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A Lesson in News Stories on the Economy – Two positives equal a negative.

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posted on Jul, 19 2009 @ 01:15 PM
The following is a prime example of the fact that you have to be the one to look at the big picture when analyzing news related to the economy. It is all interconnected and we can’t look at any one story to get the whole story. Allow me to explain with just one simple example.

The first article, July 19, 2009 (Reuters) Banks with bailout funds say loans rise: survey, presents a cheery view of banks “doing the right things” with the bailout money and making everyone feel good about it.

More than 80 percent of the U.S. banks that received federal bailout funds said the money had helped them increase lending or avoid a drop in lending as the recession worsened earlier this year, according to a new survey released on Sunday.

… of the 360 banks surveyed, 300 or 83 percent, said it was used to supplement lending activities. About 29 percent of institutions said they used TARP funds to make residential loans, 18 percent used TARP funds for commercial mortgages and 17 percent said they made other consumer loans with TARP funds, such as auto loans and personal lines of credit.

The survey, conducted from February to June, was aimed at answering a question on the minds of many lawmakers, policy makers and commentators: What have banks done with their bailout money?

300 of the 360 banks that got bailout funds are using them to lend to consumers. Great. So now that we feel good about our money being used the way they were intended (at least by those 300 banks), let’s look at the next story – one that presents a cheery picture of the largest banks doing well and being able to more than offset losses with revenues, thus reporting profits: July 18 (Bloomberg) JPMorgan, U.S. Lenders Lean on Investment Banking for Profits

Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., the three biggest U.S. lenders, reported a total of $10.2 billion in profits for the second quarter that relied on investment banking and asset sales to counter growing losses on consumer loans.

Goldman Sachs Group Inc., which gets almost none of its revenue from retail consumer banking, had a record quarter, reporting earnings of $3.44 billion.

Nine months after accepting more than $200 billion in government rescue funds aimed at preventing a collapse of the financial system, U.S. banks are girding for more losses from mortgages, credit cards and other businesses linked to consumers, while their underwriting and trading units generate revenue at or near all-time highs.

“Capital-markets businesses are going very well right now, and Goldman Sachs is the best of the best,” said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia. “But the consumer is still struggling out there and anybody with a lot of consumer exposure is struggling along with it.

Ahhhh…. The REST of the story. Banks with “consumer exposure” are struggling. So, taken together, these two positive stories are in actuality a HUGE negative. 300 of the 360 banks are lending to consumers as intended and are struggling. Where is that fact in either of these stories?

The moral to the story: Don’t depend on others to think for you… you’ll be disappointed.

posted on Jul, 19 2009 @ 05:49 PM
No response.. hmmm... I'm kind of surprised. Did this even show up on anyone's computers except mine?? (Talking to myself again).


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