From the Fed's press release:

"In April the coincident index for Pennsylvania fell 0.2 percent, the fourth month in a row with negative index growth. Average hours worked in manufacturing fell, while the unemployment rate had a marginal increase. Payroll employment remained roughly flat. Pennsylvania's economic activity as measured by the coincident index is down 0.3 percent over the past 12 months, the state's lowest 12 month rate since May 2003."

(see a larger figure)

(see a larger figure)

--Mark Price

(see a larger figure)

--Mark Price

"Never mind that the supposed Fat Cat "bailout" was a disaster for Bear Stearns stockholders, and that the idea of a "moral hazard" risk - that other investment banks will be tempted to emulate Bear Stearns - is preposterous. Never mind that if markets head back up and the collateral can be sold at a profit, taxpayers may lose nothing."

Separately Dean Baker in his weekly rundown of housing bust news makes the case for dropping the word "supposed" from the phrase "Fat Cat bailout".

"The Fed has opened its discount window to the investment banks, allowing them to borrow at a below-market interest rate. Currently this rate is 2.5 percent. Commercial banks have long had this option, but in return, they had to submit to transparency requirements and regulations. In other words, if taxpayers were going to back them up, banks needed to act responsibly. Unlike the commercial banks (banks where people have checking accounts and get mortgages), the investment banks are not subject to reserve requirements and do not have their books reviewed by the Fed. That's not all. When the Fed rescued Bear Stearns, Fed Chairman Ben Bernanke said that he would also come to the rescue of any other major investment bank in trouble. This promise is incredibly valuable. Mr. Bernanke effectively told the creditors of the other investment banks that they don't have to worry about Morgan Stanley's, Lehman Brothers', or Goldman Sachs' creditworthiness. If these banks aren't good for their debts, the Fed is.

To understand the value of this guarantee, consider going downtown and selling huge insurance policies that would earn you billions of dollars in fees. When someone asks whether you can really pay off on any claims on these policies, you get to tell them, "Don't worry, the Fed is backing them up." The customers will happily hand over the cash knowing that they have the best guarantee they could possibly find.

Cheap money and free guarantees: That's what we're giving to the investment bankers. So, when we see their huge mansions, private jets, and impressive foundations, we should all feel a sense of pride. After all, we paid for them."

--Mark Price

"The world economy, as John Maynard Keynes put it 75 years ago, is developing magneto trouble. What it needs is a push - more aggregate demand."

No word if the X-Men will answer the call.

The New York Times has a story on executive compensation which keeps rising even as shareholder returns don't. Here is a nice graphic that provides detailed info on executive pay.

Paul Krugman discusses the recent surge in food prices and spots some news about the issue on his blog.

In the Financial Times the International Monetary Fund sounds the alarm for more to be done world wide to rescue credit markets.

Also from the International Monetary Fund (IMF) some concern that housing prices are a bit high in many parts of Europe.

--Mark Price

--Mark Price

Trouble with foreclosures in Lehigh and Northampton County:

The number of homes sold at sheriff's sale is on the rise in both Lehigh and Northampton counties, and the tide of foreclosures has spread to higher-priced houses in the suburbs.

The number of homes sold at sheriff's sales in Northampton County more than doubled to 99 properties during the first three months of the year, according to the county's sheriff department, which handles the sales.

In Lehigh County, 94 homes sold at sheriff's sale in January, February and March, nearly double the number in 2007. That's a turnaround from last year. While foreclosures were already on the rise in 2007 in Northampton County, the number of homes sold at sheriff's sales had fallen in Lehigh County, compared with 2006.

While the number of foreclosed homes in the Lehigh Valley remains small, the latest statistics provide a glimpse of what might lie ahead. Economists predict more homeowners nationally and in the Valley will default on mortgages this year as a larger number of adjustable rate mortgages reset to higher monthly payments.

--Mark Price

You can find Keystone Research Center estimates of inequality in PA based on Piketty and Saez methods in the State of Working Pennsylvania 2007.

From our report here is data on the share of income of the top 10%:

"Figure 15 presents Sommeiller's data alongside our own estimates based on Pennsylvania Department of Revenue data and reveals the following trends: The share of personal income held by the top 10% peaked at 35% in 1921. This share declined in the 1920s before recovering somewhat to 31% in 1940. At around 28%, the share of the top 10% in the last several years is higher than it has been, with the exception of 1987, since the 1940s."

--Mark Price

"In London, where the Bank of England has faced criticism for not being as proactive as other central banks, the three-month Libor rate was set on Tuesday at 5.995 per cent, its highest of the year. This is nearly 0.9 percentage points above the level investors demand for risk-free money, a spread nearly as high as that which led to central bank interventions in September and December."

"The Fed's latest lending to banks under its Term Auction Facility was also in heavy demand, receiving bids for $88.9bn compared with the $50bn on offer, an excess of demand almost as great as the previous auction two weeks ago, before the collapse of Bear Stearns."

