Category: Economy

Stoller on Schneiderman & Obama

Matt Stoller has been consistently writing thoughtful analysis about the Obama administration and what’s happening in American political life, but this piece at Naked Capitalism is undoubtedly one of his sharpest pieces of writing, pulling together a number of different threads of analysis around what we’re seeing out of New York’s Attorney General, Eric Schneiderman. Stoller pushes the analysis (bold in its rarity) that Schneiderman, like Obama and any other politician, is doing what he wants to do.

In all the absurdly stupid punditry, the simple application of free will to our elected officials goes missing. Yeah, Obama got money from Wall Street. But Obama is choosing to pursue a policy of foreclosures and bank bailouts not because of any grand corporate scheme. He just wants to. He thinks it’s the right thing to do, and he’s doing it. If you don’t think it’s the right thing to do, then you shouldn’t be disappointed in him any more than you might have been disappointed in Bush. Obama is not trying to do the opposite of what he’s doing, he’s not repeatedly suckered by Republicans, and he isn’t naive or stupid. Obama is simply doing what he thinks is right. So is Eric Schneiderman. So is Tom Miller. So are any number of elected officials out there.

In positions of power, the best expression I heard is that “up there the air is thin”. That is, you have enormous latitude, if you want to use it. Power can be wielded creatively and effectively on behalf of whatever it is the wielder wants. Now of course there are constraints, plenty of them. Smart politicians spend their time working to maximize the constraints they want to impose and weakening the ones they want to overcome. But the basic Reaganite liberal argument defending supplication towards Obama these days is that Obama is “disappointing”. In this line of thought, powerful corporate interests and Republicans are preventing him from enacting what his real agenda would be were he unfettered by this mean machine. Eric Schneiderman, who is in a far less powerful position as New York Attorney General, shows that this is utter hogwash. Obama is who he is, and anyone who thinks otherwise is selling something.

The rest of the piece is really sharp and definitely worth reading. There aren’t many people consistently putting out clear-minded analysis of the Obama administration and political dynamics in America today, but Matt is one of them.

Draft Duncan Black

Duncan Black:

I understand the difficulties of getting things done, of Republican obstructionism, of Democrats who also, too, suck, but ultimately such excuses don’t matter. Results do. If I were the one in charge of this pop stand, I’d direct my economics team to come up with the “If I were a prime minister instead of a president, this is what we would do” plan. And if all they came up with was minor tax breaks for hiring, “patent reform,” and “trade deals,” I’d, you know, fire them.

That would be great, if Duncan were in charge. But he isn’t. Unless this is Duncan raising a trial balloon for him to be drafted as a presidential candidate, I’m not sure what the point is. Barack Obama wants “minor tax breaks for hiring, “patent reform,” and “trade deals” so he isn’t going to fire the people who bring him these ideas.

Government isn’t broken

In an op-ed in the Nashua Telegraph, Daniel Weeks writes:

Our problem today is not a broken government but a beholden one: government is more beholden to special-interest shareholders who fund campaigns than it is to ordinary voters. Like any sound investor, the funders seek nothing more and nothing less than a handsome return – deficits be darned – in the form of tax breaks, subsidies and government contracts.

This is pretty much what I’ve been saying for a long time now. The same thing could be said about the economy as well as the government.

Cornel West on MLK, Obama

A very powerful op-ed from Dr. Cornel West in today’s NY Times. No punches pulled:

The age of Obama has fallen tragically short of fulfilling King’s prophetic legacy. Instead of articulating a radical democratic vision and fighting for homeowners, workers and poor people in the form of mortgage relief, jobs and investment in education, infrastructure and housing, the administration gave us bailouts for banks, record profits for Wall Street and giant budget cuts on the backs of the vulnerable.

There are other powerful hits on the Obama administration, but I actually like where West is going more:

King’s response to our crisis can be put in one word: revolution. A revolution in our priorities, a re-evaluation of our values, a reinvigoration of our public life and a fundamental transformation of our way of thinking and living that promotes a transfer of power from oligarchs and plutocrats to everyday people and ordinary citizens.

In concrete terms, this means support for progressive politicians like Senator Bernard Sanders of Vermont and Mark Ridley-Thomas, a Los Angeles County supervisor; extensive community and media organizing; civil disobedience; and life and death confrontations with the powers that be. Like King, we need to put on our cemetery clothes and be coffin-ready for the next great democratic battle.

