RECESSION PANIC MEGAPOST: Bad economy threads go here! Forum

[HarlandBassett]

http://www.businessweek.com/articles/20 ... shoe-blues

Dewey & LeBoeuf can’t win. In late March an embarrassing exodus of partners prompted the global law firm to announce a management shake-up. In explaining the reshuffle to Bloomberg News, the head of Dewey’s corporate department, Richard Shutran, mentioned that the firm earned about $250 million last year. Whoops. That was a lot less than what Dewey had reported a few weeks earlier to the legal trade publication American Lawyer, which is now revising its financial database to reflect reduced results for Dewey in both 2011 and 2010. John Altorelli, one of more than 60 Dewey partners taking their practices elsewhere, told the Am Law Daily blog that he sees two potential futures for his former colleagues: a significant downsizing or “a firm busted up into a bunch of little pieces.”

The turmoil at Dewey isn’t an isolated event. Elite corporate law firms—Wachtell, Lipton, Rosen & Katz; Cravath, Swaine & Moore; Sullivan & Cromwell; and a few others—thrive on their scrupulous maintenance of quality and reputation. Beneath that exalted caste, though, a dozen large and prominent partnerships have called it quits in the past decade. They include Howrey & Simon; Thacher, Proffitt & Wood; Heller Ehrman; Thelen Reid; Jenkens & Gilchrist; Coudert Brothers; Brobeck, Phleger & Harrison; and Arter & Hadden. Many more, like Dewey & LeBoeuf, confront existential challenges that were unimaginable just a few years ago. J. Stephen Poor, chairman of Seyfarth Shaw, an 800-attorney firm in Chicago, sums up the predicament of corporate law firms he refers to as “the 99 percent”: “We have to improve or die.”

There’s more at work here than the Great Recession. Inept management and the weakness of the partnership model have also played crucial, if lesser known, roles. And as unsettling as this shakeout will be for employees of many large law firms, it’s one that is overdue.

The legal profession wasn’t always seen as a path to wealth. From 1940 to 1960, inflation-adjusted income for lawyers in the U.S. eroded significantly, while that of physicians rose, according to Declining Prospects, a forthcoming book on law firm economics by Michael Trotter, a practicing corporate attorney in Atlanta. In the 1960s and ’70s, increased regulatory complexity and corporate consolidation spurred growth in the size of corporate law firms and the fees they charged. By the early ’80s law school had become a choice destination for top college graduates. American Lawyer began gathering and publishing revenue and profit statistics for top-grossing firms, ratifying the J.D. as a ticket to the upper class.

The high-tech revolution, globalization, and Wall Street’s (dubious) expansion have generated still more demand for sophisticated legal services. In 1985 the 50 top-grossing firms had a combined revenue of $3.4 billion. If their collective top line had increased at the rate of inflation, it would have been the equivalent of $6.9 billion in 2010, Trotter notes. Instead, the figure rose to $48.4 billion.

“Hourly rates just went up and up,” Trotter says. Fancy lawyers charged whatever the market would bear. Attorneys began defecting like mad to rival firms willing to promise them million-dollar paydays. Head counts at large firms swelled, with 1,000-attorney behemoths becoming commonplace. Trotter, a former partner at the predecessor to Atlanta-based Alston & Bird (about 800 attorneys), observes tartly that corporate clients did not applaud the development. In his book, he quotes Robin Sangston, now the general counsel of Cox Communications, on what happened when one specialty partnership merged into a mega-firm: “Their rates went up, their hourly requirements went up, and I started getting marketed” to buy unwanted additional services.

As firm size increased, so did leverage—the ratio of salaried attorneys to partners, who share in the profit. Yet as Trotter’s research shows, size and leverage don’t correlate with profitability. Baker & McKenzie, the largest American-based firm with nearly 4,000 lawyers and a leverage ratio of 4.48 associates to each partner, ranks 79th in average per-partner profitability. Wachtell Lipton, with 231 attorneys and leverage of 1.69 to 1, ranks first in average per-partner profit, with $4.3 million.

By bulking up so aggressively, law firms made themselves more vulnerable to economic downturns. Partners at many firms failed to appreciate that all those salaried employees needed to be paid every month, whether or not new business is coming in the door.

Part of the problem is that the partnership structure—in which the owners jointly make all the major decisions, including how to divide the profits—works better in smaller, more stable firms with simpler finances and more modest levels of acquisitiveness. Partnership does not nurture broad-minded managers skilled in running sizable operations. In a business increasingly characterized by fierce bidding for talent and high-level defections, many successful attorneys jealously hoard clients and keep an eye on the American Lawyer numbers to see whether they ought to take their “book of business” elsewhere. Under these circumstances, client loyalty at many firms has deteriorated.

The recent economic downturn accelerated a trend already under way, says Seyfarth Shaw’s Poor: “Law firms whose business model remains what it has been for more than 30 years—namely, every year we just raise our rates and expect clients to pay up—well, those law firms will find the old ways aren’t sustainable.”

Dewey & LeBoeuf is learning that lesson now. The firm is the offspring of the 2007 marriage of Dewey Ballantine (one of whose founders was Thomas E. Dewey) and LeBoeuf, Lamb, Greene & MacRae. Before this year’s exodus began, it had more than 1,000 lawyers and leverage of nearly 5 associates per partner, according to Trotter’s book. American Lawyer is now revising the firm’s 2011 per-partner profits to $1.04 million from $1.8 million. Dewey’s costs had risen sharply in part because of over-the-top multiyear guarantees it made to rainmakers lured from rivals. Hope replaced hard-nosed strategy. “We kept thinking it’ll get better tomorrow, then it doesn’t get better,” says Altorelli, the former Dewey partner. “The next thing you know, it’s been four years.”

The firm says it will trim overhead and replace its sole chairman with a five-person committee made up of the heads of its most profitable practice groups. The new approach responds to “internal requests for more hands-on management,” Shutran told Bloomberg News. Perhaps 10 hands will steer the firm more effectively than a single pair.

