Party Like Its 1999

Today’s Census Bureau report on 2010 paints an unvarnished picture of the economic state of the union, and it’s not pretty.

The report confirms the damage done by the Wall Street debacle in 2008. The median income of American households fell by 6.4% from 2007. The median household income is 7.1% lower than it was at its peak, which occurred twelve years ago –in 1999. When you hear people talk about the “Lost Decade,” that’s what they mean.

The number of Americans in poverty jumped to 15.1% in 2010. A total of 46.2 million Americans were in poverty. That’s about 1 in every 6. The poverty rate grew almost 3 million from 2009, when 43.6 million, or 14.3 percent of Americans, were in poverty. The 2010 poverty level is the highest since 1983. More Americans are in poverty today than there were in 1959; but at least the rate has declined from around 23% in 1959.

But even these frightening statistics do not tell the whole story. Buried in the data was the fact that nearly a quarter of American families experienced “a poverty spell” lasting two or more months during 2009.

One measure of America has always been its promise of a better life for each succeeding generation. That principle is endangered too, the report shows. Twenty-two percent of Americans under 18 years old are in poverty. And the number of 25 to 34 year olds living with their parents rose 25% between 2007 and 2011.

Finally, the report contains some interesting demographic data pertinent to the politics of health care reform. Since 1987, the total number of Americans without health insurance has increased 40% - but remains at roughly 16% of the nation. Most Americans still get their health coverage from employers, but that number has dropped to 53% from about 65% in the late 1990s. A third of Americans are covered by government programs – a roughly 30% increase from 1987.

For people who feel like America is headed in the wrong direction, these numbers agree.

Harvey Column / Outrage - 09/13/2011

The Scandal That Won't Go Away

Despite the efforts of our public officials and bankers to ignore it, downplay it, paper it over or make it disappear, the fraud surrounding the mortgages at the heart of the financial collapse is the scandal that won’t go away.

Two big stories breaking over the past week showed what strong legs the scandal has. First, Huffington Post reported on a series of confidential audits that showed five of the country’s largest mortgage companies defrauded taxpayers in their handling of foreclosures on homes purchased with government-backed loans.

Then the New York Times and others trumpeted an investigation of the mortgage securitization process by New York’s new state attorney general, Eric Schneiderman. This investigation won strong praise from two of the toughest watchdogs on the financial beat, Matt Taibbi at Rolling Stone and Robert Scheer at Truthdig, who portrayed Schneiderman as a hared-charging prosecutor who unlike the feds and other state attorney generals, is not intimidated by Wall Street.

But Reuters financial blogger Felix Salmon argued that confidential audits, which were turned over to the Justice Department were a much bigger story than Schneiderman’s investigation.

Until Schneiderman’s investigation bear some fruit, I think history suggests we should be skeptical of officials who claim they are going to get tough on the banks and protect consumers.

Salmon pinpoints the real significance of the Schneiderman investigation – the continuing cracks in the state attorney general’s 50-state coalition that was negotiating with the banks to settle claims of mortgage fraud. Some Republicans had already criticized the state attorney generals for being too tough on the banks, referring to a proposed settlement as a shakedown. Other critics have raised questions about whether the attorney generals are being too soft, having sat down to negotiate without having done robust investigations first to gather ammunition.

Whatever the outcome of these on-going investigations’s, the week’s news guarantees one thing – the mortgage fraud scandal, and its offspring the foreclosure scandal, are not going away any time soon.

 

 

 

 

 

 

Around the Web / Foreclosures / Martin Column - 05/19/2011

Feds Unsettle Foreclosure Abuses

Wall Street is apparently about to win another round as federal regulators prepare to sign off on a “slap on the wrist” settlement stemming from widespread abuses in the foreclosure process.

The settlement continues the federal policy of relying entirely on the banks’ voluntary compliance, despite repeated examples of banks using fraudulent and forged documents to foreclosure on homeowners. The settlement apparently imposes no fines.

“Judges don’t tell burglars to go design their own plan to stop breaking into people’s homes and report back in 30 days,” said Rev. Lucy Kolin of the PICO National Network in response to the settlement, which is supposed to be announced later this week. “A judge would get laughed off the bench if they did this, and yet this is exactly what the Fed, OCC and FDIC have chosen to do.”

At Credit Slips, Georgetown Law prof Adam Levitin first labels the proposed settlement “Potempkin regulation,” then decides the better analogy for where we are on bank regulation is the “inmates running the asylum.”

