Category: Economy

We really need publicly financed elections

If there’s ever been a clearer demonstration of the need for the complete public financing of all federal, state and municipal elections, I don’t know what it is. Matt Taibbi:

A hilarious report has come out courtesy of the National Institute of Money in State Politics, showing that Iowa Attorney General Tom Miller – who is coordinating the investigation into the banks’ improper mortgage dealings – increased his campaign contributions from the finance sector this year by a factor of 88! He has raised $261,445 from finance, insurance and real estate contributors since he announced that he was going to be coordinating the investigation into improper foreclosure practices. That is 88 times as much as they gave him not over last year, but over the previous decade.

This is about as perfect an example of how American politics works as you’ll ever see. This foreclosure issue is a monstrous story that is somehow escaping national headlines; essentially, all of the largest banks in the country have been engaged in an ongoing fraud and tax evasion scheme that among other things has resulted in many hundreds of billions in investor losses, and hundreds of thousands of improper foreclosures. Last week, the 14 largest mortgage lenders a group that includes bailout all-stars like Citigroup, Bank of America and Wells Fargo, managed to negotiate a settlement with the federal government that will mandate some financial relief to homeowners who have been victims of improper foreclosure practices. It’s unclear yet exactly what damages and fines will be involved in the federal settlement, or how many homeowners will be affected. But certainly there are some who believe the federal settlement was a political end-run around the states’ efforts to extract their own deal from the banks.

Put it this way. If the banks had to pay what they actually owed – from the registration taxes/fees they avoided by using the electronic registry system MERS to the money taken from investors in toxic mortgage-backed securities to the fees and payments stolen from homeowners via predatory loan practices and illegal foreclosures – they would probably all go out of business. That’s how much money is at stake here: the very future of financial giants like Bank of America and Citi and JP Morgan Chase is hanging to a very significant degree on the decisions of politicians like Miller.

This isn’t to presume that Miller has backed off his strong stance of fall 2010 because he’s received hundreds of thousands of dollars in campaign donations. But a system which allows the banking industry to contribute hundreds of thousands of dollars to the Attorney General who is leading a national investigation into foreclosure fraud is a system which is ripe for the corrupting influence of money.

Time for tax cuts!

If there’s anything we need, it’s obviously to cut the corporate tax rate! The LA Times reports that we may be getting just that:

As part of their budget plan passed last week, House Republicans want to cut the corporate tax rate to 25% from 35%. The Obama administration and many Democrats also are looking to slice the current rate, but not as much.

Supporters of the corporate tax cuts say they’re needed to make U.S. companies more competitive with their foreign counterparts, and the administration and House Republicans say they want to offset rate cuts by eliminating unspecified loopholes and tax breaks.

Yet despite complaints that they fork over too much money to Washington, U.S. corporations have been paying an increasingly smaller share of federal taxes over the last half-century.

Nearly a third of all federal taxes came from corporations in 1952. Last year, they paid just 8.9%, according to government figures. Loopholes, credits and the ability to shelter earnings abroad have helped many of the country’s biggest companies pay far less than the corporate tax rate set into U.S. law.

What the corporate tax rate is on paper would be relevant if there weren’t massive loopholes that enable corporations evade taxes and pay as little as zero. Or in GE’s case, get a $3.2 billion tax benefit. Corporations are making record profits, but rather than turn those profits into capital and create jobs, they’re sitting on them or paying out massive bonuses to their CEOs.

There are a lot of things that could be done to improve our economy. Helping corporations pay a smaller share is most definitely not one of them. The fact that members of both political parties want to follow this destructive path just goes to show how little variance there is between them.

Against Civility

Krugman is shrill:

Which brings me to those calls for a bipartisan solution. Sorry to be cynical, but right now “bipartisan” is usually code for assembling some conservative Democrats and ultraconservative Republicans — all of them with close ties to the wealthy, and many who are wealthy themselves — and having them proclaim that low taxes on high incomes and drastic cuts in social insurance are the only possible solution.

