Saturday, December 4, 2010

Banks Versus People

By Peter S Goodman at the Huffington Post this article highlighting the reality of the end of unemployment benefits for two million Americans this Christmas. The funny thing to me is that we somehow expect government to create private sector jobs and no one is holding the private sector's feet to the fire. From CNN Money:

The nation's engine of job growth is revving up: small businesses were responsible for 58% of the private sector hiring in November, according to a report released Wednesday.

Private sector employers added 93,000 jobs overall last month, and businesses with fewer than 50 employees added 54,000 of those jobs, far outdoing their larger counterparts, according to payroll processor Automatic Data Processing.

Employment from large businesses, defined as those with 500 or more workers, increased by 2,000. Medium-size businesses, defined as those with between 50 and 499 workers, increased by 37,000.

We have bailed out Chrysler and GM and that bail out is working apparently. We bail out the banks and that money has gone down a rat hole. Globalization makes it more profitable to move work to foreign countries- not just profitable but more profitable, so our neighbors at home face permanent unemployment. In the face of all this the blessed private sector, the free market economy responds by, increasing profits and staying totally mum about why they aren't hiring Americans to do real work (as opposed to those of us working for government who don't apparently do real work). A whole 93,000 got jobs versus 15 million officially unemployed? And growing. The unemployed and underemployed is around 23%. Might as well blame the "very urban Obama" as described by the racist Republican Representative from Iowa, Peter Scott. God forbid we should ever question the sainted private enterprise.

In Washington, the agenda has long since moved on from bailing out megabanks to figuring out how to stop paying for things that regular people need -- luxuries like health care, retirement benefits and unemployment insurance.

In the suburbs of Denver, Anthony Roebuck and his family find themselves confronting an action list that seems cruelly divorced from the proceedings in the nation's capital: They have to figure out how to keep the heat on through the Colorado winter now that his unemployment check has run out.

The latest extension of emergency unemployment benefits expired on Tuesday, as a dysfunctional Congress let the deadline go without striking a deal to keep the money flowing. That put Roebuck -- who drew his last check on Monday -- among the two million or so unemployed Americans facing the imminent loss of their benefits between now and the end of the year.

A sheet metal worker by trade, Roebuck, 44, is accustomed to earning his own way through the force of his hands. Since May, he and his family have subsisted on his wife's paycheck from her job as a university administrator, plus a nearly $500 weekly unemployment check.

They slashed away at their grocery bill, cutting out non-essentials such as the fried snacks favored by his 15-year-old son. They traded in their late-model Jeep Cherokee for an elderly Dodge sedan. They quit going to church on Sunday to save the gas money required to get there.

Now, the math is set to get uglier still, as they contemplate how to run the household minus his unemployment check -- a situation that seems not only impossible but also unfair.

How could there have been so many billions for Wall Street, so much room to lower taxes for people with golf memberships and country houses, yet a $500-a-week check to help him pay the rent while he looks for another job suddenly threatens to bankrupt the nation?

"It's like a gut shot," he says. "I get really upset when I think about it. I have to watch my words or I'm liable to get profane."

Perhaps even more disturbing than the callousness governing the political process is how so many powerful people in Washington are now competing to take credit for depriving the economy of meaningful relief. In the political calculus of the moment, exacerbating the troubles of the most vulnerable has become a pragmatic way to curry favor.

Republicans in Congress have held up the extension of unemployment benefits and are also demanding an extension of the tax cuts President George W. Bush handed out to the wealthiest Americans. They are selling this as a stand against fiscally reckless spending and oversized government -- a form of pandering that poses dire consequences to the economy.

Unlike wealthy people handed tax cuts, laid-off workers receiving unemployment checks tend to inject nearly all of that money directly into the economy, leaving their dollars at the local supermarket, the hardware store, and the auto repair shop, supporting jobs for people who work at those places. Cutting off those checks deprives the economy of cash just as the market is showing tentative signs of improvement.

Meanwhile, the Obama administration has become so captive to the budget-cutting-as-progress mantra ruling Washington that it is taking a victory lap for diminishing the costs of the federal bailouts -- even as the savings come at the direct expense of the only piece of its rescue package that was designed to aid regular people: its anti-foreclosure program.

Earlier this week, the non-partisan Congressional Budget Office released an analysis showing that the administration would spend only about $12 billion of the $50 billion that had been dedicated under the primary bailout funds for its signature anti-foreclosure program. This, even as the foreclosure crisis shows no sign of abating.

When President Obama announced the program amid great fanfare early last year, he declared that help was on the way for somewhere between three to four million American homeowners who would now be given a chance to lower their monthly payments. But through October, fewer than 500,000 distressed homeowners were making lower payments under the program.

The reasons for this abysmal record are many: From its inception, the program has been a fiasco.

The giant banks that send out monthly mortgage bills and collect the money for the investors who generally own the notes have repeatedly lost documents sent in by applicants seeking relief. They have forced troubled homeowners to endure interminable stints on hold, waiting to be handed the latest conflicting instruction from another bank representative.

