mortgages

They're Sacrificing Us to Save Wall Street - But "Occupy Our Homes" Could Change That

Richard Eskow — Mon, 05 Dec 2011 21:00:11 -0500

This week 60 Minutes gave viewers a good look at the widespread criminality that created the Wall Street mortgage boom and led to our ongoing financial crisis. They also saw some of the overwhelming evidence of illegal activity on the part of big banks, and were reminded that none of those banks' executives have been prosecuted.

As ugly as the situation is, there is some logic behind the government's actions - and its inactions. They're acting on a tragically incorrect (but internally coherent) set of assumptions that can be summed up in one sentence. It goes something like this:

"To preserve the health of the American economy, banks must be allowed to keep preying on their consumers."

That's it. That's the logic.

But there are two exciting 'Occupy' developments this week that could change the equation - 'Take Back the Capitol' in the District of Columbia, and Tuesday's 'Occupy Our Homes' events around the country. Think of them as complementary actions: One is taking place at the site of our greatest government power. The other is bringing the action to homes where people have been victimized by bankers.

People may not realize it, but there's power in those homes, too.

The Logic of Injustice

Despite their destructive behavior, the people who bailed bankers out and are giving them a free pass for their crimes aren't necessarily evil or corrupt. Well, okay, people like this guy are. But others have merely been so infected by misguided economic thinking that they really believe that the only way to save the economy is to keep shafting consumers and pampering mega-bankers.

The thinking goes something like this: Our largest banks are too big to fail, and since we lack the will or the motivation to break them up or regulate them we must protect them at all costs. We've propped them up with TARP, quantitative easing, and $7.7 trillion in secret Federal Reserve loans, but they're still shaky as hell. If we prosecute any of their executives, their stock prices will fall and they'll collapse again. And they'll take the entire economic system with them.

That leads to some grotesque miscarriages of justice. Nobody at Wells Fargo has been indicted for money laundering, for example, despite the fact that the bank has paid millions to settle charges of laundering cash for the Mexican drug cartels that have murdered more than 35,000 people. As an experienced bank investigator working for the Senate observed, "There’s no capacity to regulate or punish them because they’re too big to be threatened with failure."

The Bailout Nobody Knows

And banks don't just need protection from their own criminality. They also need protection from their own lousy management. Their balance sheets are filled with toxic risks from their long run of incompetence, negligence, and greed. That's where you and I come in. Some powerful folks are afraid the banks will fail if they're forced to write off the bad loans on their books, or to stop profiting from loans sold deceptively or irresponsibly.

TARP may be over, but there's another massive bank rescue going on. Who's funding it? We are. Every time we pay a usurious interest fee on a credit card, we're propping up the banks. Every time we make another month's payment on an underwater mortgage, we're propping them up too. Every time we pay an overpriced consumer loan of any kind, we're making another payment into the consumer-funded bailout that's keeping the big banks afloat.

It would be great if politicians in Washington stopped using American consumers to subsidize banks that shouldn't even exist. But they haven't. That's where "Occupy Our Homes" comes in.

Occupy Our Homes

Tuesday, December 6, has been declared a National Day of Action to Occupy Our Homes. Its goal is to focus attention on the corrupt banking practices that led to the mortgage boom and today's ongoing economic misery for most of the 99 percent.

It's also a day for helping people in our communities who have been victimized by predatory lending, criminal bank forgery, unfair or illegal foreclosure practices, and other bank abuses that victimize the public. Occupy Minnesota has already occupied an illegally-foreclosed home, and plans to do the same thing with another home tomorrow. Here in Los Angeles, where an inspiring victory has already taken place, OccupyLA will help two brave families re-occupy their illegally foreclosed homes.

One of those homes belongs to a three-earner family that includes a gainfully employed woman with cerebral palsy named Ana Wison. Ana's household clearly seems capable of making its mortgage payments, but her bank's foreclosing anyway. And in one of ironies that have become all too common, the bank in quesion is none other than that Mexican drug cartel money-laundering outfit, Wells Fargo.

