Underwater secrets

Local governments'  have often stirred controversy with their use of eminent domain. While it's supposed to be used for the public good, too often it has been used to profit developers, while the public just feels ripped off.

Still, the idea of local governments using eminent domain as a tool to stabilize home prices in some of Southern California’s hardest hit communities is an intriguing one.

It’s the kind of bold action that’s been missing in the government’s limp response to the foreclosure crisis.

But the scheme that’s unfolding in Southern California’s Inland Empire, rated as the one of the most underwater in the nation, is a step in the wrong direction.

It smacks of politically-connected high-finance types, boasting of their access to politicians as their “secret formula,” wheeling and dealing in secret.

A san Francisco venture capital firm is cooking up a scheme in San Bernardino to use the government’s eminent domain power to seize some underwater mortgages from investors who own them and have been unwilling to offer borrowers principal reduction that would allow them to stay in their homes.

The firm’s idea, apparently, is to for San Bernardino County and other local government’s form a joint powers authority that would allow those government to act together to use eminent domain to seize mortgage loans, not the property, of underwater homeowners who were not behind on their payments at “market value.”

Then, according to the scheme, the firm would find investors to issue new mortgages to the homeowners at that lower, more affordable “market value.”]

The plan was hatched by San Francisco-based Mortgage Resolution Partners. That’s the firm originally headed by Phil Angelides, former state treasurer, real estate developer and venture capitalist best known recently for leading a congressionally-appointed investigation into the financial crisis.

After issuing a report highly critical of the banks, Angelides didn’t stump the country to put pressure on authorities to follow up on his report with prosecutions.

He went into the mortgage business himself, swaddling his efforts to make profits from distressed mortgages in good intentions of finding solutions to the foreclosure crisis.

It was Angelides who boasted in a letter to potential investors that his firms’ secret formula was its connections to public officials. Reuters reported that Angelides told potential investors they could generate 20 percent profits.

After Angelides’ involvement in the firm was publicized earlier this year, he stepped aside. Replacing him was Steven Gluckstern, a hedge fund veteran who was one of President Obama’s major bundlers in the 2008 election.

According to published reports, Mortgage Partners would make its profit charging a fee on every mortgage seized. How much will it be paid and how? That hasn’t been disclosed. But according to Naked Capitalism, its sources say that the firm expects to make a 5.5 percent fee on each mortgage ­– paid for by having the government seize the mortgages at a discount and sell them back to the homeowner for a profit.

The most serious general flaw in the scheme is that has unfolded behind the cloak of confidentiality agreements between government officials and Mortgage Resolution Partners, with no public disclosure or debate on the concept or details, giving the whole deal the stink of a sweetheart deal, not a solution.

When the Riverside Press-Enterprise sought written records of communication between county officials and the mortgage firm, they were told there were none.

The use of eminent domain is highly controversial because it has often been justified as benefiting the public when it ends up benefiting real estate developers. In this case, investors who own the mortgage loans have already weighed in opposing the plan. Though the plan’s backers say eminent domain has been used to seize intangible goods, they acknowledge it hasn’t been used to seize mortgage loans before. So investors are likely to challenge the process in court.

But I wouldn’t shed too many tears for the investors, who have stood in the way of principal reductions or any other means of helping homeowners.

Another question raised by the current plan: why is only Mortgage Resolutions Partners being considered as a partner for the joint powers authority? The idea should be put out for an open bid. Maybe other firms would have even better plans and offer a better deal.

And there are plenty of other issues surrounding the plan. Walter Hackett is a former banker who is now lead attorney in the Legal Aid Riverside’s branch near San Bernardino. While he likes the idea of using eminent domain as a tool to stabilize home prices,

he questions why eminent domain would be used to seize mortgage loans – which are more difficult to set a price on – rather than property itself. Seizing the property and paying the investor for the fair market value of the property, rather than the mortgage, would extinguish the old mortgage and the new investors could then issue a new one to the borrower at the market value.

Hackett also questions why eminent domain would be used only on mortgages deemed current, so-called performing loans, rather than including properties that have already fallen into foreclosure that are still owned by investors. “Former owners, or others might be able to afford reduced payments once the properties are priced at market value, rather than at the price of the underwater mortgage,” Hackett said.

Hackett’s unusual background, having been a banker and represented homeowners in foreclosure, would be invaluable in redesigning such a proposal. It should not be left only to the venture capitalists and the county politicians.

