CNNMoney.com is tracking developments in the economic rescue as they happen. Find out how much money the government is putting on the line.
Program Note: Tune in tonight to hear more about a potential second stimulus from Ed Henry and Ali Velshi. AC360° at 10 p.m. ET.
The government is engaged in a far-reaching – and expensive – effort to rescue the economy. Here's how you can keep tabs on the bailouts. Take a look at these stimulus programs designed to save or create jobs and jumpstart the economy from recession.
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/10/04/u.s.economy/art.greenspan.gi.jpg caption="Former Fed Chairman Alan Greenspan, shown here in 2008"]
CNN Financial News Producer
One year after the Troubled Asset Relief Program was signed into law, the TARP’s top cop says federal officials weren't entirely honest with the public about the health of the first nine financial firms that got bailouts.
Bailout Special Inspector General Neil Barofsky says in an audit that Treasury Dept. officials painted an overly rosy picture, creating “unrealistic expectations,” when they called the first bailout banks “healthy” institutions that would be able to lend more with government help.
Separately, the new audit looks into charges that government officials strong-armed Bank of America into completing its planned purchase of Merrill Lynch, even as BofA worried about mounting losses at Merrill in late 2008. Further, the report looks into whether officials pressured BofA to conceal those losses from shareholders.
Barofsky's office was created by the Emergency Economic Stabilization Act of 2008, which established the $700 billion federal bailout program. This audit is the fourth completed so far by the watchdog in recent months, but the first that looked at how banks said they used their bailout dollars.
Greenspan says unemployment will top 10%
Former Fed Chief Alan Greenspan over the weekend joined the chorus of politicians and pundits who say unemployment will top 10%, even though he believes the U.S. economy will grow more than expected in the third quarter.
Greenspan told ABC’s “This Week” that he expects 3% growth in the third quarter, up from the 2.5% he previously predicted. However, he said that the “pretty awful” September employment report released Friday showed the jobless rate continued to climb.
A slowing or halt in job losses is different than reversing the rise in unemployment, Greenspan noted, adding that the nation's unemployment rate - currently 9.8% - is “going to penetrate the 10% barrier before heading down.”
That prediction matches previous comments by President Barack Obama and others who say that unemployment is a lagging indicator in an economic recovery.
“Gourmet” gone… “Cookie” crumbles…
“Gourmet” magazine, which has amassed a devoted following over nearly 70 years of publication, will be shut down, publisher Condé Nast said.
The magazine, introduced in 1940, is expected to close by the end of the year.
“Gourmet,” which has nearly 1 million subscribers, fell victim to a decline in magazine advertising and followed a companywide review of magazines.
In addition to “Gourmet,” Condé Nast said it was also shuttering parenting magazine “Cookie” and two wedding magazines, “Elegant Bride” and “Modern Bride.”
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The government has spent at least $3 trillion to fix the economy, although that includes loans and investments that might one day be recouped. It has allocated, or set aside, at least $10.6 trillion to spend if needed. Where is all of this money going?
Take a look at this interactive that tracks the bailout money.
[cnn-photo-caption image="http://i2.cdn.turner.com/money/2009/08/13/news/economy/compensation_treasury/ken_feinberg_090610.03.jpg" width=220 height=282 caption="White House pay czar Kenneth Feinberg."]
Just how much is a rainmaker at a bailed-out bank really worth? Or a senior executive at a recently bankrupt automaker for that matter?
Such questions will soon be a subject of discussion at the White House as the biggest recipients of government aid begin submitting compensation plans for their top 100 employees to the Obama administration's recently appointed pay czar.
Seven companies - AIG (AIG, Fortune 500), Chrysler, Citigroup (C, Fortune 500), Chrysler Financial, Bank of America (BAC, Fortune 500), General Motors and GMAC - are due to submit proposed employment contracts for their 25 highest-paid employees Friday. Compensation proposals for the next 75 most compensated employees are due by Oct. 13.