The Occupy movement hopes to focus the public's attention on people like Ana Wison. In the words of the Dylan song: "Things should start to get interesting right around now."

Demonizing the Victim

Resisting illegal foreclosures is a good first step. It brings attention to Wall Street's criminality, venality, and plain old inhumanity toward the people they call their"customers" - but treat like serfs.

It does something else important: It counteracts the brainwashing, driven by Wall Street and dutifully echoed by the media, which has demonized the victims of bank misbehavior. (We were trying to fight that brainwashing back in 2008, without much luck.) The Occupy movement has already won several battles in that war. If the public's attention can now be focused on people like Ana Wison, that can be a powerful blow against the Wall Street/corporate media "they deserve it" hype.

What about the millions of people who have suffered because of the banks' predatory mortgage lending but aren't behind in payments or in the foreclosure process? We need to re-open the debate about the fairness of forcing any underwater homeowners to pay underwater principal on homes that their banks knew, or should have known, were going to decrease in value. After all, the same conglomeration of banks and corporate media that demonize homeowners as "greedy" and "irresponsible" spent most of the last twenty years convincing people that real estate was a sure-fire investment.

Banks made an extraordinary amount of money off the bubble they created. The total mortgage amount outstanding in this country went from $6.2 trillion in 2002 to $11.9 trillion in 2009, a meteoric rise. And while banks feed off the Federal Reserve's unusually low rates, they've renegotiating very few home loans.

Consumers also owe nearly three quarter of a trillion dollars in credit card debt, much of it being paid at unconscionable rates of 12 percent to 29 percent - while their banks enjoy rates from 0 percent to 3 percent, thanks to the government institutions created by those same consumers.

Occupy Our Homes. Occupy Our Credit Cards. Occupy Our Payday Lending ...

What will happen if consumers stopped blaming themselves? What if they demanded that the banks take responsibility for their irresponsible and/or predatory lending? What if they refused to stop this country's perverse economic role reversal, where customers have become the ATMs while banks keep making the withdrawals?

If 10% of America's homeowners declared a mortgage strike it would rock the banking world. If everybody paying exorbitant credit card interest declared a moratorium on payments all at once, Wall Street would change forever.

Think about it: "Occupy ALL Our Homes." "Occupy Our Credit Cards ... Our Payday Loans ... Our Buy-and-Drive Loans ..." I'm not saying these are necessarily the right tactics, although they very well may be. But what's most important is that we understand that consumers have far more power than we usually realize - provided we act together.

Many of Washington's leaders will cringe at the thought, of course. "That could hurt our biggest banks," they say. It would be tempting to reply, You say that like it's a bad thing. Here's a better response: Then start planning to break them up in an orderly fashion. We're done living a life of indentured servitude just so we can subsidize their greed.

Those are the discussions that we should be having. If powerful people on Wall Street and in Washington aren't worried about Occupy Our Homes , they're not paying attention. But with any luck, they soon will.

______________________

(If you've been a victim of mortgage abuse you can tell your story here. If you want to find an Occupy Our Homes event near you, you can look for one here.)

The Bank Lobby Smear Against Elizabeth Warren

Zach Carter — Wed, 21 Jul 2010 15:26:59 -0400

Ezra Klein needs to stop repeating bank lobby smears against Elizabeth Warren. He's sympathetic to the charge that Warren is "too dismissive of the benefits of financial innovation," because, well, I don't know why. It's a baseless allegation being made by Warren's opponents without any evidence whatsoever. It relies on the stock bank lobby response to every effort to strengthen consumer protection rules in the past 30 years. It should be irrelevant to a conversation about reining in predatory lending in an era of rampant abuse.

It's significant that this weak "innovation" argument is the best that Warren's adversaries can muster to protest her potential nomination to head the Consumer Financial Protection Bureau. Yesterday, Klein reiterated the line, which was presented the previous day by his fellow Post-blogger Neil Irwin. It goes like this: Predatory consumer abuses are bad, but if regulators go too far with their regulations, they can end up unnecessarily restricting credit to poor people. Maybe Elizabeth Warren will go too far, the argument goes, because she's not attuned to how financial innovations can help poor people by giving them access to credit.