This would be a corrupt, undemocratic way to make decisions about the shape of our society even if those involved really were wise men with a deep grasp of the issues. It’s much worse when many of those at the table are the sort of people who solicit and believe the kind of policy analyses that the Heritage Foundation supplies.

So let’s not be civil. Instead, let’s have a frank discussion of our differences. In particular, if Democrats believe that Republicans are talking cruel nonsense, they should say so — and take their case to the voters.

I’ve been saying this for years, but in the Beltway press, conservative views are normative. It’s no surprise when allegedly Serious pundits fawn over Paul Ryan’s “tax cuts for the rich, austerity for the middle class” budget plan. It’s no surprise that when the President makes a fairly timid defense of a social safety network which has succeeded in keeping tens of millions of Americans out of poverty when they get old or sick is viewed as shameful partisanship. The only thing which is remotely surprising is the continued willingness of so many people in the Democratic Party to accept any press framing which makes conservative views normative. Normally I’d explain that as being connected to the fact that huge swaths of Democrats with actual power, unlike the Congressional Progressive Caucus, actually agree with these conservative policies and austerity. But in this case, when even a mild attempt to hold the line is met by cries of unseemly partisanship, I have to think that the luminaries on the Hill and in the White House will exhibit the elemental instinct for self-preservation and stand up for themselves.

On Friday the House Republicans passed Ryan’s budget and positioned themselves as the party which seeks to eliminate Medicare to pay for more tax cuts for millionaires. Opposing this politically couldn’t possibly be easier, but at the end of the day, the best hope for our country is that all Democrats actually oppose this from an ideological perspective too. We don’t need more civility and bipartisanship. We need unfiltered partisanship in defense of the programs which make America a great place to live, regardless of whether you make $30,000 per year or $30 million per year. Sadly, that doesn’t look like the course Democrats in the Senate are taking, as they pursue a deeply misguided, faux-compromise through the Gang of Six. Hopefully sanity prevails and anything determined within this cabal fails to get the support it needs to be passed.

No Financial Crisis Prosecutions

The New York Times’ Gretchen Morgenson and Louise Story have a long, detailed account of how no major figures who caused the financial collapse of 2007-2008 have been criminally prosecuted for their roles in wrecking the economy. Morgenson and Story frame their piece, “why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?” One of the overarching themes they find is a choice by prosecutors like Andrew Cuomo, then New York’s Attorney General, and regulators like Timothy Geithner, then at the New York Fed, to not risk market instability by holding people accountable or conducting detailed investigations. Morgenson & Story have plenty of regulators saying they “have done the best they could under difficult circumstances,” but nonetheless, “no senior executives have been charged or imprisoned, and a collective government effort has not emerged.” This is in contrast to the S&L scandals of the 1980s, when “special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.”

One of the articles most powerful quotes comes from Bill Black:

“This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity,” said William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government’s director of litigation during the savings and loan crisis. “But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.”

Glenn Greenwald describes this as evidence of our two-tiered system of justice in the United States:

The evidence of rampant criminality that led to the 2008 financial crisis is overwhelming, but perhaps the clearest and most compelling such evidence comes from long-time Wall-Street-servant Alan Greenspan; even he was forced to acknowledge that much of the precipitating conduct was “certainly illegal and clearly criminal” and that “a lot of that stuff was just plain fraud.”

Despite that clarity and abundance of the evidence proving pervasive criminality, it’s entirely unsurprising that there have been no real criminal investigations or prosecutions. That’s because the overarching “principle” of our justice system is that criminal prosecutions are only for ordinary rabble, not for those who are most politically and financially empowered. We have thus created precisely the two-tiered justice system against which the Founders most stridently warned and which contemporary legal scholars all agree is the hallmark of a lawless political culture.

Not surprisingly, Greenwald has a comprehensive look at other stories where law-breaking elites are given a complete pass when it comes to accountability, from warrantless wiretapping to torture as compared to vicious prosecution of minor drug offenders overflowing our prisons and whistleblowers whose leaks shed needed light on illegal or immoral behavior by our government.

