Wednesday, September 29, 2010

Jobless Houseless Recovery

From Greg Hunter at this appraisal of the recent suggestion that the economy is wavering on the lip of another recession, the so-called double dip. Judging by the numbers bandied about there really has been no recovery. What exactly another round of money printing will do, no one really knows though everyone likes to speculate. It is becoming increasingly obvious, surely, that bailing out the banks has been a disaster.

Just last week, I ridiculed a group of academic economists for calling an end to the longest recession since World War II. The National Bureau of Economic Research proclaimed the recession we STILL find ourselves in ended in June of 2009. The NBER is the official arbiter of the timing of the U.S. business cycle. Well, I’m not the only person who thinks the NBER’s ascertainment of the economy defies all statistical evidence.

In his most recent report (it came out yesterday), economist John Williams of says, “The official call of the recession’s end does not in any way alter the economic outlook, either as to existing underlying business activity or as to the course of likely future economic activity; only the nomenclature that will be used in describing current activity has been changed. The re-intensifying economic downturn — already underway — simply will be called the second-dip of a double-dip recession, at such time as the NBER gets around to recognizing the “new” contraction in economic activity.”

To me, this economy looks like one great big dip. Here is what the spinmeisters at NBER said when they announced the recession was over, “The committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.” I wrote about this last week in a post I called “The Recession is Over? Really!” If you read the statement closely, NBER simply said the recession was over without any facts to back it up. I don’t know if this announcement was politically motivated because midterm elections are just 5 weeks away. I do know the facts say just the opposite– the recession is alive and getting worse. Housing sales are bottom bouncing, car sales are plunging and banks are going under unabated. The Fed is so freaked out, word is Bernanke and company has set the table for another trillion dollars of Quantitative Easing (QE) or money printing to buy U.S. debt. These are not the signs of a healthy growing economy.

The folks at are also a little freaked out at what the Fed is planning on doing and have written a very good analysis about what is coming called “Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame.” Writer Tyler Durden says, “We were stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.”

Don’t think we can print our way to out of this mess to prosperity. Durden goes on to say, “. . . stocks will benefit from QE2, as will Bonds and as will commodities. In fact, every asset class will explode in a supernova of endless liquidity. To be sure, all of this will be very short lived. Very soon, all those assets denominated in fiat paper, will promptly collapse in the great black hole of reserve currency devaluation, as it becomes clear that the Fed will stop at nothing to win the race of global currency debasement.” (Click here for the complete Zero Hedge Post.)

According to Williams, all the recent data on things such as housing starts, new home sales and orders for durable goods are “suggestive of a quarterly contraction for the current quarter (third-quarter 2010.) Williams goes on to say, “. . . today’s ongoing “recovery” is not evident in most economic data, and, like the mid-Great Depression recovery, most people will not recognize the “good times.” Main Street U.S.A. usually has a pretty good sense of what is happening in the real world, and the pain of today’s pocketbook issues still will be felt heavily at the polls, irrespective of any happy announcements or heavy political hype to the contrary.”

So, in my book, it’s “official” the recession is definitely NOT over, and it won’t be for a very long time.

Saturday, September 25, 2010

The Shape of Decline

From Zero Hedge:

I look around me and I see an Empire in Decline.

The US economy is clearly in a depression… not a recession, not a recovery, but a DEPRESSION. More than 40 million Americans (12%) are on Food stamps. Nearly one in five of us are unemployed of underemployed. Folks go to Wal-Mart at 11PM waiting for their government checks to clear at midnight so they can buy baby formula, milk and other necessities.

Three out of every five Americans are overweight. One in five are obese. Indeed, there are only two areas (one state, Colorado, and Washington DC) where obesity rates are under 20%.

Nearly three in four of us don’t get enough sleep. Almost one third of us report having trouble falling asleep EVERY night. And almost half of us report that day-time sleepiness interferes with normal activities including work.

Half of marriages end in divorce. One out of ten married couples report sleeping alone. The average American watches 28 hours of TV a week (enough to qualify for a part-time job). Two thirds of us eat dinner while watching TV, preferring the fake, sensationalized lives of others to engaging with our own families.

The TV and media are filled with foul, ungodly images of sex, violence, and hate. The most watched shows of the last decade all feature ordinary folks becoming superstars in lottery-esque competitions (American Idol, Survivor, Who Wants to be a Millionaire, etc) OR crime sagas detailing the most sordid and disgusting elements of society (CSI, Law and Order, etc) OR amoral social dramas in which notions of personal responsibility, fidelity, and common decency are unknown (Desperate Housewives, the Bachelorette, etc).

Today, brain dead, vapid human beings who have contributed nothing to society are idolized and followed as though they invented the wheel. We’ve actually got two industries devoted to presenting the illusion and reality of celebrity: Hollywood shows the photo-shopped, CGI-enhanced, scripted version, while the paparazzi and weekly glossies reveal the drug-addicted, affair-crazed, family breaking, soul-less emptiness.

Sex or violence are plastered on virtually every flat surface available. Even the check-out lines at the grocery store feature endless images of barely clothed women along with headlines sensationalizing gruesome behavior, right out in the open for children to see. And if the kid can actually read the headlines… God only knows what ideas this stuff is putting into their heads.

Financially, we’re all pretty much bust or going bust (except those on Wall Street).

New home sales in July were a RECORD low. Not record as in for the year, but the lowest since 1963. The talking heads are high fiving because sales improved in August, but failed to note that they were still DOWN 19% from August 2009 levels.

Americans two primary assets for retirement (stocks and their homes) have both been absolute disasters. Home prices are down 30%, stocks haven’t produced gains in over a decade. Every moron on TV talks about the Dow 10,000 like it’s a miracle. But when you adjust the Dow for inflation, (using the BLS’ ridiculous CPI measure) the Dow is SUB-500 in terms of purchasing power.

Our money system is controlled by an elite banking oligarchy fronted by academics who have never run a business, invented anything, or had any interaction with commerce aside from vying for tenure. Our currency is now worth less than 1/20th of what it was a century ago. And we are ALL in debt up to our eyeballs on a personal, corporate, local, state, and federal level.

Heck, even USA TODAY (not exactly the cutting edge in financial research) notes that in order to pay off our current liabilities, every US family would have to pay $31,000 a year… for 75 YEARS!!!

And we’re talking about an economic recovery?

According to David Rosenberg of Gluskin Sheff:

· Wages & salaries are still down 3.7% from the prior peak;

· Corporate profits are still down 20% from the peak;

· Real GDP is still down 1.3% from the peak;

· Industrial production is still down 7.2% from the peak;

· Employment is still down 5.5% from the peak;

· Retail sales are still down 4.5% from the peak;

· Manufacturing orders are still down 22.1% from the peak;

· Manufacturing shipments are still down 12.5% from the peak;

· Exports are still down 9.2% from the peak;

· Housing starts are still down 63.5% from the peak;

· New home sales are still down 68.9% from the peak;

· Existing home sales are still down 41.2% from the peak;

· Non-residential construction is still down 35.7% from the peak.

The American Psychological Association reports that 73% of Americans cite money as a source of significant stress. Personal bankruptcies have fallen 8% month over month from July to August. However, August 2010 bankruptcies are up 6% from August 2009… so much for the recovery.

And yet, despite all of this, assumedly intelligent people write op-ed articles and appear on TV claiming that things are swell in the US, that we’re actually OK and that the recession is over. Some of these people even have advanced degrees or have won international prizes for economics.

Let’s be honest. Forget recessions, forget even Depressions, the US is an empire in decline.

You can literally see it crumbling right in front of you. Just start looking at how people live, eat, and act on a day to day basis. Look at how our Government runs itself, how it manages our affairs, how it spends our tax Dollars. Look at how our justice system works, who it protects and who it punishes.

It’s all out there, right in the open for you to see. You don’t need an expert degree or some kind of advanced education. It’s OBVIOUS to anyone who bothers looking around.

The fact we don’t admit it doesn’t mean it’s not true.

Best Regards,

Graham Summers

Friday, September 24, 2010

Corporate Cynicism

This story from the Los Angeles Times is just one more example of the ruinous state of legislative oversight in this country. I listen to people argue against government regulation and watch how our corporate masters can't do the right thing even when they are publicly shamed. Then check out the second story from International Living magazine which views the profits of the US medical rip off from the perspective of US expatriates. Less government oversight? Really??

Anthem Blue Cross, Aetna Inc. and others will halt new child-only policies in California, Illinois, Florida, Connecticut and elsewhere as early as Thursday when provisions of the nation's new healthcare law take effect, including a requirement that insurers cover children under age 19 regardless of their health histories.

The action will apply only to new coverage sought for children and not to existing child-only plans, family policies or insurance provided to youngsters through their parents' employers. An estimated 80,000 California children currently without insurance — and as many as 500,000 nationwide — would be affected, according to experts.

Insurers said they were acting because the new federal requirement could create huge and unexpected costs for covering children. They said the rule might prompt parents to buy policies only after their kids became sick, producing a glut of ill youngsters to insure. As a result, they said, many companies would flee the marketplace, leaving behind a handful to shoulder a huge financial burden.

The insurers said they now sell relatively few child-only policies, and thus the changes will have a small effect on families.

"Unfortunately, this has created an un-level competitive environment," Anthem Blue Cross, California's largest for-profit insurer, said in a statement declaring its intention to "suspend the sale of child-only policies" on Thursday, six months after the healthcare overhaul was signed.

The change has angered lawmakers, regulators and healthcare advocates, who say it will force more families to enroll in already strained public insurance programs such as Medi-Cal for the poor in California.

The White House weighed in Tuesday, condemning Anthem corporate parent WellPoint Inc. and others that plan to stop selling child-only policies.

"It's obviously very unfortunate that insurance companies continue to make decisions on the backs of children and families that need their help," White House Press Secretary Robert Gibbs said at a news briefing.

The Obama administration had told insurers they could solve the problem by issuing policies only during designated enrollment periods. Some White House officials, however, noted that families who can't find policies might be able to sign up for high-risk pools being set up around the country as part of the new healthcare law.

From International Living:

Don’t talk to the insurance industry about the failures of the U.S. health care system, especially when insurance company profits are soaring in the first quarter of 2010.

WellPoint, the company that drew attention last year by proposing a 39 percent rate hike for some insurance customers in California, showed a first quarter 2010 profit of 51 percent, shattering Wall Street expectations.

Analysts say part of the reason for huge insurance company profits is “conservative” pricing, meaning a refusal to drop premium rates even though insurers have been blasted by the Obama administration for extraordinary rate hikes in times of high profits.

