by
ZachCarter, The Media Consortium:
Tue., Nov 25, 2008
Filed under:
NewsLadder •
Economy •
Uncategorized President-elect Barack Obama announced his economic transition team yesterday–and we’ll get to that–but first let’s take a look at the top economic stories from the week that you might not have heard–but need to know.
With so many recent headlines detailing the government’s policy position on some of the nation’s largest corporations, it’s important to remember that economic policy ought to include people living at the other end of the economic spectrum.
Obama was charged with being a “redistributionist” by conservatives within and without the McCain campaign during the final weeks leading up to the Nov. 4 election. Funny what happened. It turns out people actually find that drastic inequality thing offensive, particularly when they are losing their homes while the nation’s largest banks are getting billions in speedy federal assistance.
Treasury Secretary Henry Paulson still refuses to allocate one dime of his financial bailout funds to help struggling homeowners, while giving lip service to the idea that the housing market “correction” is at the heart of our current economic woes. Even the modest anti-foreclosure bill Congress passed in July is slow-going. In addition to about $1.7 billion to help underwater homeowners refinance into affordable mortgages, the bill directed an additional $4 billion local governments to help communities rehabilitate foreclosed homes. That sum will barely make a dent in the deepening foreclosure crisis, as Garland McLaurin of American News Project and Mary Kane of the Washington Independent detail in this video, but many cities and counties are yet to see their share of the $4 billion kitty. By contrast, hundreds of billions of dollars have been injected into banks in recent weeks.
At this point in the economic cycle, mortgages are not the only loans causing major problems. Credit card delinquencies are at their highest rate in six years, and many banking industry experts expect them to go higher as laid-off consumers move basic expenses from checkbooks to plastic. What’s worse, credit card companies currently have legal leeway to alter contracts in almost any way they wish, even if borrowers are current on their payments, as Sen. Robert Menendez, D-N.J., details in a blog for The Huffington Post. The Federal Reserve took a step in the right direction earlier this year by addressing some of the most egregious policies in the subprime credit card market, but it is time for Congress to rein in the rest of the predatory consumer lending industry.
Of course, wide swaths of the U.S. population do not worry about debt, but food. Writing for The Progressive, Brian Gilmore makes an impassioned case for swift public action to end poverty, noting that one in eight Americans did not have access to sufficient food in 2007.
When people are going hungry, the Bush administration appears to believe that eight years is an appropriate amount of time to wait for substantive public policy. But when the world’s largest financial institution is up against the wall, it gets what it wants, when it wants it. The Bush team granted Citigroup another $20 billion in bailout funds over the weekend, just days after ponying up $25 billion for company. The best part? The company’s management is still in place, and the government exacted no guarantees concerning how taxpayer money will be used.
Over at the American Prospect, Ezra Klein highlights former Treasury Secretary Robert Rubin’s role in bringing the Wall Street titan to the verge of collapse. During the Clinton administration, Rubin resisted placing government oversight on the credit derivatives market, which after a decade of unregulated growth is wreaking havoc on the U.S. economy. But Citi is one of the biggest losers in the credit market fallout, thanks in part to Rubin’s own advice as a member of the company’s board of directors.
Speaking of Rubin, Obama just named one of his protégés at the Clinton Treasury to succeed Paulson at the Department’s the top spot. Timothy Geithner, who has managed some of the most harrowing moments of the meltdown, including the Bear Stearns rescue in March, will move from the Fed’s New York office to the Treasury Department in January. Unlike Rubin, however, Geithner has spent the last few years sounding the alarm on the very risks to the financial system that have taken such a heavy toll of late, as Andrew Leonard notes at Salon.com.
The Citi debacle reveals that Paulson’s gambit to restore investor confidence in the U.S. financial sector has generated mixed results, at best. Citi shares closed at $3.77 on Friday, down from $18.35 on Oct. 3, the day Congress passed the bailout bill. The sad fact is that without some magical, and probably irrational, restoration of that elusive confidence, the $700 billion allocated by the financial rescue package will not be nearly enough to shore up the American banking sector, much less the auto manufacturing companies and retail stores that have been showing signs of extreme strain of late. William Greider details the state of affairs for The Nation, arguing that it is time to shut down the financial giants that are no longer viable and establish a new order based on smaller companies.
This post features links to the best independent, progressive reporting about the economy. Visit Economy.NewsLadder.net for a complete list of articles on the economy. And for the best progressive reporting on critical immigration and healthcare issues, check out Immigration.NewsLadder.net and Healthcare.NewsLadder.net.