Matt Taibbi has been writing about the choice to not pursue criminal charges for the financial collapse for a while. The Morgenson piece really just validates a lot of his work and shows, in painful clarity, the extent to which the scales of Justice are no longer balanced and her blindfold has been removed in the United States of America.

The demolition of a servicer-funded “research paper”

I don’t have the expertise to add anything to the discussion, but if you want to see the definition of a demolition job on a shitty paper, this is it. Yesterday American Banker posted a research paper by three economists, Charles Calomiris, Eric Higgins, and Joe Mason, into the possible effects of a settlement between 50 state attorneys general and mortgage servicers. According to the first footnote, the paper was funded “in part by the financial services industry, including entities affected by the proposed settlement.” This is a standard practice in the field of economics and something that has been highly criticized by Yves Smith in her book Econned and in Charles Ferguson’s Academy Award winning documentary, Inside Job.

Not shockingly, a paper funded by the mortgage service industry is laughably bad, ranging from being deliberately obtuse to factually inaccurate to intellectually inconsistent to intellectually lazy.  The financial blogosphere has rapidly torn the paper apart. Here are a few articles worth reading on it:

All of these are detailed take-downs of a bunk paper. If you’re at all interested in how the mortgage servicers are marshalling a defense of their practices from both state attorneys general and federal oversight bodies, it’s instructive to read these posts. Additionally, you can bet that lobbyists for mortgage servicers are taking the Calomiris, Higgins, and Mason paper around the Hill and trying to influence policy makers away from actually doing anything about the foreclosure crisis. Getting this debunked is important and folks did their part in an heroic way.

Taibbi on Ryan’s Austerity Plan

Matt Taibbi:

We are in the middle of a major national disagreement over budget priorities, and that debate is going to turn into a full-scale cultural shooting war once the 2012 presidential election season comes around. It is obvious that we have a debt problem in this country and that something needs to be done about it. But a huge part of the blame for the confusion and the national angst over our budget issues has to be laid at the feet of media assholes like Brooks, who continually misrepresent what is actually happening with national spending.

The last ten years or so have seen the government send massive amounts of money to people in the top tax brackets, mainly through two methods: huge tax cuts, and financial bailouts. The government has spent trillions of our national treasure bailing out Wall Street, which has resulted directly in enormous, record profit numbers – nearly $100 billion in the last three years (and that doesn’t even count the tens of billions more in inflated compensation and bonuses that came more or less directly from government aid). Add to that the $700 billion or so the Obama tax cuts added to the national debt over the next two years, and we’re looking at a trillion dollars of lost revenue in just a few years.

You push a policy like that in the middle of a shaky economy, of course we’re going to have debt problems. But the issue is being presented as if the debt comes entirely from growth in entitlement spending. It’s bad enough that middle-class taxpayers have been forced in the last few years to subsidize the vacations and beach houses of the idiots who caused the financial crisis, and it’s doubly insulting that they’re now being blamed for the budget mess.

Amen. Taibbi also debunks the idea that Ryan is somehow courageous:

The absurd thing is that Ryan’s act isn’t even politically courageous. It’s canny calculation, but courage it is not. It would be courageous if Ryan were, say, the president of the United States, and leaning on that budget with his full might. But Ryan is proposing a budget he knows would have no chance of passing in the Senate. He is simply playing out a part, a non-candidate for the presidency pushing a rhetorical flank for an out-of-power party leading into a presidential campaign year. If the budget is a hit with the public, the 2012 Republican candidate can run on it. If it isn’t, the Republican candidate can triangulate Ryan’s ass back into the obscurity from whence it came, and be done with him.

No matter what, Ryan’s gambit, ultimately, is all about trying to get middle-class voters to swallow paying for tax cuts for rich people. It takes chutzpah to try such a thing, but having a lot of balls is not the same as having courage.

Right again.

Stiglitz on income inequality

Joseph Stiglitz has a must-read piece in Vanity Fair this month, titled, “Of the 1%, by the 1%, for the 1%.” There’s too much great analysis in it quote adequately, so I’ll just tease this part:

But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
…
America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.

