Martin Column - Page 12 - Represent Consumers

3 Steps Toward Real Economic Recovery

Democrats should be less worried less about Sarah Palin’s mangling of American history and more concerned about the Obama administration’s consistent underestimation of the recession since the financial collapse.

The president and his team has been downplaying the seriousness of the jobs and housing crises since they took office, repeatedly taking inadequate steps to address the twin fiascoes of foreclosure and unemployment, while wrongly conceding to Republicans that the political focus should be the short-term deficit.

This is not only bad for the country but bad politics for the Democrats, increasing the chances that voters will blame them for not fighting harder for programs to create jobs and straighten out the housing mess. Never mind that Republican efforts to address these issues amount to less than zero.

Nobody expects the president and his party to win every fight. But we do expect him not to wave the white flag before the fight starts.

Circumstances still offer the president opportunities to show that he finally gets it – and to signal a more aggressive approach.

First, the president can launch a fight for Elizabeth Warren to head the Consumer Financial Protection Agency. Warren is popular, articulate and sensible, and the agency was her idea in the first place. Of course the Republicans hate her, in fact they don’t want a single head of the agency. Republicans favor a committee to run the agency, the more easily for the banks to bamboozle it.

Second, he can replace his outgoing economic adviser, Austan Goolsbee with somebody more tuned in to the jobs and housing crises. How bad was Goolsbee (and the administration’s economic policies he defended)?

Here’s how economist Firedoglake blogger Scarecrow put it after listening to Goolsbee Sunday, saying it was up to the private sector to create jobs now because government could do nothing: “If I’d been asleep for the last decade and woke up to ABC This Week’s interview of Presidential economic advisor Austan Goolsbee, I would assume that Mitt Romney won the 2008 election, that he was predictably following Republican dogma about how to recover from a severe financial collapse and recession...” Scarecrow wrote.

With Democrats like these, who needs Republicans?

Third, Obama can fire his Treasury secretary, Timothy Geithner, who has shamelessly pandered to his banker cronies while ignoring Main Street’s woes since he helped engineer the bailout as head of the New York Fed prior to the Obama administration.

Of course it will take more than gestures and a few appointments for the president to tackle the continuing severe economic challenges we face. But he can still saddle up and take a brave ride on the right side of history, if he chooses.

The Scandal That Won't Go Away

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

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

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

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

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

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

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

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

What About The Rest of Us?

In one of the most appalling aspects of our current politics, our elites – elected officials, media lords and corporate chieftains, have swept the opinions and concerns of most Americans off the table to pursue their own agenda.

So we’re stuck with sterile political games focused on the national debt, even while a majority of Americans favor higher taxes on the rich and more aggressive action to reduce unemployment.

We get the highly touted insider trading conviction of a hedge fund billionaire while the Justice Department doesn’t pursue its own FBI’s massive evidence of the too big to fail bank’s fraud at the heart of the financial collapse.

It’s clear that whoever is setting priorities is not us. Take for example President Obama’s deficit commission, which has worked hard to legitimize the austerity agenda embraced by most of both parties. Not only was it stacked with well-known deficit hawks, It was made up of a collection of lifetime politicians, bureaucrats, with a CEO thrown in – because we wouldn’t want the CEOs to feel left out of any big idea brainstorming.

But what about the rest of us? Over at Campaign For America’s Future, Dave Johnson has been asking some intriguing, relevant questions.

For one, what would the deficit commission have looked like if it truly reflected the population of the country, rather than the backroom.

If a 100-person deficit panel truly reflected the country, it would present a stark contrast to the gang the president relied on:

• 19 people on the commission would receive some form of Social Security benefits, 12 of those as retirees. And on this deficit commission they get to talk when the ones making over $250K propose cutting Social Security.

• 43 of the commission members would have less than $10,000 saved up for retirement. 27 of those less than $1,000.

• 98 of the 100 members would make less than $250,000 a year.

