Tags: foreclosure, homeowners, mortgage debt, mortgage fraud, roger hollander, state governments, subprime, wrongful foreclosure
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Needy states use housing aid cash to fund prisons, education shortfalls, and plug budgets
As part of a financial settlement over fraudulent mortgage practices earlier this year, some of the nation’s largest banks agreed to make payments to state government totaling $2.5 billion that would be earmarked for victims of wrongful foreclosure and other distressed homeowners. Instead, reports the New York Times today, a majority of those funds are going to plug state budget shortfalls, leaving homeowners without recourse and validating critics who questioned the strength of the deal when it was announced in February.
Protesters staged a rally against home foreclosures in California on Tuesday outside the State Capitol in Sacramento. (Max Whittaker for The New York Times)
The total settlement was for $25 billion, but only a tenth of that was to come in the form of cash payment to the states. The remainder was to come in the form of “credits” for reducing mortgage debt and other loan activities.
Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, told the Times the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”
* * *
The New York Times: Needy States Use Housing Aid Cash to Plug Budgets
Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.
In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.
Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.
“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”
Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”
The $2.5 billion was intended to be under the control of the state attorneys general, who negotiated the settlement with the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally. But there is enough wiggle room in the agreement, as well as in separate terms agreed to by each state, to give legislatures and governors wide latitude. The money can, for example, be counted as a “civil penalty” won by the state, and some leaders have argued that states are entitled to the money because the housing crash decimated tax collections.
Shaun Donovan, the federal housing secretary, has been privately urging state officials to spend the money as intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he said Tuesday.
Some attorneys general have complied quietly with requests to repurpose the money, while others have protested. Lisa Madigan, the Democratic attorney general of Illinois, said she would oppose any effort to divert the funds. Tom Horne, the Republican attorney general of Arizona, said he disagreed with the state’s move to take about half its $97 million, which officials initially said was needed for prisons.
Tags: bailout, banking committee, barney frank, chris dodd, Citibank, Economic Crisis, financial crisis, foreclosures, Goldman Sachs, homeowners, Martha Coakley, massachusetts, massachusetts attorney general, Merrill Lynch, Morgan Stanley, Politics News, roger hollander, rule of law, ryan grim, Subprime Mortgage Crisis, subprime mortgages, ubs, unfair loans
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(Roger’s note: read this then tell me why the Bailout funds could not be used to help homeowners pay subprime mortgages so that the Attorney General could pursue criminal charges against Goldman Sachs for the sake of justice and future deterrence; instead of letting Goldman Sachs get away with breaking the law with impunity and buy their way out with the taxpayers dollars. I am guessing that the Massachusetts AG is taking her cue from Barack Obama and his AG, Eric Holder, who would rather “reconcile” and “look forward” rather than comply with their oaths of office to defend and uphold the U.S. Constitution.)
Ryan Grim, www.huffingtonpost.com, May 12, 2009
Massachusetts Attorney General Martha Coakley won a victory against the Goldman Sachs Group Monday, forcing the financial firm to cut a $10 million check to the state and pony up $50 million to help around 700 homeowners pay subprime mortgages.
“Goldman Sachs is pleased to have resolved this matter,” says Michael DuVally, a Goldman spokesman, declining to comment further.
They were also pleased, no doubt, by the terms in the settlement that allowed Goldman to avoid admitting any wrongdoing. Letting Goldman off excuses what could have been criminal behavior, but it also brings relief to hundreds of homeowners and offers a roadmap to some sort of law-enforcement-driven solution where lawmakers have come up short.
Massachusetts Congressman Barney Frank, chairman of the House Financial Services Committee, said he wouldn’t “second guess” Coakley’s decision to settle short of criminal convictions. “I don’t know what other avenues she had available, but I will say this: Getting significant relief for 700 people is very important, both for them and for the economy. Now, that’s a legitimate consideration in getting it done more quickly than waiting for a couple years to go through the criminal procedure,” he tells the Huffington Post.
Rep. Bill Delahunt was a Massachusetts District Attorney for 23 years. He said balancing immediate justice for victims with bringing the white-collar criminals to justice can be difficult.
“You almost have to judge those on an ad hoc basis. There’s no formula,” he says in general, adding that he didn’t know enough about Coakley’s investigation to comment on her specific course of action.
“Clearly, there’s a preference to pursue them criminally because I think that creates deterrence,” he says. “You know, it’s difficult to deter a kid who’s going to rob a 7-11 store for 25 bucks but for people who are purportedly educated, or at least sophisticated, who defraud others, they’re more susceptible to being deterred.”
But the most sophisticated they are, the more they can drag out a prosecution. By the time they’re found guilty, half the victims may be out on the street, their homes foreclosed.
“It’s not always a perfect world and you can’t always secure the perfect justice,” says Delahunt. “It would appear that our attorney general did some good work that resulted in a very significant sum of money for redress by their behavior.”
Frank agrees. “I can’t tell exactly what the considerations were, but I’m inclined to think the value of getting immediate relief for 700 people and saving their homes, yeah, I’d trade off a little for that,” he says.
Goldman Sachs was not accused of originating the subprime loans in question, but rather investigated for facilitating the process by buying them and bundling them into securities without regard to whether the borrowers would be able to pay them back — or whether the borrowers or originators had followed reasonable lending practices or filed the appropriate paperwork.
“We will continue to investigate the deceptive marketing of unfair loans and the companies that facilitated the sale of those loans to consumers in the Commonwealth,” Coakley said in a statement. (Coakley’s press office did not return a call.)
The state attorney general’s office has previously pulled in more than $75 million from settlements with UBS, Morgan Stanley, Citibank, and Merrill Lynch, all related to the financial crisis.