It is all a very sad, scary picture. But it’s time to confront it and offer policy solutions that seek to tilt the balance in the other direction and stop the massive transfer of wealth from working Americans to the top 1%.

Ryan’s Austerity Budget

Duncan Black seems to be the only person who regularly tries to remind people that Republicans won big in 2010 by criticizing Democrats for trying to take away Medicare.  What’s so bizarre about Ryan’s budget plan, which includes a massive privatization and the effective destruction of Medicare for everyone under 55, is that it ignores what was for the GOP good politics in favor of a policy agenda rife with political risk. Duncan writes:

For some reason only crazy liberal bloggers watching political campaign ads on the teevee in their basements noticed that GOP candidates’ only semi-substantive issue in the last election was an attack on Obama Medicare cuts. And they went hard on it. And old people freaked.

David Brooks says the Ryan budget, “will become the 2012 Republican platform, no matter who is the nominee.” As Ryan moves his plan forward and it becomes the center of debate, Democrats have the opening to basically do exactly what the GOP did in 2010. Dems can run on defending Medicare and while correctly attack Republicans for wanting to take it away.

Ezra Klein points out that even if Ryan doesn’t get everything he wants, a “compromised” version of his plan would still be a huge win for Republicans seeking to destroy social programs in the US:

Ryan is beginning the debate far to the right. He won’t get everything he wants, but if he gets 50 percent of what he wants, or even 35 percent, it’ll be the most dramatic victory that conservatives have scored against the social safety net in a generation — larger, at least in dollar terms, than anything done to welfare in 1996.

The one wrinkle in this is that for the most part would be an outcome the White House would be fine with. After all, it was the president who put together a deficit commission, which Paul Ryan served on. The details on what a solution look like may be different, but Obama and Ryan do share the belief that entitlement spending is a problem that needs to be solved now. As Atrios wrote a few days ago, “one party says big spending cuts are necessary but sorta sad, one party says spending cuts are necessary and awesome.”

All of this adds up to a bizarre situation where politically Democrats are in a position to protect Medicare and other entitlement programs, while ideologically the people controlling the Democratic Party seem unlikely to actually use this political advantage, as they too want to see spending cuts. It’s not shocking to me that Republicans want to speed up the transfer of wealth from working people to wealthy elites; this is who they are and they’ve never been shy about it. What is incredibly frustrating and disempowering is the extent to which Democrats will, in some way or another, end up going along with this because they too want the same outcome, they’ll just feel a bit worse about it. Sure, they’ll want to be seen as opposing it, but unless the counter-offer from Democrats is not only making no cuts, but expanding spending for the social safety net, this opposition will be based on the premise set by the Republicans that there is a budget crisis and a deficit crisis and cuts must be made (but never raising revenues!). I hope I’m wrong, but I’m not ready to be optimistic about how Ryan’s budget will be fought against.

60 Minutes on Foreclosure

http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf

I agree with Yves Smith take on this piece:

this 60 Minutes report covers familiar ground. However, the fact that the story is coming now shows that even with bank efforts to pretend that there is nothing to see here, in fact the problems are widespread and difficult to solve. This segment, as highlighted in the text advanced release last Friday, includes a discussion of DocX and the practice of using “surrogate signers“, which are temps signing….in the name of robosigners! Having robosigners relying on corporate authorizations wasn’t low cost enough, apparently. Rather than take the time and effort to have more robosigners authorized (which is already not kosher, as we know, since the robosigners were attesting to have personal knowledge when they clearly didn’t), they went beyond providing bogus affidavits to having workers engage in forgery.

It also showed the work of NACA, but didn’t provide the most crisp description of the NACA process and how it addresses servicer bottlenecks (see here for more details). But it does feature Lynn Szymoniak and the procedures of the now-shuttered DocX, the infamous document fabricating subsidiary of LPS.

So consider this an interesting view of the state of play. The MSM is willing to cover practices that banks have been forced to admit they engage in and they claim to be cleaning up. This is helpful in terms of public outrage, as in validating the charges made on specialist blogs for blogs for more than two years, but is still far from the hot button issues now, such as servicer-driven fraud or chain of title problems.