I’m not suggesting that local governments shouldn’t find a way to use eminent domain or find other creative solutions to help struggling homeowners. But we also need to stop assuming that when the financiers and politicians go into the back room, they come out with something that’s in our interest – even if they say it is.

We learned from the bailout and the government’s subsequent coddling of the financial industry how the secrecy and lack of transparency undermine trust in both our financial system and our government.

However inconvenient to the bankers and hedge fund honchos, such proposals must be hammered out with full public participation and debate. We don’t need any more secret formulas” brewed with corporate cash and political connections in back rooms with you and me kept out.

 

 

Foreclosures / Martin Column - 07/12/2012

London calling – is anyone listening?

Here we go again.

The scandal over bank manipulation of a key interest rate is just the latest strong signal that bankers rigged the system to benefit themselves and screw everybody else.

Not that we need another signal.

The scandal stems from something called LIBOR – the London Interbank Offered Rate. It’s an integral part of the global banking system. LIBOR is supposed to reflect the interest rate at which banks loan money to each other. It’s also a benchmark rate for other transactions, everything from home mortgages and credit cards to complex derivatives.

That means that the cost of the mortgage loan is pegged to whatever LIBOR is. On a home mortgage loan, for example, the interest rate might be a few points above LIBOR. The Financial Times estimates that about $350 trillion worth of contracts are tied to LIBOR.

It turns out that British-based Barclays Bank was manipulating the rates to increase their own profits, and to disguise how the bank was performing­ – possibly with the collusion of their regulators. The conservative Economist calls it “the rotten heart of finance,” and cautions that it is about to go worldwide.

The scandal hit home in England first, causing Barclays’ Bank president to resign and pay a record fine, and regulators on both sides of the Atlantic promising to get to the bottom of it.

But there are strong suspicions that Barclays wasn’t alone, that other too big to fail banks might have also engaged in the same shenanigans. The Wall Street Journal reports that at least 16 banks are under investigation, in three criminal and 10 civil probes.

It’s bad enough that Barclay traders have been caught discussing the manipulation in emails, referring to the rate manipulation as “the fixings” and requesting a particular rate as casually as if they were ordering a double latte.

What’s worse, the Financial Times started raising questions about the LIBOR-rigging five years ago and the Wall Street Journal cast doubt on the banks’ LIBOR practices in May 2008. 2008. So any regulator or prosecutor with an iota of curiosity could have been digging into LIBOR since then.

As we already know, curiosity about bankers’ malfeasance has been a rare commodity among the officials who are supposed to be scrutinizing their bank behavior. Remember President Obama’s repeated promises to get tough on bankers, most recently in his State of the Union speech in January?

Don’t expect Mitt Romney to make an issue of it – at least 15 of Barclay’s most senior U.S.-based bankers have donated the maximum $2,500 contribution to his presidential campaign. The CEO who resigned, Bob Diamond, had been among the co-hosts for a London fundraiser when Romney goes to London for the Olympics. (Barclays’ political action committee has also contributed significant amounts of cash to Democrats, though not the president, over the years.)

The LIBOR scandal rips the curtains away from one of the nastiest Big Lies on both sides of the 2012 presidential campaign: the president’s line that his Dodd-Frank reform has fixed the financial system, and Romney’s pitch that regulation is the problem and that we should leave bankers alone to run their business as they see fit.

 

 

 

 

 

 

 

Martin Column / Mitt Romney / President Barack Obama / Too Big To Fail - 07/09/2012

No Lobbyist Left Behind

If we forced CNN commentators to wear the names of their clients on their sleeves like NASCAR drivers we might have a deeper, more honest debate over what’s going on in Washington.

Unless you live under a rock without any form of media, it’s hard to miss the nonstop frenzy over dumb comments made by CNN commentator Hilary Rosen about Ann Romney.

Rosen said Romney never worked a day in her life, which made her unqualified to comment on the economy. Republicans then attacked Rosen as another in a long line of Democratic elitists who have no respect for women who work in the home.

When she comments on CNN, the network labels Rosen a “Democratic strategist,” though they don’t disclose any particular strategy that she’s come up with.

CNN doesn’t mention her work representing many high-profile clients in Washington, D.C. with interests across a wide range of issues. Her firm, SKDKnickerbocker is filled with former government employees cashing in on their contacts on behalf of their corporate clients. The firm, which includes President Obama’s former communications director Anita Dunn as managing director, isn’t required to disclose clients because it doesn’t acknowledge that what it does is lobbying. In Washington-speak the firm is “political consulting and public relations firm.”

