July 21, 2009: Statement of FHFA Director James B. Lockhart on the Appointment of Charles Haldeman as CEO of Freddie Mac

Click on map for larger image. Here is a map of the three month change in the Philly Fed state coincident indicators. Forty seven states are showing declining three month activity. This is what a widespread recession looks like based on the Philly Fed states indexes. On a one month basis, activity decreased in 46 states in June, and was unchanged in 1 state. Here is the Philadelphia Fed state coincident index for June. The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for June 2009. In the past month, the indexes increased in three states (Mississippi, North Dakota, and Vermont), decreased in 46, and remained unchanged in one (North Carolina) for a one-month diffusion index of -86. Over the past three months the indexes increased in two states (Mississippi and North Dakota), decreased in 47, and remained unchanged in one (Montana) for a three-month diffusion index of -90. The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Most of the U.S. was has been in recession since December 2007 based on this indicator. Note: this graph includes states with minor increases (the Philly Fed lists as unchanged). Almost all states showed declining activity in June. Still a very widespread recession ...

Aggressive policy actions taken around the world last fall may well have averted the collapse of the global financial system, an event that would have had extremely adverse and protracted consequences for the world economy. Even so, the financial shocks that hit the global economy in September and October were the worst since the 1930s, and they helped push the global economy into the deepest recession since World War II. The U.S. economy contracted sharply in the fourth quarter of last year and the first quarter of this year. More recently, the pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization. The labor market, however, has continued to weaken. Consumer price inflation, which fell to low levels late last year, remained subdued in the first six months of 2009.

Report lays out several options for farm loan restructuring WASHINGTON, D.C. - The Congressional Oversight Panel today released its "Special Report on Farm Loan Restructuring" fulfilling a mandate under the Helping Families Save Their Homes Act of 2009 to analyze "the state of the commercial farm credit markets and the use of loan restructuring as an alternative to foreclosure by recipients of financial assistance under the Troubled Asset Relief Program (TARP)." The Panel's report first examines the state of the agricultural sector and notes that, in general, it has fared somewhat better than the broader economy. The balance sheets of farmers and agricultural lenders have remained relatively strong, though some parts of the agricultural economy, most notably dairy are in crisis. Rural areas were generally less exposed to the housing bubble, providing some protection for rural community banks from the shock of the financial crisis, until more recently. Recent trends and projections in farm lending are troubling. The U.S. Department of Agriculture (USDA) expects net farm income to decline by 20 percent in 2009, which may reduce some farmers' ability to repay loans later in the year, although the impact may be mitigated by an increasing reliance on off-farm income. Demand for direct operating loans from the agricultural lender of last resort, the Farm Service Agency (FSA), increased 81 percent over the last year, and demand for direct ownership loans increased 132 percent. Congress asked the Panel to examine the possibility of establishing a farm loan restructuring mandate for TARP-recipient commercial banks in order to prevent agricultural foreclosures. The Panel looked at several existing programs: the Farm Service Agency's process, the Farm Credit System and the Home Affordable Modification Program (HAMP) as possible models for actions under TARP to aid farmers. The report notes that the effects of any loan restructuring mandate for TARP...

cites citing The Economist quoting Richard Thaler: The [Efficient Capital Markets] hypothesis has two parts, he says: the “no-free-lunch part and the price-is-right part, and if anything the first part has been strengthened as we have learned that some investment strategies are riskier than they look and it really is difficult to beat the market.” The idea that the market price is the right price, however, has been badly dented. I think this is exactly right. Ever since graduate school I have said that I believe in efficient markets, by which I mean the “no-free-lunch part.” The idea that some people might think that “no free lunch” implied that “prices are right” didn’t even occur to me at the time. My thinking was basically like this: yes there are bubbles, but it’s hard to tell if you are in one, and even if you can tell, you can’t tell how long it will last so you can lose a lot of money betting against it, and even if you have a very long time horizon, who’s to say you won’t be in another bubble when you finally want to sell? Put another way, you may be “right” about an asset price, but if the market is composed of lots and lots of people who are “wrong,” and those people are never going away, what does that get you? More fundamentally, for an interesting asset like a share of stock (or a house), what does it even mean for a price to be “right?” Sure, ten years later you can see what the dividends have been for ten years and what the stock price is on that date, but that price is no more “right” than any other price; it’s still a collective, irrationality-tainted guess about the future. Future states of the world are not only unknowable right now, they dont’ exist right now, so questions of right and wrong don’t even apply to them. There are just better and worse estimates, and there will never be any way to determine which estimate was better. (Just because things work out a certain way doesn’t imply that that was the most likely outcome.) I think I’ve beaten this...

The depth and breadth of the global recession has required a highly accommodative monetary policy. Since the onset of the financial crisis nearly two years ago, the Federal Reserve has reduced the interest-rate target for overnight lending between banks (the federal-funds rate) nearly to zero. We have also greatly expanded the size of the Fed’s balance sheet through purchases of longer-term securities and through targeted lending programs aimed at restarting the flow of credit.