Earlier in my post on US Unemployment Reaching a 26-Year High, I said this about the U-6:

Among all groups, the U6 underemployment rate -- a broader measure of the jobs shortfall which includes people whose hours have been cut, those working part-time for lack of full-time work, and those who have given up looking -- is 17.5 percent. This is the number that I prefer to use as the real unemployment number. This reflects those individuals who can no longer find work in their chosen careers and have instead been forced back to school or to take lower paying jobs in the service sector. The lack of manufacturing jobs and a collapse in even high-paying white collar sectors such as finance and legal services poses a particular worry for the US economy and ultimately for the Administration.

David Leonhardt of the New York Times has some more color on our serious underemployment problem. Here are some of the lowlights:

In all, more than one out of every six workers -- 17.5 percent -- were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina.

The new benchmark is a sign of just how much damage financial crises tend to inflict. A recent book by Carmen M. Reinhart and Kenneth S. Rogoff, two economists, found that over the last century the typical crisis had caused the jobless rate in the country where it occurred to rise for almost five years. By that standard, the jobless rate here would continue rising for two more years, through the end of 2011.

Officially, the Labor Department's broad measure of unemployment goes back only to 1994. But early this year, with the help of economists at the department, The New York Times created a version that estimates it going back to 1970. If such a measure were available for the Depression, it probably would have exceeded 30 percent.

Vermont Senator Bernie Sanders, the left-leaning Independent who caucuses with the Democrats, today introduced legislation that would give the government the power to identify and break up financial firms that are "too big to fail."

The story from Reuters:

An independent U.S. senator on Friday introduced a bill that would give the government the power to identify and break up financial firms that are "too big to fail," an idea that is catching on.

"If an institution is too big to fail, it is too big to exist," said Senator Bernie Sanders in a statement.

"We should break them up so they are no longer in a position to bring down the entire economy," he said.

Sanders is an independent outside the U.S. political mainstream. But he is not the only one looking at break-ups.

Representative Paul Kanjorski, the Democratic chairman of the capital markets subcommittee in the U.S. House of Representatives, is working on a break-up power amendment.

It would give a new government systemic risk council break-up power, with clearance from the president.

"It's the natural action of capital to grow and exceed. Now we're going to contain it," Kanjorski told CNBC television.

He said large banks oppose his amendment because it would threaten them. But, he said, mid-sized and smaller financial institutions would be helped by it because they would be better able to compete if mega-firms were downsized.

"When the people's money is being used to bail out these large companies ... We certainly have to have someone to tell them what to do in order to save them," he said.

House Financial Services Committee Chairman Barney Frank said earlier on CNBC that a bill he is working on, which Kanjorski wants to toughen, would let a systemic risk regulator "break up" risky financial firms.

The Obama Administration has proposed regulating large firms' risk-taking much more tightly to prevent them from failing, while setting up new protocols for managing failure if things go wrong. Senator Sander's approach, however, would be to prevent the firms from getting so big in the first place.

The legislation introduced by Senator Sanders would give Treasury Secretary Timothy Geithner 90 days to list commercial banks, investment banks, hedge funds and insurers that he deems too big to fail.

The bill defines that as "any entity that has grown so large that its failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial government assistance."

A few quick thoughts. One, I think it important to separate investment banks from commercial banks. Two, exotic derivative products need to be regulated. At times it is difficult to tell the difference between Wall Street and the Vegas Strip. Three, don't allow commercial banks to grow via acquisition. Make them grow organically. That's part of the Canadian banking model and the Canadian banking model is worth studying closely. From an April 2009 Brookings Institution report:

In Canada, over-leveraging is discouraged. The ceiling on leverage ratios (assets to capital) for Canada's financial institutions is capped well below the U.S. norm (an average of 18:1 compared to over 25:1, respectively).

Second, the requirements for mortgage loans are relatively stringent. Down payments of at least 20 percent are ordinarily required, unless the bank obtains mortgage insurance through the Canada Mortgage and Housing Corporation (CMHC). The CMHC exerts a prudential influence over mortgage underwriting. Banks rely extensively on it for default insurance, which is conditioned on comparatively strict criteria for creditworthiness.