Last year, Bloomberg Business week reported that the firm coordinated an army of lobbyists unleashed by a coalition led by Google, Apple and Cisco pushing for a tax holiday.

The Republic Report compiled a partial list of clients, including big railroads, agricultural interests, PepsiCo and General Mills and for-profit education companies.

In addition, the Washington Free Beacon reported that Dunn pitched SKDKnickerbocker’s services as part of a team that offered to restore hedge funds’ sullied reputations, though apparently nobody swung.

Rosen’s poke at Ann Romney may have stirred up media frenzy, offering just the excuse for a jive revival of jive working mom v. stay-at-home brawl that sheds no light and offers no insight to anybody.

It’s also not the kind of controversy that’s likely to upset Rosen’s clients, who will recognize it for the sideshow it is compared to their free-flowing access to the White House. It’s more likely that it will provide Rosen with an opportunity for some good-natured self-deprecating humor to grease her way as she makes the rounds through the corridors of power.

The Obama administration has made a big deal about how it holds itself to a higher standard by not taking money from lobbyists. But that doesn’t mean lobbyists don’t have a strong presence in the White House, as the New York Times reported Saturday. “Many of the president’s biggest donors, while not lobbyists, took lobbyists with them to the White House, while others performed essentially the same function on their visits,” the Times reported.

Several years ago, GOOD magazine came up with the idea of making politicians wear suits with the names of their biggest contributors, like NASCAR drivers advertise their sponsors. Politicians have been reluctant to embrace the idea. They’re perfectly happy to keep us focused on the sideshow provided by Rosen and those like her, who babble phony nonsense on TV but profit from their access to the real game off-screen.

Lobbying / Martin Column / Mitt Romney / President Barack Obama - 04/17/2012

The Truth About the AG Mortgage Settlement...."Coming Soon"

The "settlement agreement" between state attorneys-general, the Obama Administration and five large banks over unlawful home foreclosures was front-page news everywhere this morning. Only one problem: you can't get a copy of the agreement itself.  All we have is a few hand picked details promising "relief" to defrauded borrowers, and pledges by the banks that they'll obey the law from now on.

Check out the special web site, which proudly trumpets the "landmark settlement," the "historic"agreement and the "landmark relief," but offers only a factsheet entitled "Servicing Standards Highlights" that purports to summarize the deal, and a bunch of phone numbers for the banks and the AGs.

Everything else is "coming soon."

This is an outrage, and frankly, the news media and all the rest of the pundits out there ought to have demanded the full and complete document before heralding the settlement as a major event. To my astonishment, most of the reports I read today failed to note that the actual settlement agreement has not been released to the public.

Ever heard of the lawyer's favorite maxim, "the devil's in the details"? The banks here were accused of failing to comply with legal technicalities like proving that they actually held the mortgage to the homes they foreclosed on.  When it comes to themselves, the bankers know those details matter: You can be sure that their lawyers have negotiated and reviewed every single comma. Shouldn't American taxpayers and homeowners, who have borne the terrible brunt of these banks' gross irresponsibility and greed for the last three years, had a chance to review the proposal before our elected officials signed on the dotted line?

I've seen this kind of stunt many times before - for example,  a settlement of a lawsuit that was described by the parties in a press release as returning $500 million in overcharges to insurance customers. Months later, the settlement agreement itself is quietly filed with the court, and surprise! You had to fill out a ten page claim form to get your money, and the insurance company got to keep whatever's left. (As a lawyer for one of the policyholders, I joined with Consumer Watchdog in an objection to the settlement.)

It is no little irony that many people lost their homes because they didn't read the fine print of the loans, or couldn't understand what it meant. But when it comes to the settlement of the fiasco, no one can read it even if they want to. We have nothing in print, fine or otherwise, beyond the press materials.

Remember you heard it first here: there'll be lots of surprises when we finally get to look at the details of this deal.

 

 

Foreclosure / Foreclosures / Harvey Column - 02/10/2012

For foreclosure relief, occupy the Legislature

Two years ago, California legislators bowed to bankers when they failed to pass legislation that would require mediation between a bank and borrower before banks could foreclose on the borrower’s home.

