D.C. Disconnect: Beltway Media Edition

The historic first ever Federal Reserve press conference delivered even less than the little that was expected.

That was in part because Fed chair Bernanke is good at making economic policy boring and opaque.

After all, that is his job.

But the reporters who cover the Fed have no such excuse.

At the press conference, they shared none of the outrage that continues to be expressed by the rabble outside Washington who are upset by the Fed’s bailout of big banks, and who fought to make the agency more transparent.

The whole thing had the flavor of a rote exercise, featuring people who appeared to be sleepwalking rather than covering the secretive agency that handed out trillions to the financial industry with no questions asked.

There was no skepticism, no appearance that the reporters had done their homework to challenge the Fed’s behavior in boosting banks while abandoning working people. There was none of the excitement that reporters worked up for the non-story of Obama’s birth certificate.

The press conference confirmed what we already knew: federal authorities, including Bernanke have abandoned the unemployed. They’ve moved on. Although employment is one of two of Bernanke’s mandates, he insists his hands are tied.

The reporters participating in this historic occasion treated the bailout as old news. Somehow they managed to miss that every time the Fed provides information about its actions in the bailout, it raises more questions than it answers.

Thankfully, not everybody in Washington shares this view. Sen. Bernie Sanders, the independent socialist from Vermont who caucuses with the Democrats, has been doing his best to dog the Fed.

A day before Bernanke held his press conference; Sanders released the results of a study he ordered from the Congressional Research Service of the Fed’s secret lending program. That study showed how the big banks gamed the bailout, profiting from investing the low interest loans the Fed gave them rather than loaning the money to businesses to get the economy going.

Sanders put out a press release with a catchy headline –  “Banks Play Shell Game With Taxpayer Dollars.” This wasn’t enough to rouse the reporters who cover the Fed; nobody could be bothered to ask Bernanke about it as his press conference. According to the research service, the banks pocketed interest rates 12 percent greater than the low-interest emergency loans the Fed was giving them. The purpose of this emergency loan program had nothing to do with enriching bankers; it was justified only because we were told it was the only thing that would get the economy going.

It’s worth remembering that Bernanke and the Fed fought a losing battle against the release of any details about its secret lending program. You would have thought the reporters would have welcomed the opportunity to subject Bernanke’s decision-making to public scrutiny.

 

 

 

 

 

The Never-Ending Bailout

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

 

 

 

 

D.C. Disconnect: The Real Yes Men

While the political prank behind news reports that General Electric had decided to pay all its taxes was quickly uncovered, a much greater fraud continues undetected.

Behind the GE prank was a group of political satirists and activists who call themselves the Yes Men. But it’s the nation’s major media that’s really earned that name with its relentless unquestioning hype of deficit hysteria and the need for harsh cuts to social programs.

Anointing only those politicians willing to consider the most severe cuts as the most serious, the major media haven’t questioned who’s behind this austerity agenda, and who will profit from it: Wall Street.

It’s the same crowd that sold the politicians and the public on the benefits of financial deregulation in the 80s, and then scared the country into providing Wall Street with a no-questions asked bailout. We all know how that worked out for the rest of us.

Who would fall for their snake oil a second time without closer examination? The real yes men just keep out churning out the Wall Street-induced hysteria with a straight face. When regular folks insist they're more concerned with unemployment and foreclosures than they are with the deficit, the real yes men just tut-tut.

The little people will never understand.

For Wall Street and its political enablers, the austerity agenda hoax is a just a Trojan horse to carry them to their real goals: crippling government’s ability to regulate and keeping taxes low for the wealthiest Americans.

The financial industry plays the two teams off each other: Republicans claim the Democrats aren’t man enough to make real cuts, while Democrats argue we should go along with their version of austerity to avoid the Tea Party’s lunatic extremes.

After caving in and extending the Bush era tax cuts last year, President Obama has recently talked about sprinkling increased taxes for the wealthiest among the cutbacks on the poor and middle class. But so far in his presidency he has shown little stomach to fight for even his own positions when they encounter resistance from either Wall Street or Republicans.

One of the most bizarre aspects of the continuing hoax is the respect given to the credit rating agencies, which have been justly chastised, but so far escaped prosecution, for their irresponsible antics in the financial collapse. They have about as much credibility as the recently junked color-coded terror alerts.

Now we have credit rating agency Standard & Poor’s, which never raised alarms about toxic mortgage securities, and slept through the both the budget-busting Bush tax cuts and the Obama extension, throwing the stock market into conniptions over the deficit.

