New signs of worsening economic situation on clarkhoward.com

CLARKONOMICS: There are several new signs that our nation's economic situation is worsening. Citibank is about to be split up into pieces. Bank of America, meanwhile, is in need of a second round of bailout money after receiving an initial $25 billion. Finally, a new estimate from Wall Street puts the total value of the banking sector's toxic assets at $2.1 trillion -- that's $2,100 billion dollars!

You'll recall that the original Wall Street bailout was around $700 billion. But now it appears that the actual real problem is three times the size of the entire original bailout. Meanwhile, Clark says he's not excited about the new $850 billion stimulus proposal floating around Congress.

If Clark were in charge of the bailout, he'd triage the banks and divide them into good (solvent) banks and bad (insolvent) banks. The bad banks would be taken over by the FDIC, and the good banks would receive money to re-capitalize. The reality is that we don't have enough money to save all the banks.

Right now, the banks are allowed to be as large as 10% of their deposit dollars. Bank of America got a waiver that allowed them to exceed that limit and thus become "too big to fail." But Clark believes that number should be dialed back to 2% so that no bank can grow to be "too big to fail." We should not have a bloated banking sector that could imperil our entire economy.

Yet Clark doesn't want to create unnecessary panic over this issue. His advice is to just do what you can in your own life to reduce debt and dial back spending.

What others are saying

Houseing and mortagages.
When the good times were being had, housing was just starting to be the new investment tool. Not just live in for a home but an investment to buy and sell and buy and sell.I had chances to buy in Florida but did not for I was not sure I could afford to. Friends did and they went on to make a very large amount of money.On East and west coast they bought and flipped. A condo was $275,000 just in 2002 resold for $350,000 in 2005 and then for $475,000
in 2007. I'm sitting with the new buyer and mention that soon reality on value of these properties will com,e around. He got upset and said realty is what people will keep paying for them. Now we know. The same property is back under $300,000 with no buyers. It got so messed up that developer were buying water frontage and just putting in a boat slip w/ a shed to sell with a house off water to increase prices by 100%. Now what I'm saying realty is back and the people that was buying at any price has to be held to standards. They wanted to make a killing in home market, has now accept they must take the loss. I should not make up the lost profit the wanted to make. They weren't buying to just have a home but to flip for a large profit. That was going on all over the USA. My business does not all the time make a profit, so should I fill the other people should make up the difference?
By Doyle @ 03/06/09 06:15:06 PMreport abuse
Bail out
If the government paid down everyones mortgage. Each family would have more imcome to spend and keep the economy moving. But they gave it to the few who messed everything up in the lending and banking industry. No one seems to know how to show a clean financial statement. So know the money is put into these companies and they are still sinking.
Our mortgage still needs to be paid. Our honest workers are being laid off and stuck with the bill. Wow what a mess. At least I know not to send my children to Ivy league schools. It is not worth the money. They produce cookie cutter idiots.
By JoKing @ 03/03/09 10:56:30 PMreport abuse
BANK OF AMERICA IVY LEAGUE THUGS
BANK OF AMERICA STOLE MY HOME. Contrary to ubiguitous advice that banks don't want foreclosure/willing to work with homeowner, they underhandedly forced foreclosure as I sat with money in hand and incorrect info about where and to whom to bring it. Really lousy lawyers added to losses. They did not even match my own efforts in the matter.
Billing by the hour is absurd given the poor quality of pool available to those without 'deep pockets'; regardless of pocket depth, isn't it about time lawyers get paid according to results? Or, at the very least penalized for false claims prior to taking money from prospective client (i.e. lying). Also ironic is the overwhelming tendency to provide no contract. (not that it makes a difference. When broken, consumer goes back to same square one in lousy legal process). While in the legal mess, let's look at 'creative' legal interpretations and judges who legislate from the bench. We need to confront the golden thread of all issues currently on the table: lying called sales, advertising; predators disguised as protectors; sociopaths who smess with our ability to discern because they're better 'good guys' than ggood guys. If ever there was application of 'it takes one to know one' principle! How much money would all of us have were it not for cheats and liars?! Kindness confused with weakness; trusting twisted as 'chump';victimized frowned on/dismissed as 'volunteer victim'!! Discovery Channel did piece on reliable lie detection technology. Let's make that as available as new t.v. technology and then see how stimulated the economy!!!
By LINDA D.W.G. @ 02/01/09 08:45:04 AMreport abuse
Personal Responsibility
I agree with those who say that individuals should take responsibiltiy for their decisions. However, this financial crisis is now hitting those that made good decisions. I bought a house that I could afford, didn't spend too much, invested in my 401k, had some savings, but lost my job after 12 years along with about 150 others. Now I cannot afford my house, 401k is about one third what it was, my savings account is gone. Understand that everyone is hurting now, show a little compassion in your comments, if not your actions. We do have responsibility for ourselves and I will survive somehow. When the country recovers from this mess, let's not allow those we elect to take us back to where we are now.
By Reality @ 01/19/09 11:34:02 AMreport abuse
BOA
With all the financial loses, I was just wondering how much BOA paid to rename Panther Stadium in Charlotte? Was this cost effective & with this type of spending should they receive bail out money?
By K Greene @ 01/17/09 10:19:09 PMreport abuse
economic situation
Stastically (SP) the stock market soars and tanks. I f you choose to invest, do so in the long run. I lost a ton of money in my 401k over the last year, but I'm still in it (no panic, though I'm getting closer to retirement). Your dollars buy stocks now cheaper than before. When we rebound, you'll do well. It will come back. Do you have any examples since the "great depression" where investments weren't good other than choosing a lousy stock that tanked? Take Clark's advise. I don't pinch pennies like he professes to do, but it allmakes sense.
By doingokayGA @ 01/17/09 08:14:51 PMreport abuse
economic situation
Regardless of what everyone is feeling, my clan is holding out well. We don't have oodles of money, never had. We chose to be frugal, it is has proved to be prudent. We have older cars, we bought houses we could afford. No ego. We dedicated time to educate ourselves. No one in our family is at risk of losing their job. It's the choices you make in life. No one to blame, but yourselves. Sorry this sounds harsh, but it all comes down to this. Take responsibility for your actions.
By doingokayGA @ 01/17/09 07:56:01 PMreport abuse
Worsening economy
Clark has kept me in the market up to this point but my faith in him and his belief that sticking it out will pay off in the long run is being tested by this latest horrible commentary.
It appears to me that while higher returns for stocks in the long term is at best uncertain, the near term has only one real possibility in my opinion and it's not pretty.
I'm out.
By Not too late to get out @ 01/17/09 07:39:34 PMreport abuse
Response for confused
I think Clark was referring to the law that limits any bank to holding a maximum of 10 percent of all U.S. deposits.
By Dave @ 01/17/09 07:26:06 PMreport abuse
Give tax payer dollars back to taxpayers
Please someone tell me why we keep giving money to the banks, instead of just giving it to homeowners and business to pay back on their loans? Then the banks would get their money, and taxpayers would have more money to spend and boost the economy.
By Lori @ 01/17/09 07:56:19 AMreport abuse
What is the answer?
I am in the same boat with happyhomeowner in that I am educated and didn't spend over my means when purchasing my home.