Another contributing factor to insurance company profits this year was a weak flu season last year. WellPoint estimates gaining $35 – $50 million in Q1 profit due to a flu season that failed to live up to the dire warnings of global health authorities.

WellPoint earned $876.8 million in Q1 2010, up from $580.4 million a year ago, while paying 3 percent fewer claims compared to the same period last year.

Analysts say that health insurance company profits would have been larger but for worry about the affect on profits resulting from the passage of the new health care reform bill.

Thursday, September 23, 2010

Health Insurance Reform

None of these reforms seem that radical to me, me who has excellent coverage and wishes we had single payer. yet Republicans want to roll these reforms back. Why?

Starting today, insurers will be required to:

Keep you covered when you get sick: Simple mistakes or typos will no longer be grounds for insurance companies to cancel your insurance.

Cover kids with pre-existing conditions: Your kids can no longer be denied health coverage just because they have a pre-existing condition like hay fever, asthma, or previous sports injuries. This protection extends to all plans, except "grandfathered" plans in the individual market.

Allow young adults to stay on their parents' plan up to age 26: Even if their first few jobs don't provide health benefits, your kids can still remain covered by your insurance.

Remove lifetime limits: You will no longer need to worry about your health insurer limiting the amount of coverage available through their plan if you face an expensive medical condition. This will help Americans who develop chronic conditions from taking drastic measures to avoid medical bankruptcy.

Phase out annual limits: Many plans include annual dollar limits on how much medical coverage can be obtained per year. On all non-"grandfathered" plans in the individual market, these limits will be phased out over the next three years.

For any insurance plan that goes into effect after September 23, 2010, your insurance company must:

Pay for preventive care like mammograms and immunizations: Addressing problems before they start can help keep you healthier, and new insurance plans will now cover many preventative tests and immunizations without any copayment.

Give you a better appeals process for insurance claims: Now you'll have a guaranteed and fair path to help you receive the benefits you paid for if insurance companies deny your claim.

Let you choose your own doctor: Health reform makes it clear that you can choose any available participating primary care provider as your provider, and any available participating pediatrician to be your child's primary care provider.

Provide easier access to OB-GYN services: Women will no longer be required to have a referral from a primary care provider before seeking coverage for obstetrical or gynecological (OB-GYN) care from a participating OB-GYN specialist.
Allow you to use the nearest emergency room without penalty: If an emergency arises while you're away, you will no longer have to drive home to your in-network provider to receive in-network benefits.

Many other new benefits of the law have already taken effect, including rebate checks for seniors in the donut hole and tax credits for small businesses.

Keep watching, as more rights, protections and benefits for Americans are on the way now through 2014.

US Musicians Health Insurance

By Rob Fitzpatrick, Guardian Newspaper. The US system of medical insurance and fee for service is amystery to people used to government run single payer. They don't feel let down by their government run medical system. I guess I'm staying with the Police department till I die to keep my health insurance...Imagine how much easier part time work or small buisness hiring would be with single payer. Never mind saving lives. Lives that have rejected single payer.

Josh Homme has a pertinent piece of advice for any musician hoping for help from the American medical system. "If you want to live," says the leader of Queens of the Stone Age, "you better be rich."

Two years ago, Homme's Queens bandmate Natasha Shneider died from cancer, aged just 52. She was put on chemotherapy pills – two a day at $500 a time. Schneider had health insurance that split the cost, but that still left her paying $500 a day for essential treatment. Now Brian O'Connor, the bassist in one of Homme's other bands, Eagles of Death Metal, has been diagnosed with stage-four colon and lung cancer as well as tumours on his bones.

"This was a 6'3" guy," Homme says. "He went from 230lb to 180lb in six months. None of us could understand it. It's just heartbreaking. I'm 37 now and I've been beating myself up my whole life, but I'm insured, I know the status of my own health. Brian is only 44 and his insurance is sorted now, but even when you're insured you still get slow-rolled. The bureaucracy of insurance has become its own problem. Brian's cancer is incredibly aggressive. He needed surgery immediately, so we paid for four days in hospital with a brilliant anaesthetist and one of the best surgeons in America. That was $25,000. If he'd had insurance he would still be waiting for it to clear and he would have had to have $100,000 worth of cover. It's mystifying to me where it's all going."

In the US, every prescription, every visit to the doctor, every stay in hospital must be paid for. If you're in a steady job with the right corporate insurance, you should be covered. But that situation just doesn't apply to musicians, so the likes of O'Connor have been forced into playing a dangerous game. Often unable to afford the premiums, they have to gamble against falling ill, and the odds of that gamble get worse as they get older.

On 23 March this year, the 56-year-old Funkadelic guitarist Garry Shider was working in his small home studio in the suburbs of Maryland when he realised he could not move some of the fingers on his left hand. Shider thought he was having a stroke and alerted his wife Linda, who rushed him to hospital. He was x-rayed and rushed to a larger hospital in Washington DC. Shider had been suffering with a bad cough and intermittent problems with his right leg for months, but he had never really taken the symptoms seriously, and waited for the pains to pass. It turned out to be brain cancer.

Shider had worked with George Clinton since 1971. He'd had some health insurance, mostly through union affiliations, but in recent years he had given them up. "The premiums were $300 a month," Linda says. "We just couldn't afford that."

The man who co-wrote One Nation Under a Groove found money was often tight. After he was diagnosed, a fund was set up to raise money for his treatment at a specialist unit in Texas, but Shider died on 16 June.

Rob Max works for Sweet Relief, a California-based musicians fund that provides assistance to professional musicians who struggling with illness, disability and age-related problems. What he sees is a generation of musicians increasingly unable to cope.

"This is a growing problem," Max says. "For a lot of musicians, insurance is just not economically viable. They're not choosing to be irresponsible – healthcare can cost you thousands of dollars a month, and when you get into your 50s the premiums go through the roof. These fees are way beyond most people's reach."

Singer and songwriter Vic Chestnutt became a friend of Max's. He had hospitalisation insurance left over from his time signed to Capitol Records – it paid for hospitalisation, not drugs or doctors or anything else – that cost him $500 a month, which he struggled to pay.

When he fell ill in early 2009, his insurers paid out $100,000 for three stays in hospital, but the hospital demanded another $70,000 for two operations, later reduced to $35,000. He would also have faced being sued for the cost of two other operations had he not died on Christmas Day 2009, after attempting suicide two days earlier.

Max was also working with Little Feat's drummer Richie Hayward – who had also played with Bob Dylan, Eric Clapton and Robert Plant – until his death in August from liver cancer. Max explains that because Little Feat were a touring act, Hayward saw no money from recordings and could not afford health insurance. "Guys like him will be working full time until they just can't work any more. It's not right. I think of it as like watching a bunch of 70-year-old construction workers still trying to put up a building rather than sitting back and collecting the rent."

If the situation is bad for musicians whose music you might actually know, it is worse for the vast number you've never heard. Carolyn Schwarz works for HAAM (Health Alliance for Austin Musicians), a non-profit organisation which has provided low-cost healthcare – costing around $1,800 a year – for about 2,000 local musicians over the last five years. It receives no public money, and every penny is raised from local people and businesses.

"Our numbers are increasing all the time," Schwarz says. "Musicians, unfortunately, often suffer from the opposite of hypochondria."

Take Steve Reid. One of the world's finest drummers, Reid played on Dancing in the Street aged 16 and later with James Brown, Sun Ra, Miles Davis and Fela Kuti. Between 2006 and 2008 he recorded four albums with the UK electronic artist Kieran Hebden, aka Four Tet.

"Steve considered the options and said, 'Fuck that. I'm going to enjoy myself now,'" Hebden says, his new baby daughter gurgling happily on his lap. "He had no insurance. He was, basically, below the poverty line, living in his son's flat in Harlem. But the chemotherapy for his throat cancer was very hard – he'd get the bare minimum of care then he was out, not even a bed to rest in. There was no compassion, even at the end. The hospital was a business and each visit was like a slap in the face for him."

The DJ Gilles Peterson also knew Reid well. "A lot of these musicians didn't make much money even in their prime years – they were always living day to day. But there has to be a way we can help people now."

And help, when it comes, can effect the most incredible change. Lester Chambers is 70. As part of the Chambers Brothers, the pioneering late 60s psychedelic soul band, he recorded the classic Time Has Come Today in 1968. The Brothers' 1970 record Funky was heavily sampled in A Tribe Called Quest's I Left My Wallet in El Segundo 20 years later. He played in Bob Dylan's early electric band, and played on bills with Jimi Hendrix.

He, too, has cancer, and he needs eye, back and dental surgery. He hasn't been able to work for three years, and was reduced to sleeping on people's couches. Recently he received a gift of $10,000 from Yoko Ono and he has now moved into a new house. I call Lester Chambers on his (also new) mobile. He is softly spoken and unfailingly polite.

Ask Chambers if he misses performing and his voice leaps in volume. "Oh my God, do I ever," he says. "I love to sing and play harmonica and I've not been able to for so long." These days his pleasures are a little more prosaic. His first unaided visit to the supermarket was victory enough to lift his mood. "And I've got a new doctor to see," he laughs. "I can't wait to feel better." Now he has hope that he might.

Josh Homme admits he's "very conservative" politically. He doesn't think the government has any better idea how to spend his money than he does, and whenever an administration has tried he's sure they've got it wrong. "But this is such a huge problem," he says. "We can't turn away from it."

Wednesday, September 22, 2010

Foreclosure Bank Blues


Another ticking time bomb in the realm of real estate bad behavior is bound to go off sooner rather than later, and it is likely to impede normalization of values of residential property.

As readers no doubt know, there is a lot of actual and shadow residential real estate inventory in the US. The time from serious delinquency to foreclosure has lengthened considerably, due not just to crowded court dockets, but also bank/servicer disinclination to take possession (reasons include that investors take a dim view of bank real estate holdings; the bank is liable for expenses, most important real estate taxes, once it takes possession; more foreclosures would lead banks to have to write down clearly overvalued second mortgages, leading to losses and lowering bank capital levels).

Most analysts have argued that it would be preferable to accelerate the process of clearing the overhang of housing inventory, since prices need ultimately to return to price level in relationship to incomes and rent rates more in line with long standing historical norms. And the officialdom seems to accept this view, since Fannie and Freddie are pressuring servicers to move faster on foreclosures.

