From IBD:

It's the 5th bank [Wachovia] to agree to repurchase auction-rate securities under pressure from federal and state regulators who said the banks misled investors. It'll buy $8.5 bil worth that investors couldn't sell. Citi, (C) UBS, (UBS) JPMorgan Chase (JPM) and Morgan Stanley (MS) also have agreed to buy back the securities. N.Y. may sue Merrill Lynch over the issue and is probing Fidelity and Charles Schwab. (SCHW)

Anyone who is currently arguing that we are not in a recession is simply proving how little they know about economics. The underlying facts and figures are clearly pointing otherwise.

There is one measure that the "there is no recession" (or as Barry Ritholtz calls them the Pervasive Pollyannas of Prosperity or PPP) crowd points to: we have not have two consecutive quarters of negative GDP growth.  Therefore, we're not in a recession.  The official organization that dates recessions (the NBER) answers that observation thusly:

From the LA Times:

The proposal would offer concessions to Republicans who have called for increased domestic production: An area of the Gulf of Mexico, 50 miles off Florida's coast, would be open to drilling; and Virginia, the Carolinas and Georgia could decide whether to allow drilling 50 miles off their shorelines.

From Bloomberg:

Merrill Lynch & Co. was accused by Massachusetts Secretary of State William Galvin of misleading investors about the stability of the auction-rate market at the same time the investment bank was marketing the securities.

Yesterday the Federal Reserve released the latest Beige Book.  Boy are they a bunch of whiners.  These central bankers are in such a mental recession it's sick.  They need to stop talking to businessmen and listen to Fox news to get the real story.

From a story talking about the new housing bill:

From the WSJ:

The package could also come at a significant cost to the U.S. government, which would be authorized to invest billions of dollars in troubled mortgage giants Fannie Mae and Freddie Mac, as well as insure up to $300 billion in refinanced mortgages. As a result of the bill, Congress will raise the national debt ceiling to $10.6 trillion from $9.8 trillion. It will also give Fannie Mae and Freddie Mac a new, tougher regulator.

Today I'll be on KTLK at 11:30 CST to talk about the economy.

We've seen a wave of news stories that Wall Street is scared of Obama, or the Obama will lead to a market crash or that Obama will kill the economy.  First -- it's not like the Republicans have a lot to crow about here.  We're currently dealing with the long term effects of Republican excesses and the results are terrible.  Secondly - and more importantly, the historical record (those pesky facts again) indicate that Democrats are far better for the economy than Republicans.

At least according to someone who should know:

"This is a very serious banking crisis. There's just no question about that," said Donald G. Ogilvie, a longtime president of the American Bankers Association and now a senior adviser at Deloitte LLP.

From Bloomberg:

A government takeover of one or both companies is among several options that have been considered by White House officials, according to a person familiar with the discussions who spoke on condition of anonymity. Senior Bush administration officials are considering placing either or both firms in a conservatorship if their problems get worse, the person said.

I was emailing with some friends about what to do about the federal budget.  Below are my thoughts and analysis, which should be classified as "back of the envelope" thinking.

Yesterday, Ben Bernanke gave a speech about financial regulation.  In the speech he discussed what happened with Bear Stearns.  It is an interesting explanation.

To those of us who started writing about economics on the web, Barry Rithotlz is like a blog God father.  His blog the Big Picture was one of the first economics blogs I found and is one I still read regularly.  He inspired many of us to start writing ourselves.  

This will be a long and fairly involved article.  However, there is a lot of ground to cover.  So, let's start with the charts of the market.

Let me begin with this caveat: I'm a capitalist.  I like making money.  I don't see anything inherently wrong in the pursuit of profit.  However, I do see something wrong with what has happened underneath the surface of the economy over the last 7-10 years.  There has been a wave of corruption largely related to the mortgage market.  Whether it's brokers who fail to disclose terms and conditions to borrowers, banks who fail to actually check credit, ratings agencies who do a poor job of analyzing collateral, fund mangers who do little to no due diligence, or regulators who have (at best) fallen asleep on the job it seems as though everyone dropped the ball this time around.

Last week the stock market took a big hit, largely as a result of continued problems in the financial sector.  The short version of what is happening is not good: banks of all sizes are taking big hits to their capital which will restrain their ability to make loans for the foreseeable future.  That, in turn, will add to an already slow economic environment.

I originally wrote this at the end of 2006, largely because of the need to find a way out of mammoth amount of debt in the US economy.  This article and the ideas presented are salient to the recent push to drill in Alaska and offshore.  While I have heard a great deal of rhetoric from both candidates, little of it makes economic sense.  McCain wants to institute another round of supply-side policies despite the fact that the previous two times these ideas were implemented the US increased its overall debt at a mammoth level (see charts below).  While I agree with Obama's overall concept he faces a different problem: he  inherits a federal government that is deeply in debt.  I explained his basic problem here.  The problem with both candidates is no one is accepting the fact the US is in a dire situation at the federal level.  Dire situations call for radical solutions.

The Federal Reserve released the Beige Book last week.  This is a great source of economic information.  It is essentially a collection of anecdotal information from the Federal Reserve's contacts in each Federal Reserve district.  As such it provides valuable insight into what is actually happening on the ground.  Here is a link to the complete report.  I'm going to break this down into smaller pieces of information and provide some charts to flesh out what the report says.  All the charts are from econoday unless noted otherwise.

Over the last few weeks, we've seen an important development from various central banks: they have issued statements they are concerned about inflation's latest uptick.