unfortunatley we are paying for those who DID spend over their means. Instead of bailing out them out, how about we pay to educate them on responsible spending and saving habits?

I know I probably have on my rose colored glasses, and that money will probably go down the drain too b/c greed in the end will prevail. But maybe we would educate some people?
By SadAmerican @ 01/16/09 04:02:51 PMreport abuse
Blame Game - Avoid Panic? LOL-- too late for that now
Ted brings on no point with his blame of "ridiculous & illegal mortgage lending practices..."

Five years ago, when I bought a house, I bought one I could afford. Now I can still continue to pay my mortgage and live in it.

People that bought more than they should, signed up for no interest loans, etc took a lage risk. Being uneducated about one of your most important life purchases is not an excuse. Unfortunately for them !@#% happened. Their fault.
By happyhomeowner @ 01/16/09 02:59:56 PMreport abuse
Reserve requirements
In the 4th paragraph, are you talking about the requirement that a bank have reserves equal to 10% of deposits (see http://en.wikipedia.org/wiki/Reserve_requirement )? If so, "dialing back to 2%" would increase risk and allow the banks to grow more. Increasing this requirement to, say, 20% would keep banks smaller.
By Confused @ 01/16/09 12:53:38 PMreport abuse
you suprise me clark...
RE: "If Clark were in charge of the bailout, he'd triage the banks..."

