housing

They Live In Motels And On Friends’ Couches, But Are These Kids Homeless?

by Saki Knafo on February 11, 2012

Huffington Post…

Homeless kids have the right to an education. That’s the basic rationale behind the McKinney-Vento Act of 1987, a law meant to ensure that homeless kids receive the same quality of schooling as everyone else. But with more families losing their homes as a result of the lingering effects of the recession, many homeless advocates say the law doesn’t go far enough to help them. Yet attempts by these advocates to change things have led to a bitter debate within the field of homelessness advocacy itself. At the center of the debate is the question of who qualifies for government-subsidized housing. As it stands, anyone defined as homeless by the Department of Housing and Urban Development can apply for housing aid from the government. The problem is that HUD’s definition leaves out thousands who lack permanent homes — people who sleep on the couches of friends and relatives, or many who live in cramped motel rooms. Before approving aid in these cases, HUD requires proof that their arrangements are very tentative: either documentation of a lack of funds to afford a hotel room for more two weeks, or confirmation from the friend offering the couch that this setup can not be permanent. Providing such documentation is often a difficult hurdle for people living under these circumstances. Families with children make up a large part of this population. As the fastest growing segment of the homeless population, homeless families have been especially affected by the recent recession. Since the economic downturn, according the Department of Education, the number of homeless children has increased by 38 percent, to almost 1 million (many experts consider this a low estimate). But by HUD’s definition, only about 30 percent of such children, about 300,000, are considered homeless. In December, six children testified at a congressional hearing on H.R. 32 , a bill aimed at expanding HUD’s homeless definition and introduced by Republican Judy Biggert (R-Ill.) The children talked about the hardships of sleeping four or five to a room in cheap motels and bouncing from one relative’s living room to the next. They said that the resulting stress had caused them to struggle in school. Yet because they fail to meet HUD’s criteria for homelessness, they and thousands of others like them aren’t eligible for housing help. On Tuesday, the bill made it out of a markup session of Biggert’s Financial Services Subcommittee on Insurance, Housing and Community Opportunity. If the legislation is passed this year, HUD would count these kids as homeless. The responsibility of identifying homeless children would fall to organizations that already track them for the public schools; this would bring the homeless children count closer to the Department of Education’s estimate of 1 million. Supporters of the bill include the National Association for the Education of Homeless Children and Youth. But not all advocates for the homeless are on board. The Corporation for Supportive Housing and the National Alliance to End Homelessness have opposed the bill, saying that it would expand the rolls of kids eligible for HUD aid without increasing the amount of funds. They worry that homeless people with the most pressing needs would suffer as a result. “Our understanding is that this would have a bad impact on the worse-off kids,” said Steve Berg, an executive for the National Alliance to End Homelessness, “kids who are living on the streets and in abandoned buildings and in backs of cars.” Homeless advocates should devote their energy to getting Congress to enlarge the budget of HUD and other agencies that help the homeless, Berg said. If Berg and his allies are now in the uncomfortable position of fighting a measure clearly intended to help homeless people, the same is true of several Democrats in the House. Representatives Maxine Waters, Mel Watt, and Luis Gutierrez — all established liberals — criticized the bill at the markup session. To make the bill more palatable, Waters offered an amendment that would provide more funding for homeless children. “Unless we add the Waters amendment with additional resources for those kids, someone who is currently getting services is going to end up on the street,” Gutierrez said. “This is not an easy issue, but the conversation we need to have isn’t about how to count homeless kids; it is about how we get resources to those kids.” Yet, many Republican who favor the measure, in part because they believe it could help streamline HUD’s bureaucracy, are unlikely to go for Waters’ proposal. Some ardent backers of the bill dismiss such Waters’ amendment as unrealistic. Even if Democrats regain control of the House, they say, politicians this year will never agree to spend more money on homeless people — unless they comprehend the full scope of the problem. And that won’t happen unless they get an accurate count of the country’s homeless families, they say. “Congress doesn’t really think it’s a problem,” said Diane Nilan, a prominent advocate for homeless families who attended the December hearing. “They don’t see the vulnerable families that are just hanging on.”

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They Live In Motels And On Friends’ Couches, But Are These Kids Homeless?

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Ben Bernanke: Blame Housing For This Lousy Recovery

by The Huffington Post on February 10, 2012

Huffington Post…

Housing, with some help from Wall Street, got us into the Great Recession, and it is housing that has made the recovery from that recession so slow and painful, Federal Reserve Chairman Ben Bernanke said today. “The state of the housing sector has been a key impediment to a faster recovery,” Bernanke said in a speech at the National Association of Homebuilders International Builders’ Show in Orlando, Florida on Friday. “In the typical economic recovery, a resurgent housing sector helps fuel reemployment and rising incomes,” he added. “But as you know all too well, that scenario has not played out this time.” Bernanke cited economic studies that suggest the collapse in home prices might be shrinking consumer spending, the largest engine of U.S. economic growth, by between $200 billion and $375 billion a year. Underwater homeowners are also unable to move to find better, higher-paying work or borrow against home equity to help with emergency expenses, Bernanke observed. So begins the vicious cycle in which clusters of foreclosed homes lower property values throughout entire communities and hurt property tax revenues, which lead to cutbacks in municipal services that push house prices still lower. Economists have seen evidence lately that the housing market might finally have hit a bottom after a collapse and slump that has lasted more than six years. But home prices and new-home construction are still in a deep pit despite record-low mortgage rates that have made housing theoretically more affordable than ever . The Fed helped push those interest rates to rock-bottom lows in part to support the housing market. But their efforts have mostly been met with frustration. Bernanke suggested the still-weak housing market might be making it hard for low rates to do much good. Banks, suffering from losses on bad mortgages are afraid of taking still more losses so tighten lending standards, making borrowing more difficult even at low rates. “The Federal Reserve, in its supervisory capacity, continues to encourage lenders to find ways to maintain prudent lending standards while serving creditworthy borrowers,” Bernanke said. “But the slow recovery of the housing market and the economy” and other factors are keeping lenders cautious. He also acknowledged that the recovery in housing will continue to be painfully slow, estimating that one million foreclosed homes owned by banks could hit the market each year “for the next few years,” keeping downward pressure on prices. One possible solution, he acknowledged, would be to turn some of these foreclosed properties into rental properties, to help meet rising rental demand. But he also acknowledged there was no silver bullet for housing. Without it, the recovery could stay slow and painful for a while longer.

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Ben Bernanke: Blame Housing For This Lousy Recovery

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The Most HIlarious #FedValentines

February 10, 2012

Whoever said monetary policy isn’t sexy just doesn’t know what they’re talking about. In anticipation of Valentine’s Day, the twitterverse is abuzz with economics nerds tweeting sweet nothings using the hashtag #FedValentines , of course in reference to the Federal Reserve. You can’t blame them. With the Fed’s head, Ben Bernanke, constantly discussing stimulus tactics like quantitative easing, the urge for double entendre is hard to resist. The trend comes as Bernanke addressed the National Association of Homebuilders International Builders’ Show Friday, saying that the Fed’s efforts at spurring economic growth are being thwarted by obstacles to mortgage lending, according to Bloomberg. Tragically, the bearded, bald hearthrob didn’t offer his own #FedValentine during the speech, but rest assured we’ll update this post if that changes. That’s not to say the regional federal reserves themselves can’t have some fun on a Friday. According to its twitter feed , the San Francisco Federal Reserve is “going through extraordinary measures to increase your stimulus.” Check out some of our favorite #Fedvalentines, to get a sense of love in the time of near-record low interest rates:

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The States Where Companies Are Hiring

February 10, 2012

From 24/7 Wall St.: Companies across the country are hiring more workers, at least if you ask their employees. In 2011, 31 percent of U.S. workers reported that their employers were hiring, according to Gallup’s Job Creation Index . Only 18 percent said that their employers were laying workers off. Of course, residents of some states report much higher rates of job creation than others. 24/7 Wall St. reviewed the Gallup Index, as well as a number of other economic indicators, and identified the eight states where residents think companies are hiring most. Read The Eight States Where Companies Are Hiring To develop the Job Creation Index, Gallup asked those surveyed whether companies are hiring or letting employees go. While the national score reflects that most states believe employers are hiring, 24/7 Wall St.’s analysis suggests that self-reporting by workers may not perfectly align with reality. These states are not experiencing the greatest recoveries — including in employment — as they have little to recover from. The states’ strong economies may be affecting their residents’ perception of the economy. Five of the eight states on this list are among the top nine states on another recent Gallup poll ranking states’ confidence in the national economy. Those who live in states that are doing well see the entire country as doing well. The majority of states where high percentages of workers reported job creation also have extremely low unemployment rates to begin with. Six of the eight states have among the 10 lowest unemployment rates in the country. North Dakota, the state where the largest share of workers reported that their employers are hiring, has the lowest unemployment rate in the country. And while unemployment rates are low, the majority of these states have had relatively low unemployment rates for some time. Most did not have particularly impressive improvements in unemployment last year. Other than Utah and West Virginia — the only states with exceptionally large drops in unemployment — the rest have had low unemployment rates since 2006 and throughout the recession. Housing markets in most of the states where respondents believe jobs are plentiful also have been stable. Seven of the eight states on the list are among the 15 markets that suffered the least from the third quarter of 2006 to the third quarter of 2011. Five of the states actually experienced increases in home prices over this period. These are the eight states where workers say companies are hiring, according to 24/7 Wall St. :

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Employment Rate For Young Adults Lowest In 60 Years

February 9, 2012

Are you young and looking for work? You’re in good company. Just 54 percent of Americans ages 18 to 24 currently have jobs, according to a study released Thursday by the Pew Research Center. That’s the lowest employment rate for this age group since the government began keeping track in 1948. And it’s a sharp drop from the 62 percent who had jobs in 2007 — suggesting the recession is crippling career prospects for a broad swath of young people who were still in high school or college when the downturn began. “They had the misfortune to be born at a time that would dump them into this labor market as young people,” said Heidi Shierholz, a labor market economist at the Economic Policy Institute. “If we stay on the track that we’re on, this cohort is not going to outpace their parents.” The Pew study arrives just days after the Labor Department’s monthly jobs report, which showed the national unemployment rate trending down for a fifth straight month — a change that many took as a sign that the economy is finally beginning to right itself. Yet joblessness is still high, and financial security remains out of reach for millions more people than just a few years ago. Young adults were largely spared the collapse in wealth that many older Americans went through when the housing market imploded. Still, in some ways they have it the worst of any demographic. Besides the historically low employment rate for people in their late-teens and early-20s — which is, incidentally, about 15 percentage points below the general employment rate for working-age adults, according to Pew — the recession has eroded young workers’ paychecks to a far greater degree than any other age group. Among adults ages 18 to 34, more than a third say they have gone back to school in the face of a tough labor market, the Pew study notes. Nearly a quarter have taken an unpaid job or moved back in with parents. One in five have put off having a child or getting married due to economic concerns. Still, the young people surveyed by Pew seem remarkably optimistic. A full 88 percent say they’re either making enough to suit their needs now, or expect to in the future. And 60 percent of people ages 18 to 34 say their children will have a better standard of living than them. That prediction is notably more confident than that of people ages 35 and older, of whom only 43 percent have a similarly hopeful view. Young people are probably correct to say that their earning power will grow as they age, said Shierholz. But a wealth of research suggests that young people who enter the job market during a recession face years of wages that are lower than people who got there slightly sooner and had a chance to establish themselves. People who graduated and kicked off their job search in 2009 or 2010 are likely to experience pay 10 to 15 percent lower than their peers’ , for as much as a decade after leaving school. If all of this seems like grim news for young people, they can at least take comfort knowing that older generations seem to recognize their struggles. The Pew study found that among the general population, 41 percent of people think young adults have it tougher than anyone in the current job market, and a growing number of parents say they believe children should aim for economic independence by age 25, rather than a younger age. Part of that cross-generational commiseration may come from the fact that huge segments of the national population are struggling financially right now. Shierholz told The Huffington Post that the obstacles faced by young job-seekers reflect the muted health of the overall economy. “Things were not so great even before the recession hit,” she said, citing the growth of the wage gap and the decline of labor unions — trends that predate the current slump by several decades — as factors keeping the lower and middle classes from achieving greater economic buoyancy. “If you want to move the dial on what’s going on with young workers’ unemployment, you need to help the labor market more broadly.”

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Two Key States To Join National Mortgage Deal

February 7, 2012

WASHINGTON — Arizona and Florida, two of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can’t afford their mortgages. Formal announcements could come within a week, according to the officials, who spoke on condition of anonymity because they weren’t authorized to discuss the settlement publicly. Arizona and Florida’s involvement buoys hopes that a full 50-state deal is imminent. Arizona Attorney General Tom Horne said he first wants to resolve a separate foreclosure-related lawsuit his state filed against Bank of America. Florida officials say they are still in discussions. Attorney General Pam Bondi “remains engaged in the settlement discussions in order to ensure that Floridians receive their fair share in the agreement,” she said in a statement. The nationwide deal would be the biggest settlement involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure. The settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures – an action known as robo-signing. Five major states – California, Delaware, Massachusetts, New York and Nevada – are still considering whether to join the settlement. Massachusetts, which filed its own lawsuit against the five major lenders in December over deceptive foreclosure practices, has been quiet about its thinking. But Massachusetts Attorney General Martha Coakley acknowledged last month she thought a deal between the banks and states would be reached and that she would keep an “open mind” as to whether Massachusetts would accept an agreement. California still has “significant sticking points,” but they may be settled in the coming days, said officials with direct knowledge of the negotiations. That represents progress from a few weeks ago, when California Attorney General Kamala Harris called the proposed settlement “inadequate.” California officials walked away from the negotiating table altogether in September. California’s backing is particularly crucial. It was among the states hardest hit by the foreclosure crisis. And it has the most residents “underwater”: They owe more on their loan than their home is worth. Without California’s participation, the money available to homeowners nationally would be about $19 billion rather than $25 billion. Homeowners in states that opt out of the deal wouldn’t share in the settlement money. The money available to homeowners could run as high as $25 billion if all states approve the deal. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure. The five lenders – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – have already agreed to the settlement. In settling the charges, the states would agree not to pursue further investigations against the banks in civil court. The deal would not protect the banks from criminal investigations. __ Associated Press Writers Randall Chase in Dover, Del., Gary Fineout in Tallahassee, Fla., Michelle Price in Phoenix, Ken Ritter in Las Vegas, Donald Thompson in Sacramento, Calif., and Michael Virtanen in Albany, N.Y., contributed to this report.

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Australia’s Jan construction activity down 1.2 points

February 7, 2012

(MENAFN) The Australian Industry Group (Ai Group) and Housing Industry Association (HIA) said that last month, the country’s construction activity dropped 1. 2 points to 39.8, reported Xinhua …

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Mike Lux: A Healthy Skepticism

February 5, 2012

The struggles around a potential settlement with the bankers over crimes they committed have been fascinating. Beyond the immediate settlement talks on robo-signing, the bigger saga about whether Wall Street will be held accountable, and whether the housing market recovers any time soon, is going to take as long to resolve itself as President Obama is in office — although the short-term resolution will have a lot to do with whether that is for one more year or five. The immediate debate is on the settlement — state attorneys general have been instructed that they need to decide by Monday whether to sign on it. The issues remain exactly the same today as it has been throughout the time the settlement talks have been going. Administration officials arguing for a settlement say that on robo-signing alone that it would be a long laborious process to prosecute all these claims, that not that many attorneys general would do aggressive prosecution, and that even if prosecutors won all the potential cases, the amount of money that would be awarded wouldn’t be all that much more than what the settlement is calling for. They argue that the money from the settlement would not only write down a lot of underwater mortgages but would provide money for desperately needed legal services that would help lots of hard pressed people who have been screwed by bankers. Those attorneys general who have been reluctant to sign on, and progressive activists like me who have been against a settlement, have been concerned that no investigations are being done to determine the full extent of the crimes committed, and that any legal release would be drawn far too broadly allowing the big banks to once again get off without being held accountable for their crimes. I have always been of the view that there are two supremely important things in this whole fight over the settlement. The first is a much more comprehensive and aggressive investigation of the biggest banks, one that, done right, would result in indictments of bank executives for fraud, along with the possibility for a far bigger amount of money from the banks for mortgage writedowns. The second is the legal release issue, because if that release is broadly drawn, any investigations going further — whether they are federal or state — could be rendered moot before ever getting out the door. Beyond those two things are a whole set of relatively more modest but still significant issues in terms of how a settlement would be structured, including the actual amount of money involved. On the first issue, the task force gives some hope, and the administration deserves credit for appointing it, but many issues remain including whether it will have the needed staffing resources, and whether the Department of Justice and Securities and Exchange Commission officials who have seemed reluctant in the past to support more aggressive investigation will support New York Attorney Genral Eric Schneiderman in his efforts to push strongly ahead. On the second issue, I remain hopeful the release will be narrow, but also have confidence that Schneiderman, California Attorney General Kamala Harris, Nevada Attorney General Catherine Cortez Masto, Delaware Attorney General Beau Biden, and perhaps some other important attorneys general will refuse to sign on to a settlement with bad release language — and those are four incredibly important states not to be in a settlement. On the final set of issues, I have less confidence at the moment that I and other progressives will be happy with all or even most of the details, although I’m sure there will be a mix of good and bad. One bit of good news: according to Housing and Urban Development Secretary Shaun Donovan in a blogger call Saturday, it looks like there may end up being as much as $40 billion in mortgage writedown money involved in the settlement deal, as opposed to the $25 billion that had been reported previously. There is one other factor on all this which is a great sign: Schneiderman’s lawsuit filed against the big banks is a sign he is going to continue to be aggressive and independent in pursuit of justice on Wall Street. If, as I suspect, DOJ needs prodding, I think this kind of lawsuit is a good shot across the bow, as well as incredibly significant legal work in its own right. Here’s a great report from Rachel Maddow Friday night about the lawsuit: Visit msnbc.com for breaking news , world news , and news about the economy Side note before I go on: I am delighted to see Maddow doing such a good job of digging into this subject (in addition to this segment, she did a very knowledgeable interview with Schneiderman a few days ago). One of the key parts to the all-important task of holding the new task force accountable is good reporting from high-profile reporters like Rachel. In addition to good reporters continuing to pay attention to what happens next with the task force, the broader progressive movement needs to be very focused on holding that task force accountable. I know there has been a lot of debate and division among progressives over how optimistic to be, with some arguing that the administration’s history re investigating financial fraud and holding the big banks accountable in general has been very weak, that this new task force doesn’t have enough resources assigned to it, and that some of the players in the task force have not been inclined to investigate Wall Street fraud in the last three years. Some of us have been more optimistic given Schneiderman’s role and a sense that the political tides are shifting, although even a relative optimist like me is unhappy with the still relatively small amount of DOJ resources allocated and the continuing drip of rumors that key DOJ players want to slow this task force down. However we think on this, though, I think progressive optimists and pessimists need to be firmly united in one thing: we need to be singularly focused in the months to come on scrutinizing everything going on — and especially not going on — at the task force, and holding it absolutely accountable. Any report of a road block in the investigation, any information about a DOJ or SEC player holding things up, any inkling that Schneiderman is being held back, and I think we should raise holy hell. And if the weeks and months go by with few subpoenas and depositions, and with no or very few lawsuits or indictments of major financial industry players, we should be asking- with our outdoor voices, not our indoor voices- what the hell is going on. Having said all that, let me close on an optimistic note. Healthy skepticism is a good activist’s best asset, especially in this case with an opponent so powerful who has yet to be held accountable by anyone. And this administration has been a disappointment on too many banking industry related things. But political dynamics do actually change things, and effective political organizing and communications do too. Progressives won a strong, independent Consumer Financial Protection Bureau because we fought side by side with a great champion Elizabeth Warren to make it happen, and I hope and believe that in working with Eric Schneiderman and other progressive attorneys general we can do the same thing with this investigation. In the last few months, Obama did recess appointments of strong progressive nominees for CFPB and the National Labor Relations Board; he has gone from cutting deals with Republicans on the budget to fighting strongly for new jobs programs paid for by tax increases on the 1 percent; he has rejected the Keystone pipeline. On housing itself, he has announced a progressive new policy to develop new rental property, forced bankers to adhere to standards making it tougher to foreclose on unemployed people, and adapted a new homeowners’ bill of rights that has the potential to be significant. And in the course of these settlement talks, progressives allied with Schneiderman and other progressive attorneys general have fundamentally changed the nature of the deal, with this new task force not even on the table a couple of months ago. If it turns out the release language in the settlement is narrow, and we get $40 billion in write-down money instead of the $15, $20, or $25 billion discussed a couple months back, that would also be the result of great organizing by progressives and a new responsiveness by this administration. I’ll say it again: a healthy skepticism is an activist’s best asset, and we need to keep banging away to hold the administration accountable. But to ignore the fact that some important things are changing, and that hope is a real possibility, is to ignore our own success as organizers, and to ignore that the underlying political circumstances are shifting in our favor and that we should take advantage of that fact. President Obama is responding to us. We should keep the heat on, but we should also recognize that we are capable of winning some victories.

