Author: Matt Browner Hamlin

http://holdfastblog.com

Tom Morello on Paul Ryan

Rage Against the Machine guitarist and general badass activist Tom Morello takes on Paul Ryan in an op-ed in Rolling Stone. Ryan has famously said that Rage Against the Machine is one of his favorite bands, but he likes their sound and not their radical left wing lyrics. OK then. Morello writes:

Ryan claims that he likes Rage’s sound, but not the lyrics. Well, I don’t care for Paul Ryan’s sound or his lyrics. He can like whatever bands he wants, but his guiding vision of shifting revenue more radically to the one percent is antithetical to the message of Rage.

I wonder what Ryan’s favorite Rage song is? Is it the one where we condemn the genocide of Native Americans? The one lambasting American imperialism? Our cover of “Fuck the Police”? Or is it the one where we call on the people to seize the means of production? So many excellent choices to jam out to at Young Republican meetings!

Don’t mistake me, I clearly see that Ryan has a whole lotta “rage” in him: A rage against women, a rage against immigrants, a rage against workers, a rage against gays, a rage against the poor, a rage against the environment. Basically the only thing he’s not raging against is the privileged elite he’s groveling in front of for campaign contributions.

You see, the super rich must rationalize having more than they could ever spend while millions of children in the U.S. go to bed hungry every night. So, when they look themselves in the mirror, they convince themselves that “Those people are undeserving. They’re . . . lesser.” Some of these guys on the extreme right are more cynical than Paul Ryan, but he seems to really believe in this stuff. This unbridled rage against those who have the least is a cornerstone of the Romney-Ryan ticket.

The Housing Market

David Dayen makes some very good observations about the ongoing debate of what’s happening in the housing market, noting that we should not just be having a conversation about housing prices, but the market and its impacts on whole.

But ultimately, all of these are issues about housing prices. They are not issues about the housing market as a whole, and its relative health. Should we be OK with the fact that institutional investors like hedge funds are becoming absentee slumlords all over the country? Should we be OK that banks are holding these properties for years, waiting for the moment to dump them on the market, leading to blight in communities, disrepair, lowered home values for the neighbors, and a mark-to-myth accounting, where the bank never has to take the actual loss on the loan? Should we be OK that large states and regions are subjected to these practices, and as a result will see their economies recover far more slowly than the rest of the country? Should we be OK with low housing starts and diminished construction jobs? Should we be OK with current policy, letting housing hit bottom and clear, with years of suffering going unaided?

We shouldn’t just focus on prices in this housing recovery debate, in other words. We should look at what kind of housing market we have in the aftermath, and whether it works for the country.

 

Two Ratchets

Duncan Black describes the way of the world in a very similar way as I’ve been thinking about it for quite a while. Though his articulation, as always, is much more direct.

I just assume that going forward we basically have two ratchets. The one ratchet keeps getting nudged in the direction of giving more goodies to rich people, and except for possible temporary blips, those goodies aren’t going away.

The other ratchet gets nudged in the direction of fewer goodies for the rest of us. And once gone, they’re gone for good.

This is the process of how class warfare in America is actualized. And odds are if you’re reading this, you’re almost certainly losing.

Baker versus Ryan

Dean Baker takes on Paul Ryan and a lot of the fawning love Ryan has received from the political press that ignores that the truth is Ryan is no deficit hawk.

Governor Romney’s decision to select Paul Ryan as his running mate has condemned the country to 90 days of ridiculous news stories and columns about a choice on the size and role of government. The debate is silly because its explicit assumption is that Paul Ryan wants a small role for government. There is no evidence to support this assertion.

From here, Baker outlines a number of ways he’s previously identified in his book, “The End of Loser Liberalism” around how the government structures economies that amount to billions or even trillions of subsidies and protections for certain industries. This obviously has to do with the size of government and its role in the economy, yet is ignored by both the press and conservatives in favor of limiting the discussion to taxes and spending.

Baker goes on:

While Paul Ryan is a vocal opponent of the policies that the government has in place to protect low and middle income people, he has never indicated any opposition to the massive interventions, like patent monopolies for prescription drugs and the Fed’s policy of using unemployment to fight inflation, that redistribute income upward. For this reason, it is flatly wrong to describe Mr. Ryan as a supporter of small government. He is more accurately described as an opponent of government interventions that redistribute income downward and a supporter of government policies that redistribute income upward. [Emphasis added]

I don’t expect many reporters will take up Baker’s accurate framing of Paul Ryan, but it’d be nice if they did.

