Updated 12/2/2009 : 9 FINANCIAL HIGHLIGHTS This report shows only those financial highlights of the U.S. Government directly related to the cash operations of the Department of the Treasury and the rest of the Federal Government. Total Receipts, Outlays and Surplus ( or Deficit ( (In billions of dollars) -1900 -1500 -1

Bank of America plans to repay $45 billion in government aid, a move that will allow the bank to begin escaping pay and other restrictions imposed by the U.S.

The forecasters at Goldman Sachs are among the most negative on the outlook for the U.S. economy. But when it comes to the world, they’re downright bullish. In an updated forecast Wednesday, Goldman’s chief economist Jim O’Neill predicts that the global economy will grow a blazing, inflation-adjusted 4.4% in 2010, and 4.5% in 2011. And it will happen even as the world’s biggest economy, the US, grows an anemic 2.1% and 2.4%. The impetus, Mr. O’Neill believes, will come from consumers in a booming developing world — particularly China and India. He notes that retail sales in developing countries have increased by a total of more than $60 billion since January 2007, while remaining effectively flat in the developed world. “The rise of the consumer” in the developing world “is a major strategic development for our era,” writes Mr. O’Neill. It’s an argument Mr. O’Neill has been making for quite a while, but the new forecast offers some nuance. Goldman expects Chinese growth to slow from 11.4% in 2010 to a slightly less extreme 10% in 2011, while India picks up some of the slack, growing at 8.2% in 2010 and 8.7% in 2011. The advanced world is also supposed to lend a hand in 2011, with the UK growing 3.4%. In Goldman’s rose-tinted future, all this will happen with little adverse effect on prices. The bank predicts that global inflation will be a cool 2.6% in 2010 and 2.7% in 2011. Real GDP Growth Country 2008 2009 (Goldman forecast) 2009 (Consensus forecast) 2010 (Goldman forecast) 2010 (Consensus forecast) 2011 (Goldman forecast) World 2.7 -0.8 -0.9 4.4 3.8 4.5 U.S. 0.4 -2.5 -2.4 2.1 2.7 2.4 Japan -0.7 -5.2 -5.7 1.5 1.4 1.6 Euro Zone 0.6 -3.9 -3.8 1.5 1.2 1.9 U.K. 0.6 -4.6 -4.5 1.9 1.2 3.4 China 9 8.7 8.5 11.4 9.6 10 India 6.7 6.6 6.1 8.2 7.6 8.7 Brazil 5.1 0.5 -0.4 5.8 4.6 5 Russia 5.6 -9 -7.7 4.5 3.5 5.5

From the Fed: Reports from the twelve Federal Reserve Districts indicate that economic conditions have generally improved modestly since the last report . Eight Districts indicated some pickup in activity or improvement in conditions, while the remaining four--Philadelphia, Cleveland, Richmond, and Atlanta--reported that conditions were little changed and/or mixed. On real estate: Home sales and construction activity improved across much of the nation, though prices were generally said to be flat or still declining somewhat. A majority of Districts reported that the lower-priced segment of the housing market has outperformed the high end . .... Multifamily housing markets deteriorated further in the New York and Chicago Districts. More broadly, a number of eastern Districts reported continued declines in home prices--specifically, Boston, New York, Philadelphia, and Richmond. In contrast, prices were said to have firmed somewhat in the Dallas and San Francisco Districts and stabilized in the Chicago and Kansas City Districts. Most reports maintained that the lower end of the market has outperformed the higher end: New York, Philadelphia, Richmond, Atlanta, Minneapolis, and Kansas City all noted relative weakness at the high end of the market, with relative strength at the lower end; in most cases, this strength was largely attributed to the homebuyer tax credit (which was recently reinstated and expanded to include existing owners). Despite the firming in sales, the level of new residential construction activity was generally characterized as weak, though recent trends have been mixed--Atlanta, Kansas City, and Dallas noted some pickup in home construction, whereas the Chicago and St. Louis Districts reported declines. Residential construction was described as flat or stabilizing by Cleveland, Minneapolis, and San Francisco. Commercial real estate conditions were widely characterized as weak and, in many cases, deteriorating further. Market conditions were reported to...

Note: The monthly data is noisy and is not adjusted for days in the month. From the American Bankruptcy Institute: The 112,152 consumer filings in November represented a decrease of 18 percent from the 135,913 filings registered in October, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). Despite the drop from the previous month, the November filings represented a 12 percent increase over the 99,925 consumer filings in November 2008. ... "While bankruptcy filings cooled in November, consumers are still feeling the effects of rising unemployment rates and housing debt," said ABI Executive Director Samuel J. Gerdano. " Bankruptcies are set to top 1.4 million filings for 2009 as consumers and businesses continue to seek shelter from economic distress." emphasis added Click on graph for larger image in new window. This graph shows the non-business bankruptcy filings by quarter. Note: Quarterly data from Administrative Office of the U.S. Courts, Q4 2009 is estimated using monthly data from the American Bankruptcy Institute. The quarterly rate is at about the same level as prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. There were over 2 million bankruptcies filed in Calendar 2005 ahead of the law change. There have been over 1.3 million personal bankruptcy filings through Nov 2009, and there will probably be over 1.4 million filings in all of 2009.

I am posting a response to yesterday's Treasury announcement about pushing lenders/servicers to make more trial modifications permanent under the government's housing bailout program (Home Affordable Modification).

The Goldman Sachs Urban Investment Group announced today an investment of $61 million to support the preservation of more than 500 affordable rental homes for low-income New Yorkers. The investment will go to the New York Equity Fund (NYEF) and represents the largest single investment in the fund’s history.

