BANKS IN THE NEWS: “VENEZUELAN police have swooped on a getaway ambulance used by robbers escaping from a dramatic two-day bank siege. They arrested four bandits affected by drink and drugs and freed the last of the hostages after a marathon ordeal.”

WHITE HOUSE OPTIMISTIC AS FED CUTS RATES AGAIN
STOCKS FALL, CRISIS DEEPENS
RALPH NADER “EXPLORING” ANOTHER RUN FOR THE WHITE HOUSE

The word from 37,000 feet and Denial Central is nothing to worry about. Reuters reports from high in the sky:

ABOARD AIR FORCE ONE (Reuters) - The White House played down talk that the United States might be headed for a recession and said a report on fourth-quarter gross domestic product released earlier on Wednesday did not change its outlook.

“I have not heard at all that we have changed our outlook, and we are not forecasting a recession,” White House spokesman Tony Fratto told reporters traveling with President George W. Bush to California for the start of a tour of western states.

U.S. GDP in the fourth-quarter grew at a meager annual rate of 0.6 percent, the Commerce Department said. That reading was weaker than 1.2 percent rate forecast by private economists.

And meanwhile, the Federal Reserve bank cut the interest rate AGAIN, the second time in 8 days. You have to realize that this is not done unless they are really worried. They cited “considerable stress in financial markets.” Yahoo reported:

“The Fed action pushed the funds rate to 3 percent… The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.'’ — Possible, or begun a year ago?”

So what happened. Did the economy bounce back? NOPE. Actually, stocks fell, as the Age reported in Australia:

A volatile night in US trading ended with stocks turning negative late in the session despite the Federal Reserve’s decision to slash a key interest rate for the second time in nine days in a bid to stave off recession.”

Note that word again” “Stave Off.” It is now the Dissector’s choice for the most overused cliché of the week

WHO BENEFITS FROM RATE CUTS?

Dean Baker raises this question on the American Prospect website: “Is the Fed Bailing Out the Economy or the Banks?”

That is the question that reporters covering the latest rate reduction should be asking. When the Fed announced its 0.5 percentage point rate cut this afternoon, something very interesting happened: long-term interest rates rose. The 10-year treasury rate jumped by about 5 basis point when the Fed announced its rate cut. The current rate of 3.72 percent is about 34 basis points higher than the low hit earlier this year.

….“The long-term rate matters much more for the economy than the short-term rate since it affects the rate that people will pay on mortgages, car loans and most other important sources of credit. If the Fed’s rate cuts lead to higher long-term rates, then it is possible that it is actually slowing growth by cutting rates.'’

SUBPRIME LENDERS REWARDED

And meanwhile, Bloomberg reports that the suboprime lenders are getting a big break on accounting rules:

By following new guidelines issued last month by a banking- industry group called the American Securitization Forum, Hewitt said servicers will be allowed to modify subprime mortgages where defaults are “reasonably foreseeable,'’ without jeopardizing the trusts’ off-balance-sheet treatment.

Of course, you can’t make money out of nothing, so this just means the losses will bleed in over a long period of time where investors will be “surprised” by earnings shortfalls.

This is of course DISGUSTING—but only the business press is reporting it. It was this “forum” that wrote the Bush mortgage relief plan which got so much press and helped very few. And read this Zogby poll:

Zogby/South Florida CEO Poll: Housing Market a Major Concern More than one-quarter of residents know someone whose home was foreclosed upon.

HOME OWNERSHIP IN RECORD PLUNGE

MORTGAGE CRISIS CREATES GHOST TOWN

Besides the fact that asset strippers are having a field day in such neighborhoods, the prophet, James Howard Kunstler has been validated: The suburbs are the slums of the future

A WEBSITE TO HELP PEOPLE JUST WALK AWAY FROM THEIR HOMES

ALSO SEE MY MEMO TO THE FBI URGING MORE INVESTIGATIONS OF WHITE COLLAR CRIMINALS ON MEDIACHANNEL.ORG