But a recent report by the U.S. Justice Department should cause the Legislature to take another crack at making a critical choice: Do they want to provide tools to reduce foreclosures, or do they want to keep kowtowing to bankers?

California remains among the hardest hit by foreclosures: third worst in the country.

While foreclosure rates are going down nationally, that’s more a reflection of the continuing mess in the foreclosure process itself rather than any fundamental restoration of health in the housing market.

So the problem hasn’t gone away by itself.

Federal efforts to help homeowners have been ineffective because they’re voluntary for the banks, with inadequate government oversight. For the feds, foreclosure reduction efforts have consisted mainly of offering banks modest incentives for loan modifications, incentives that are less than the profit the bank, in its role as loan servicer, makes from foreclosing on homes.

As demonstrated by the California legislators’ previous refusal to embrace mediation, government officials at all levels have so far lacked the political will to force banks to take the action needed to stem foreclosures. Two years ago, Assemblyman Pedro Nava spearheaded the foreclosure mediation effort,  AB 1639,  which passed the Assembly but died in the Senate under fierce banking opposition. Consultant on the bill was Los Angeles mediator Laurel Kaufer, chair of the State Bar's ADR committee.

Around the country, there  have been a host of mediation programs around the country, with mixed results. ¶

Programs in Connecticut and Philadelphia successfully settled about three of every four cases, avoiding foreclosures. In Nevada, officials reported that about 42 percent of the cases in mediation settled without foreclosure. Nevada also reported another significant finding – the banks dropped many of the foreclosure attempts during the mediation process because there paperwork wasn’t in order.

But in late December, the Florida Supreme Court closed down its foreclosure mediation program after state officials determined it wasn’t working because so few cases eligible for mediation ended in settlement.

Then, just a couple of weeks later, the U.S. Justice Department issued a promising report calling for wider federal use of mediation in foreclosure and more research into how well it works.

The details of foreclosure mediation programs vary widely. The most successful programs, the Justice Department explained, are those that begin early in the foreclosure process, require mandatory participation, include some form of financial counseling for homeowners, are well publicized and require a high degree of transparency by the banks  – meaning that banks have to disclose how their foreclosure process works, including the secretive, often confusing criteria by which they grant loan modifications.

Will the feds blow this opportunity to attack the foreclosure crisis, as they bungled their earlier efforts? Or will finally get a clue and start taking effective action?

In California, we shouldn’t wait to find out.

This Justice Department report should give a boost to a renewed effort to require mediation in California foreclosures, and offers some guidance to California in how to create a successful mediation program.

But it will only happen if people mobilize against the banking lobby, which is sure to oppose any attempt to weaken bankers’ complete control over the foreclosure process.

We keep hearing how the Occupy movement has changed the debate, how issues that couldn’t gain traction six months ago can now get a fuller hearing. We should seize the opportunity to give legislators the opportunity to get the bankers off our backs.


Foreclosures / Martin Column - 01/18/2012

Confessions of a Conflicted Occupier

When the LAPD stormed into Los Angeles City Hall Park after midnight my first reaction was fear.

They flooded into the park without warning through the doors of City Hall, a massive masked army in riot gear, batons raised.

Where was our order to disperse?

The raid was just the latest deterioration in the city government’s relationship with Occupy. First they welcomed us with open arms, the City Council invited us to stay, the police stood by with commendable restraint. Then, six weeks in, City officials launched a propaganda campaign stressing the problems of the encampment. The campaign was designed to erode public support, making it imperative that they move in.

I was in the park that night in solidarity with a movement for which I have great hopes, and somesgivings. Partly, it’s me. I’m not by nature a joiner. I spent years as a newspaper reporter and editor, doing my best to conceal my biases and not take sides.  By temperament as well as training, it’s natural for me to see both sides of an issue and poke holes in arguments, rather than come up with solutions. I’m better at asking questions than having to come up with answers.

But after eight years of disastrous policies during the Bush era, and severe disappointment with President Obama and the Democrats’ embrace of Wall Street, weak financial reform and tepid leadership in focusing on the main problems facing the economy – unemployment, foreclosure, widening income disparity and attacks on the middle class – I was more than ready for a movement that wanted to focus on those problems.

My wife and I visited Zucotti Square a week into Occupy Wall Street and were buoyed by people of all ages who had showed up from all over the country to figure out how to work together to deal with the issues. When I first head the human mic, in which the crowd repeats everything that a speaker says, phrase by phrase, I thought I had stumbled into a street theater performance. It took me a few minutes to realize that this was a meeting, the general assembly.