Neither Post blogger cites any evidence that Warren has ever backed a destructively overzealous consumer protection rule—they just note that some people say that Elizabeth Warren doesn't like financial innovation enough (and then they don't say who says it).

This is a theoretical objection that the bank lobby trucks out every time anybody tries to curb an obvious abuse. Hypothetically, it can always be the case that a bad rule can unnecessarily restrict consumer credit, but the bank lobby always deploys this argument in response to any regulation to distract people from the specifics of the rule in question. That they're doing that now against Warren suggests they have no case, and they know it. Irwin, in fact, actually acknowledged that the objection was unfounded:

Of course, the same question needs to be asked about the other reported candidates for the job . . . but Warren is the one who is attracting 100,000-plus endorsements through an online petition.

In other words, Irwin is saying that while there's no evidence that Warren is insufficiently attuned to credit access and financial innovation, that could still in fact be the case, just as it could be the case for literally any appointee to the CFPB post. Arguments don't come much weaker than that.

Has Warren ever said we need to roll back the 30-year mortgage or ban credit cards? No. Look at her actual record as a reformer—she was a key figure in getting new credit card regulations through Congress last year—were those "too dismissive of the benefits of financial innovation?" Anybody want to bring back double-cycle billing? Retroactive interest rate increases? Jacking up rates because you returned a library book late? That's what Warren has fought against and won. They were transparent abuses, they made a ton of money for banks, and consequently, banks do not like her. Since they can't come out and say that they want to keep their predatory profits, bankers make up this theoretical nonsense about Warren opposing financial innovation.

But Klein still wants Warren to explain "the test she would apply to decide whether consumer financial instruments were legitimate." This is silly. It implies that the CFPB director's job will mostly be about banning consumer financial products. The new agency probably isn't going to write tons of radical new consumer protection rules, much less go around banning loan types-- it just has a different incentive structure than the Fed and the OCC which will make its enforcement efforts more effective.

There has been a policy consensus on predatory lending standards for decades, and it basically amounts to ability to repay and adequate disclosure. Nobody really disputes these standards in principle, regulators have just decided not to enforce them for a long time. Take a look at the Fed's 2001 guidance on identifying predatory subprime lending. It's great, and with a few minor modifications, can apply to just about any kind of credit you can think of:

Making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation;

Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ('loan flipping'); or

Engaging in fraud or deception to conceal the true nature of the loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower.

Warren's opponents aren't worried that she'll get the standard wrong, they're worried that she'll actually enforce the standard and take away predatory profits.

Banks scored $38 billion in overdraft revenue in 2009, while the industry's total combined profit was just $12.5 billion. The subprime crisis actually happened. The entire country is still drowning in foreclosures, and unrestrained predatory lending helped crash the entire global economy. Predation is a mainstream business for major banks, and has been for decades. We've spent the last 30 years allowing outrageous abuses on a massive scale in the name of financial innovation. Banks are still the most powerful lobby group in Washington. The CFPB won't even have sole authority to write consumer protection rules-- other bank regulators will have veto power. Without a strong, committed reformer like Warren, the CFPB isn't going to make a lot of headway. Worrying about Warren because she might go too far, without any evidence that she will do so, simply does not make sense.

I don't know about Irwin, but so far as I can tell, Klein supports Warren to head the CFPB. He's just saying that an objection voiced by people who oppose her is not outrageous. The trouble is, the objection is, in fact, outrageous.

The Chamber of Commerce's Jobs Deception Campaign

Richard Trumka — Thu, 15 Oct 2009 10:30:06 -0400

Unions are popularly known as "the folks who brought you the weekend." In contrast, the U.S. Chamber of Commerce has the distinction of trying to take away the weekend--along with overtime pay, the minimum wage, Buy America rules, workers' freedom to form unions, child labor standards....The list is long and ugly.