Another option would be to jettison partnership altogether and give management responsibilities to a chief executive officer steeped in leadership rather than litigation. But that’s unlikely to happen at many high-end firms. Lawyers capable of generating top fees simply don’t want to become conventional employees, says Trotter. Partnership is a cherished status, blending the roles of director, major shareholder, and big man on campus.

Alternatives do exist, however. At Seyfarth Shaw, project managers (mostly non-lawyers) help guide big transactions. Computer-generated flow charts determine the course and pace of litigation. “Last year was our best ever in financial terms,” Poor says. The firm saw revenue rise 7 percent, to $484 million, and profit per equity partner increased by 11.2 percent, to $816,000. Meanwhile, the Atlanta firm where Trotter now practices, Taylor English Duma, represents a back-to-the-future model. It hires mostly experienced attorneys, keeps leverage and overhead low, and undercuts competitors on rates. Since 2006 it has grown from six attorneys to more than 100.

Yet even these approaches can’t fix the fundamental challenge facing the legal profession: At all levels, the industry suffers from excess labor. The number of people with law licenses grew from 212,600 in 1950 to 1,225,000 in 2011—a sharp change from a ratio of one attorney for every 709 Americans to one for every 257. Forty-five thousand newly minted attorneys become available every year in a field with only 25,000 job openings. Law firms of all sizes laid off attorneys during the lean years of 2008 and 2009, and hiring has not fully rebounded. During the past year, unemployed young attorneys across the U.S. have banded together to sue their alma maters—generally schools of modest repute—for fraudulently exaggerating graduates’ job prospects. (One such suit filed against New York Law School was dismissed in March by a judge who said aspiring attorneys should know the concept of caveat emptor.)

Despite the disgruntlement of recent law school graduates, the decline of some white-shoe law firms has an upside. The number of people taking the Law School Admission Test has fallen by nearly 25 percent in the past two years. We have a lot of decrepit bridges in this country, factories that could use modernization, and clean-energy technologies that need inventing. It’s a moment for more engineers and entrepreneurs, not more lawyers.

[manofjustice]

The "economy" is not the main problem, and it's unfortunate that TLS moves posts concerning the job market to a "bad economy" thread because it gives the wrong idea. The problem with the legal market is it's in a state of correction after a long-term bubble. Even if the economy starts booming again and it's not a jobless recovery (which it probably will be) the legal market specifically will still be a losing bet for the majority of prospective law students.

I simply disagree.

Here's the problem. A lot of people here don't know anything about economics. What makes you say that the legal market was a bubble?

You're talking about a difference between structural and cyclical unemployment, but to me, there is not much to suggest that the problem is structural. Really, given the track record of law to continue to divide into new fields and only complicate, I would say that the long-term future of the legal market is probably similar to what it always has been.

What is affecting the structural balance of the legal market, precisely? Doc review? Temp agencies? Technology changes? I don't see any of that as being a real problem.

So what is it? Over-supply? Well, that isn't structural, that is market. What happens is that wages will adjust and I think that we're seeing the response to over-supply now. The pendulum is going to swing backwards. That's the market.


No, I think that the problem really, actually, in all honesty, is the market.

The ABA disagrees. http://www.abajournal.com/magazine/arti ... digm_shift

(God I love posting that article.)

Technology and innovation will reduce doc review and take all the "big money" (has there ever been?) out of two-bit wills and divorce petitions. But sophisticated legal work will still require highly paid lawyers. "Increased client savvy" (it was low before?), in-house utilization (they don't pay well in business?), globalization (they don't pay well in business abroad?), or technology (you can google a brief?) won't make much more of a difference in that. Not all lawyers will be highly paid. But this article seems to suggest that the bi-modal distribution of salaries is going to collapse and shift left: lawyers will start making the same, and less. If anything, as doc review falls out, new lawyers drop, and existing lawyers change professions, retire, or just live with less, eventually the remaining lawyers of the left-hand of the distribution, doing actual legal work, while perhaps fewer in absolute number, might on average get paid more.

Unlike a manual labor market, the legal market, in my view, has always been far more assortative: aptitude and experience is matched to legal need. What's happening is that some legal needs are starting to pull away from some classes of aptitude and experience. That shift affects other matches only to the relative extent that classes of aptitude and experience will cross-match with legal needs. That relative extent is diminished by an out-of-work attorney's non-legal options. Providing out-of-work attorneys with non-legal options may be the strongest way in which a recovering economy strengthens the legal market, in addition to simply providing it with more work.

[romothesavior]

Lets also keep in mind that for the average law student in the boom years, law school was still a horrible decision most times. The recession just sent the problems already inherent in legal education up the chain. Even if the hiring market got back to 07-08 levels, most law students would still be at crappy schools graduating into crappy jobs and graduating into a mountain of debt.

TTT law school deans love to turn the economy into a whipping boy to place all their troubles on, but a hard look at their placement from pre-ITE shows that they've always sucked. This "bad economy" megapost business is really more for the T14/T1 people. They're the ones who will see the recovery more than anyone (and already are).

[lynch]

Oh i feel bad for them.

[HarlandBassett]

This "bad economy" megapost business is really more for the T14/T1 people. They're the ones who will see the recovery more than anyone (and already are).

http://www.thefacultylounge.org/2012/06 ... ction.html

Northwestern Law (#12) considering dropping class size down to maintain its LSAT threshold.
Chicago Law (#5) not changing class size.


"The trickle-up and trickle-down of this could be interesting for those of us at lower-ranked schools. Enrollment was down nationally this year, especially among top LSAT performers, so many higher-ranked schools went deeper into the pool, with the expected ripple effect. But that effect could be countered if many higher-ranked schools reduce class size."

The top14 can either reduce class size or dip deeper into the LSAT pool, which decreases the ranking of the school. These 2 actions are going to shift the USNWR in opposing directions. If one or both are done, and taking into account the scale of these actions, it will affect the lower-ranked schools tremendously.


"Students' price sensitivity (or, in some cases, lack thereof) is an interesting confounding variable on the trickle down/trickle up effect. Right now the rankings largely reflect resources, and students have historically been much more rankings sensitive than price sensitive--but I think that is changing; at least this cycle, applicants seem to be much less willing to take on huge debt burdens (the "Campos effect"?). I've written before that I think the rankings will change dramatically with greater price sensitivity.