The next night, back home in downtown Los Angeles, we walked our dog Billie through the park at City Hall. Occupy needs to be happening here, I said, and it should be at City Hall.

A bunch of activists I didn’t know at the time was way ahead of me: they had been organizing for a couple of weeks. That very night, when we got home from our walk, the announcement that Occupy LA would begin the following day appeared on my Facebook page.

The next morning a thousand people marched from Pershing Square to City Hall, and a hundred of them set up tents.

I have a schizophrenic relationship to Occupy. The charms of the General Assembly have eluded me. All the crazy talk—like proposals to get money from the City to build a giant flower pot, complete with giant flower, on the grounds of City Hall, in which people would live. This scheme was met by an objection— a hard block. But the objector never questioned the sanity or practicality of the proposal; rather they had ideological issues with taking money from the Man aka the City. When the talk wasn’t bonkers, it was endless. I could also see conditions at the camp were deteriorating, with more and more people camped out to party and smoke pot, not to build a new social and political movement. Sometimes the wild mess of people was bracing and inspiring, but sometimes it was just heartbreaking.

One of the first nights I was there a guy pulled up with a card table and a pot of chili and started ladling it out. It was some of the most delicious chili I ever tasted. I got inspired and started making pots of vegan lentils and black beans to take to the camp. But then I would get another whiff of the increasingly squalid conditions in the camp and want it gone. Can’t the movement just evolve to the next step in which camping out would no longer be its most visible image and most important product?

I refused to make them soup, but then my wife, Stacie Chaiken, who helped organize an interfaith clergy group at Occupy, would give me a hard time and I would go back to making soup.

I saw what the Occupy meant to her, how she understood it in a way that went beyond the encampment and the endless meetings. I saw what it meant to my friend, a special-ed teacher, who has been in despair watching the corporatization of public education. I made new friends at Occupy who had a much higher tolerance for the mess and the meetings, who found at Occupy connections to other people and pieces of themselves that had been for such a long time missing.

I fell in with a group that was meeting with City officials, initially about logistics, and then about an attempt to conclude the encampment at City Hall, with the possibility that the City might turn over a patch of land and some office space to a nonprofit created by Occupy. The discussions eventually came to naught, in part because neither the City nor our group could deliver. Controversy erupted because a faction of Occupiers who have not been involved in the talks with City officials objected to our engaging in “secret” discussions because that went against the Occupy principle of complete transparency. If the Mayor and Police Chief wanted to talk to us, they should come to the General Assembly and get on stack, meaning they should wait in line like everyone else for their turn to speak.

Maybe those who objected were right. But I strongly doubt that City and police officials would have showed up at the General Assembly to discuss issues with—and submit to the verbal slings and arrows of the Occupiers, as many of them wished. And I found the discussions with the Police and Mayor’s office a fascinating experiment, very much in keeping with the open-ended spirit of Occupy. The conversations also served to prolong the Occupation at City Hall Park long after it would have doubtless have been shut down.

The night of the raid, there were about 100 people who had decided to get arrested in acts of civil disobedience. They were all people who had been trained in non-violence. I was not one of them. When the police arrived in their shock and awe attack, I was right in the middle of the park. I scampered through the maze of tents, out of the park onto to First Street. I encountered a police line, and asked the officers—wearing helmets, carrying weapons of non-lethal destruction—how I might safely exit the perimeter. They stared at me, stone-faced.

I told the police that if there were orders being given, we couldn’t hear them. Rumors swept through the street that everyone within the perimeter were about to be arrested.

Finally I made my way up Main Street to Temple, across the Triforium and down onto Los Angeles Street. I was able to walk west on Second Street, where I found my way to the Redwood for a stiff drink before last call at 2am, where I watched the rest of the proceedings broadcast live on KTLA.

I didn’t like the way it went down that night. It was inconsistent with the LAPD’s previous restraint and with the respect the City had expressed for this important free speech movement. After I got over my initial fear, I understood why the police—in their fear of potential violence from antisocial people in the encampment— reacted in the way they did.

None of this qualifies me for the Occupy Hall of Fame. Unlike some of those I’ve met in this movement, I don’t claim to have all the answers.