how about this for an idea: let the failing companies fail and the prosperous prosper. government intervention is only going to prolong this recession. how can the government "bail out" debt by creating more debt?

the government/senators/other leaders are completely out of control and have abandoned the U.S. Constitution for quite some time now. i'm beginning to think the only 'fix' is to start over.
By anti-socialist @ 01/16/09 10:36:48 AMreport abuse
Avoid Panic? LOL-- too late for that now
Clark needs to raise hell! If more people in the media had highlighted the ridiculous & illegal mortgage lending practices five years ago, much of the current crisis could have been avoided.
By Ted @ 01/15/09 10:00:44 PMreport abuse

Houseing and mortagages.

When the good times were being had, housing was just starting to be the new investment tool. Not just live in for a home but an investment to buy and sell and buy and sell.I had chances to buy in Florida but did not for I was not sure I could afford to. Friends did and they went on to make a very large amount of money.On East and west coast they bought and flipped. A condo was $275,000 just in 2002 resold for $350,000 in 2005 and then for $475,000
in 2007. I'm sitting with the new buyer and mention that soon reality on value of these properties will com,e around. He got upset and said realty is what people will keep paying for them. Now we know. The same property is back under $300,000 with no buyers. It got so messed up that developer were buying water frontage and just putting in a boat slip w/ a shed to sell with a house off water to increase prices by 100%. Now what I'm saying realty is back and the people that was buying at any price has to be held to standards. They wanted to make a killing in home market, has now accept they must take the loss. I should not make up the lost profit the wanted to make. They weren't buying to just have a home but to flip for a large profit. That was going on all over the USA. My business does not all the time make a profit, so should I fill the other people should make up the difference?

By Doyle @ 03/06/09 06:15:06 PMreport abuse

Bail out

If the government paid down everyones mortgage. Each family would have more imcome to spend and keep the economy moving. But they gave it to the few who messed everything up in the lending and banking industry. No one seems to know how to show a clean financial statement. So know the money is put into these companies and they are still sinking.
Our mortgage still needs to be paid. Our honest workers are being laid off and stuck with the bill. Wow what a mess. At least I know not to send my children to Ivy league schools. It is not worth the money. They produce cookie cutter idiots.

By JoKing @ 03/03/09 10:56:30 PMreport abuse

BANK OF AMERICA IVY LEAGUE THUGS

BANK OF AMERICA STOLE MY HOME. Contrary to ubiguitous advice that banks don't want foreclosure/willing to work with homeowner, they underhandedly forced foreclosure as I sat with money in hand and incorrect info about where and to whom to bring it. Really lousy lawyers added to losses. They did not even match my own efforts in the matter.
Billing by the hour is absurd given the poor quality of pool available to those without 'deep pockets'; regardless of pocket depth, isn't it about time lawyers get paid according to results? Or, at the very least penalized for false claims prior to taking money from prospective client (i.e. lying). Also ironic is the overwhelming tendency to provide no contract. (not that it makes a difference. When broken, consumer goes back to same square one in lousy legal process). While in the legal mess, let's look at 'creative' legal interpretations and judges who legislate from the bench. We need to confront the golden thread of all issues currently on the table: lying called sales, advertising; predators disguised as protectors; sociopaths who smess with our ability to discern because they're better 'good guys' than ggood guys. If ever there was application of 'it takes one to know one' principle! How much money would all of us have were it not for cheats and liars?! Kindness confused with weakness; trusting twisted as 'chump';victimized frowned on/dismissed as 'volunteer victim'!! Discovery Channel did piece on reliable lie detection technology. Let's make that as available as new t.v. technology and then see how stimulated the economy!!!

By LINDA D.W.G. @ 02/01/09 08:45:04 AMreport abuse

Personal Responsibility

I agree with those who say that individuals should take responsibiltiy for their decisions. However, this financial crisis is now hitting those that made good decisions. I bought a house that I could afford, didn't spend too much, invested in my 401k, had some savings, but lost my job after 12 years along with about 150 others. Now I cannot afford my house, 401k is about one third what it was, my savings account is gone. Understand that everyone is hurting now, show a little compassion in your comments, if not your actions. We do have responsibility for ourselves and I will survive somehow. When the country recovers from this mess, let's not allow those we elect to take us back to where we are now.