So it's farcical that today the Chamber launched a campaign estimated to run in the tens of millions of dollars to promote job creation.

The Chamber's campaign originally started out as an attack against financial regulation--until the Chamber found out how strongly U.S. taxpayers support reining in Big Banks and the financial industry's widespread shady practices. So the Chamber conveniently changed the packaging to purportedly focus on jobs, which in fact the American people desperately need.

Look at who accompanied the Chamber suits while they were announcing their Orweillian-named "free enterprise campaign." As Sam Stein reported here:

Many of the individuals featured on Wednesday are long-standing donors to Republican candidates and groups that have fought efforts to enhance regulation. And, in one case, the business leader appearing alongside [Thomas] Donohue to decry the interference of government in the market place received business through the benefit of government contracts.

Yet, while millions of America's workers struggle to find jobs in an economy where there are more than six workers searching for every one job, the Chamber repeatedly opposed extending unemployment insurance. Can't have government interference in the marketplace, after all. Or aid to jobless workers. The same workers the Chamber's smoke-and-mirrors campaign is supposed to be all about.

The Chamber also is joining with Big Banks and financial giants to try and kill a proposed agency that would protect U.S. consumers from being preyed upon by unscrupulous banks, mortgage lenders and many of the same financial institutions that helped create our nation's economic disaster. The Obama administration's proposed Consumer Financial Protection Agency, which this week is being considered in the House Financial Services Committee, would regulate products such as credit cards and home loans, while ensuring the U.S. Securities and Exchange Commission oversaw the $450 trillion "derivatives" market that sunk the world economy.

The Chamber is spending $2 million in attack ads, claiming that the new agency would hamstring even your local butcher from extending you credit for a week. It's the same sorry effort at deception and outright lies that the health insurance industry now is trying to pull in the debate over health care reform. Tell enough lies and hope someone believes you.

As President Obama said in response to the Chamber's distortion:

"We've made clear that only businesses that offer financial services would be affected by this agency. I don't know how many of your butchers are offering financial services," Obama said to laughter.

The Chamber is so twisted up in deception it seems unable to even provide accurate membership numbers. Writing in Mother Jones this week, David Corn points to a big discrepancy between the Chamber's public membership numbers and reality.

In testimony before Congress, statements to the press, and on its website, the Chamber claims to represent "3 million businesses of all sizes, sectors, and regions." In reality, the number is probably closer to 200,000.

Not sure if the 200,000 includes Apple Inc., Pacific Gas & Electric and the other giant corporations that recently have pulled their membership from the Chamber because of its draconian stand on climate change.

The Chamber's so-called "free enterprise" campaign has been tried before. After World War II, the National Association of Manufacturers led a similar such effort. That campaign to sell capitalism to U.S. consumers incurred the derision of no less than the editors of Fortune magazine, who found similar sentiments among business executives represented on the boards of the business associations that supposedly represented them.

In dismissing the campaign as ludicrous, one such executive described it this way:

The best way we can demonstrate the importance of Free Enterprise is to make it work.

It's clearly not working now. And although the Chamber may try to wrap itself in the shiny trappings of a feel-good campaign, its repeated attacks on consumers and workers demonstrate who the Chamber stands for: Wall Street not Main Street.

This is a crosspost from Huffington Post.

The Truth about the Community Reinvestment Act

Hillary Hampton — Mon, 29 Sep 2008 14:11:27 -0400

Conservative commentators in the Wall Street Journal and the National Review, and on YouTube are spreading the myth that the Community Reinvestment Act, a law designed to eliminate discriminatory banking practices, caused the current financial crisis. In the words of Fox News' Neil Cavuto, “Loaning to minorities and risky folks is a disaster.”

Conservatives have twisted the facts to substantiate their revisionist history. But don’t be fooled: the financial crisis was caused by conservative financial follies and bankers run amok and nothing more.