I do have more questions:

Has the Occupy movement really changed the national debate, as some occupiers have claimed, or has it taken a first baby step onto the national stage? Yes, I hear the president’s populist-sounding speeches, but I have yet to hear him propose a massive jobs program or even an adequate program to address foreclosures, let alone withdraw his support from the disastrous focus on austerity instead of getting the economy going.

Is this really a movement of the 99 percent, or is it a movement of the self-selected few—activists, anarchists, bohos, hippies and others who can camp on the lawn for weeks at a time, and stand through a General Assembly?

Should the heart and soul of a movement really be that endless meeting? The General Assembly seems more like a necessary evil than a true solidarity-building exercise. How about some dancing, or singing or poetry, or praying?

Can this movement evolve beyond the symbolic taking of public space and public debate into a forum we so badly need, to including a broader spectrum of people, that can take on the bread-and-butter issues of the distressed majority?

Where is the path out of City Hall Park into the heart of the City?

 

 

 

 

 

 

Martin Column / Occupy - 12/13/2011

Occupy Washington

Emboldened by the U.S. Supreme Court, big corporations have been busy exercising their newly granted First Amendment rights. Now a growing number of Americans are exercising theirs, assembling in cities throughout the nation to protest the bailouts, budget cuts and other artifacts of the Wall Street financial debacle three years ago this month.

Americans are notoriously slow to rouse, even when they are hurting. And we are certainly hurting: nine percent of Americans are “officially” unemployed; count those who have given up looking or have taken jobs far beneath their skill and ability, and one in five are struggling to stay afloat. Those fortunate enough to hang on to their jobs have to worry about the cost of health insurance, gas and groceries. 81% of Americans say the country is on the wrong track. The other twenty percent are presumably among those who lay claim to most of the wealth of our country.

Eighteen days ago, a few hundred citizens rallied in New York City, inspired by a call to “Occupy Wall Street” proposed by a magazine article. At first, the protestors – largely young people - got a snide blow-off from the New York Times. But thanks in part to some gratuitous pepper spray from the police, media coverage grew along with the protestors’ numbers. Last weekend, thousands marched in New York, while citizens in Los Angeles, Chicago, St. Louis, Philadelphia, Denver, Madison, Atlanta and Boston have turned out. The list is growing. Participants defy categorization or caricature: they come from all walks of life, all age groups, all ideologies. All share the view that the country has run off the rails.

Europeans have been protesting for months, their economies suffering severe collateral damage from the economic contagion unleashed by the Great Recession here at home. In Iran, Egypt and other Middle East nations, anger at poverty and political oppression boiled over earlier this year; dictators were overthrown.

But until now, most Americans have occupied nothing more than their living rooms – odd, since America’s own citizen revolution has been the beacon of democracy for the rest of the world. Many no doubt are simply too busy and too tired: two wage earner families, with some parents holding two jobs each. Some have lost so much confidence in government and in themselves that their sense of powerlessness has led to personal paralysis. No one can challenge the decision to stay home.

But the choice to stand in protest is the one singular act of political power left to the silent majority of the American people. A radical United States Supreme Court has concluded that corporate donations to politicians – a.k.a. bribery – are a form of “expression” that is protected by the First Amendment. The multinational conglomerates have used their vast wealth to seize control of our country. This has to change, and it has to be done by an amendment to the U.S. Constitution specifying that the right to support candidates and causes in elections belongs only to human beings - you can start the process right here. In the meantime, powerful as they are, corporations cannot march down our streets. Only human beings can do that.

Inevitably, the defenders of the intolerable status quo try to brand protests and protestors as insubordinate. They know that a citizenry, aroused, is a fearsome force. In recent days, as more Americans stand up to denounce the virulently destructive disparity in incomes and opportunities between the corporate elites and everyone else, the corporate hacks on Capitol Hill and the talk radio commentariat indicted the discussion as “class warfare.” Apparently that’s impermissible in our democracy because it challenges the core concept that “we the people” rule, and “we” is supposed to mean all of us. That’s precisely what’s at stake, of course, and the people demanding that it be addressed are nothing short of patriots.

Warren Buffet, the world’s second richest person according to Forbes, told CNN last week: “Actually, there’s been class warfare going on for the last 20 years, and my class has won.”

As we reported back in 2009, Wall Street has occupied Washington for too long. Now it’s up to us to take it back.