But what if this resolution process has new land mines planted in it? What if there are not widely understood impediement to foreclosed properties ending up with new owners? If there are good reasons buyers will have reason to be leery of buying houses out of foreclosure, we could have a lot of homes sitting vacant, a blight on neighborhoods and a source of even greater losses to banks and investors.

Yet it appears that the very same sort of corners-cutting that led financial firms to shovel money to weak borrowers could impede working through the inventory of seized residential real estate. An article discusses an analysis by AFX Title, a title search company, that shows problems with title on foreclosed properties to be widespread:

As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today, or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”….

The problem is created through a break in the chain of mortgage ownership. Until the 1980’s, most mortgages were loans between the homeowner and a bank, who lent the money directly. More recently, the mortgage financing system transformed into an international system of securitization, with mortgage lenders packaging their loans into securities, bought and sold by investors like stocks. These transactions even split individual mortgages into sections, where each loan could have parts owned by different investment banks.

The transfer of ownership in these mortgage backed securities (MBS) was done with contracts on the balance sheets of Wall Street investment banks, such as Morgan Stanley and Goldman Sachs. The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place…

There are reports that some title insurers are indicating that they will not insure for this title defect.

Yves here. Some readers may take this all to be unduly alarmist. But confirmation that this problem is real and potentially serious comes via a new “gotcha” practice by Wells Fargo on foreclosure sales. Wells is sufficiently concerned about the risks of selling properties out of foreclosure that it is springing an addendum on buyers, shortly before closing, which effectively shifts all risk for any title deficiency on to the buyer.

Now why is this a big deal? Go reread the boldfaced sentence above. If a bank like Wells does not have the right to foreclose, it cannot have clean title to the property. So the bank could conceivably be selling something it does not own.

Let’s say you buy a vase from a store. You open the box when you get home and find out the box is empty. You’d clearly be within your rights to get your money back.

With the Wells Fargo addendum, even if the bank has sold you the equivalent of an empty box, you have no recourse to Wells. Zero. Zip. Nada.

Let’s go back and give a bit of context. Wells is encouraging buyers in foreclosures to use its attorney and title insurers and reportedly offers to split fees. So the bank is taking steps to steer buyers not to get legal advice. This matters because the problems in this document would not be evident to a layperson. And it’s not even evident to lawyers not expert in real estate; I learned about this situation because a lawyer I know who does a fair bit of real estate work had been contacted by a friend of his, a lawyer looking to buy a house over foreclosure. Wells had presented the prospective buyer with this supposed “standard” addendum on the day of closing and said they would not negotiate it (you can read it in full at ScribD). The buyer was advised not to sign it.

On the surface, this document may not seem all that troubling. But what it does, in effect, is say “Warning, warning, you are buying a property out of foreclosure, there is risk here, and you can’t hold us responsible for anything we told you in the sale process.” (see paragraphs 1 and 2). Now the not-trivial problem with that is: how can you possibly evaluate the risk of buying a property out of foreclosure without asking the current owner? And if the current owner isn’t legally responsible for what they say, or more important, what they deny is a problem, they buyer cannot perform effective due diligence. This vitiates a principle that is well embodied in most areas of consumer and business law, that a seller is liable for the representations he makes about his wares.

Now specifically, the potential problem with the deal is the bank in many states will at best be giving the buyer a “quitclaim” deed (the addendum finesses this in paragraph 18, that the buyer only gets a “special/limited warranty deed. As the lawyer who took a dim view of this addendum put it, “This is like the ‘Special Olympics,’ not like ‘You are my special someone’.” That means the bank is merely transferring whatever it interest it has.

But per the AFX article above, the bank may own nothing. It may have foreclosed without having a clear enforceable right to the property (this is the basis of the burgeoning number of cases where borrowers are successfully challenging the bank/servicer’s right to foreclose, because it cannot prove it actually owns the note, which is the IOU between the borrower and the lender; if you don’t own the note, in 45 states, you have no right to enforce the lien on the property).

Now this little problem can be solved by title insurance, right? Well, guess what, some title insurers have exited the business, some others are starting to write policies with meaningful exceptions when they can’t go to the courthouse and find a clear chain of title. Oh, and Wells is trying to steer you towards their title insurer. What do you think the odds are that their title insurance policy doesn’t have exceptions?

So what is the risk? The lawyer explains:

The typical (unsophisticated) buyer thinks that because they have a lawyer at closing (no matter whose lawyer it is), a title policy, etc…….that they are all safe and sound. They struggle through one of these REO transactions for a month or two, finally get in the house, something bad goes wrong, and they find out that 1) the title policy won’t cover them and 2) the land isn’t unique (see the nasty provision in paragraph 27 on “specific performance”), so a refund is all you get – and you are out on your ear. Hopefully, with a refund – and that may be the best outcome. But if somebody comes in, and voids a foreclosure, your title policy doesn’t pay – Wells Fargo has clearly disclosed that this was a foreclosure, so you only got what they had (nothing), and you have no recourse, no insurance, and guess what, an unsecured loan for half a million bucks.

Given how many sales will be done out of REO, and the rising number of problems surfacing with making sure that mortgage securitizations took all the steps to become the real party of interest in a particular property, it is only a matter of time before we see some blowups of the sort the attorney was worried about, of a buyer shelling out hard dollars for a house, or taking a big mortgage, and winding up with nothing. And a few incidents like that getting the press they deserve will put a pall on REO sales.

Think the risk isn’t real? Then why has Wells bothered to insist that REO buyers sign a new type of addendum, when it has been selling REO for decades? This effort to shift all title risks on to the buyer is a tacit admission of problems. And look at the document itself. The buyer has to initial it in eight places as well as sign it. That’s a clear statement of Wells’ intent to shift the risk to the buyer.

Tuesday, September 21, 2010

Mortgage Modification Scam

By Steve Dilbert of Miami Fraud Investigation. Every time I think I have figured out the profit and loss of the Mortgage Backed Security scams I learn something new. This analysis has dire implications.

I began working on this project last year at the peak of the modification frenzy and finished it about a month ago. I originally planned on posting it last week on the eve of the Mortgage Servicers Convention in Dallas. I decided to hold off because I didn’t want to ruin the fun of the champagne fueled Conga lines or the Mad Men style skirt chasing that usually goes on at conventions sponsored by the financial services industry.

The findings of my year-long investigation would have put everyone into a panic mode and stopped the flow of the Dom Perignon for the Conga lines and the awkward moments at the water cooler this week and replaced it with Tums and Roll-Aids. So in the spirit of not being a party pooper and in an effort to create a distraction for those employees who may have had “too much fun” I decided to wait.

What have I discovered that would create so much anxiety? Well, mortgage servicers are ripping off not only homeowners but the pension funds and hedge funds who have invested into Mortgage Backed Securities. What they’re doing is reminiscent of what was portrayed in the Martin Scorsese film, Casino, where the local mob Capos would “skim” large sums of money off the top of the casino revenues before they were counted and sent to the bosses in the mid-west.

Before we get into that, we need to hop in the Way Back Machine like Peabody and Sherman from the Bullwinkle cartoons and go back in time. Back to a time when cops were beating up hippies, Martin Luther King and Bobby Kennedy were challenging us as a nation to be better people, men were going to the moon and Jon Voight was playing a gay gigolo on the big screen.

Back then, President Lyndon Johnson had a great idea. Well, it seemed like a great idea at the time anyway, to make homeownership a birth right for every American. In those days of Prediluvian America, those who owned the loan also evaluated the risk, collected payments and would adjust payments or terms as circumstances warranted. Using this business model, lenders made money by writing loans they knew would perform and borrowers had unmediated access to decision makers at the bank that could modify the terms of the loan. This guiding principal behind this practice was transparency of all parties involved.

This sounds like a great business model and it was. It helped George Bailey survive the Great Depression in “It’s a Wonderful Life” and it helped many real life banks survive the Great Depression. However, expanding homeownership under that business model would have driven the federal budget deficit not only through the roof but to rings of Saturn. Imagine if you will today’s national debt numbers in 1967 dollars. If converted to 2010 values the numbers would be so large it would blow out a circuit on the speech synthesizer Stephen Hawking uses on his wheelchair.

Being this was the height of America’s period of ingenuity and optimism, President Johnson and his Mortgage Finance Task Force didn’t let a small problem of a sky rocketing national debt prevent them from coming up with a plan. Remember, these were the same people who built a space program from nothing and put a man on the moon within 9 years while fighting the war in Vietnam.

This group of financial wizards devised a scheme to auction off mortgages owned by the federal government and the scheme they developed would eventually turn mortgages from long-term commitments that only financial giants like governments, banks and insurance companies were willing to own, into a commodity that any investor could buy and sell. The loans are put into pools are traded like baseball cards on the commodities market. This is also when the federal government privatized Fannie Mae and created both Freddie Mac and Ginnie Mae.

The first mortgage backed security was sold in 1970 and with this business model came positive results. Lenders expanded and morphed this model to where home loans were turned into commodities where ownership and accountability diffused.

Today, the vast majority of loans are originated with the intent of selling them on the secondary market packaged together in pools called special purpose vehicles or trusts by underwriters who represent government sponsored enterprises, investment banks or commercial banks. These special purpose vehicles are then repackaged and re-disbursed to investors all over the world. Bonds are issued for the different categories of payments, including interest payments, late payments, principal payments and prepayment penalties. Different groups of investors or tranches may get paid from different categories and in a different order.

Tax and accounting rules were set up to govern these trusts or Real Estate Mortgage Investment Conduits (REMICs) and they were set up to ensure that the assets of the trust are passively managed. This means they are handled by someone else usually a servicer. This type of management is required because the trusts receive preferential tax treatment. So as long as the trust complies with these management guidelines, the trust is not required to pay tax on its income, thus increasing the profitability of the trust. Compliance also allows investors insulation from the bankruptcy of the entity that transfers the mortgages into the securitized trust. Without this protection, creditors from the originator could seize mortgage loans from the trust to satisfy debts incurred by the originator. This business model morphed into what is essentially a legally run multi-trillion dollar tax-free Ponzi scheme. This scheme is so large it makes Bernie Madoff’s empire look like a kindergarten production of the movie, Wall Street.

The only problem was the guys at Treasury, the Federal Reserve and the banks never consulted with the guys at NASA about Newton’s theories of gravity when they set this up. Who can blame them, they were bankers not rocket scientists. The bankers neglected to consider the idea that what goes up must come down. In 2007, housing which had survived 40 years of double digit interest rates, the S&L crisis, and three recessions was dealt a coup de grace by investors worldwide when they stopped buying mortgage backed securities and Newton’s theory was proven correct. The debate is still out as to what created this.

