The Homes Chuck Schumer Didn’t Save

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DDay and Zach Carter both reported yesterday on the NY Fed’s conclusion that the 2005 Bankruptcy Bill had pushed an extra 200,000 people into foreclosure. Here’s Zach:

Economists at the New York Federal Reserve have concluded that a controversial 2005 law backed by banks and credit card companies pushed more than 200,000 people into foreclosure and exacerbated the subprime mortgage crisis.

[snip]

In a paper released Tuesday, New York Fed researchers Donald P. Morgan, Benjamin Iverson and Matthew Botsch determined that the law sparked about 116,000 additional subprime mortgage foreclosures a year after going into effect.What’s more, they note, these foreclosures pushed home prices down, which may have lead to additional foreclosures. When the value of a home drops below what a borrower owes on the mortgage, it becomes nearly impossible to get out of the loan by selling the house or refinancing, making foreclosure more likely if they become unable to afford the monthly payment.

“By making it harder for borrowers to avoid paying credit card debt, [the 2005 bankruptcy law] made it more difficult for them to pay their mortgages, so foreclosure rates rose,” the economists wrote.

Which I guess means it’s time again to recall what Chuck Schumer responded to me on January 28, 2008, when I pointed out that the bankruptcy bill was going to exacerbate the financial crisis that was about to hit. Schumer, Byron Dorgan, and Sherrod Brown all agreed the law was a problem. (Schumer and Dorgan voted against the bill, though Debbie Stabenow, pictured in my post, voted for it.) But, Schumer said, we couldn’t just fix the obvious problems with it in 2008 because (you guessed it) we needed a bigger majority.

Senator Schumer explained that he didn’t want to pick around the edges, he wanted to make a real fix, and we’re not going to be able to do that until we get a bigger majority.

That was, of course, in 2008. That November, the Democrats would win solid majorities in both houses, as big a majority as you’re ever going to get. Yet the Democrats never found time to get around to fixing the Bankruptcy bill.

“Made in America” in the 21st Century

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[youtube]SKL254Y_jtc[/youtube]

In Trash Talk, bmaz wrote about a “lunchpail” Superbowl, pitting two teams named after people who make things against each other: the Steelworkers versus the Meatpackers. And the game ended appropriately, with a team owned by the people of a small city, having gone to a monstrous stadium as much a tribute to one arrogant man as it is a sports venue, taking home the trophy named after the man who put their city on the map. We can rest easy as Jerry Jones and the other greedy bastards threaten to lock out their players, knowing that the spirit of the game will be in the hands of the people of Green Bay.

All of which was the perfect background for this ad, as much a tribute to a city and a way of life our elites would like us to forget as it is an ad for a car. The visuals are amazing–not just the great monuments of Detroit, but (at :16) the juxtaposition of the disaster porn that our media have lapped up in the last couple of years–“a town that’s been to hell and back”–with the American flag–“the finer things in life.” (It was perhaps a better tribute to our national anthem than the one Christina Aguilera gave.) And, then, with Joe Louis’ fist punctuating the image, followed quickly by Diego Rivera’s tribute to industry, the ad laid out its creed in a working man’s voice.

You see, it’s the hottest fires that make the hardest steel. Add hard work and conviction and the know-how that runs generations deep in every last one of us. That’s who we are. That’s our story.

All culminating in a synthesis of the grit of Eminem and the uplift of gospel.

Yeah, there’s an irony at the heart of the ad: as the tagline “Imported from Detroit” suggests. We’ve been sold to the highest–the only–bidder, for scraps. And it took the genius of a metrosexual Canadian-Italian to reclaim the dignity of America’s industrial base.

Made in America isn’t as simple as it used to be.

Back in the 70s, as our industries were first struggling against the challenges of globalization, the unions had a campaign–Made in America–that appealed to the pride and perhaps parochialism of average Americans as reason enough to buy a product.

As the last few decades have shown, it turns out that Made in America wasn’t reason enough.

This ad, I think, tries to reclaim that idea, to appeal to the dignity of the men and women in flyover country so often maligned by “experts” who know little about what they write.