• 50 of the members would come from households in which the total income of all wage-earners is less than $52,029.

• 13 would have income below the poverty level.

• 14 members would be receiving food stamps.

• 16.6% of the commission members would be un- or underemployed, and would be wondering why they are on a deficit commission at all instead of a jobs commission.

• The commission would include the right proportion of factory and construction workers, and people who work in a kitchen, and work waiting tables, and teaching, and nursing, and installing tires, and all the other things that people do except, apparently, those on DC elite commissions. (People who do hard, manual labor get an extra vote each on what the retirement age should be.)

• 74 members would not have college degrees.

• 20 would not have graduated high school.

• 18 would speak a language other than English at home.

Under present circumstances it’s highly unlikely that the president would appoint a commission to consider the deficit or anything else for that matter that wasn’t stacked with wealthy insiders intent on slashing government services for anybody who is not like them. But highlighting the disconnect does point out in a particularly graphic way why those at the top have managed to get left out when its time to divide up the sacrifices.

Financial Crisis / Martin Column - 05/17/2011

Bringing it All Back Home

Looking at the photo of President Obama and his advisers tracking the mission to kill Osama bin Laden, I was struck by the president’s extraordinary intensity.

In the photograph I read not only his passion for the mission and his concern for the Navy SEALS, but his knowledge that his own job could be at stake.

Looking at Obama so present in the photograph, I couldn’t help but think about how absent he’s been from the economic crisis that’s afflicting millions of people here at home. Yes, he’s been worried about Bin Laden; yes, he’s obsessing about the deficit; and yes, he’s got to raise a billion dollars to fund his reelection. But we are still facing an economic crisis that has left housing behind, with the worst unemployment in decades.

So where’s the situation room for the unemployed and those losing their homes? Where are the presidential commissions and crack teams focused on tracking down new ways to salvage communities ravaged by foreclosure and joblessness?

I had the opportunity to hear President Obama at a rally a couple of weeks ago. He talked about how he stays up late reading letters from the unemployed. But the president’s rhetoric rang hollow and slick in the face of his lack of aggression in fighting for benefits for the long-term unemployed. He abandoned them at the same time that he extended the Bush era tax cuts for the wealthiest.

They’re the Obama era tax cuts now.

We’re in a bitter fight for real economic recovery here at home, to keep the most vulnerable from further suffering, to narrow the widening gap between rich and poor, to keep the country from losing its soul. It’s a complex mission, in uncertain terrain, against implacable foes.

The mission in Abbottabad required guts, rigorous planning, determination and flawless execution to accomplish what was deemed just and right. Now we need our president and all of his intensity fighting for us here at home.

Martin Column / President Barack Obama - 05/12/2011

Real Fraud, Faux Enforcement

The number one question people ask me when they find out I write about the financial crisis is: “How come nobody has gone to jail?”

I think I have found an explanation. His name is Robert Khuzami and he works as chief of the Securities and Exchange Commission’s enforcement division.

He is not the literal reason. SEC enforcement is civil, not criminal. So he’s not responsible for putting people in prison.

But focusing on Khuzami puts into sharp focus the conflicts at the heart of the government’s efforts to regulate and hold accountable the big banks.

Khuzami is a former federal prosecutor. But he came to the SEC from a high-profile position he took after his stint as a lawman: he served as general counsel to Deutsch Bank, one of the world’s largest investment banks, which had a massive business in the securitized mortgage loans, and was the recipient of nearly $12 billion in “backdoor bailout” federal funds funneled through AIG.

The Wall Street Journal reported that Khuzami was the first SEC enforcement chief to come directly from a big bank. He is one in a long line of Obama economic appointments with strong ties to the financial industry, who either worked for the banks directly or in their interests by favoring deregulation that was one of the major causes of the economic collapse.

Now Khuzami’s former employer, Deutsch Bank, is in hot water with the feds, who sued the bank earlier this month alleging that the “bank committed fraud and padded its pockets with undeserved income as it repeatedly lied so it could benefit from a government program that insured mortgages,” Business Week reported.

