Dean Baker: Fiddling with Fannie and Freddie Only Sets Us Up for Another Crash

Best leave the mortgage market in government control or abolish Fannie Mae and Freddie Mac entirely and let moral hazard rule

 

President Obama's announcement of his plans for a restructured mortgage market was painful for those who remember the bubble and crash. It seems as though he learned nothing from this disaster.

The key problem in the bubble years was the ability of private actors to profit by taking huge risks in issuing and securitizing bad mortgages, while handing the downside risk to taxpayers. This was the story with Countrywide, Bank of America, Goldman Sachs, Citigroup and the rest.

It was also the story with Fannie Mae and Freddie Mac in their prior incarnation, before the collapse of the bubble sent them into conservatorship. The pre-conservatorship Fannie and Freddie were run as for-profit companies. Their top executives made Wall Street-type salaries, pocketing tens of millions of dollars a year.

Taken

Under civil forfeiture, Americans who haven’t been charged with wrongdoing can be stripped of their cash, cars, and even homes. Is that all we’re losing?

by Sarah Stillman
August 12, 2013

On a bright Thursday afternoon in 2007, Jennifer Boatright, a waitress at a Houston bar-and-grill, drove with her two young sons and her boyfriend, Ron Henderson, on U.S. 59 toward Linden, Henderson’s home town, near the Texas-Louisiana border. They made the trip every April, at the first signs of spring, to walk the local wildflower trails and spend time with Henderson’s father. This year, they’d decided to buy a used car in Linden, which had plenty for sale, and so they bundled their cash savings in their car’s center console. Just after dusk, they passed a sign that read “Welcome to Tenaha: A little town with BIG Potential!”

They pulled into a mini-mart for snacks. When they returned to the highway ten minutes later, Boatright, a honey-blond “Texas redneck from Lubbock,” by her own reckoning, and Henderson, who is Latino, noticed something strange. The same police car that their eleven-year-old had admired in the mini-mart parking lot was trailing them. Near the city limits, a tall, bull-shouldered officer named Barry Washington pulled them over.

Dean Baker: Glass-Steagall Now: Because the Banks Own Washington

August 8, 2013

A bipartisan group of senators recently put forward a proposal for new Glass-Steagall legislation that would restore a strict separation between commercial banks and speculative trading. Anyone familiar with the ways of Washington knows that such legislation is badly needed. It is the only way to prevent the Wall Street gang from continuing to rip off the public and subjecting the rest of us to the risks of their speculation.

The idea of the original Glass Steagall was to create two completely distinct types of banks. On the one hand there would be the standard commercial banks with which most of us are familiar. These are the banks where people have checking and savings accounts and where they might go to take out a mortgage or small business loan.

The Horrific Specter of the "Post-Fleming Amendment" Fundamentalist Christian Military

Posted by Mikey Weinstein

From its inception, our American republic has been a melting pot among nations. Citizens originating from every region of the world, from every religious background and no religious background, and from every ethnicity have sought to make a living for themselves and their families within our borders. This cultural and ethnic alloy has only been made possible by the foundational protections established within our Constitution, its construing federal and state case law, and the subordinate laws serving to uphold it. Recently, a perversion of the sacrosanct principle of freedom of religion enshrined in the First Amendment to the United States Constitution has found its way to Congress through the evil bigotry of a repugnant Christian fundamentalist carpetbagger and Congressman by the name of John Fleming [2] (R-LA 4th).

The Constitutionally-derelict Rep. Fleming believes that any way to abridge the ability of servicemembers to express their deeply-held religious convictions somehow constitutes a conspiratorial "threat" to their rights of free speech. At first glance, his Religious Liberty Amendment [3] to the National Defense Authorization Act of 2014 would seem innocuous enough. In actual practice, however, the bill would give carte blanche to those who would wreak havoc on the morale, good order, and discipline of U.S. servicemembers who faithfully serve in the United States armed forces. What Fleming's amendment would do is add any type of "actions and speech" to the protected religious freedoms of servicemembers, thus rendering commanders all but helpless to stop potential problems until such actions or speech reach the point that they "actually harm" (a euphemistic phrase for “irreparably damage”) good order and discipline.