Wall Street conspiracy theorists like claim that it was a planned bust out by the mega-wealthy. They claim the investment houses did sort of like what Tony and the boys did when someone owed them money on The Sopranos. They went in ravaged through everything of value and maxed out the guy’s credit with no intent of paying it back. The only difference, they claim, was that the banking bust out was legal because it was done by “respectable society”. They claim that Bear Stearns and other investment houses pre-sold these securities and needed to fill them as quickly as possible which is why you had so many exotic mortgages such as Option-ARMs, No-Doc and NINJA programs.

Once investors stopped buying mortgage backed securities, this created a domino effect across credit markets and eventually reached the homeowner. People stopped buying homes and property values plummeted faster than contestants on a Japanese game show. Overleveraged homeowners now owed more on their mortgages than their house was worth.

The rise of the MBS industry has created a new generation of loan servicers. Up until the meltdown, loan servicers were like an Asian wife. They were dutiful and passive in public, but yet behind closed doors yielded great power.

The sole purpose of these servicers was to collect and process payments on mortgage loans. While some specialize in subprime loans, some servicers specialize in loans that are already in default (so-called special servicers). There are companies that contain entire families of servicers: prime and subprime, default and performing. Some of these servicers are affiliated with the originating company. Nearly half of all subprime loans are serviced by either the originator or an affiliate of the originator. However even when the servicer is affiliated with the originator, it no longer has exclusive control over the loan or an undivided interest in the loan’s performance. Servicers are usually collecting the payments on loans someone else owns and then pay the Trustees on a quarterly basis and this relationship is governed by the Pooling and Servicing Agreement or PSA. The PSA is essentially the agreement between the servicer and the trust which details the responsibility of both parties.

Servicers receive their revenue two ways. First, they receive the majority of their revenue from acting as an automated pass-through accounting entity whose mechanical actions are performed offshore or by a computer system. Second, servicers generally profit from servicing fees based on a fixed percentage of the total unpaid principal balance of the loan pool and interest income on homeowners’ payments held by the servicer until the service has to make payments to the investor. They then deduct any pay outs at an inflated rate for taxes and insurance or any affiliated business arrangements from the payments to the investor.

After the meltdown, mortgage servicers were no longer willing to play a passive role in public and moved from the proverbial bedroom to the boardroom faster than when O-Ren Ishii cut off Boss Tanaka’s head with her samurai sword in the movie, Kill Bill.

Like O-Ren Ishii, the servicers were smart and they quickly figured out that if they acted quickly they could profit from the financial chaos around them. Servicers were flooded with requests for modifications from upside down homeowners. They quickly seized on the idea that they could exploit their ability to skim off the top of the payments to investors by exaggerating their cost estimates and by increasing the outstanding balances of the loans in the trust. There was one problem with that idea; most homeowners in late 2007 early 2008 were not yet behind on their payments.

What servicers began doing next is shocking! They began to tell homeowners they would not negotiate a modification unless they were 90 days behind on their payments. Publicly the excuse was because they needed to rescue as many homeowners as possible before moving on to stable homeowners. This wasn’t entirely true. Let’s be honest, this was a blatant lie. What they weren’t saying is how much their profit margins increased by encouraging people to go into default. The longer someone stays in default the more profit they made by misleading both the trustee and the homeowner. This gave the servicers incentive to push homeowners into delinquency and keep them there indefinitely with or without a pending modification.

When the homeowner would submit the application for the modification, the lender would drag out the approval process by repeatedly claiming they lost the paperwork. Again, this all goes back to their profit margin on loans in default and the outstanding balances of the pool. This is why when HAMP was announced in 2009, servicers were included into the program. HAMP was intended to encourage servicers to modify loans but the cash incentives offered by the federal government were not large enough to entice the servicer to abandon the profitable business model of skimming off the top.

Another misleading statement made by servicers is that they need approval from the trustee to approve a modification. This is another lie. Due to the passive management requirement of the trust under REMIC guidelines, investors have little control and seldom influence the servicer’s actions when it comes to modifying a homeowner’s loan and thus have full discretion to negotiate a modification of a loan for the homeowner. Most PSA also impose no meaningful restrictions against servicers who negotiate modifications and actually authorize modifications. In most cases, the PSA immunizes the servicer from litigation from investors when they do modifications.

Servicers also use the excuse that REMIC guidelines penalize them from doing loan modifications. This is also not factual accurate. REMIC rules offer an “escape” clause. REMIC rules state that a loan can be modified when it is in default or a default is reasonably foreseeable.

So now my friends, you now know what would have turned off the flow of Champagne for the Conga lines and put a stop to the reckless sexual abandonments at the conference last week. The Lending Industry’s dirty secret and the trail of public betrayal that they hid from homeowners and investors.

The shocking thing about this whole scheme is its not independent companies doing it. It’s the major banks. Wells Fargo, JP Morgan-Chase, Bank of America, HSBC, they all do it. That’s right. These banks who received corporate welfare checks in the billions of dollars are now pocketing money from some sweet old grandmother’s pension fund. So while grandma is forced to eat cold oatmeal because she can’t afford to heat it up, banking executives from Citibank and JP Morgan-Chase go in front of congress and claim they had nothing to do with it.

Monday, September 20, 2010

Health Care Bonus

From these statistics that don't surprise me and will never advance the cause of universal health care, no matter who reads them. A colleague of mine thinks I am crazy to advocate single payer and when I pointed out how the VA (a single payer system) sends a car to Key West from Miami to get a veteran to a specialist who then has a medical check up and is approved for increased disability status, without hiring a lawyer, he says that just a fluke. Most government run health care is crap. Not that he has any knowledge. If Keith is unwilling to reconsider his position when faced with facts all he represents is the mainstream lunacy. I am on the fringe. The VA story by the way came from the This Week On The Island blog.

Once upon a time in America, people became doctors and nurses because they wanted to help people, building hospitals was a labor of love, lawyers didn't chase ambulances, health insurance companies did not openly abuse their customers and greedy pharmaceutical companies did not dominate the entire health care industry. But today all of that has changed. Why do most people choose a career in the health care industry today? It is because they want to make a lot of money and live a comfortable lifestyle. Why do most health facilities get built today? They get built because someone is hoping to make a huge profit. Why do so many lawyers specialize in medical malpractice? Here's a hint - it is not because they want to make life better for people. Why do health insurance companies keep raising premiums even while they are making record profits? It is because they can and because they are greedy. Why are pharmaceutical corporations some of the most profitable companies on the face of the earth even though their products are harming tens of millions of people? It is because our health care system has become wildly corrupt and is now about making as much money as possible.

Not that everyone in the health care industry is motivated by greed. Some doctors and nurses volunteer a ton of their time to assist the poor and the needy. Others use their vacation time to go overseas and provide free medical care in third world nations. Many religious groups and non-profit organizations build hospitals and clinics because they are truly trying to help people. And there are a few health insurance companies that are trying to play the game honestly.

But unfortunately, those with noble intentions in the health care industry are the exception rather than the rule. Overall, the health care industry in America is all about the money, and it is about time that we quit pretending otherwise.

The following are 20 signs that the health care industry in the United States has become all about making as much money as possible....

1 - Even as the rest of the U.S. economy deeply struggles, America's health insurance companies increased their profits by 56 percent in 2009.

2 - According to a report by Health Care for America Now, America's five biggest for-profit health insurers ended 2009 with a combined profit of $12.2 billion.

3 - The top executives at the five largest for-profit health insurance companies in the United States received nearly $200 million in total compensation in 2009.

4 - According to an article on the Mother Jones website, health insurance premiums for small employers in the United States increased 180% between 1999 and 2009.

5 - Health insurance premium increases are getting totally out of control. For example, the 39% increase in health insurance premiums that Anthem Blue Cross imposed on some California customers last year was so obscene that it made national headlines.

6 - Since 2003, health insurance companies have shelled out more than $42 million in state-level campaign contributions.

7 - There were more than two dozen pharmaceutical companies that made over a billion dollars in profits in 2008.

8 - Each year, tens of billions of dollars is spent on pharmaceutical marketing in the United States alone.

9 - Nearly half of all Americans now use prescription drugs on a regular basis according to a CDC report that was just released. According to the report, approximately one-third of all Americans use two or more pharmaceutical drugs, and more than ten percent of all Americans use five or more prescription drugs on a regular basis.

10 - According to the CDC, approximately three quarters of a million people a year are rushed to emergency rooms in the United States because of adverse reactions to pharmaceutical drugs.

11 - According to a very surprising new study, 85 percent of new pharmaceutical drugs are "lemons" and pose serious health risks to their users.

12 - The Food and Drug Administration reported 1,742 prescription drug recalls in 2009, which was a gigantic increase from 426 drug recalls in 2008.

13 - Shocking new research has found that expectant mothers taking antidepressants have an astounding 68 percent increase in the overall risk of miscarriage. Yet the pharmaceutical companies are essentially doing nothing to stop this.

14 - The use of psychiatric medications among 18 to 34 year old members of the U.S. military and their wives increased by 42 percent between 2005 and 2009.

15 - There are some disturbing new medical studies that suggest that many of the most popular anti-depressant drugs are no more effective than a placebo.

16 - Pharmaceutical companies continue to rake in billions of dollars from selling vaccines and are encouraging even pregnant women to take them, even though there is mounting evidence that taking vaccines while pregnant dramatically increases the rate of miscarriage.

17 - One woman in New Hampshire is seeking more than $24 million in damages from the manufacturer of a prescription drug that she took for shoulder pain. It turns out that as a result of taking the drug, she is now blind and has been left scarred by internal and external burns.

18 - According to one stunning new study, the medical liability system in the United States added approximately $55.6 billion to the cost of health care in 2008.

19 - Pharmaceutical companies have become so greedy that now they are even attempting to patent our genes. It is being reported that over three million gene patent applications have been filed with the U.S. government so far. Tens of thousands of gene patents have already been granted at this point. It is estimated that companies hold approximately 40,000 patents on sections of the human genome right now. Those patents cover approximately 20% of our genes.

20 - According to a recent report, Americans spend about twice as much as residents of other developed countries on health care, but get much lower quality and far less efficiency in return.

Saturday, September 18, 2010

Middle Class Destruction

From I continue to believe, as I read the debate about giving the rich their tax cuts, that "everyone does better when everyone does better. Yet when tyou read the fifteen statistics laid out in the essay it's clear we are all headed down the opposite path. And our President daily resembles Herbert Hoover in more ways than before.

