Bernanke: Another Year of Pain

Just another year of recession. Fingers crossed. That's the latest assessment of Fed Chairman Ben Bernanke, who sees a potential economic recovery a year away. The New York Times quotes the Fed chief as saying, "If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability—and only if that is the case, in my view—there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.” He also told lawmakers that the idea of nationalizing vulnerable banks has little appeal. The Wall Street Journal called Bernanke's testimony "the strongest comments yet against nationalizing major Wall Street firms." That was enough for the markets, which nearly recovered all of Monday's losses.

And last night it was President Obama's turn. The president vowed to act with the “full force of the federal government” to shore up the financial system, the Financial Times writes. The president also acknowledged more taxpayer money would be needed to bail out banks in need. Obama sent a strong message that the government will do whatever it takes to ensure big banks have “enough confidence and enough money” to keep lending. But at what cost to the banks? The WSJ profiles the precarious position of Citigroup CEO Vikram Pandit, who is literally pleading with government officials to continue running the teetering banking giant even as the government is poised to take 40 percent control.

The situation at AIG seems to be going from bad to worse. Yesterday news leaked that the government-controlled insurer could be readying a $60 billion quarterly loss for next week. Today it emerges that its last-ditch attempts at raising money through asset sales are not going well. According to the WSJ, AIG's bid to sell American International Assurance Co., its "Asian crown jewel," is meeting with little to no interest. "The sale has become a symbol of a troubled auction process and unrealistic expectations that will only deepen AIG's entanglements with the Fed in the years ahead," the newspaper reports. AIG is shopping other units around to help pay off the $150 billion tab it owes Uncle Sam. Those auctions appear to be generating a bit more interest, Bloomberg reports, including Met Life's multibillion-dollar bid for American Life Insurance Co.

U.S. house prices recorded their biggest fall in more than 21 years, BusinessWeek reports, citing new data from the S&P/Case-Shiller U.S. National Home Price Index. Cities across the nation felt the pain as prices plunged 18.2 percent during the final quarter of 2008 with Phoenix, Las Vegas, and San Francisco all experiencing drops of more than 30 percent. Home prices will probably fall for years to come (though the declines will get smaller and smaller). And while the speed in declines eased slightly for Denver, Los Angeles, Miami, San Diego, and Washington, most metro areas won't start to see price increases until 2011 or 2012, BusinessWeek writes. In Asia, economic indicators continue to cause alarm. The Financial Times reports that Japan suffered a fall of nearly 50 percent in exports last month, "leading to the country’s worst trade deficit ever." With demand for Japan's goods drying up all over the world, domestic industrial output is expected to have dropped by 10 percent in January—that's worse than December's figures.

The newspaper industry is confronting two scenarios that up until just a few months ago would have seemed unfathomable: San Francisco is poised to lose its leading daily newspaper, and Liz Smith no longer has a daily column in a New York newspaper. Yesterday the Hearst Corp. announced it would close or sell the San Francisco Chronicle unless it can cut a new deal with its unions, the New York Times reports. Hearst says the Chron lost more than $50 million in 2008 and will lose more this year. The demise of the Chronicle would leave just the free-circulation San Francisco Examiner to cover the city. Meanwhile institutional gossip-columnist Liz Smith will write her last column for the New York Post on Thursday after the cash-strapped tabloid decided not to renew her contract. "Like so many other newspapers around the nation, we are buffeted by unprecedented economic gales,” Editor Col Allen wrote to Smith when informing her of the decision. The 86-year-old columnist will be reborn online at Wowowow.com (seriously).

Finally, times are tough when Silicon Valley recruiters can't get their calls answered. They're even tougher when the job recruiter himself is looking for work. The NYT heads to a networking luncheon not far from Google HQ to see just how bad the prospects are for the once humming hotbed of job placement. "The monthly luncheon, now in its 11th year, has long been a source of job leads for countless recruiters, and many showed up last week with the faint hope of hearing about an opening for themselves," the newspaper writes.