Will Afghan Bailout Trump U.S. Homeowners?

At least you know where the Tea Party stands. If it’s a government program, they want to end it.

The Democrats are murkier. They propose tepid solutions to serious problems like the foreclosure crisis, then when their programs don’t work it, ends up reinforcing the Tea Party’s arguments that government doesn’t work.

So the Tea Party-driven Republicans come along and want to whack the Obama administration’s failed foreclosure prevention scheme known as the Home Affordable Modification program. They would probably want to whack it even if it was working, but that’s another subject.

The Tea Party doesn’t offer anything in its place. Homeowners are pretty much on their own at the mercy of the banks.

So much for the American Dream.

Many people have pointed out that the HAMP program is something between an abject failure and a scam that rips off already beleaguered homeowners.

The Obama administration doesn’t offer so much of an argument in its defense as a hapless shrug. In this video, Treasury Secretary Timothy Geithner acknowledges that the foreclosure prevention program amounts to a “tragic, terrible mess.”

But hey, the administration says, it’s better than nothing.

Meanwhile, the foreclosures continue while authorities investigate massive fraud by the banks in the foreclosure process.

This is not a debate calculated to offer much confidence that our public officials can deal effectively with the problems that afflict those of us who live in the reality-based community.

I was reflecting on this tawdry spectacle while reading about the latest developments in the latest “too big to fail” bank bailout to strike at U.S. taxpayers – this one in Kabul, Afghanistan. My colleague Harvey Rosenfield warned about this brewing fiasco several weeks ago.

Apparently the wildly corrupt officials and their cronies used the bank as their private piggy bank, and the bank’s imminent collapse is now a greater threat to Afghanistan’s security than the Taliban.

As recently as last September, officials were offering assurances that U.S. taxpayers would not have to pay for a bailout. Now apparently if we don’t cough up $1 billion the war and the country will be lost and all the previous billions we’ve squandered there will have been wasted.

So we can’t afford a dime to help homeowners in this country but we must spend $1 billion to bail out the Afghans.

I don’t expect the Democrats to put up much of a fight against such an outrage.

I hope the Tea Party stands strong on this one.

 

 

 

Elizabeth Warren's Inside Move

So President Obama did not appoint bailout critic and middle-class champion Elizabeth Warren to head the new Consumer Financial Protection Agency.

He did appoint her to an important-sounding post as a White House adviser with responsibility to set up the agency, which after all was her idea in the first place.

Is the president actually marginalizing her with the window dressing of a fancy title? Or will she have a meaningful role in setting up the agency and shaping policy?

The punditocracy has gone into overdrive analyzing the president’s handling of Warren.

The positive spin is that it’s a savvy political move on Obama’s part to get her to work right away creating the agency and avoid a Republican filibuster, and that the president will finally be hearing from an insider not under Wall Street’s spell.

The more skeptical interpretation sees it as the latest example of the president’s failure to push back against Wall Street on issues that Wall Street cares about. As he has in the past, rather than picking a principled fight with Wall Street (and Republicans) Obama found a way around it.

The third spin, from Barney Frank, is that Warren actually didn’t  want a permanent appointment now, keeping her options open to either exit the administration or accept the job later.

Writing on WheresOurMoney.org earlier, Harvey Rosenfield, eloquently described why Warren is the best person to lead the new agency.

Warren has been a long-time critic of predatory lending practices and the American way of debt. In her role as congressional monitor of the federal bank bailout she’s been a fearless straight shooter and a down-to-earth demystifier of the complexities and foibles of high finance.

But Obama’s handling of her appointment reinforces the impression that he’s weak in the face of Wall Street’s power. Why in the world, with a high-stakes election less than 2 months away, would the president want to avoid a fight with Wall Street and Republicans on behalf of the undisputed champion of the middle-class and consumers? If the president does intend to appoint Warren to head the agency later, does he seriously think it will be easier later?

Unlike most of the president’s other top economic advisers, Warren has never been cozy with Wall Street. But it’s simply not realistic to expect the president is about to get more aggressive in reining in the big banks with Warren on the inside.