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Fannie Mae Ignored Crucial Warnings Of Mortgage Crisis

February 5, 2012

Years before the housing bust — before all those home loans turned sour and millions of Americans faced foreclosure — a wealthy businessman in Florida set out to blow the whistle on the mortgage game.

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Charles Ferguson: Let Them Eat Task Forces

February 4, 2012

In his State of the Union speech, President Obama said and proposed many reasonable-sounding things. One of them was this: We’ll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud… financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender… So pass legislation that makes the penalties for fraud count. And tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. Now, how could you be against that? In his speech, and indeed as has been true for his entire career, Mr. Obama deserves an A for rhetoric. But what grade does he deserve for action? Alas, he flunks. It has now been three and a half years since the financial crisis of September 2008. Only a few months after that crisis — three years ago now — President Obama took office. At the time, he had an overwhelming popular mandate and huge majorities in both houses of Congress. The nation was in crisis, with unemployment growing nearly half a percent per month. The Bush Administration’s policies (and the financial sector that those policies had allowed to run wild) were utterly discredited. If ever real change is possible in Washington DC, this was that time. In that situation, and over the intervening three years, what did President Obama do? Well, we got a stimulus package, and then a year later a watered-down, absurdly complicated new law that addressed everything except the most important issues. And that’s about it. Consider the record: President Obama’s personnel appointments were heavily weighted towards those who had sat by and done nothing as the housing bubble grew (Tim Geithner, Ben Bernanke), former officials who had made major contributions to causing it (Larry Summers), senior lobbyists for the worst of the banks (Mark Patterson, Tom Donilon), a former board member of AIG (Richard Holbrooke), and literally dozens of former executives of banks and hedge funds that had played major roles in causing the crisis. The new chair of the SEC, Mary Shapiro, was the former head of the investment banking industry’s self-regulation body, which brought not a single enforcement action related to the bubble. Her new director of enforcement, Robert Khuzami, was formerly general counsel for Deutsche Bank, which profited by helping John Paulson create securities so that he could profit by betting that they would fail. We got the Financial Crisis Inquiry Commission, deliberately crippled through its tiny budget (less than $10 million for its entire operation, beginning to end), limited subpoena power, and publication date conveniently just after the 2010 midterm elections. Even so, the FCIC actually did a pretty decent job, and demonstrated that the housing bubble had involved pervasive fraud on the part of the banks. Moreover, there followed a huge wave of private lawsuits. The banks fought them hard, and have tried extremely hard to prevent depositions and testimony from becoming public. But many plaintiffs persisted, and there has now accumulated a massive record of extraordinarily repulsive, and clearly illegal, behavior. In a book that I have just finished, and which will be published in May, grimly entitled Predator Nation , I go through what is known in considerable detail, and make the case for large-scale prosecutions and asset forfeitures. This information is already public. So what has happened as a result? Well, the SEC has filed some civil fraud cases — not many, and not big. Thus far, every single one has been settled with a minor fine, with neither individuals nor banks required to admit guilt. Criminal prosecutions of banks? Zero. Criminal prosecutions of senior financial executives related to the bubble? Zero. RICO cases, such as were used against Michael Milken and are routinely used against drug dealers and other organized criminals to seize their assets and forfeit their ill-gotten gains? Zero. Sarbanes-Oxley prosecutions, based on CEOs’ certification of obviously fraudulent financial statements? Zero. In Mr. Obama’s three years in office, not a single U.S. bank or senior financial executive has been convicted of any crime (or even prosecuted), or had their assets confiscated. But now, it’s re-election time, and Occupy Wall Street has shown simmering anger among the population. So we create a task force. (There was another one before, too, but never mind.) A week later, several bankers are arrested. They’re low level patsies, who worked for a Swiss bank, and who didn’t create or sell the toxic stuff; they just traded it afterwards. And the task force? Its initial personnel: a whopping 15 people in the Justice Department, and ten — count them, ten — FBI agents. Eventually, Justice says, the task force will have an awesome 55 people. Goldman Sachs has 32,000 employees, there are several thousand financial industry lobbyists, the FBI has a total of 14,000 agents — but hey, I’m sure that those ten agents are the very best. So yes, it’s absurd, and rather disgusting. But it must also be said that President Obama is not alone in prostrating himself before the financial sector. Congress is no better, and neither are Obama’s likely opponents in the presidential race. Newt Gingrich screamed about government interference while he was being paid $1.6 million by Freddie Mac’s chief lobbyist for “conservative outreach.” In Mitt Romney, we have someone who thinks it’s perfectly OK to have a tax rate of 14 percent on over $20 million per year in unearned income, and who wants to increase taxes on the poor while reducing them further for the wealthy. Unfortunately, the power of financial sector money has by now produced a pervasive, bipartisan systemic disease in American politics, of which the president’s recent speech is merely one example among many.

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Stardust: Homes, Not Tents, For Occupy Bernal

February 3, 2012

Bernal Heights is a unique San Francisco neighborhood, known for its progressive sensibility and the bald park on the top of its hill. ‘When are we going to ‘occupy’ Bernal? ‘locals joked as the occupy movement spread to sites across the nation in the second half of 2011. So it was really no surprise when Occupy Bernal was born, the first neighborhood in San Francisco to form its own Occupy group. Despite the park with the great view, however, they pitched no tents. The organizers of the group came together to save long-time neighbor Thomas German, a 72 year old veteran of the U.S. Navy, from foreclosure action by Wells Fargo bank. Now, that spark has spread to a grassfire of foreclosure resistance that involves dozens of threatened homes on Bernal Heights alone. The movement is pressuring banks, especially Wells Fargo, which is headquartered in San Francisco, to declare a moratorium on home evictions and auctions and to instead come up with a fair deal for financially stressed homeowners. Occupy Bernal, an autonomous neighborhood group that defines its own activities, considers itself an ally of Occupy San Francisco and the broader movement. It has similarities with actions being initiated across the United States as communities stand together to turn back the tide of foreclosures set in motion by the Great Recession. The call for an Occupy Bernal meeting at the Bernal Heights Neighborhood Center (BHNC) struck a chord with Bernal residents and about 60 people showed up at that first General Assembly (GA) on December 21, 2011. Among them was the famous San Francisco performance artist and sex educator Annie Sprinkle, who, with her wife, the artist Beth Stephens, are German’s next-door neighbors. From all walks of life they came to contribute their ideas and passion to the goal of keeping their neighbors in the neighborhood. Everyone who attended agreed to confront any banks that had written predatory loans and contributed to the economic crash. They agreed to collectively take on those responsible for the foreclosures and evictions of their neighbors. Using near-consensus process, the GA formed work groups to focus on housing and foreclosure, protest actions, communications, coordination, outreach and education. An affinity group of “Wild Old Women” (WOW) from nearby senior housing project, Coleridge Park Homes, had already started a nonviolent picket of the Bank of America branch at 3250 Mission Street, near 29th Street, to demand a moratorium on evictions and foreclosures, fair treatment of seniors on fixed incomes, and that the bank pay its share of taxes. The WOWs quickly became the core of the Occupy Bernal action work group and stepped up their protests, staging a weekly picket of Bank of America at noon on Thursdays. The Bank of America branch regularly locked their doors in response to the seniors approaching with their walkers, canes and protest signs. The Housing and Foreclosure work group of Occupy Bernal formed a Fair Deal subgroup to iron out the group’s demands to the banks, and a Home Defenders group to canvas the neighborhood and meet the residents of the estimated 84 threatened homes on the hill, where more were appearing on the list every day. “We visited 13 Wells properties,” said Buck Bagot, a longtime community activist who went from door to door with this writer to speak with occupants facing bank action. “We are actively working with seven households. Six of them are now active in Occupy Bernal. Two had worked out refis with Wells, and two households didn’t feel the need to work with us. We have one other foreclosee who is with Chase,” said Bagot. “We’re going out to knock on more doors this weekend.” Alberto DelRio is one resident who already received that knock on the door. “The day before, I was thinking, is there anyone out there who really cares?”” DelRio said at a recent meeting. ““I had been talking with loan counselors, lawyers. It all felt like more of an interrogation than help.” “Before I met my neighbors from Occupy Bernal, I was ashamed. I felt like I’’d let my mother and my family down. Now I realize that although I made a mistake, Wells Fargo took advantage of me. Like they did so many other people.” For Del Rio and those of his neighbors facing foreclosure and eviction, the help couldn’t come too soon. Thomas German, born in Mobile, Alabama, in1940, had found employment as a die setter at the San Francisco Mint after serving in the U.S. Navy and rented a home in Bernal in 1967. In 1974, after living in the neighborhood for some years, he decided to purchase the home on Andover Street for $21,000. But although German obtained and held insurance for his home, the insurance didn’t cover bringing the place up to code when a fire gutted the place in 2008. With the encouragement of loan personnel at Wachovia Bank, German borrowed on the equity he was told was in the value of the home at that time. Like millions of others, he signed a predatory loan agreement for an adjustable rate mortgage (ARM), because he thought he could surely repay the loan or refinance at a lower rate. His only income is a federal pension, limiting his Social Security benefits. Soon, German could no longer afford to make loan payments on his income. By 2008, his federal tax return noted home mortgage interest of $25,959 against taxable pension income of $31,3883; just paying the mortgage interest alone represented 81% of his taxable income. Meanwhile, the very same day that Congress passed the bailout plan that would award Wells Fargo a $25 billion dollar bailout from the taxpayers of the U.S. – the largest amount awarded in a single bailout payment – Wells Fargo announced it would reverse its prior decision and buy out Wachovia for $12.7 billion by the end of 2008, forming the nation’s second largest bank in terms of deposits. That same week, U.S. Treasury Secretary Henry Paulson issued a document revising the tax code to benefit some banks that buy other banks: a tax break worth up to $25 billion for Wells Fargo. In contrast to Wells Fargo’s bailout success, German applied twice for a loan modification under the Home Affordable Mortgage Program (HAMP) mandated by the U.S. Treasury as a response to the home mortgage loan crisis. Wachovia/Wells Fargo denied the loan modifications twice, once in June 2010 and again in November 2011. Bagot contacted San Francisco Supervisor David Campos to arrange a meeting with Wells Fargo executives on January 11, 2012. At the meeting, Occupy Bernal demanded that Wells Fargo declare a moratorium on all evictions and foreclosures from predatory or for-profit Wells Fargo mortgage loans and negotiate a fair deal for every stressed home owner and renter in San Francisco. Wells Fargo representatives agreed to expedite cases of specific Bernal Heights residents mentioned during the meeting, but did not respond to the demand for the moratorium. Washington and Maria Davila have been renting a home, whose owner lives in Las Vegas and is ill with cancer, that Wells Fargo scheduled for a foreclosure auction. In response, Occupy Bernal called for a protest at San Francisco City Hall as part of the Occupy Wall Street West nonviolent actions on January 20, 2012. Before the protest could take place, however, Wells Fargo contacted Occupy Bernal to let the group know that they had postponed the auction. More than a hundred Occupy Bernal protestors and supporters headed downtown that day to celebrate the postponement of the auction. Maria Davila and other Bernal neighbors facing eviction spoke to the crowd. “My foreclosure auction for today was postponed for two months, but this isn’t enough, ” said Davila on the steps of City Hall. ” We must stop the foreclosures, for me, for my family, and for all of us in Bernal Heights.” During the celebration, however, the foreclosure auctioneer prepared to auction off other properties, which caused some confusion. A group of the protestors disrupted the event, which resulted in all scheduled auctions being postponed that day. Since then, Wells Fargo has agreed to postpone only two foreclosure auctions for Bernal neighbors and has not yet agreed to a fair deal loan modification for any of the home owners or renters facing eviction or foreclosure. The Foreclosure Radar database shows 24 area properties scheduled for auctions plus 28 more in preforeclosure as of February 1, 2012. One well known San Franciscan who has sought the solidarity-power of Occupy Bernal is ‘Archbishop’ Franzo King, co-founder of the St. John Coltrane African Orthodox Church, a religious and cultural institution in the Western Addition community of the city. King, who lives in the Bayview-Hunter’s Point neighborhood next door to Bernal Heights, had asked for a loan modification which Wells Fargo denied. To obtain the loan modification, Wells would have to either forgive or defer some of the loan principal in order for a loan to work at 2% interest over a 40-year term and not have the monthly payments, including insurance and property taxes, rise above 31% of the Archbishop’s gross income. “The archbishop has the same problem faced by every Wells Fargo foreclosee with whom we work,” explained Bagot. “In a fair and affordable refinance — paying what he can afford per month based on his income — he still can’t pay off his whole principle. And Wells will neither forgive nor forbear the amount of the principal that he cannot pay off.” While such a proposal to a lending institution may seem revolutionary or unthinkable, Occupy Bernal members believe that that if they stand with their neighbors and fight collectively, they may well be able to exert enough pressure on the banks that they will relent. “In our meeting with them, Wells representatives said that they had forgiven $4 billion in loans nationally. Then why not for the people with whom we are working right here?” asks Bagot. Despite billions in bailouts to banks, the United States government admits it has failed to protect home owners, as only one million home owners, rather than the four to five million anticipated, have been able to benefit from federal loan modification programs such as HAMP. In his recent State of the Union address, President Obama admitted, “I’ll be honest, the programs we’ve put forward didn’t work at the scale we’d hoped,” and announced plans to extend HAMP – although only to those mortgage holders who have kept current on payments – as well as the formation of a financial crimes unit to expand investigations into the “abusive lending and packaging of risky mortgages that led to the housing crisis.” Big banks are seeking a $25 billion deal to limit their fallout from the crisis. California Attorney General Kamala Harris of California has gone on record opposing the deal because it doesn’t help home owners most in need. Meanwhile, the people who are the actual faces of this crisis sweat it out, day by insecure day. German is still struggling to find a way to stay in his home. He filed bankruptcy to try to prevent foreclosure and eviction, which resulted this week in the stay being removed; he now faces a foreclosure sale probably within 30-40 days. He is elderly and walks with a cane. Occupy Bernal has formed a support group to help him stay in the neighborhood, and set him up with Ed Donaldson, a counselor with the San Francisco Housing Development Corporation. At an early Occupy Bernal meeting, Alberto Del Rio uttered the dawning realization: “They [Wells Fargo] promised us the moon.” Less than a month later, on the steps of San Francisco’s City Hall, he was saying , “United as people together, we can show them that we’re in control. They only think they’re in control.”

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Mike Lux: The Great Task Force and Settlement Debate

February 2, 2012

It has been a fascinating last few weeks in the great banking/housing debates. The administration is growing less and less tentative in its rhetoric against Wall Street, and is opening up multiple new fronts to take on the black hole of the housing market that is throwing a wet blanket over the broader economy. NY Attorney General Eric Schneiderman has been pounding on the doors of Department of Justice, demanding they work with him and give him more resources to do the aggressive prosecution he wants to do, and they have relented to an extent, but we still don’t know how aggressive the new task force they set up will be. The long rumored robo-signing settlement, which has been a few days away from being inked for about a year now, seems like it is moving toward completion, but Nevada AG Catherine Cortez Masto sent a letter with 38 specific questions that trouble a lot of people. And progressives who have been working on banking issues for years are debating whether to have any faith at all in the developments of the week. I am going to focus on the settlement and AG Masto’s letter, because the rumors and counter-rumors, arguments and counter-arguments, are dizzying. I should stipulate that I am not a lawyer, and have seen none of the actual language of the settlement, so all I’ve got to work with are lots of conversations, blog posts, news reports, and Masto’s letter. Since the settlement talks began more than a year ago, I have had a ton of conversations with AG Tom Miller of Iowa, Schneiderman and some of his staff, a couple of California AG Kamala Harris’ staff people, and a boatload of administration people, so a lot of what I have been trying to do is combine what I am hearing from all those conversations with what I am seeing other places. My assessment of what people tell me is based partly on how much I trust them (which can admittedly be flawed; such things are highly subjective judgment calls), but mostly my read of the political dynamic, which is of course different for each of the players. On Jan. 27, I released a story outlining what sources high up in the settlement negotiations told me would be the nature of the legal release for the banks. Some of the phrases they gave me, such as the phrase “vast majority” (used twice) were pretty vague, and because I hadn’t seen the actual language, I was reporting only what I was told, but it sounded like we were headed toward fairly tight release language on the settlement. However, the very same day, Masto sent a letter to Shaun Donovan at HUD, AG Tom Miller, and DOJ settlement chair Tom Perrelli with a list of 38 detailed questions indicating either that she had yet to see any language, or that any settlement language she had seen was so vague and poorly written as to cause big worries about the nature of the settlement. Her questions raised alarm bills with me and with writers I respect including David Dayen and Yves Smith , because if she had seen the release language and was asking these kinds of questions, it probably meant very bad things, and certainly would have meant I had been lied to by my sources on Jan. 27. One possibility, of course, is that AG Masto doesn’t know what she is talking about, or is acting in bad faith, raising questions she already know the answers to. I do not believe that for a minute. From everything I have heard, Masto is a very smart and capable AG who is fighting hard for Nevadans who have been royally screwed over by mortgage fraud. Nevadans have been hit harder than anyone by the rampant levels of fraud in every aspect of the housing market in recent years, with a stunning 60 percent of Nevada homeowners in underwater mortgages. Masto’s letter shows that she and her staff are deep into the nitty-gritty on these issues, and that she is asking all the right questions. I have confidence that she is fighting the good fight effectively on behalf of her constituents. But I still find it difficult to believe the administration would be so politically stupid to appoint a high-profile task force to investigate financial fraud; make a big deal about it by announcing in the State of the Union address, having Schneiderman sit in the First Lady’s box, and then talking about it extensively in another big speech on housing yesterday; leak something about the settlement where they claim the release will be very narrow and tight; and then have a settlement with a release that is weak, broad, and full of loopholes so that their shiny new task force is dramatically undermined and rendered toothless. Trust me, I have seen the polling: this is a president whose path to re-election could not be more clear — he needs to have credibility as a champion against the abuses of Wall Street, and he needs to have a fired-up base. The firestorm that would be created if this administration would agree to a bad settlement after all this build-up would be immense, with close allies like the AFL-CIO and MoveOn.org denouncing the administration, and Occupy and community organization demonstrators around the country protesting Obama at every campaign stop. I also can’t imagine AGs like Eric Schneiderman and Kamala Harris, who have built their political brand and base dramatically by standing up against a weak settlement, agreeing at this late date to something bad. It doesn’t make any political sense at all for them to do that. Schneiderman’s reputation will now live or die with the success of this new financial fraud task force, so why would he ever agree to a settlement that didn’t allow him full running room to thoroughly investigate financial fraud? I don’t know all the legal ins and outs of this, but I do know politics, and a weak settlement at this point doesn’t make any sense to me. So if Masto isn’t in the wrong, and the settlement release language is relatively strong, where does that leave me? My strong hunch is that Masto, at least as of the time she sent the letter (no way to tell what she has seen since), still hadn’t seen much if any of the language being proposed in the settlement agreement. If that conclusion is correct, I think the administration has been making a serious mistake in the bargaining strategy on this settlement. I’m sure there are things I’m not understanding about all this, and I feel for the people trying to herd 51 AGs, five big banks, and multiple government agencies all in the same direction. It’s got to be just a mess. But given how late in the game this is, that HUD Secretary Donovan is saying there was a deadline for the AGs to say yes or no by the end of this week, for an AG in a state as central to the housing crisis as Nevada to not have seen the proposed settlement language by last Friday would be a travesty. I don’t know what the answer to this mystery is. Maybe my political instincts are all wrong, or there are deep things I’m not getting about what is going on, but I think the administration needs to be talking more to AGs like Masto to get this right, and to make sure her questions get answered. Most importantly of all, if there is to be a settlement, the release language needs to be as tight as a drum, or all hell will break loose. I think we’ll know more very soon.