Marcellus Shale: fracking for 80% less

Originally posted at AMERICAblog.

This is a big deal – the Marcellus Shale natural gas field is becoming like the new ANWR, only instead of being in the Alaskan wilderness, it’s a gas field that runs through the highly populated east coast and midwest. Instead of risking the health and well-being of rare animals as in ANWR, fracking in Marcellus Shale risks the health and well-being of millions of Americans. For energy companies want to get at this gas, they have to use a violent, destructive process called hydraulic fracturing (aka fracking), that pipes water and sand deep underground to force the gas out. Fracking is as nasty as it sounds, producing highly toxic byproducts that contaminate groundwater. Bloomberg reports that US government geologists have dramatically reduced their estimate of the amount of natural gas that can be extracted by fracking in the Marcellus Shale formation:

The U.S. will slash its estimate of undiscovered Marcellus Shale natural gas by as much as 80 percent after a updated assessment by government geologists.The formation, which stretches from New York to Tennessee, contains about 84 trillion cubic feet of gas, the U.S. Geological Survey said today in its first update in nine years. That supersedes an Energy Department projection of 410 trillion cubic feet, said Philip Budzik, an operations research analyst with the Energy Information Administration.

Coincidentally, just a few days ago law enforcement superhero and New York Attorney General Eric Schneiderman subpoenaed a number of energy companies under the Martin Act, alleging that they weren’t being honest with investors about how much gas were in their wells.

Investigators have requested documents relating to the formulas that companies use to predict how much gas their wells are likely to produce in the coming decades. The subpoenas, which were sent on Aug. 8, also request documents related to the assumptions that companies have made about drilling costs in their estimates of the wells’ long-term profitability.The investigation will be watched closely in the industry because the attorney general, Eric T. Schneiderman, is using a New York law called the Martin Act that gives him broad powers over businesses and allows him to obtain and publicly disclose an unusual amount of information.

Subpoenas were sent to the three companies — Range Resources, Cabot Oil and Gas, and Goodrich Petroleum — according to the sources, who have direct knowledge of the investigation. Mr. Schneiderman also broadened a continuing investigation by his office into a fourth company, Chesapeake Energy, asking it to respond to similar questions about its shale gas wells, they said.

One of the reasons Schneiderman has taken interest in these energy companies is that New York State pension funds have heavily invested in these companies. Schneiderman has an obligation to help protect the State’s investments, especially if the companies haven’t been honest with investors.

It’s also worth noting that in addition to Schneiderman challenging yet another powerful corporate lobby, he’s also going against New York Governor Andrew Cuomo, a Democrat who has sought to end a moratorium on fracking in New York. Seriously – where can we get a few dozen more Eric Schneiderman’s to help get this country back on track?

Schneiderman removed from leading 50 state settlement committee

Originally posted at AMERICAblog

Yesterday Iowa Attorney General Tom Miller, who is in charge of the 50 state settlement negotiations between banks, the administration and all 50 state attorneys general summarily kicked New York AG Eric Schneiderman off of the Executive Committee, which had been steering the negotiations.

Schneiderman, who doesn’t want a settlement to bar further investigations of mortgage practices by individual states, was removed from the executive committee of state officials working on the deal, Iowa Attorney General Tom Miller said yesterday in a statement.
“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” said Miller, who is leading the state group. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.

We will see if Miller removes Delaware’s Beau Biden, who’s right there with Schneiderman pushing for real investigations and a narrow settlement, or Illinois’ Lisa Madigan, who has also cast doubt on the scope of settlement being too broad. David Dayen has a strong response from Iowa Citizens for Community Improvement:

“Miller threw Schneiderman under the bus and as a result we’re likely to see a significantly weaker settlement,” said CCI member Judy Lonning from Des Moines. “We’re extremely disappointed. Tom has really let us down.”

“Scheiderman was the first AG to say that he wasn’t going to back down on the big banks, and he was the first AG kicked out of the investigation,” Lonning said, “There’s no question who this decision favors. It’s all about making life better for the big banks, and we expected Tom Miller to do better than this.”

Harsh words for Miller, coming from a group that has fought hard to make sure the settlement looks out for struggling homeowners who have suffered abuse at the hands of greedy banks.

The real question is, can this group under Miller get a settlement at all? Or will the hard lines being drawn by Schneiderman and a handful of others make the process moot?

