The August slide in long-term rates found bottom this week, with the 10-year T-note briefly to 3.28 percent (3.37 percent today), and lowest-fee mortgages to 5.25 percent.

The last time it was so low was during a single week in early July, the best since a general rise began in early May. To break through these levels would require a sharp thump in the stock market or newly weak economic data; pushing the other way is constant Treasury borrowing and a great deal of refinance demand just above 5 percent.

The most mighty gorilla of all data, first-Friday payroll data for the prior month, arrived today right on forecast: 216,000 jobs lost in August, and 49,000 more shaved from summer estimates.

The August slide in long-term rates found bottom this week, with the 10-year T-note briefly to 3.28 percent (3.37 percent today), and lowest-fee mortgages to 5.25 percent.

The last time it was so low was during a single week in early July, the best since a general rise began in early May. To break through these levels would require a sharp thump in the stock market or newly weak economic data; pushing the other way is constant Treasury borrowing and a great deal of refinance demand just above 5 percent.

The most mighty gorilla of all data, first-Friday payroll data for the prior month, arrived today right on forecast: 216,000 jobs lost in August, and 49,000 more shaved from summer estimates. The "Green Shooter" economic optimists think it’s terrific news, insisting that a smaller-loss trend will cross over to job growth toward the end of this year.

The L-shaped-recovery crowd argues that we’re not in a "V" until we’re in one, and this alleged recovery pattern may just dribble off into a puddle. The "Clunker"-puffed "Institute for Supply Management" manufacturing index rose to 52.9 in August, in positive territory for the first time in 18 months, but the companion survey of the four-times-larger service sector crept up only to 48.4 from 48.

The National Association of Realtors reports a continuing rise in "pending sales" — contracts written — up another 3.2 percent in July but questionable. Purchase-mortgage applications are still flat, and distressed markets report huge volumes of contracts contingent on short-sale approval often withheld, or failing loan approval for other reasons.

The money-politics world often feels suspended at Labor Day. Congress has been home on recess ("Dei gratia" … Latin for "by the grace of God"); the earful it got on health care got the media ink, but I bet they heard even more about the economy, just not in town-hall grandstanding.

The economy is also in odd suspense, poised between "V" and "L," but nothing like the anxious portent last year when some of us thought all hell was about to break loose.

This time the dominant economic pause is in policy. Federal Reserve Chairman Ben Bernanke’s greatest work in the last two years, since the first credit/banking show-stop in August 2007, was his continuous invention of unprecedented Federal Reserve programs to prevent Great Depression 2.0 — often over and around Congress, with authority found in reinterpretation of ancient statutes. All of that invention stopped about 90 days ago. …CONTINUED

Franklin Delano Roosevelt (FDR) was known for other acronyms, namely the "alphabet agencies": NRA, CCC, FHA, WPA, etc. But Bernanke outdid him. TAF, PDCF, TSLF, CPFF, TALF, MMIFF, ABCP-MMMF and more are still running. As inventive as these have been, they have been new versions or scales of traditional action: provide liquidity, stop fire-sales, prop up banks.

Only two — TARP (Trouble Asset Relief Program) and PPIP (Public-Private Investment Plan) — addressed the unique and deadly aspect of our current predicament: a bursting credit bubble led to collapse in asset values — our very first balance-sheet recession.

We still have the debt we took on, but the fall in our assets has diminished our net worth. In many cases crushed it or pushed it negative.

PPIP was the flagship of the new Treasury-Fed team, to extract $1 trillion in toxic assets from banks and thereby to restore asset-liability balance, healthy capital ratios and credit. PPIP is "DOA" (dead on arrival), sometime in early summer buried without headstone, and the Fed has since not rolled out a single new alphabet Frankenstein.

Households and co-dependent banks are still in a net-worth hole. The Standard & Poor’s/Case-Shiller home-price model has its flaws, but its approximation has national prices back to 2002 levels from 2006 peak. Total mortgage debt in 2002 was $6 trillion and grew to $11 trillion by 2007. We still owe the money. A housing "recovery" defined as dinky gains from 2002 prices will not repair net worth, nor will debt reduction by foreclosure.

Two years into this new era, after massive and inventive intervention, it makes some sense for the Fed to take a breather and see how the economy responds, and so the newly released minutes of the Fed’s August meeting were as passive as could be.

The gazillion-dollar question masked by suspense: Will traditional Fed measures, no matter how grand and novel, cause recovery from a first-time balance-sheet pit?

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

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