 

Harvey Column - 10/04/2011

“If We Build It, He Will Come”

Washington has become Wall Street’s “field of dreams.” There, the money conglomerates engage in their beloved sport of financial speculation, cheered on by a small but powerful group of public officials who have sold out the rest of the country.

Deregulation was a home run for the financial industry. Wall Street’s friends in Washington sacked the rules of the game, unleashing the hedge funds, banks, investment firms, insurance companies and other speculators who made billions before the crash, then got billions more from the taxpayers after the crash.

Meanwhile, as today’s New York Times points out, almost nothing has been done about “derivatives,” the virtual technology for the speculation that drove our economy into the dugout three years ago. Federal agencies that were supposed to issue new regulations to prevent another debacle have been tied up in knots by Wall Street lawyers.

Jobless and fearful for their kids’ future, people are furious about what happened.  But it was always going to be a daunting task to mobilize the public behind the necessary reforms when they are so complex, and anything drafted to appeal to directly to Americans’ wallets – say, by providing a cap on credit card interest rates, or low-rate mortgages, or other forms of financial relief – would have inspired the financial industry to retaliate with nuclear weapons. Neither the President nor anyone in Congress were willing to start that fight, principled as it would have been.

So it has all come down to Elizabeth Warren, the brainiac Harvard law professor who suggested, in a law review article in 2005, that Congress create a new federal agency with the mission of protecting consumers against false advertising, misleading contracts and the general thievery of the financial industry.  Democrats proposed the agency as part of the Wall Street reform legislation in 2009, and after the industry thought they had whittled it down to something they could easily live with – or simply get around – Congress created the Consumer Financial Protection Bureau and the President signed it.

Warren was the obvious person for the job, and almost immediately Americans began calling on President Obama to nominate her for the post.

What Wall Street didn’t realize at first is that it is way, way easier for Americans to get behind a human being than a thousand-page piece of legislation that has been lawyered and lobbied into mush. America has become a celebrity-driven culture, and while Elizabeth Warren is no Lady Gaga, she is one of a small number of outsiders that have occasionally busted up the D.C. establishment – just as Ralph Nader did in the 1970s, and Jimmy Stewart fictionally did in the Frank Capra movie “Mr. Smith Goes to Washington.”

Whether President Obama will nominate Warren to the position has become the defining question of his Presidency for millions of Americans, especially those who voted for "change we can believe in" in 2008.

When confronted with demands by civil rights leaders to take action against racial discrimination in the late 1930s, President Franklin Roosevelt’s legendary retort was “make me do it.” Whether he ever said that, the strategy he suggested is literally page one of the best manual for citizen empowerment and political organizing.

Let’s put it in more contemporary terms. President Obama has made it clear he doesn’t want to nominate Warren. It’s just another fight he’d rather not have. He embraces consensus, not controversy.

But the President has to know she’s the best person for the job. So the burden is on Americans to make it impossible for him not to nominate her. Part of that means punishing the people who are working against her – members of Congress, and those in the Administration – because they are doing Wall Street’s dirty work. These are the same people who let Wall Street plunder our nation and then bailed Wall Street out with our money.

My guess is, we can make Obama do it.

Consumer Financial Protection Agency / Harvey Column / Outrage / President Barack Obama / Uncategorized - 06/22/2011

The Never-Ending Bailout

Even though banks' super-charged profits and eye-popping bonuses are back, they want you to keep paying the costs of their foreclosures.

In California, where the foreclosure crisis has hit with brutal force, it will cost communities between $600 billion and $1 trillion in lost property value, almost $4 billion in lost property tax revenue, and over $17 billion in local government costs between 2008 and 2012, according to Ellen Reese, a University of California Riverside sociologist and Jan Breidenbach, who teaches housing policy at USC, writing in the San Bernardino Sun.

That amounts to be about $20,000 per foreclosure that local governments [meaning you] have to pay every time a bank forecloses on a home.

One California legislator has made a modest suggestion: have banks pay those costs at the time of the foreclosure, so taxpayers don’t have to absorb them later.

The way the banks have responded, you would think that the legislators had proposed seizing the banks and distributing the bankers’ money on Main Street.

The mortgage bankers’ association, in best fear-mongering fashion, told its members that making the banks pay the costs of their failed loans would dry up all future home lending in the state.

In her April 6 letter to her membership, the association’s president, Pam Sosa, doesn’t offer any suggestion how the costs banks are currently passing on to you and me could be mitigated.