This just throws another factor into the mix since the economy is in the shitter.

[romothesavior]

^ Yep, and like you said, the breakdown of people deciding not to go is skewed towards the top LSAT takers. So the people who should go least (the 140-150 range people) are generally still attending T3s and T4s, while more and more of the high 160s-170s people are saying, "Yeah... this isn't such a good idea" or are listening to the "retake" message. The people with the higher LSAT scores are, as a whole, making better decisions when it comes to going to law school or not (shocking, I know).

But soon these bottom schools could run out of warm bodies. Tamanaha has written about this a lot. Some schools have seen such massive drops in applications that they could soon need to have 100% acceptance rates just to fill the class, and even that might not work. Once these T3 and T4 cash cows start losing cash, there is no way they stay open long, especially if they're affiliated with a parent university. Law schools bring almost nothing of value (like research med schools, etc.) besides money. It is conceivable that we see some schools go out of business.

[spleenworship]

^^^ yup ^^^

Maybe even some lower T2s, honestly.

Another thing that wouldn't surprise me is to see some T1s dropping down into the T2s just because some of the T2s and T3s that are state schools will climb. Idaho, as just one example, doesn't deserve to be in the T3 with the craptastic schools in that set.

As, thank gawd, some law students become better informed consumers, state schools are getting advantages. The middle or low high scorers (~3.3/160s, or splitters- i.e. 168/3.0 or 3.9/151) who want to go to law school are rapidly taking advantage of small (sometimes large) scholarship plus in-state tuition opportunities to graduate with low debt. They know they aren't getting T14, or a good scholarship to a T1, so they are really considering their state schools. This year on the forum I watched one guy having a hard time choosing between LSU at $17k a year, and UVa. My state school has seen its LSAT and GPA medians go up two years in a row now- my class raised the median LSAT 1 point and GPA 0.08 points, and next year's 1Ls raised it another 2 points and 1.1 points respectively.

[lynch]

Yes don't go to G-town so it won't happen again.

[HarlandBassett]

Moody's downgrades 15 banks, Morgan Stanley down two notches
http://www.chicagotribune.com/business/ ... 9032.story

[HarlandBassett]

http://www.nytimes.com/2012/07/06/busin ... nted=print

Moving to Spur Economy, 3 Central Banks Take Action
By KEITH BRADSHER and MELISSA EDDY
In the span of less than an hour on Thursday, China’s central bank and the European Central Bank cut interest rates and the Bank of England stepped up its economic stimulus program.

While the moves were not coordinated, they emphasize the concern financial officials have about a global economic slowdown and highlight the role central banks are playing in seeking to bolster growth.

China’s central bank unexpectedly cut regulated bank lending rates by nearly a third of a percentage point and made a rule change that could reduce borrowing rates for companies with good credit by an additional three-fifths of a percentage point.

Just four weeks earlier, the central bank, the People’s Bank of China, announced a similar rate reduction and rule change. The moves underline the growing worries in Beijing about what the government has begun to describe as a sharp economic slowdown.

In Frankfurt, the European Central Bank cut its benchmark interest rate to its lowest level ever in what may be its most aggressive move yet to unblock the flow of credit and prevent further deterioration of the euro zone crisis.

Most analysts expected a cut, but its scale appeared to disappoint investors looking for a more aggressive move. The major stock indexes in France, Germany and Italy all fell sharply after the move.

The E.C.B. cut its benchmark rate to 0.75 percent from 1 percent, which was once regarded as the lower bound on the official rate. With interest rates now close to zero, the bank and its president, Mario Draghi, will have a dwindling selection of conventional monetary policy tools they can use to combat the crisis.

In London, the Bank of England stepped up its economic stimulus, announcing an increased bond-buying program intended to jolt the struggling British economy out of a double-dip recession.

The central bank left Britain’s benchmark interest rate unchanged at a record low of 0.5 percent, apparently concluding that quantitative easing, which involves buying government bonds to increase available capital, was a more effective measure to lift the economy.

In Beijing, the central bank reduced the regulated rate for one-year bank loans by 0.31 percentage points, to 6 percent.

At the same time, it said banks would be allowed to charge as little as 70 percent of the regulated interest rate to good customers; the previous minimum, set a month ago, had been 80 percent. And until the initial rule change early last month, banks had been required to charge at least 90 percent of the regulated rate, even to their best customers.

On Thursday, the central bank also lowered the regulated minimum interest rate that banks must pay depositors. But the reduction in deposit rates was smaller, a quarter of a percentage point.

The smaller change in deposit rates is the latest sign that Chinese banks have found themselves lately in the unfamiliar position of struggling to persuade Chinese households and companies to deposit more money. A variety of trusts and other investment vehicles have become popular in China as savers have begun to rebel at very low regulated deposit rates, which will fall to a minimum of 3 percent for one-year certificates of deposit with the changes announced on Thursday evening.

China’s central bank provided no explanation for its moves, which take effect Friday morning. But the initial reaction of private sector economists was that the rate cuts represented a signal of genuine worry by Chinese decision makers

“This aggressive policy action reflects, in our view, a deepening concern by policy makers that the economy has yet to find a bottom and requires additional stimulative monetary settings to engineer a recovery,” Nick Chamie, an economist at RBC Dominion Securities, wrote in a research note.

Much as top Federal Reserve officials receive advance warning of economic statistics in the United States, Chinese policy makers have almost certainly received at least a rough preview of second-quarter economic statistics scheduled for release next week. Most economists now expect those figures to show considerably weaker-than-usual growth, at least compared with China’s vigorous expansion over most of the last three decades.

The interest rate reduction coincides with an emerging consensus that inflation, widely seen in China as the paramount danger to the economy last summer and perhaps even a threat to social stability, no longer poses much of a challenge. While annual inflation at the consumer level peaked at 6.5 percent at the consumer level last July, it has decelerated so sharply since then as the economy has slowed that it reached just 3 percent in May; the consensus forecast of economists is that when the government announces on Monday the inflation rate for June, it will show just 2.3 percent.

