Back to Where We Began. Finally.

CATHERINE RAMPELL

Dollars to doughnuts.

The American economy has finally reached the size it was before the recession began four years ago, according to the latest gross domestic product report from the Bureau of Economic Analysis.

Dollars to doughnuts.

That may sound like good news, but it’s long overdue, and frankly not good enough. If the economy were functioning normally, it would be significantly greater today than it was before the recession began.

Here’s a look at the level of gross domestic product over the last decade:

It has taken 15 quarters for the economy to merely recover the ground lost to the recession. That is significantly longer than in every other recession/recovery period since World War II. In the previous 10 recessions, the average number of quarters it took to return to the prerecession peak was 5.2, with a high of 8 quarters after the recession in the 1970s.

Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and Vice President Joe Biden’s former economic adviser, has written up some additional thoughts on the significance of these numbers. He observes:

[R]egaining the peak is just a proximate goal. What we’ve really lost here is the trillions in output between potential GDP (how the economy would have done absent the recession) and actual GDP. That’s the actual cost of the downturn—the output, jobs, incomes, opportunities, even careers, that were lost in the Great Recession.

Rajat Gupta, Merely Affluent

Rajat Gupta was rich by almost any standard. He just wasn’t rich compared with many of the people who surrounded him. He knew it, and he didn’t seem to like it.

More than a few of his friends and colleagues had tens or even hundreds of millions of dollars. They included his fellow board members at Goldman Sachs, the alumni of McKinsey & Company — a firm that Mr. Gupta ran and that paid him a few millions of dollars a year — who then made fortunes on Wall Street and, perhaps most important, his friend Raj Rajaratnam, the hedge-fund manager sentenced to 11 years in prison for insider trading. Mr. Gupta, who was indicted Wednesday for passing along corporate secrets to Mr. Rajaratnam, has proclaimed his innocence.

DAVID LEONHARDT

Thoughts on the economic scene.

What seems beyond doubt, however, is that he was envious of the wealth that his peers were amassing. In that way, Mr. Gupta is a symbol of a different kind of income inequality from the one at the heart of the Occupy Wall Street protests, where demonstrators proclaim themselves part of the “other 99 percent” and criticize the top 1 percent of earners.

Thoughts on the economic scene.

Mr. Gupta was surely part of the 1 percent. But seems to have felt as if he was part of the other 99 percent of that 1 percent.

You don’t have to sympathize with him to see how his envy could have affected the choices he made — orienting his post-McKinsey career around making money, handing over large chunks of his money to Mr. Rajaratnam and, at least according to prosecutors, going to great lengths to curry favor with Mr. Rajaratnam.

Such envy extends well beyond people accused of committing crimes. The inequality among the rich is a major force pushing many graduates of the country’s top colleges to Wall Street and drawing middle-aged professionals from other lines of work to finance.

Consider the numbers. Three decades ago, a taxpayer at the cutoff for the top 0.01 percent of earners — that is, in the top 1/10,000th — was making about 10 times as much as someone at the cutoff for the top 1 percent, according to research by the economists Emmanuel Saez and Thomas Piketty.

Since then, the top 1 percent has done very well, nearly doubling its income in inflation-adjusted terms, which is a far bigger raise than most households have received. Yet the very rich have done vastly better: someone at the cutoff for the top 0.01 percent now makes 30 times as much as someone at the top 1 percent, according to the latest numbers.

To someone making a few million dollars a year, these very rich — rather than the median-earning American — are often the relevant benchmark. “Most families are trying to keep up with the Joneses,” as Catherine Rampell wrote in a post here earlier this year. “And in dollar terms, the rich are falling far shorter of their respective Joneses than the middle-income and lower-income are.”

Another fee bites the dust: Wells Fargo backs off debit charge

Joining an industry's retreat in the face of customer protests, Wells Fargo has abandoned the idea of charging debit card fees -- the third major bank to back away from such plans in a day.

The San Francisco banking giant had planned to test a monthly $3 fee for users of its debit cards in five states. It said in a statement Friday that it had called off that pilot program "as a response to customer feedback the bank has received."

"We will continue to stay attuned to what our customers want," said Ed Kadletz, head of Wells Fargo’s debit card division.

A host of critics including President Obama have attacked Bank of America's plan to charge account holders $5 a month if they use their debit cards to make purchases. The populist outrage, highlighted by protests staged by the Occupy Wall Street movement, has caused other major U.S. banks to hold off on imposing similar fees.

Earlier Friday, Bank of America backpedaled, saying it would make it easier for its customers to avoid the fee by waiving the charge if they also used BofA credit cards, maintained minimum account balances or made certain direct deposits. Details of the revised plan had not been finalized, a person familiar with the changes said.

Also Friday, JPMorgan Chase said that after its own eight-month testing of $3 monthly debit card fees it had decided against imposing them on its customers.

Citibank, US Bank and Union Bank are among other major institutions that have now taken the no-debit-fee pledge. However, certain regional banks, such as SunTrust and Regions, already have implemented fees similar to those at Bank of America.

It will be interesting to see what other new charges the banks cook up as they try to make up for revenue lost to new regulations governing credit card, overdraft and debit card practices that were imposed in the aftermath of the financial crisis.   