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José Viñals: How to Exit the Danger Zone: IMF Update on Global Financial Stability

February 1, 2012

Since September of last year, risks to global financial stability have deepened, notably in the euro area. However, over the past few weeks, markets have been encouraged by measures to provide liquidity to banks and sovereigns in the euro area. This recent improvement should not be taken for granted, as some sovereign debt markets remain under stress and as bank funding markets are on life support from the European Central Bank (ECB). Main sources of risk Many of the root causes of the euro area crisis still need to be addressed before the system is stabilized and returns to health. Until this is done, global financial stability is likely to remain well within the “danger zone,” where a misstep or failure to address underlying tensions could precipitate a global crisis with grave economic and financial consequences. Despite the recent improvements, sovereign financing stress has increased for many countries — with almost two-thirds of outstanding euro area bonds at spreads in excess of 150 basis points — and financing prospects are challenging. Markets remain very volatile and long-term foreign investors have sharply reduced their exposure to a number of euro area debt markets, including some in the core. Keeping these investors involved is essential to stabilizing markets. Moreover, deleveraging by European banks may ignite an adverse feedback loop to euro area economies and beyond, even if acute pressures have been mitigated by recent extraordinary ECB measures. Like cholesterol, deleveraging can be good and bad. European banks have had excessive levels of leverage and had expanded into a number of non-core areas. So, increasing bank capital levels, shedding bad loans and withdrawing from non-core businesses should be encouraged. But there is also the danger that deleveraging could be too fast, overly concentrated in some areas and could cut off credit at the expense of the economy. All these risks could spill over well beyond the euro area. Emerging European economies would be most affected, reflecting the substantial presence of euro area banks in these countries. Nor is the United States immune to spillover risks, given the close transatlantic financial and trade connections. A large shock from the euro area could be magnified by existing weaknesses, notably in the still-fragile U.S. housing sector. Policy Priorities Policymakers need to press ahead and bolster plans to restore financial stability in the euro area and beyond. Urgent policy action is needed: First, in the euro area, the “firewall” needs to be sufficiently large and convincingly built to avoid abnormally high funding costs for sovereigns and banks. To do this, it will be important to strengthen, and advance work on, the European Stability Mechanism (ESM) as soon as possible. Action by the ECB to provide the necessary liquidity support to stabilize bank funding and sovereign debt markets will also be essential. At the international level, the IMF aims to raise up to $500 billion in additional lending resources to create a global firewall. This would further help not only restore confidence in the euro area, but also address potential spillovers. Second, a macroprudential gatekeeper is needed to assure bank deleveraging plans are consistent with sustaining the flow of credit to support economic activity and to avoid a downward spiral in asset prices. The potentially harmful effects of deleveraging should be addressed at both the national and international levels. Within the European Union, such a role should be coordinated among European banking authorities. Third, a credible increase in bank capital buffers remains necessary to restore market confidence. Banks should increase their capital levels, not just capital ratios, in line with the recent European Banking Authority (EBA) recommendations. For those solvent and otherwise viable banks that cannot raise sufficient private capital, public funds should be made available, based on strict conditionality. To complement this support and limit the additional burden on some sovereigns, a pan-euro-area facility should have the capacity to take direct stakes in banks. Fourth, adjustment remains essential, but the short-term impact on growth should be taken into account. The solvency of sovereigns must be assured. Governments have to implement credible medium-term fiscal consolidation strategies within a solid euro area framework. Over the longer term, initiatives to strengthen fiscal and financial union will be crucial to restoring market confidence. Elsewhere, the United States and Japan need to address their fiscal challenges, and the United States must solve the problems of the housing market and mortgage debt overhang. Fifth, policymakers in emerging markets should stand ready to counter funding and credit strains, and to deploy countercyclical policies where headroom is available . Emerging markets in many cases have built ample cushions of reserves that could be used to counter external liquidity shocks. The global financial system remains fragile. It is urgent to restore confidence in the euro area and beyond. Otherwise we run the risk of a deepening of the crisis, with far-reaching global economic and social consequences. Fortunately, it is not too late to put in place the right policies that take us out of the danger zone. But for this, we need good politics and the collective determination to reach now a cooperative solution both within Europe and at the global level. From IMFdirect blog .

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After Oakland Street Battle, Occupy Movement Split Over Confrontational Tactics

February 1, 2012

By Laird Harrison OAKLAND, Calif., Feb 1 (Reuters) – When anti-Wall Street protesters set out to take over Oakland’s shuttered convention center on Saturday, they left no doubt about the reception they expected. Scores concealed their faces with bandanas, and dozens carried shields, some painted with anarchist symbols. What happened next — a 10-hour street battle in which demonstrators and police pelted each other with tear gas canisters, smoke grenades and other projectiles — has intensified a debate within the Occupy Wall Street movement over what forms of confrontation it should embrace. Activists calling for greater equality in income and tighter regulation of financial institutions have clashed with police across the country since September, usually while advocating non-violence. But a series of conflicts with police in Oakland have stood out as the most violent, with one activist, Iraq war veteran Scott Olsen, suffering a brain injury on Oct. 25. Protesters on Saturday said they were trying to establish a new headquarters and community center to take the place of the tent camp police dismantled at Frank Ogawa Plaza in front of City Hall last fall. Police lined up on street corners and in front of the convention center to thwart the would-be occupiers. Objects began flying through the air as soon as demonstrators tore down a section of chain-link fence in front of the building. “Of all the (anti-Wall Street) marches and rallies in the city of Oakland, this has been the most violent and hostile to the police,” said Oakland Police Department spokeswoman Johnna Watson. Some 400 protesters were arrested, and several police officers and demonstrators were injured. “While we respect every citizen’s right to protest peacefully, we will not tolerate individuals who come to Oakland with an organized strategy to riot, clash with police officers, vandalize property and wreak havoc upon the city,” Alameda County District Attorney Nancy O’Malley said in a statement. Demonstrators accused the police of beating them with batons and of trapping them between police lines, then arresting them for supposedly disobeying orders to disperse. People in the San Francisco Bay Area appeared to be turned off by Occupy’s tactics on Saturday, according to an opinion poll by SurveyUSA. Of 500 people surveyed on Sunday, 26 percent said they had once supported the Occupy movement and now do not. Added to 31 percent who said they always opposed the movement, the poll suggests a majority of public opinion opposes the group. Some leaders within the movement were distancing themselves from tactics employed by fellow occupiers on Saturday. “A lot of conversation is coming out of that, a lot of self-reflection,” said Nichola Torbett, a self-described devout Christian who took part in the first Occupy Oakland organizing meetings in September. Torbett said she has participated in nearly every major Occupy Oakland event and was arrested when police cleared out a protest encampment on Nov. 15. But she stayed away from the march on Saturday. “It was organized by a very militant anarchist segment of the movement,” she said. “I support the idea of taking a building, especially for housing those who don’t have housing. But I don’t support it with the kind of triumphal attitude I saw expressed.” In November, following a day of mostly peaceful Occupy Oakland rallies that gave way to a night of unrest and over 100 arrests, some activists joined city officials in blaming small bands of agitators who they said provoked police. Mike King, an organizer of the movement’s effort to shut down West Coast ports on Dec. 12, stayed away on Saturday because of “personal obligations.” He defended the demonstrators’ attempt to take over a building but said he prefers to devote his energy to building relationships with labor leaders. Without condemning the attempt to occupy the convention center, labor leaders kept a low profile during the demonstration and its aftermath. Representatives for the Service Employees International Union, which helped organize Occupy rallies in a number of cities, did not return repeated calls seeking comment, nor did the Alameda Labor Council nor the California Teachers Association. The California Nurses Association, which has staffed medical stations during previous Occupy Oakland marches, had no official presence at the demonstration Saturday, said spokesman Chuck Idelson. “We don’t support violence no matter who is doing it,” he said. Still, many occupiers defend Saturday’s action. Shake Anderson, who took part in the march, acknowledged, “it could have been better organized” but insisted the goal was worthy. City officials are unable or unwilling to help the homeless, hungry and unemployed, he said. Occupy Oakland was meeting those needs in its camp at Frank Ogawa Plaza until it was evicted by the police, he said. “We need a space so we can feed each other and educate each other,” he said. “Let us have our big house and leave us alone.” (Editing by Steve Gorman and Daniel Trotta)

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Chris Birk: VA Loans Have a Huge Year, Remain Safest Lending Option on the Market

February 1, 2012

Military borrowers continue to flock to the safety, security and unmatched buying power of VA loans in the wake of the subprime mortgage meltdown and ensuing credit crunch. VA loan guarantees have soared 168 percent since 2007, according to data from the Department of Veterans Affairs . The agency backed more than 357,000 loans in Fiscal Year 2011, up from just 133,313 in FY07, an increase of nearly 14 percent. That tremendous growth is a testament to the increasing power and appeal of this no-down payment loan program, which has helped more than 18.7 million service members purchase or refinance a home since 1944. What’s Driving the Growth? 
A key factor in the continued growth of the VA loan program is its flexible credit and underwriting standards, which open the doors of homeownership to scores of military members who might otherwise struggle to secure financing. Lenders have tightened their requirements in the last few years in response to the economic turmoil. But veterans and their families don’t need perfect credit to qualify for the VA loan program. Liquidity is another important factor. Borrowers typically need at least a 5 percent down payment for conventional financing, and those who can’t put up at least 20 percent have to pay monthly private mortgage insurance. Loans backed by the Federal Housing Administration come with a 3.5 percent minimum down payment. But VA loans are one of only two loan programs left that provide no-down payment financing to qualified borrowers. That’s an incredible benefit in the current market, and it allows military borrowers to pay little, if any, money up front to purchase a home. Will it Continue? 
The reality is VA loans are likely to become even more popular in the coming years. New regulations and changes in the mortgage industry will put a greater emphasis on sizable down payments. Those who can’t put down a good chunk of change may find it difficult to secure favorable interest rates. In addition, interest rates will probably remain low for the foreseeable future, which will continue to drive overall VA loan volume. At the same time, thousands of service members are set to return from Iraq and Afghanistan in the coming months.  Many will be looking to take advantage of the home loan benefits earned by their service. Chris Birk is director of communications for the VA Mortgage Center, which specializes in VA loans for veterans and active duty service members. This post originally appeared at VA Loans Insider .

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Sanford D. Horwitt: Alinsky, Foreclosures and Holding Banks Accountable

February 1, 2012

Memo to the Obama Administration: if you want to see the makings of a national model to hold big banks accountable for fixing foreclosure-devastated neighborhoods, go to Milwaukee and talk to citizen leaders of a community organization who are practicing what Saul Alinsky preached. “You broke it, you fix it,” demonstrators chanted outside Wells Fargo’s downtown Milwaukee headquarters on a cold January day two years ago. The scores of angry citizens were members of a broad-based community organization, Common Ground, that is comprised of some 40 interfaith religious congregations and other organizations. Ultimately, they targeted not only Wells Fargo but also four other large banks — Deutsche Bank, U.S. Bank, Bank of America, JP Morgan Chase — that either owned, were trustees or servicers of foreclosed houses. Forty years after his death, Alinsky’s influence is alive and well not only through his still widely read book, Rules for Radicals , but also through the work of his Industrial Areas Foundation (IAF) that he started more than 70 years ago with a grant from Marshall Field III, scion of the Chicago department store family. Today’s IAF has created more than 60 community organizations in the U.S. and abroad, but one of the newest, Common Ground, that spans Milwaukee and three adjacent Wisconsin counties, is doing what even the federal government has found to be so elusive: holding big banks accountable for the subprime foreclosure fallout that has left many cities much poorer and pockmarked with foreclosed and abandoned houses. By successfully pressuring five big banks into an unprecedented multimillion dollar commitment to help rehabilitate Milwaukee neighborhoods and winning local government support, the IAF’s grassroots Milwaukee organization has forged what observers say should be replicated nationwide. Before they took to the streets, some 250 Common Ground volunteers devoted nearly a year and hundreds of hours researching the banks’ financial statements and foreclosure filings, and going door-to-door documenting the condition of poorly maintained, abandoned houses that degraded neighborhoods. The grim statistics: more than 20,000 foreclosure actions since 2007, a staggering $4 billion in lost property values and, in the case of just one bank, Deutsche Bank, an astonishing 17,041 housing code violations. Consulting with city officials, Common Ground developed a set of demands, which included a bank-financed fund for the rehabilitation of abandoned houses. At first, the banks refused to meet, but Common Ground members, with terrier-like tenacity, weren’t going to be stonewalled like the city government had been when the banks ignored the upkeep of their foreclosed houses. Using media coverage to good advantage, Common Ground leaders hosted a high-profile public hearing where housing and financial experts explained the link between the blighted neighborhoods and the banks’ investment in the subprime mortgage market. In May of 2010, Common Ground sent two of its members some 4,000 miles to confront Deutsche Bank’s CEO, Josef Ackermann, at the bank’s annual shareholders meeting in Frankfurt, Germany. German media gave Common Ground’s story about Deutsche Bank extensive coverage, including its slogan: “German immigrants built Milwaukee; now a German bank is destroying Milwaukee.” After a Common Ground member addressed the shareholders in fluent German, Ackermann announced that he was sending a high-level delegation to Milwaukee to meet with Common Ground and city officials. But the negotiations with Deutsche Bank and the other four banks dragged on for a year, and it took another trip to Germany, plus a Common Ground appearance at Wells Fargo’s 2011 shareholders meeting in San Francisco before a deal started to take shape. Wells Fargo was the first to step forward with a financial commitment and by the end of the summer the other four banks did, too. The total: $33.8 million in cash and mortgage commitments for priorities that the city and Common Ground identified: the rehabilitation of 100 foreclosed houses in one pilot neighborhood, Sherman Park; mortgage commitments so the rehabbed houses in Sherman Park and other neighborhoods can be sold; hiring more nonprofit housing counselors and supporting a new nonprofit organization that will employ and train low-income men and woman to monitor foreclosed houses and keep them safe and secure. Here’s the larger, national significance of the Milwaukee story. First, to repair foreclosure-damaged neighborhoods in American cities, grassroots groups with the pluck and persistence of Common Ground must organize to pressure banks to do the right thing when other institutions, including government, are not up to the task. These groups also have the indispensable role, which banks and governments cannot perform, of strengthening the social fabric in fragile, recovering neighborhoods by inspiring local residents to become engaged citizens and shape their own destiny. Second, the Milwaukee story shows how a savvy community organization and city officials working together can leverage limited public money. Like other hard-hit cities, Milwaukee received federal Neighborhood Stabilization Program funds. When Common Ground brought the banks to the negotiating table, city officials agreed to target $2 million of its NSP money to revitalize the Sherman Park neighborhood. With that $2 million, Common Ground leveraged a total of $33.8 million from the five banks, a ratio of almost 17 to 1. Multiply the woefully inadequate $7 billion in NSP funds appropriated nationwide to fix devastated neighborhoods by 17 and you get a much more realistic $119 billion. That should be the big banks’ share, at a minimum. Call it the banks’ down payment on repairing the subprime damage. The precedent that has been established with the banks in Milwaukee has national implications, according to Alexander von Hoffman, senior fellow at the Joint Center of Housing Studies of Harvard University, who calls the multi-bank financial commitment “unique and significant.” And as Alderman Michael Murphy, the respected, veteran chairman of Milwaukee’s Common Council Finance and Personnel Committee says about the Milwaukee model: “I would hope that other cities would look at this as a blueprint of how to try to address the foreclosure crisis.” Indeed, it is a blueprint and a success story that deserves to be repeated — and, one would hope, promoted by the Obama Administraton. Sanford D. Horwitt is the author of Let Them Call Me Rebel: The Life and Legacy of Saul Alinsky .

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U.S. To Charge Four Ex-Traders With Fraud Related To Subprime Morgages

January 31, 2012

* Four former Credit Suisse traders expected to be charged -sources * Credit Suisse cooperating with investigators -sources * Charges stem from financial crisis (Adds details on those charged) By Lauren LaCapra and Jennifer Ablan Jan 31 (Reuters) – U.S. authorities are preparing to charge four former Credit Suisse Group AG employees with criminal and civil fraud related to write-downs on subprime mortgage derivatives at the height of the financial crisis, sources familiar with the matter said. Credit Suisse will not be charged in the matter, which is being investigated by federal prosecutors and the U.S. Securities and Exchange Commission, the sources said. The four people to be charged were former Credit Suisse traders who were fired, another source said, but it was unclear when and for what reason. The suspected illegal conduct took place roughly four years ago, the source said, adding that the bank had been cooperating with officials. The investigation stems from $2.85 billion in write-downs that Credit Suisse took on collateralized debt obligations in 2008, said the sources, who spoke on the condition of anonymity. Credit Suisse revealed those CDO losses in early 2008, and blamed them on a group of rogue traders – who the bank said had deliberately mispriced securities – and on a failure of internal controls. Credit Suisse, the Federal Bureau of Investigation, the SEC and Manhattan U.S. attorney Preet Bharara declined to comment on the matter. Charges could come as early as Wednesday, people familiar with the matter said, but the timing was uncertain. The planned charges come as the Obama administration is stepping up efforts to prosecutes Wall Street bankers and others for misconduct related to the financial crisis. Last week during his State of the Union address, President Obama announced the formation of a mortgage-fraud task force to pursue subprime-related cases. The collapse of the subprime housing market was one of the triggers of the worst financial crisis since the Great Depression. (Additional reporting by Matthew Goldstein, Basil Katz and Sarah N. Lynch; Editing by Gary Hill)

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Consumers Mostly Complain About Credit Cards To New Agency

January 31, 2012

The new Consumer Financial Protection Bureau has received about 12,000 complaints over the past six months from consumers who had problems with their credit cards and mortgages, according to the CFPB’s semi-annual report to Congress. In the half year ending Dec. 31, 2011, the agency received 9,307 credit card complaints and 2,326 mortgage complaints through its website, by phone, and through referrals from other federal regulators, according to the report released Tuesday. What are people upset about? There is no clear winning category among credit card complaints. “Billing disputes” edged out “Identity theft/fraud/embezzlement,” but collectively accounted for about a quarter of all complaints. More than half of all consumers who contacted the CFPB with a complaint about mortgages reported issues over making payments, or problems they experienced when they were unable to pay, such as related to loan modification or foreclosure. Established under the Dodd-Frank financial regulation law and launched last July, the CFPB has sought input from consumers on how it should carry out its mission, soliciting specific complaints regarding credit cards and mortgages. The number of complaints received so far should help the agency better understand consumer beefs. But, it represents just a small fraction of the universe of possible complaints the bureau could potentially receive, given the current foreclosure crisis and the more than 500 million outstanding credit card bills, according to the report. “The consumer response system is still in its early stages,” said Jennifer Howard, a CFPB spokeswoman. “We are using our website and public events to publicize the system and coordinating with other agencies to ensure consumers know CFPB is here to help. We expect that volume will pick up as more consumers learn about it.” The CFPB passed along about 75 percent of all the complaints it received to the company involved in the dispute. Slightly more than half — 55 percent — of those complaints were reported as “closed with relief,” meaning the company resolved whatever issue it was that led to the complaint. About 30 percent were closed without relief — were not resolved — and the rest are pending, according to the bureau. The bureau also provided some information in the report about how consumers felt about those actions. About 40 percent of consumers “did not dispute” the action the company took in response, while 13 percent of consumers did dispute the responses. Nearly half of all customers have not yet replied to the CFPB to tell the agency what they think about the response. What is missing from the report is any indication that the agency was anything but a conduit for these complaints, though the agency previously said in a press release about credit card complaints that they “provide potential insights into issues within the credit card marketplace that may inform the CFPB across its full range of activities: supervision, enforcement, rulemaking, research, and consumer education.” It is also quite likely that a bank or a credit card company would take a complaint forwarded along by its regulator more seriously than one that came through directly from a consumer. The agency’s most significant public outreach thus far has been a year-long request for feedback on efforts to both make mortgage documents more transparent and also to make it easier for the housing industry to comply with various federal laws. Over seven rounds of testing, the CFPB received about 27,000 individual comments on its website providing feedback on the prototype mortgage forms. Roughly half of these comments were provided by consumers and half by industry representatives, the bureau said. Also on Tuesday, a planned Republican boycott of new director Richard Cordray’s appearance at a Senate hearing to discuss the report fizzled , as only half the GOP members skipped out in protest of his recess appointment by President Barack Obama.