NYT editorial says Schneiderman shouldn’t go along with foreclosure settlement

Originally posted at AMERICAblog

This is big. The New York Times editorial board is saying that New York Attorney General Eric Schneiderman shouldn’t go along with the Obama administration’s, and Iowa AG Tom Miller’s, efforts to have a broad settlement of their ongoing foreclosure fraud investigation.  (John reported on the administration’s efforts to push prosecutors to settle, here.)

The Times ed board then rebuffs HUD Secretary Shaun Donovan, who has been pressuring Schneiderman to stop rocking the boat. The Times doesn’t get all their facts right – the settlement in discussion isn’t for a narrow immunization around robosigning. But what’s most impressive, beyond them calling out the Obama administration’s efforts to help Wall Street avoid investigation and accountability, is how the Times accurately calls the settlement inadequate and one of the weakest options out there for helping homeowners.

The administration also says that the proposed settlement would require the banks to write down the principal balance on underwater loans. According to news reports, the banks are likely to pay around $20 billion in the deal. With 14.6 million homeowners owing $753 billion more on their mortgages than their homes are worth, how far does the administration think $20 billion would go?

The administration should pursue principal reductions for stressed borrowers, and it could do so immediately by calling on Fannie Mae and Freddie Mac to refinance the underwater loans of borrowers who are current in their payments. What it shouldn’t do is pretend that the proposed settlement is the only — or best — way to get quick relief to homeowners.

The numbers being tossed around with the foreclosure fraud settlement are tiny. Even at ten times what’s being talked about, the settlement figure, which would be spread across five major banks, would be inadequate. And the administration already has tools at its disposal to directly benefit underwater homeowners. They’re just refusing to use them.

Phillip Anderson of New York’s top political blog, The Albany Project, suggested that people call and thank Schneiderman for standing up for the rule of law and for homeowners. If you’re in NY, drop his office a line and tell him you stand with him:

Maybe we should all call our AG (800 771-7755 or 212 416-8000) or e-mail him and thank him for standing up to the banksters and their enforcers in DC. I bet he would appreciate the show of support.

Dean Baker on Obama, SS & Class War

Economist Dean Baker writes about why Obama wants to cut Social Security. It’s a good read, in that it’s terrifying and depressing, but heavily based in facts. Baker closes with this incredibly important analysis of class warfare in the United States and who the economy is actually working for:

This brings up the fundamental point. The country has been and is getting richer. The reason that most people do not feel better off is that most of the money has gone to those at the top. Part of the reason is that they have been distracted by nonsense about the crushing burden of Social Security, so they have not paid attention to the policies that put more money in the pockets of the rich. Unfortunately, at the moment, President Obama seems to be working with the distracters.

I’d just say that talking about “the crushing burden of Social Security” isn’t about providing a distraction, though it certainly is that. That conversation and the actual goal of reducing Social Security is in itself an act of class warfare. Social Security is a key program that keeps old people from being in poverty. Taking it away or reducing it will drive more people into poverty. Destroying Social Security is one of the ultimate goals of the wealthy elites’ class warfare.

Fed gave $1.2 trillion to aristocracy of American finance

Originally posted at AMERICAblog.

Bloomberg:

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

Bloomberg also has a dramatic chart which documents these findings. Keep in mind that this lending started in 2008 and continued into 2009.

Equally stunning to the extent to which “the aristocracy of American finance” got bailed out was the extent to which the aristocracies of non-American finance also got bailed out:

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

Keep in mind while this money was shooting out of a fire hose from the Fed to giant international banks, nothing has been done on a remotely similar scale to help out working Americans. Marcy Wheeler has a good take away from this:

the money the Fed lent out to these highly leveraged risk takers could have paid off (much less merely guaranteed) the 6.5 million delinquent and foreclosed mortgages that are currently dragging down the American economy.But instead of offering money to homeowners who would have used it to stay in their homes and sustain their neighborhoods, the Fed instead loaned it to the banks that were leveraged to the hilt.

Additionally, the free money the Fed gave to big banks could have come with a strict requirement that they lend it right back out to Main Street. But it didn’t and the economy is still in the crapper three years later.

The assault on Eric Schneiderman continues

Last week I wrote about the smear campaign that’s revving up against New York Attorney General Eric Schneiderman. Now Schneiderman is facing intense pressure from the Obama administration to drop his objections to a bad settlement with Wall Street around the foreclosure crisis. Gretchen Morgenson reports:

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

Not surprising, the large banks, which are eager to reach a settlement, have grown increasingly frustrated with Mr. Schneiderman. Bank officials recently discussed asking Mr. Donovan for help in changing the attorney general’s mind, according to a person briefed on those talks.