The Obama administration’s lack of enthusiasm for holding the big banks accountable doesn’t exactly come as a surprise. Dog bites man.
They were supposed to working with the 50 state attorneys general to investigate the extent and impact of the foreclosure problems, but the attorneys general and the Fed have yet to conduct an investigation worthy of the name, as if they were investigating violations of law, which they should be. If the Feds and the AG's insist on negotiations with the banks, negotiation without robust investigation is a recipe for disaster.

What’s left unclear by reports of the proposed settlement is whether the state AGs are now free to pursue investigations and remedies on their own or whether the settlement will undercut them.

That’s especially relevant in places like California, where the state’s new attorney general, Kamala Harris, ran a strong election campaign promising to protect homeowners from foreclosure abuses and to hold banks accountable. During the “negotiations”, Harris hasn’t had much, if anything, to say. Her office hasn’t been returning my calls.

Now that the Feds have once again caved in to the big banks, Harris will have the opportunity to keep her campaign promises and enforce the law equally. Homeowners will be counting on her.

 

 

Around the Web / Federal Reserve / Foreclosure / Martin Column - 04/07/2011

Remind AGs Who They Work For

The big banks are headed to Washington D.C. in an effort to weaken any potential settlement stemming from complaints about the banks’ misbehavior in the foreclosure crisis.

Those of us who favor holding the banks accountable are taking a different route Tuesday – through the country’s 50 state capitals.

A coalition of homeowner and consumer advocates are encouraging people to contact their state attorney generals today in an effort to encourage them to conduct real robust investigations into the big banks’ foreclosure fraud, not just go through the motions.

The official response to disclosures of the big banks’ sloppiness and downright fraud in the foreclosure process has been a mishmosh. President Obama refused to declare a moratorium while the mess was sorted out; the state attorney generals promised a tough investigation but don’t appear to have followed through, and then the various federal bank regulators got involved in an effort to negotiate a settlement.

One strategy for the big banks and their Republican allies has been to demonize Elizabeth Warren, a strong homeowners’ advocate who has been working to set up the Consumer Financial Protection Bureau, which was created as part of the financial reform package passed last year. While the CFPB doesn’t exist yet, Warren has apparently been involved in the settlement process because that agency will have a hand in enforcing a settlement.

At the national level, it’s not just the Republicans that are covering for the bankers. The Obama administration in its present mood of bank coziness hasn’t been inclined to either prosecute bankers for violating the law or drive a hard bargain with them.

So that leaves it up to the attorneys general, several of whom, including Illinois’ Lisa Madigan, Iowa’s Tom Miller and California’s new attorney general have promised tough stances in protecting homeowners and holding banks accountable. Which means it’s up to us to call them – today – and remind them to hang tough.

 

 

Consumer Financial Protection Agency / Foreclosure / Martin Column - 03/28/2011

Top 4 Lesson Big Bankers Can Teach Us

America’s bankers have been extraordinarily effective in responding to a financial crisis that they created. They’ve worked hard to make sure that the response to the crisis didn’t threaten their fat bonuses or their awesome political power.

They succeeded in gutting the toughest aspects of financial reform. Then they started lobbying the regulators who will have the enforcement power.

Now they’re toiling to undermine a proposed settlement with authorities over widespread abuses in the foreclosure process, and demonizing consumer champion Elizabeth Warren and the Consumer Financial Protection Agency in the process.

Of course they’re getting plenty of help from their government enablers. As Gretchen Morgenstern reported in the New York Times, the 50 state attorney generals who are supposed to be spearheading the investigation into the foreclosures aren’t doing any actual investigating.

This puts them at a definite disadvantage when they sit down to negotiate with the banks.

Those of us who aren’t bankers and would like to see a different outcome could learn a few things from the bankers.

How do the bankers do it?

  1. They’re relentless. They don’t take no for an answer and they don’t know the meaning of defeat. They have lots of money and they’re not afraid to spend it on campaign contributions and lobbying. While we may not be able to match their cash, there’s no reason we can’t be as relentless as the big bankers. They wouldn’t still be in business, let alone raking in billions in bonuses, if we hadn’t bailed them out.
  2. They have no illusions about loyalty. They spent big to elect President Obama. But when it looked like they could get more from the Republicans, they switched sides. Nobody can take their support for granted.
  3. They have no shame. They never apologized for all the risk and fraud that created the collapse. They never offered to tighten their belts or pick up part of the tab. They just kept fighting for their selfish interests.
  4. They maintained their sense of humor. How else do you explain their carping about how anti-business the president is, while Obama’s team does whatever it can to prop up the “too big to fail banks” while wringing its hands that it just can’t do any more to help the unemployed or distressed homeowners?