RELATED:

BofA backpedals on $5 debit fee

Chase opts out of debit-card fee

Debit card users may switch banks over new fees

-- E. Scott Reckard

Photo: Wells Fargo in San Francisco. Credit: Paul Sakuma / Associated Press

BofA backpedals on $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

RELATED:

Chase opts out of debit-card fee

Citibank is next with a new banking fee

Survey: Debit card users may switch banks over fee

--E. Scott Reckard

Photo credit: Lucas Jackson / Reuters

California state housing agency reverses on foreclosures

A state-run housing agency at least temporarily has suspended the practice of foreclosing on a small number of borrowers who rented out their homes.

The office of Senate President Pro Tem Darrell Steinberg (D-Sacramento) on Friday announced that the California Housing Finance Agency had agreed to his request to halt the foreclosures, even though the homeowners had not fallen behind on their monthly payments.

Earlier this week, Senate investigators issued a report that said the agency, known as CalHFA, initiated or threatened foreclosures on about 200 borrowers because they were no longer living in the homes as required by state regulations and interpretations of federal tax law.

The borrowers, who owed more on their properties than their market values, moved out for a variety of personal reasons but did not want to sell the homes at losses.

"The agency is making the right decision during difficult economic times," said Steinberg. "Struggling families, who are working to do the right thing in meeting their obligations, shouldn't be saddled with an extra, unnecessary burden."

The agency said it finances $4.2-billion worth of low-interest mortgages through the sale of tax-free bonds. U.S. Internal Revenue Service Rules specifically prohibit that the money from the sale of bonds be lent to home buyers who do not live in the properties.

Nevertheless, the agency in a letter to Steinberg and Senate Housing Committee Chairman Mark DeSaulnier (D-Concord) said it asked its board of directors to revisit the issue of owner-occupancy at its January board meeting. In the meantime, it is temporarily ceasing foreclosure proceedings  against "those who may be renting out their residence while staying current on their payments."

DeSaulnier said he is asking the agency to make the change permanent. "CalHFA serves predominately low-income, first-time home buyers," he said. These Californians should not fear foreclosure when they are doing everything right."

RELATED:

A realistic fix for mortgage crisis 

Obama's housing rescue plan: Up from underwater

State agency foreclosing on borrowers who rent out their homes

-- Marc Lifsher

Photo: A foreclosed Glendale home in September. Credit: Kevork Djansezian / Getty Images

White House orders loan review to avoid more Solyndras

The White House, shifting its position on the Energy Department's loan guarantees, said it will now review the entire program for such ill-fated decisions as the much-publicized $535-million loan guarantee for California solar equipment maker Solyndra, which later fell into bankruptcy.

The step aims to defuse the embarrassing Solyndra episode, which has given rise to criticism that the Obama administration has wasted hundreds of millions of dollars in taxpayer money.

In a news conference this month, the president asserted that "the overall portfolio has been successful." He said: "It has allowed us to help companies, for example, start advanced battery manufacturing here in the United States. It’s helped to create jobs."

Obama’s defense opened him to charges that he has been tone-deaf to Solyndra’s implications. With the economy still weak and deficits topping $1 trillion, the White House can’t afford to be seen as lax overseers of taxpayer dollars.

Republicans have seized on the issue. As Obama crisscrosses the country pressing for his $447-billion jobs plan, Republicans have been citing Solyndra as an example of stimulus spending that backfired.

GOP presidential candidate Mitt Romney, speaking at the Values Voter Summit this month, said: "I welcome renewable energy. But as an old venture capitalist myself, I can tell you this: There will be no more Solyndras."

White House chief of staff William Daley ordered the 60-day evaluation and asked for recommendations about "how to improve the loan monitoring process," according to the White House.

Leading the inquiry is Herb Allison, a former Treasury official who oversaw the federal bailout program for the financial sector.

In a statement, Daley said that "while we continue to take steps to make sure the United States remains competitive in the 21st century energy economy, we must also ensure that we are strong stewards of taxpayer dollars."

Investigators are poring over the Solyndra deal. The Justice Department and congressional Republicans have been investigating the loan since the company filed for bankruptcy. At the request of Republican-controlled congressional committees, the White House has turned over thousands of emails, some of which showed administration officials rushing to approve the deal in time for a glitzy photo op.

The White House has balked at releasing everything in its possession, including the president’s BlackBerry messages. Republicans are threatening to use subpoenas to get more information even as the administration prepares to release thousands more email communications in the coming months.

They aren’t stopping at Solyndra. Congressional investigators have recently turned their attention to loan guarantees granted by the Energy Department to two automakers -- Fisker Automotive and Tesla Motors -- and to the U.S. subsidiary of a steel company owned by a Russian firm.

 RELATED:

-- Peter Nicholas and Neela Banerjee

Photo: Solyndra's headquarters in Fremont, Calif. Credit: Robert Galbraith / Reuters

BofA will make it easier for customers to dodge $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

RELATED:

Chase opts out of debit-card fee

Citibank is next with a new banking fee

Survey: Debit card users may switch banks over fee

--E. Scott Reckard

Photo credit: Lucas Jackson / Reuters