But the U.S. attorney general would have a hard time making a similar case nationally. Coakely relied on stricter rules on subprime lenders who make “unfair” loans under state law.
Congressional Democrats hope to give the federal government the power some states now have. Last week, the House passed anti-predatory lending legislation that Coakley helped Frank’s committee draft.
“What we do in our bill is to go beyond any set of state laws,” says Frank, citing a requirement that five percent of the loan portfolio be kept by the company that originates the loan. Having that amount of skin in the game, he hopes, will persuade a lender to take a loan seriously.
The bill is now, like much else, stalled in the Senate.
Banking Committee Chairman Chris Dodd (D-Conn.) says that subprime lending reform is a lesser priority because the credit freeze has inadvertently dried up the business.
“That’s true right now but we cannot count on that being true forever,” says Frank. “You couldn’t count on getting a non-predatory loan a little while ago and it is true that the freeze has helped some. That’s true in some other areas as well. There aren’t a lot of credit default swaps being written.”
But, says Frank, the financial industry won’t have forgotten how to write a bad loan once the market thaws.
“It is important to get laws on the books, because this de facto moratorium isn’t going to last forever,” he says.
Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America
Obama Increases Number of Prisons, Cops May 12, 2009Posted by rogerhollander in Criminal Justice.
Tags: bailout, bailout millionaires, black prisoners, Criminal Justice, criminal justice race, doj, federal budget, federal prisons, homeless, homeowners, imprisonment rate, incarceration, incarceration rates, justice department, mendota california, new prisons, obama budget, prison budget, prison industrial complex, prison racism, rady ananda, roger hollander, u.s.jails, women prisoners
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Rady Ananda, www.opednews.com, May 12, 2009
President Obama’s 2010 budget proposes $105 million for two new federal prisons. The new budget will also add $3 billion to the Department of Justice budget from 2008 figures, putting 50,000 more cops on the payroll. That might be necessary since he continues to bailout billionaires and millionaires, while allowing more homeowners to become homeless.
Though only comprising 5% of the world’s population, the US jails more citizens, in raw numbers and as a percent, than any other nation on the planet. Obama proposes to jail another 3,000 citizens, devoting scarce dollars to the prison industrial complex.
To highlight some prison fun facts from a prior article:
The US convicts people of color at rates far above those for whites, and for longer terms. In 2006, the incarceration rate per 100,000 for whites was 409, and 2,468 for blacks. That’s an imprisonment rate of nearly 3 in 100 for blacks, or six times higher than for whites. With the federal government’s war on drug users, women now comprise a growing portion of those imprisoned. In 1925, the US jailed one in 100,000 women; in 2006, the US jailed one in 746 women.
In the economically distressed town of Mendota, California, formerly an agriculture community, Mendota officials see economic opportunity in jailing people. With over $49 million in federal funds, the new prison scheduled to open in 2010 will employ only 314 people. No one is sure how many, if any, of them will be Mendota citizens.
Under Obama’s proposed federal prison budget, West Virginia will take the remaining $55 million for a new federal prison.
Tags: amy goodman, bailout, bank of america, banks, bar association, bruce marks, citigroup, department of commerce, economic justice, economic meltdown, evictions, fair housing center, fammie mae, fdic, foreclosures, gmac, Goldman Sachs, homeowners, hsbc, jpmorgan, judd gregg, kathy broka, legal aid, legal aid society, marcy kaptur, mortgage restructure, mortganges, naca, option one, paulson, pnc, predators tour, predatory lending, real estate, roger hollander, sec, sheriff's eviction, Stimulus, subprime, tarp, tim geithner, treasury department, Wachovia, Wall Street, wilbur ross
www.democracynow.org, February 3, 2009
Rep. Marcy Kaptur, Democratic Congress member from the Ninth Congressional District of Ohio. She’s the longest-serving Democratic woman in the history of the House.
Bruce Marks, Founder and CEO of NACA, the Neighborhood Assistance Corporation of America, which has just successfully pressured Fannie Mac to restructure thousands of troubled mortgages.
Kathy Broka, President of the Fair Housing Center in Toledo, Ohio.
AMY GOODMAN: After an $850 billion bailout for Wall Street and another $25 billion for the auto industry, struggling homeowners still await large-scale government assistance. The Obama administration says it’s working out the details of its plan to stem foreclosures.
Well, in the absence of government action so far, some are taking action on the local level. In Michigan, Wayne County Sheriff Warren Evans announced Monday he won’t enforce sales of foreclosed homes. Wayne County includes the city of Detroit and has had more than 46,000 foreclosures in the past two years. Evans says he came to the decision after reviewing the Troubled Asset Relief Program, the Wall Street bailout measure known as TARP. He says the foreclosures would conflict with a provision ordering the Treasury Department to reduce foreclosures and help restructure loans. Evans said he’d be violating the law by denying foreclosed homeowners the chance at potential federal assistance. He said, “I cannot in clear conscience allow one more family to be put out of their home until I am satisfied they have been afforded every option they are entitled to under the law to avoid foreclosure.”
Meanwhile, the government-backed mortgage giant Fannie Mae has agreed to restructure mortgages after a campaign led by one of its biggest critics, the Neighborhood Assistance Corporation of America, or NACA. Fannie Mae will work with NACA to modify mortgage payments for struggling homeowners. In October, NACA held a protest outside Fannie Mae’s D.C. headquarters, blockading the entrance until being granted a meeting with top executives.
And in Ohio, Democratic Congress member Marcy Kaptur is encouraging homeowners facing foreclosures to stay in their homes. Kaptur says residents should exercise squatters’ rights to refuse being forced out because of loans she says could well have been illegal.