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Timothy Pratt: Don’t Bet On Las Vegas

January 31, 2012

Nearly 1 in 7 Nevadans who bought homes between 2004 and 2008 are at least 60 days behind in their mortgage payments or entering foreclosure, according to a new report . That’s almost the same amount that have already been foreclosed on, meaning the state may only be halfway through its housing crisis. What’s more, only Florida has a higher share of mortgages that are “seriously delinquent” or in foreclosure, meaning Nevada’s unfortunate status as ground zero for the issue may last a while. Due to the complex relationship between underwater and foreclosed homes and unemploymen t, this issue goes beyond homeownership itself and is a drag on the overall economy. The report, “Lost Ground, 2011,” was prepared by the Center for Responsible Lending. It includes state-by-state analyses of mortgages taken on during the height of the nation’s real estate boom and not only looks at their current status, but breaks them down by race, ethnicity and income. It concludes that “the nation is not even halfway through the foreclosure crisis,” considering that 2.7 million homes have been foreclosed on, but 4 million more are inches from the same end. In that sense, Nevada is like the rest of the nation; the difference is in the share of mortgages. According to the report’s interactive map, the top five states in their share of mortgages at risk of foreclosure, are Florida, with 17.4%; Nevada with 13.4%; New York with 9.8%; New Jersey with 9.7%; and Mississippi with 9.6%. The map allows you to see where the problem might be heading, which isn’t necessarily where it’s been in all cases, as with Michigan, which has been near the top until now, but may fall into the middle in the near future. Nevada has led the nation in foreclosures for some time, so that may remain the case. Other findings include: – middle- to upper middle class homeowners are more affected by the housing crisis in boom areas like the Las Vegas Valley; and – Hispanics and blacks, particularly the former, are more likely to fall behind in payments and face foreclosure. The center also makes a series of policy recommendation s aimed at regulating the mortgage industry and protecting consumers. It seems these ideas may be lost in the months leading up to the elections, as debt and jobs fight for the spotlight and members of Congress fight each other. Timothy Pratt writes from Las Vegas, Nevada. This story was originally published in his blog, Back to Work . If you would like to contribute as a citizen journalist to The Huffington Post’s coverage of American political life, please contact us at www.offthebus.org .

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Timothy Pratt: That Sinking Feeling

January 31, 2012

When it comes to indicators on the recession and its aftermath, both Las Vegas and Nevada are at the top of all the bad lists and at the bottom of all the good ones. But we can’t be ostriches, so here comes the latest quarterly report by CoreLogic , showing Nevada still tops the nation in the percentage of houses underwater. The figure: 58 percent. While this is less than the nearly two-thirds seen as little as eight months ago, it’s still bad news. (The top five is rounded out by Arizona, Florida, Michigan and Georgia, which nudged out California for the first time.) This particular part of the economy is undoubtedly linked to joblessness. Some analysts argue that sinking housing values actually push people out of an area. Others say they may help cause immobility and thus further unemployment, a vicious circle. Before considering these ideas, let’s put Nevada’s numbers in context. Nationwide, there are 10.7 million houses underwater, or worth less than what their owners owe the bank. That’s down at least 200,000 from the previous quarter, which — surprise — is about the number of houses that have slid into foreclosure during the last three months, according to a recent report on household debt from the New York Federal Reserve. It’s also 22.1 percent of all mortgages, or nearly 1 in 4. In Nevada, meanwhile, 58.3 percent of all mortgages are underwater, and another 4.8 percent are approaching negative equity, the technical term. If housing prices continue to slide, which recent news indicates i s the case, then that figure should start to rise again. So what does this mean for unemployment in the valley and the state of Nevada, which also continue to lead the nation? Again, analysts have looked at areas with plummeting housing values and the relationship to state-to-state migration. Back in June, economist Mike Konczal summarized their research: people with high negative equity might have even higher mobility than others, meaning they are more likely to rent out their place or simply walk away. Which sounds familiar to anyone living in the Las Vegas valley. So the question continues to be, are we losing people who may have skills needed in the near future to diversify the local and state economy? Elsewhere, Konczal pondered the ties between sinking housing values, foreclosures and unemployment. He wrote: So unemployment increased more in places with a lot of underwater mortgages in the past year. Question: As the worst mortgage debt in the highest unemployment states continues to be foreclosed on, and no mortgage relief, cramdowns, or inflation is inbound, how much will this become a spiraling problem? Foreclosures depress housing values making unemployment worse increasing foreclosures? The link between how a further local depression in housing values could increase unemployment needs some more causation analysis, but I think there’s a real, and worrisome, problem here. How many more states will end up in a Nevada spiral before this is done? And, to the concern of those of us who live here, when will the “Nevada spiral” end? Las Vegas writer Tim Pratt writes a blog, Back To Work , at Nevada Workforce Connections. If you would like to report as a citizen journalist on aspects of the nation’s political and economic life where you live, please contact us at www.offthebus.org .

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David Woolner: 130 Years After His Birth, We Still Live in FDR’s World

January 31, 2012

Government has a final responsibility for the well-being of its citizenship. If private cooperative endeavor fails to provide work for willing hands and relief for the unfortunate, those suffering hardship from no fault of their own have a right to call upon the Government for aid; and a government worthy of its name must make fitting response. – Franklin D. Roosevelt January 30 marked the 130th birthday of Franklin D. Roosevelt. For most of today’s generation, FDR has become a somewhat distant figure, far removed from the day-to-day struggle to make ends meet at a time of slow growth and high unemployment. They know from their history books that FDR launched the New Deal in the midst of the Great Depression, and that he led the nation to victory in the Second World War. But aside from these basic facts, the average American knows very little about the extent to which the government — and America’s role in the world — was transformed in the critical years between 1933 and 1945. Yet, if these same individuals were to pause for a moment to consider just how much Franklin Roosevelt’s leadership continues to influence their lives, they might soon conclude, as the late Arthur Schlesinger, Jr. once observed, “that the world we live in today is Franklin Roosevelt’s world.” Consider, for example, just a few of the major initiatives that were introduced under FDR’s leadership: the banking and financial reforms that brought us the Federal Deposit Insurance Corporation , the Securities and Exchange Commission and, until the passage of the Graham-Leach Act in 1999, the separation of commercial and investment banking . These monumental pieces of legislation brought much needed stability and transparency to our financial system and helped restore the American people’s faith in the banking and securities industries. What is more, they were not inspired by any deep-seated enmity for capitalism on FDR’s part. Rather, they were based on common sense principles derived from the hard-won lessons of the 1920s, which, above all else, taught the American people that “heedless self-interest” represents not just “bad morals,” as FDR put it , but also “bad economics.” FDR also acted swiftly and effectively to help troubled American homeowners through such programs as the Home Owners Loan Corporation , which refinanced approximately 20 percent of all urban mortgages in the country in less than three years; revolutionized the mortgage industry through the widespread use of the 30-year amortized mortgage; and led to the establishment of the Federal Housing Authority (FHA). His administration also pushed through the Social Security Act , which not only provided pensions for the aged, but also our nation’s first national system of unemployment insurance, two programs that remain critical to our social and economic wellbeing. Then there was the passage of the National Labor Relations Act that established the National Labor Relations Board and guaranteed the rights of workers to form unions and engage in collective bargaining, and the Fair Labor Standards Act, which established maximum hours and minimum wages for all workers, unionized or not. But that was not all. To put people back to work, FDR launched a series of efforts to improve America’s woefully inadequate economic infrastructure. Between 1935 and 1943, the most famous of these programs, the Works Progress Administration (WPA), literally built much of modern America, including 572,000 miles of rural roads, 67,000 miles of urban streets, 122,000 bridges, 1,000 tunnels, and 1,050 airfields. The WPA also constructed thousands of schools, hospitals, water treatment facilities, firehouses, and nearly 20,000 other state and local government buildings, many of them adorned by murals painted by out of work artists. This infrastructure helped lay the basis for the massive economic expansion that took place during World War II and the post-war years. In the meantime, the Rural Electrification Administration “wired” the 90 percent of American farms that still had no electricity while the Civilian Conservation Corps (CCC) and Soil Conservation Service restored America’s forests and farmland. As a result, there is hardly a community in this nation that still does not enjoy the benefits of the public works ushered in under the New Deal. Finally, we should remember that prior to World War II the United States had turned inward and refused to play a leading role in world affairs. Convinced that the Second World War had come about in part from the global economic depravity that helped give rise to fascism in Europe and Asia, FDR used the war as a catalyst for the construction of a new political, strategic, and economic order. It was based in large part on the extension of American moral and military power through the United Nations and the extension of American economic power through the creation of the International Monetary Fund, World Bank, and a new multilateral economic system that would open up the world’s markets and natural resources to freer trade. Taken together, these measures resulted in a permanent restructuring of the world’s social, economic, and strategic makeup. They formed the basis of the new world order that has given rise to the globalization of the world’s economy and the American-led multilateral security system that the United States has played a leading role in since 1945. In much the same way that FDR’s wartime leadership expanded America’s role in the world, the New Deal dramatically expanded the scope of the federal government’s responsibilities in American life. Where Washington had previously been only a distant factor in the social and economic standing of the nation, it now became the federal government’s responsibility to maintain economic prosperity, to mitigate the worst effects of unfettered capitalism, to spread industrial and agricultural development to impoverished regions of the nation, to guarantee workers’ right to choose their unions, to protect the bargaining rights of those unions, and to conserve and develop the nation’s vast natural and artistic resources. In less than a decade, the United States government had become the primary guarantor of social and economic justice for all Americans, rich and poor alike. Today’s right-wing extremists, much like the conservative critics in FDR’s own day, call this “socialism.” But the New Deal did not set out to radically change the foundations of American capitalism. On the contrary, it revised that system in order to save it. While Roosevelt did foresee and support the increased socialization of the American economy and society — insofar as that meant greater government responsibility for the people’s welfare — he took for granted that the system would remain rooted in free market principles, and he was no socialist. The overall result was to create a domestic social and economic structure that allowed capitalism to flourish even as the government put in place the means by which it might be regulated. This new “philosophy,” which included the embrace of Keynesian economic policy , stood at the root of what President Obama has correctly called the post-1945 creation of the “strongest economy and middle class the world has ever known.” President Obama is right to call for more action on the part of the federal government to stimulate the struggling U.S. economy. He is also right to demand a return to an America where “everyone gets a fair shot, …everyone does their fair share, and everyone plays by the same set of rules.” But thanks to the mythology perpetuated by the same right wing that attacked FDR, the New Deal and the philosophy behind it has been largely forgotten. Instead, we are told time and time again that the free market will provide all we need — excessive wealth for some and well paying jobs for everyone else — so long as government, with its nasty habit of deficit spending, gets out of the way. This free market myth ignores the overwhelming evidence from the 1920s, ’30s, and ’40s that the free enterprise system can fail and that there are times when the government must step in to restore the economic health of the nation. Yet it has become so pervasive that even in the wake of the greatest economic crisis since the Great Depression, our political discourse remains fixed not on how much the government should spend to restore the economy, but on how to reduce the deficit; not on how we might use government to restore basic fairness to our economic system, but on how we might reduce government involvement in the economy at a time when we can least afford it. In such a political environment, is it any wonder that even President Obama’s effort to pass his modest jobs bill faces an uphill battle? Franklin Roosevelt once said that there was nothing he loved so much “as a good fight.” Perhaps, in this critical election year, it is time for the president and the leaders of the Democratic Party to take on the right-wing soothsayers of doom and make the case clearly and unequivocally for the one instrument strong enough to take on the forces of greed and avarice that have hijacked our democracy. Perhaps they should remind the American public, as Franklin Roosevelt did, that there comes a time in the life of every people when the only way to take on the forces of “economic tyranny” — whose callous behavior has twice in the past century nearly brought our country to ruin — is to turn to “the organized power of government.” Cross-posted from New Deal 2.0 .

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Home Prices Fell For Third Straight Month In Nearly All Major Cities

January 31, 2012

WASHINGTON — U.S. home prices fell for a third straight month in nearly all cities tracked by a major index. The declines show that most homeowners are not reaping the benefits from some signs of an improving housing market. Prices dropped in November from October in 19 of the 20 cities tracked, according to the Standard & Poor’s/Case-Shiller home-price index released Tuesday. The steepest declines were in Atlanta, Chicago and Detroit. Phoenix was the only city to show an increase. The declines partly reflect the typical fall slowdown after the peak buying season. Still, prices fell in 18 of the 20 cities in November compared to the same month in 2010. Only Washington and Detroit posted year-over-year increases. Prices in Atlanta, Las Vegas, Seattle and Tampa fell to their lowest points since the housing crisis began. And prices have fallen 33 percent nationwide since the housing bust, to 2003 levels. “The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand,” said David M. Blitzer, chairman of the S&P’s index committee. The Case-Shiller index covers half of all U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The November data are the latest available. Home values remain depressed despite some hopeful signs at the end of last year. Sales of previously occupied homes rose in the last three months. Homebuilders are more optimistic after seeing more people express interest in buying this year. And home construction picked up in the final quarter of last year, which helped housing contribute to broader economic growth. Home prices tend to follow sales, which are still below healthy levels. And a large number of vacant homes are sitting idle on the market, which means prices will likely stay unchanged for several years, said Paul Dales, senior U.S. economist at Capital Economics. “The most likely scenario in the U.S. is that in 2012 prices will bob around a bit, with one month’s gain being reversed the next month,” Dales said. “But in general, over the next couple of years, house prices will do nothing more than remain broadly stable.” Dales said prices might not rise consistently until 2015. He said lower unemployment and better pay raises are essential to a full housing rebound. Among other improvements needed: _ The supply of homes for sale must decline further. The inventory fell in November to a seven-month supply, although a healthy supply is about six months. _ Sales need to rise consistently and more first-time buyers must drive the increases. First-time buyers stay longer and invest in their homes, which helps neighboring home values rise. _ More young people and immigrants must buy. Declining immigration and a rise in renting has hampered home sales. _ More than a million homes at risk of foreclosure must be cleared from the market. Many are in limbo because a government investigation into questionable mortgage lending practices, which has dragged on for more than a year. _ Banks must further loosen lending requirements. Conditions are improving for those in position to buy a home. Job growth is up, prices are down, mortgage rates are at record lows and rental prices have risen sharply since the housing bust. Still, many people can’t afford to buy or are unable to qualify for mortgage. Some people in position to buy are holding off, worried that prices could fall even further. Many economists say the U.S. could be experiencing what similarly occurred in Britain in the 1990s, when it took four years for home prices to rise again after falling prices left homeowners with little financial equity in their homes.

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SEC Probes Deutsche Bank’s ‘Crap’ CDOs

January 30, 2012

The Securities and Exchange Commission investigates a Wall Street behemoth over claims that it assembled and sold a package of subprime mortgage-backed securities at the behest of hedge fund king John Paulson without telling other investors that Paulson planned to short it. Sound familiar? Almost two years ago, Goldman Sachs was in the SEC’s cross hairs over such an allegedly fraudulent scenario and ended up settling charges for $550 million, but not without becoming the poster boy for Wall Street shenanigans that helped crash the economy. Now, it’s Deutsche Bank that is being probed by the SEC, Der Spiegel reports , for allegedly letting Paulson help pick “junk” mortgage-backed securities that went into a collateralized debt obligation without telling other investors that the hedge funder was shorting the CDO, called START. Deutsche Bank was the fourth-largest issuer of CDOs in the United States, but it has largely avoided the glare of a federal investigation while its competitors, including Goldman Sachs, Citigroup and JPMorgan, have all been probed by the SEC over how they marketed deals involving subprime mortgage-backed securities. The agency has come under criticism for that lapse, with particular focus on the fact that the SEC’s enforcement chief, Robert Khuzami, previously worked as the general counsel at Deutsche Bank when it was packaging such CDOs . The bank gained a certain infamy for its role in packaging START, as well as other CDOs, during hearings led by Sen. Carl Levin (D-Mich.) last year. It was revealed then that Deutsche banker Greg Lippman once advised a colleague to buy protection for the bank against START, emailing him: “Start is crap you should short because I bet we’ll have to … buyback cash ones next year.” Another email that came out during the hearing described Paulson’s role in structuring the CDOs: “The $1 billion START 2005-B trade was backed by a static pool of CDS [credit default swaps] on mezzanine RMBS [residential mortgage-backed securities] for Paulson Advisors ($4 bln risk arb hedge fund). Paulson retained the bottom 6% of the trade and we sold the rest of the capital structure. Paulson, who came to us with the strong desire to short the U.S. housing market, wrote CDS on underlying ABS (over 100 names) to DB [Deutsche Bank] and DB intermediated them into the deal.” Germany’s biggest bank was also sued over the deal last October by Loreley Financing, which had purchased $440 million worth of CDOs from 2005 to 2007. Loreley claimed that Deutsche defrauded the plaintiffs by issuing CDOs that were “destined — and indeed, designed — to fail.” Duncan King, a spokesman for Deutsche Bank, declined to comment on the SEC probe. As to the Loreley lawsuit, King stated in an email: “Along with other banks and financial institutions, Deutsche Bank is faced with lawsuits brought forward by retail and institutional clients who have lost money in the course of the financial crisis. We look into these claims carefully and, if they prove wrong, defend ourselves vigorously.” SEC spokesmen and Loreley Financing’s lawyer declined to comment to The Huffington Post. The Zombie Insider-Trading Case In another sign that the SEC is sharpening its claws, the agency isn’t letting death get in the way of a case. On Friday, a New York federal judge granted the SEC the right to pursue the estate of Charles Wyly Jr., the Dallas billionaire who was facing insider-trading charges when he died in a car crash in August, Thomson Reuters correspondent Alison Frankel reports . Frankel adds that U.S. District Judge Shira Scheindlin, in her ruling, found “that it doesn’t make sense to permit Wyly’s estate to hold onto his allegedly ill-gotten gains simply because he’s no longer alive.” FDA Monitored Email Of Medical-Device Whistleblowers The Washington Post revealed Monday morning that the Food and Drug Administration monitored the personal email of its own scientists and doctors “after they warned Congress that the agency was approving medical devices that they believed posed unacceptable risks to patients, government documents show.” The staffers have filed suit against the FDA in federal court in Washington, arguing that they were harassed or dismissed based on information uncovered through the snooping. CFPB Outlines Ambitious Agenda For Next 6 Months In its first semiannual report to Congress, the Consumer Financial Protection Bureau outlined an ambitious agenda, according to American Banker . Over the next six months, the CFPB plans to issue final rules requiring a lender to verify a borrower’s ability to repay a mortgage loan; propose a rule streamlining disclosures required by the Truth In Lending Act and the Real Estate Settlement Procedures Act; propose rules regarding the mortgage market, including new servicing standards, loan originator compensation rules and restrictions on high-cost loans; and propose initial rules defining the scope of its nonbank program. The bureau has hired more than 750 staffers and spent about $123.3 million in fiscal year 2011, according to its report. Food Industry To White House: Don’t Make Us Pay For Safety A coalition of food industry groups — including the National Frozen Pizza Institute, American Frozen Food Institute and American Meat Institute — wrote a letter to the White House Monday, urging the administration to stop using industry fees to fund food safety initiatives and to use congressional funding instead. “As consumers continue to cope with a period of prolonged economic turbulence and food makers struggle with record high commodity prices, the creation of new food taxes or regulatory fees would mean higher costs for food makers and lead to higher food prices for consumers,” says the letter. “As such, we believe imposing new fees on food makers is the wrong option for funding food safety programs.” Regulators and food safety advocates tend to prefer fees because they “guarantee a dedicated revenue stream for their activities,” rather than depending on the fickle whims of lawmakers, reports The Hill . Today’s Must-Reads In a giant conflict of interest, taxpayer-owned mortgage giant Freddie Mac has giant investment portfolios that will pay off if “homeowners stay trapped in expensive mortgages with interest rates well above current rates,” report ProPublica’s Jesse Eisinger and National Public Radio’s Chris Arnold . California health officials are investigating skin-lightening products sold in the Bay Area for possible mercury contamination, says California Watch . Two Japanese suppliers of automotive electrical components — Yazaki Corp. and DENSO Corp. — agreed to plead guilty and to pay a total of $548 million in criminal fines for their involvement in multiple price-fixing and bid-rigging conspiracies in the sale of parts to automobile manufacturers in the United States. It’s the second-largest criminal fine ever for an antitrust violation, announces the Justice Department .