Also from the Financial Times the credit squeeze stirs up trouble in Iceland:

"Fears that Iceland could be the first country to fall victim of the global financial turmoil grew on Tuesday when its central bank abruptly increased interest rates 1.25 percentage points to 15 per cent in an attempt to restore confidence in its struggling currency and stave off a full-blown economic crisis."

Daniel Gross discusses the New Deal institutions which are currently preventing a complete collapse of mortgage lending.

"1. The Federal Home Loan Bank system. Last year, the model of originating and securitizing mortgages began to break down in the wake of the subprime debacle. Mortgage companies that relied on the capital markets (rather than deposits) to raise the money for mortgages suddenly found themselves starved for cash. Many of them turned to the FHLB, which was created in 1932 (so let's give that one to Herbert Hoover) and provides capital to lenders. Indeed, had it not been for the FHLB, it's possible that the nation's largest mortgage lender, Countrywide Financial Corp., might have gone under. Sen. Charles Schumer, D-N.Y., noted last fall that Countrywide borrowed a whopping $51.4 billion from the Atlanta FHLB as its troubles mounted. On Monday, the FHLB pitched in again, relaxing regulations on member banks to allow them to double the number of mortgage-backed securities issued by Fannie Mae and Freddie Mac that they can hold on their books for the next two years. The FHLB noted that this measure could allow member banks to purchase more than $100 billion worth of such securities.

2. The Federal Housing Authority. The FHA, which was created in 1934, insures mortgages made by approved lenders to borrowers who are creditworthy but not particularly affluent. As the mortgage market grew like Topsy and subprime lenders peddled credit to underserved markets, the FHA may have seemed outdated. But in the wake of the subprime debacle, the FHA has suddenly become an important part of the effort to stanch the rising tide of foreclosures. Last summer, it created FHASecure, a program that lets certain borrowers switch from adjustable-rate mortgages into fixed-rate mortgages. "From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA's refinancing product." As part of the recently passed stimulus package, the FHA is also temporarily jacking up the size of the mortgages it will insure (in high-cost housing areas) from $362,790 to $729,750.

3. The Federal National Mortgage Association (Fannie Mae), which was created in 1938. Fannie Mae purchases so-called conforming mortgages (mortgages under a certain size) made by other lenders and packages them into securities, which it effectively insures. (Here's a historical table of the conforming loan limit, which was $417,000 for a single home last year.) Fannie Mae and its brother government-sponsored enterprise, Freddie Mac, are playing a central role in the federal response to the housing crisis. The stimulus package boosted the size of the loans Fannie and Freddie can buy, from $417,000 to "125 percent of the area median home price in high-cost areas, not to exceed $729,750." And then earlier this month, OFHEO, the body that regulates Fannie and Freddie, said it would lift the cap on the amount of capital they could use to buy mortgage-backed securities and make loans, providing "up to $200 billion of immediate liquidity to the mortgage-backed securities market."

4. The Federal Deposit Insurance Corp. The FDIC, which was founded in 1933 and insures bank deposits, is playing more of a passive role. Many of the financial institutions that have failed or suffered near-death experiences in the current crisis—subprime lenders, jumbo lenders like Thornburg Mortgage and Bear Stearns—essentially fell victim to runs on the bank. Once customers and counterparties came to believe that it wasn't safe to do business with these firms, their days were numbered. But one sector has been largely immune from runs on the bank—banks themselves. Even as banking companies have racked up significant losses on soured loans, and even as some tiny banks have failed, Americans haven't rushed to yank their cash out of their checking and savings accounts. The reason: In the event of a failure, depositors with $100,000 or less at FDIC-insured institutions are made whole."

Brad Delong and Paul Krugman push back on the recent news about the most successful New Deal institution Social Security.

The OFHEO did however also recently release a new index of housing price data for Pennsylvania. The new data covers housing prices in non-metropolitan Pennsylvania between the 1st quarter of 1995 and the 4th quarter of 2007.

Before presenting the numbers let me briefly discuss housing prices and inflation. For the majority of Pennsylvanian's their homes represent their most valuable asset. Just like when a stock price rises, rising housing prices mean that Pennsylvanian's have more wealth. Just how much more wealth they have depends on what is happening to the overall price level (measured here as consumer prices less shelter). So in Pennsylvania from the 4th quarter of 2006 to the 4th quarter of 2007 housing prices increased by 2.8% but since over the same period consumer prices increased by 2.8% the value of Pennsylvania homes was unchanged.

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Before adjusting for inflation housing prices in non-metropolitan Pennsylvania increased by 3.3% in the 4th quarter of 2007. Factoring in inflation, housing prices increased slightly 0.5% in the region. Like in many parts of Pennsylvania there has been a sharp slowing of the growth in housing prices in non-metropolitan Pennsylvania compared to the recent past. Overall between 2001 and 2006 inflation-adjusted housing prices rose by 31% in non-metropolitan Pennsylvania. Before adjusting for inflation housing prices rose by 54% in non-metropolitan Pennsylvania.

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Given the widespread growth in housing prices it is no surprise that subprime loans (see our estimates of the subprime share of all mortgages originated by county in Pennsylvania) even in non-metropolitan counties became an important source of financing for many families.

--Mark Price