ADP : Nonfarm private employment decreased 169,000 from October to November 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from September to October was revised by 8,000, from a decline of 203,000 to a decline of 195,000. Note: ADP is private nonfarm employment only (no government jobs). The BLS reported a 190,000 decrease in nonfarm private employment in October (also -190,000 total nonfarm), and ADP originally estimated October private nonfarm employment losses at 203,000; so ADP was pretty close to the BLS number last month. On the Challenger job-cut report from Bloomberg: Planned firings fell 72 percent in November to 50,349 from 181,671 during the same month last year, Chicago-based placement firm Challenger, Gray & Christmas Inc. said today. Announcements were down 9.6 percent from October. ... The level of announced job cuts was the lowest since December 2007, Challenger said. The BLS reports Friday, and the consensus is for 100,000 net jobs lost, and a 10.2% unemployment rate for November.

From Diani Olick at CNBC: (ht Brad) ... the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements ... Those steps will include raising minimum borrower FICO scores, requiring larger down payments, and reducing the maximum permissible seller concession from six percent currently to three percent. It could also include raising up-front and/or annual insurance premiums, which would require Congressional authority. This is according to the testimony HUD Secretary Shaun Donovan is scheduled to present to the House Financial Services Committee on Wednesday afternoon, obtained by CNBC. These proposals are similar to what Kenneth Harney outlined in the San Francisco Chronicle ten days ago: . Harney suggested the FHA was looking at four possibilities: Higher down payments. The current downpayment requirement is 3.5%, and Harney mentions proposals for an increase to 5% or more. This will probably not be changed. Higher mortgage insurance premiums. Currently, FHA charges an "up-front" mortgage insurance premium of 1.75 percent of the loan amount. Most borrowers roll that into their loan and finance it. FHA also charges an annual premium, paid in monthly installments, of either 0.5 percent or 0.55 percent, depending on the down payment. To rebuild reserves, FHA could ... raise the up-front premium to 2 percent or as high as the current statutory maximum of 2.25 percent. It could also raise the annual fee... Cutting home-seller "concessions" to borrowers' loan costs. Currently the FHA will allow the seller to pay many of the buyers closing costs (up to 6% of the purchase price). Many people think this is excessive - especially with a 3.5% downpayment. Toughening credit standards. Harney writes: FHA is by far the most lenient and flexible player when it comes to evaluating applicants' creditworthiness.

“The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset price bubble bursts in the future.” -Ben Bernanke, Federal Reserve Chairman > Ben Bernanke, it seems, is changing his spots. He is now trying to prove that he is not Alan Greenspan. The technique? Spotting and popping asset bubbles before they do too much damage. This is a major change for the Fed Chairman. (Note that the Fed first floated a trial balloon on this in ). Bernanke made his Fed bones, so to speak, back in 1999, when he presented a paper to Fed officials at their annual Jackson Hole meeting, arguing against the Fed popping bubbles. His argument? The Fed should focus on controlling inflation, not trying to manage the cycle of booms and busts. That argument resonated with Easy Al. Under Alan Greenspan, the Fed accomplished neither goal. The various Greenspan era bubbles such as tech-stocks, credit, oil and commodities boom, and of course, housing all ran their course unabted, with no interference from the Fed. Inflation — much higher from 1999 to 2007 than CPI falsely reports — also ran wild. Here is Jon Hilsenrath of the WSJ: “Fed officials used to think there was little they could or should do to prevent bubbles from inflating. For one thing, identifying bubbles with any certainty was deemed to be too difficult. And even if they could be accurately pinpointed, pricking them might do more harm than good. Raising interest rates to stop a bubble, for instance, could slow growth in other parts of the economy that were otherwise healthy. The Fed’s main strategy instead was to mop up after a bubble burst with lower interest rates to cushion the blow to the economy and restart growth. That strategy was a key conclusion of Mr. Bernanke’s writings on the subject of bubbles when he was a Princeton professor, and again when he first came to the Fed as a governor in 2002. It was an approach...

The housing and credit crisis of 2007 showed the weaknesses of our banking system. In fact a whole international market of mortgage securities was based on bad loans that homeowners could simply not pay. Banks among other players had invested heavily in mortgage securities and other financial contracts. This hit banks hard, very hard. The U.S government reacted with financial measures that were unprecedented. First by taking control of two of the largest home mortgage firms, bailing out leading banks and a major, some would say “the major”, insurance company and that was only the beginning. The bailout then consisted of an initial $600 billion and then $12.8 trillion pledged for loans, loan purchases and credit guarantees in an effort of stopping the freefall the economy was going through. Even a bailout of this magnitude was not enough to help banks like Wachovia that were by now too underwater with bad loans and mortgage securities to survive. Wachovia was by no means alone in this problem various large banks were bought out. Wachovia was bought by Wells Fargo & Co a regional bank happy to pay for the nationwide network Wachovia had. Wells Fargo & Co. did look like a promising company as a regional bank with plenty of room to grow. However now finance commentators feel Wells Fargo & Co shares look expensive in the light mounting losses in the large pool of troubled loans it took from the Wachovia Corp takeover. It is hard to explain why Wells Fargo & Co trades at 2.2 times its tangible book value when other top banks like JPMorgan, often considered the best, and Bank of America Corp trade at 1.9 and 1.3 times respectively. Before the Wachovia takeover there might have been logic in adding value to Wells Fargo because of the great potential of growth it had, but it is hard to see this potential now it has the nationwide presence and is saddled with billions of dollars in bad loans both in mortgages and commercial real estate. Losses in bad loans are...