Paul Krugman: Phony Fear Factor

We live in a golden age of economic debunkery; fallacious doctrines have been dropping like flies. No,
monetary expansion needn’t cause hyperinflation. No, budget deficits in a depressed economy don’t cause soaring interest rates. No, slashing spending doesn’t create jobs. No, economic growth doesn’t collapse when debt exceeds 90 percent of G.D.P.

And now the latest myth bites the dust: No, “economic policy uncertainty” — created, it goes without
saying, by That Man in the White House — isn’t holding back the recovery.

I’ll get to the doctrine and its refutation in a minute. First, however, I want to recommend a very old essay that explains a great deal about the times we live in.

Secrecy Has Already Corroded Our Democracy in Real Ways

By Conor Friedersdorf

This summer, Rep. James Sensenbrenner, an author and longtime champion of the Patriot Act, emerged as one of the most concerned voices arguing that the law is being used to violate the rights of Americans. A letter the Wisconsin Republican sent to Attorney General Eric Holder singles out Section 215, the law's "business records" provision. "As the author of the Patriot Act,"  he wrote, "I am extremely disturbed by what appears to be an overbroad interpretation." He was referring to Edward Snowden's revelation that Team Obama collects data on the phone calls of almost all Americans.

Sensenbrenner began to question whether our constitutional rights are secure. "I do not believe the released FISA order is consistent with the requirements of the Patriot Act," he wrote. "How could the phone records of so many Americans be relevant to an authorized investigation?" His newfound skepticism came as a pleasant surprise to critics of the surveillance state. Two years ago, when key provisions of the Patriot Act were scheduled to sunset, Sensenbrenner proudly and unapologetically lobbied for the re-authorization of the law he helped write. Congress ought to make provisions including Section 215 permanent, he argued back then. "Section 215 of the Act allows the FISA Court to issue orders granting the government access to business records in foreign intelligence, international terrorism, and clandestine intelligence cases," he said. "The USA PATRIOT Improvement and reauthorization Act of 2005 expanded the safeguards against potential abuse of Section 215 authority, including additional Congressional oversight, procedural protections, application requirements, and judicial review."

As Our Planet Fries, Think We Are Headed for Renewable Energy? Think Again

By Michael T. Klare

August 8, 2013  |  When it comes to energy and economics in the climate-change era, nothing is what it seems.  Most of us believe (or want to believe) that the second carbon era, the Age of Oil, will soon be superseded by the Age of Renewables, just as oil had long since superseded the Age of Coal.  President Obama offered exactly this vision in a much-praised June address [4] on climate change.  True, fossil fuels will be needed a little bit longer, he indicated, but soon enough they will be overtaken by renewable forms of energy.

 

Many other experts share this view, assuring us that increased reliance on “clean” natural gas combined with expanded investments in wind and solar power will permit a smooth transition to a green energy future in which humanity will no longer be pouring carbon dioxide and other greenhouse gases into the atmosphere.  All this sounds promising indeed.  There is only one fly in the ointment: it is not, in fact, the path we are presently headed down.  The energy industry is not investing in any significant way in renewables.  Instead, it is pouring its historic profits into new fossil-fuel projects, mainly involving the exploitation of what are called “unconventional” oil and gas reserves.

Energy Markets Are Manipulated

by Washingtons Blog - August 1st, 2013, 12:00pm

Big Banks Manipulated Energy Markets In California and the Midwest … Ripping Off Tens of Millions of Dollars in 9 Months

The Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in  California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011.

As shown below, big banks have manipulated virtually every other market as well – both in the financial sector and the real economy – and broken virtually every law on the books.

Big Banks Conspiracy is destroying America

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Imagine 100 Goldman Sachs banks running America and the world. It’s happening. Forget politicians, Big Banks rule the world.