Now, it’s probably not the [story] you’ve been reading in papers, the one being written by folks who’ve never even been here and don’t know what we’re capable of.

Who knows if the ad will work? Who knows whether it’ll sell cars; who knows whether it’ll convince a region barely regaining confidence after a terrible trauma to believe?

But whatever the cynical calculations behind this ad, whatever the value of the Chrysler 200, someone needed to tell this story.

Alan Simpson: America Is a Cow w/300M Tits. Plus, 10M MOTUs?

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Alan Simpson claims he misspoke back in August when he called Social Security “a milk cow with 310 million tits.”

He explains,

“I meant to say that America was a milk cow with 300 million teats, and not just Social Security.”

Oh. Okay. So Social Security is not the only way we suck at our nation’s teat, huh? Since he’s pushing to cut defense along with Social Security, I guess he’s arguing that our servicemen and women are just a bunch of freeloaders.

But I’m curious.

Back in August, Simpson said Social Security had 310 million tits–presumably counting every American since every American participates in Social Security. His revised statement says America has just 300 million tits.

So where’d the other 10 million tit-sucking Americans go?

My guess? Simpson doesn’t want to hurt the fee fees of any of the MOTUs who mythologize their own accomplishments even while ignoring that they are themselves the chief teat-suckers.

So there you have Alan Simpson’s census of America. 300 million of us are deadbeat teat-suckers. And the MOTUs? I guess they are the poor cow.

Clinton’s Blowjob: 5 Times More Important than the Wall Street Crash

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Honest, I’m posting this video not for obvious affinities I have for Dylan Ratigan’s argument. But mostly because of the obvious suggestion, based on the resources we dedicate to investigating them, that Clinton’s blowjob was five times more dangerous for our country than the crash of our entire financial system.

“No One Could Have Predicted the Housing Bubble Middle East Status Quo Would Crash”

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The WSJ has a fascinating narrative of how both the US and Mubarak’s government were utterly unprepared for a democratic revolution in Egypt. From a meeting two months ago at which Egypt again refused democratic reforms, after which Hillary declared Egypt to be the “cornerstone of stability and security in the Middle East and beyond,” to a meeting on Monday when when a Middle East expert asked Obama’s National Security Council, “Please tell me you have contingencies in case Mubarak’s regime collapses” (the NSC said they did not), our government’s certainty that it could depend on the status quo generally and Egypt specifically has utterly collapsed.

And it was not just the government generally; predictably, the intelligence services paid to anticipate such events had no idea it would happen, either. Just one week ago, the new head of Israel’s military intelligence, Major General Aviv Kochavi, echoed Clinton’s earlier certitude that Egyptian would remain stable.

…on January 25, the day when massive protests first erupted across Egypt, Major General Aviv Kochavi, newly appointed head of Israel’s Military Intelligence Directorate, told a Knesset committee that “there are no doubts about the stability of the regime in Egypt”…

And while he’s predictably using the observation to demagogue, Crazy Pete Hoekstra ascribes the surprise to same kind of group think that has long plagued our intelligence analysis.

We were blind sided on Egypt. Problem is group think and risk aversion in state/intel community!

Part of the problem may be that US intelligence services rely more on the Egyptian government than on talking to opposition figures directly.

For years, the US Central Intelligence Agency has worked closely with the Egyptian security establishment in the contentious context of Washington’s “war on terrorism”. But it is unlikely that the CIA has been as meticulous in developing trustworthy contacts inside Egypt’s fragmented but dynamic and energized Egyptian opposition. The latter, whether religious or secular, is naturally distrustful of American officials, whom it sees as longtime supporters of the dictatorial rule of President Mubarak, in the interests of what US Vice President Joe Biden has called “geopolitical interests in the region”.

But that’s definitely not the whole of the problem. As Wikileaks revealed, we know our government met with a youth activist in 2008, as well as other NGOs. Yet embassy officials deemed that activist’s assessment that the opposition would have to replace Hosni Mubarak with a parliamentary government before the 2011 elections to be “highly unrealistic, and [] not supported by the mainstream opposition.” (Dismissing the activist’s claims so easily undoubtedly also made it easier to dismiss the suggestion that the US should pressure Mubarak “by threatening to reveal information about GOE officials’ alleged ‘illegal’ off-shore bank accounts.”)