The president has shown that he is capable of ignoring perfectly good advice from well-respected advisers with impressive job titles within his administration. Remember Paul Volcker? The former Fed adviser has been a lonely voice within the Obama administration warning about the continuing dangers of the too big to fail banks and too much risky business in the financial system. But the president used Volcker as little more than a populist prop, preferring the more conciliatory approach championed by his other top economic adviser, Larry Summers, Treasury Secretary Tim Geithner and Fed president Ben Bernanke. These three effectively fought off the tougher aspects of financial regulation at the same they time touted themselves as real reformers. While the president made clear Warren will work directly for him, will she be able to match Summers, Geithner and Bernanke, all seasoned bureaucratic infighters? She’s done little to endear herself to them and has publicly tangled with Geithner.

There’s no question that Warren, a Harvard bankruptcy law professor, has already played an extraordinary and important role in helping understand the financial collapse and its fallout. She’s never been anything but forthright, no-nonsense, principled, unafraid to speak truth to financial power and to demand accountability. She will need all those qualities as well as thick skin and nerves of steel for her new job. The stakes are high. I wish her well.

Around The Web: Nothing Natural About Financial Disaster

Maybe this is the one that will finally cause people to take to the streets.

The crack investigative journalists at Pro Publica and NPR’s Planet Money have uncovered the latest evidence of how the big bankers schemed to keep their bonuses and fees coming by creating a phony market for their mortgage-backed securities, which were tumbling in value as the housing market tanked in 2006.

The Pro Publica/NPR investigation shows how the bankers from Merrill-Lynch, Citigroup and other “too big to fail” financial institutions undermined a system of independent managers who were supposed to be evaluating the value of the securities. The banks simply browbeat the managers into buying their products rather than face losing the banks’ business.

Meanwhile, the bankers continued to make money off every deal, even though the rest of us paid a high price for their continued trafficking in complicated financial trash.

Then when the entire business unraveled in the financial collapsed, these bankers got a federal rescue and a return to profitability.

Pro Publica acknowledges it’s complex material, so they’ve accompanied their investigation with a cartoon and graphs to make it easier to understand.

My WheresOurMoney colleague Harvey Rosenfield wrote recently about the falseness of the claim that either Hurricane Katrina or the financial collapse were primarily natural disasters. The NPR/ProPublica investigation is yet more evidence that the bankers’ irresponsible self-dealing turned a downturn in the housing market into full-blown catastrophes.

Writing on his blog Rortybomb, Mike Konczai hones in on the stark contrast in the fate of the bankers and many of the rest of us:  “Remember that by keeping the demand artificially high for the housing market in the post-2005, these banks created its own supply of crap mortgages. These mortgages inflated and then crashed local housing prices. Meanwhile the biggest banks got tossed a lifeline and homeowners can’t even short sale their home much less have a bankruptcy judge that can set their mortgage to the market price with a large penalty. And everyone lines up to tell those people what ‘losers’ they are, how `irresponsible’ they’ve been for being pulled into becoming the artificial supply for artificially created demand of housing debt. What sad times we are living in.”

Meanwhile the SEC is supposedly investigating the self-dealing. We’re still waiting for the tougher new SEC that the Obama administration promised. In the latest indication that we may have to wait a while longer, a federal judge has rejected the agency’s proposed $75 million settlement with Citibank over charges that the bank misled its own shareholders about the shrinking value of its mortgage-backed securities. The SEC said the bank misled investors in conference calls by saying its subprime exposure was $13 billion, when it was actually more than $50 billion. Among the pointed questions the judge asked: Why should the shareholders have to pay for the misdeeds of the bank executives, and why didn’t the SEC go after more of the executives?

The judge’s questions about accountability mirror the uneasy questions a lot of us have about this administration’s reluctance to take on the bankers whose behavior led to ruin for the country while they profited.

Wall Street Gives Thanks

(Translated into English by Harvey Rosenfield)

November 22, 2009

Dear People of the Rest of the Country:

The holidays are here. Like you, we have all worked very hard during this difficult and trying year.  Now it’s time for all Americans to take a well-deserved few days off, chill out at your favorite Caribbean getaway, crack open a bottle (we like the 2006 Antinori Cab), gather around family and friends and yachts, and recognize how blessed we are for getting to “do God’s work,” as Master Blankfein says.