It was just a few years ago in “The Great American Bubble Machine,” a Rolling Stone feature, that Goldman was indicted by Matt Taibbi: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Detroit is Not Broke!

By Scott Baker

The on-again-off-again pending bankruptcy of what was formerly America's 4th largest city, Detroit, has been all over the news lately. In all of these stories, whether blaming the collapse of the domestic auto industry, profligate workers taking pensions, or, even closer to the truth, speculators (read: banks) who precipitated a housing collapse, and even the fact that only 53% of City property owners paid their 2011 property taxes while approximately $246.5 million in taxes and fees went uncollected for 2011, of which $131 million was due to the City - there is one glaring omission of coverage, whether Detroit is, in fact, broke. One would think that with such extensive coverage of everything from the city's crumbling infrastructure to its money-and-personnel starved police department's pathetic 10% crime-solving rate and 58-minute police department responses, that at least some research would have been given to whether Detroit is, in fact, out of money. Note; I didn't say, "whether Detroit is bankrupt." Bankruptcy is a legal finding. Being out of money is a statement of fact. There is a crucial difference, as we shall see.

Study Finds 5 Ways Conservative Media Erode Trust In Scientists

A new study shows five ways conservative media decrease trust in scientists, leading their audience to doubt climate change.

Former Fox News host Glenn Beck once declared "Do I believe scientists? No. They've lied to us about global warming." But the study, by the Yale Project on Climate Communication, concludes that it's actually the other way around: conservative media consumers don't believe in scientists, therefore they don't believe in global warming.

L.A. Story

Harold Meyerson, August 6, 2013

The Los Angeles Alliance for a New Economy: a new model for American liberalism?

Take a left as you exit the Long Beach Airport, and you’ll pass three acres of greenery named “Rosie the Riveter Park.” The park stands at the southeast corner of what had once been the mammoth Douglas Aircraft factory, where DC-3s, -4s, -5s, all the way up to -10s, were once manufactured, and where, during World War II, 43,000 workers, half of them women, built the B-17 bombers and C-47 transports that flew missions over Europe and the Pacific.

World War II and then the Cold War remade Long Beach. Federal dollars funded the Douglas factory, a new naval shipyard, and numerous defense firms. An entire city—the working-class community of Lakewood, which borders Long Beach on the north—was built to house the sudden influx of defense workers. Long Beach became and remains the second-largest city in Los Angeles County.

The Pay Is Too Damn Low

by James Surowiecki, August 12, 2013

A few weeks ago, Washington, D.C., passed a living-wage bill designed to make Walmart pay its workers a minimum of $12.50 an hour. Then President Obama called on Congress to raise the federal minimum wage (which is currently $7.25 an hour). McDonald’s was widely derided for releasing a budget to help its employees plan financially, since that only underscored how brutally hard it is to live on a McDonald’s wage. And last week fast-food workers across the country staged walkouts, calling for an increase in their pay to fifteen dollars an hour. Low-wage earners have long been the hardest workers to organize and the easiest to ignore. Now they’re front-page news.

The workers’ grievances are simple: low wages, few (if any) benefits, and little full-time work. In inflation-adjusted terms, the minimum wage, though higher than it was a decade ago, is still well below its 1968 peak (when it was worth about $10.70 an hour in today’s dollars), and it’s still poverty-level pay. To make matters worse, most fast-food and retail work is part time, and the weak job market has eroded what little bargaining power low-wage workers had: their earnings actually fell between 2009 and last year, according to the National Employment Law Project.

Obama outlines plans to dismantle Fannie Mae and Freddie Mac

President cautioned that the 'era of expecting a bailout' was over in a speech in Phoenix – the epicentre of the housing bubble

Dan Roberts in Washington
theguardian.com, Tuesday 6 August 2013 17.35 EDT

Efforts to unravel housing subsidies that fuelled the financial crash reached a milestone on Tuesday as Barack Obama said the national housing recovery was now strong enough to begin dismantling federal mortgage giants Fannie Mae and Freddie Mac.