Congress member Kaptur joins us now from Toledo, Ohio. She is the longest-serving Democratic Congress[woman] in history. We’re also joined by Kathy Broka, president of the Fair Housing Center in Toledo. And on the line in Boston is Bruce Marks. He’s the president of the Neighborhood Assistance Corporation of America, which has just successfully pressured Fannie Mae to work with it to restructure thousands of troubled mortgages.
We’re going to go first to Ohio. Congress member Marcy Kaptur, can you repeat what you said on the floor of the House? What are you urging homeowners who could be foreclosed to do?
REP. MARCY KAPTUR: Well, the most important thing to do is to get legal help. And what we are finding is that if people receive a notice from a financial institution, their first reaction is fear, rather than getting proper legal representation. Here in our region, we recommend that people go to Legal Aid or the Advocates for Basic Legal Equality—or nationally, there’s a number people can call: (888) 995-HOME—and to get the proper legal representation, so they can actually have the scales of justice be balanced rather than, now, all the power to Wall Street and none of the justice to Main Street.
AMY GOODMAN: Now, explain how that works. If you have a person who’s at home, and they come to take the family out, you’re saying sit there?
REP. MARCY KAPTUR: Well, if it’s a sheriff’s eviction, if it’s reached that point, that is almost impossible. But we find that most of the foreclosures that haven’t reached that point, families are not getting the proper legal representation, and that’s why I’m saying that possession is nine-tenths of the law; therefore, stay in your property.
Get proper legal representation. If you believe that Wall Street has been deceptive, could have been fraudulent or tried to dupe the public, and with these subprime loans and with the kind of circuitous financing that’s been done, Wall Street cannot produce the deed nor the mortgage audit trail, you need a lawyer.
And you should stay in your home. It is your castle. It’s more than a piece of property. It’s your home.
And just because Washington hasn’t handled this bailout properly—and we never should have done it this way in the first place. We should have used the Federal Deposit Insurance Corporation and the Securities and Exchange Commission to resolve and do these workouts. Washington chose another road, which has been very, very destructive. I have opposed this all the way. But because they’ve done the wrong thing, you, at least, shouldn’t be the victim of what’s been happening on Wall Street and in Washington. You need a lawyer. You need a good lawyer. And you ought to get that legal representation so that the scales of justice are balanced.
AMY GOODMAN: And Congressman Kaptur, of course—Congress member Kaptur, of course, the people who are being forced out of their homes now are in the most difficult situations. How do they afford a lawyer? How can they even think along these lines?
REP. MARCY KAPTUR: Well, that’s why I’m recommending your Legal Aid Society. Call your local bar association or the national number, (888) 995-HOME. Most people don’t even think about getting representation, because they get a piece of paper from the bank, and they go, “Oh, it’s the bank,” and they become fearful, rather than saying, “Oh, wait a minute. This is contract law. The mortgage is a contract. I am one party. There is another party. What are my legal rights under the law as a property owner?” And many times, they are abrogating their own rights. They’re forgetting that they have rights in this proceeding. And they need to exercise those legal rights.
You know, when this mess started, when the meltdown really started back last year, 75 percent even of the subprime loans were performing. That means people were making their payments. What Washington has done and what Wall Street has done has made it so much worse. But those loans were performing loans. The other 25 percent weren’t all bad either. There were some issues, but they could have been worked out. Washington went backwards, when it should have gone forwards. It should have embraced Main Street; it embraced Wall Street first, and they trusted them again, the very same institutions, the five top ones, that have done most of the damage: JPMorgan, Wachovia, Bank of America, Citigroup and HSBC. If you get a letter from one of those, you should say, “I need a lawyer.” You need a lawyer in order to represent your interests in that contract.
AMY GOODMAN: You’re saying they did it wrong. Explain exactly what you felt was wrong and how it should have been done right and how it can be fixed now, Congress member Marcy Kaptur.
REP. MARCY KAPTUR: Alright. Well, if we look at prior meltdowns in the real estate market—and I’d love to have an hour to tell you what’s really gone wrong—but the federal institutions that were normally used to do workouts and to resolve pending bank failures are the Federal Deposit Insurance Corporation and the Securities and Exchange Commission. They have all the examination powers. They have enormous power to do workouts, to track that loan, to get it, to put the borrower at the same table. If they have to write down some losses, both by the lender and by the mortgagee, they do that. The Securities and Exchange Commission comes in and, through their auditors, they deal with the real valuation of property, even in a downturned economy.
Those institutions were put on the shelf. They were not used. In fact, I think one of the reasons they were not used is because when they come in, they bring examiners. They actually look at the books. They can do mortgage audit trails. And I think that Wall Street really didn’t want that, and they were powerful enough, in order to help to pass a bill, scaring Congress right before the election, before a new president was elected last fall, that they really put all the power in the Treasury Department, which isn’t a housing agency. It really doesn’t do bank regulation in the same way that the FDIC does, nor oversight. Treasury really works with Wall Street. They basically sell US debt. There’s a real circuit that goes between Wall Street and Washington, the Capitol, the US Treasury Department. So they used the wrong agency.
They brought in people from the very companies, like Goldman Sachs, to run the Treasury that had been one of the agencies—one of the companies that was going under, so they made it into a bank holding company. You can follow the trail of what they did. Meanwhile, they’re protecting their interests on Wall Street. And here on Main Street, the so-called bailout that they were given hasn’t trickled down. And so, millions and millions of families are getting foreclosure notices. They don’t have proper legal representation. The Washington-Wall Street circuit isn’t really working to allow these workouts to occur, and people are falling off the edge.