The "America" that so many of us have taken for granted for so many decades is literally disintegrating right in front of our eyes. Most Americans are still operating under the delusion that the United States will always be "the wealthiest nation" in the world and that our economy will always produce large numbers of high paying jobs and that the U.S. will always have a very large middle class. But that is not what is happening. The very foundations of the U.S. economy have rotted away and we now find ourselves on the verge of an economic collapse. Already, millions upon millions of Americans are slipping out of the middle class and into the devastating grip of poverty. Statistic after statistic proves that the middle class in the United States is shrinking month after month after month. Meanwhile, millions of Americans are starting to wake up and are beginning to realize that we have very serious problems on our hands, but they have no idea what is causing our economic distress and they are unaware that most of our politicians have absolutely no idea how to fix the economic disaster that we have created.

On the mainstream news, the American people are treated to endless footage of leaders from both political parties proclaiming that the primary reason that we are in the midst of such an economic mess is because of what the other political party has done.

Republicans proclaim that we are experiencing all of this economic chaos because of the Democrats.

Democrats proclaim that we are experiencing all of this economic chaos because of the Republicans.

Even many readers of this column (who are generally more educated and more informed than most average Americans) leave comment after comment blaming either the Democrats of the Republicans for our current economic mess.

But do you really want to know who is to blame for our economic problems?

Both of them.

This economic nightmare has taken literally decades to develop, and both Democrats and Republicans have contributed greatly to this disaster.

Both parties have absolutely refused to stand up to the Federal Reserve and the horrific economic policies that they have been shoving down our throats for decades.

Both parties have stood idly by as the U.S. trade deficit has absolutely exploded in size and the United States has become significantly poorer month after month after month.

Both parties have refused to do anything as month after month after month large numbers of factories and good paying jobs leave the United States.

Both parties have shoved the spending accelerator to the floor when they have been in power and now we have the largest national debt in the history of the world.

Both parties have done essentially nothing as the health care industry, which was once the envy of the world, has degenerated into a cesspool of corruption and greed and now seems designed to do little more than to provide pharmaceutical companies and health insurance crooks with obscene profits.

If factories keep leaving the United States and jobs keep leaving the United States and the federal government keeps going into more debt and state governments keep going into more debt and local governments keep going into more debt, then things are going to keep getting worse.

It does not take a genius to figure that out.

The United States is continually getting poorer and is continually going into more debt.

Can anyone out there explain how that is a formula for economic prosperity?


Can anyone explain how that would work?

Please leave a comment and explain that to all of us if you can.

The truth is that as wealth continues to leave the United States and as the U.S. gets even deeper into debt, more Americans are going to become poor.

It really is that simple.

The following are 15 shocking poverty statistics that are skyrocketing as the American middle class continues to be slowly wiped out....

#1 Approximately 45 million Americans were living in poverty in 2009.

#2 According to the Associated Press, experts believe that 2009 saw the largest single year increase in the U.S. poverty rate since the U.S. government began calculating poverty figures back in 1959.

#3 The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.

#4 According to the U.S. Department of Agriculture, on a year-over-year basis, household participation in the food stamp program has increased 20.28%.

#5 The number of Americans on food stamps surpassed 41 million for the first time ever in June.

#6 As of June, the number of Americans on food stamps had set a new all-time record for 19 consecutive months.

#7 One out of every six Americans is now being served by at least one government anti-poverty program.

#8 More than 50 million Americans are now on Medicaid, the U.S. government health care program designed principally to help the poor.

#9 One out of every seven mortgages in the United States was either delinquent or in foreclosure during the first quarter of 2010.

#10 Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many as were receiving it in 2007.

#11 The number of Americans receiving long-term unemployment benefits has risen over 60 percent in just the past year.

#12 According to one recent survey, 28% of all U.S. households have at least one member that is looking for a full-time job.

#13 Nationwide, bankruptcy filings rose 20 percent in the 12 month period ending June 30th.

#14 More than 25 percent of all Americans now have a credit score below 599.

#15 One out of every five children in the United States is now living in poverty.

As millions more Americans continue to climb on to the "safety net", how long is it going to be before it breaks?

The reality is that the system can only support so many people. We are now at a point where our anti-poverty programs are clearly unsustainable in the long-term, but nobody has a solution for how we are going to get all of these people off of these programs or how we are going to provide good jobs for all of them.

The cost of every U.S. government anti-poverty program is absolutely soaring. Meanwhile, the U.S. government is already running a budget deficit that is approaching 1.5 trillion dollars every year. If you cannot understand that we have a very serious problem on our hands then you are probably not awake.

The U.S. economic system is dying. Blaming the other political party is not a solution. Running around the country offering "hope" and "change" and giving people a vague sense that things will get "better" soon is not going to cut it either.

The American people need very real economic solutions to very real economic problems.

But nearly all of our politicians are way too busy either trying to get elected or trying to stay in office to tackle the very serious problems which are destroying our economy.

Unfortunately, the American people love to watch our politicians play politics. They love to watch the little ping-pong ball of blame go back and forth. They love to pick sides and to cheer for their "team".

None of that is doing any good. Right now millions of Americans are getting sucked into poverty each year and neither major political party is doing anything real to address the very real economic problems that are causing that to happen.

But most Americans have become so "dumbed down" that they don't even understand what the real problems are anymore.

All most Americans seem to want these days is to watch a good show.

Thursday, September 16, 2010

President Obama's Dream

By Michael Green on In this essay the author reflects my own rather weary feelings about President Obama's shortcomings. He does it well too, as I have encountered increasing difficulties sharing my feelings with progressive friends who think the sun still shines out of the President's namby pamby approach to getting things done.

This week, Barack Obama called for a $50 billion spending program to launch a long-term public works infrastructure upgrade of road, rail, airport and other transportation facilities over the next six years.

According to coverage in the New York Times, “officials said that, under the best case scenario, if Congress acts quickly, the plan could start creating jobs over the course of 2011. But the officials emphasized that the White House does not view the proposal as a ‘stimulus, immediate jobs plan,’ calling it instead a ‘six-year reauthorization that’s front-loaded.’

“With only a few weeks of this year’s Congressional session left before lawmakers head home to campaign for re-election, the White House concedes it may face an uphill battle in getting the plan passed this fall, either before lawmakers break for the mid-terms or afterward, in a lame-duck session. Typically, transportation measures do get bipartisan support, but they often require months of work.”

Hmm. Like Martin Luther King before him, it would appear that Barack Obama truly has a dream.

And look at how much our dreams have shrunk in forty years. King dreamed of a society in which people were judged by the content of their character without regard to the color of their skin. Barack Obama has a dream about being able to scratch together a few nickels so that the country can do what it manifestly should have been doing decades ago.

And look, as well, at how much we’ve shrunk as a country. A substantial chunk of King’s magisterial dream has already come true (with, of course, much yet to be done). Obama’s puny one is dead on arrival.

I can’t imagine what the guy was even thinking.

It’s a dream to believe Republicans would agree to anything whatsoever at this point, after they’ve blocked every possible initiative they could, so why is he still indulging that fantasy?

It’s dream, now that Obama has helped Democrats boot away Teddy Kennedy’s seat in liberal Massachusetts, that Republicans would even let this plan come up for a vote in the Senate.

It’s a total and complete dream to believe that they would do so right before an election.

It’s a dream to believe, with the administration having completely blown the national discourse these last two years, that the public would favor any further government spending now.

It’s even a dream to imagine members of Obama’s own party passing this legislation in the current political environment.

And it’s a dream to think that it would matter if they did. Obama is the great master of far too little, far too late, and far too poorly done – when and if it’s done at all.

So many dreams. Given the president’s evident desire to indulge deeply in hallucination, I say if he wants to dream, why doesn’t he let himself go...?

Why doesn’t he just dream that the economy will double in size overnight? It would be so much easier than doing the hard work of actually building it. It would be so much easier than having to show the political muscle necessary to make things happen in the current environment.

Why doesn’t he just dream that Planet Earth will grow a thermostat – right near the Potomac for that matter – so he can just reach over and turn down the temperature? It would be so much easier than actually leading the battle necessary to stop a handful of global-scale predators from getting rich by cooking life forms on this planet out of existence.

Why doesn’t he just dream that regressives will fall down on their knees and ask the country’s forgiveness for ripping it off blind over thirty years and running?

Why doesn’t he just dream that Iraqis will forget about a millennium of ethno-religious conflict and just make nice with each other next week?

Why not dream that Islam disappears from the planet? Maybe then America could win in Afghanistan.

Why not dream that Judaism disappears from the planet? Maybe then the settlers will unsettle the West Bank and Obama’s pathetic Middle East peace initiative could actually work.

Why not dream that Christianity disappears from the planet? Maybe then we Americans could all start thinking, rather than just fearing, hating and killing.

Why doesn’t he just dream that it was January 2009 again, and he could have a do-over?

I watched Obama’s press conference this week, and I was reminded again of what a misfit he is for the presidency, and what a misfit he is for our time. He doesn’t seem to get the concept that an effective president has to get in fights. He doesn’t seem to understand that there are genuine enemies to the public interest out there (and, mostly, that they’re not to be found overseas). He doesn’t seem to understand that the reason presidents have to get into fights is because these enemies exist, because they are ruthless and entirely sociopathic, and because their victories are the public’s losses.

Instead, there was Barack at his latest public event, demonstrating once again how it is possible for abysmal communication skills to reside within the body of a sometimes gifted communicator. There was the halting, ineffective, delivery. There was the blood-drained absence of passion on topics where the expression of some serious outrage is not only not a bad thing – as he seems to believe – but would be eminently healthy and highly welcome. There was the president almost never taking the opportunity to grab the bully pulpit, stake out the ethical high ground, show the kind of leadership that the public always craves from its chief executive, and deliver a moral lecture to call us to our senses. There he was continuing to treat the oligarchy of this country and their Republican marionettes not as predatory enemies of the people, but rather as nice, well-intentioned folks who have a slightly different but just as respectable a set of ideas from his. There was the president ducking difficult questions about his own previous assertions, hiding from the word “stimulus”, and almost never grabbing affirmative control of the discourse and the agenda. And there he was, frankly, looking altogether and all-too-often rather annoyed with the whole business.

Watching performances like that, I frequently find myself really wondering why this guy ever sought the presidency. Getting there is one of the most physically and emotionally difficult things a person can do. It’s one of the biggest mountains there is to climb. So why did he go through all that just to be a placeholder president? Why succeed at campaigning only to tank at governing? Why be a historically great candidate only to have history regard you as a failed president?