In a speech in Phoenix, the epicentre of the housing bubble, the president outlined a series of steps he said could limit the negative impact on home buyers of scrapping these billions of dollars in loan guarantees but insisted there was no alternative if future housing bubbles were to be avoided.

Fannie and Freddie, as the two federally-created entities became known, were blamed for encouraging an era of reckless lending and were bailed out by the US government at a cost of $187bn.

ORNL research reveals new challenges for mercury cleanup

OAK RIDGE, Tenn., Aug. 5, 2013 — More forms of mercury can be converted to deadly methylmercury than previously thought, according to a study published Sunday in Nature Geoscience. The discovery provides scientists with another piece of the mercury puzzle, bringing them one step closer to understanding the challenges associated with mercury cleanup.

Earlier this year, a multidisciplinary team of researchers at Oak Ridge National Laboratory discovered two key genes that are essential for microbes to convert oxidized mercury to methylmercury, a neurotoxin that can penetrate skin and at high doses affect brain and muscle tissue, causing paralysis and brain damage.

Scientists discover key to easing aquaculture's reliance on wild-caught fish

For the first time scientists have been able to develop a completely vegetarian diet that works for marine fish raised in aquaculture, the key to making aquaculture a sustainable industry as the world's need for protein increases. "This makes aquaculture completely sustainable," said Dr. Allen Place. "The pressure on natural fisheries in terms of food fish can be relieved. We can now sustain a good protein source without harvesting fish to feed fish."

Obama Negotiates Cuts to Medicare as the Program Reaches its 48th Anniversary

Tuesday, 06 August 2013 14:16  
By Candice Bernd, Truthout | Report 

President Obama announced a new "grand bargain" for middle class job creation last week while speaking to an audience at an Amazon.com facility in Tennessee. His plan would cut corporate tax rates and create a business tax that would fund investment on infrastructure projects and education. But will the president agree to cut Medicare in a deal with Republicans? 

Congressional Republicans responded to President Obama in their own address, which heavily criticized the Affordable Care Act for stymieing businesses from hiring and suppressing work hours. 

Dean Baker: The Economy Is Awful and Larry Summers Should Not Be Fed Chair

In his recent defense of Larry Summers President Obama appeared to be badly confused about the state of the economy. This apparently leads him to believe that the country should be grateful to Larry Summers for his successes, as opposed to furious at him for his failures.

Obama’s story is that the economy was in a free fall when he took office and the program that was in large part designed by Summers helped turn it around. While it is true that the economy was in free fall, there was no reason to expect that to continue regardless of what policies were pursued. Note that in every single wealthy country the sharp drop in output at the end of 2008 and the beginning of 2009 was stopped and reversed by the end of the year. Other countries were not able to rely on the genius of Larry Summers in setting their policies.

Law to Clean Up ‘Nuisances’ Costs Innocent People Their Homes

by Isaiah Thompson, Special to ProPublica,
Aug. 5, 2013, 6:39 a.m.

When Rochelle Bing bought her modest row home on a tattered block in North Philadelphia 10 years ago, she saw it as an investment in the future for her extended family — especially for her 18 grandchildren.

Bing, 42, works full-time as a home health assistant for the elderly and disabled. In summer when school is out, her house is awash with grandkids whom Bing tends to while their parents work. And the home has been a haven in troubled times when her children needed help or a father went to jail. One of Bing’s grandchildren lives there now.

Take a Close Look at Craziness of the GOP's Attempts to Destroy Obamacare — It'll Take Your Breath Away

By Beverly Bandler

August 4, 2013  |  Norman Ornstein, celebrated political scientist and independent scholar of the conservative American Enterprise Institute, suggests that today’s Republican Party – and its nihilistic approach to the Affordable Care Act – takes one’s breath away.

 

Ornstein has noted that there are traditional and respectable ways for legislators to act toward an existing law that they disagree with – and then there is what the current Republicans are doing toward Obamacare.

