoonfed by govt in the last 2 months and wonder if they were for Somalia if folks over at Fed sound like things mending nicely ( or did the US Fed report on Canadian economy ? )