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Bill Could Raise Minimum Wage In New York

January 30, 2012

All that talk about income inequality may be having its effect in Albany. Assembly Speaker Sheldon Silver (D-Manhattan ) is proposing a bill to raise the minimum wage 17 percent. The measure would bump the wage from $7.25 an hour to $8.50 an hour, or from $14,500 a year to $17,000 a year. “It’s absurd to expect anyone, let alone a working family, to afford the cost of living today,” Silver said, according to CBS News . If the bill were to pass, New York would have the third highest minimum wage in the country, behind only Washington and Oregon. Currently, 18 other states have higher minimum wages. The last time the state legislature voted to raise the wage was 8 years ago. The measure enjoys support from both Mayor Bloomberg and Governor Cuomo. “The cost of living in New York City, like nearly everywhere else, has gone up,” Bloomberg said during his annual State of the City address earlier this month. “And not just housing, but food, transit and all the key parts of a family’s budget. But there’s one thing that, in all fairness, hasn’t gone up: The ability of those at the bottom of the economic ladder to pay for those essential needs.” Bloomberg, however, backtracked slightly today, according to Capital New York . “I said I would ‘support’–conceptually, I did not have a problem and said that I would support Shelly’s idea of a raise … I haven’t looked at that number yet,” Bloomberg said. “You want to make sure that it is competitive with the adjoining states first. Number two, what it’s likely to do is to reduce employment among young people. And so we’ve got to see with the expected decrease in jobs for young people that invariably would come out of an increase in the minimum wage, how we’re going to have funds to create jobs for those kids.” The bill, of course, also has its outright opponents. From The New York Times : “The national minimum wage went up, and in the United States of America the economy’s the worst it’s been since the Great Depression,” said Senator Tom Libous, a Binghamton Republican. Mr. Libous said he was skeptical of studies suggesting that increasing the minimum wage spurs economic growth. “I think that’s a lame theory that doesn’t amount to much,” he said.

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Kirsty Hughes: US, China and the Rest – Is the Global Order Really Changing?

January 30, 2012

This year, the elites in Davos – debating the future of capitalism – faced a little more self-doubt than usual as to whether they have the best ideas to run the world, not least in the face of the intractable euro crisis. But the future of capitalism is just one big global challenge among many facing today’s world including climate change, poverty, conflict, instability and oppression. And one big part of the answer as to how – and how well or badly – we deal with these challenges in the coming decades will depend on who takes global decisions. Much ink has been spilt already on the emerging multipolar world order. But there is no agreement as to how big a change the rise of China and others represents, let alone how much it will change the power of the US or the role of multilateral institutions not least the UN. Will this be a more complex, unstable, power-hungry world or will it stay the mixture of national-interest, alliances, values, rules and ad-hockery we see today? In a recent article Robert Kagan argues the decline of the US is a myth . The rest may be rising, he says, but US economic and military strengths will continue. Joe Nye makes a similar point about the future of power – and predicts that China will grow but will not surpass US power. He describes a three-dimensional chessboard, with the US dominant on the first level – military power; on the second level – economic power – he says a multipolar world already exists, and then on the third level – transnational relations with all sorts of transnational actors from NGOs to multinationals to organised crime – there is something more like chaos than clear powers. How much does size matter? As China has grown to be the second largest economy after the US, much attention has been given to rankings by economic size – with predictions of ‘the West’ shrinking as China, India, Brazil, Mexico and others catch up. These changes are big, and will surely impact on geopolitics, global power relations, who has an influential voice at the UN or G20 or WTO and so on. But change is often slower than it seems. And it depends how you measure things – including unknowns like future growth rates. So let’s take just one set of estimates – from the respected Carnegie think tank – of rankings of the top ten by their gross domestic product (and note, they rank countries in so-called market prices not the ‘purchasing power parity’ – PPP – measures which adjust for the fact that costs of food or housing are so much cheaper in India or China; PPP measures always rank the emerging economies higher). This Carnegie 2010 study estimates economic size in 2030 and 2050 compared to 2009. And yes by 2050, China is bigger than the US. But what is interesting is how little the country names in the top ten change. By 2030, Canada and Italy have fallen off the list, and Mexico and Russia are on it. But interestingly it’s the same names in 2030 and 2050 – though crucially with the order changed: 2030 ranking: US, China, Japan, India, Germany, UK, France, Russia, Brazil, Mexico 2050 ranking : China, US, India, Japan, Brazil, Mexico, UK, Germany, France, Russia And of course there’s always a European question – if the European Union survives the euro crisis and its single market remains, then counted as one ‘country’, the EU would be in the top five in 2030 and 2050. So what’s new? Quite a lot is the answer, even from this simple list by economic size. Diverging economic views: Firstly, in the past, economic size and wealth has tended to go together – the biggest economies also had amongst the highest incomes per head. But China, India and Brazil have a long long way to go to catch up with US or European standards of living. The UN’s overarching measure of human development (which considers, wealth, health, education and more) in 2010 has the US ranked number four, China at 89, Brazil at 73 and India at 119. In that sense, the US may be more of a global model and leader – but it will have lost some relative clout as others catch up in size. And China, Brazil, Mexico and India as they grow – and if they keep growing – will surely have increasingly influential voices in places like the G20 and WTO. But their views on what global decisions should be taken on free trade, or climate change or development assistance may differ a lot from the US and Europe – not just because of different political systems or foreign policy priorities but because they are at different stages of development. And, as and when the world fully emerges from the global economic crisis and the euro fiasco, where will different countries stand on protectionism, on interventionist industrial policies, on regulating finance or exchange rates? Wherever the new global consensus settles (if it does) these emerging powers will be much more influential than before. And creating a consensus – as the limited success so far of the G20 shows – will be more difficult. Diverging interventionist views: Secondly, while the US for now is by far the dominant military power in the world, even in the face of rising Chinese defence spending, the experience of the last ten years shows clearly that there is little convergence on whether, when, why and how to intervene in other countries. The recent Libya intervention saw China, Russia, Brazil, India and Germany abstain – with Russia clearly now wishing it had vetoed the UN resolution. Brazil and India are democracies and more supportive of human rights than China or Russia. But they are wary of supporting UN human rights resolutions that target particular countries, wary of international intervention even in words. Where will the emerging world order end up on defence of human rights, or on military interventions – a mixture of principles, self-interest, ad-hoc alliances and occasional UN endorsement like today, or more just a power-based/Hobbesian world? Tackling Poverty? The biggest providers of development aid today remain the wealthiest countries but countries like China, Brazil and India are getting into the aid business too. But with 75% of the poor now in middle-income countries – not in the poorest countries – it looks likely that the development sector will change a lot too. How long will India or Brazil continue to welcome western NGOs into their country or accept policy-lessons from the World Bank or US or EU? Whether that is good news for the world’s poor is another big question but change is on the agenda for development too. Climate catastrophe? By 2050, on current trends global temperatures will have risen by more than 2 degrees and could be heading for a three or four degree rise in the years after that, with huge effects on many countries. The most affected will mostly be in poorer countries, with much of sub-Saharan Africa set to face migration, drought, conflict in a three or four degree scenario. But even a quick look at big rivers across the borders of India, China and Pakistan show that climate change could create big conflicts in the coming decades. Will the emerging multipolar order be any better than we are today at tackling climate change or at tackling its fall-outs if temperatures go over two degrees? The 2009 Copenhagen summit – which fell apart without agreement – suggests not. The more recent 2011 Durban summit which made a breakthrough to agree to aim at a global deal, though not til 2020, suggests movement (even if so far not enough) is possible. A New Global Settlement? After the second world war in 1945, there was a whole new global deal – the UN was founded, the Bretton-Woods institutions – the World Bank, IMF – were set up, Keynesian economics, welfare states, the Marshall plan meant active regulatory government were the order of the day. After the 1975 economic crisis, the Keynesian order gave way to the neoliberal economic approach of Reagan and Thatcher. So after today’s economic crisis, and in the face of a changing global political scene, what sort of new global settlement will we see? The ‘West’ – the US and Europe – are having to share their global influence and voice with more countries both east and south. Will these countries come together to forge a clear new system or will the current one adjust and shift a bit, setting up bodies like the G20? And in either case, will there be more difference and diversity – and will that be creative or conflictual, liberal or repressive? The answers are not clear and will be debated for years to come. But the answers will depend on political choices and arguments made today, not only on economic size, or military clout. And they will determine the sort of world we live in over the next decades.

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David Coates: Republican Truth and Real Truth: GSEs and the Housing Bubble

January 29, 2012

In any wars of words in an election season, truth is often an early casualty. The war of words between Mitt Romney and Newt Gingrich is no exception. The two Republican front-runners are currently telling each other carefully fabricated stories about their own pasts that cover tracks and reinvent reputations . But in the end that is less damaging to the entire democratic process than the accidental and less contrived stories that, in passing, they are also telling us. Right now, as they attack each other with increasing venom, the four remaining Republican presidential candidates are collectively rewriting a critical part of our immediate past — and in the process are seriously misleading us as they battle with each other. The main rewrite now underway in their twice-weekly televised clashes is a rewrite on housing finance. In Florida, and no doubt soon again in Nevada where the foreclosure crisis is even more severe, the men seeking the Republican nomination persistently blame the housing bubble on public policy and on federally underwritten regulatory agencies: on Fannie Mae and Freddie Mac, and on the evil impact of the Community Reinvestment Act. They did so in Tampa last Monday in the first of their two Florida debates, and they did so even more starkly in their second debate in Jacksonville on Thursday night. They said this: Mitt Romney : [to Newt Gingrich, in Tampa] “You also spoke publicly in favor of these GSEs, these government-sponsored enterprises, at a very time when Freddie Mac was getting America in a position where we would have had a massive housing collapse….Freddie Mac did a lot of bad for a lot of people.” [Then, of Newt Gingrich, in Jacksonville] “Fannie Mae and Freddie Mac were a big part of why we have the housing crisis in the nation that we have….He should have stood up and said, look, these things are a disaster. He should have been anxiously telling the American people that these entities were causing a housing bubble that we’re seeing here in Florida and around the country.” Rick Santorum [ in Tampa] “There were several of us in the United States Senate back in 2005 and 2006 who saw this on the horizon, who saw the problem with Fannie and Freddie, and tried to move forth with a bill…we said, if you don’t constrain these two behemoths from continuing to underwrite this subprime mortgage problem, then we’re going to have a collapse. Unfortunately that proved – proved to be true.” [in Jacksonville] “In 2006…in warning of a meltdown and a bubble in the housing market, I stood out, I stood tall, and tried to get a reform….to gradually decrease the amount of mortgage that can be financed by Freddie – or underwritten by Freddie and Fannie over time, keep reducing that until we get rid of Fannie and Freddie.” Ron Paul : [in Tampa] “…in addition to that, it was an insult to injury, because they kept interest rates especially low with Freddie Mac and Fannie Mae, and there was a line of credit there, and it was a guarantee. As a matter of fact, I had introduced legislation 10 years before the bubble burst to eliminate that line of credit. But then the Community Reinvestment Act added more fuel to it, you know, forcing banks to make loans that are risky loans.” [in Jacksonville] “…we know how the bubble came about. It was excessive credit, interest rates held too low, too long, the Federal Reserve responsible for that. Community Reinvestment Act, which is Affirmative Action telling banks that they have to make these risky loans.” In focusing on Newt Gingrich’s relationship with Freddie Mac in this fashion, his three main challengers offer us an explanation of the housing crisis that puts full responsibility for it (and its consequences) back onto the GSE’s, the Federal Reserve and the CRA; and they are not alone in this. Theirs is a view recently reinforced by the SEC decision to prosecute senior GSE managers for failing to disclose the scale of the subprime loans on their books; by the widely-read newspaper articles of the GSE’s long-time critic, Peter Wallison; and by the extensive coverage of the new book by Gretchen Morgenson and Joshua Rosner, Reckless Endangerment , one that singles out Fannie Mae for particular criticism and censure. The only problem with that view is that factually it is, in all its essentials, entirely misleading! • Blaming a Community Reinvestment Act passed in 1977 for a crisis that emerged only three decades later was always a stretch. If the Act was guilty, its guilt certainly took a very long time to kick in; and it is a claim which recent research has entirely discredited. As Levitin and Wachter have reported on the basis of their careful survey of all the relevant research data, “there is little evidence that the CRA contributed directly to the bubble. CRA subject institutions made a disproportionately small share of subprime mortgage loans,” and “relatively few subprime loans even qualified for CRA credit ,either because they were made outside CRA assessment areas or were made to higher income borrowers.” The findings of the Federal Reserve staffers Avery and Brevoort’ s were similar: that “areas covered by the CRA experienced lower delinquency rates and less risky lending,” not higher ones. “According to recent Fed data , 75 percent of higher-priced loans made during the peak years of the subprime boom were made by independent mortgage firms and bank affiliates not covered by the act.” “Only 6% of…subprime loans had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend,” the Financial Crisis Inquiry Report noted, “were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.” Which is presumably why the Report could definitely conclude, as it did, that “the CRA was not a significant factor in subprime lending or the crisis.” • Timing matters too in relation to the GSEs and the development of a housing bubble. There is overwhelming evidence that the role of the GSEs in the explosion of housing prices and the spread of subprime lending was, at most, secondary and late. It was definitely not primary and early. The GSE’s did have an implicit government guarantee of solvency that enabled them to borrow at lower rates; and they did defend that special status with heavy lobbying. They also were the source of the securitization of mortgages that slowly transformed US housing finance from a “lend and hold” model of mortgaging to a “lend and sell on” one. But what they did not do was either initiate the lowering of underwriting standards that fueled the explosion of subprime lending, or spread those toxic assets through the U.S. and then global financial systems. Private lenders were responsible for the first of those two crucial drivers of the housing crisis, and private banks were responsible for the second. As Mark Zandi has recently noted, in 2002 before the housing boom, the two agencies held almost 54% of all mortgage debt. By summer 2006, at the peak of the bubble, their market share was down to 40%; and “it is difficult to see how the agencies could have been responsible for inflating the housing bubble at a time when they were losing a full 14 percentage points of market share.” Only as private lenders ran into difficulties did Fannie and Freddie move in to take up the slack, jumping ‘back into the housing market at precisely the wrong time.” It was in competition with private lenders, and in order to recapture market share, that eventually the GSEs did indeed lower their underwriting standards. But that belated lowering was a consequence of Fannie and Freddie being privately-owned, not of being government-sponsored. It was a lowering driven by shareholder pressure, demanded in order to compete with private-label mortgage backed securities ” In contrast , the wholly public FHA/Ginnie Mae maintained their underwriting standards and ceded market share.” It is data like this that led the Financial Crisis Inquiry Commission to report that, in their view, “the two entities contributed to the crisis but were not a primary cause.” • In consequence we would do well to discount both the Wallison thesis, and that advanced by Morgenson and Rosner. The Wallison enthusiasm for the SEC decision to prosecute senior GSE managers – his assertion that the prosecution “has made it clear that the two government sponsored enterprises played a major role in creating the demand for low quality mortgages before the 2008 financial crisis” – has been effectively rebutted by

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GRAPHIC: America’s Housing Market Divided Between Rich, Poor

January 29, 2012

The United States is divided into 41,861 distinct zip codes. And the difference in housing prices pushes them even further apart. The truly drastic disparity in the value of U.S. homes has been put into sharp focus in the below infographic by CreditSesame.com , a credit score and personal finance website. In one Detroit neighborhood, for example, half of all homes costs less than $6,388. Compare that to Alpine, New Jersey, where more than half of homes costs more than $4,550,000. Such discrepancies highlight the state of a two-sided housing market , one in which growing numbers live in low-income or high-income areas , with less of a middle in between. Check out this interactive infographic from CreditSesame.com to find out more:

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For First Time, Income Inequality An Issue At Davos

