The “U.S economy turning a corner” is the latest hopeful trumpeting from news reports and media outlets. George Soros proclaims that “the economy has actually bottomed”. And the most recent Wall Street Journal survey of top economists found that 57% believe the “recession is already over,” while another 23% believe that the economy will turn in the next month or two.

Well, before everyone starts setting out the wine and roses for a celebratory feast, shouldn’t we know for whom exactly the economy is turning and in which direction?

Main Street is dealing with rising unemployment, rising home foreclosures, and rising bankruptcies. Federal and State governments are battling rising deficits and plummeting tax revenues. Consumer confidence is down, retail sales are down, manufacturing sectors are down. Even the banks we bailed out with TARP funds are still awash in those lovely toxic assets, the very things that started this recession ball rolling, and leaving them unbalanced. As Elizabeth Warren, chair of the Congressional Oversight Panel for TARP funds, explains:

“No one has a good handle how much is out there,” Warren said. “Here we are 10 months into this crisis…and we can’t tell you what the dollar value is.”

Estimates are that “somewhere between $600 billion and $1.5 trillion in toxic assets (is) spread across the balance sheets of the small and the large banks,” Warren said, adding: “That’s a lot.”

Ms Warren and the COP also point to the ticking time bomb of defaults on commercial real estate loans waiting to explode in 2010-2011 and hit smaller banks.

smaller U.S. banks faced billions of dollars in losses from delinquent commercial property loans and were far less able to raise capital and absorb losses than their larger counterparts.

An analysis done by the panel showed that under a scenario 20 percent worse than assumptions used in the Federal Reserve’s stress tests, about 719 banks with assets between $600 million and $100 billion would need to raise some $21 billion in new capital to offset loan losses.

“Treasury must be prepared to turn its attention to small banks in crafting solutions to the growing problem of troubled whole loans,” the panel said, adding that it should consider using similar stress tests — along with pledges for additional capital — on smaller institutions.

Which does not leave Treasury is the best of positions to launch its PPIP.

Treasury prepares to launch a significantly scaled-down version of its toxic asset program, a series of public-private investment funds to purchase toxic mortgage securities with $30 billion in government subsidies.

… accounting forbearance that allowed banks to avoid recognizing losses on these assets combined with large institutions’ ability to raise capital after regulator “stress tests” in May reduced investor angst over toxic assets.

And if your wondering how bad it is getting for banks, here is the number of bank closing by month over the last 12 month period. Notice the jump to 24 in July which makes 72 closings so far for 2009.

Month/Number of Bank Failures

Jul 2008 – 3
Aug 2008 – 3
Sep 2008 – 4
Oct 2008 – 4
Nov 2008 – 5
Dec 2008 – 3
Jan 2009 – 6
Feb 2009 – 10
Mar 2009 – 5
Apr 2009 – 8
May 2009 – 7
Jun 2009 – 9
Jul 2009 – 24

Not exactly convincing signs of a recovering economy.

I haven’t a clue as to how those economists formulated their rosy predictions. But I’m betting the big bonus bank executives at Goldman Sachs, Morgan Stanley and JPMorgan Chase were weighing heavily on the scales.

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