 

Financial Crisis / Financial Reform Legislation / Foreclosure / Martin Column / Outrage - 03/19/2011

From Prosecutions to Peanuts

It was only last December that the head of a 50-state attorney general investigation into foreclosure fraud boldly told homeowner advocates, “We will put people in jail.”

That was Tom Miller, Iowa attorney general, who added, “One of the main tools needs to be principal reductions, just like in the farm crisis in the 1980s…there should be some kind of compensation system for people who have been harmed…And the foreclosure process should stop while loan modifications begin.  To have a race between foreclosures and modifications to see which happens first is insane.”

That was then. Now Miller is backing off his tough talk, replacing it with a strategy of negotiating with the big banks and a bunch of federal agencies to come up with a settlement.

The amount of the potential settlement is $20 billion, according to press reports.

Gone is any notion of prosecutions.

There’s been a lot of discussion about whether this amount is too high or too low. The banks contend that they might have been sloppy about their paperwork but they foreclosed on only a few people who hadn’t been making their mortgage payments. No harm, no foul.

But homeowner advocates and critics are outraged, arguing that the banks are guilty of more than slovenliness, they violated laws intended to protect consumers. You can’t pass laws that require banks to follow certain procedures and then allow the banks to flout them. That reinforces one of the most corrosive aspects of the bailout and its aftermath – that the system is rigged so that the banks don’t have to follow the law.

Not to mention that $20 billion is pocket change to the big banks and won’t go far in modifying the mortgages that they refused to touch so far.

In addition, any fund that is controlled by the banks rather than a responsible government agency is a recipe for continued inaction by the banks.  See the disastrous Obama Administration HAMP program, which is somewhere between an abject failure and an actual scam that rips off homeowners.

Miller’s retreat is not the only distressing signal coming from the foreclosure front. Here in California the new state attorney general, Kamala Harris, made the strong protection of homeowners in foreclosure a key plank of her campaign. Yet her office recently signed off on a feeble $6.8 million settlement of a lawsuit against Angelo Mozilo and another top official of Countrywide Financial who presided over that company’s orgy of subprime lending before the financial collapse.

$5.2 million of the money goes into a restitution fund for victims. Mozilo and his president, David Sambol, admitted no wrongdoing. They’re not on the hook for the money- Bank of America, which bought Countrywide will pay it for them.
As David Dayen points out on Firedoglake, the settlement was probably inherited from her predecessor, the present governor, Jerry Brown. But that doesn’t mean she has to tout such a pittance as some great victory for the state.

It’s just a very small drop in a bucket with a very big leak in it.

If you live in California, you can call Harris’ office and suggest she stop caving into predatory lenders and start living up to her campaign promises.

Wherever you live, please contact your attorney general and remind them they are, after all, not the bankers’ buddies, but the people’s prosecutors.

Here are numbers where you can reach your state attorney general.

 

Around the Web / Foreclosures / Martin Column / Outrage - 03/04/2011

Don't Let the Bad Guys Get Away!

Hollywood loves a good chase. Last night at the Oscars, Tinsel Town sent a strong message to the rest of the country – the bad guys are getting away, and the cops aren’t even on their trail.

For a brief instant the Obama administration’s sorry efforts in holding bankers accountable for the financial collapse took center stage at, of all places, the Academy Awards.

Accepting his Oscar for “Inside Job,” his documentary about the financial collapse, Charles Ferguson used the opportunity to remind the audience of millions that not a single banker had gone to prison for fraud.

Ferguson was saying what the mainstream media has deemed a non-story, following President Obama’s lead in downplaying accountability while highlighting evidence of economic recovery.

But Ferguson joins a handful of prominent critics, including Bill Black, Simon Johnson, former Sen. Ted Kaufman, Dean Baker and Matt Stoller, who have been sending the same message in a variety of less prominent venues.

Meanwhile the president, far from insisting that his prosecutors develop fraud cases against top bankers, appoints them to top positions in his administration.

Typical is this recent column from the New York Times oped columnist Joe Nocera, who pooh-poohs the criminal aspects of the financial meltdown, blaming it on widespread “mania.”

Make no mistake; these are hard cases to make. In the 90s I covered the prosecution of savings and loan magnate Charles Keating, the poster child for bad behavior and political shenanigans for that earlier banking fiasco that also followed a rash of deregulation. Keating was convicted in both state and federal court. Though the convictions were overturned, Keating did serve four and a half years of his five-year state sentence.