The Canada Mortgage and Housing Corporation transparently plays a role in circumscribing residential mortgage securitization. The great bulk of all lending in Canada takes place within the banking system itself, not through a largely unsupervised secondary market for bundles of loans and securities supposedly backed by other bundles of loans and securities--the "shadow banking system" - hedge funds and buy out firms - that has burgeoned in the United States.

Senator Sanders Unfiltered: Break 'Em Up!

Congressman Michael McMahon, the first term Representative from the NY-13 Congressional District that covers Staten Island and parts of Brooklyn, will vote against the historic Democratic healthcare legislation that the House leadership intends to bring to floor as early as this weekend.

From Staten Island Live:

Rep. Michael McMahon will vote against the sweeping health care reform bill, in an expected House vote tomorrow, bucking the White House and Democratic congressional leaders who are heavily invested in seeing it pass.

"As a candidate for Congress in 2008, I ran on the platform of reforming our healthcare system while containing costs and improving access for Staten Islanders and Brooklynites," McMahon (D-Staten Island/Brooklyn) said in a press release. "This legislation contains laudable reforms which I support; it allows individuals to keep coverage when they leave a job and young people to remain covered under their parents' plan, and bans discrimination based on pre-existing conditions. However, I believe that the net negatives of this bill outweigh the positive effects for Staten Island and Brooklyn residents and I will be voting no when the House considers the legislation."

Sources said voters on both sides of the bridge are "overwhelmingly opposed" to the bill -- and have let McMahon know it.

At a raucous public forum he hosted here last month, dozens of agitated Islanders decried the bill as a form of socialism. Reaction in Brooklyn has been slightly less vitriolic, but nearly just as opposed.

A source said e-mails, phone calls and letters to McMahon's congressional offices have been running 60-40 against the bill.

McMahon, a first-term Democrat in what has been a reliably red Republican district, has had Tea Party protests staged across the street from New Dorp office on the issue.

I am surprised that e-mails, phone calls and letters to McMahon's congressional offices have been running 60-40 against the bill. You can contact Congressman McMahon here.

Congressman McMahon and 39 other Democrats can say no. Any more than that and we're sunk.

Former Vice President and Nobel Peace Prize winner Al Gore has given an interview to the UK Guardian in which he expresses his optimism that the US will enact meaningful climate legislation.

He notes that "I was in China two days ago, and the premier of China asked me, in essence, why I'm optimistic that the Senate will pass legislation when the conventional wisdom says otherwise. And the answer is that I have been a part of conversations between Democrats and Republicans that give me a very different view from what the consensus is in the journalistic community." Gore then cites the recent op-ed by Democratic Senator Kerry of Massachusetts and Republican Senator Graham of South Carolina in the New York Times as evidence of wide bi-partisan support for climate legislation. He then added that "There are other surprises like that in store."

Even so, the former Vice President expects a hardening tone  from climate change deniers. He attributes this to "the sunset phenomenon, where there's a spectacle just before the subsiding": as the remaining climate change doubters and vested interests begin to realise that the game is up, he suggests, they're bound to make one last stand. "This self-interest on the part of some of the carbon polluters - who are becoming a bit intense in their efforts - reflects their awareness that public opinion has been shifting very significantly," he says. "When I say 'they', I don't mean to indict all of them, because the business community is now very much split... but that realisation has produced a desire on the part of some of these carbon polluters to dig in their heels."

Asked about the recent mass protests and civil disobedience for the climate across the world, Gore responded, "Civil disobedience has an honourable history, and when the urgency and moral clarity cross a certain threshold, then I think that civil disobedience is quite understandable, and it has a role to play. And I expect that it will increase, no question about it."

The article is strongly recommended.

Per the San Jose Mercury News:

Democratic Sen. Dianne Feinstein said Thursday she will base a decision on whether to run for California governor next year largely on the solutions the announced candidates put forward to deal with the state's fiscal problems.

Polls indicate she would be a heavy favorite if she chooses to run. Feinstein told The Associated Press in a brief interview that she is grateful for that support, but it will not be a significant factor in her decision.

