Rising home foreclosures and continuing elevated job losses dominated a mostly-somber batch of U.S. economic data Thursday. 
It was a rash of home mortgage defaults in the United States that helped precipitate last year's financial meltdown and a global credit squeeze that pushed the United States into the deepest and longest recession of the post-World War II era. Economists say stabilization of homeowners' finances and an overall recovery of America's battered housing industry will be a key to a sustained economic recovery.
Wednesday brought news that new home construction fell unexpectedly last month, reflecting continued softness in the U.S. housing sector and concerns about expiring federal subsidies for first-time homebuyers.
Now, a private group reports that the proportion of American homeowners who are behind on mortgage payments or in foreclosure continues to rise, reaching a record-high for the ninth consecutive quarter.
In 2007 and 2008, unscrupulous lending to borrowers with poor credit was blamed for most foreclosures. Currently, a growing proportion of defaults stems from homeowners with solid financial histories who have lost their jobs. That, according to Jay Brinkman, chief economist for the Mortgage Bankers Association which compiled the report.
"Clearly, the results have been driven by the changes in employment," he said. "We have had about a 5.5 million increase in the number of unemployed in the country over the last year."
The president of the trade publication Inside Mortgage Finance, Guy Cecala, agrees.
"[U.S.] Unemployment over 10 percent is creating a great hardship for a lot of borrowers, and that is clearly showing up in the [foreclosure] numbers," he said.
Cecala says the deterioration may continue. "The expectations are this high rate [of foreclosures] will continue at least through the first half of next year," he said.
If foreclosures are tied to employment, U.S. job losses are holding steady at an elevated level. The Labor Department reports 505,000 newly-laid off Americans filed for unemployment benefits last week, virtually identical to the previous week's total.
Pennsylvania-based economist Joel Naroff says current job losses, while less severe than earlier in the year, remain indicative of rising U.S. unemployment.
"Clearly we are at a level that is too high. It indicates that the unemployment rate is likely to go up," said Naroff. "To get the unemployment rate declining, we need to see the new claims numbers below 450,000. I would like to see it closer to 400,000, and that would tell me the [unemployment] problems are largely behind us." 

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Image by gmeurope via Flickr, 2010 Chevrolet Camaro

General Motors says it lost more than $1 billion in the third quarter, but the head of the U.S. auto giant says the company has performed better than expected. GM CEO Fritz Henderson says as a result, the company is now in a better position to begin repayment of nearly $7 billion in emergency U.S. government loans.

The GM plan is to repay debt by 2011
General Motors posted a third quarter loss of $1.1 billion (November 16), but says stabilizing sales and lower operating costs will allow the company to repay what it owes the U.S. government by the end of 2011 - four years ahead of schedule.
GM Chief Executive Fritz Henderson says the first payment of $1 billion will go out in December. "It's a commitment from the entire leadership team in the company to repay the taxpayer, first and foremost, from repaying the loan and then over time, generating value in the shares so that the taxpayers benefit as major shareholders of the company," he said.
The debt represents 13 percent of the $52 billion that U.S. taxpayers have invested in General Motors - the majority of which was exchanged for a 61 percent ownership stake in the company.

Earnings are better than expected
Despite suffering a net loss in the third quarter, GM Chief executive Fritz Henderson says company earnings were better than expected. "Again, these are managerial numbers. Not satisfactory. I mean, certainly much lower than what has been," he says, "Although it is not necessarily comparable, and certainly better than our plan going into bankruptcy. But nonetheless it's a loss and you cannot be satisfied with it."
Much of the company's third quarter sales came from overseas as a result of GM's expansion in Asia. The new numbers coincided with President Obama's visit to China. "GM is an American company with tens of thousands of employees in this country," he explains, "and responsibility for its future ultimately rests with us."
GM, which emerged from bankruptcy in July, has lost $88 billion since 2005. But there were encouraging signs Monday for U.S. automakers as the government released new consumer numbers.

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Image via Wikipedia, Eric Holder (photo PD)

