Clarion Content

Earlier in the week the Clarion Content published a piece entitled, "It is happening" by which we meant, among other things, that if the greatest economic rupture since the Great Depression was underway there must be places where it was being felt with harsh severity. While we wrote about one such place, Mendota, California, President Obama spoke in another Wakarusa, Indiana.

The President had brave words for the northwest Indiana town that has suffered massive job losses in the face of an RV plant closure. Obama announced $2.4 billion in federal grants to boost U.S. production of electric cars. According to the Los Angeles Times, "In the nearby city of Elkhart, where more than 45% of the businesses are in manufacturing and one-quarter of those are tied to the RV industry, more than a dozen RV factories have shut down in the last 12 months." It is our contention that the President is efforting to do the right thing. However, the scale of the changes happening to manufacturing in the United States are far more than government can control. At most it can nudge, attempting to do much more is probably fraught with greater dangers, blowback and unintended consequneces.

The Clarion Content still has far bigger worries about the financial sector. This week saw the failure of three more regional banks bringing the 2009 total to 72 failed banks on the year. Two of the banks were based in Florida, the third in Oregon. Officers of a fourth bank, financially troubled Colonial BancGroup confirmed federal agents raided its Orlando branch Monday with a search warrant, the Associated Press reported. The bank has 355 branches in Florida, Alabama, Georgia, Texas and Nevada. Colonial is Florida's sixth largest bank. A recent deal to inject fresh capital into the Montgomery, Alabama based bank failed, the Sarasota Herald-Tribune reported.

CNN Money said late last week that Austin, Texas based Guaranty Bank could be soon seized by the government. They report that it would be the biggest bank failure of the year by assets. Guaranty Bank has has $13.4 billion in assets and operates 160 branches. Some estimates say the bank's failure could cost the FDIC insurance fund $4.9 billion. Guaranty was damaged by a giant portfolio of mortgage-backed securities, backed largely by option adjustable-rate mortgages (ARMs) in California and Texas. CNN Money reports according to filings the bank has negative capital of $748 million.

What does all this mean to you and us, dear reader? Well like the devastation of Mendota, California, it is unclear just yet. It adds credibility to the claims about the scale of successive waves that hit the American economy in the last ten years. We should be ever more grateful that we are not starving and ever more cautious, humble.

Labels: Economy