Good prosecutors don't mind tough cases. They enjoy the challenge. But their bosses set their priorities and have to give them the support they need.

The Obama administration is barely even trying, afraid of alienating the bankers it’s trying to court. The cases that have been brought are either minor sideshows or they’ve been mishandled.

A local prosecutor told me that federal authorities have shown no interest in the painstaking work of building serious cases against bank executives, which would involve authorities going after minor players such as mortgage brokers, and working their way up the chain of responsibility.

In Inside Job, former New York state attorney general Eliot Spitzer has a suggestion for prosecutors – do unto the bankers what the prosecutors did unto him: go through their credit card receipts looking for evidence of illicit activity, like paying for high-priced hookers. Bust the bankers for their bad personal behavior and then obtain their cooperation in investigating financial abuse.

It may work; it may not. But at least prosecutors wouldn’t be sitting on their hands. They’d be doing their jobs – aggressively going after the bad guys.

 

 

Around the Web / Martin Column / Uncategorized - 02/28/2011

The President's Odd Jobs Choice

About the only the job that Jeffrey Immelt would be less qualified for than jobs czar would be to lead a crackdown on the influence of big money lobbyists.

Oh wait- there is no crackdown on lobbying.

So Immelt, the CEO of General Electric, will have to make do with the job the president has given him as head of the administration’s reconfigured outside economic advisory council, which is supposed to focus on job creation.

I’ve written before about G.E. as a prime example of how major corporations benefited from the bailout without exhibiting any gratitude to taxpayers.

To say that Immelt is a weird choice for a job creation initiative is an understatement.

Under Immelt’s stewardship, G.E. has shredded thousands of jobs in the U.S. while outsourcing many jobs to India and China. In the years before the financial collapse, G.E. focused on building up its enormous credit operation, which melted down under the weight of bad loans along with the rest of the financial sector. If not for the generosity of taxpayers, who gave G.E. more than  $16 billion in low-interest loans to keep it afloat, Immelt himself probably wouldn’t have a job. In 2008, Forbes named Immelt one of the U.S. most overpaid executives.

His company has engaged in economic blackmail, threatening the state of Massachusetts that G.E. would close plants if state officials didn’t cough up tax breaks. It’s true that Immelt’s GE has embraced green technology – but only wherever there is a substantial government subsidy involved.

Meanwhile, GE is spending more than any other firm on lobbying, while it pays little or no taxes.

If Immelt has had any previous innovative ideas about substantially reducing unemployment, he’s kept them to himself. This is the person our president chooses to lead his jobs effort? For Immelt and other corporate and financial titans, the “too big to fail” bubble has never really burst. They’re continuing to rake in profits and shape government policies in their own interests, while the majority who don’t have access to power are shut out from financial security as well as political influence. Rather than challenging this unequal equation, our president has chosen to try to climb into the bubble himself.

Around the Web / Executive Pay / Martin Column / Too Big To Fail - 02/02/2011

Night on Fantasy Island

As a snapshot of the wildly dysfunctional state of our political union, last night’s festivities were a smashing success. All sides were serving up plenty of mom, apple pie and platitudes while ignoring what’s actually left on plates of millions of Americans –nothing.

I did find at least something to agree with in what each of the speakers said. Who can quarrel with President Obama when he calls on us to “win the future?” And I want my government as lean and mean as Paul Ryan and the Republicans do, without any wasteful subsidies that boost corporate tycoons and their overseas expansion rather than creating decent-paying jobs here at home.

It’s true that the tea party’s spokeswoman, Rep. Michele Bachman of Minnesota, looked like aliens had captured her brain and were speaking through her. Maybe we would have been better off if the aliens had captured Obama and Ryan too. At least Bachman briefly took note of the high unemployment rate before she went off to into her own rhetorical fantasyland.

That’s more than you can say for President Obama, who was pitching us his hallucination that his new pals from the Chamber of Commerce are going to beat their corporate profits into ploughshares in partnership with government, in an effort to foster new technologies and growth that we all share. Forgive me if I can’t get too worked up about this. Didn’t we try this government-corporate partnership recently? Wasn’t that what the bailout was?

Back here on Planet Earth, that didn’t work out so well for a lot of us, though it does seem to have worked well for the president’s friends at General Electric and JPMorgan Chase.

Both Ryan and Bachman aren’t interested in any partnerships; they want to dismantle government altogether so that GE, JPMorgan and the rest of the corporatariat can run the show without any interference at all. The only difference is that Bachman would like to do it faster, with less nice talk, than Ryan.