As Ornstein has commented: “When a law is enacted, representatives who opposed it have some choices (which are not mutually exclusive). They can try to repeal it, which is perfectly acceptable — unless it becomes an effort at grandstanding so overdone that it detracts from other basic responsibilities of governing. They can try to amend it to make it work better — not just perfectly acceptable but desirable, if the goal is to improve a cumbersome law to work better for the betterment of the society and its people.

The more nefarious US foreign policy, the more it relies on media complicity

Americans are shielded from the ugly consequences of US military power by our journalists' self-censorship

Mark Weisbrot
theguardian.com, Monday 5 August 2013 09.30 EDT
The US still has military spending that is higher in real, inflation-adjusted terms than it was during the peak of the Reagan cold war build-up, the Vietnam war and the Korean war. We seem to be in a state of permanent warfare, and – we have recently learned – massive government spying and surveillance of our own citizens. This is despite an ever-receding threat to the actual physical security of Americans. Only 19 people have been killed by acts of terrorism in the US since 11 September 2001, and none or almost none of these was connected to foreign terrorists. Also, there are no "enemy states" that pose a significant military threat to the US – if any governments can be called "enemy states" at all.

One of the reasons for this disconnect is that most of the mass media provide a grossly distorted view of US foreign policy. It presents an American foreign policy that is far more benign and justifiable than the reality of empire that most of the world knows. In a well-researched and thoroughly documented article published by the North American Congress on Latin America (NACLA), Keane Bhatt provides an excellent case study of how this happens.

Ozone-protection treaty had climate benefits, too, study says

The global treaty that headed off destruction of earth's protective ozone layer has also prevented major disruption of global rainfall patterns, according to a new study in the Journal of Climate.

The 1987 Montreal Protocol phased out the use of chloroflourocarbons, or CFCs, a class of chemicals that destroy ozone in the stratosphere, allowing more ultraviolet radiation to reach earth's surface. Though the treaty aimed to reverse ozone losses, the new research shows that it also protected the hydroclimate. The study says the treaty prevented ozone loss from disrupting atmospheric circulation, and kept CFCs, which are greenhouse gases, from warming the atmosphere and also disrupting atmospheric circulation. Had these effects taken hold, they would have combined to shift rainfall patterns in ways beyond those that may already be happening due to rising carbon dioxide in the air.

The Big Lie Goes After Obamacare

By Christopher Flavelle 2013-08-02T16:35:51Z

Opponents of Obamacare are trying to persuade people who are eligible for subsidized health insurance not to sign up. Let's consider what makes that campaign so offensive.

The logic, explains Twila Brase, president of the Citizens' Council for Health Freedom, goes like this: Obamacare depends on state insurance exchanges to expand health coverage, and those exchanges in turn depend on a sufficient number of young and healthy people to buy coverage. So groups such as hers are telling people not to buy coverage on the exchanges, in an effort to bring the whole law tumbling down.

The Great American Do-It-Yourself Retirement Fraud, Brought to You By Big Finance & Co.

By Helaine Olen

 

August 2, 2013  |  Editor's note: This article is part of an ongoing AlterNet series, "The Age of Fraud."

“For retirement, the answer is 4-0-1-k,” proclaimed Tyler Mathisen, then editor of Money magazine in 1996. “I feel sure that someday, like a financial Little-Engine-That-Could, it will pull me over the million-dollar mountain all by itself.”

For this sentiment, and others like it, Mathisen was soon rewarded with an on-air position at financial news network CNBC, where he remains to this day. As for the rest of us? We were had.

The United States is on the verge of a retirement crisis. For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.

Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer?

A month after ace programmer Sergey Aleynikov left Goldman Sachs, he was arrested. Exactly what he’d done neither the F.B.I., which interrogated him, nor the jury, which convicted him a year later, seemed to understand. But Goldman had accused him of stealing computer code, and the 41-year-old father of three was sentenced to eight years in federal prison. Investigating Aleynikov’s case, Michael Lewis holds a second trial.