Myth: The Community Reinvestment Act forced banks to make loans to all low-income families and people with poor credit, fining banks that refused to comply.

Fact: The Community Reinvestment Act has encouraged banks to lend fairly and responsibly for over 30 years. The Community Reinvestment Act does not impose fines; it periodically examines FDIC-backed banks and issues them a CRA-compliance rating. [Community Reinvestment Act] To receive a high rating, banks must meet the financing needs of as many members of their community as possible and must not discriminate against racial and ethnic groups or certain neighborhoods. However, a bank cannot receive a high rating unless it is also maintaing “safe and sound banking practices.” [Community Reinvestment Act] In other words, the CRA requires banks to lend to working-class families and people of color, but only when those people have been deemed credit-worthy.

Myth: The housing bubble burst when too many people with home loans mandated by the Community Reinvestment Act failed to make their mortgage payments.

Fact: More than half of problematic sub-prime loans made in the last few years were issued by banks that are not regulated by the CRA. [U.S. House Committee on Financial Services] The CRA applies only to financial institutions that are insured by the FDIC, but not to independent mortgage companies such as Countrywide. In fact, non-CRA lenders were twice as likely as CRA lenders to issue excessively expensive subprime loans to vulnerable creditors. [Federal Reserve Bulletin] Responsible mortgages made by CRA lenders have a low rate of foreclosure similar to that of traditional mortgages. [Federal Reserve]

Myth: In 1995, Bill Clinton changed the Community Reinvestment Act to allow the securitization of CRA and subprime mortgages.

Fact: The 1995 revisions to the CRA changed only the way in which a bank’s CRA compliance is evaluated; they made no mention of mortgage securitization. [60 F.R. 22156] Under the 1995 rules, banks are rewarded only for making mortgages in their communities, not for re-selling mortgages as securities.

Myth: President Bush and Senator McCain tried to stop the subprime mortgage crisis, but Democrats blocked their efforts.

Fact: Bush and McCain supported the Federal Housing Enterprise Regulatory Reform Act of 2005, which would have created a new government agency to oversee Fannie Mae and Freddie Mac and other federal housing programs. However, the bill would have done nothing to stop the rash of subprime lending that preceded the housing bubble because it provided oversight for only Fannie and Freddie, not for the companies that issued subprime mortgages. [GovTrack]

Newsflash: Populism Is Popular

David Sirota — Thu, 17 Apr 2008 13:08:50 -0400

Whenever pundits and political elites express surprise at the power of populism, I always think back to the tongue-in-cheek headline of Chris Hayes' In These Times article that read "Economic Populism Proves Popular." Populism is an ideology that says that government should - gasp! - reflect what actual people want. It is just so damn funny when the same political Establishment professing reverence for our democracy then expresses outrage and surprise that politicians once in a while are forced to reflect what the public wants.

So I was laughing today when I read this Bloomberg News piece breathlessly telling us that "Democrats Pushing Obama, Clinton Toward Populism" - as if that's something so outrageous and odd as to be shocking. Here's the critical news from Pennsylvania, Indiana and North Carolina - three states whose primaries are coming up:

Democrats in all three states had a negative view of trade, with 58 percent in Indiana, 55 percent in Pennsylvania and 61 percent in North Carolina saying it has hurt the economy. At least three in 10 in each state say it hurt a lot.

This finding conforms with earlier polling showing voters of both parties are sick and tired of lobbyist-written trade policies that undermine our economy and destroy the environment and human rights in the developing world.

Additionally, the same poll shows the public is angry about our politicians using their power to hand over more goodies to the banks and Wall Street firms that created the financial crisis:

A majority in each state favors a government bailout of homeowners in danger of foreclosure, according to a Bloomberg/Los Angeles Times poll of likely Democratic voters...After mortgage lenders, voters in the three states faulted insufficient government regulation, as well as irresponsible borrowers, for the housing crisis...Respondents in all three states say, by margins of 2 to 1 or better, that the federal government should regulate the financial industry more aggressively.