By Reality @ 01/19/09 11:34:02 AMreport abuse

BOA

With all the financial loses, I was just wondering how much BOA paid to rename Panther Stadium in Charlotte? Was this cost effective & with this type of spending should they receive bail out money?

By K Greene @ 01/17/09 10:19:09 PMreport abuse

economic situation

Stastically (SP) the stock market soars and tanks. I f you choose to invest, do so in the long run. I lost a ton of money in my 401k over the last year, but I'm still in it (no panic, though I'm getting closer to retirement). Your dollars buy stocks now cheaper than before. When we rebound, you'll do well. It will come back. Do you have any examples since the "great depression" where investments weren't good other than choosing a lousy stock that tanked? Take Clark's advise. I don't pinch pennies like he professes to do, but it allmakes sense.

By doingokayGA @ 01/17/09 08:14:51 PMreport abuse

Regardless of what everyone is feeling, my clan is holding out well. We don't have oodles of money, never had. We chose to be frugal, it is has proved to be prudent. We have older cars, we bought houses we could afford. No ego. We dedicated time to educate ourselves. No one in our family is at risk of losing their job. It's the choices you make in life. No one to blame, but yourselves. Sorry this sounds harsh, but it all comes down to this. Take responsibility for your actions.

By doingokayGA @ 01/17/09 07:56:01 PMreport abuse

Worsening economy

Clark has kept me in the market up to this point but my faith in him and his belief that sticking it out will pay off in the long run is being tested by this latest horrible commentary.
It appears to me that while higher returns for stocks in the long term is at best uncertain, the near term has only one real possibility in my opinion and it's not pretty.
I'm out.

By Not too late to get out @ 01/17/09 07:39:34 PMreport abuse

Response for confused

I think Clark was referring to the law that limits any bank to holding a maximum of 10 percent of all U.S. deposits.

By Dave @ 01/17/09 07:26:06 PMreport abuse

Give tax payer dollars back to taxpayers

Please someone tell me why we keep giving money to the banks, instead of just giving it to homeowners and business to pay back on their loans? Then the banks would get their money, and taxpayers would have more money to spend and boost the economy.

By Lori @ 01/17/09 07:56:19 AMreport abuse

What is the answer?

I am in the same boat with happyhomeowner in that I am educated and didn't spend over my means when purchasing my home.

unfortunatley we are paying for those who DID spend over their means. Instead of bailing out them out, how about we pay to educate them on responsible spending and saving habits?

I know I probably have on my rose colored glasses, and that money will probably go down the drain too b/c greed in the end will prevail. But maybe we would educate some people?

By SadAmerican @ 01/16/09 04:02:51 PMreport abuse

Blame Game - Avoid Panic? LOL-- too late for that now

Ted brings on no point with his blame of "ridiculous & illegal mortgage lending practices..."

Five years ago, when I bought a house, I bought one I could afford. Now I can still continue to pay my mortgage and live in it.

People that bought more than they should, signed up for no interest loans, etc took a lage risk. Being uneducated about one of your most important life purchases is not an excuse. Unfortunately for them !@#% happened. Their fault.

By happyhomeowner @ 01/16/09 02:59:56 PMreport abuse

Reserve requirements

In the 4th paragraph, are you talking about the requirement that a bank have reserves equal to 10% of deposits (see http://en.wikipedia.org/wiki/Reserve_requirement )? If so, "dialing back to 2%" would increase risk and allow the banks to grow more. Increasing this requirement to, say, 20% would keep banks smaller.

By Confused @ 01/16/09 12:53:38 PMreport abuse

you suprise me clark...

RE: "If Clark were in charge of the bailout, he'd triage the banks..."

how about this for an idea: let the failing companies fail and the prosperous prosper. government intervention is only going to prolong this recession. how can the government "bail out" debt by creating more debt?

the government/senators/other leaders are completely out of control and have abandoned the U.S. Constitution for quite some time now. i'm beginning to think the only 'fix' is to start over.

By anti-socialist @ 01/16/09 10:36:48 AMreport abuse

Avoid Panic? LOL-- too late for that now

Clark needs to raise hell! If more people in the media had highlighted the ridiculous & illegal mortgage lending practices five years ago, much of the current crisis could have been avoided.

By Ted @ 01/15/09 10:00:44 PMreport abuse

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Jan 15, 2009 -- New signs of worsening economic situation

What others are saying