By Michael Lewis

To Sergey Aleynikov’s new way of thinking, every American could benefit from some time in jail, but in the event that you are yourself actually arrested and sent away, “there are certain practical aspects to keep in mind.” First, dress warmly. Detention centers tend to be freezing cold, even in summer, and so if you happen to be wearing shorts or short sleeves you’re in for a spectacularly unhappy night. Second, carry no cash. “If you have money, they charge you a convenience fee,” he explains. “If you don’t have it, they don’t charge you. The less money you have on you, the better.” Third, memorize a couple of emergency contact phone numbers. On the night of his first arrest he discovered he didn’t actually know his wife’s cell-phone number. He’d always phoned her by name from his cell phone’s address book, but his phone was one of the first things they’d taken from him.

The fourth, and final, rule was by far the most important: Don’t say a word to government officials. “The reason you don’t,” he says, “is that, if you do, they can place an agent on a witness stand and he can say anything.”

Paul Krugman: Republicans Against Reality

Last week House Republicans voted for the 40th time to repeal Obamacare. Like the previous 39 votes, this action will have no effect whatsoever. But it was a stand-in for what Republicans really want to do: repeal reality, and the laws of arithmetic in particular. The sad truth is that the modern G.O.P. is lost in fantasy, unable to participate in actual governing.

Just to be clear, I’m not talking about policy substance. I may believe that Republicans have their priorities all wrong, but that’s not the issue here. Instead, I’m talking about their apparent inability to accept very basic reality constraints, like the fact that you can’t cut overall spending without cutting spending on particular programs, or the fact that voting to repeal legislation doesn’t change the law when the other party controls the Senate and the White House.

From Russia With Love: Snowden Gets Asylum

Jacob Heilbrunn | August 1, 2013

 

With its decision to grant Edward Snowden temporary asylum, Russia is once again demonstrating its independence from America and handing a big victory to WikiLeaks. The Obama administration has gone into overdrive to attempt to capture Snowden, promising Moscow that Snowden would neither be tortured nor subjected to the death penalty if he is returned. But in the wake of the treatment of Bradley Manning, who was apparently subjected to prolonged isolation and other maltreatment, those promises are necessary but hardly sufficient. America's track record when it comes to dealing with dissent—for that is what Snowden represents—is a parlous one, from the incarceration of Eugene Debs during World War I to the latest batch of whistleblowers. So Moscow has blown a giant raspberry at President Obama.

 The problem is really of his own making. The appropriate response to Snowden would have been to promise him immunity from prosecution and allow him to return to America, where he could have testified to Congress. From a practical standpoint, the administration would have been better off with Snowden in America rather than back in Russia, where he can dribble out embarrassing information. Everything that Snowden has said appears to be accurate. The latest revelation concerns a computer program called XKeyscore that is one more step towards the omnicompetent state. It permits government officials to snoop wherever and whenever they please, to trawl through your internet activities, chats, emails, and so on. The indispensable James Bamford, writing in the New York Review of Books, reports that "with the arrival of the Obama administration, the NSA's powers continued to expand at the same time that administration officials and the NSA continued to deceive the American public on the extent of the spying."
 

Current Political System Incapable of Meeting Social, Economic, Environmental Challenges

Friday, 02 August 2013 10:24
By Gar Alperovitz, Truthout | Op-Ed

It's a commonplace sentiment that politics in America is broken. Each week brings more evidence of deadlock in Wshington, of social and economic decay and of disillusionment. The debased nature of politics, however, is only the most superficial symptom of our problems. Beneath the surface-level partisan bickering, much deeper currents have begun to shift.

Recent polls, for instance, show that roughly 80 percent of Americans believe their congressional representatives to be "more interested in serving the needs of special interests groups" than "the people they represent." Almost four out of five believe a few rich people and corporations have much too much power. And only 37 percent - not much more than a third of the population - have confidence in the most solemn and august of American institutions, the Supreme Court.