Few economists worry that the Chinese economy will stay weak if the Chinese government decides to mount a sustained stimulus effort. In contrast with the West, much of the current slowdown in China is the result of the government’s hitting the brakes too hard last year, through a national credit squeeze engineered to slow inflation and a series of bans on real estate speculation to make housing more affordable.

European officials face a greater concern about growth.

The European Central Bank’s president, Mr. Draghi, said Thursday’s interest rate decision was based on indications that growth in all 17 of the countries using the euro had shown signs of slowing. But he sounded upbeat about the potential long-terms benefits to the euro zone of steps agreed to by the bank and European Union leaders last week to address the underlying causes of the region’s debt crisis.

“We welcome the move to take action to address financial market tensions, restore confidence and revive growth,” Mr. Draghi said of the leaders’ plans, which would include giving the E.C.B. a new role as a centralized supervisor of the region’s banks to ensure more financial discipline throughout the bloc.

The interest rate cut is likely to increase speculation that the central bank’s next step to contain the crisis will be huge purchases of government bonds, similar to the quantitative easing undertaken by the Federal Reserve.

“The E.C.B. is aware that cutting rates to their lower bounds is likely to fuel market expectations that an outright Q.E. launch will follow shortly after,” Jens Sondergaard, an analyst at Nomura, said in a note to clients ahead of the rate decision.

A big increase in such bond buying might help contain borrowing costs for Spain and Italy and prevent those countries from becoming insolvent. But huge bond purchases would probably meet with outrage in Germany and threaten the unity of the euro zone.

Many Germans fear that they will bear a large share of the burden if the central bank suffers losses on its bond holdings and needs to ask for more capital from euro zone countries.

The E.C.B. also cut the rate it pays on deposits, which may help discourage banks from hoarding cash. Healthier banks have been parking record sums at the central bank, preferring to earn a meager 0.25 percent interest rate than to risk lending excess cash to their peers.

The E.C.B. cut the deposit rate to 0 percent, also a record low. But it is unclear whether that will do anything to restart the interbank money market, which in good times is a crucial source of short-term financing for banks. Banks may simply keep the money in their own vaults now that there is no incentive to deposit it with the E.C.B.

Britain’s decision to add £50 billion, or $78 billion, in additional stimulus comes on top of £325 billion already pumped into the economy by the Bank of England over the last several years.

Britain’s banking crisis wrecked government finances, prompting London to embark on its biggest austerity program since World War II. The economic outlook has been worsened by the crisis in the euro zone economy, which has sapped global confidence and decreased demand in major trading partners.

George Buckley, chief British economist at Deutsche Bank in London, said the impact of the new spending would be equivalent to adding 0.5 percent to gross domestic product.

But he cautioned that the overall impact on the economy would be limited, given the difficulties confronting other European economies.

“This is helpful at the margins, but the big issue is what happens to the European economy as that will be transmitted across the English Channel,” he said. “£50 billion in quantitative easing is not going to solve the problems. All the Bank of England can hope to do is to offset some of the headwinds from Europe.”

[HarlandBassett]

LIBOR

http://www.youtube.com/watch?v=0oV2mI0IYp8

[redbullvodka]

LIBOR

http://www.youtube.com/watch?v=0oV2mI0IYp8

Well it may be bad for bankers, but these banks have to pay someone to litigate...

[HarlandBassett]

LIBOR

http://www.youtube.com/watch?v=0oV2mI0IYp8

Well it may be bad for bankers, but these banks have to pay someone to litigate...

This scandal is still unfolding. No one is sure how much money was made or lost on this scam yet. But think of it, with trillions of dollars in investments based on a number that now seems dodgy, if you lost money on a deal, you'd be calling your lawyers right now.

The city of Baltimore and a pension fund in Connecticut are the first to sue, claiming the LIBOR manipulation cost them millions. More lawsuits are on the way.

http://www.npr.org/blogs/money/2012/07/ ... -literally

[HarlandBassett]

The regulatory machinery will grind slowly. Investigators are unlikely to produce new evidence against other banks for a few months yet. Slower still will be the progress of civil claims. Actions representing a huge variety of plaintiffs have been launched. Among the claimants are investors in savings rates or bonds linked to LIBOR, those buying derivatives priced off it, and those who dealt directly with banks involved in setting LIBOR.

Deciding a figure for the potential liability facing banks is tough, partly because the cases will be testing new areas of the law such as whether, for instance, an Australian firm that took out an interest-rate swap with a local bank should be able to sue a British or American bank involved in setting LIBOR, even if the firm had no direct dealings with the bank. The extent of the banks’ liability may well depend on whether regulators press them to pay compensation or, conversely, offer banks some protection because of worries that the sums involved may be so large as to need yet more bail-outs, according to one senior London lawyer.

A particular worry for banks is that they face an asymmetric risk because they stand in the middle of many transactions. For each of their clients who may have lost out if LIBOR was manipulated, another will probably have gained. Yet banks will be sued only by those who have lost, and will be unable to claim back the unjust gains made by some of their other customers. Lawyers acting for corporations or other banks say their clients are also considering whether they can walk away from contracts with banks such as long-term derivatives priced off LIBOR.

http://www.economist.com/node/21558281

[sunynp]

The regulatory machinery will grind slowly. Investigators are unlikely to produce new evidence against other banks for a few months yet. Slower still will be the progress of civil claims. Actions representing a huge variety of plaintiffs have been launched. Among the claimants are investors in savings rates or bonds linked to LIBOR, those buying derivatives priced off it, and those who dealt directly with banks involved in setting LIBOR.

Deciding a figure for the potential liability facing banks is tough, partly because the cases will be testing new areas of the law such as whether, for instance, an Australian firm that took out an interest-rate swap with a local bank should be able to sue a British or American bank involved in setting LIBOR, even if the firm had no direct dealings with the bank. The extent of the banks’ liability may well depend on whether regulators press them to pay compensation or, conversely, offer banks some protection because of worries that the sums involved may be so large as to need yet more bail-outs, according to one senior London lawyer.