Kenneth Feinberg, the man charged with handling the task, is expected to rule on the first set of pay plans within the next 60 days. That information is due to be made public by Treasury sometime after, although any announcement may not include details of pay packages for individual employees.
CNN Financial News Producer
Even though the government won’t publicly reveal the results of the bank “stress tests” until Thursday, numerous leaks are painting a troubling picture for some of the nation’s largest financial institutions.
According to several reports, regulators have determined that Bank of America may need roughly $34 billion in capital to weather a more painful economic environment. A company spokesman declined to comment.
Bank of America has received extensive assistance from the government to date, taking in $45 billion in taxpayer funds. A potential capital shortfall of this magnitude is certain to increase the pressure on CEO Ken Lewis, whom shareholders ousted as chairman of the bank last week.
Reports out Tuesday indicated that the government will direct more than half of the 19 banks that underwent the tests to boost their capital reserves, a move that officials hope will quell fears about the solvency of the financial sector.
New signs of life in the job market
The pace of job losses may be slowing, according to two private reports released this morning.
CNN Financial News Producer
More troubling news on the unemployment front today... the number of Americans filing initial claims for jobless benefits increased last week while the number of people continuing to claim benefits set yet another record high.
First-time claims for unemployment insurance rose by 27,000 to 640,000 from the previous week revised figure of 613,000. And the number of people receiving benefits for one week or more rose by 93,000 to 6,137,000 million. That’s the highest number on records dating back to 1967.
Earlier this month, the government reported that 2 million jobs have been lost since the beginning of 2009 through March, bringing the nation's unemployment rate to the 25-year high of 8.5%.
Home sales drop in March
Sales of previously-owned homes fell in March but analysts say the housing market is showing signs of stabilization.
The National Association of Realtors said that so-called “existing home sales” fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.
Program Note: Tune in to the CNN Money Summit on Friday at 11 p.m ET to hear Ryan Mack and others weigh in on the economy.
President of Optimum Capital Management
Somewhere in Detroit, right now, there is a union worker sweating as he helps to produce cars for this country on the assembly line. He thought that his contract with the UAW was set in stone but, unfortunately, to his dismay it was renegotiated and he has just found out that his salary was cut in order to keep his job. As well, he is now overly concerned that his health care will be reduced when he retires and his retirement will not be fully funded. All around him he hears horror stories of those who retired without the promised full pension and he sees the numbers of workers around him decrease every month by the dreaded pink slip.
The market falters because of the failure of the banking system, and the government calls upon this worker for help. Bush, Paulson, Bernanke, and other members of the government explain to this worker that if the banks fail he will be negatively impacted. This same story is repeated by Obama, Geithner, Bernanke, and other government officials. This worker is a little reluctant at first but he eventually gets the bigger picture. He understands how the system works so he reaches into his pocket with his calloused hand and pulls out some of hard earned capital to give to the banks to support the system.
Soon after, on his way to work at 4:30 am, getting prepared to do a double shift, he picks up a cup-a-joe and a newspaper with a headline that grabs his attention. Headline: “AIG Gives $165 million in Bonuses!” He doesn’t really follow the news that closely but thinks to himself, “I wonder if they used my hard earned money to bail out AIG as well?”
When he gets to work, in the locker room, many of the co-workers are talking about the same story. They ask him, “Do you see that we bailed out THOSE GUYS only to help them get their million dollar bonuses!?”
Talking Points Memo
According to the Post's A1 story tomorrow, the administration is 'considering asking Congress' (i.e., this is a trial balloon) to give the Treasury Secretary powers to seize non-bank financial institutions: in other words, the Lehman Brotherses and AIGs of the financial world.
Also in the background is the emerging debate about what government agency is going to take on the new role as 'systemic risk regulator' - the Fed? or some new agency yet to be created. This is an issue that Elana Schor has been writing about at TPMDC. And it seems to be swirling in the background in the spat between the White House and Sen. Dodd.