"What does affect it is watching to see what precise programs are put forward by various candidates to handle what is a very serious structural budget deficit in this state," Feinstein said. "It's of major consequence and California is in considerable distress, and there have to be reforms."

Feinstein said she would take a close look at candidates' dedication to enacting their proposals as well as their ability to develop enough support to enact the changes.
The state's Department of Finance is anticipating a $7.4-billion deficit in 2010-11, even after lawmakers enacted deep budget cuts this past summer. Those cuts were so hard to come by that the state had to issue IOUs to continue operating.

Republicans have three candidates running for governor: Insurance Commissioner Steve Poizner, former eBay chief executive Meg Whitman and former congressman Tom Campbell.

Democrats have no announced candidate so far, though Attorney General Jerry Brown has formed an exploratory committee.

Two thoughts cross my mind. One, she and Jerry Brown are close friends. I suspect that if he runs, she won't. Two, she is at the pinnacle of her Senate career and the chair of the Intelligence Committee. If that's not her dream job, I don't know what is.

We're still waiting for the video to be clipped, but folks watching MSNBC earlier this hour saw what will undoubtedly be an instant Youtube classic: Markos hitting Tom Tancredo so hard in response to Tancredo's attacks on the Veterans Affairs department that Tancredo scampered off set. Here's what Markos had to say that set Tancredo into flight:

"Tom, I'm a veteran. I did not get a deferment because I was too depressed to fight in... Vietnam."

The video...

The Bureau of Labor Statistics released its October 2009 unemployment report. The numbers were worse than expected.

The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.

Most analysts had expected the unemployment rate remain just shy of 10%, instead it shot past that barrier reaching a 26 year high. In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points. Factory payrolls dropped by the most in four months, and the average workweek held at a record low.

Since President Obama took office in January, the economy has lost 3.49 million jobs. Overall the US economy has lost 7.3 million jobs since the recession began in December 2007, when the unemployment rate stood at 4.9 percent.

On the positive side, the number of temporary workers increased by 44,000 in October, adding to gains in the previous two months. This suggests that that businesses have squeezed as much production as they can out of their existing workforces and thus bring in temporary workers to fulfill orders. On the other hand, businesses seem reluctant to make permanent hiring decisions.

As the Wall Street Journal reported last week, companies are postponing major investments in either capital equipment or labor and instead holding more cash reserves. In the second quarter that ended in June, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short-term investments, or 9.8% of their assets, according to the Wall Street Journal's analysis of corporate filings. That is up from $846 billion, or 7.9% of assets, a year earlier. In the third quarter quarter that ended in October, cash assets increased to 11.1% of total assets, from 10.1% in the second quarter. The good news is that companies have cash to invest; the bad news is that so far companies don't seem to have a better use of cash other than to pay down debt. Translation, orders remain soft.

Though the right wing blogs have tried to write an apocryphal history of the special election in New York's 23rd congressional district, the fact is that Democrat Bill Owens ran on a platform that included support for healthcare reform and won. Now Owens, freshly sworn in as a United States Congressman, is reiterating his support for healthcare reform.

Rep. Bill Owens (D-NY) can be counted on as a "yes" in this weekend's expected vote on the House Democrats' health care bill, announcing his support in a press release.

"This legislation will reform the insurance industry and provide increased access to affordable healthcare without taxing healthcare benefits, cutting Medicare benefits or raising taxes on the middle class, and that is exactly the direction we need to go," said Owens. "There are still changes I would like to make, including raising the payroll exemption for small businesses, but like I said last week, there is a fundamental need for reform and we must act with a sense of urgency."

With Owens' support, as well as that of California's new Congressman John Garamendi (whose office confirmed to me this afternoon his intention to vote in favor of healthcare reform), Speaker Nancy Pelosi is now two votes closer to the 218 required to get H.R. 3962, the Affordable Health Care for America Act, through the House and on to the Senate. Still waiting to hear, though, whether Michael Barone or anyone else is willing to take me up on my bet that Pelosi will get her 218...