It appears, then, that the US has met with some of these activists; it just apparently dismissed them as a bunch of naive youth.

Read more →

The $900 Million Headline Versus Our Afghan Policy Backing a Vertically Integrated Criminal Enterprise

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The NYT has one of the most stunning headlines of the day.

Losses at Afghan Bank Could Be $900 Million

The story tells a story of Afghanistan’s own “Too Big to Fail” problem that offers opaque descriptions of precisely what caused the problem, but waits until the 17th and 18th paragraph to explain the real problem with the bank.

Kabul Bank has extensive links to senior people in the Afghan government. In addition to Mahmoud Karzai, other shareholders included Haseen Fahim, the brother of the first vice president, and several associates of the family from the north of Afghanistan. Afghan officials said the bank poured millions into President Karzai’s election campaign.

It is the loans and personal grants made by the bank to powerful people, including government ministers, that could prove the most explosive, Western and Afghan officials said. “If people who are thought to be clean and who were held up as ‘good’ by Western countries suddenly are caught with their fingers in the till, it will cause questions from donors,” said a Western official in Kabul. “They will say, ‘Why are we here?’ ”

I wondered why Dexter Filkins, who has done so much on Afghan corruption, focused on the missing money rather than the problem of corruption. But then I remembered–after I saw Alissa Rubin and James Risen on the byline–that Filkins moved to the New Yorker earlier this month.

As it turns out, Filkins has his own version of the story. The explanation of the same disappearing hundreds of millions Filkins offers in an article 3.5 times longer than the NYT’s already long 1800 words is that–as one of Filkins’ sources explains, the Afghan government is a “vertically integrated criminal enterprise.”

Much of the money disappeared (Filkins explicitly states what the NYT just suggests) in outright bribes to the key members of Hamid Karzai’s administration.

The evidence, according to American officials close to the inquiry [into the collapse of the Kabul Bank], appears to implicate dozens of Afghan officials and businessmen, many of them, like [Karzai’s finance minister and campaign treasurer, Omar] Zakhilwal, among Karzai’s closest advisers, with regulatory responsibilities over the Afghan financial system. Among the others are Afghans regarded by American officials as among the most capable in Karzai’s government: Farouk Wardak, the Minister of Education; Yunus Qanooni, the speaker of the Afghan parliament; and Haneef Atmar, the former Minister of the Interior.

[snip]

“Just straight bribes,” a senior NATO officer said of the payments to Afghan officials.

Much of that bribe money–perhaps as much as $14 million–came in response to Hamid Karzai’s request for campaign donations and went to pay for his badly discredited 2009 re-election.

Now American officials say that Zakhilwal was one of dozens of Afghan leaders and businessmen who, collectively, accepted tens of millions of dollars in gifts and bribes—some sources say as much as a hundred million dollars—from executives at Kabul Bank.

[snip]

According to several current and former Afghan officials, during the 2009 campaign Kabul Bank and Karzai’s reëlection machine became nearly interchangeable. Afghans who served in Karzai’s government say the more likely contribution from Kabul Bank was between eight and fourteen million dollars—and that it kept on doling out money even after the election, which Karzai finally won, in November, 2009. At the time, election monitors declared that about a million ballots cast for Karzai were fraudulent.

More troubling still is Filkins’ report that some of this money is being funneled to the Taliban.

At Kabul Bank, according to a Western official familiar with the investigation, records show that Ruhullah, the head of a private security company and an ally of Ahmed Wali Karzai, the President’s half brother, transferred money into accounts believed to be controlled by the Taliban.

At the same time, Filkins explains here as he has in the past, this corruption is what drives Afghans to support the Taliban.

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Our Industrial Policy Needs to Do More than Arm Dictators

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Spencer has a useful catalog of all the war toys Egypt buys with our military aid.