A particular worry for banks is that they face an asymmetric risk because they stand in the middle of many transactions. For each of their clients who may have lost out if LIBOR was manipulated, another will probably have gained. Yet banks will be sued only by those who have lost, and will be unable to claim back the unjust gains made by some of their other customers. Lawyers acting for corporations or other banks say their clients are also considering whether they can walk away from contracts with banks such as long-term derivatives priced off LIBOR.

http://www.economist.com/node/21558281

Why is the LIBOR story a bad economy thread story? Isn't it more newsworthy than that?

[HarlandBassett]

Why is the LIBOR story a bad economy thread story? Isn't it more newsworthy than that?

i view this thread as "massive psychotic risks that should be taken into consideration if you're deciding whether to attend law school" thread

[ArmyVeteran]

How bad are Patent lawyers affected by the recession? Are only the T14 patent lawyers getting jobs?

[Law School Bubble]

The bolded part explains why the economy has zero chance of recovering and why we are where we are: 2/3 of the economy is consumer spending - how the F*$@% does increased production do anything to help that? Answer - it doesn't. Everyone is looking at the supply side/business side - if businesses start doing better, making more supply, or making it more efficiently, that's supposed to be good - Bull S%&$&. An increase in personal earnings, that is what affects an economy that is 2/3 consumer spending.

Yes, the growth has been captured by fewer and fewer. And everyone is still so busy looking at, "What is productivity doing," "What is GDP" that no one is even thinking to address this, the central issue of this downturn. So onward toward collapse we continue...

Since our last Yale president didn't get it, and our current Harvard one doesn't, maybe we need a Cooley president to pull us out of this...

You can't think of any way that increased productivity and businesses doing better might help increase consumer spending? I can: jobs.

You're right, economists look at "What is productivity doing," "What is GDP doing," and another measure that you conveniently left out, and just happens to be the absolute favorite measure: "What is unemployment doing?"

Doesn't matter how many jobs there are if every average joe tends to be UNDEREMPLOYED.

Many people with law degrees are having to settle for 40k a year jobs.

Well please know that many bachelor's degrees who graduated in the heart of the recession had to settle for salaries sometimes half that to have something coming in, half that and no benefits, half that and still contract!

So yeah, income is the problem here because creating jobs can be b.s. Florida use to act before the recession like it had such great job increases, then you dig deeper and find out it's mostly service jobs.

America is sending a lot of professional jobs overseas where it's cheaper or hiring foreigners for rarified jobs cause they are cheaper.

But the cost of living for those already here has not changed.

Seems like the solution, for those with foreign ties, is to get the education here and hightail it back to wherever they have ties, do whatever conversion program is necessary there, and deal with life in a third world country that actually recognizes itself as such. All the poor immigrants are still coming here because it's all bullsh*t service jobs like cleaning toilets, housekeeping, and fast food and mall retail that are numerous and have help wanted/now hiring signs up. And such standing-intensive, manual labor-intensive jobs paying minimum wage are not for someone to make a career out of, they take a physical toll on the older set. Even nurses complain of how lifting fat people all across America has destroyed some of their backs. It's not like there is some ultra desirable niche people are just ignoring.

With cronyism and ethnocentrism at all time high now in these jobs (witness any McDonald's that gets a hispanic store manager all of a sudden you see the whole store is full of barely English speaking workers, and blacks who usually had these jobs did NOT suddenly move up the food chain)...with all of that going on within each little immigrant group trying to help their set get the step up in life as well (as the jews and italians and so one did in Ellis Island days), it is NOWHERE NEAR as sensible as people think to plan on moving up the ranks in these minimum wage thankless low status hellholes.

And people who are already hurt once by graduating with a bachelor's in the recession and making slightly above $10 an hour and may even be getting older have nothing to lose by going for what they actually want to do in life, because it seems the money and jobs will be an issue either way.

Law is still the only professional degree that you CAN, if you really planned the area of it you go into properly, and worked out a mentor(s) and practical experience in said area of it before graduation, go into business for yourself (i.e., give yourself a job) the day you get notice you passed the bar exam. Nurses have steady jobs but require a lot of politicking with b*tch senior nurses/scornful doctors (I've read plenty of mistreatment from doctors) and an oversupply of females in the workplace and all the cattiness that entails in order to maintain a job, they are always shortstaffed and overworked (and PHYSICAL overwork is much more dangerous to your continued ability to work and enjoy life outside of work period than MENTAL overwork), and unless they take boatloads of additional education, are doomed to forever be working for others. Even as an ARNP allowed to open their own practice, some doctor still has to sign off on/oversee it.

Lawyers are still needed in low income urban areas (might be best served by blacks, hispanics, and other minorities), rural areas (might be best served by whites though), and in countries regarded overall as the low-income areas of the world even though obviously they do have their elite, half of which tends to be trying to runaway to the US and other areas because they are chasing the mythical streets of gold and have not gotten the memo that life is rough everywhere on the planet for the 99%. Which I don't think they realize they automatically downgrade themselves to become part of once they leave their lofty position in their small corner of the world.

Not everyone will have the connection with the mentor base and client base in these three areas to make it...so obviously it means law is still a go for the top class, and for the ones who can get a decent amount of scholarship money wherever if they are into the type of law best serving the needs of rural or low income urban areas, especially if they look, and if necessary, can sound like, their client base (whether it's a whole nother language or whatever), and law is still a go for folks from foreign third world countries who are willing and able to readjust back there and be big fish in a small pond instead of dead or near it in the ocean. Or even just a go for those for whom a $40k salary (after ensuring attending the cheapest law school possible if not one of the top ones with excellent LRAPS) is a world of improvement from their current salaries.