Meanwhile the California Bankers’ Association says if the bill becomes law, they’ll simply pass the cost on to their customers.

Why should the banks have to pay when they’ve done such a stellar job convincing the politicians that you won’t mind picking up the tab for the bankers’ losses?

If you thought that the financial collapse would curtail the banks sense of entitlement to write their own rules for their business, you would be wrong.

If you thought that the financial collapse would have made the banks think twice before demanding that we pay the costs when their business goes south, their reaction to AB 935, sponsored by San Fernando Valley Democrat Bob Blumenfield, demonstrates that you would be wrong.

Of course, the real purpose behind AB 935 is not to get the banks’ money. It is provide more of a financial incentive to the banks to work out sustainable modifications that would allow homeowners to remain in their homes. The Obama administration’s Home Affordable Mortgage Program has had little success in encouraging banks to modify loans because in part, the incentives it offers to the banks are too small But the banks find it tough to make their case on the merits. They can’t argue they don’t have enough money to pay their own way. Instead they rely on fear tactics and the inside game, which has served them so well in getting legislators and regulators to water down efforts to crack down in the wake of the financial collapse. In the depths of the recession in California, at the same time bankers were collecting billions in bailout, they were spending $70 million in lobbying fees and campaign contributions to thwart or weaken legislation that would have protected homeowners in the foreclosure process.

Testifying earlier this week on behalf of AB 935, economist and blogger Mike Konczal described foreclosures as a “lose-lose situation.” A foreclosure fee that accurately covers the real costs the community will have to pay will encourage more sustainable modifications, he said. He also debunked the mortgage bankers’ argument that it would have an impact on new lending, because it will only be applied to already existing loans. Citing recent Federal Reserve statistics, Konczal said relatively few homeowners are actually walking away from their “under water” homes, “and are willing to pay to do right by their communities and their promises. It would be great to have a financial system that met them halfway."

But the banks disagreed. They fought back hard on AB 935. Late Tuesday, Peggy Mears of Alliance of Californians for Community Protection sent around an email to say that the legislation appeared to be dead for the year, stuck in legislative committee.

 

 

 

 

 

 

 

Financial Crisis / Foreclosure / Martin Column - 04/26/2011

Want a Job? Go to Prison

American workers find themselves in an increasingly uncomfortable squeeze.

On one hand, public officials demonize organized labor, as seen in Wisconsin and several other midwestern states.

On the other hand, the growing trend in outsourcing keeps jobs closer to home, but with equally disastrous results, paying prisoners an average of less than a dollar an hour for work once done by decently paid workers on the outside.

Prisoners aren’t just making license plates anymore. They do everything from manufacturing plastic cups and furniture to operating call centers.

In the most recent example of this disturbing trend, prisoners are apparently building electronic parts for Patriot missiles.

The story was laid out by Jason Rorhlich on Minyanville, where he displays all of the promotional material by the firm, which obtained the contract to have the prisoners do the work. The firm, called Unicor, is a giant, wholly-owned subsidiary of the federal government originally formed during the Depression. It operates more than 100 factories in federal prisons and employs about 17,000 inmates, or about 11 percent of the federal prison population.

Unicor even received nearly $1 million in stimulus money, earning the ire of some on the outside who said they could have used the work.

After Rohrlich’s piece appeared, and it was picked up by Wired, Lockheed’s PR machine spun into action, denying that prisoner labor was used in building the Patriot, acknowledging for Wired that prisoners only worked on Raytheon’s ignition system for the missile. Which left Rohrlich and readers scratching their heads, given how hard Unicor has been bragging about its work on the missiles themselves. Does Unicor, an arm of the federal government, not know what its employees/prisoners are up to? Or is Lockheed working on some pretty lame damage control? I hope the missiles work better than the public relations does.

As Wired points out, the Patriot is just one in a long string of weapons work that Unicor has done, including work on F-15 and F-16 fighter jets and Cobra helicopters.
This week, Unicor scored a $20 million, no-bid contract to build bulletproof vests. All I can is say is they must have connections, since the last time they built body armor for the Army, it didn’t work so well. Last year the Army had to recall 44,000 Unicor-built helmets because they failed ballistics testing.

This is not about trashing prison training and rehabilitation efforts, which should be continued because the evidence shows that they work in reducing recidivism. But can’t our public officials find a way to do it without undermining the middle class, which they all claim to be so devoted to?

 

 

 

 

Martin Column - 03/11/2011