Notwithstanding this repeat of yet another rather tepid public performance, there’s lots of media buzz this week that “Obama is back!”, because of one or two speeches he gave recently. For example, here are the opening lines from an email blast just sent from the folks at “Dear MoveOn Member: Remember what it felt like to watch Barack Obama back when he was Candidate Obama? Seeing him fired up and ready to go in front of a crowd of 20,000? Well, as of this week, that Obama's back. On Wednesday, he gave a feisty, tough speech that showed just how irresponsible Republicans have been, how crazy it'd be to give them back control of Congress this fall, and what he proposes to do to get our economy back on track.”

You know, this whole concept just infuriates me beyond belief. Let’s just take the best case scenario here, to start with. Let’s just say that over the last two years Barack O’Bambi was too nice a guy, too committed to changing the bitter partisanship in Washington, too much a believer in the healing powers of his own magical self. That is the best case scenario – the most generous interpretation of this failed presidency – and even that is enough to disgust me to the bone. Sorry, but I don’t want a president that shockingly naive.

Our national problem isn’t that we honorably disagree over two equally respectable philosophies of governance and therefore don’t get along because we’re all such good citizens that our passionate commitment to the public weal as we each see it best pursued leads us to be occasionally intemperate. No. Our problem is that there is a group of elite raptors who are seeking to vacuum every ounce of wealth out of the pockets of the other 99 percent of us and scoop it into their own pockets instead, and that they’ve employed a set of politician stooges who have in the last several decades jettisoned all meaningful behavioral limitations on what they’re willing to do to achieve those ends. In that sense, the idea of some religious crackpot cracker in Florida burning the Koran isn’t some bizarre anomaly. It is, instead, precisely the logical outcome of a set of politics in which you have “mainstream” members of Congress challenging the president’s very nationality and his religion, calling him a socialist, and accusing him of legislating death panels to kill grannies. It is precisely what we should expect to have happened. It is precisely the product of three decades of Atwater/Gingrich/Rove style politics.

These (alleged) people cannot be negotiated with, because they are not interested in public policy-making that is in the national interest. That’s not their mission, and only a naive fool or someone who had spent the last thirty years underground excavating the seventh moon of Jupiter would fail to understand that. Changing the tone in Washington – which, in any case, is always a far secondary aspiration relative to getting people jobs, protecting the environment, ending criminal wars, and so on – simply will never happen until all the bomb-throwers and barrier-builders in Congress are driven from the temple, and until political aspirants across the land get the message that whatever form of McCarthyism du jour they are contemplating employing in order to get elected will cost them more votes than it will gain them. Neville Chamberlain is almost universally despised and derided today for trying to negotiate with Hitler. Which part of that lesson do you not get, Barack?

But, of course, this is only the most charitable interpretation of how Obama’s presidency might be explained. The second-to-the-worst-case scenario is that he has exactly the same masters as Republicans do, but is simply a bit nicer fellow than they are in terms of implementing their common plutocratic objectives.

Which leaves the very-worst-case scenario, being the same oligarchy-serving Obama just described, with the added bonus of a boundless cynicism. This Obama governs in the interest of the overclass, but shows up on your television set three months before every election talking like some sort of progressive champion of the people.

I suspect that’s what we’re looking at right now, and it makes my eyes bleed. Like many progressives, I feel duped by the Obama of 2008. (I know there are many other lefties out there who think that any of us were fools to believe that Obama might have done great things as president, but I think those folks were wrong to assume that. I’m quite sure they would have said at least as much in 1932 about the theretofore aristocratic, safely uncontroversial and careerist Franklin Roosevelt. But look how that turned out. FDR became a “traitor to his class” and turned crises into great progressive achievements. LBJ – a Texan, for chrissakes – did much the same during his at-bat. Obama had at least as much potential to join that club.)

I’m furious enough at Obama for squandering opportunity, for taking care of the privileged and allowing the rest of us to suffer, for reviving the monsters of the right instead of finishing the job of crushing them, and for setting back the cause of policies and ideas I care passionately about. But it adds massive insult to injury for him to turn around and come, hat in hand, back to the people who put him into office, singing his populist song right before an election.

Maybe he’s even sincere. Maybe even slow-learning Obama has truly learned a lesson and turned a corner. Maybe. But how do I and tens of millions of people like me know that? How do we know that if we were to drag our weary butts to the voting booth to endorse his party again, that Progressive Barack won’t bait and switch us once more, disappearing for another two years in favor of Corporate Obama, only to resurface just in time for the next election?

Screw that. I’m way too pissed off to take the remotest chance of that happening. The irony of Obama is that nothing has so distanced me from the Democratic Party than the great socialist himself. Even another John Kerry-style yawner in 2008 would have done far less damage to my nearly non-existent affections for the party at that point. Let’s face it – among progressives, the Democrats had been living off of a combination of reputational inertia and the endless insanities of the alternative Republicans for three or four decades leading up to the last election. However, because Obama was no ordinary politician engaged in ordinary, cheap campaign rhetoric, because he came to office at a time of crisis – thus opening the door to more serious reforms than would otherwise be possible – and because the right had so badly repudiated their own politics, I believed there was a real chance this time could be different, just as it was under LBJ and FDR.

And there was, indeed, a real chance. It’s just that Obama booted it. The result has been disastrous all around. I know I speak for many in saying that I can’t imagine ever trusting him with my vote again. I don’t even expect to vote Democratic again in my lifetime. The exception would be if the left were to do what the far right has done to the GOP – namely, hijack the party. That might happen, but I don’t it see it on the horizon right now, that’s for sure.

As for Obama, it’s hard to imagine any way in which he has not sealed his fate as a one-term president, and one of the great failures in that high office. He’s the James Buchanan of our time – the milquetoast who faced great crises but brought only tepid, conventional, status quo and restrained solutions to the table. He has failed, just as Buchanan failed, and he will likely therefore join Buchanan on the list of the lousiest presidents.

Obama is going to get whacked hard in November, and this election will be a more personal repudiation of the president than are most mid-terms. It will be widely seen as his loss more than the party’s. He will have three choices at that point. He can make little strategic change and keep his existing politics. But the pressures from within and without to alter course will be too enormous for that to be likely.

Second, he can turn to the left and become truly the people’s president. Despite the fact that this is the only real possibility for salvation (though he probably doesn’t even have time for that anymore), he is extremely unlikely to do so, not least because the election will be falsely but nearly unanimously read as a wholesale repudiation of Obama’s already ‘socialist’ tendencies. A turn to the left would be loudly and endlessly trumpeted by the right as spitting in the public’s eye. And since Democrats never, ever, argue back, that narrative will carry the day, just as the socialist narrative has ludicrously carried the day so far.

The last option will be to turn to the right, as Clinton did, and hope that in 2012 he can convince grumbling voters that the GOP nominee is slightly more insane than he has been anemic. I have little doubt that this is the direction he will go.

Unlike Clinton in the 1990s, however, he is unlikely to have an economic boom that could allow people to forget politics and vote for incumbents. My guess is that current unemployment levels will not abate in the coming two years. Indeed, because the half-baked stimulus of 2009 is now about out of gas, there is a very real chance that things will get worse. Nothing kills a presidency like recession. But add to that slow drip decline the endless GOP investigations of bogus administration scandals you’ll be seeing on a television set near you starting next January, and you can stick a fork in this president.

That’s all well and good and completely just, as far as I’m concerned. I’d relish doing the sticking myself, actually. It’s just that – and I hope here that the president can pardon another eruption of my silly tendency toward civic responsibility that occasionally gets the better of me – it’s a disaster for America and for the world.

Maybe if Barack dreams energetically enough, though, it doesn’t have to happen.

Maybe if he just dreams that he has a chance to be one of the great figures in American history because he inherited great crises requiring profound solutions, it will come to pass.

Oh, wait a minute. That dream already did come true.

Only he turned his dream opportunity into a nightmare by showing up for the war armed with a cap gun.

Saturday, September 11, 2010

Fear Itself

By Bill Quigley

07 September, 2010

Since September 11, 2001, fear has been the main engine of change in the United States. Who would have thought that across the US, where people boast that it is the home of the free and the land of the brave, people would gladly surrender their freedom and liberty because they so fear terrorism?

Who would have thought that the US would allow, much less pay for, the National Security Agency to intercept and store 1.7 billion emails, phone calls and other communications – every single day – and pay for 30,000 people to listen in on phone conversations in the name of fighting the fear of terrorism?

Who would have thought that people across New York City, where people are proud of their diversity, would fear construction of a mosque and community center downtown?

Who would have thought that people across the US, where people argue that they helped bring down the wall that separated East and West Germany, would so fear their neighbors to the South that they support construction of a wall of separation with Mexico?

Who would have thought that some of the highest lawyers in the land would write memos illegally authorizing the torture of people in the name of making the US safe?

Who would have thought that Democrats would compete with Republicans to try to keep the globally shameful Guantanamo prison open so that people inside the US
would not have to fear having living near prisons with alleged terrorists in them?

Who would have thought that people in New York City, a place where people admire their own toughness, would fear having criminal trials of alleged terrorists in their city?

Who would have thought that in the US, where people take pride in the constitutional independence of the judiciary, those judges would turn down the case of Maher Arar, who was captured in the US and flown out to a Syrian prison to be tortured, because they fear that even looking at the case would interfere with national security?

Who would have thought that the people of the US would fear to have Uighurs, members of persecuted ethnic minority who struggled for their freedoms against China, allowed to live even temporarily in the US?

Who would have thought that the people of the US would so fear the possibility of the Taliban ruling Afghanistan and the false possibility of weapons of mass destruction in Iraq, that we would send our sons and daughters to die by the thousands in Iraq and Afghanistan?

Who would have thought that there once was a US president who said “the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance…”?

You tell me what happened to the land of the free and the home of the brave since September 11, 2001.

Bill is Legal Director of the Center for Constitutional Rights and law professor at Loyola University New Orleans. He can be reached at

Friday, September 10, 2010

Predicting Decline

From the website Seeking Alpha, this devastating commentary:

Six months ago, very few mainstream economists or economic commentators were willing to accept the existence of conditions that typically imply recession or even depression. Today, we are seeing a significant number, but still in the minority, of the best and brightest of our economists predicting conditions that typically lead to recession and even depression.

I view Bloomberg as the most serious of the national TV commentators on economics and markets. They have shifted from virtually no pessimistic talk six months ago to now about 30% predicting bad things coming. Take the economic papers delivered at Jackson Hole with the Fed last week. There is a marked change in attitude. However, a change in consensus attitude does not mean we have a consensus that a depression is coming.