The Obama administration has announced the formation of a new task force to target financial fraud. It replaces an earlier corporate fraud unit created in 2002 by the Bush administration following a series of corporate scandals. Attorney General Eric Holder says the new group will have a broader scope, and be able to provide better coordination among federal and state agencies that investigate and prosecute financial crimes.
The Obama administration is pledging a more aggressive effort to prosecute and discourage financial fraud. U.S. Attorney General Eric Holder, who will lead the task force, says fraud has caused hardship for thousands of Americans and contributed to the worst financial crisis in decades.
"This task force's mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from occurring," Holder said. "By punishing criminals for their actions, we will send a strong message to anyone looking to profit from the misfortunes of others."
Formation of the high level panel comes as the administration wrestles with a weak economy and public outrage over Wall Street bonuses. It also comes amid criticism that regulators ignored irregularities that allowed imprisoned financier Bernard Madoff to perpetrate one of the biggest frauds in U.S. history.
"By carrying out this mission aggressively and effectively, we will promote the integrity of our markets, preserve taxpayers' resources, and protect the vast majority of consumers, investors, and companies that play by the rules and adhere to the law," Holder states.
The task force will include representatives from various federal and state agencies working together to investigate crimes from mortgage fraud to insider trading.
Treasury Secretary Timothy Geithner says the administration also plans to initiate financial reforms to discourage fraudulent activity before it can start. "We need to do everything we can to help restore trust and confidence in our system and central to that effort is enacting stronger and smarter rules with much stronger and much more proactive enforcement,' he said.
The task force replaces one created in 2002 by the Bush administration following the corporate scandals that led to the collapse of energy giant Enron Corporation.

Image via Wikipedia, Ben Bernanke

The head of the Federal Reserve is predicting moderate growth in the U.S. economy, with subdued inflation.
In a New York speech Monday, U.S. Federal Reserve Chairman Ben Bernanke cautioned that significant economic challenges remain, including tight credit and unemployment that he described as "much too high."
Bernanke gave no indication that the Fed would raise U.S. interest rates from historic lows any time soon. The low rates are intended to bolster the economy by making it easier for companies to borrow the money they need to buy equipment, build factories, and hire people.
But low interest rates also tend to cut the value of the dollar. The Fed chairman tried to reassure investors that he will be "attentive" to the strength of the dollar.

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Image via Wikipedia, The Woodmen Tower, Omaha, Nebraska

OMAHA, Neb., Nov. 13 /PRNewswire/ -- Woodmen of the World has filed a federal lawsuit seeking recovery of $29.7 million in investments that U.S. Bank National Association lost in a short-term investment program managed by an affiliate of the bank.
The lawsuit in U.S. District Court in Omaha accuses U.S. Bank of breach of contract, negligence, breach of fiduciary duty, gross negligence, negligent misrepresentation, fraudulent misrepresentation and fraudulent concealment. It was filed after U.S. Bank refused to make good on the losses.
"Woodmen remains financially strong," said Woodmen spokesperson Steve Haack, Vice President of Marketing and Public Relations. "The losses represent less than one half of 1 percent of Woodmen's nearly $8 billion in assets. But Woodmen is committed to the responsible management of member funds and filed the lawsuit in order to live up to that commitment."
The losses came about through U.S. Bank's short-term investment program. Without Woodmen's knowledge, U.S. Bank invested a portion of the money in high-risk securities that were not the high-quality investments that Woodmen was led to expect.
In March 2008, Woodmen inquired about the safety of the investments. Although U.S. Bank knew otherwise, U.S. Bank nevertheless represented to Woodmen that these short-term investments were sound, according to the lawsuit.
"Only a few months later, U.S. Bank would perform an about-face and take drastic measures to dissolve" the fund, transferring the assets to an illiquid fund without Woodmen's consent, the suit says.
The lawsuit describes U.S. Bank's actions as grossly negligent, and says that U.S. Bank made intentional misrepresentations to Woodmen about the investments.
"At no time prior to July of 2008, and only after Woodmen was forced to sign a confidentiality agreement, did U.S. Bank inform Woodmen" that some of Woodmen's short-term investments had been placed in high-risk securities, the lawsuit says.
Woodmen is continuing to pursue other avenues to resolve this matter, Haack said.
Woodmen of the World was founded in 1890 as a fraternal benefit organization. Today, Woodmen of the World offers insurance, annuities, mutual funds, and 529 college savings plans.
Source: Woodmen of the World 

The number of newly-laid off Americans filing for jobless benefits continues to decline, while U.S. merchants are showing some improvement in sales figures.

The U.S. Labor Department says new claims for unemployment benefits fell to the lowest level in 10 months.  Last week's total, 512,000, was 20,000 less than the previous week and below many analysts' expectations.
Even so, weekly unemployment claims above the half-million mark are a sign that the U.S. economy continues to shed jobs, albeit at a slower pace than a few months ago.
Economists are awaiting signs of vibrant job creation in the United States.  But a new report suggests employers are finding ways to get more output from their existing workforce, rather than hiring new laborers.  The Labor Department says American worker productivity jumped nearly 10 percent in the third quarter of the year.
Economist Joel Naroff says American companies are in no rush to hire:
"They are working their people longer," he said.  "They are getting more output from their people.  And as a result of that, they do not need new workers at this point."
Meanwhile, a wide range of American retailers are reporting improved sales.  From warehouse discounters to luxury-goods merchants, many retailers say sales rebounded in October.  But the improvement was not universal.  Several specialty-items retailers reported drops in sales.
Consumer spending accounts for more than two-thirds of U.S. economic activity.

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