Somewhere, the scales of justice have to be balanced, and Washington has to use the traditional instruments that have worked. They have actually given power to a department that has been abysmal in its handling of taxpayer dollars. And you know what? There’s been no real oversight by the Congress, as required by that TARP law that was passed last year. So it, to me, is just an indication of how much power these institutions really have politically. But why should my constituents or the constituents of members around the country be hurt even more? They need representation in this process. They deserve it.
AMY GOODMAN: Congress member Marcy Kaptur, when you talk about those who caused the problem now being in charge of solving the problem, you can only think of a job description for the Treasury Secretary: be a part of the mess and don’t pay your taxes, and you, too, could be Treasury Secretary of the United States of America, Tim Geithner. Your thoughts?
REP. MARCY KAPTUR: Walk away with billions. And then—oh, Secretary Paulson came from Goldman Sachs, which, as this crisis began, carefully tucked itself as a—I call it a gambling house; it was an investment house up on Wall Street—they came under the Bank Holding Company Act. Why would they do that? Morgan Stanley did, as well. Why would they do that? They did that because they then become eligible for deposit insurance, which the good banks have paid into for decades. But Goldman didn’t pay into that. Morgan Stanley didn’t pay into that. So they all of a sudden went legit; they turned from a gambling house into a bank, just like that. Most of the public didn’t even catch that. And so, they wanted the protections, though they were high-risk institutions in their behavior, and they’ve hurt our country and the people of our country so much. They wanted to come under, put their nose under the tent of the Deposit Insurance Corporation.
You know, and then the good banks had to pay more for deposit insurance. They were powerful enough to turn the banking industry of this country almost upside-down and hurt banks in places like Ohio and caused the merger of institutions. Ohio now lost one of its major banks called National City Bank; it was merged with PNC in Pittsburgh. And the vice chair of PNC in Pittsburgh was the gentleman who invented derivatives on Wall Street. He left Wall Street and went to PNC. PNC now effectively has price control over the western part of Pennsylvania and parts of eastern Ohio now. That’s how powerful these institutions are.
And so, they’re not just powerful in Washington; they really have power out in the regions to control lines of credit, lending. It’s just unbelievable. This feels like the late 1920s and early 1930s, in terms of the concentration of the banking system itself. And if you look at the bad paper, if you look at where there’s trouble, 95 percent—95 to 98 percent of the paper really has moved to five institutions, the ones that I mentioned: JPMorgan Chase, Bank of America, Wachovia, Citigroup and HSBC. They have this country held by the neck.
AMY GOODMAN: We’re talking to Congress member Marcy Kaptur. This term, she becomes the longest-serving Democratic congresswoman in US history. She is the dean of the Ohio congressional delegation. I hope you’ll stay with us. We are also going to go to a housing activist in Toledo, and we’ll be joined by Bruce Marks, who’s head of NACA, the Neighborhood Assistance Corporation of America. He’s from Boston. He was blockading Fannie Mae; now he’s working with them. We’ll find out what’s happened. Stay with us.
AMY GOODMAN: We’re talking about the housing crisis. Our guests are Congress member Marcy Kaptur, the longest-serving congresswoman in US history. She joins us from Toledo, Ohio, as does Kathy Broka, president of the Fair Housing Center in Toledo, and Bruce Marks, founder and CEO of NACA, the Neighborhood Assistance Corporation of America.
We’re going to come back to Toledo in a minute. But, Bruce Marks, tell us the scope of the problem in Massachusetts. And how did you, who was blockading the doors of Fannie Mae in October until you could meet with its CEO, how did you end up now working with Fannie Mae?
BRUCE MARKS: Well, it’s good to be on, Amy.
I mean, we have got offices around the country. We have got forty offices around the country. We do the best solutions out there for working people throughout this country. So if you go through NACA, you’re able to restructure your mortgage by permanently reducing your interest rate to as little as three percent and reducing your principal to make your mortgage affordable. And we’re doing it for tens of thousands of homeowners.
And in a sense, it’s done through nonviolent bank terrorism. So what we do is we confront these institutions. And yes, Fannie Mae has done the right thing. They have set the standard. But on this Saturday, Sunday and Monday, if you go to our website, Amy, and you go there, and what—we appreciate what Marcy is saying in terms of being able to—don’t leave your home, like what the sheriff in Cook County, Chicago has done—he has said, “I will not foreclose. I will not throw anybody out of their home.” But this weekend, we’re going on the Predators Tour. So when the congresswoman says that we should hold JPMorgan responsible, we should hold Option One, Wilbur Ross, who heads Option One, responsible, and GMAC. Let’s go to their homes. So if you go to our website at naca.com—and we would like the congresswoman to join us—let’s go on the Predators Tour to the homes of these CEOs with thousands of homeowners.
And this is what we’re going to do with thousands of homeowners, go into their home and say, “I want you to meet my family. I want you to see who you’re foreclosing on.” We’ve got to not just talk the talk; we’ve got to walk the walk. And walking the walk means it’s personal. If someone’s going to lose their homes, if you go to our website, you can see pictures of how the rich and the greedy are living now on our dime, on our dollar, on our homes. So we’re going—if they’re going to take our homes, we’re going to go to their homes, and we’re going to tell them, “No more.” And that’s what it has to do, not just go and stop the foreclosures. Let’s go into their communities.