For the SEC, it’s all kosher because its stringent recusal policy assures that Khuzami won’t work on any Deutsche Bank cases.

Remember that Khuzami was not just a guy punching a clock. He was the bank’s general counsel, so he supervised legal issues for the firm.

So here was a former federal prosecutor who, in the midst of the go-go real estate boom, apparently thought it was OK for his bank to commit mortgage fraud. Zero Hedge dug up his financial disclosure statement, which reveals he was compensated nearly $4 million in salary and bonuses between 2006 and 2009, and may lose money if Deutsche Bank suffers as a result of the government’s lawsuit.

The president and the SEC, knowing what kind of mischief the too big to fail banks were engaged in during the boom, and how Khuzami had profited from it, thought it was a terrific idea to appoint somebody like him to go after his former cronies.

Khuzami’s tenure at SEC has been marred by accusations that he gave two Citibank executives preferential treatment in agreeing to drop charges against them after he met secretly with their lawyer. In January, the SEC’s inspector general said it was investigating the matter.

Is there no one but former bankers available to work in the financial sector? The president, with $1 billion to raise to fund his reelection effort, has been unwilling to dig into the fraud at the heart of the financial collapse. Until he does, the economic recovery will be built on quicksand.

AIG / Martin Column / President Barack Obama / Securities and Exchange Commission (SEC) / Too Big To Fail - 05/11/2011

P.R. Won't Fix Foreclosure Mess

Will one of the nation’s too big to fail banks succeed in buying its way out of a shameful scandal stemming from dozens of improper foreclosures of military families and overcharging thousands more?

J.P. Morgan Chase, which hauled in $25 billion in the bailout, is in full damage control mode, paying out $56 million to settle a class action brought by military families – about $4,500 per family – and temporarily lowering mortgage interest to 4 percent for other military families.

But the bank is still facing a federal investigation stemming from the allegations. Whether the Justice Department finds the nerve to hold accountable one of the big banks remains an open question.

It hasn’t so far, despite evidence of widespread fraud in the bank’s use of robo-signers who verified the accuracy of thousands of foreclosure documents without ever reading them.

But our political leaders haven’t worked up the courage to call it what it is.

The bank had no choice but to acknowledge it had screwed up. To show just how serious it was about doing right by the nation’s fighting men and women, J.P. Morgan Chase appointed an actual commission with some real-life celebrities on it, including retired general William McChrystal and former football legend Roger Staubach.

The Justice Department has no excuse not to go after J.P. Morgan and other banks that have been violating the Servicemembers Civil Relief Act, which is supposed to keep military families safe from foreclosure while they’re on active duty. Military families have been particularly hard hit by the foreclosure crisis, with 20,000 facing foreclosure last year, a 32 percent increase since 2008.

Federal investigators just made the Justice Department’s job easier – in a recent study GAO found more than a couple of dozen improper foreclosures of military families. You might not think that sounds too bad, until you realize they found those bad foreclosures in an examination of just 2,800 foreclosure files.

Instead of pretending that the foreclosure mess is just going to sort itself out on its own, our political leaders need to acknowledge how deep a hole the big banks have dug for the rest of us to figure a way out of.

We don’t need more hapless PR. A realistic first step would be a foreclosure moratorium. If anybody else but the big banks were engaged in these kind of shenanigans, it would just be labeled what it is: fraud, plain and simple.

Around the Web / Foreclosure / Martin Column - 05/09/2011

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.

Federal Reserve / Martin Column / Outrage - 04/28/2011

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.

Financial Crisis / Foreclosure / Martin Column - 04/26/2011

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?

Around the Web / D.C. Disconnect / Martin Column - 04/22/2011

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.

Executive Pay / Financial Crisis / Martin Column / Outrage / Social Security / TARP - 04/16/2011