They have been told that the good people at Bank of America or J.P. Morgan Chase -- to pick on two giants -- would love to give them a break, but the greedy investors who own their mortgages will not go along, even though the opposite is often true: The clueless investors, who would be better served by loan alterations that cut their losses, are kept in the dark while the big banks drag out the foreclosure process, capturing fees by funneling orders for fresh appraisals and title searches that they funnel through their own subsidiaries.

And even the supposed success stories-- the homeowners who have navigated through the rat's nest of ineptitude and deceit to come out with loan modifications -- do not represent a fix to the fundamental problem. Lower payments have come through lowering interest rates and extending the life of the loans, not by writing down the size of the outstanding balances. With millions of people now owing more to the bank than their homes are worth, many have given up and stopped mailing checks to their lender.

Many housing experts have argued that the only effective way to curb foreclosures would be to force the mortgage companies to write down loan balances. But the Obama administration, led by Treasury Secretary Timothy Geithner, has consistently shot down the idea of forcing the banks to swallow write-downs, because someone would have to pay the costs. Perhaps the banks, perhaps the taxpayer, and probably both.

"This is a conscious choice we made, not to start with principal reduction," Geithner said late last year, while testifying before a panel convened by Congress to keep tabs on the federal bailouts. "We thought it would be dramatically more expensive for the American taxpayer."

This, from the same man who played a leading role in putting hundreds of billions of dollars in taxpayer money on the line to rescue Wall Street.

In an interview Wednesday, Treasury's assistant secretary for financial stability, Tim Massad, said the department still planned to expend the full share of bailout funds on its anti-foreclosure effort, disputing the Congressional Budget Office's projection.

But he acknowledged that, from inception, the administration's program was limited by a reluctance to spend taxpayer funds too aggressively. He said Treasury was also confined by Congress in not being able to force mortgage companies to give homeowners relief. The result: a voluntary program that depends upon taxpayer-financed cash incentives for banks, one that has moved too slowly.

"We're not getting as many mods as we hoped," Massad said, referring to loan modifications. "But we still have two years."

These days, this seems like the only policy imperative with currency in Washington: keeping the lid on costs, and never mind the needs of a nation still grappling with the terrible effects of the recession. Abdication of responsibility has somehow become a political virtue, a sign of fiscal toughness and even moral rectitude.

This is the spirit at work in the deficit-cutting plan released Wednesday by the president's bipartisan commission, which takes aim at Social Security and Medicare spending yet still lowers tax rates.

Contrast the new austerity for retirees, laid-off workers, and homeowners facing foreclosure with the unbridled generosity lavished upon corporate American during the worst days of the financial crisis.

As the Federal Reserve on Wednesday reluctantly opened the books on how it distributed some $3.3 trillion in aid during the crisis, it became clear that the central bank was basically taking over lousy investments from all comers. Even foreign banks were able to avail themselves of the Fed's cash, selling toxic assets to the central bank at prices the market never would have paid.

Such was the necessary price of staving off the financial apocalypse that might have resulted had the wrath of the market been allowed to carry on -- this, we are told repeatedly by the people in charge. The money had to be handed out swiftly and indiscriminately. Fair enough, maybe so, but we have also been told that, eventually, the repairing of the financial system would lead to the healing of the broader economy, and then those facing foreclosure because they are out work would no longer have to worry. Then the millions of jobless people would see their lives restored.

And not only has that not happened, but each time the unfortunate human leftovers of the recession have found themselves in need of help just to keep the lights on, we are told (by the same people who spared no expense for the banks) that there is nothing left to give them. Now is the time to get serious about putting our fiscal house in order. The bailout window is closed.

Anthony Roebuck does not want a bailout. He wants a job.

He spent the summer in a state-financed training program, learning how to construct solar and wind power farms. He is willing to work in renewable energy, though those jobs pay as little as $8 an hour compared to the $23 an hour he brought home from his last position, installing heating and air conditioning systems. And still, no one wants him, knowing that he will up and leave once the higher-paying jobs come back.

He has been hitting construction sites, two and three a day, in search of work. And still he is unemployed. He was offered a possible job in Utah, but moving there would entail giving up his wife's paycheck and pulling his son out of high school.

So he is instead becoming expert in a new facet of the American experience, shuffling bills he cannot pay and hoping better days come soon.

"Until I can get to work we're going to be juggling between the light bill and the heat bill," he says. "What can be late? What can't be late? What can we skip?"


Danette said...

I'm reading Matt Taibbi's article on the Foreclosure Crisis in Rolling Stone... it's just too much. The fraud he talks about is really sickening.

And as pointed out-- no jobs. Unemployment has gone back up at a time when there are usually holiday hirings to make people feel better. And then there are the things no one talks about. For instance, my daughter's company was sold and her pay was raised. Sounds good but her commission was lowered (which was a big part of how she made her $$). She lost her PTO and her health insurance. I can get her on my insurance for $80 more each month but I make $13.99 a month and can't really afford to pay the extra healthcare but may have to. She's got asthma and a cold could mean hospitalization. Health so-called "reform" didn't help her much (except keep her eligible for my insurance until she's 26 if her company never offers healthcare in the meantime).

Conchscooter said...

The squeeze is endless and cruel. The idea that we live ina society where any of us can make our way to the top through "hard work" and all that stuff is completely out of date yet...our neighbors just don't see the gap widening the way it is.