And so, you can see pictures of where Jamie Dimon, CEO of Chase, lives, not just in Stamford, Connecticut, where we’re doing this event with literally thousands of homeowners, or re. Wilbur Ross, who runs Option One, or Feinberg, who runs GMAC, you can see where they live. And if you can’t come to Stamford, Connecticut, then go to their—go to Jamie Dimon’s home in Chicago or in other parts of the country, because these CEOs, they have multi-million-dollar homes. The one in Stamford, Connecticut—actually it’s in Mount Kisco, $17 million, where he lives. And so, that’s what we have to do. And also, what we’re going to do—
AMY GOODMAN: And what are you demanding when you go to their homes?
BRUCE MARKS: I’m sorry?
AMY GOODMAN: What are you demanding when you go to their homes?
BRUCE MARKS: We are demanding that they meet with the homeowners who they’re foreclosing on. We believe that if they can see, face-to-face, in the eyes of the homeowners, what they’re doing and the consequences of their actions, that that makes it personal. And we want their children to meet the children of the homeowners who are losing their homes and have those children have a conversation with each other and have their children go back to their parents and say, “Mom, Dad, is it true that you’re foreclosing on these homeowners?”
I mean, Wilbur Ross, he owns Option One. He has $1.8 billion in net worth. $1.8 billion. Jamie Dimon, $300 million. Frey—this guy is suing Bank of America, because he does not want them to do modifications. I mean, you go down the line, you can see their homes, you can have their addresses. You can go visit them, not just on our Predators Tour, but anytime you want, because they—it’s personal now.
And we’re not just going as ten or twenty people; we’re going with hundreds and thousands, because at this event, we’re also doing individual counseling, because, yes, you’re right, we have agreements with the major servicers out there where they’re required to restructure your mortgage to make that affordable for the long term. Yes, it’s nice, and it’s a good step that we say get an attorney, but it’s the confrontation, it’s the advocacy, it’s personalizing the issue that makes that work, and to get other sheriffs around the country, like they’ve done in Cook County, saying, “I’m not going to foreclose on my own. I’m not going to foreclose on hard-working people, because that’s who I am,” to do that. And, you know—and we’re able to get it done.
And Congress has been nowhere on this stuff. Where is the moratorium on the foreclosures? Where is—we still have hearings today on the refinance option by Barney Frank. We know that doesn’t work. So—
AMY GOODMAN: Well, let’s talk about Hope for Homeowners, and I want—
BRUCE MARKS: —when is Congress going to step up and say, “Let’s restructure mortgages to make them affordable”?
AMY GOODMAN: I wanted to talk about the Hope for Homeowners bill, and maybe Congress member Kaptur could weigh in here. It was passed last summer. The idea is it would help out something like 450,000 homeowners to stop the foreclosures. And in the end, I think there have been twenty-one successful applications. It’s almost impossible to go through that system. Barney Frank is saying, well, now they’ve not only prevented abuse, they’ve prevented use. And so, today they’re reopening it. What’s that about, Congress member Kaptur?
REP. MARCY KAPTUR: Well, I am one of three Democrats that voted no on that bill. And during the debate and during our caucus meetings on the bill, Congressman Frank, who chairs the committee, and I had an ongoing debate in a very open forum, where I basically said it won’t work and that the necessary workouts were not going to be done, that the administration would find a way, because of the way that the bill was written, not to give us the immediate help that we needed. He prevailed in that vote; I did not.
But I went up to him after that vote—I’ll never forget it—and I said, “You know what, Barney?” I said, “You’re a friend of mine. We serve together. I really hope you’re right.” And my heart was breaking at that point, because I knew that hundreds and hundreds and hundreds of more people in my region, just my region, would receive foreclosure notices and would be thrown out of their homes during that period. And that is exactly what has happened. I hope that Chairman Frank will act with dispatch to bring to the table the parties that need to be brought to the table to get these workouts going.
This foreclosure crisis has tied up our entire banking system to the point where companies that want to expand in districts like ours, where unemployment is over 11.5 percent now, cannot get credit from the banks. This is having a terrible impact on the credit system of this country. And that bill was completely inadequate, and it was almost doomed to fail.
The proper way to proceed is to bring the FDIC and the SEC to the table now. I hope that the new president, President Obama, will bring the chair, will bring Sheila Bair to his office, will make necessary appointments to those boards and talk to people who’ve actually resolved bank crises in the past, like William Isaac, who had served both the Democrats and Republicans back in the 1970s and ’80s when we had these problems before. This isn’t the first time that the banks of this country have sort of done it to the American people, and there are very knowledgeable experienced people in the commercial banking world who have actually done these workouts and have systemically changed what needs to be done. They’re not being used right now.
AMY GOODMAN: Congress member Kaptur, your assessment of the Treasury Secretary Tim Geithner and who he has brought on?
REP. MARCY KAPTUR: Well, you had asked me the question before about the influence of Wall Street in Washington. Mr. Geithner has now brought one of the major lobbyists who had lobbied for Goldman Sachs as his chief of staff, Mr. Patterson. And this revolving door between Washington and Wall Street is terribly strong. And I say, how can we trust the very people who brought us to this point to now manage the public dollars, the taxpayer dollars of the people of the United States? We need to clean out that operation, and we need to hold the Wall Street banks and all of their associates accountable to the American people. The scales of justice have to be balanced. They are far out of whack right now.
AMY GOODMAN: Kathy Broka is also in Toledo with Congress member Kaptur. She’s president of the Fair Housing Center there in Toledo. Tell us the scope of the problem, Kathy Broka. We heard Bruce Marks lay out what NACA is doing. What is Fair Housing Center in Toledo doing? How many people are being foreclosed on? How are you helping?
KATHY BROKA: Toledo is, along with Cleveland, which was considered the epicenter of the foreclosure crisis in the country—I was talking to Cleveland people months ago who had people from all over the country showing up in their offices as the epicenter of the foreclosure crisis. So we’ve been struggling with this for years.
