Humphrey Hawkins Day on Capitol Hill

One word that has cropped up frequently in the headlines over economic stories recently: “gloom.” And, it was spread all around. “Investors must be feeling a little like Hercules,” read the Lex Column in the Financial Times the other day. “Each time they chop off one of Hydra’s heads threatening the market, another pops up.” Rep. Carolyn Maloney (D-N.Y) said after Bernanke reported to the House, “New problems in the economy are popping up like a not-very-funny version of whack-a-mole.” Actually, New York Times writer, Alan Blinder, had conjured up that image three days earlier writing, “Most of the potential headwinds stem from the housing slump and related financial crises that began – but, unfortunately, did not end – with the subprime mortgage debacle. Wounded financial markets are supposed to cure themselves: asset prices fall, bargain hunters rush in and markets return to normal. But so far, that doesn’t seem to be happening much. Instead, house prices keep dropping, the mortgage-foreclosure problem grows and new strains in the financial system keep popping up like a not-very-funny version of Whack-a-Mole.”

The day after the Fed chief gave that assurance, CNN reported that regulators are preparing to handle 100-200 bank failures over the next two years, especially in Rust Belt areas such as Ohio and Michigan and states like California, Florida and Georgia. “As loan delinquencies rise, and bank failures increase, the FDIC [Federal Deposit Insurance Corporation] is shoring up its reserves, “ the CNN report said. “The agency is bringing back formerly retired employees to bolster a division that deals specifically with bank failures.”

I spoke to a friend the other day who is proud that two of his sons of family-building age had become journeymen in the construction trades; now he’s worried about their future.