That news outlets seem so surprised that the public supports populist policies to deal with our economic crisis just shows how out of touch with mainstream public opinion our political elite is from the rest of the country.

TBA 2008 - Housing Crisis and Corporate Accountability

Brian Dockstader — Wed, 19 Mar 2008 11:41:33 -0400

Featuring: Dean Baker, Theresa DiMartino, Al Meyerhoff, Lisa Ransom

The More Americans Demand Change, The More The State Of The Union Address S

Andrea Batista Schlesinger — Tue, 29 Jan 2008 10:30:05 -0500

DMI’s Rapid Response to the 2008 State of the Union

Click here to read the Drum Major Institute for Public Policy’s full analysis of the President’s domestic policy prescriptions – complete with statistics and talking points -- online at www.drummajorinstitute.org/sotu2008

The American people want change. Every Presidential candidate, Democrat and Republican, has made this a mantra. But the State of the Union Address reveals no alteration from President George W. Bush. This year the President labored to keep breathing life into the same worn out ideology that has repeatedly failed America’s current and aspiring middle class.
The President continues to proclaim the foundation of our economy sound when so many current and aspiring middle-class Americans are losing their spot in the American Dream. He prioritizes ideology over proven methods of stimulating the economy and providing health care. He uses the language of consumer choice to dress up what really amounts to unbridled corporate power and profiteering. He continues to assert that the market will right itself, if only people understand it more and restrict it less, despite all of the evidence to the contrary.

Despite the praise-worthy components of President Bush’s address tonight – his signing of the Energy Independence and Security Act, his cooperation with Congress to pass a stimulus reform that would include millions of low-income Americans he initially intended to exclude, his newfound interest in supporting military families – his approach reflected a commitment to ideology, as opposed to willingness to see how that ideology has actually impacted current and aspiring middle-class Americans.

After years of insisting that the economy was doing great as middle-class families were squeezed by stagnant wages and a rising cost of living, it takes weak corporate profits to make the President recognize that times are tough.

* Because the President’s ideology insists that tax cuts are always preferable to government spending, the stimulus proposal includes costly and ineffective incentives for business rather than a fast and efficient expansion of unemployment benefits that would both boost the economy and help the middle-class households hardest hit by the downturn.

* Looking at the corporate recklessness and lack of government oversight that created the subprime mortgage crisis, President Bush avoids regulating the industries at fault. Rather he touts a plan that allows banks to decide on a purely voluntary basis whether they care to work out a payment plan with beleaguered homeowners. We don’t imagine that’s the kind of volunteerism he heralded elsewhere in his address.

* A middle-class standard of living is defined by things like access to education, health coverage and the opportunity to hold down a stable, well-paid job, yet from education to health care to tax policy, the President preferred to experiment with market-based solutions that won’t help aspiring Americans work their way into the middle class. It was particularly shocking that the President urges Congress to make his failed tax cuts for the wealthy permanent, despite their failure to help the nation recover from the last economic downturn.

The President tells us that he trusts the American people. The more important question is whether the American people have any reason to trust the White House. The President’s support of choice in this State of the Union address reveals that he is choosing not to heed the call of the American people for common-sense solutions to the challenges they face.

Yet, what is most important this address, is not the President delivering it, but the ideas represented. This State of the Union can either serve as a blueprint for continuing to move backwards, or a line of demarcation away from a policy outlook that has caused irreparable harm to America’s middle class. While the President’s years of imposing dangerously flawed policies on the nation are drawing to a close, future leaders, in Congress and the White House, will determine whether his distorted worldview lives on, and continues to afflict the middle class and the nation.

* * * * * *
You will find DMI’s full analysis of the President’s domestic policy prescriptions online at www.drummajorinstitute.org/sotu2008

Click here to read DMI’s analysis of what Bush’s State of the Union address means for:

Economy (including the foreclosure crisis)
Budget
Energy and Environment
Healthcare
Education
Veterans
Immigration
FISA Immunity