As last week unfolded, the news for Wall Street seemed to get better and better, while the view from Main Street continued to look gloomier and gloomier. Many may wonder whether the economic recession could really be over when so many citizens are out of work, out of their homes, and out of food. To help sort out the conflicting state of the U.S. economy, here is an interpretation of some of last week's headlines.

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No Jobs

At first glance, the Wall Street Journal's report that "New Jobless Claims Flat at 505,000" might have indicated that the employment situation was finally beginning to turn around, especially since 533,000 new claims for unemployment were filed during the same period last year.

But, a closer look at the data shows that number of new claims for unemployment was flat only because the Labor Department increased the number of claims reported the week before by 3,000. Moreover, only one state, Florida, reported a significant reduction in new claims, while 18 states reported more than 1,000 new claims last week, with Michigan's 6,001 new claims topping the list.

No Shelter

The housing news is no better than the jobs news. In reporting "Delinquencies Continue to Climb in Latest MBA National Delinquency Survey," the Mortgage Bankers Association (MBA) revealed that nearly one of every ten homeowners was at least a month behind in its payments.

As the MBA report detailed, the delinquency rate is more than 37 percent higher than a year earlier and shows that the mortgage industry has a long way to go before it returns to pre-recession delinquency rates.

The MBA reports even more troubling news: The delinquency numbers do not include the homes that are actually in foreclosure, a figure that also rose sharply. About one in seven mortgage holders are either in foreclosure or delinquent.

The mortgage banker's chief economist, Jay Brinkmann, explained why the end of the recession does not signal the end of the foreclosure process. "Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in G.D.P.," Brinkmann said on the MBA's Web site.

The housing news gets worse. Even though more than 25 percent of subprime loans are delinquent, it is now homeowners with prime fixed-rate mortgages, not the subprime borrowers, who are having trouble meeting their monthly payments. As the MBA reported, these prime borrowers account for the largest share of foreclosures started.

The bleak jobs outlook is not good news for the 52 million homeowners with monthly mortgage payments. As Brinkmann elaborated, even as job growth returns sometime next year, "there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates."

No Food

The New York Times reported in "Hunger in U.S. at a 14-Year High," that 49 million Americans did not have a reliable access to adequate food last year. The U.S. Department of Agriculture reports that families with children have been hit especially hard by the recession, with more than one out of five families with children having a hard time getting enough to eat each day.

As the USDA remarked, the "fundamental cause of food insecurity and hunger in the United States is poverty -- marked by a lack of adequate resources to address basic needs such as food, shelter and health care."

Nationwide, the USDA found that more than 600,000 families relied on the generosity of food pantries in 2008, up 14 percent from the pre-recession figures. The food insecurity problem is especially acute in the Washington area. Martha's Table, a D.C. non-profit that provides food and clothing to the needy, is experiencing a four-fold increase in activity -- from distributing 80 bags of food a month last year to 322 a bags a month this year, the Washington Post reported.

Good News for Wall Street

Profits Up and Taxes Down

While the news for Main Street depicts a bleak economy, the news for Wall Street depicts a rather rosy economy. The headline that may best illustrate the differences between the fortunes of Main Street and Wall Street is from the New York Times: "Wall Street on Track for Record in Profits." Thomas DiNapoli, the New York state comptroller, reported that the four largest investment firms in Manhattan earned $22 billion in profits over the first three quarters of this year. The Times noted that these profits are leading to a resurgence in bonuses, with six of the top bank holding companies setting aside $112 billion for bonuses and salaries this year.

As mind-boggling as these figures are, the real jaw-dropping numbers arise in the reduced taxes these firms will pay despite these record profits. Because companies may apply losses incurred in earlier years to reduce current taxable income, the New York State comptroller estimates that these firms may pay 20 percent less in taxes during a year they earned record profits than they did in a year when the federal government gave them a taxpayer-funded bailout.

Benefits of the A.I.G. Bailout

The American International Group is the gift to Wall Street that keeps on giving. On Monday, Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), reported that the federal government failed to limit payments to the banks that had invested with A.I.G. As the New York Times reported, "Audit Faults New York Fed in A.I.G. Bailout" for not using its influence over the banks to which A.I.G. owes money. The federal government has provided more than $180 billion in financial support to A.I.G., much of which has been used to purchase contracts that had lost significant value during the financial crisis. As Barofsky's report concluded, "The very design of the federal assistance to A.I.G. was that tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.'s counterparties."

According to the report, had A.I.G. entered bankruptcy, these contracts would have been worth far less than the full value -- $27 billion -- that the federal government paid for them last fall. (The federal government also allowed the counterparties to keep $35 billion of the collateral that A.I.G had put up.) Treasury Secretary Timothy Geithner, who led the negotiations as president of the Federal Reserve Bank of New York when the payments were made, responded that the federal government prevented "A.I.G. from defaulting because our judgment was that the damage caused by failure would have been much more costly for the economy and the taxpayer."

Behind the News

For Goldman Sachs, there was good news that did not make the headlines. Although Goldman Sachs earned $2.3 billion in 2008, it paid just $14 million in taxes, or an effective rate of 1 percent, last year. Furthermore, the vast majority of Goldman's taxes were paid to foreign countries, where its operations were very profitable.

In turning to this year's performance, Goldman expects to pay a record $22 billion in compensation and benefits to its employees. These payments have created adverse publicity, so, in an attempt to change the tone, Goldman Sachs announced that it is setting aside $500 million in a five-year initiative known as "10,000 Small Businesses" to support small companies. Normally, such a gesture would be praised.

Yet, at just $100 million a year, this figure represents a miserly 0.4 percent of this year's projected $22 billion in compensation and benefits. Thus, Goldman should not receive too much credit for this gesture. (In addition, it had been reported earlier that Goldman Sachs was considering making a $1 billion, not a $500 million, charitable contribution.) Furthermore, although Goldman Sachs has made more than $1 billion in charitable contributions since 1999, the firm has paid its employees more than $120 billion and earned more than $75 billion before taxes in the past decade.

There is more good news for Wall Street/bad news for Main Street to report. Although Goldman Sachs' earnings are four times higher this year -- $3.19 billion in the third quarter -- compared with last year, its workforce is 15 percent smaller now than it was a year ago. As a result, Goldman Sachs is able to pay each of the remaining 31,700 employees an average $675,000 in compensation and benefits -- an astounding 86 percent increase over last year.

Finally, what may be the bleakest news for Main Street comes from "The 2008 Study of High Net Worth Philanthropy" that Bank of America issued in May. Despite the growing need for assistance, the very wealthiest people are cutting back what they give to their communities in the form of charity.

The study showed that households with income above $5 million slashed their charitable contributions by more than 14 percent from 2005 to 2007. This stinginess does not extend to other high-net-worth individuals. For example, the next-wealthiest group increased its contributions by 7 percent.

Unfortunately, these individuals are not offsetting their reduced monetary contributions by increasing their volunteer hours. Just 75 percent of high net worth individuals volunteered for a charitable organization in 2007, compared with 90 percent two years earlier.


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