Who’s the Fall Guy?

There are lots of folks who believe that the Dow is crashing because the financial world didn’t get the tax-cutting, deregulating Republican that they are supposed to have favored. I don’t think so. Both Barack Obama and John McCain supported tax cuts (in different ways), both decried lack of governmental oversight in the financial markets and both understood the need to absorb the pain while restructuring for a sound recovery. Strangely, I do not think that the election results had much to do with the Dow fall.

Instead, November 5-7 happened to be the precise days that a lot of financial information was reported; the “numbers” are coming out – they’re not Republican numbers or Democratic numbers, they are American numbers now. And here what Wall Street has been looking at in the last few days. How do you think you’d react looking at all this new information?

1. The U.S. Department of Labor just announced the highest unemployment rate in a quarter of a century. 3.84 million Americans are reported now unemployed and receiving unemployment benefits. Late October showed an increase of 122,000 in people who are continuing to receive unemployment benefits – the worst number since 1983.

2. The non-partisan Government Accountability Office (GAO) just advised President-Elect Obama to consider a top-down redo of the governmental oversight structure of the financial markets, which has been assembled and patched over decades in a piecemeal debacle of missing pieces, special interest concessions and failed vision. The GAO’s notice stated: “The current crisis facing the nation's financial markets dramatically illustrates the ineffectiveness of the regulatory system in overseeing the increasing complexity of U.S. markets, institutions, and products that have rapidly evolved over the last 30 years." It is clear that there is a litany of failure: the negative impact of the repeal of the once-required separation of traditional commercial banking from trading/investment banking (the partial repeal of Glass Steagall in 1999), to an unregulated derivatives market, to under-regulation of private equity and hedge funds, failure to address over-borrowing (with insufficient equity) at every level from homeowners to corporations, to a failure to impose meaningful standards on the credit rating organizations.

3. Retail sales in October have sunk to a low according to the ICSC-Goldman Sachs index, the weakest October performance since at least 1969 when the index began.

4. Worker productivity (the amount an employee produces for every hour on the job) slowed down by 3.6 percent.

5. Corporate earnings reports (for the last quarter, and the projections for the next quarter) have been pouring out, and the results are dismal.

6. The economy contracted at a 0.3 percent pace in the third quarter, which ended in September.

7. Foreclosures continue unabated and housing prices continue to fall. Bottom is still a ways away.

8. Overseas, the Bank of England just took an axe to its benchmark interest rate by 1.5 points, cutting it to 3 percent. This means the dollar strengthens but our exports drop.

I’m Peter Dekom, and I live here too.