January 29, 2012

DAVOS, Switzerland — Europe’s crippling debt crisis dominated the world’s foremost gathering of business and political leaders, but for the first time the growing inequality between the planet’s haves and have-nots became an issue, thanks largely to the Arab Spring uprisings, the Occupy movement and other protests around the globe. The mood at the end of the five-day meeting in Davos was somber, and more than 2,500 VIPs headed home Sunday concerned about what lies ahead in 2012. Plenty of champagne flowed in this alpine ski resort – but the atmosphere was flat and the bubbling enthusiasm of some past World Economic Forums was noticeably absent. Despite some guarded optimism about Europe’s latest attempts to stem the eurozone crisis, fears remain that turmoil could return and spill over to the rest of the world. And there were no answers to the widening inequality gap, but a mounting realization that economic growth must include the poor, that job creation is critical, and that affordable food, housing, health care and education need to part of any solution. Just before the forum began, the International Monetary Fund reduced its forecast for global growth in 2012 to 3.3 percent from the 4 percent pace it projected in September. Many other economic forecasters also predict a slowing economy, including New York University’s Nouriel Roubini, who is widely acknowledged to have predicted the crash of 2008 and who said he might be “even slightly more bearish” on the new IMF forecast. Asia is expected to remain the engine for global growth though at a slower rate, with China leading the way at more than 8 percent, followed by India and Indonesia. IMF Managing Director Christine Lagarde warned that the eurozone crisis is not the region’s problem alone. “It’s a crisis that could have collateral effects, spillover effects, around the world,” she said. “What I have seen, and what the IMF has seen in numbers and forecasts, is that no country is immune and everybody has an interest in making sure that this crisis is resolved adequately.” The IMF is the world’s traditional lender-of-last-resort and Lagarde is trying to increase its resources by $500 billion so it can help if more lending is needed in Europe or elsewhere. European countries have said they’re prepared to give the IMF $150 billion, but that means the rest of the world will have to come up with $350 billion. At a closing panel Sunday, Paul Polman, CEO of Unilever, said a readjustment in Europe is essential “because, if you want to really simplify it, we’ve lived above our means, and we’ve done that for too long, and the moment of truth has arrived.” Vikran Pandit, CEO of the global bank Citi, said the euro crisis “is costing us about 1 percent in GDP around the world. You do the math. You do the math and say: ‘How many jobs is that? How many people are not working because of that? What can we do to go after the biggest question we’ve got for this decade which is jobs?’” The world needs 400 million new jobs between now and the end of the decade, not counting the 200 million needed just to get back to full employment, so “that should be our number one priority,” he said. To keep the spotlight on jobs and poverty at the forum, the Occupy movement that began on Wall Street and spread to dozens of cities around the world set up a protest camp in igloos in Davos. They demonstrated in front of City Hall. In a separate protest, three Ukrainian women were arrested when they stripped off their tops – despite temperatures around freezing – and tried to climb a fence surrounding the invitation-only gathering holding banners saying: “Poor, because of you” and “Gangsters party in Davos.” Citi’s Pandit said to create the conditions for growth, economic uncertainty must end and that means quickly resolving the eurozone crisis, ending regulatory uncertainty, and getting the public and private sector together to build infrastructure that can create jobs. Unilever’s Polman said it’s unacceptable that more than 1 billion people are hungry every day while another billion are obese. “How do we pull up the people that are excluded from the work force, at the bottom of the pyramid?” he asked. “That we haven’t quite figured out yet.” Sheryl Sandberg, CEO of Facebook, said the Internet sector has been creating hundreds of thousands of jobs and to keep up innovations in technology “great scientists” need to be educated all over the world, investment in infrastructure is critical, and regulations must not stifle growth or access. Nobel economics laureate Peter Diamond, an economics professor at the Massachusetts Institute of Technology, said in an Associated Press interview that in the U.S. there is “an unemployment crisis,” especially among young people who aren’t accumulating experience. He said the government should fix the Social Security system, fix aging infrastructure, spend on research, and start fixing the education system. When the forum opened, its normally upbeat founder Klaus Schwab said he remained a deep believer in free markets but that capitalism is out of whack and needs to be fixed “to serve society.” He welcomed critics’ ideas of how to fix it – including from the Occupy protesters, though they walked out of a side event where a representative had been invited to talk. This year for the first time, the forum invited about 60 “Global Shapers” – young leaders under 30 – to the forum to try to address issues confronting the generation that will be running the world in decades to come. Among the younger generation also at Davos were Chelsea Clinton, daughter of the former U.S. president and present secretary of state, who moderated a panel on philanthropy and philanthropist Howard Buffett, son of Warren Buffett, whose foundation focuses on promoting agriculture and fighting hunger, especially in Africa. The possibility of Iran developing nuclear weapons was among top concerns at Davos this year. There were also several follow-up panels on the Arab Spring and a session moderated by Schwab with Israeli President Shimon Peres and Palestinian Prime Minister Salam Fayyad, which demonstrated the deep divisions over getting peace negotiations back on track. But although the conflict in Syria – where the U.N. estimates a crackdown on anti-government protesters has killed some 5,400 people over the past year – came up in the Arab Spring panels, it wasn’t a hot issue. Julia Marton-Lefevre, director general of the International Union for the Conservation of Nature, said that this year for the first time at Davos “the environment is not treated so much as separate topic, which I think is a good thing.” “We are moving towards a more integrated approach to the world’s challenges,” she said. “Environment is not a side issue, it’s really a part of everything. For me, of course, nature is a life support system – and finally it is being recognized as being a part of the solution.”

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Eva M. Clayton: PBM Merger Means More Bad News For Consumers

January 29, 2012

American consumers, still worried about finding or keeping their jobs and paying their bills in today’s troubled economy, could receive another blow if a major health-industry merger is approved. Early this year, the Federal Trade Commission (FTC) will decide whether or not to allow pharmacy benefit managers (PBMs) Express Scripts, Inc. (ESI) and Medco Health Solutions to merge. For the sake of American patients — particularly those in lower-income and minority communities — I sincerely hope the deal is stopped. Undoubtedly, most Americans today are feeling the effects of our troubled economy in some way or another. This is especially true for the underserved communities that were struggling just to keep up even when our economy was doing well. Education, housing, healthcare and jobs are just a few of the areas where underserved Americans have historically lagged behind. Our economic downturn has only exacerbated these disparities. For instance, while the overall U.S. unemployment rate dropped for the fourth straight month in December, black unemployment rose again from 15.5 to 15.8 percent overall and from 39.6 to 42.1 among African American teens. Similarly, communities that are traditionally less likely to own their own home are even more likely to have lost their homes as a result of the recession. And finally, nearly 50 million Americans are currently without health insurance – this number includes a disproportionate number of lower-income and minority Americans. If we are going to get back to full strength, we need to get things moving in a more positive direction. To start, we need to avoid making things worse for those that have been hit the hardest by taking away access to local community pharmacies and increasing prescription prices. And this is what could result from an approved merger between ESI and Medco, two of the nation’s largest PBM companies. PBMs broker prescription drug contracts for employers, unions, health plans and others. They do so largely without regulation and with a lop-sided advantage in negotiations that increases costs to insurers and reduces the reimbursements paid to pharmacies. They squeeze the delivery system at both ends, pushing profits toward the middle. These are multi-billion-dollar companies, which, combined, would control an excessive share of the market – approximately 50 percent – and would be almost twice as big as their nearest competitor. In recent years, PBMs have used their clout to reduce reimbursement rates to pharmacies for filling prescriptions to levels that are, in some cases, unsustainably low. They have a financial interest in doing so, both because it increases their own profit, and because community pharmacies compete with the mail-order pharmacies run by the PBMs themselves. An approved merger will give the consolidated-PBM increased power to continue to wield a lopsided advantage in setting contract and reimbursement terms for community pharmacies. Already, Express Scripts has taken an aggressive stance against one of the country’s leading community chain pharmacies that is reducing patient choice. If Express Scripts is allowed to merge with Medco, it is very possible that the consolidated PBM will not only continue this bullying behavior, but will use its size and dominance to cause further harm to patients, community-based pharmacies and healthcare outcomes. Many smaller pharmacies would be forced to close their doors due to the increased costs and severely slashed reimbursements that would result. Pharmacists are front-line health providers, offering many health services in addition to filling prescriptions. If community pharmacies close, neighborhood residents will no longer have convenient access to medications, vaccinations, health screenings and prescription counseling. Restricting access to these services hurts everyone, but low-income and minority communities that already struggle with health-care affordability and accessibility issues, and have lost significant ground economically since the start of the recession, will be hardest hit. Small and independent pharmacies may not fit into the PBM industry’s vision for the future. But community pharmacies and pharmacists are the most affordable and accessible health care provider in many communities — and underserved communities in particular. Certainly their loss will have an adverse affect on patient care and outcomes. The potential harm posed by this merger is nationwide – and therefore, the deal should be closely scrutinized and stopped. American patients and consumers can ill-afford the costs (financial and otherwise) that an approved merger would generate. Eva Clayton, a former member of Congress from North Carolina, is chair of the Preserve Community Pharmacy Access NOW! (PCPAN) coalition.

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Jed Kolko: If It’s Florida, It Must Be Housing

January 27, 2012

Republican presidential candidates have kept housing on the back burner – until now. Next Tuesday’s Florida primary is moving housing front-and-center. Bold new proposals? Don’t be silly. (Hey, I’m an equal-opportunity critic – I said the same about Obama’s State of the Union .) But Romney did hold a housing roundtable, and the candidates are using housing as a scoop for slinging mud at each other. At least that’s something. Why does the Florida primary thrust housing into the limelight? Four reasons: 1) The housing bust took Florida down. Prices in most of Florida have fallen by at least 40% since their peak. Along with Nevada , Arizona and inland California , Florida was ground zero for the housing bubble, and now its residents are deep underwater. 2) Florida is in foreclosure purgatory. It takes more than two years for homes to go through the foreclosure process in Florida, longer than any other state except New York and New Jersey (which have far fewer foreclosures to begin with). That means 14.0% of Florida loans are stuck in foreclosure, compared with 6.3% in Nevada , 3.2% in Arizona , 3.2% in California and 2.7% in Michigan , according to LPS . This keeps Florida’s housing market in limbo and prevents Florida from benefitting from a plan to sell government-owned homes to investors after a foreclosure is complete. 3) Searches and prices are bubbling. Despite the bust and the foreclosure backlog, demand is stirring in Florida. Our Metro Movers Index shows that far more house hunters are looking to move to Florida – especially to North Port – Bradenton – Sarasota , Fort Lauderdale , Cape Coral and West Palm Beach -than they are looking to leave. Thanks, baby boomers and investors. And prices rose more than 2% in the third quarter of 2011 in West Palm Beach, Fort Lauderdale and several other Florida metros. 4) What happens in Florida doesn’t stay in Florida. Florida is a national housing story. One-third of all the searches for Miami homes on Trulia.com are from people living more than 500 miles away. What’s more, Chicagoans and New Yorkers can’t seem to get enough of Florida. Three of the top 10 long-distance search destinations from Chicago are Florida metros, as are five of the top 10 search destinations from New York . You or someone you love cares about Florida. The Florida housing market represents the worst of the bubble and hope for recovery. Let’s hope the Republican candidates have something to say about it, because Florida voters will.

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Details Emerge of New Financial Fraud Unit

January 26, 2012

The new Financial Crimes Unit announced by President Barack Obama during Tuesday’s State of the Union address will have the power to investigate mortgage fraud going back at least 10 years, according to senior officials at the Department of Justice. The new unit, however, could jeopardize the negotiations now taking place between five of the country’s largest banks, the states’ attorneys general and the Obama administration over mortgage fraud and wrongful foreclosures, some observers say. In a conference call with reporters on Thursday afternoon, senior officials at the Department of Justice fleshed out details of the new unit. The new unit will focus on both the origination and securitization (or packaging) of mortgage loans. The unit will also investigate loans that were sold to, and insured by, government agencies, said Justice Department officials. The new unit “has a pretty good chance of derailing it,” JPMorgan Chase CEO Jamie Dimon told CNBC on Thursday, referring to the settlement. JPMorgan is one of the five banks involved in those negotiations. It is likely that under the settlement investigators could pursue cases only from as early as January 2008, said a source close to the negotiations who is prohibited from speaking on the record. The banks are interested in the settlement because it will protect them from future liability, according to one industry insider who agreed to speak on the condition of anonymity. If they agree to spend $25 billion to guarantee such protection, then find themselves facing the exact same cases with the new investigative unit, they no longer have an incentive to bother with the settlement. Senior officials at the Department of Justice were quick to emphasize that the fate of the settlement talks is unrelated to the new unit. “We have certainly heard criticisms that the settlement would give immunity for all [the mortgage-related misconduct], but that’s simply not true …This [unit] is addressing a very different problem than the servicing settlement,” said one official. Some view the new unit as a response to the growing criticism that the Obama administration has yet to seriously pursue the big banks and high-level executives responsible for the housing crash that led to the worst financial crisis since the Depression. “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans,” Obama said on Tuesday. The investigators will consider a variety of cases, including false statements, mail and wire fraud, and failure to comply with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, established in the wake of the savings and loan crisis. This law empowers investigators to examine wrongdoings going back a decade. Many other mortgage-related laws have statutes of limitations for less than half as long. Already the new unit has 15 attorneys and 10 investigators, including FBI agents. Once fully staffed, it will employ roughly 55 people, in addition to the five co-chairs, and include a mix of new hires and existing personnel from participating agencies, including the Treasury Department, Consumer Financial Protection Bureau, Internal Revenue Service, Department of Housing and Urban Development and Federal Housing Administration as well as the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. A “significant portion” of the unit will be based in Washington, D.C., though officials anticipate expanding to “at least three or four U.S. attorney offices,” as the cases unfold, said a Justice Department official. The new unit’s co-chairs had their first call Wednesday and included staff from the office of Delaware Attorney General Beau Biden, who has resisted signing on to a settlement deal. The unit is funded through “existing resources,” according to the Justice Department officials and is part of the larger Financial Fraud Enforcement Task Force established in 2009 to investigate the roots of the 2008 financial crisis. With representatives from more than 20 federal agencies and 94 U.S. attorneys offices, the 2009 task force has disappointed critics who argue that it has chosen to pursue relatively small fraudsters while leaving alone the major offenders, including the CEOs of banks that wrongfully foreclosed on struggling homeowners. Eric Schneiderman, the New York attorney general, is one of the new unit’s five co-chairs. He gained prominence last year with his repeated assertions that the pending deal between the administration and the five banks would be too soft on the Wall Street behemoths, which are accused of falsifying mortgage documents and inappropriately denying loan modifications to needy homeowners. Specifically, Schneiderman has said he is worried that states would be required to drop potential legal battles against the banks in exchange for securing $25 billion in assistance for struggling homeowners.

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David K. Levine: Why Economists Are Right: Rational Expectations and the Uncertainty Principle in Economics — Part I

January 26, 2012

Rational expectations consequently fail for the same reason Communism failed — the arrogance and ignorance of the monopolist. John Kay In physics the Heisenberg uncertainty principle asserts a limit in our ability to simultaneously know certain facts, such as the position and speed of a particle. The theory that captures this idea is a probabilistic theory: in quantum mechanics only the probabilities of outcomes can be known in advance. Strangely, more is expected of economists. Much is made of the inability to forecast the current crisis — some say it is a crisis of economics; others say that it arises from the assumption of “rational expectations.” On the contrary: it is a fundamental principle that there can be no reliable way of predicting a crisis. The analogy with physics is instructive. The Heisenberg uncertainty principle arises because the observer interferes with the system. This is more pronounced in economics: an analyst who makes forecasts that are believed will have an impact on the behavior of the people she is analyzing. Should there not be an uncertainty principle in economics? There is — and the much maligned theory of rational expectations is the tool that economists use to account for the relationship between analyst and analyzed. Of course crises can be predicted. If I say every year “there will be a crisis this year” eventually I will be right. If 100 people each pick a different year then one of them is bound to be right. A reliable method of predicting a crisis must be a rule that anyone (or at least anyone with the requisite technical expertise) can apply and reach the same correct conclusion as anyone else using the same method. The uncertainty principle in economics arises from a simple fact: we are all actors in the economy and the models we use determine how we behave. If a model is discovered to be correct, then we will change our behavior to reflect our new understanding of reality — and when enough of us do so, the original model stops being correct. In this sense future human behavior must necessarily be uncertain. Take an example: how we might predict stock market crashes? Suppose that two behavioral psychologists, call them “Kahneman and Tversky,” produce a model of ” cognitive biases ” that predicts when crashes will occur. The model tells us that the stock market will crash on October 28. Since the model is reliable and has a perfect track record, we naturally believe this prediction. So what would you do? You would sell all your stock on October 27. But of course if enough people do this the stock market will crash on October 27 and not October 28. So this apparently reliable model will be proven wrong. Notice the emphasis here on models, or at least rules, that in principle we can all apply. Beware of oracles. Suppose Warren Buffet can always predict the day of a stock market crash and is kind enough to warn us in advance. If he can’t — or won’t — tell us how he does it we have two problems. First, he will eventually die — and then where will we be? Second, how can we know if he is really an oracle, or if he is just the lucky one of a hundred (or thousand, or billion) who said something at random and happens to be right? If we know the rule, we can apply it to historical data as well as to incoming data. The likelihood that a rule will have always proven to be correct when it is in fact wrong is naturally quite small. To take an example: the theory of gravity was controversial when it was first proposed. Yet today who thinks that the predicted trajectory of an artillery shell will be wrong? Certainly I wouldn’t care to stand where the theory says the shell will land. Do you imagine if Newton had simply made predictions about the impact of artillery shells without revealing his method anyone would have heard of him today? Stock markets provide many good examples. Have brilliant physicists working with powerful computers figured out how to forecast the stock market and make a buck? Perhaps — but of course if there are predictable patterns in stock prices — eventually the brilliant physicists will drive them away. One of the main theoretical observations of finance theory it that stock market prices are relatively unpredictable — and this is backed up by decades of evidence. That isn’t to say you might not be able to turn a profit by a clever observation and insight — just that the wise investor counts his money quickly and after six months moves on. The uncertainty principle doesn’t just apply to stock markets. Suppose a clever political scientist was able to predict that there would be a revolution in Libya and that it would end on October 11, 2011 with the death of Muammar Gaddafi. Would such prediction come true? Not surely if Gaddafi believed it — no doubt he would have left the country well in advance of that date, and while the revolution would have been successful it would have ended much more quickly and peaceably. The uncertainty principle in economics leads directly to the theory of rational expectations. Just as the uncertainty principle in physics is consistent with the probabilistic predictions of quantum mechanics (there is a 20% chance this particle will appear in this location with this speed) so the uncertainty principle in economics is consistent with the probabilistic predictions of rational expectations (there is a 3% chance of a stock market crash on October 28). Note what rational expectations are not: they are often confused with perfect foresight — meaning we perfectly anticipate what will happen in the future. While perfect foresight is widely used by economists for studying phenomena such as long-term growth where the focus is not on uncertainty — it is not the theory used by economists for studying recessions, crises or the business cycle. The most widely used theory is called DSGE for Dynamic Stochastic General Equilibrium. Notice the word stochastic — it means random — and this theory reflects the necessary randomness brought about by the uncertainty principle. In simple language what rational expectations means is “if people believe this forecast it will be true.” By contrast if a theory is not one of rational expectations it means “if people believe this forecast it will not be true.” Obviously such a theory has limited usefulness. Or put differently: if there is a correct theory, eventually most people will believe it, so it must necessarily be rational expectations. Any other theory has the property that people must forever disbelieve the theory regardless of overwhelming evidence — for as soon as the theory is believed it is wrong. So does the crisis prove that rational expectations and rational behavior are bad assumptions for formulating economic policy? Perhaps we should turn to behavioral models of irrationality in understanding how to deal with the housing market crash or the Greek economic crisis? Such an alternative would have us build on foundations of sand. It would have us create economic policies and institutions with the property that as soon as they were properly understood they would cease to function. Stay tuned for Part II.

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Florida Senator Calls For Taxpayer-Funded Sports Stadiums To Shelter Homeless

January 26, 2012

As the presidential campaign rolls into Florida, Republicans may face the issue of homelessness on an unexpected front: ballparks. A bill to force taxpayer-funded sports stadiums to double as homeless shelters is making its way through the Florida legislature this week. The bill, introduced by Republican state Sen. Michael Bennett of Florida, seeks the enforcement of a dormant 1988 law that said sports teams that accept public dollars to build their venues must shelter indigent people on off nights. If teams can’t prove that they’re already complying with the law, Bennett wants them to repay the more than $300 million that Floridians have forked over for facilities such as the Miami Dolphins’ Sun Life Stadium and the Miami Marlins’ new baseball stadium. The proposal aims going forward to make teams accountable for following the original law and providing care for homeless individuals. The politically charged legislation underscores the resentment that many feel about subsidizing sports stadiums while watching state and local governments cut needed services. Over the past decade, the public has shelled out billions of dollars for plush new digs to house their local sports teams. The bill arrives just as the Republican candidates — sometimes accused of ignoring the neediest of recession-bitten Americans — will be facing off in a Jan. 31 primary in Florida. The idea of sheltering homeless individuals where exorbitantly paid athletes such as the Miami Heat’s LeBron James and the Marlins’ newly acquired Jose Reyes play at least draws attention to the problem, say homeless advocates. “It’s an interesting thing to throw out there,” Neil Donovan, the executive director of the National Coalition for the Homeless, told The Huffington Post. “It’s a good litmus test to kind of respond to it.” The coalition had written about the forgotten law before it re-emerged in the public eye. The letter noted that the stadiums would have to comply with the same safety standards as any other shelter. It also emphasized Florida’s desperation, given its estimated 86,000 homeless and 9,000 available beds. A homeless advocate in Miami echoed Donovan’s sentiments. “It’s a great idea, as long as there are wraparound services that are provided to address the needs of any homeless population, such as screening, mental health treatment and job training,” said Ed McGowan, the CEO of Concept House in Miami. The bill faces three more stops in the state Senate before it is sent to the floor, according to the Miami Herald . A companion bill in the House is also set to be voted on. As the economy has weakened, so has the claim of franchises that stadium construction creates jobs and community revenue. Since 2000, taxpayers have shelled out $5 billion of the $9 billion used to build 28 major league stadiums, according to a 2008 University of Utah study. That includes the upcoming Super Bowl’s site, Lucas Oil Stadium in Indianapolis. The touted benefits for the public good have mostly not materialized, the study determined. Bennett, the Florida state senator, fumed over rich franchises demanding citizens’ money while programs for the poor continue to be cut. But the taxpayers’ burden could add up to victory for society’s most ignored population. Said McGowan: “I think just our economic times over the last two or three years has made everyone look at homelessness.”