Neither the president, Ryan, or Bachman could focus on reality long enough to mention the long, steep decline of the middle class or the on-going foreclosure crisis, or offer any specific ideas on addressing those very real issues.

Back here on Planet Earth, we’re going to have to harness all of our ingenuity, strength and diversity just to wrestle our political system back from these leaders and their corporate backers before they plunder what’s left of it.

Congress / Financial Crisis / Foreclosures / Martin Column / Outrage / President Barack Obama - 01/26/2011

What Have You Done For General Electric Lately?

With your help, the company founded by Thomas Edison, the genius inventor, survived the nation’s worst recession in 80 years.

But billions in taxpayer-funded bailout relief and subsidies and paying zero federal taxes was not enough for General Electric.

The company wants more from you.

They want more subsidies, more dubious government contracts and more political power.

Business was terrible for a while, and GE’s credit division dragged the whole company down.

As result, 19,000 of the GE employees who had a job at the beginning of 2009 didn’t have one when the year ended. They joined the 4,000 GE employees who lost jobs the year before. For workers that still had jobs, the average salary was about $32,000 a year.

Things were tough at the top too.

CEO Jeffrey Immelt had to give up his bonus for the second year in a row, and was forced to limp along just on his annual compensation of nearly $10 million.

In 2008, Forbes magazine named Immelt one the U.S.’ 5 most overpaid bosses. For the past 6 years he’d been averaging $15 million a year.

Of course, before the economy crashed, CEO pay was through the roof in general. Getting on that most overpaid list wasn’t easy. Competition was stiff. Two of the other guys on the Forbes list made millions running their financial firms, Countrywide and Indymac, into the ground.

Taxpayers’ generosity helped ease the GE titans’ pain, allowing the company to take advantage of billions in subsidized loans and loan guarantees at such favorable interest rates that they amount to a massive government subsidy.

The company managed to eke out $11 billion in profits on $157 billion in revenue.

That’s when the Internal Revenue Service stepped in to ease GE’s burden. By the time the lawyers and accountants were done, you probably paid more taxes than GE did – unless you also happen to be Exxon.

GE didn’t issue a press release about most of those subsidies. Neither did the federal government. In fact, the Federal Reserve has fought to keep its subsidies of GE and other major corporations confidential. But they were forced to disclose the subsidies under the terms of the financial reform passed earlier this year.

It might have been made the Federal Reserve and GE uncomfortable if the public had known that GE’s CEO was sitting on the Fed’s board of governors while they were doling out low-interest loans to his company, an apparent and outrageous conflict of interest.

But your generosity to GE doesn’t stop with bailout and tax giveaways. As part of the 2009 stimulus package, the company got $24.9 million toward retooling an appliance factory in Kentucky, one of four plants GE is retooling in the government’s green technology initiative.

Like Immelt, the workers will have to adjust to lower pay. They’ll no longer make $20 an hour. Now they’ll be paid $13 an hour.

The company is returning to its roots in making appliances.

But the retooling comes too late for GE’s light bulb business, which was once a source of good jobs in Ohio. While it was borrowing taxpayers’ money in 2009, it was closing one such plant in Niles, Ohio – the fifteenth to close in the state since 1980. The new more energy efficient bulbs will be made in China.

As GE and others American firms were busy chasing short-term profits from the fancy financial products that eventually blew up the economy, they neglected the kinds of innovation that might have saved those jobs.

But General Electric has moved on, staking a big chunk of its future on a costly jet engine that the Defense Department says is wasteful and that it doesn’t want. So General Electric has been lobbying Congress to override the Defense Department. Maybe those that worked in the light bulb factories of Ohio could move to Washington and get jobs as lobbyists.  GE’s spending on lobbying has skyrocketed: from $4.54 million in the first quarter a year ago to $7.14 million in the first quarter of this year.

Meanwhile, while GE dukes it out in D.C., the company has informed the state of Massachusetts that if it  expects GE to limit layoffs of those working at an aircraft factory there, the state’s taxpayers are going to pay.

At the same time the state is facing a series of devastating budget cuts, GE is seeking a $25 million tax credit to help with the retooling of it plant in Lynn, which employs 3,000 people. The company’s already cut 600 jobs at the plant, without the tax credit, GE says, it will cut more. Usually states give tax credits for companies to create new jobs, not as a payoff to keep them from cutting existing jobs.

So here’s the latest innovation from GE. It has nothing to do with creating better, more energy-efficient products. GE has come up with a new way to put the squeeze on taxpayers.

Executive Pay / Federal Reserve / Martin Column / Outrage - 12/19/2010