In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal. [Emphasis added]

The amount of stomach-turning, nausea-inducing  crap in this one passage is hard to handle. The Obama administration – through HUD and the DoJ – is pressuring New York’s top law enforcement official to stop doing his job. The banking industry asked the Obama administration for this pressure and the Obama administration has complied. Not only is the administration pressuring Schnedierman’s office, they’re pressuring consumer groups to pressure Schneiderman’s office on behalf of the bankers. And then Donovan is justifying it with the transparently false line that it’s, in fact, about “a desire to speed up help for troubled homeowners.”

The current figure being bandied about in the 50 state attorney general settlement talks with the banks is in the range of $20-25 billion. If Donovan and the Obama administration wanted to “speed up help for troubled homeowners” they could instantly unleash the approximately $40 billion the Federal government has sitting unused from the HAMP program and the Hardest Hit Fund. But they don’t want to speed help to troubled homeowners, as Atrios points out, because they’ve had years to do this and still haven’t done it.

The only rival to Donovan in terms of hair-pulling absurdity is Katheryn Wylde of the NY Federal Reserve board and Partnership for Charlotte New York City:

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Actually, Ms. Wylde, no, they’re not. Wall Street is Wall Street. Main Street is Main Street. And corporations are not people. Sadly it’s hard to imagine Shaun Donovan or anyone else driving this in the Obama administration disagreeing with Wylde.

Not shockingly, I’m not the online one writing online who’s furious about this reporting on the administration’s efforts to squash investigations into foreclosure fraud.

Yves Smith:

Yet rather than address real, serious problems, senior administration officials are instead devoting time and effort to orchestrating a faux grass roots campaign to con a state AG into thinking his supporters are deserting him because he has dared challenge the supremacy of the banks.

Marcy Wheeler:

You see, the Administration has an “immediate opportunity to help a huge number of borrowers stay in their homes,” without any action from Eric Schneiderman. They have a way to do so more swiftly, in such a way the servicers actually would be held accountable. It would involve offering refis with principal reductions to all the underwater homeowners whose loans are owned by Fannie and Freddie. That would not only help a huge number of borrowers stay in their home, but it would be massive stimulus.

But instead they’re sending Donovan to pressure Schneiderman to pursue a measure that would benefit far fewer homeowners and probably take more time, while putting the last nail in the coffin of the rule of law in this country.

Phillip Anderson:

Did you see what [Donovan] tried to do right there? It’s called lying. It’s complete and utter bullshit. The Obama administration’s desire for Schneiderman to, well, stop doing his job, isn’t to further the interests of distressed homeowners at all. It’s all about giving the banksters yet another “get out of jail free” card.
…
Eric Schneiderman was elected to do a job, an extremely important one, serving the public’s interest and he’s doing a mighty fine job of it so far. If anything, the enemies he’s making, as illustrated above, show just how well he’s performing in that position. At a time when our US Attorney General, the AGs of states around the country as well as the federal agencies like the SEC and other instituions that are supposed to be representing the public’s interest seem to be AWOL or simply indifferent to those interests, Schneiderman is one of the few public officials anywhere that seems to actually want to do anything to hold anyone, anyone at all, accountable.

I can’t really recall a single piece of news that made me as hopping mad as this piece by Morgenson did. It’s not that this was really news. I knew that the Obama administration and Wall Street banks would try to pressure Schneiderman and other AGs to not investigate foreclosure fraud. But the fact that the administration and its surrogates are so openly admitting that they don’t want their to be investigation is just stunning. It’s probably better, as David Dayen points out, that this is out in the open. It helps draw the battle lines with greater clarity.

On one side Eric Schneiderman and other AGs like Beau Biden, Catherine Mastos, and a few others are fighting for homeowners and the American public. On the other side, Shaun Donovan, Katheryn Wylde, and other Obama administration figures are fighting on behalf of huge Wall Street banks. Now that that’s clear, I suggest you do what Yves Smith and Phil Anderson suggested and thank Eric Schneiderman for his leadership:

If you are a New York resident, I hope you’ll call (800 771-7755 or 212 416-8000) or e-mail Schneiderman and thank him for standing up to the corruption of the banks and their enablers in the Administration. I think he will appreciate the show of support.