The Fair Housing Center alone has helped save homeowners over $5 million by doing loan modifications and workouts. This is one small agency, whose primary purpose was to investigate allegations of discrimination in housing. Now, at least half of the work that we do is on foreclosures, because there were really no other agencies in the city that was doing the work, and it was the primary problem in our community. And so, we are doing workouts, but we’re one small agency. This needs to be on a massive national scale. We can’t piecemeal this any longer. I feel like my staff are little gerbils on a wheel that just keeps turning around. So, as much hard work as we do, as dedicated as my staff is, we need help.
I’m so tired of hearing how banks are saying, “Call us early, before you get in trouble.” And then we try to do that, and they tell us, “Why are you calling us? You’re not even behind yet on your mortgage payment,” even though the homeowners are doing their due diligence and know that they’ve got a loan that’s going to adjust in two to three months and that they absolutely won’t be able to keep those payments going. And so, they’re doing what the banks tell them to do. When are the banks going to do what they say they’re going to do? That’s my question.
I was watching TV not too long ago, when Maxine Waters was on trying to get in touch with one of her constituent’s lenders to see what could be done for them, and it took her over half-an-hour, maybe even longer, two, three hours, where she kept getting the runaround. If she can’t get an answer, a straight answer, from the banks, what do you think our constituents are doing? How hard do you think it is for those of us who are on the frontline trying to get these deals done to keep the homeowners in their houses?
AMY GOODMAN: What would be the single act that would help you most, would help people who are threatened with losing their homes most, Kathy Broka?
KATHY BROKA: The single act would be for the banks to do what they say they’ve been doing for months and years: just do what you say you’re doing, that you want to keep people in their houses, that you’re willing to work with them, because we get someone at a bank, we finally get a person who’s there to help, who will do these loan modifications and workouts, and then the next month they’ve been laid off, and somebody new comes on. Get people in those departments at the banks who have the authority to do workouts that make sense.
I get so tired of hearing the banks say, “Well, you know, these don’t work. These loan modifications don’t work, because we give them to homeowners, and then, two or three months later, they’re right back being in default.” But what they don’t say is, oftentimes those homeowners have gotten into workouts without any representation, the bank has thrown them something and said, “Take it or leave it,” have set them up once again for failure, and then they use those very statistics to tell the rest of the people in the United States that these are just freeloaders and why are we helping them. It’s so unfair, and it’s so untrue.
AMY GOODMAN: Congress member Kaptur, what do you think of the Obama stimulus plan? What do you think, the possibility that your state, that Ohio, could get something like $9 billion under the plan? How much of a stimulus is the overall plan?
REP. MARCY KAPTUR: Well, first of all, I’ve been concerned about how much a state like Ohio, which is in deep recession, will actually receive from this program. We appreciate the President’s leadership on extending unemployment benefits, on covering people with health insurance, on heating assistance. I call these lifeline programs, absolutely essential. The people who have been thrown out of work have paid tax dollars to help our country when she gets in a situation like this, so I think they’re getting back what they paid for, essentially.
But the real issue for Ohio is, if all Ohio gets is $9 billion or $12 billion, which some people have been saying, our population is 3.66 percent of the country. Not even discounting for unemployment, we should be receiving anywhere between $25 billion and $30 billion in the various tax provisions and the investment portions of the bill. And if we do not receive that, then my question is, to which states is that money going?
So I think that the lifeline support programs are critical, but here, regionally, right now, because our banks are not loaning, even green energy companies—we’re one of the three leading solar energy capitals in the hemisphere. I have solar companies out here that want to bring on employees. The banks won’t loan. They—we have companies that want to bring up factory floors right now, and even some of these Ohio banking institutions that have received TARP funds, the bailout funds, aren’t making loans. So it’s very important—and I hope the administration is listening to this—that—
AMY GOODMAN: Looks like we just lost the satellite. We’re going to try to bring it back. We’ve been talking to Congress member Marcy Kaptur, also Kathy Broka, president of the Fair Housing Center in Toledo. We’re going to go to a break. We’ll come back, and hopefully we’ll get her back on satellite, or we’ll get her on the phone. But we’ll wrap up that discussion, and then we’re going to turn to Sri Lanka and what’s happening there. This is Democracy Now! Stay with us.
AMY GOODMAN: We’re back with Congress member Marcy Kaptur. Again, she is the longest-serving congresswoman in US history. Two last questions for you.
Slightly off topic, but very much a part of the stimulus package, we just got this emergency email from a fellow Ohioan, Congress member Kaptur. It is from the well known anti-nuclear activist Harvey Wasserman. As you were talking about alternative energy, he says, “A $50 billion nuke power bomb is dropping toward Obama’s stimulus package. The desperate, dangerous nuclear power industry has dropped a $50 billion stealth bomb,” he says, “meant to irradiate the Obama Stimulus Package.
“It comes in the form of a mega-loan guarantee package that would build new reactors Wall Street [wouldn’t] finance even when it had cash.” He says, “It will take a [healthy] dose of citizen action to stop it, so start calling your Senators now.”
He says that “[t]he vaguely worded bailout-in-advance provision was snuck through the Senate Appropriations Committee in the deep night of January 27. It would provide $50 billion in loan guarantees for ‘eligible technologies’ that would technically include renewable sources and electric transmission. But the handout is clearly directed at nukes and ‘clean coal.’”
Now, this is in the Senate section. What do you think of this?
REP. MARCY KAPTUR: Well, I have not read the Senate bill. They’ve just been drafting that. I can tell you, in the House bill, we have $114.5 billion for green energy: for solar, for wind, for geothermal, for biofuels. These are all industries we are bringing up here in our region.