The conditions that are indicative of recession or depression include 1) a looming financial crisis for banks with real estate loans, 2) deflation, 3) the futility of the country to have government print the money to spend our way out with stimulus, 4) a growing consensus (at least in a considerable number of Republicans and fiscally conservative Democrats) that the country can not afford to pump more debt onto the national balance sheet.

However, it makes sense to look at the the indicators mentioned above to see where we are going.

1.Housing Collapse. The housing market will be declining significantly in the next year or two. There will be increasing unemployment and we should soon pass again the 10% number of unemployed. There is not, and will not be, the earning power for the current debtors to pay their mortgage loans. Banks and other indirect lenders such as holders of CLOs (Collateralized Loan Obligations) will experience a substantial loss of value due to the coming reduction of housing prices and the related non payment of mortgage loans. Most banks are holding properties off the market and not marking these assets to market, creating a false impression of solvency. We are on the verge of massive bankruptcies such as Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). The rate of falling house prices will accelerate rapidly in the next two years. Defaults will grow rapidly during the next two years. It is conceivable that it will be 6 years for the downturn to play itself out.
2.Deflation. Banks face the major losses on these mortgage portfolios. The amount that will be lost will be so great that this becomes the major driver for the coming deflation. (Full understanding of this argument requires one to understand that write-offs of bank credit have the practical result of reducing the money supply which in turn causes the deflation. For further explanation of this, see Robert Barbera´s book The Cost of Capitalism.) Then, of course, there will be even less jobs and less consumer spending which will become a self enforcing driver of the economy to the downside. The conventional argument is that stimulus can offset this market decline. However, there are coming losses of many trillions invested in the housing market and government stimulus can only cover a few trillions. There is no practical capacity for the government to offset the magnitude of decline in the money supply that is coming, which makes deflation inevitable.
3.Stimulus. The government and the optimists hope that stimulus can provide a solution here. First, as stated in the point above, there is not nearly enough money creation capability in the Fed to offset the enormous losses coming to the economy, and therefore the reduction in the money supply. Additionally, the Fed gun is essentially empty. You cannot make lending rates negative, and we are already essentially at zero. You can buy bonds and drive down longer term rates, but this will back fire. It is not helping to create employment. It is only funding many buyouts at ridiculously low costs of funding. Almost all of these buyouts inevitably lead to employee reductions by the new owners, thereby reducing employment. Thus the Fed measure of putting up low cost money into the market will now cause reductions in employment not increases in employment. In short, there is nothing we can do that we can do that we have not already tried and failed. This author has reported in prior articles over the last several years that stimulus does not work at the end of the economic cycle. At the end of the economic cycle, there are not good investments to be made in de novo business which generate employment. The money ends up going for financial transactions (.i.e. buying other businesses). Stimulus only works at the beginning and middle of the economic cycle, where it is rarely used. As we observe objectively the results of stimulus, this truth can be empirically verified; specifically, the stimulus money is not used for new investments that create jobs. The apologists for the stimulus say thousands of teachers have jobs that they otherwise would not have. It is true that some teachers have jobs because of the stimulus, but the fact remains that net employment is down very substantially. The government can not directly employ all those who need jobs. Furthermore, employment will decline further in the next several years because the general economy will be declining.
4.Deficits and Debt must be reduced. Now we have a growing number of people who do not believe stimulus works and that the country can not afford adding to the national debt. Ironically, whether we try more stimulus or not, the results will be the same. Deflation. More stimulus now may delay for a year or so the inevitable truth, but it has the bad effect of making the resolution of the problem even more costly. No stimulus means the economy will take its natural course which is down. History will say we had a housing bubble peaking in 2006, which required a nationwide bank bailout in 2008 by the national government, which leads in 2010/2012 to growing recognition that the country is not very solvent, leading to a great increase in interest rates in 2011/2014 to permit the US government to continue to sell its paper. Long term bond holders will experience enormous losses caused by the increase in interest rates. The loss of bond principal values caused by the increase in interest rates and the increased cost of funding business and mortgages will be the capstone to the coming depression
We have witnessed in the last 6 months a growing concern over the future. By 2012, we will have clear evidence in the markets of the fact that we are in recession, or more likely depression.

Disclosure: This writer has put his money where his mouth is. He has substantial short positions. Short the ESU 10 future and long the inverse ETFs for SKF and SDS.
About the author: James Wood James F. Wood is a retired Country Manager for Citibank in three Latin American countries. Nearing 70, James is now devoted to analyzing markets and where our economy is going. He believes that the next few years will be some of the toughest we have had since the Depression which started in 1929.

Wednesday, September 8, 2010

National Nightmare

Our Long National Nightmare Isn't Over, It's Just Beginning

by David Michael Green

In the 1930s, the only thing we had to fear was fear, itself.

Today, the main thing we have to fear is us, ourselves.

Looking out over the horizon, I'm starting to wonder just how many shades of dark there are on the pallette. Lately, I get the feeling that we're about to find out.

I wish I could say that this society did our best to fight our demons, but that the odds were simply insurmountable. You know. Like we were just sitting there by ourselves on our remote little Pacific island, a thousand years before telephones and radar when - bang - the tsunami hit, no fault of our own. And we bravely struggled heroically, doing our mightiest to save as many lives as we could.

I mean, if you've got to crash and burn, better to go down with a little dignity and honor, eh?

But, no, not for me, apparently. I'm an American. I live in a country - nay, an empire! - that insists on destroying itself. I'm part of the generation of decline. My people are the fools who perfected the fine art of committing suicide by stupidity.

It's an astonishing act, and one of wide participation.

The nightmare of the right in America edges increasingly close to dragging the country past the point of no return, over the cliff of violent implosion. At this point, there is already little that is missing save the jackboots and broken glass.

The Republican Party was once a moderately conservative, pro-business outfit, until it was highjacked by the oligarchy and turned into a full-on predatory machine, hiding behind the facade of hate mobilizing issues like bogus overseas threats abroad and uppity brown people and demanding women at home. Basically, any way that middle class white males could be distracted from their sinking economic status - through the diversion of a sense of superiority over others, or the supposed threat to that superior status - was employed to cover for a party whose true agenda was to quietly produce the greatest transfer of wealth in all of human history.

Having succeeded dramatically, they are back at it again. It is now transparent, for anyone who cares to look, that the ugly tea party movement in America is an invention of the Koch brothers, Rupert Murdoch, Dick Armey and their sick ilk, once again mobilizing a boatload of fools who are angry, but too stupid to know quite why. This explains their endless rhetoric about the evils of the federal government, and their simultaneous desire to keep their Social Security and Medicare benies. It also explains their unmatched idiocy in serving as tools for their own destruction. If they succeed, they fail. If they get their champions elected, they lose their government-provided (Shhhh!) goodies. Brilliant.

In any case, the takeover of the GOP by Serious Money is now well into its second stage. Just when you thought it couldn't get any worse, it is. Seriously, what is the next step after this one fails to provide any long-term solutions to what ails America, as most assuredly will be the case? For a decade or three now, regressives in America have been showing that they are capable of anything. Which more or less answers that question, doesn't it? If you're willing to savage military icons like John McCain, Max Cleland and John Kerry in order to win elections - and especially after you get away with it every time - you're willing to do anything. If you're willing to mock the 9/11 widows as scheming opportunists, you're willing to do anything. If you're willing to don a tuxedo and joke about missing WMD at a press banquet in Washington, just as you're telling the American military's adversaries in Iraq to "bring it on", you're willing to do anything.

Looking at the rhetoric the right throws in the direction of our president these days, questioning his very nationality (oh, did I mention that he's black?), it's easy to see that they‘ve gone completely over the line. But what's really out of control is what lies underneath this insanity generated for the consumption of an ignorant hoi polloi. And what that is - what you see when you move the slime-infested rock away - is an unfathomably monstrous greed. Watching these folks in action, you could easily get the impression that they had been impoverished their whole lives. That they had been denied everything, right down to food and water. That they had been deprived through poverty especially of their dignity. You know, like the real poor people of this world, the forty or fifty percent of the Earth's population that survives on less than two dollars per day. Those folks.

Instead, we are talking about people who are already fantastically rich. And who, despite this, are absolutely hell-bent on getting richer, even if that means depriving hundreds of millions of people in the American middle class of their middle classness, and in many cases, ultimately of their lives. How do we explain people like this? Are they not essentially sociopathic? Are they not made of essentially the same stuff as those who can kill without guilt or remorse? Especially when you consider that even the greediest among us reach a limit beyond which one can effectively make use of the next dollar and the one beyond that, so that pushing others into poverty is no longer even for purposes of your own benefit, but instead for some kind of sick sport? Aren't these the characters whose essential sickness preachers and philosophers and shrinks have been trying to sort out for millennia?

Whatever the explanation for such illness, the effects of their efforts are certainly plain to see. We're talking here about a class of Americans who have been essentially offended by the diminishment of inequality produced in America during the middle part of the twentieth century, due to the national policies ranging from the New Deal to the Great Society, Republican administrations included. America's socio-economic structure changed dramatically during that time, and almost entirely for the better. A huge middle class that had never existed before came into being. Anti-poverty programs took the worst sting out of living conditions for the poor. And America became the greatest economic dynamo since the Roman Empire. Meanwhile, by the way, the rich remained very, very rich.

But that was not enough. So they have made a concerted effort over the last generation or so to revert the country back to the bad old days of Herbert Hoover and Calvin Coolidge. Think about that for a second. What sort of elevated sickness, what sort parental deprivation in childhood, what sort of total absence of conscience and consciousness is required to produce a group of people with that mentality?

I wish I knew. But I do know that their plan worked. As Robert Kuttner notes in The American Prospect: "For more than three decades, the wages of American workers have been close to flat while economic insecurity has risen massively. Although the productivity of the U.S. economy has doubled in a generation, most of those gains have not been captured by workers. And in the decade that began in 2001, inflation-adjusted wages have fallen for all but the most affluent 3 percent of the population.

"This pattern of deepening inequality was well entrenched before the financial collapse - which only made things worse. In 2006, economists at Goldman Sachs, sounding almost Marxian, reported that ‘the most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income.' By 2006, wages as a percentage of gross domestic product were already at their lowest share - 45 percent - since government began keeping statistics in 1947. In the past three years, the decline in worker earnings has only intensified, as worker bargaining power has been undermined by very high unemployment. As the economy has stumbled toward a feeble recovery, corporate profits and executive bonuses have rebounded smartly, but salaries and wages have not.