This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.
See more tagged with: agenda, Bush, cabinet, Ezra Klein, mortgage crisis, NewsLadder, Obama, the economy, The Nation, TMC and Washington Independent
by
ZachCarter, The Media Consortium:
Tue., Nov 18, 2008
Filed under:
NewsLadder •
Economy •
Green •
Congressional Oversight •
Uncategorized The Bush administration is squandering hundreds of billions of dollars on incompetence, again.
In a House Domestic Policy Subcommittee hearing on Friday, Rep. Dennis Kucinich, D-Ohio, took Interim Assistant Treasury Secretary for Fianancial Stability Neel Kashkari (read: bailout chief) to task over the Treasury’s decision to spend every cent of the first $350 billion in bailout funds buying up preferred stock in Wall Street icons and other banks, while allowing troubled borrowers to fend for themselves.
Kashkari did his best to deflect the outrage, but his task would have been easier had the Treasury’s position been defensible. In a Senate Banking Committee hearing the day before, both consumer-protection advocates and banking executives endorsed an anti-foreclosure initiative devised by FDIC Chairman Sheila Bair that would create strong incentives for the private sector to cut borrowers some slack. Despite the plan’s broad appeal, both Paulson and Kashkari refused to devote any Treasury funds to the program, making the bailout chief sound like, well, a chump, when he insisted that Treasury is doing everything in its power to keep people in their homes.
The whole thing is beginning to look a little too much like Iraq. Bush administration officials steamroll both chambers of Congress with warnings of a dire emergency and are rewarded for their efforts with unprecedented authority and funding. Shortly afterwards, it becomes clear that the initiative has been squandered on meaningless giveaways to huge corporations without any corresponding social benefits. Naomi Klein of The Nation details the corruption parallels in an illuminating piece for Rolling Stone.
Laissez-faire lunacy
Most depressing is the bailout’s complete impotence with regard to providing broader economic support. Paulson and Kashkari have succeeded in keeping the U.S. financial sector afloat for the time being, but despite an enormous injection of taxpayer funds, banks are not lending money out into the broader economy. One part of the problem is the fact that President Bush & Co. took years to acknowledge that the country was in fact facing disaster (remember Paulson’s 2007 talking point that the subprime mortgage crisis was “contained”?). Now that the Treasury is finally taking action, it is doing so in an environment where there simply are not many good loans to be made. The other roadblock is Paulson’s refusal to require banks who accept public money to put it to use for the public good, as Joshua Holland explains for Alternet.
That desperate attempt to adhere to some kind of free-market principle—not forcing companies to do anything with billions of dollars allocated to partially nationalize them—was on display Friday at a speech Bush gave in New York. It sounds like a sick joke. After demanding $700 billion to save Wall Street, Bush is still warning against the evils of government intervention, claiming that free-market systems have a monopoly on “social justice and human dignity.”
“The greater threat to economic prosperity is not too little government involvement in the market,” he said. “It is too much government involvement in the market.”
Matthew Rothschild skewers this absurdity over at The Progressive.
“You can’t have social justice and human dignity with mass unemployment, rampant foreclosures, high rates of poverty and food insecurity, and a health care system that leaves almost 50 million people uninsured,” Rothschild writes.
Bush did make a few nods to sanity during his speech, arguing that markets need to be “more transparent,” but the claim was a little perplexing amid reports that the Federal Reserve is refusing to disclose who it is granting about $2 trillion in emergency loans.
“Where is the ridicule?” Dean Baker asks in a blog for the American Prospect, arguing that Paulson and Bernanke are looking more like “crony capitalists” every day.
Going green, going global
Bush’s speech was designed to frame the debate surrounding the meeting of leaders from the world’s 20 largest economies to address problems in the global financial architecture. Fortunately, President Bush does not have final authority to sign an agreement for the U.S., that task will be left to Barack Obama in April of next year. Over at oneworld.net, Gary Gardner and Michael Renner note the opportunity not just for a New Deal to refashion the U.S. economy, but to ink a Green Deal that does away with global dependence on fossil fuels and provides for a fairer distribution of wealth across the globe.
At the moment, U.S. economic policy remains dominated by how to handle the bailout. How Democrats seek to proceed with lashing Detroit automakers to that $700 billion debacle will say a great deal about the majority party’s governing intentions heading into the next Congress.