I happen to represent the nuclear power plant that in the last twenty years has had more accidents than any other one in the country. And so, my own view is—and, in fact, there was a brownout a couple years ago because of this particular—the system this particular plant is attached to. And my feeling is, until we can actually assure ourselves that these plants are operated safely, I don’t know why we would want to reward this industry. I would be very concerned about that, based on our own living history of what has happened here. This is a very dangerous technology and one that we have to exercise extraordinary responsibility. So I was—that was not in the House version, to my knowledge, and I haven’t read the Senate language.
AMY GOODMAN: Finally, two questions. One is Judd Gregg as Commerce Secretary, and the other is, well, the question about you. George Voinovich has announced he will not be seeking another Senate seat. You’re the longest-serving congresswoman in history. Will you be seeking his seat in 2010?
REP. MARCY KAPTUR: Well, maybe I’ll just say that in terms of my tenure, I’m the longest-serving Democratic woman. There are others, Republican women, who have served thirty-five years, so I’m far from that right now, but at least on the Democratic side of the aisle, I am the longest-serving woman.
And we’ve just come through an election out here in Ohio. Our economy is in really tough straits. And I think it’s too early for anyone to say that they are or are not running. Obviously, I think every elected official in Ohio who’s a Democrat is looking at that right now. And we’ll give it some time.
AMY GOODMAN: And as for Judd Gregg, who is stepping away from his seat as senator, tapped to be the third Republican in the Obama administration in a key seat as Commerce Secretary, your thoughts on him?
REP. MARCY KAPTUR: Well, the Department of Commerce is a very important department, obviously. And about 60 percent of its budget is NOAA, the National Oceanic and Atmospheric Administration. He comes from a coastal state in the Northeast, so I think that his knowledge of some of the issues that come before the Department of Commerce will be an asset. And we wish him very well. And the Department of Commerce, particularly in the Economic Development Administration, is very important to us here in the industrial and agricultural heartland. I would hope that the fact that he comes from a rather small state will not in any way prescribe his travels or his views about what needs to be done to help the big industrial and agricultural states to move forward economically.
AMY GOODMAN: Congress member Marcy Kaptur, thanks so much for being with us, again, the longest Democratic woman who has served in US history.
REP. MARCY KAPTUR: Thank you.
AMY GOODMAN: Thank you, speaking to us from Toledo, Ohio. And thanks also to Kathy Broka, president of the Fair Housing Center in Toledo, and Bruce Marks of NACA, naca.com, that’s the Neighborhood Assistance Corporation of America, speaking to us from Boston.
Cutting Wages Won’t Solve Detroit Three’s Crisis December 9, 2008Posted by rogerhollander in Economic Crisis, Labor.
Tags: auto workers, automakers, automobile industry, bailout, bankers, bankruptcy, benefits, big three, bonuses, chevrolet, chrysler, concessions, congress, detroit, Economic Crisis, environment, executive salaries, ford, foreclosure, gas, general motors, global warming, healthcare, homeowners, insurance, jane slaughter, japan, jobs, labor, labor costs, labour, mark brenner, medicare, motor city, oil, pension, petroleum, roger hollander, steel, sticker price, suv, taxpayers, toyota, uaw, unemployment, uninsured, unions, wages, Wall Street, workers
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Automakers have blamed workers for the financial collapse of the Detroit auto industry. (Photo: motortrend.com)
Thursday 04 December 2008, www.truthout.org
by: Mark Brenner and Jane Slaughter, The Detroit News
In the 1980s, Chevrolet proclaimed itself the “Heartbeat of America,” but today the American auto industry barely registers a pulse. As Washington considers Detroit’s plea for life support, the only place where pundits, politicians and Big Three executives seem to agree is that auto workers must make do with less or watch their jobs disappear.
Some lawmakers have complained that unions are the source of the problem, but they fail to understand some inconvenient truths. According to the latest figures from the U.S. Commerce Department, every worker in Big Three factories could work for free and only shave 5 percent off the cost of their cars. The auto companies pay as much for hubcaps and fenders as they do in wages.
Data from the Harbour Report – the industry’s gold standard – reveal that even including their benefits, labor costs in the Big Three’s plants account for less than 10 percent of the sticker price.
No matter how you cut the numbers, demolishing auto workers’ living standards will not transform the industry. The Big Three have been trying for years. They have slashed at least 200,000 jobs since 2004, and last year they wrung billions of dollars in concessions from the United Auto Workers. The union instituted a second-tier wage of $14.50 an hour for new hires, lower than pay in the nonunion, foreign-owned auto companies in the South.
The impact is all too apparent in auto communities across the Midwest. Forty thousand Detroit homeowners are in foreclosure, and the unemployment rate has hit double digits in many auto towns. That suffering will multiply if one of the Big Three collapses, or if retired auto workers are punished for decisions they had no hand in.
Automakers’ decisions have been disastrous. While competitors developed gasoline-electric hybrids, Detroit mined the gas-guzzling truck and SUV market, making $104 billion in profits between 1994 and 2003. Wall Street and Congress weren’t calling for more research and development or curbing the company’s dividend payments and high-flying executive salaries back then.
Pundits crow for us to “Dump Detroit,” but they don’t advertise that through a bailout or the bankruptcy courts taxpayers will shoulder the burden of the automakers’ colossal missteps.
Washington shouldn’t back into a bailout – it should jump in feet-first. What’s needed is not a half-measure, a cash infusion in exchange for selling the corporate jets. Now is the time to take a sweeping look at the country’s needs.
Our first steps should confront global warming and oil dependence through a comprehensive overhaul of the transportation system. Federal policy hasn’t changed since the 1950s, when gas was a nickel a gallon.
