by Calculated Risk on 3/07/2009 12:43:00 PM

Last year I wrote a post about how falling oil prices would provide some cushion for the U.S. economy: The Oil Cushion. Here is an update ...

The following graph shows the monthly personal consumption expenditures (PCE) at a seasonally adjusted annual rate (SAAR) for gasoline, oil and other energy goods compared to the U.S. spot price for oil (monthly).

Click on graph for larger image in new window.

The good news is at current oil prices (U.S. spot prices averaged about $39 per barrel in February), oil related PCE will be in the $250 billion seasonally adjusted annual rate (SAAR) range in Q1 - well below the $440 billion SAAR of the first 8 months of 2008.

This is a savings of about $16 billion per month compared to the first 8 months of 2008. That savings will definitely provide a cushion for consumers.

The previous two quarters (Q3 and Q4) saw two of the four largest percentage declines in PCE in the last 40 years (-4.3% and -3.8% respectively). But there was little or no oil cushion in Q3, and about $7 billion per month in Q4 ... and as expected, the Q4 oil cushion showed up more as savings, as opposed to other consumption. But savings is a help too, because rebuilding savings is a necessary step towards rebuilding household balance sheets.

In Q1 the oil savings is much larger and will probably provide more of a cushion for consumers.

Data sources:
PCE from BEA underlying detail tables: Table 2.4.5U. Personal Consumption Expenditures by Type of Product line 117.

Oil prices from EIA U.S. Spot Prices.

by Calculated Risk on 3/07/2009 12:44:00 AM

The employment (or unemployment!) report was the big story on Friday. The BLS reported payroll employment declined by 651 thousand jobs in February and the unemployment rate jumped to 8.1%. Here is a graph of unemployment rate and the year over year change in employment, and a graph comparing job losses in post WWII recessions, and a graph of the number of workers working part time for economic reasons.

In an interesting speech, Kansas City Fed President Thomas Hoenig called for nationalization of insolvent banks: Too Big has Failed

The FDIC reported that the 17th bank failed this year: Freedom Bank of Georgia, Commerce, Georgia.

Meanwhile the Senate is considering a bill to temporarily allow the FDIC to borrow $500 billion from the Treasury. From the WSJ: FDIC Bill Dodges a New TARP Fight This sounds like some larger bank failures are coming.

And the House is considering a bill to make changes to mark-to-market accounting. From the LA Times: House bill would create panel to OK accounting rules

Get ready for another push to suspend "mark-to-market" accounting rules.

A bill introduced late Thursday by Rep. Ed Perlmutter (D-Colo.) and Rep. Frank Lucas (R-Okla.) would create a federal board to "review the application" of accounting principles -- including controversial mark-to-market rules.

Best to all.

by Calculated Risk on 3/06/2009 10:21:00 PM

Another video from Jim the Realtor. In the comments: "not a house. This is a time machine. To 1976"

by Calculated Risk on 3/06/2009 07:40:00 PM

From the WSJ: Goldman, Deutsche Bank and Others Got AIG Aid

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

The WSJ named Goldman Sachs, Germany's Deutsche Bank, Merrill Lynch, French bank Société Générale, Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC as some of the counterparties that received payouts from AIG.

by Calculated Risk on 3/06/2009 06:12:00 PM

From the FDIC: Northeast Georgia Bank, Lavonia, Georgia, Acquires All of the Deposits of Freedom Bank of Georgia, Commerce, Georgia

Freedom Bank of Georgia, Commerce, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Northeast Georgia Bank, Lavonia, Georgia, to assume all of the deposits of Freedom Bank of Georgia.
...
As of March 4, 2009, Freedom Bank of Georgia had total assets of approximately $173 million and total deposits of $161 million. In addition to assuming all of the deposits of the failed bank, Northeast Georgia Bank agreed to purchase approximately $167 million in assets at a discount of $13.65 million. The FDIC will retain the remaining assets for later disposition.

The FDIC and Northeast Georgia Bank entered into a loss-share transaction. Northeast Georgia Bank will share in any losses on approximately $96.5 million in assets covered under the agreement. ...

The FDIC estimates that the cost to the Deposit Insurance Fund will be $36.2 million. ... Freedom Bank of Georgia is the seventeenth FDIC-insured institution to fail in the nation this year. The last bank to fail in Georgia was FirstBank Financial Services, McDonough, on February 6, 2009.

Friday is here!

Update ... from Soylent Green Is People

Friday: Freedom failed.
Cost Today: Thirty Six Mil.
Upward Soars Our Tab.