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California Still Not Joining National Mortgage Settlement

January 26, 2012

One day after New York Attorney General Eric Schneiderman was named co-chairman of a federal mortgage fraud task force, California Attorney General Kamala Harris announced that she still refuses to join the national foreclosure settlement currently under negotiation among the Obama administration, the state attorneys general and the nation’s five largest banks. “We’ve reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California,” said Shum Preston, spokesman for the California Department of Justice in a statement released Wednesday. “Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners, and meaningful enforcement that ensures accountability. At this point, this deal does not suffice for California.” One major issue still undecided is the extent to which banks will be released from liability for misconduct in the mortgage market, say sources familiar with the negotiations. If a broad release is granted, states couldn’t pursue their own civil investigations of bank misdeeds. Another ongoing concern is that the financial benefit that homeowners would receive from the settlement seems too small, say sources familiar with the negotiations. The deal has been in the works since October 2010, when attorneys general from all 50 states banded together with the federal government to punish five large financial institutions — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial — for mortgage-related misconduct, including robo-signing and failure to provide mortgage modifications to eligible homeowners. In addition to a monetary penalty, the deal is expected to reform the mortgage servicing industry and offer relief to homeowners in the form of mortgage modifications, principal writedowns, refinancing and other options. Both Harris and Schneiderman walked away from the negotiations over concerns that the deal would be too soft on the banks. In his State of the Union address on Tuesday night, President Barack Obama announced the formation of the Financial Crimes Unit, under which “federal prosecutors and leading state attorneys general [will] expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.” Schneiderman is one of five men selected to co-chair the new unit, which is part of a larger Financial Fraud Enforcement Task Force , a sprawling cross-agency investigative effort established by Obama in November 2009 to “hold accountable those who helped bring about the last financial crisis as well as those who would attempt to take advantage of the efforts at economic recovery.” With representatives from more than 20 federal agencies and 94 U.S. Attorney’s Offices, the task force has disappointed critics, who argue that it’s chosen to pursue relatively small fraudsters while leaving alone the major offenders, including the CEOs of banks that wrongfully foreclosed on struggling homeowners. “Look at what happened with WorldCom. … Those guys were committing fraud at their own companies, and still they went to jail for what they did,” said a prominent securities lawyer, referring to the fates of CEO Bernard Ebbers and other WorldCom executives. In comparison, “these financial shenanigans had an impact way beyond any one company, and these guys are still walking around free,” said the lawyer. “There’s just not been much effort to hold Wall Street or any of these other guys accountable.”

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Creation Of Obama’s New Financial Fraud Task Force Feels Like ‘Groundhog’s Day’ To Some

January 25, 2012

The announcement that President Barack Obama would create a task force devoted to cracking down on financial fraud comes comes just three years after he announced a different fraud task force, leaving many in the enforcement community scratching their heads. In his State of the Union address on Tuesday night Obama announced the formation of the Financial Crimes Unit, which will include a “special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis,” he said. “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.” The language was reminiscent of a speech Obama gave in November 2009 when he announced the creation of the Financial Fraud Enforcement Task Force , a sprawling investigative unit established to “hold accountable those who helped bring about the last financial crisis as well as those who would attempt to take advantage of the efforts at economic recovery.” With representatives from more than 20 federal agencies and 94 U.S. attorneys offices, that task force, created in 2009, has disappointed critics who argue that it has chosen to pursue relatively small fraudsters while leaving alone the major offenders, including the CEOs of banks that wrongfully foreclosed on struggling homeowners. “Look at what happened with WorldCom. … Those guys were committing fraud at their own companies, and still they went to jail for what they did,” said a prominent securities lawyer who wished to remain anonymous, referring to the fates of CEO Bernard Ebbers and other WorldCom executives. In comparison, “these financial shenanigans had an impact way beyond any one company, and these guys are still walking around free,” said the lawyer. “There’s just not been much effort to hold Wall Street or any of these other guys accountable.” So what will make this new investigative group any better? One difference is that the new unit will pool state and federal resources to leverage impact, said an official with the Department of Justice. “Given that there are federal, state, civil and criminal components to these investigations, marshaling our efforts will be more effective.” Another key difference is the new unit’s narrow focus, enabling the investigators to delve deeply into the issues instead of having to spread themselves across a variety of different types of fraud, said the DOJ official. Specifically, whereas the older task force is charged with investigating the financial fraud that lead to the economic crisis in the broadest sense — corporate fraud, insider trading, Ponzi schemes — this working group is very narrowly targeted on fraud related to the origination and securitization of mortgage loans. For some consumer advocates, the new unit sounds promising. “I think it is a good sign that the administration has made this commitment to pursuing origination fraud,” said Diane Thompson, counsel for the National Consumer Law Center, one of the nation’s premier consumer organizations. “There has been a dearth of accountability for the fraud that landed us in the global economic catastrophe we are living through.” Others remain less convinced. “I am agnostic about this,” said Dean Baker, an economist and co-director of the Center for Economic and Policy Research. Eric Schneiderman, the New York attorney general, is one of the new unit’s five co-chairs. Schneiderman gained prominence last year with his resistance to the deal currently being negotiated between the Obama administration, the Department of Justice, and the majority of the state attorneys general with five of the nation’s largest banks after their being charged with falsifying mortgage documents and inappropriately denying loan modifications to needy homeowners, among other wrongdoings. Schneiderman has resisted participating in any deal that doesn’t allow states to pursue their own cases against the mortgage companies. The new group is a subunit of the larger task force. “I have respect for Schneiderman, but he is basically joining an existing task force on mortgage fraud that has done nothing for two years,” Baker said. “Perhaps he will be able to turn things around, but if that was the intention it would seem to make more sense to simply let him set up his own task force.” Three of the new unit’s co-chairs have also served on the Financial Fraud Enforcement Task Force, which raises concerns for David Dayen, a progressive blogger who’s written extensively on the housing crisis. “Three of the five co-chairs of this panel have a history of dragging their feet on enforcement against the banks in precisely the same areas that this panel will allegedly investigate,” wrote Dayen in a post . Dayen is referring to Tony West, assistant attorney general for the civil division, Robert Khuzami, director of enforcement for the Securities and Exchange Division, and Lanny Breuer, assistant attorney general for the criminal division. In addition to Schneiderman, the final co-chair is John Walsh, U.S. attorney general for district of Colorado.

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Micah Hauptman: The Power to Break Up the Big Banks

January 25, 2012

The idea that behemoth banks should be broken up is widespread and bipartisan, embraced by regulators and politicians alike. Regulators — past and present — including Simon Johnson , Richard Fisher and Thomas Hoenig have offered public support for downsizing and reforming “too big to fail banks.” The latest to publicly embrace the idea is Sheila Bair , the Republican-appointed FDIC chair who was critical in dealing with the financial crisis. Politicians also have become supportive of breaking up the big banks. Chief among them is Jon Huntsman , who made this issue the central focus of his presidential campaign, but even Newt Gingrich has expressed sympathy for splitting up financial institutions. The conservative media also has gotten into the act. The idea has garnered support from Bill Kristol of the Weekly Standard, Charles Gasparino of the Fox Business News Network and Arnold Kling of National Review, to name a few. So, how do regulators actually do it? They can use section 121 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 121 gives the Federal Reserve and the Financial Stability Oversight Council the authority to mitigate the “grave threat” that a financial institution poses by limiting the bank’s activities or forcing it to divest assets — in other words, the authority to break up a bank into separate institutions. If regulators do their jobs properly, the resulting institutions should be simpler, smaller, and safer. Those firms would be less likely to fail — and less dangerous in the event that they do. Take Bank of America, for example. In its current form, it is a “grave threat” by any reasonable definition of that phrase. On Wednesday, Public Citizen filed a petition with financial regulators, calling on them to break up the bank and reform it. The petition details how Bank of America is a systemically dangerous behemoth, holding $2.1 trillion of assets. That equals roughly 1/7 of U.S. gross domestic product and makes it the second-largest bank holding company in the U.S. Its size and number of different lines of business make it too complex to manage or regulate properly. In addition, Bank of America’s financial condition is poor and could deteriorate rapidly. Near- and long- term financial indicators demonstrate the market’s unease with the firm. It likely is undercapitalized, as it faces potential liability and market risks that could severely destabilize it. In fact, an ongoing study by the Volatility Institute at New York University’s Stern School of Business confirms the danger posed by the bank. Of all U.S. financial institutions, Bank of America contributes the most to systemic risk. This means not only that Bank of America is highly susceptible to financial crises, but also that it could “create or extend” a crisis. If Bank of America in its current form were to fail, it would devastate the financial system. Regulators would have few options for dealing with an imminent failure, and all of them would be bad. These include bailing out the firm — something prohibited by the Dodd-Frank Act — or trying to put the bank through an orderly liquidation. There are many risks involved in putting such an unwieldy institution through liquidation. Many people think it wouldn’t work. In any event, it’s likely that a liquidation would be anything but “orderly.” Luckily, these problems can be avoided. The Dodd-Frank law gives financial regulators the authority to act preemptively, safeguarding financial stability by engineering a soft landing for Bank of America well before a crisis materializes. It’s imperative that they use that authority. We’re not saying that Bank of America is bound for a crisis. We’re saying that the possibility of a crisis is all too real — and it’s a risk we can’t afford to take. That’s why financial regulators must act now. This post was co-authored by Micah Hauptman and David Arkush of Public Citizen’s Congress Watch division.

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Harry Reid Backs Obama’s Call For Congressional Insider Trading Ban

January 25, 2012

WASHINGTON — Senate Majority Leader Harry Reid (D-Nev.) said Tuesday night he would support legislation to end insider trading among members of Congress and saw no reason why the bill couldn’t become law this year. President Barack Obama called on Congress during his State of the Union address to swiftly pass legislation barring legislators from investing in companies whose business is affected by matters before the two chambers. “Well, I think people should have enough sense not to do it without legislation, but I will support legislation,” Reid told a handful of reporters after the speech. Could the bill become law this year? “I don’t see why it shouldn’t,” Reid said. Senate Republicans were glad to hear of Reid’s willingness to back the bill — or at least his inability to see how its demise might come about. “Oh good! I hope he schedules it for floor action,” Sen. Susan Collins (R-Maine) said when told about Reid’s backing. Collins is the top-ranking Republican on the Senate committee that approved the legislation in question, the Stock Act. The committee chairman, Sen. Joe Lieberman, said he was glad to hear the president backs the bill. “I think [the bill's prospects] were helped by the president’s endorsement, but the bill came out of committee on a bipartisan basis,” said Lieberman (I-Conn). “It’s one of those things we can do to restore some trust and confidence in confidence.” The bill is casually referred to in the Capitol as “The 60 Minutes Act,” a reference to a report by the television program about a series of insider trades by members of Congress. At the time, I wrongly reported that 60 Minutes’ poor choice of targets for its report, and its clumsy attempt to connect specific trading to specific legislative action, set momentum for the bill back. Instead, in fact, the report propelled the legislation forward. Still, during Obama’s endorsement of the bill, the House floor was awfully quiet, belying the public offers of support. And Reid wasn’t exactly enthusiastic about embracing Obama’s expansion of the bill to block all lobbyists from bundling political contributions, and all bundlers from lobbying. “I don’t think he said that,” Reid said. “He talked about bundlers and he talked about lobbyists, I guess, or some bundlers are lobbyists, I guess. I don’t know. Nevertheless, it’s an easy bill to support. “I hope he brings it to the floor. I don’t see a lot of controversy there,” Sen. John Cornyn (R-Texas) said.

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IT’S OFFICIAL: Condoms Are Now Required In Porn

January 25, 2012

LOS ANGELES — Actors in adult movies filmed in Los Angeles will be required to use condoms under an ordinance signed into law by Mayor Antonio Villaraigosa, and porn industry leaders say the regulation could lead them to abandon the nation’s porn capital. The law, signed Monday, will take effect 41 days after it is posted by the city clerk, something that could happen as early as this week. Officials with the AIDS Healthcare Foundation, which lobbied for years for such a law, expressed jubilation Tuesday and said they would now turn their attention to getting a similar condom requirement adopted elsewhere. “The city of Los Angeles has done the right thing. They’ve done the right thing for the performers,” said Michael Weinstein, president of the AIDS Healthcare Foundation, which had pushed the measure for six years. He said its adoption is crucial in protecting adult film actors from HIV and other sexually transmitted diseases. Weinstein said his group’s next move will be to get Los Angeles County to adopt a similar measure for its unincorporated areas. The group is in the midst of a petition drive to put the issue on the ballot, but Weinstein said he hopes the county’s Board of Supervisors will react as the Los Angeles City Council did and pass such an ordinance itself. The council gave its final approval last week. Industry officials estimate as many as 90 percent of the porn films produced in the United States are made in Los Angeles. Most are filmed quietly in the city’s suburban San Fernando Valley. After the council’s action, several of the industry’s biggest filmmakers said they might consider moving just outside the county. That prompted Simi Valley Mayor Bob Huber to announce last week that he would ask the city attorney for his community, located just across the county line from the San Fernando Valley, to write a similar ordinance. Weinstein said Tuesday his group would also be vigilant in keeping track of where porn producers might go. Exactly how the law will be enforced is still to be determined. It calls for makers of porn films to pay a fee, the amount still to be determined, that would be used to pay for spot checks at filming locations. The City Council is creating a committee to determine the amount of the fee and who would make the spot checks. Weinstein said he envisions enforcement would fall on nurses or other public health providers. “It is not anticipated, based on what we desire or what has been discussed, that it would be uniformed police officers,” he said. Weinstein said he would be open to working with industry leaders to enforce the law. He noted the ordinance does not require condoms when oral sex is involved because his group, which originally crafted it, agreed with the filmmakers that infection through oral sex was not as great as through other sex acts. The industry already requires that actors be tested for HIV every 30 days, and filmmakers say they believe that is sufficient. “It’s not that I don’t doubt the sincerity of their desire to protect the talent. And believe it or not, we have the same ambition,” Christian Mann, general manager of Evil Angel Productions, said last week after the council’s vote. “We just don’t believe their way is the best way,” added Mann, who is also on the board of directors of the industry trade group the Free Speech Coalition.

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WATCH: Postal Worker Caught With Truckloads Of Stolen Mail

January 25, 2012

On top of a financial crisis of devastating proportions, it looks like the U.S. Postal Service has yet another problem on its hands: an employee that’s hoarding stolen mail. Karen Samford, a 72-year-old postal worker in Texas, has been suspended from her job after admitting she stole and kept literally truckloads of bulk mail over the last decade, MyFoxHouston reports ( h/t The Consumerist ). Her boss reportedly became concerned with the excess mail in her office and asked if she had stashed any elsewhere, to which she admitted to renting entire storage units to hold the junk mail. “This is a hoarding problem,” she told MyFoxHouston. “People can have mental issues… it doesn’t make them insane. It makes them stupid.” Read the entire MyFoxHouston report here. Hoarding has been an especially popular topic of late, in part due to the success of TLC’s Hoarding: Buried Alive , a show profiling those who suffer through the practice. This week, for example, firefighters in Arizona struggled to extinguish a house fire after finding thousands of beer cans and ceiling-high stacks of newspapers upon entering the home. The owner said he was just “holding on to” the trash. But Samford’s episode is only the latest public relations disaster for the struggling agency. USPS also made headlines just last week after a security camera caught on tape a postal worker throwing a package over a fence . And it’s not just USPS that’s guilty of some bad deliveries. A similar event transpired last month when a FedEx employee delivered a package in much the same manner . USPS has bigger problems than bad deliveries anyway. The independent government agency is facing the possibility of default due to a monstrous budget shortfall, even as it desperately seeks ways to reduce costs and raise revenues — including cuts and raising the price of stamps . Last month USPS announced it would delay the closure of some 3,700 local post offices and hundreds of mail processing centers to allow Congress time to pass legislation that would stave off default. The closures are currently estimated to result in $6.5 billion worth in savings and some 100,000 layoffs. If USPS does reduce services, many small business owners fear the increased expenses of relying on more expensive private companies like FedEx will weigh on them, The Huffington Post reports .

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Occupy Movement Responds To Obama’s State Of The Union

January 25, 2012

The Washington, D.C. faction of the Occupy movement is slated to issue a response to President Barack Obama’s State of the Union address Tuesday. From their encampment in McPherson Square in D.C., Occupiers are expected to deliver their message via the “people’s microphone,” a system of call-and-response where one person reads part of a statement and the crowd then repeats it. An organizer for Occupy D.C. tells the Atlantic Wire that their group didn’t coordinate with the larger Occupy Wall Street movement. Choire Sicha at The Awl gives a preview from an embargoed press release sent around to reporters, writing that it’s strangely “off-key”: The language of the speech is bombastic yet vague, unspecific and sort of… narcissistic? Lots of rambling about how politics is bought and paid for, yadda yadda. (I mean, yes, that’s true! But it’s just atmospherics; why not name some names then?) About half of its claims are reminiscent of the Tea Party. (To be fair, Occupy and the Tea Party share about a 50% base common interest! Which is good and fascinating!) What’s worse about the planned speech is: it’s vaguely poetic without at all being poetry. Their rebuttal is expected to be streamed live, via Occupy DC’s UStream account . Below, Occupy’s entire statement: This 2012 “State of the 99%” response to the State of the Union will be delivered by a group of Occupiers assembled outside in a well-lit spot at McPherson Square following the conclusion of the President’s State of the Union address and/or the Tea Party response. The presentation will unfold this way: one participant will begin in the center/front of the group, in the middle of the camera frame, surrounded by the others. That person will deliver the first line of the speech, and will then be echoed by the People’s Mic. That person will then read their second line, and as the People’s Mic echoes the second line, that person will move off to the side and rejoin the group, while another person will step into the center spot to read the next two lines, with each line again echoed by the People’s Mic. This will continue, cycling through the crowd, with each person reading two lines and being echoed by the People’s Mic. Mic check! [mic check] Mic check! [mic check] Fellow Americans, good evening! [Fellow Americans, good evening!] We are men and women of the 99 percent Many of us have spent many months at Occupy Wall Street and at other Occupations across the country and around the world We are here tonight to report on the State of the 99 percent in America Of course most Americans know the state of the 99 percent very well But sometimes the one percent, on Wall Street and in Washington, need a reminder Financially, the state of the 99% is not strong That is an understatement. Never in our lifetimes have so many hard-working Americans Faced so many difficulties, so many uncertainties, so many indignities In Occupy camps around the country We find Americans from all walks of life [3 personal story couplets] Some of us have had it rougher than others And it turns out living in camps is no picnic either But we do not give up easily And we take inspiration from the brave Americans who came before us From Dr. King, who gave his life fighting for economic justice From the Suffragettes, who insisted the voice of women be heard From all of those brave or foolish enough to believe in America’s defining idea theidea of democracy That we are all created equal And we all have an equal voice in shaping the laws we all live by America Let’s be honest. When our courts tell us corporations have more right to speak than we the people do That’s not democracy. When pepper spray and midnight raids make a joke of the 1st Amendment right to assemble. That’s not democracy. When defrauding clients, blowing up our economy, forging thousands of documents and seizing people’s homes illegally is not a crime but protesting all that is a crime That’s not democracy. Our America is not a democracy, not yet. We all know why: Wall street owns Washington. Bribery is legal, and the laws we live by are for sale to the highest bidder That is why our government serves the very rich and powerful at the expense of the rest of us It protects the bonuses of bankers and Wall Street executives, while failing to keep hard-working families in their homes; It shields offshore tax havens for the very wealthy, while letting our bridges, schools, and infrastructure fall apart; There have been dark periods in our nation’s history, when corruption became the norm when grave injustices stood in the way of America living up to its best ideals. But time and time again, Americans stepped up to take back their government and correct our course. Today Occupy Wall Street and the 99% movement step into this proud American tradition. But fear not, one percent! We are not here just to help the 99% at your expense. We are here to help you too. For when you’ve begun to think rigging the game is fair game When you regard hard-working Americans as undeserving of a middle-class life and unworthy of the profit their own work creates When you treat the people who build your buildings and serve your food and raise your children and patrol your streets without respect You have not only lost touch with our humanity You have lost touch with your own humanity You need to find it again, for everyone’s sake Real democracy will do you good We are the 99% We are here to create the democracy we have all been promised. We are the 99%. Our finances are weak, but our spirit is strong. We are the 99%. Our spring is coming.