Detroit, the Arsenal of Democracy, retooled in a matter of weeks when we needed tanks, not cars, in 1941. We could produce this century’s answer to the interstate highway system and build mass transit and high-speed trains.
That same sense of urgency is needed for vehicles that don’t run on petroleum. If American engineers can build satellites that read your license plate from outer space, they can develop an alternative to the gasoline engine.
Automakers need direction as much as financial support from Washington, just as Japan’s government molded Toyota into a world-class performer.
In every other industrialized nation, government has stepped in and given their auto companies a significant edge. Most important, they all adopted national health care and pension systems decades ago.
General Motors alone provides health coverage to a million people – workers, retirees and families. The annual price tag is about $5 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM spends on steel.
That burden could be lifted, to the benefit of 47 million uninsured Americans, by adopting a Medicare-style program for everyone. It would save the nation as much as $350 billion per year now spent for insurance companies to shuffle paper and deny claims.
The fate of the Motor City captivates us because it speaks to our future. For 30 years, politicians have bowed to Wall Street, sitting by while wages for most workers stagnated. Big Three workers have maintained their living standards better than most, in no small part because they have a union. In a country where investment bankers gave themselves $30 billion in bonuses last Christmas, have we reached a point where $58,000 a year with benefits is too much to ask?
We once promised the pursuit of happiness to all, including the workers who make our factories run, not just those who trade credit default swaps. Now more than ever, we need to recapture that spirit with a thoroughgoing plan to rescue the environment, care for the sick and transform transportation.
Mark Brenner and Jane Slaughter work for Labor Notes, an independent monthly labor magazine in Detroit. It receives no support from the United Auto Workers.
Question for Economic Experts: Can You Say “Housing Bubble”? December 8, 2008Posted by rogerhollander in Economic Crisis.
Tags: Barack Obama, bernanke, bush administration, dean baker, Economic Crisis, economic downturn, economic policy, financial system, great depression, greenspan, Henry Paulson, homeowners, house prices, housing, housing bubble, interest rates, life's savings, morgtgage rate, nasdaq, robert rubin, sub-prime
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(Photo: The Financial Help Center)
Monday 08 December 2008
by: Dean Baker, t r u t h o u t | Perspective
The answer for many economists is apparently “no.” Many of the most important figures in economic policy over the last decade, including luminaries like Alan Greenspan, Ben Bernanke, Robert Rubin and Henry Paulson, could not see the $8 trillion housing bubble growing right in front of their eyes. As the bubble grew larger, and the financial system became ever more highly leveraged, these folks saw nothing but blue skies ahead.
Not only did these folks miss the bubble, even now, they still can’t seem to understand the housing bubble as its collapse throws the economy into the worst downturn since the Great Depression. That is the only possible explanation for Henry Paulson’s 4.5 percent mortgage rate policy.
The bubble has largely deflated in many parts of the country, however, prices in many of the former bubble markets still must decline another 20 percent to 30 percent to return to trend levels. It does not make sense to apply the same policy to both bubble and non-bubble markets.
In non-bubble markets, it might be appropriate to use aggressive measures, like extraordinarily low mortgage rates, as a tool to stabilize house prices. We want to avoid the scenario in which falling house prices create an expectation of further declines in house prices. This expectation can become self-fulfilling, as potential buyers defer purchases, causing house prices to fall further.
By contrast, in the bubble markets, supply hugely exceeds demand at current prices. The only way to restore stability to these markets is to have prices return to levels that are consistent with the underlying supply and demand conditions. The effort to sustain prices at their current bubble-inflated level will be no more successful than an effort in 2000 to keep the NASDAQ at its 5,000 peak.
Even worse, to the extent that we can artificially prop up house prices in these bubble markets, we would just be passing along the pain to a new contingent of homebuyers. We are not going to have 4.5 percent mortgage interest rates forever. Suppose the economy recovers in a few years and mortgage rates rise back to a more normal 6.5 percent to 7.5 percent level.
Whatever effect low mortgage rates had in sustaining house prices will be reversed. House prices will complete their correction and today’s homebuyers may well be seeing losses of 15 percent to 20 percent when they sell their homes in five years. For a house selling at $250,000, this price decline translates into a loss of $38,000 to $50,000.
Losing $38,000 to $50,000 would destroy the bulk of most homeowners’ wealth. That does not seem like very good policy.
Unfortunately, most of the promoters of the housing bubble still have not owned up to the harm caused by their policy. Millions of people are facing the prospect of losing their home, and tens of millions of people are losing their life’s savings, because the people who are supposed to know better didn’t. They encouraged people to buy homes and/or borrow against them in what was quite obviously a bubble-inflated market.
Before Paulson is allowed to carry through with his scheme to use public money in an attempt to reinflate the housing bubble, he should be forced to publicly explain how he thinks this policy will work. There are clearly people who will be badly harmed by temporarily reinflating the bubble. Unless Paulson can explain how the benefits will outweigh this harm, he should not be allowed to pursue his blanket policy of providing 4.5 percent mortgages everywhere.
As it is, Paulson and other people in policy positions have not even acknowledged that we have a housing bubble that is in the process of deflating. Paulson could not possibly be so incompetent that he still doesn’t see the housing bubble, but for some reason he can’t bring himself to talk about it.
If Paulson cannot bring himself to talk about the housing bubble in a serious way, then he does not deserve to be taken seriously in discussions of economic policy. The same is true of any other person in either the Bush or Obama administration. In this period of crisis, we can’t afford to waste any more time with policymakers so clueless that they can’t see an $8 trillion housing bubble.