Whatever Egypt’s military does next, chances are they’ll do it with American weapons.Al-Jazeera showed M1A1 Abrams tanks carrying Egyptian soldiers through Cairo in what its correspondents called “a show of force.” Those iconic American tanks have been co-produced in Egypt since 1988; the Egyptians have about 1000 of them. As was endlessly re-tweeted, canisters containing tear gas that the police used on protesters — before the hated police melted away over the weekend — had “Made in America” stamped on them. (Our colleagues at Ars Technica take a look at what’s inside the Pennsylvania-manufactured tear gas.)

On Sunday, fighter jets flew low over a Cairo crowd, turning on their afterburners to deafen their audience. Most likely they were part of Egypt’s fleet of 220 F-16s.

Most of the $1.3 billion that the U.S. annually provides to Egypt in military aid goes for weaponry to defend Egypt against foreign assault, like Patriot air-defense missiles, Multiple Launch Rocket System rocket pods and TOW anti-armor missiles. That’s not particularly relevant for crowd control against protesters.

He’s right: the spectacular images of the Egyptian military showing its presence amid protesters serves to highlight the war toys at the heart of our influence with the Egyptian military, and therefore at the heart of our relationship with Egypt. No more spectacular, of course, than the video from al Jazeera, above, showing US-made F-16s buzzing thousands of protesters in Tahrir (Liberation) Square.

Meanwhile, in far less spectacular news, today Commerce Secretary Gary Locke and Energy Secretary Steven Chu will quietly be rolling out the White House’s effort to “Startup America,” which is either an effort to focus an investment on jobs or a cynical election year stunt.

The contrast, though, is instructive.

We have long publicly forsworn anything that resembles an industrial policy here in the US. But we actually do have an industrial policy; it’s called the Military Industrial Complex (recently enhanced with the Intelligence Industrial Complex). While we refuse, as a country, to invest in technologies and jobs in manufacturing peaceful goods, an enthusiasm for investing unlimited amounts in military technology (the jobs are a critical side benefit) is almost a requirement among our elected leaders.

Not only do those toys provide desperately needed jobs around the country. Not only do these toys allow us to extend our empire around the world. But just as critically, they serve a critical role in maintaining our hegemony. We give millions and (in the case of Egypt) billions in aid to friendly leaders, and they turn around and spend it on our war toys. Many of these friendly leaders are dictators that use the toys as a veiled threat and occasionally a blunt instrument to sustain their own power.

Which leads to uncomfortable moments like these, where a dictator’s last gasp consists of unleashing American war toys against his own people.

While the juxtaposition of those F-16s buzzing the brave protesters with this latest attempt to try to solve the jobs crisis in the US is just an odd coincidence, it needs to be instructive as the Administration tries to “Startup America.” Not only do we need a more proactive jobs policy, an investment in goods that someone besides friendly dictators will want to buy. But if we don’t do that–if we don’t find something to make that won’t inevitably end up playing a starring role in a dictator’s brutality–then we’re going to have a lot more problems down the road.

Obama may really believe that we will “Win the Future” by out-innovating, out-building, and out-educating our competitors. Good. Because it’s increasingly clear the way to “Win the Future” is not by brutalizing other countries’ mobs.

Obama Gives Manufacturing a Promotion

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Since Ron Bloom–IMO, the most effective member of the Auto bailout team–got named the special advisor for manufacturing in September 2009, those of us insisting the country has to reinvest in manufacturing have argued Bloom should get more power to make that happen.

At least in theory, his imminent promotion to Assistant to the President will finally make that happen.

Bloom was named special adviser for manufacturing at the Treasury Department in September 2009. Since then, he has made occasional speeches about manufacturing. But the change will give him more clout and allow him to dedicate his full efforts to manufacturing.

His new title is assistant to the president for manufacturing policy within the National Economic Council. Bloom declined to comment.

Alliance for American Manufacturing Executive Director Scott Paul’s enthusiastic statement on the promotion suggests Bloom will be able to bridge the world of manufacturing and that of the banksters that populate the White House.

The Alliance for American Manufacturing enthusiastically welcomes the announcement today of Ron Bloom being elevated to the position of assistant to the president for manufacturing policy.  No one knows the intersection of Wall Street, company board rooms, how things work on the shop floor, and economic policy better than Ron, who demonstrated his skill and know-how in helping to lead the auto industry recovery effort.