“It’s time to think big,” Andrew Leonard writes for Salon.com. “A Manhattan Project-scale plan to move the U.S. into an energy-sustainable future should start with a complete restructuring of the automotive industry,” according to Leonard.
The sagas of the financial and automobile industries have more in common than meets the eye. Both have lobbied heavily against new regulations for decades, and the lax oversight has left both in dire straits. While conservatives are quick to point to labor union contracts that make workforces at GM, Ford and Chrysler pricier than for foreign manufacturers, the fact is that the Big Three have drastically lost market share in recent years by failing to make cars people actually want to buy. In a video produced for American News Project, Garland McLaurin details how Detroit spent millions lobbying Congress against raising fuel economy standards while failing to develop cars that achieve high gas mileage.
Millions of people could be out of a job if the Big Three go under, but if Democrats hurl money at the companies with no strings attached, they’re no better than the current administration’s set of bailouteers.
This post features links to the best independent, progressive reporting about the economy. Visit economy.newsladder.net for a complete list of articles on the economy. And for the best progressive reporting on critical immigration and healthcare issues, check out Immigration.NewsLadder.net and Healthcare.NewsLadder.net.
This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.
See more tagged with: Congress, dennis kucinich, global warming, government accountability, media consortium, mortgage crisis, Mother Jones, NewsLadder, renewable energy, the economy and Truthdig
by
addiestan, The Media Consortium:
Fri., Jul 11, 2008
Filed under:
Media Consortium: journalism project Marking National Housing Crisis Investigation Week, The Media Consortium examines Miami as a case study at the leading edge of a market disaster. Tomorrow, the Consortium’s next in its series of Live From Main Street town hall programs will take place in Miami’s Lyric Theater: “Magic City, Hard Times: How is Miami Facing the Economic Crisis and Working Toward a Sustainable Future?”
If you had any doubt of a housing crisis in the U.S., listen to the word from the horse’s mouth. According to RealtyTrac, a California-based firm that monitors foreclosures for investors, the national foreclosure rate for June 2008 exceeded by more than 50 percent the rate for June of last year. A foreclosure notice was delivered last month to one in every 501 U.S. households, RealtyTrac reported.
Yet the crisis is deeper than those numbers suggest. While the burst of the housing-market bubble is nearly always pegged to the surge in risky subprime mortgages made to under-resourced borrowers over the course of the last decade, the bust is affecting people who never borrowed a dime.
Neither borrower nor lender — but huring
“[T]he misconception is that the [housing] crisis is just a crisis around people who took loans,” said Gihan Perera, executive director of the Miami Workers Center. “On one level, that is clearly…where the bomb directly hit, in that there are tons of people who are losing their homes through foreclosures…but the ripple effect of the entire credit crisis is actually much bigger than that.”
In Miami, for instance, the foreclosure epidemic encompasses not only single-family homes, Perera explained, but apartment buildings, as well. “So the banks then are either trying to get rid of those buildings, or hold on to them at the least cost until they can get rid of them,” leaving tenants in the lurch. And with a flood of people losing their homes now entering the rental market, said Perera, who will be featured as a panelist at Live From Main Street program, rents are climbing.
The RealtyTrac report released yesterday names Florida among the five states with the highest foreclosure rates.
The crisis is reaching well into the middle class. In Florida, it’s not just urban centers like Miami that are hard-hit, but recently-built, upper-middle class boom-built communities like Celebration in the Orlando area, according to an investigation by a local television news operation, 2 News of WESH-TV. In their Central Florida region, WESH reported, “the most homes in foreclosure are in zip codes that didn’t exist five years ago.” But, regardless of income, communities of color appear to be the hardest hit, especially by the high level of defaults on subprime loans, which charge higher rates of interest than do prime mortgages. Often the rate for the first year or two of the loan is low, but then hikes up substantially after that.
Communities of color feel the pain
“All the estimates are that blacks and Hispanics will be hurt much more by the decline in housing fairly significantly,” said Algernon Austin, Ph.D., director of the Race, Ethnicity, and the Economy program at the Economic Policy Institute, a Washington, D.C., think tank. “United for a Fair Economy estimates that it will be, basically, one of the greatest losses of wealth for African-Americans and Latinos that we’ve seen in, you know, probably the last hundred years.”