It’s not just a coincidence. The ratings agencies are bought and paid for by servants of Wall Street. They know that Wall Street was reaping big short-term profits off the mortgage securities, and favors tax cuts for the rich. They also know Wall Street favors government-crippling budget cuts.

Just how long will the real Wall Street, its servants and cronies get away with this ruse?

 

Government of Honeywell, By Honeywell, For Honeywell

 

Of all the corporate big shots offering the rest of us stern lectures about the sacrifices we’re going to have to make, is there any more infuriating than Honeywell’s CEO’s, David Cote?

Cote, who was paid $20 million last year, has been a particularly outspoken member of President Obama’s deficit commission, with a special kind of shameless gall to be able, with a straight face, to warn the rest of us that we will have to get by with less retirement and health care if the country is going to deal with its deficit.

I’d like to propose a new rule: before the president hands somebody like Cote [pronounced Ko-tay] a billion-dollar megaphone, that person and his company should demonstrate that they are following generally accepted rules of good citizenship.

In the case of Honeywell, the company makes the rules it has to live by. And why shouldn’t it? One of the largest contractors to the federal contractors, it’s also one of the heaviest hitters when it comes to lobbying, spending $6.5 million last year. Among manufacturing firms, only General Electric spent more.

But when it comes to political contributions, Honeywell far outstrips GE, with $2.3 million spent in the 2009-2010 election cycle compared to GE’s $1.4 million.

And Honeywell doesn’t just rely on high-paid lobbyists, when the bailout faced a skeptical public in 2008, Cote (who sits on the board of J.P. Morgan Chase) wrote to his employees to suggest they get out and support the bailout.

But in every set of rules that the government sets  related to Honeywell, those millions spent influencing the government turn out to be very solid investments.

For example, taxes. Cote’s Honeywell doesn’t pay any, according to the Citizens for Tax Justice.

It’s all perfectly legal in the rigged world of the U.S. tax code, where corporations like Honeywell use the political access that only money can buy to write the rules they have to live by.

How rigged is the U.S. tax code?

Well, for example, look at the plight of homeowners who lose their home to foreclosure. Even after those poor saps lose their homes, if the lender forgives some of the mortgage debt because the house sells for less than the homeowner owed, the IRS could still come after them.

I know, I know, those homeowners should have had the foresight to hire more lobbyists and increase their contributions to political campaigns.

Taxes are hardly the only place where Honeywell falls short on the standards of good citizenship.

Honeywell has major contracts in Iran, and despite U.S. sanctions against that country, the company has taken a somewhat relaxed view toward compliance, agreeing that it wouldn’t take on any new work in Iran while it closes out its current work.

Because you wouldn’t want sanctions to be too disruptive to Honeywell’s ability to make profits.

Back home in the U.S., Cotes’ Honeywell has been especially good at squeezing sacrifices from other people, like its workers and the communities who live near its facilities.

Dirt Diggers Digest has compiled a useful summary of Honeywell’s actions at the Illinois plant that is the sole facility in the country where uranium ore is converted into the uranium hexafluoride gas used in the production of both nuclear power and nuclear weapons, a risky process using highly toxic materials.

Last year workers at the plant balked when the company sought to eliminate retiree health benefits, reduce pensions for new hires, cap severance pay and contract out maintenance. So Honeywell locked them out and brought in replacement workers.

After an explosion at the plant, Honeywell was cited by the Nuclear Regulatory Commission for improperly coaching replacement workers during investigations by federal inspectors, while the Environmental Protection Agency fined the company $11.8 million for illegally storing hazardous waste – only the latest in more than $650 million in fines for misconduct, according to the Project on Government Oversight.

But the federal contracts keep pouring in, because in Honeywell’s world, misconduct is just part of doing business, and doesn’t have real world consequences. And apparently that misconduct doesn’t give David Cote any qualms about telling the rest of us what we need to do.

Do you have candidates for most infuriating corporate bigwig? Let WheresOurMoney.org know.

 

 

 

 

 

Quotable-Finley Peter Dunne

"High finance isn't burglary or obtaining money by false pretenses, but rather a judicious selection from the best features of those fine arts."

Finley Peter Dunne, Chicago author, 1867-1936


Feds Unsettle Foreclosure Abuses

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

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

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

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

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

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

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

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

 

 

Billion-Dollar Campaign Bus Leaves Unemployed Behind

Congress and the president threw the long-term unemployed under the bus last year in the deal to extend the Bush era tax cuts for the wealthiest Americans.

As the president and his fellow politicos revv up his re-election campaign bus, are they now poised to run over the 99ers, as the long-term unemployed are known?

