(that's another one of our themes for 09) (Jul 25: States Slammed by Tax Shortfalls) (Apr 25: Shoes Beginning to Fall in the States) (Dec 16 2007: California in a State of Emergency - Coming to a Theater Near You)

Given that over 12 percent of the U.S. GDP is driven by state and local government spending, and with many key states' 2009 budgets being under-funded, governments will be forced to cut costs and this will weigh significantly on GDP, she said. (The United States of Subprime - government spending, healthcare spending, defense spending, home building and going to restaurants - now that's a healthy economy)

Whitney said home prices were not close to bottoming and expects prices to ultimately be at least 25 percent lower from current levels. She also sees further declines in homeownership rate. (nods head sadly in agreement)

The unemployment rate, which is up over 40 percent year-on-year in key states, is "headed materially higher," Whitney said.

I think Meredith has been reading the blog, much of this could of been lifted from my comments a year ago ;)

Wall Street participants continue to live in denial of the "rebound in 6 months". For long time readers you will remember the incessant calls for "2nd half 2008 rebound", right? Where are those people now? Ah, still on CNBC touting how this is yet another bottom and yet another solution (bailout) that will take away all our pain.

It is interesting to hear the cries of anguish when what has been happening in Ohio, Indiana, and Michigan for the past half decade finally hits Wall Street. Now all the sudden - job losses are a national emergency and every resource in America must be brought to bear to solve their pain (because their pain is all our pain) - when it's Midwest manufacturing jobs on the other hand... well it's just "free markets doing their thing". :)

The "Great Cleansing" continues....

p.s. the mother of all bailouts continues to get new fans wanting to attach their pet projects to it - now the FDIC's Sheila Blair would like to attach bad mortgages directly to it.

• ...restructuring of troubled mortgages should be part of the final package, the head of the Federal Deposit Insurance Corp. said Tuesday.
• ...the government could acquire troubled mortgage assets or provide a guaranty for delinquent loans, buying them and removing them from the overall pool of mortgages, Bair suggested.

Sure why not - our pockets are limitless. Hopefully we can get this Frankenstein up to maybe $1 trillion or if we're really good $1.5 trillion by the time we revisit it in 2 years once it "ends". Can I send my credit card balances in as well so Tom in Nebraska, Lori in Oregon, or Frank in Arizona can take care of it? Sign me up. Please invoice Tom, Lori, and Frank directly - I'm going to Maui to celebrate my newfound financial "freedom".