Paul Ryan

Charles Pierce:

Paul Ryan is an authentically dangerous zealot. He does not want to reform entitlements. He wants to eliminate them. He wants to eliminate them because he doesn’t believe they are a legitimate function of government. He is a smiling, aw-shucks murderer of opportunity, a creator of dystopias in which he never will have to live. This now is an argument not over what kind of political commonwealth we will have, but rather whether or not we will have one at all, because Paul Ryan does not believe in the most primary institution of that commonwealth — our government. The first three words of the Preamble to the Constitution make a lie out of every speech he’s ever given. He looks at the country and sees its government as an something alien that is holding down the individual entrepreneurial genius of 200 million people, and not as their creation, and the vehicle through which that genius can be channelled for the general welfare.

Treasury’s hold over Fannie & Freddie

David Dayen has flagged a bit of analysis which says that the Treasury Department has such a large investment in Fannie and Freddie, they could compel the GSEs to do principal reduction if they wanted to. Dayen quotes Ralph Axel of Bank of America:

The FHFA’s decision also underscores the fact that the GSEs are not government agencies; they are private companies that have been temporarily taken over by their federal regulator whose specific mandate is to conserve their assets and continue their activities. As private companies, the GSE will likely respond to economic incentives. The Treasury’s power to modify the terms of the US$19bn dollar annual dividend that Fannie and Freddie (combined) owe to the Treasury is a tool of tremendous strength that could provide one such incentive.

The Treasury has the power to lower the dividend or tie it to incentives. It can tie the dividend to principal reductions or to easier underwriting standards or reduced putback activity to stimulate refinancings and new loans. The US$19bn dwarfs the US$3.6bn savings that the FHFA found from principal forgiveness. This is not housing finance reform, but it is a way to create effective temporary stimulus without raising additional federal debt while simultaneously moving toward larger structural changes.

David goes on to note:

And the fact that they are not making these conditions tells you a lot about whether or not the objections at Treasury to DeMarco’s decisions represent something real or something convenient for the election period. Geithner may be pinning the blame for the continued problems with underwater borrowers on DeMarco to deflect criticism away from the Administration. But he’s unwilling to do anything about it. And that tells the tale.

I don’t know anyone on the left who disagrees with the idea that Fannie and Freddie should be doing widescale principal reduction. But the idea that Ed DeMarco is a master villain beyond the prolonged foreclosure crisis and the lack of principal reductions just isn’t true. There have been numerous opportunities for the Obama administration to enact principal reduction which they have repeatedly elected to not take. Likewise there are outstanding ways for them to do these policies, but again they choose not to.

This isn’t to say that DeMarco is wrong and the country wouldn’t be better off with someone who supported helping homeowners at the head of FHFA. But the same could be said of having a Treasury Secretary who did this, or a head of HUD or the SEC or the DOJ who thought banks should be prosecuted for foreclosure fraud, instead of coddled and protected. Fire DeMarco? Sure, but let’s make sure Geithner and company are moved out with him.

…Adding, in another post about the SEC and DOJ choosing not to prosecute Goldman Sachs, Dayen notes:

Incidentally, there is one bit of exposure left for Goldman on this particular batch of Fremont loans. One federal entity has sued Goldman and other banks for misrepresenting mortgage-backed securities. That would be the Federal Housing Finance Agency. That Ed DeMarco is such a scoundrel.

Indeed.

Looming tax peril for underwater homeowners

David Dayen has a story at Salon that is genuinely must-read. He’s flagging the fact that for the last three years, there has been a federal law which excludes principal reductions from homeowners from taxation. Any amount of debt that is written off by banks during a mortgage modification has not been counted as taxable income. That law will expire at the end of 2012, making it likely that homeowners who receive principal reductions, sell their homes at short sale, or received compensation as part of the national mortgage settlement or Servicemember Civil Relief Act settlements will have to pay federal taxes on the money. Given that these are almost entirely people who are in foreclosure due to a lack of money, this could be devastating.