The head of the Congressional Black Caucus, Rep. Emmanuel Cleaver, appears ready to concede without a fight that the cost of extending unemployment benefits to the 99ers is “prohibitive.”

Two members of Cleaver’s caucus, Reps. Barbara Lee and Bobby Scott have proposed H.R. 589 to fund some benefits for the long-term unemployed.

Once again, Congress appears to be unwilling to find the $14 billion to extend unemployment compensation for the more than 1 million Americans out of work for at least 99 weeks.

President Obama seems more preoccupied with fighting for the $1 billion he says he will need for his reelection campaign.

How much could one of those 99ers contribute to the president, or anybody’s political campaign, for that matter?

That’s what occurred to me when I read who Obama – the man who at one time was supposed to transform American politics – had chosen to run his campaign to keep his job.

That would be Jim Messina, one of the undisputed experts at raising massive corporate campaign cash, a former staffer for Sen. Max Baucus, one-time head of the one Senate’s Finance Committee and one of the top vacuums of special interest contributions ever, according to Public Citizen.

So much for the grass roots that got the president where he is today. He’s dancing with Wall Street, big pharm and the insurance industry now. Messina apparently takes a dim view of the grass roots activists and their issues, which tend to clog up his vacuum cleaner.

For the corporate titans Obama will be relying on, it’s been a very, very good recovery.

For a lot of the grass roots folks who walked precincts and made phone calls in 2008, not so much. They’ve lost jobs, health insurance, homes, savings, pensions, and security.

Minorities have been especially hard hit, USA Today reports, by a “dual system” of finance. More than 20 percent of African-Americans and Hispanics will lose their homes in the present housing crisis, the Center for Responsible Lending contends.

Meanwhile the long-term unemployed, many of them older workers, face high hurdles reentering the workforce. Younger people face their own challenges, often taking lower paying jobs when they can find employment.

The politicians may be giving up on those of us who are unemployed but we shouldn’t. Call your congressperson and demand that they find the money for H.R 589.

 

 

 

 

 

 

Happy Talk

Treasury officials and many politicians are busy patting themselves on the back because the Troubled Asset Relief Program will end up costing taxpayers less then expected.

The way these folks describe it the TARP and other aspects of the federal bailout were just supposed to function as a loan program for the banks while they were having some trouble.

TARP is also winning praise for having “restored trust” in our financial system.

Beyond the scary rhetoric that gave birth to the bailout and self-congratulatory sermons it’s being buried with, the bailout consisted of a set of rules and a way of picking winners and losers in the economic crisis that did anything but build trust.

Remember when the Fed chair, Ben Bernanke, insisted that he was a Main Street guy, that he was interested in the financial system only inasmuch as it helped out Main Street?

But the bailout institutionalized a system where the government could only afford to bail out the biggest bankers and corporate officials while abandoning smaller banks and business owners along with millions of troubled homeowners and vulnerable employees.

As Fortune’s Alan Sloane wrote, “the more bailout rocks you turn over, the more well-connected players you find who aren't being forced to pay the full price of their mistakes.”

Oh well, the apologists say, nothing’s perfect. It could have been so much worse.

One official who hasn’t joined in the festivities is Neil Barofsky, the former special inspector for the Troubled Asset Relief Program, who bid the bailout a scathing farewell in the New York Times, which you can read here.

The Obama administration and bailout apologists would like to have us believe that it was just a necessary first stage of the recovery to ensure that the bankers stayed rich and the wealthiest Americans’ increasing share of the nation’s wealth kept on growing.

But in Barofsky’s view, there was nothing inevitable about the no-strings attached bailout that filled the bankers’ pockets while offering little to Main Street. It had nothing to do with the operation of the free market either. It was very carefully crafted by public officials working hand in hand with Wall Street to maintain its power while gnawing away at the increasingly fragile livelihoods of ordinary Americans.

As Barofsky notes, “Treasury officials refuse to address these shortfalls. Instead they continue to 
stubbornly maintain that the program is a success and needs no 
material change, effectively assuring that Treasury's most specific 
Main Street promise will not be honored.”

And while recent employment gains are welcome news, Dean Baker points out the losers – African-Americans among whom unemployment remains distressing high and wage earners in general, whose pay is not keeping up with inflation.

The bailout celebration is just part of the happy talk designed to buoy the notion that the recovery is well underway. But this bailout-fueled recovery continues to pick highly predictable winners – with the powerful, wealthy and politically connected doing swimmingly while everybody else just limps along.