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WATCH: Kendall-Jackson President On Undercover Reality TV Show

January 25, 2012

As anyone who has actually pursued the dream of the wine industry knows, it ain’t easy. Thus was the lesson when Kendall-Jackson President Rick Tigner sported fake braces, color-changing contacts, a sweet new handlebar mustache and cut and dyed hair to become the newest reality TV star on CBS’s ” Undercover Boss .” (SCROLL DOWN FOR VIDEO) The show disguises executives to go undercover into the day-to-day depths of their companies. For Tigner, this meant picking grapes, bottling wines and doing the dirty work at his billion-dollar brand — the parent of labels including La Crema, Murphy Goode and others. According to SFGate , Tigner posed as Jake, “a good-old boy grocery store manager from Plano, Texas” who was starring on a pilot about people considering a career change. The Huffington Post obtained a clip of the show, featuring slapstick scenes of Tigner breaking bottles and fumbling through grape-picking. “That’s disastrous,” said one employee about Tigner accidentally breaking branches on the vines. “That’s like dropping money on the ground. A later scene showed Tigner working the tasting room with a complete lack of knowledge about the wines. (We would have hoped he would have at least been good at that part.) But in Tigner’s defense, it’s not his job to know the wines; it’s his job to keep Kendall-Jackson a billion-dollar company. Check out the episode on CBS on January 29 at 8:00 p.m., and check out our preview clip below:

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Romney Makes Startling Remark

January 25, 2012

WASHINGTON — Mitt Romney said corporations “are people too.” Now, he says not only that banks are people, but they “aren’t bad people.” The comment came Tuesday in Florida, which has the seventh-highest foreclosure rate in the country. “In this case, it’s because of the banks,” he said to a small group in front of a Fannie Mae-foreclosed home in the town of Lehigh Acres in the southwest part of the state. “Well, the banks aren’t bad people. They’re just overwhelmed right now.” The remarks echoed Romney’s previous response to a heckler last August two days before the Ames Straw poll. “Corporations are people, my friend…of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People’s pockets. Human beings my friend,” he said. It’s part of a pattern of Romney making offhand remarks that make him sound out of touch with the economic , which he says he can fix. “Don’t try and stop the foreclosure process. Let it run its course and hit the bottom,” he said in Las Vegas last October, which has the highest foreclosure rate of any metro area over 200,000 people according to RealtyTrac. Nevada leads the states among foreclosures. “I’m also unemployed,” he said to a group of unemployed people in June, also in Florida, which has jobless rates above the national average. “I like being able to fire people who provide services to me,” said Romney in New Hampshire earlier this month as part of an answer on why he favored competition among health insurers. “If someone doesn’t give me the good service I need, I want to say I am going to get somebody else to provide that service to me.” Romney later defended his remarks as being taken out of context; however, Romney himself took a quote of Obama out of context in an attack ad. The remarks came on the same day that the former Massachusetts governor — who has an estimated wealth between $190 million and $250 million — released his tax returns , which showed that he and his wife paid a 13.9 percent effective rate on $21.7 million in 2010–much lower than most middle-class taxpayers due to their income entirely deriving from investments.

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How Mitt Romney Got A Seven-Digit Windfall Courtesy Of Goldman Sachs

January 24, 2012

Mitt Romney, man of considerable wealth, has Goldman Sachs to thank for at least some of his fortune. In his 2010 and preliminary 2011 tax returns, made available for public viewing on Tuesday, Romney’s relationship with the Wall Street firm comes to life — one in which a future Republican presidential candidate benefited from preferential treatment during the iconic investment bank’s initial public offering in 1999. (Read More about the Mitt Romney-Goldman Sachs connection at The Caucus) As noted by The New York Times , Romney experienced a seven-digit windfall in 2010 thanks to his connection with Goldman Sachs, which handled many of the candidate’s assets in return for some $48,582 in management fees . Romney’s bonanza came about as a result of a 2010 sale of 7,000 stock shares from Goldman Sachs’s initial public offering, which happened in 1999. At the time, Goldman’s public launch raised some eyebrows for how carefully the company steered the allocation of its own stock. The fact that Romney was even given the opportunity to have shares in the company when it went public makes him part of a rather exclusive club, as shares went to a handpicked group of customers, employees, and partners . Romney acquired 7,000 shares, which went into a blind trust managed by Goldman itself — eventually netting $1,130,123.87 . That sale wasn’t the only time that Romney realized financial benefits as a result of his connection with Goldman Sachs. The Center for Responsive Politics, which tracks campaign contributions from the employees, owners and political action committees of various organizations, lists Goldman Sachs as the top donor to Romney’s campaign in this election. Romney’s relationship with Goldman Sachs could raise questions about his ability to police the financial sector in the wake of the financial crisis. Still, he’s not alone in getting criticized. The cozy relationship between Wall Street and Washington has come under fire thanks in part to the Occupy movement .

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Greg Voakes: From Googol to Glory: The Tale of Sergey and Larry

January 24, 2012

Larry Page and Sergey Brin met at Stanford in 1995, the same year Microsoft released its cleverly named Windows 95. Back then, the two were just computer science nerds trying to find their way in a world without Google — but they quickly got to work on what would later become the algorithm behind the world’s most heavily trafficked search engine. From the time they hired their first in-house chef to the disclosure of their monster IPO, this timeline attempts to chronicle the revolution of Google — one that has completely changed the Internet. Created By Online PhD

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Romney’s Income Puts Him In The Top 0.006 Percent

January 24, 2012

TAMPA, Fla. — Mitt Romney and Newt Gingrich’s fight for Florida and the states beyond stayed at a high boil Tuesday as Romney released tax returns showing annual income topping $20 million – including a now-closed Swiss bank account – and Gingrich insisted his high-paid consulting work for a mortgage giant that contributed to the housing crisis didn’t include lobbying. After a night of mutual sniping in a debate, the two leading GOP presidential candidates tried to turn the arguments over their various business dealings to his own advantage. Romney’s release of two years’ worth of tax documents, showing him at an elite level even among the nation’s richest 1 percent, kept the focus on the two men’s money and how they earned it. Romney’s income put him in the top 0.006 percent of Americans, according to Internal Revenue Service data from 2009, the most recent year available. His net worth has been estimated as high as $250 million. As the former Massachusetts governor relented to pressure and released more than 500 pages of tax documents, Gingrich kept up the heat, saying Romney was “outrageously dishonest” for accusing him of influence peddling for government-backed mortgage giant Freddie Mac. The former House speaker said Romney’s charges were ironic, given that it was revealed after Monday’s debate that Romney himself was an investor in both Freddie Mac and its sister entity, Fannie Mae. “I don’t own any Fannie Mae and Freddie Mac stock. He does, so presumably he was getting richer,” Gingrich told Fox News on Tuesday. The specter of well-off Gingrich and wealthier Romney feuding over money matters pleased Rick Santorum, who lags in polls for next Tuesday’s Florida primary but hopes to benefit from the dust-up as the race moves on. He told MSNBC: “The other two candidates have some severe flaws.” Striking out in two directions, Romney planned to offer advance criticism of President Barack Obama’s Tuesday night State of the Union address, then focus on Florida’s housing woes in an event sure to again highlight Gingrich’s $25,000 monthly retainer from Freddie Mac. Gingrich, starting a busy day of campaign rallies along Florida’s Gulf Coast, also took on Obama, criticizing him on foreign policy, energy plans and other issues. “I’m not so much interested in trying to tear Obama down as I am interested in getting the country to see clearly who he is,” he said in St. Petersburg. Records released by Romney’s campaign show he closed a bank account in Switzerland in 2010, as he was entering the presidential race. He also kept money in the Cayman Islands, another spot popular with investors sheltering their income from U.S. taxes. But Benjamin Ginsberg, the Romney campaign’s legal counsel, said Romney didn’t use any aggressive tax strategies to help reduce or defer his tax income. “Gov. Romney has paid 100 percent of what he owes,” Ginsberg said Tuesday. Romney paid about $3 million on nearly $22 million in income in 2010 and indicated his 2011 taxes would be about the same, $3.2 million on nearly $21 million in income. During the debate, Romney predicted his tax information would generate chatter but not any surprises, saying what he paid was “entirely legal and fair.” Romney had declined to disclose any tax releases until he came under mounting criticism from his rivals. In 2010, he donated a combined $3 million to the Mormon Church and other charitable causes. His effective tax rate was about 14 percent, the records showed. For 2011, he’ll pay an effective tax rate of about 15.4 percent, a level far lower than standard rates for high-income earners, reflecting the lower rate for long-term capital gains. The tax records may silence Gingrich and others who argued that Republican voters should know the details of Romney’s wealth before they select their presidential nominee and not after. But it also could open up new lines of attack. After Gingrich’s overwhelming victory in South Carolina last Saturday, Romney can ill afford to lose Florida’s Jan. 31 primary, and he showcased a new aggression from the opening moments of the debate. He said Gingrich had “resigned in disgrace” from Congress after four years as speaker and then had spent the next 15 years “working as an influence peddler.” In particular, he referred to the contract Gingrich’s consulting firm had with Freddie Mac, a government-backed mortgage giant that Romney said “did a lot of bad for a lot of people and you were working there.” “I have never, ever gone and done any lobbying,” Gingrich retorted emphatically, adding that his firm had hired an expert to explain to employees “the bright line between what you can do as a citizen and what you do as a lobbyist.” Rep. Ron Paul, who’s bypassing Florida in favor of smaller, less expensive states, returned to Texas after Monday’s debate. Santorum will appeal to the tea party to help revive his candidacy, appearing at two tea party events. ___ Associated Press writers Kasie Hunt in Florida and Connie Cass, Jack Gillum, Stephen Braun and Stephen Ohlemacher in Washington contributed to this report.

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Ebong Eka: Can You Hear Me Now? Doesn’t Matter — Just Email Me!

January 24, 2012

Media and the American landscape changes continually with technology. As a result, the way we get our information will change accordingly. We’re basically becoming a “three screen Information society.” A ” Three Screen Information Society ” is comprised of: 1) a smart-phone, 2) tablet PC and 3) a flat screen. Smart-phones are mobile computers that can do everything from reminding you to send flowers to your mother on Mother’s Day to helping you find your car in a mega-mall parking lot. Tablet PCs, like the iPad, Kindle Fire and Motorola Xoom, aren’t just for Angry Birds (which is as addicting as Zynga’s “Words with Friends”) but are also used to read newspapers, watch movies and read best-selling books. Flat screens, on the other hand, aren’t as mobile but provide visually rich content in High Definition (HD). The good news about our current technological landscape is the prices for these amazing tools (or toys) continue to fall. The bad news is the costs associated with using these technological marvels and computer devices are starting the rise. Checking email, surfing the Internet, using great apps like Facebook and Twitter all require robust data plans… for which we pay our phone carrier’s for the privilege. Mobile phone companies also realize the increasing demand for data. “Data usage is increasing at about 40 percent a year,” said AT&T’s spokesman Mark Siegel. With over 300 million cell phone users in the U.S. alone, that’s a lot of data usage! AT&T recently announced they will be raising prices by as much as 33 percent on Jan. 22, 2012. New customers on its least-expensive program will pay $20 a month for 300 MB, while three gigabytes (GB) will cost you $30 a month. The price increase will only affect new customers and not those currently in existing contracts. The higher the demand for data usage, the more likely we’ll see price increases for these services in the future. Before contemplating an early exodus from your current phone carrier, here are a few tips to consider: 1. Check your phone bill for your current data usage. You may have room to lower your bill by choosing a lower priced plan or by increasing the plan. 2. Research other carriers and compare your current data needs with what the other carriers offer. Don’t only focus on price! 3. Most phone carriers offer a corporate discount. Check with your company and the phone carriers to see if you qualify for a corporate discount. You can save as much as 22 percent per month/bill for working at your company. 4. Consider switching carriers — Sprint and T-mobile offer unlimited data plans (with some data speed restrictions of course). Maybe it was good for the consumer that the AT&T and T-mobile merger didn’t happen. More importantly, with the exponential increase in data usage, “Can You Hear Me Now? (TM)” will no longer apply. Just send me an email instead! Stay tuned for more money tips! Got Money questions? Email your questions: info(at)EbongEka.com

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A busy and mixed week for the superpower…

January 21, 2012

Unlike the past weeks since a new year began this week was filled with data regarding the superpower’s business, labor and housing conditions along with important inflation reports all in all …

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VIDEO: Mitt Romney Defends Bain Capital Tenure, Tries Out ‘Crony Capitalism’ Charge

January 20, 2012

Mitt Romney gave a sneak preview of a defense he plans to use against President Obama when it comes to the former governor’s tenure at Bain Capital, a “vulture capitalist” firm. Pressed by Newt Gingrich on his time as a private equity executive, Romney turned the question to Obama. “He’s been practicing crony capitalism,” Romney said of the president. “You’ve got to stop the spread of crony capitalism.” Crony capitalism isn’t a new charge to throw around, though using it to neutralize Bain is. Romney’s list of particulars included the auto bailout, Solyndra, appointments to the National Labor Relations Board and the Keystone XL pipeline. Only Solyndra could plausibly be considered crony capitalism, if the charge that the administration sent a $5 million loan guarantee to the solar panel company to take care of campaign contributors is accurate. The auto bailout and the NLRB examples, even in Romney’s own formulation, are at worst favors done for Big Labor, not crony capitalists. The pipeline, meanwhile, is backed by large elements of labor, while opposed by environmentalists, so it’s difficult to include it under a crony capitalism umbrella. Debates are a good place to work out messaging, and Romney appears to be trying out crony capitalism.

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Tom Fox: Sharing Best Practices Across an Agency

January 19, 2012

Oftentimes federal workgroups innovate and/or develop best practices, but we do not share across systems. How do high-performing government agencies or private sector companies spread best practices to ensure integration? — Supervisor (GS-15), U.S. Department of Veterans Affairs Anyone who’s worked in a large organization can tell you how it is difficult to spread best practices effectively across organizational stovepipes. However, regardless of your agency’s size, geographic diffusion or IT systems, there are a number of strategies for how to best share information successfully. The most high-performing organizations I’ve worked in or witnessed develop best practices as a result of their senior leaders setting clear expectations that employees should be sharing their knowledge across their agency. While online tools are useful, the most effective way to share information is still through face-to-face contact, and our federal government has a number of avenues to help connect you with colleagues. If we take the federal IT community as an example, there are several opportunities for sharing best practices including officially sanctioned communities like the Chief Information Officers (CIO) Council , professional associations, or external networking groups like my organization’s (the Partnership for Public Service) Strategic Advisors to Government Executives program, which connects senior-level IT executives in government with their predecessors in the private sector. You might also consider building your own group within your agency. Start by talking with others who are working on similar projects and then organize a coffee or brown bag lunch to begin sharing best practices. A web-based database can be helpful in facilitating this process also, so that teams can share project-oriented best practices and lessons learned in a consistent format. If you get really ambitious, you could also work with your internal information management team to figure out the best ways of using an existing Intranet or SharePoint site as means of storing and sharing information with a broader audience. Federal managers, how have you effectively shared best practices within your agency and across the federal government? Please share your ideas by adding a comment below, or by sending an email to me at fedcoach@ourpublicservice.org . This post originally appeared on the Washington Post’s Federal Coach blog.

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Ron Ashkenas: Stop Bashing HR

January 19, 2012

Especially today , recruitment, retention, and development of human capital is a critical success factor for almost any organization. Yet the area charged with helping line managers leverage their human capital — Human Resources — is often regarded with outright disdain . Just look at a few of the comments readers made in response to a recent (and thoughtful) HBR post by Brian Hults from Newell Rubbermaid called Why HR Really Does Add Value : “I have yet to see HR add value to any organization.” “[HR] is more often an obstacle that needs to be navigated to complete real business processes.” “The fact that the author essentially advocates turning HR into something that would be called ‘strategic planning and integration’ is exhibit A as to the complete uselessness of HR…” These comments are not unusual. In many organizations, HR is perceived as inefficient, ineffective, overly bureaucratic, and incapable of contributing to results — despite the fact that its role is absolutely critical. So what’s going on? One possibility is that the criticisms could be true. Some organizations do have weak HR functions that mostly perform transactional work that doesn’t add unique value. But in my experience, and that of consultants working with dozens of firms, this level of HR incompetence is rare. The more likely reason is that people have negative experiences with transitioning HR functions. This can happen in two ways: On one front, corporations are spending millions of dollars on systems (e.g. PeopleSoft, SAP, Workday) to streamline basic HR transactions and improve HR information. Putting these new processes in place takes time, not to mention major shifts in roles and responsibilities; and it rarely goes smoothly. Simultaneously, these same firms are trying to strengthen the more strategic and consultative roles of HR — such as talent assessment, leadership development, change management, and organization effectiveness. But this also takes time, both to develop people and to build the processes necessary for them to be effective. Jeff Shuman, who heads HR and Administration for the Harris Corporation, one company that values HR as a strategic business partner, explains what it takes to get through this transition: “Five years ago, managers wanted HR to do all the employment — and talent-related work. We had to push back and make it clear that managers were accountable too for their people and that HR was there to take an enterprise-wide approach, guide, and provide tools, but not do everything employment-related for them. We then invested in technology to help managers do the basic transactions, focus the HR generalists’ role, and grew our skills in OD, leadership development, and talent. Now managers have most of the HR components they need on their desktops — employee assessments, development plans, reward and recognition reminders, and things like that. That has freed up our HR staff to help managers solve more strategic problems, identify elephants in the room, look at the human capital implications of business strategies, and challenge them to assign the best people on the most critical assignments. This took a strategic approach, and it didn’t happen overnight.” So HR’s evolution — like the one that Shuman spearheaded at Harris — does not just concern changing HR. It’s also about helping managers take more accountability for people and culture, and eventually blurring the rigid distinction between “HR” and “management.” In fact one of the key contributors to success at Harris was much greater rotation of people between HR and the line organizations. This has created an environment where there is less “HR-talk” since managers and HR people have common perspectives and language. Given the human capital challenges facing almost every organization, perhaps it’s time to ease off the HR-bashing. Instead, let’s figure out what it will take to accelerate the transition that most HR functions truly want to make, and how line managers can make the journey with them, side by side. What’s your experience with the evolution of HR? Cross-posted from Harvard Business Online .

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