The fact is, the folks who are "fml" because they left $50k and $60k and $70k jobs to go do law school I have no sympathy for because they are simply being greedy. Cut your damn expenses, the median salary of the US is about the $36k range, if you're well over median or more to the point if you are already beyond the TYPICAL entry level salary for MOST lawyers...what are you leaving that job for to come and clog up the legal system for people who want to be lawyers and are not already making that kind of money? Can't afford your mortgage? Rent your house out and trade down to an apartment or start learning how to live with people again and share your McMansion or hot loft or condo with some family or friend who pays their rent on time. Can't afford your gas? Move as close to your existing job as possible or the nearest metrorail station that will cancel some of that commute off your gas bill. Make the wife or the husband get a job. For that matter people are looking at debt and expenses as a reason not to get married. That's where you make a mistake the depression era folks were not making. When incomes were low people BANDED TOGETHER they didn't split apart and try to conquer the beast of life on their own! Now that times are bad instead of shacking up and living empty meaningless lives all of our 20s why not go ahead and get married? Not everyone is going to qualify for LRAPs anyway so at least at the point where your income no longer qualifies for it, it's safe to go ahead and do so. If you were waiting on being able to buy the McMansion to have a wife...hello a happy marriage can happen in an apartment, and it's time more of us learned who will REALLY be with us for richer or poorer, better or worse, sickness and health, by not putting them up on high the moment we start out life with them. Let their ass help you work toward that goal so the two of you can share that accomplishment together, not one coasting to greatness and comfort on the back of the other. We can't afford freeloaders of any kind anymore unless they are our children and keep in mind children use to be the Social Security and 401(k) of the past generations, you invested in them so when you could no longer do for yourself, they would be both willing and able to take care of you. Maybe it's time instead of putting off life and everything that makes it worth living to chase the God almighty dollar, we got back to that. Unless we're just going to have a whole generation or two of men that wait til they are finally established in about their 40s or 50s who run and try to marry and start a family with 25 year olds because the older women's eggs didn't wait on their career to establish itself before rotting away. Can't see how that is good for anyone's quality of life if they have an ounce of family orientation in their body and did not take a vow of chastity.

If I was making $50k a year right now I certainly would not waste my time on law school with the legal landscape the way it is, even if I wanted to be a lawyer. Because the opportunity cost would be too great. However anyone making below the typical non-biglaw new grad legal salary AND wants to be a lawyer really has every reason to try it out...just try and go to a school that allows you to graduate with minimum debt, and make sure understand every detail of IBR/ICR in case it becomes necessary.

Worst case scenario if you decide you want to buy a house and your debt to income ratio after law school is too high, buy it in someone else's name and have them gift it to you. Or wait til your parents are done with theirs and have willed theirs to you to buy a house. If you are serious about law school and can't avoid the debt, that's the type of drastic planning I feel is necessary to get the life you want out of this. Figure out what you want and how to make it happen. I just read that anecdote about White and Case and how one of them married some bigwig banker's heiress daughter...you think the fact that she was a banker's heiress DIDN'T figure into his decision to make her a part of his life forever? Maybe more of us who have to think so hard about finances need to get back to how THOSE folks back then got ahead and start making sure the people we associate with in life can help us. I've certainly seen where marrying for love only certainly hasn't helped a lot of people. Marry someone that has their own house already if you're already in the debt situation and won't be out anytime soon. Women work now, women buy houses, there is no need for the man to be the one to provide the house. Make sure if she or he doesn't have the law school debt, and you both want to get married, that the house is bought BEFORE you get married. Just buy less house! That's less of a utility bill and decorating/furnishing bill anyway!

All I'm saying is, whatever life you want, even if it's the big money kind, there are ways to make it happen. It might not be a way you are willing to take, but doesn't mean there isn't a way to make it happen! What should stop happening though is people who already have decently paying jobs clogging up the legal employment system as if they have nothing better to do. Have a heart and leave something for the ones who don't already make your income, learn to be satisfied with what you have since it's nowhere near bottom of the ladder income-wise!

Sorry but it burns me to see people acting like just a job is all that's needed. America has plenty jobs in that case, what do you all think immigrants are still immigrating here for?

Many of the upper middle class and upper class foreigners that come here for school on a visa, go back home and do fine rather than jumping through all the hoops here trying to convince some company to hire them. And they are making lower income but often living a better quality of life. It's not those that are running here for work, except the greedy ones who just like the concept of USD even though things are obviously not the best here. It's the ones who have nothing where they are coming from or who THINK they have nothing. Some of them arrive here and get stuck in the expense of life here and find out they should have maybe kept their accounting job back home.

I do not like people advocating simply jobs. Because keep in mind if the ad for the job does not say a bachelor's degree or an advanced degree is REQUIRED, and you have it...it is worded to give them room to UNDERPAY you, not for you to look all special and more desirable as a candidate for having something they did not require! I have a cousin that is an HR manager and consultant, and she cleared that up for me. The attractiveness of law, medicine, etc. are that they are professions that have licensing, examinations, etc. as a restriction to not just allow any and everyone access to the jobs. Maybe we as law students and future law students need to look at how to make ourselves more marketable in a global economy. And that includes in other countries that aren't already fully developed. So many people take the bar in more than one state, if you're willing to put yourself through that hell 2 and 3 and more times, you should be able to adjust to doing a conversion program for a brief amount of time and joining the bar in a different country. Maybe instead of vacationing somewhere you could live there. Always room at the top.

[Law School Bubble]

^ Yep, and like you said, the breakdown of people deciding not to go is skewed towards the top LSAT takers. So the people who should go least (the 140-150 range people) are generally still attending T3s and T4s, while more and more of the high 160s-170s people are saying, "Yeah... this isn't such a good idea" or are listening to the "retake" message. The people with the higher LSAT scores are, as a whole, making better decisions when it comes to going to law school or not (shocking, I know).

But soon these bottom schools could run out of warm bodies. Tamanaha has written about this a lot. Some schools have seen such massive drops in applications that they could soon need to have 100% acceptance rates just to fill the class, and even that might not work. Once these T3 and T4 cash cows start losing cash, there is no way they stay open long, especially if they're affiliated with a parent university. Law schools bring almost nothing of value (like research med schools, etc.) besides money. It is conceivable that we see some schools go out of business.

The higher LSAT ones may also be the ones who care the most about biglaw, and if biglaw is the one with its heartblood gushing out, maybe they are a whole lot less willing than other types of test takers to settle for what's left out there, so they say if they can't get the biglaw or a comforting probability of biglaw, best to go be a doctor or work for mommy or daddy or cool it where I am, I'm not broke.

As they should.