For those who took the subprime loans, the crisis is particularly acute. The UFE report to which Austin refers asserts that “the subprime mortgage crisis will cause African-Americans to experience wealth losses of between $72 billion and $93 billion over its duration. For people of color in general, the racial bias of subprime mortgage lenders accounts for nearly double the wealth losses for people of color as for whites.”
The ten regions listed in the RealtyTrac report that show the highest levels of
foreclosures are in either California or Florida, states with large communities of color. In the 2000 census, Florida ranked number two among the fifty states for the size of its African-American population. At least 20 percent of its inhabitants describe themselves as Latino or Hispanic.
Women targeted by subprime lenders
Women are extremely hard-hit by the crisis, and discrimination may well be in play. In a 2006 study, the Consumer Federation of America looked at (PDF) who received high-interest subprime mortgages, finding that “women are more likely to receive subprime mortgages of all types regardless of income… For purchase mortgages, women earning double the median income are 46.4 percent more likely to receive subprime mortgages than men with similar incomes.”
Add race to gender, and you find that African-American women, who are more likely to head single-parent households than white women, are the suffering the worst of the mortgage meltdown — especially, perhaps, middle-class black women. According to the Consumer Federation study, “Upper-income African-American women are nearly five times more likely to receive subprime purchase mortgages than upper-income white men, and upper-income Latino women are nearly four times more likely to receive subprime loans than upper-income white men.”
Black women, as always, were the last people into the musical chair game,” said Perera, “and then the chair was swept [out from] under them.”
House of cards
Although the crisis now extends beyond subprime borrowers to people at all levels of investment in the housing market, it was the subprime frenzy that tipped the market, said Wilhemina Leigh, Ph.D., a senior researcher at the Joint Center for Political and Economic Studies in Washington, D.C. “Nobody was regulating the Wall Street investment banks” that bought up the the bad debt from the subprime mortgage brokers and packaged that debt in securities. “Consequently they bought whatever they felt like buying, whatever looked good. It was really like the wild, wild West…”
Add to that a lack of oversight of the subprime brokers themselves, and a crisis was born. “[J]ust given that there were large pockets of people of color who just didn’t understand how the process worked, they were a ready-made set of pawns to be used, and to be taken advantage of in many cases by brokers who moved into these areas that didn’t have banks or credit unions and set up their shops there. They were the only game in town, so if you wanted a mortgage and walked through their doors, no matter what type of credit score you might have had, even if you qualified for prime, you weren’t going to get that because the only thing these shops knew how to do was subprime mortgages.”
In areas like Miami, the proliferation of subprime mortgages helped fuel speculation and an unsupported real-estate boom.
Wall Street, developers get off easy
While Wall Street has taken a hit on the housing bust, it’s nothing compared to the price paid by Main Street “The way our laws are currently structured,” Leigh explained, “a person who buys a security that ’s backed by a pool of mortgages does not have any liability once the…underlying mortgages go belly-up.” Wall Street walks away, leaving Main Street holding the bag. Last November, in a report issued jointly by three nonprofits that advocate affordable housing, author Kevin Connor wrote, “The big five investment banks are projected to pay out $38 billion in bonuses this year (2007) — even more than last year.”
Even in the face of a full-blown housing disaster for working people in his city, said Perera of the Miami Workers Center, politicians are looking to keep developers in the black while cutting back on social services for everyday Miami-dwellers. He cites a $3 billion project handed to large developers to build a baseball stadium and a tunnel under the Port of Miami. “We couldn’t get a jobs program to dig ditches, and kind of help working-class people out, “said Perera. “We’re about to give $3 billion to developers to dig a tunnel.”
See more tagged with: housing discrimination and mortgage crisis
by
Brian Beutler, The Media Consortium:
Thu., Sep 6, 2007
Filed under:
Media Consortium: journalism project After watching mortgage market turmoil steal headlines throughout the August congressional recess, House Democrats dove into the growing crisis today, calling for stiffer regulation and listening as an administration official warned that the worst could be yet to come.
For the past two weeks, economists and market analysts have filled news pages and airwaves with a raging debate over the likelihood of a major economic downturn driven by the subprime-mortgage market’s implosion. Some observers argue the blaring headlines about a crisis are overblown. Others fretfully predict a slow, but not catastrophic correction. Still more worry about a full recession. They all agree, though, that a major component of today’s economic landscape is changing, and quickly.
Read the full report…
See more tagged with: mortgage crisis, Rep.Barney Frank and Robert Steel
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