"In the 1940s, 1950s, and 1960s, wages and productivity moved upward in lockstep. Beginning in the 1970s, as government regulation of labor conditions faltered, trade with nations that exploited their own workers increased, and corporations declared open war on unions, the lines diverged. Productivity kept increasing, while median wages were nearly flat."

This is the successful agenda of the right in America, though it has been cleverly masked by the politics of resentment. This has been the real ‘class warfare' in the United States these last decades - not, as pouncing regressives instantly scream out in an effort to silence truth, the very occasional and even more feeble attempts by the odd Democratic politician who slips up and mentions what has actually happened. And, as Warren Buffett is honest enough to point out, the war is over and his side won. As Robert Reich noted in a recent New York Times op-ed, the richest one percent of Americans have gone from taking in nine percent of the total national income right before the Reagan era began, to nearly one-fourth of it today. As Reich also reminds us, the last time this happened was in 1928. I would rush to say, "Hey, remember how that one turned out?", but it's pretty unnecessary to crack the history books for that reference, since we're now living it. As just about the stupidest society that ever was, we've decided to get together to explore the fun and exciting question, "What would happen if America had a devastating economic downturn once again, boys and girls?!?!"

There is one big difference between today and the 1930s, however. Once there was a political party in America - the one that did the New Deal and the Great Society - that stood up a bit for the middle class and the poor. But Bill Clinton and Barack Obama have led the Democrats down a different path. Now the party stands for a slightly weaker version of the GOP's plutocracy protection service. And, seemingly, for getting its face bitch-slapped bright red at every possible juncture. Both aspects of the New Democrats are a puzzle, but particularly the latter. What sort of psychology of the self-loathing explains how a Clinton or an Obama can be so passive, even when getting handed their heads by the most scurrilous of creeps on the political landscape, pieces of (allegedly) human garbage who could be destroyed with the slightest show of self-defense, let alone a wee assertion of political courage?

The current White House is such a failure that I am sometimes left scratching my head in understanding why that is the case. The puzzle becomes especially acute if one considers how transparently intelligent Barack Obama is, and how strategically clever they were in running their presidential campaign. It's true, of course, that there are different kinds of smart. Jimmy Carter understood nuclear physics, but not the presidency. George W. Bush understood the presidency, but was otherwise as intellectually vacuous as a mud pie. Still, Obama has shown serious evidence that he has keen political smarts. Until he became president, that is.

One obvious explanation for this puzzle is that the guy, like Clinton before him, is just another flavor of corporate tool. Ya got yer Republican Wall Street marionettes, see, and ya got yer Democratic Wall Street marionettes... That much is clear, but it still doesn't explain why this White House has been as inept as it has. Another claim that some people make is that he just wants one term, and will take the money and prestige and run. The problem with that theory is that he already had the money. And, quite arguably, he could have done better financially by simply writing a third book than by sitting in the Oval Office earning a mere half mil per year. What is absolutely clear, unless there is some radical and nearly unimaginable change of course, is that he will leave the presidency as one of history's great losers, which again suggests to me that he would have been better off just sitting it out. Not to mention all the stress and ever-present death threats he could avoid by just hanging on the sidelines.

Whatever the explanation, the effect could not be clearer. Obama came into his presidency with more wind in his sails than perhaps anyone since Johnson in 1964, and this for a black man with an Islamic name, no less. He then blew it, utterly and completely. The indications of this are everywhere, starting with all the subsequent by-elections which he has turned into ‘bye' elections for candidates from his party. Meanwhile, there are Democrats running for Congress today who are literally running TV ads dissing Barack Obama and Nancy Pelosi. And even those who are not mostly don't want the president showing up in their districts before this election.

Now the latest polls are showing Republicans with a ten percent lead in generic congressional ballots. This is the biggest they've ever had in the 68 year history of polling. Meanwhile, half of Republican voters are enthusiastic about voting this November, while only one-fourth of Democrats are. On top of everything else, Republicans are doing this well despite offering nothing in terms of a plan for solving the problems that are upsetting voters. They will cut taxes on the rich. That's it. The entirety of the rest of what they stand for is simply "NO!!!" to all things Demon Obama.

Now, think about this for a second, and bear in mind that when it comes to the GOP we are talking about a political party that the very same polls show voters still hating. How astonishingly inept do you have to be to turn the world upside down on its axis and hand not only resurrection but in fact control of Congress to such thugs, and hugely despised ones at that? What kind of a full-blown multiple-car crash of a politician do you have to be to make the party of Bush, Cheney, Boehner and McConnell seem preferable to the public, by a wide margin?

Wait. Don't answer yet. It gets worse from there. In 2003, the ratio of Democratic to Republican identifying/leaning voters was about 50 to 40 among young voters, known as the Millennial generation. By 2008, via a combination of the effects of both George W. Bush and (candidate) Barack Obama, that ratio had moved an astonishing distance to provide a whopping gap of 62 to 30. Now, less than two years into the rule of Mr. We Are The Ones We've Been Waiting For, it is back to 54 to 40. These are incredible swings in identities that are usually far more stable. And they are incredibly important, because there is good evidence to suggest that voters who select a given party over a series of elections in the early part of their lives wind up keeping that party ID for life. In other words, Democrats had an opportunity here to lock in with an entire generation of voters a hugely disproportionate preference to continue voting for them. Imagine the difference this would have made in elections for the next seventy(!) years, especially over time as these Millennials replaced older, more conservative, voters in the electorate, and as they themselves came to turn out in larger proportion each election cycle, as every generation does when it ages. Democrats could have come close to locking up control of American government for the coming half-century, just as they essentially did after 1932. Instead, the party's leaders have alienated this generation so much that they have returned the identification numbers to the period when George Bush and his party were highly popular. That's a real achievement, folks.

Dan Pfeiffer, Obama's communications director, recently averred that "The public is rightly frustrated and angry with the economy". So far so good, Dan. Very perceptive for a guy in the Obama White House. You should have stopped there, though. Instead, Dan went on to say that, "There is no small tactical shift we could have made at any point that would have solved that problem". You know, I don't really know who Dan Pfeiffer is, but I would say that anyone making this claim should be removed from office, and fast. Indeed, right now I would say that anyone who has the title of Obama's communications director should probably just be taken out back and shot, on account of gross incompetence and lethal negligence. I'm sorry, but these fools are so clueless. This could have turned out so differently, and, moreover, that was obvious in January of 2009 to anyone who had paid attention to American politics for the last thirty years. This White House was not praiseworthy for seeking to be bipartisan. Rather, it was embarrassing for not even knowing who its enemies were.

The worst, though, is what is to come. Obama and the Democrats will get slaughtered in November. This will happen not so much because of the socialist crimes they are alleged by the right to have committed - which are of course utter nonsense - but simply because of what they have not done, which is to solve the country's problems. Yet, because of the socialist, big-spending, freedom-crushing narrative that regressives have successfully fomented and that the administration (including - Hello! - paging COMMUNICATIONS DIRECTOR DAN PFEIFFER!!) has been completely inept about countering, and because the other post-election option of actually getting it right would appear to be (and would be vociferously made to appear to be, by Republicans) an act of spiteful spitting in the public's eye, the administration will have no option after the election but to tack yet further to the right in the ensuing two years.

That will be disastrous for Obama, for Democrats and for the country. (I could care less about the first two, who deserve it, and frankly I'm leaning that same way for number three on the list as well.) Like Clinton before him, Obama will try to placate voters and Republican monsters with their sponsoring oligarchy by moving to the right. Of course, there is absolutely nothing there except tax cuts for the wealthy (he is already proposing tax cuts for the bottom 98 percent). The Republicans have no other solutions for the economy (or anything else, for that matter), though these dam-busting boondoggles for the fiscally obese are, of course, no solution either. And, like Clinton before him, Obama will be relentlessly hounded by congressional investigations into every manner of bogus scandal that the fevered minds of the closeted perverts on the right can dream up to keep the administration reeling.

Unlike Clinton, however, there will be one big difference. I often said, back in the day, that the only thing that kept the American public from immolating Wild Bill, and the only thing that kept the Senate from convicting him in his impeachment trial, was that the economy was jumping at the time and Americans were therefore fat, dumb and happy. Today, however, they're merely fat and dumb, and even the fat part isn't a good thing in this case. The public could not possibly be more surly - apart that is, from how surly they'll be in a year or two. Obama has been as idiotic a president as could be created if you sat down with the intention of making one, and they will be happy to watch him get savaged him when they have a chance. By bringing timidity and compromise with criminals to bear against multiple severe crises, and by refusing to fight for anything, he has launched a vicious cycle that is sucking him inexorably down, and us with him: He fails to solve the problems, the public gets angry and frustrated, his party loses elections, the right accuses him of everything from being a socialist to a fascist, he says nothing in response, the public gets angrier and more frustrated, his party loses more elections, they are then even more unable to govern than before, the public is about to explode in anger and frustration, he moves to the right and thereby offers even less of a solution to these crises than the non-solutions already on display, and ... so on. And so on, again. Rinse and repeat.

Obama and the rest of the cowardly and corrupt members of his party have guaranteed their own destruction, that's for sure, but that is likely the least unkind thing that history will say about them. If we think about where this all goes next, it becomes clear what these shallow punks are trading away for their pathetic self-interest and unwillingness to fight against treasonous criminals. Democrats will be smashed in the next two elections, and the right will gain full control of the government and full responsibility for the state of the country. At that point, Republicans will have to put up or shut up. Since they will have no remotely viable way to solve the problems people face - since, indeed, their real mission is to make those problems worse, because that is necessary to further enrich their sponsors - they will reach for ever greater means of distraction to keep the public's attention elsewhere. All I can say is, "Watch out, third world countries everywhere".

We know what these people are capable of, though Cheneyism has only hinted at how bad it could ultimately get.

History will record - if there are historians left to record it - that this was a moment of monsters, cowards and indolents: those being the right, the supposed left, and the public, respectively.

It's the worst of all worlds, and the combination is likely to be catastrophic.

Given the magnitude of the crises we face and the ability of those who would govern us - and those who would be governed by them - to do anything whatsoever in pursuit of their own, narrow, short-term interest, it could well be far worse than catastrophic.

It could be entirely lethal.
David Michael Green is a professor of political science at Hofstra University in New York. He is delighted to receive readers' reactions to his articles ( [1]), but regrets that time constraints do not always allow him to respond. More of his work can be found at his website, [2].