Some whose focus was not even biglaw in the first place have no reason not to continue on, because really, most of the 200k debt type schools' graduates cannot afford PI jobs, a lot of them cannot afford to or do not have the local connection to move to where jobs might actually be. Some local kid who got an alright score and went to an alright school and wants to go right back to his hometown will actually have better odds especially if he's not talking about going into the legal equivalent of basketweaving, than someone who is middle of the road at a t-14 fighting like a gladiator for the same jobs in the same major areas as...eeeeeverybody else.

ETA, also much easier for little mr. homegrown to hang a shingle...people already know him and if he was doing his job during law school, he was networking his way into good mentors/contacts where he wants to practice. I know if people want a lawyer and they live in a community not just a city full of strangers, they tend to ask who they know to recommend someone, and then they trust him. If he can't take their case for whatever reason, they will trust his recommendation to use little mr. homegrown since the recommended lawyer's word was trusted by their friend. So he can get trickle-down business from that direction and the courts, and build his name to the point where they call his name first on its own merit. Or, he builds up enough experience as a direct underling of such an employer in his town, that he can either take over their practice when they retire or get enough experience to credibly build a full office of his own from scratch.

[sadsituationJD]

A non-top 14/non-Biglaw law degree is akin to a real estate salesperson license nowadays: virtually everyone has one, there are no "paying" jobs, and it isn't any sort of "career" but more or less an occasional "score" here and there, like your aunt/uncle/grandma slip n' falls at the Pathmark and you refer it to Jacoby and Myers for a 1/3 fee split, or a buddy gets a DWI and you go beg for the minimum suspension for $500 or whatever.

Trouble is, a real estate sales license takes 2 weeks and about $150 to obtain, whereas a J.D. takes 3 years and often north of 100 K.

The answer is to keep the Top 14 programs to "prep" biglaw bound folks, and for everyone else (i.e, shitlaw) just make law an associate degree at best. More so than anything else, law lends itself to online study, since it's just boring passages of reading and rote memorization of mostly irrelvenent rules and procedures. You could easily have programs at local community colleges and such, with local shitlawyers (trip n' slip, DWI, wills, fender bender stuff) teaching how to fill out the forms and other cut n' paste crap for like $3000 a semester.

Follow the associate degree with a 3 year apprencticeship in shitlaw, and then just admit these kids sans bar'zam.

[SuperCerealBrah]

A non-top 14/non-Biglaw law degree is akin to a real estate salesperson license nowadays: virtually everyone has one, there are no "paying" jobs, and it isn't any sort of "career" but more or less an occasional "score" here and there, like your aunt/uncle/grandma slip n' falls at the Pathmark and you refer it to Jacoby and Myers for a 1/3 fee split, or a buddy gets a DWI and you go beg for the minimum suspension for $500 or whatever.

Trouble is, a real estate sales license takes 2 weeks and about $150 to obtain, whereas a J.D. takes 3 years and often north of 100 K.

The answer is to keep the Top 14 programs to "prep" biglaw bound folks, and for everyone else (i.e, shitlaw) just make law an associate degree at best. More so than anything else, law lends itself to online study, since it's just boring passages of reading and rote memorization of mostly irrelvenent rules and procedures. You could easily have programs at local community colleges and such, with local shitlawyers (trip n' slip, DWI, wills, fender bender stuff) teaching how to fill out the forms and other cut n' paste crap for like $3000 a semester.

Follow the associate degree with a 3 year apprencticeship in shitlaw, and then just admit these kids sans bar'zam.

lol You could make this argument for almost every degree out there. They should just make it a Bachelors degree like Accounting and be done with it. There is absolutely no reason whatsoever for law school to be 3 years post college. The rest of the world seems to get this.

[HarlandBassett]

Fed to launch QE3 by buying mortgage securities

WASHINGTON (MarketWatch) — The Federal Reserve, worried that improvement in the unemployment rate has stalled, announced a third large purchase of bonds on Thursday in an effort to bring down long-term interest rates and spur growth.

The Fed said it would buy mortgage-backed securities at a pace of $40 billion per month.

The Federal Open Market Committee, which ended a two-day meeting on Thursday, said it was concerned that, without the action, “economic growth might not be strong enough to generate sustained improvement in labor market conditions.” Read text of statement.

In addition to bond purchases, the Fed said it intends to keep the benchmark short-term interest rate, the federal funds rate, at nearly zero until mid-2015. The prior guidance on the first rate increase had been late 2014.

The guidance now extends well beyond the term of Fed Chief Ben Bernanke, which ends early in 2014.

Stocks (DJI:DJIA) spiked but then lost about half their gains after the Fed statement was released. The U.S. dollar turned up and 10-year Treasury prices turned down. Read Market Snapshot.

The Fed has left the federal funds rate at nearly zero since December 2008.

The committee’s vote was 11-1. Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, dissented, as he has at every meeting this year.

The Fed took the aggressive action out of a growing concern for the economic outlook, especially the anemic labor market.

The Fed said it would continue to monitor incoming information.

“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,” the FOMC said.

Despite holding interest rates at zero for more than three-and-a-half years, and the central bank buying $2.3 trillion in assets, the unemployment rate has been stuck above 8% since early 2009. There are 12.5 million unemployed workers.

Economists and even Fed officials disagree on whether further asset purchases will have any lasting effect on the economy.

The Fed hawks are worried that core consumer price inflation is running at a 2.1% rate over the past 12 months despite the weak economy.

Economists expect sluggish growth for the last six months of the year. Headwinds from the European sovereign debt and banking crises are holding the economy back.

There is also mounting concern over a stalemate over U.S. fiscal policy.

[minnbills]

Ben Bernanke rocks

[Camron]

I see a lot of people offering suggestions on how to reform the current legal market conditions but these are just my thoughts as a Canadian.

In Canada, our legal market is not in great shape (salaries have become stagnant, lower retention at big law firms for articling/intern students, unemployment numbers are rising, and inability to find articleships for recent law grads); but it is MILES (KMs here ) ahead of what the current condition is in the USA. I think this is due to a few reasons (which may or may not hold true in the future).