Imagine struggling near foreclosure in an underwater home – you bought it for $300,000 but now it’s only worth $200,000. You get your bank to make a deal to keep you in your home, cutting the principal on your mortgage by $100,000. Great! Only if this law expires and the mortgage modification happens after its expiration, you’ll now be sent a federal tax bill that could be $20-30,000 or more, depending on your income. It’d be crushing.

If this tax policy isn’t dealt with and comes into existence next year, it would be as functionally stupid as any which exists in America today.

What’s terrifying is that extending this law would be a tax cut at a time when Washington is captured by deficit fever. Per Dayen, “the Congressional Budget Office estimates that excluding principal reductions from taxation for two more years will save recipients $2.7 billion.” $2.7 billion isn’t a ton of money, but it isn’t nothing either. Since we’re facing a fiscal cliff, plus the expiration of the Bush tax cuts, plus the debt ceiling, it’s clear that Congress will be looking for ways to save money, particularly from powerless constituencies. And given the lack of action by Congress to aid homeowners, it’s hard to imagine a less powerful constituency than homeowners at risk of foreclosure.

Nonetheless, there are multiple pieces of legislation moving through the House and Senate aimed to extend the protection for homeowners. Keep in mind that the initial law was set to expire after three years because it was assumed the housing crisis we were in would be over by then. Obviously that assumption was wildly optimistic. We need a fix that will survive on a long enough term to actually right the housing market. Dayen again:

At stake is the future of the housing market itself. Though analysts keep touting a bottoming out of prices and home sales, the numbers suggest that there’s still a long way to go, and the biggest stumbling block remains negative equity. “For us to get to a housing recovery, we really do need significant principal reduction,” said Rheingold. “As we’re seeing the first signs of doing any principal reduction or short sales, if this tax relief is allowed to expire, it would really do tremendous damage.”

Senator Debbie Stabenow and Rep. Jim McDermott have both introduced bills to fix this. Stabenow’s is just a one year extension, though McDermott’s is quite comprehensive. It’s easy to imagine dealing with this issue becoming a yearly task for Congress, as no one wants to do anything that can be seen as contributing to the debt long term. As a result, homeowners at risk of foreclosure may remain in an even more precarious position for a long time to come. This is the real sort of uncertainty which hurts people and the economy (as opposed to the fictional uncertainty which fuels invisible bond vigilantes).

This issue has largely flown under the radar to this point in time. Hopefully Dayen’s reporting, as well as work being done by activist groups like ACCE, will put pressure on Congress to act quickly. The longer this goes unresolved, the more likely it will be lost in the coming hysteria around expiration of the Bush tax cuts, sequestration, and the debt ceiling.

SEC blows a lay-up

Yves Smith and David Dayen have good takes on the SEC’s failed criminal prosecution of Brian Stoker, a former Citibank executive who was caught dead to rights for misleading investors on a CDO offering. David fears the outcome will be even less (hardly possible!) criminal prosecutions from the SEC:

Sadly, if the SEC can’t secure a conviction in a relatively open and shut case like this, it’s almost certain that they will fold up their tent and stop even a semblance of aggressive prosecutions against the banks. It doesn’t appear they have the personnel available to do the job. After 20 years of near-consistent defunding, I’m not that surprised.

Yves similarly thinks less prosecution will be likely as well, though she provides a vision for what law enforcement should look like when it comes to financial crimes.

Having been exposed as inept, the SEC is guaranteed to avoid another public embarrassment. So they will continue to draft claims that get good PR and settle cases. And it is a no brainer that the Obama Administration will refer to this decision as further proof that it is just too hard to pin anything on those bank executives. One has to wonder, given SEC enforcement chief Robert Khuzami’s deep involvement in the CDO business (he was general counsel of the Americans at Deutsche Bank from 2004 to 2009) and the Administration’s insistence that it’s pointless to even try to prosecute bank executives, whether this case was thrown, as opposed to merely lost. But absent evidence, never attribute to malice that which can be explained by incompetence.

Charles Ferguson and Eliot Spitzer are right. If anyone was really serious about going after bank misdeeds, the path of action would be to go after how bankers pay for drugs and prostitutes on the company dime. This would not be hard to prove and the threat of jail time would get them to sing. But it’s long been apparent that the problem is not the lack of viable courses of action, but lack of will to undermine the rule of our financial overlords.

The lack of will stems from a disbelief that Wall Street should be held accountable the way regular people are held accountable for their crimes.