Bold Lite

Maybe President Obama's jobs plan will succeed in making congressional Republicans look bad before the 2012 election, especially if they reject it and demonize it as another socialist plot.

But even in the unlikely event that the congressional Republicans pass it whole, would the president's $440 billion grab bag offer significant solutions to Main Street’s most pressing problems – reducing the unemployment rate and halting the foreclosure crisis?

Probably not.

It’s true that the president and his administration did not dig the deep economic hole the country is in. And the president deserves some credit for stepping out of Washington’s deficit obsession bubble just long enough to recognize that nothing the government has done so far has been enough to lift those outside Wall Street out of that hole – the worst economic downturn since the Great Depression.

But throughout his administration, and again last night, he has not offered big enough shovels, to dig us out of it.

As Paul Krugman [who labels the plan “a lot better than nothing”] points out, the collapse of the housing bubble blew a  $1 trillion a year hole in the economy, a hole that last night’s jobs plan won’t come close to filling.

But a comparison of the jobs plan’s $440 billion price tag with the unsuccessful $16 trillion bank bailout suggests its relative timidity. Remember that the federal government handed over that money to the bankers with no strings attached and no questions asked.

While the administration likes to tout the bank bailout’s success by bragging that most of the money has been repaid, by its most important measure – ensuring that the banking system helped restore the Main Street economy - it remains a costly failure.

Still you have to at least acknowledge that the bank bailout was a bold scheme. The same can’t be said for the American Jobs Act, which as the president stressed, was a collection of non-controversial proposals that even corporate Republicans have endorsed in the past.

Call it Obama’s “bold lite.”

Yes, it was bolder than what the president has suggested since the original $700 billion stimulus. It includes $240 billion of tax cuts and about $200 billion in infrastructure spending and aid to local governments, along with regulatory review, a vague housing scheme, plus a significant new round of budget cuts to pay for it, including unspecified threats to Medicare.

According to an estimate by Economic Policy Institute, the new plan, if passed whole, would create 2.6 million new jobs over the next several years and prevent the loss of another 1.6 million jobs.

That’s not chopped liver – but the country is still staggering under the weight of persistent 9 percent unemployment, with 14 million Americans unemployed, another 8.8 million working part-time but seeking fulltime work, and another 2.6 million who don’t show up in unemployment numbers because they’ve given up looking for work. In addition, we face a continuing foreclosure crisis and the threat of future budget cuts.

While I hope that the congressional Republicans don’t just decide to block the proposal, experience suggests that they are stuck on that strategy as a way to undermine the president. Will “a lot better than nothing” be good enough to help millions of Americans for whom the recovery has only been a mirage? Or is the president setting himself up, and the rest of us, for another round of dashed hopes and failure?

Uncategorized - 09/10/2011

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.

 

 

Around the Web / Federal Reserve / Foreclosure / Martin Column - 04/07/2011

Around the Web: Landmark or Pit Stop?

I understand why people feel the need to tout the historical significance of the financial reform package that passed the conference committee. The president needs it politically and those who support him want to give him credit for getting anything at all in the face of the onslaught of bank lobbyists. Lots of folks worked very hard against tremendous odds to get something passed.

But I think a more sober analysis shows that what’s been achieved is pretty modest. It hands over many crucial details to the same regulators who oversaw our financial debacle.

Summing up, Bloomberg reports: “Legislation to overhaul financial regulation will help curb risk-taking and boost capital buffers. What it won’t do is fundamentally reshape Wall Street’s biggest banks or prevent another crisis, analysts said.”

Zach Carter characterizes it as a good first step. The Roosevelt Institute’s Robert Johnson writes: “This first round was not the whole fight. It was the wake-up call and the beginning of the fight. Rest up and get ready. There is so much more to do.”

The question is when we’ll get the chance to take the additional steps that are needed. The public is skeptical that the new rules will prevent another crisis, according to this AP poll. The Big Picture’s Barry Ritholtz grades the various aspects of the reform effort. Overall grade? C-. Top marks go to the new minimum mortgage underwriting standards. But legislators get failing grades for leaving four critical issues on the table: “to big to fail banks,” bank leverage, credit rating agencies and corporate pay.

Ritholtz saves some of his harshest evaluation for the proposal to house the new consumer protection agency inside the Federal Reserve, which he finds “beyond idiotic.”

Around the Web / Executive Pay / Financial Reform Legislation / Martin Column - 06/25/2010

One Reporter's Fight With the Fed

I didn’t know Mark Pittman, a reporter at Bloomberg News. We emailed a few times about the landmark lawsuit he instigated challenging Federal Reserve secrecy. I do know that Pittman is a genuine hero in a story which has very few.

He died too young last year, at 52. From what I gather, Pittman combined rumpled style, intellectual firepower and fierce persistence. The fight he waged to get the Fed to open its books serves as a lasting legacy and a strong reminder that one savvy, dogged person can make a real difference.

Earlier this month, Pittman’s employer, Bloomberg News Service, won yet another round in its fight with the Fed.

Federal Reserve / Martin Column - 03/31/2010