We only have 15 law schools in Canada and they all have respectable standards for admissions. Simply put; if you don't have a mediocre GPA (3.5+) or LSAT score (160+), you don't stand a chance of getting admitted into a Canadian law school (does not account for splitters and is more or less the floor, not the average). In America, clearly these standards are not in place. If you have the financial means (not necessarily with your own cash as we see a ridiculous debt load for American law students), you can earn a J.D. in America. To compensate for that, American law schools are branded into different tiers (something that doesn't exist in Canada) and T14 are regarded as the "safe" law schools. However, the damage is already done by having the crappy law schools in the market. It dilutes the value of a J.D. and the ABA's primary interest should be in maintaining this value by limiting who can and who can't become a law school. The limited number of law schools also limits the output of lawyers in the market and current estimates have the supply being output by law schools roughly equal to the demand (of course, there is some issues there with lawyers who may be coming back into practice or foreign lawyers entering the market).

We also have mandatory articleships for all law graduates before they can become practicing lawyers. I feel this is a much better indicator of your ability to be a lawyer than a bar exam. An articleship generally lasts a year and although you will not be earning your full salary potential out of law school, it does limit the number of lawyers right of law school who can become practicing lawyers. This also acts as a great barrier for Americans and other foreigners who may try to enter our legal market and also for Canadians not smart enough to attend law school in Canada (and went to a crappy one in the USA/UK/Australia) as they will need to secure employment before they can become a practicing lawyer.

The tuition charged at Canadian law schools, for the most part, is fairly reasonable given salary and job potential. Most law schools in Canada charge between $10k-18k in annual tuition fees. This is more inline with our job expectations and there are government /law school programs in place to erase your debt obligation if you are unable to find employment or you take on a social-service oriented practice (I am aware that some American law schools offer a similar service). However, I have been finding that some Ontario law schools are making the transition to the American model. UofT, for example, tuition fee has been steadily rising and is now around the 30k/year region. Although still cheaper than most American law schools, job outlook has been diminishing in the big law market of Toronto and environment conditions should not be justifying faculty/salary increases. This is also true for Osgoode. However, most law schools across Canada still offer affordable tuition fees.

To conclude, I think it really boils down to the underlying identity of Canada and America for the difference in the legal market. The Canadian legal market is more tightly and better regulated that results in greater job security but at the expense of the great earning potential one could make doing big law in the USA (i.e. big law in Canada is $100k-110k for 1st year associate with 25% bonus, I understand that in America it is something like $150k with a similar percentage for a bonus). This also very accurately paints a picture of the underlying Canadian economic model where we have many free market mechanisms in place but we also maintain many socialistic ideas and values that are in place by government intervention. The American legal market holds more true to the "free market" mechanism that America is known for and consequently suffers when the economy is in the shitter and shines when the economy is on a boom.

Sorry for my slightly OT rant...

[dnelson]

How do Americans who go to Canada for law school (and employment) end up doing? Is there any bias against them in hiring?

I see a lot of people offering suggestions on how to reform the current legal market conditions but these are just my thoughts as a Canadian.

In Canada, our legal market is not in great shape (salaries have become stagnant, lower retention at big law firms for articling/intern students, unemployment numbers are rising, and inability to find articleships for recent law grads); but it is MILES (KMs here ) ahead of what the current condition is in the USA. I think this is due to a few reasons (which may or may not hold true in the future).

We only have 15 law schools in Canada and they all have respectable standards for admissions. Simply put; if you don't have a mediocre GPA (3.5+) or LSAT score (160+), you don't stand a chance of getting admitted into a Canadian law school (does not account for splitters and is more or less the floor, not the average). In America, clearly these standards are not in place. If you have the financial means (not necessarily with your own cash as we see a ridiculous debt load for American law students), you can earn a J.D. in America. To compensate for that, American law schools are branded into different tiers (something that doesn't exist in Canada) and T14 are regarded as the "safe" law schools. However, the damage is already done by having the crappy law schools in the market. It dilutes the value of a J.D. and the ABA's primary interest should be in maintaining this value by limiting who can and who can't become a law school. The limited number of law schools also limits the output of lawyers in the market and current estimates have the supply being output by law schools roughly equal to the demand (of course, there is some issues there with lawyers who may be coming back into practice or foreign lawyers entering the market).

We also have mandatory articleships for all law graduates before they can become practicing lawyers. I feel this is a much better indicator of your ability to be a lawyer than a bar exam. An articleship generally lasts a year and although you will not be earning your full salary potential out of law school, it does limit the number of lawyers right of law school who can become practicing lawyers. This also acts as a great barrier for Americans and other foreigners who may try to enter our legal market and also for Canadians not smart enough to attend law school in Canada (and went to a crappy one in the USA/UK/Australia) as they will need to secure employment before they can become a practicing lawyer.

The tuition charged at Canadian law schools, for the most part, is fairly reasonable given salary and job potential. Most law schools in Canada charge between $10k-18k in annual tuition fees. This is more inline with our job expectations and there are government /law school programs in place to erase your debt obligation if you are unable to find employment or you take on a social-service oriented practice (I am aware that some American law schools offer a similar service). However, I have been finding that some Ontario law schools are making the transition to the American model. UofT, for example, tuition fee has been steadily rising and is now around the 30k/year region. Although still cheaper than most American law schools, job outlook has been diminishing in the big law market of Toronto and environment conditions should not be justifying faculty/salary increases. This is also true for Osgoode. However, most law schools across Canada still offer affordable tuition fees.

To conclude, I think it really boils down to the underlying identity of Canada and America for the difference in the legal market. The Canadian legal market is more tightly and better regulated that results in greater job security but at the expense of the great earning potential one could make doing big law in the USA (i.e. big law in Canada is $100k-110k for 1st year associate with 25% bonus, I understand that in America it is something like $150k with a similar percentage for a bonus). This also very accurately paints a picture of the underlying Canadian economic model where we have many free market mechanisms in place but we also maintain many socialistic ideas and values that are in place by government intervention. The American legal market holds more true to the "free market" mechanism that America is known for and consequently suffers when the economy is in the shitter and shines when the economy is on a boom.

Sorry for my slightly OT rant...