Ron’s intellect and perspective are much-needed at a time when Congress and the Administration turn their attention to creating good manufacturing jobs in America.  We share Ron’s interest and ability in bringing labor and business together to solve problems, and we look forward to working with him in his new capacity to strengthen our economy.

Mind you, at a time when the Obama Administration is also pushing the job-killing Korean trade deal, it’s not yet clear that Bloom’s promotion represents a real commitment to rebuilding our own manufacturing capacity. But at least it’s a step in the right direction.

Working Thread on FCIC Report

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I keep trying to immerse myself in the FCIC Report, but keep getting distracted–I guess I’ll have to read it this weekend. But it’s high time I put up a working thread for the rest of you.

The report itself is here.

Lambert Strether has made 1147 of the backup documents released by the FCIC available here.

And Masaccio sent me this observation from the report last night:

The number of suspicious activity reports—reports of possible financial crimes filed by depository banks and their affiliates—related to mortgage fraud grew 20-fold between 1996 and 2005 and then more than doubled again between 2005 and 2009.

p. 22 in the .pdf

This means that the regulators were not doing their jobs under the Bank Secrecy Act, the PATRIOT ACT and other laws. These laws are designed to enable prosecutors and regulators to spot money-laundering and other crimes.

Lenders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities. As early as September 2004, Countrywide executives recognized that many of the loans they were originating could result in “catastrophic consequences.” Less than a year later, they noted that certain high-risk loans they were making could result not only in foreclosures but also in “financial and reputational catastrophe” for the firm. But they did not stop.

And the report documents that major financial institutions ineffectively sampled loans they were purchasing to package and sell to investors. They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators. Nonetheless, they sold those securities to investors. The Commission’s review of many prospectuses provided to investors found that this critical information was not disclosed.

That is tantamount to saying that these people committed crimes. They sold securities with documents that were knowingly false.

The Mythification of the Looting Elite

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As more and more people talk about how inequality threatens our economic system and just in time for Davos, the January 22-28 edition of the the Economist had a special report on “The Global Elite.” While the edition has been out there for a while, I was struck by the degree to which it seems to be an attempt to mythify the looting going on so as to claim it serves some kind of useful societal function. Here are the sections:

Of particular interest are some of the key myths propagated by this report. A central theme is that this new global elite got there not by taking from others, but by virtue of their superior intelligence.

The big change over the past century is that elites are increasingly meritocratic and global.

And they got their wealth though their own actions, through work.

How did these people grow rich? Mostly through their own efforts. Only 16% of high-net-worth individuals inherited their stash, according to Capgemini. The most common way to get rich is to start a business: nearly half (47%) of the world’s wealthy people are entrepreneurs. You do not have to be a genius to build a million-dollar business, but it helps if you are intelligent and extremely hard-working.

[snip]

Another 23% of the world’s millionaires got rich through paid work, estimates Capgemini.

The focus here is on people like orthodontists who have built a practice rather than finance execs who have been getting rich off the public teat. And the report provides two reasons why the super rich are good for you. One, because they offer business opportunities, because, “when you are seriously rich it is hard to spend all your money.” And two, because they give their money away. Though, after noting that public spending still dwarfs philanthropy, the report retreats to arguing the elite are good for society just because of the contributions they make to society.

Modern philanthropists are typically self-made, so they are used to getting things done. Rather than simply handing sacks of cash to charities that already exist, they often prefer to build their own institutions, observes Paul Schervish, the director of Boston College’s Centre on Wealth and Philanthropy. The way they measure their success is not by how much they disburse but by the return they earn on their charitable investment, measured in lives saved or improved.

[snip]

By and large, global leaders change the world more by doing their day jobs than in their spare time. Even Mr Gates, who was widely reviled for his business activities, probably did more good by amassing his fortune than he is doing by giving it away. The computer revolution he helped to bring about transformed the way people handle information.

The report goes even further to explain why you shouldn’t be afraid of this purportedly self-made elite getting richer and richer. You don’t need to fear meetings like Davos and Bilderberg because, well, the world is a complicated place and rich people should be able to get together in off-the-record gatherings.

The world is a complicated place, with oceans of new information sloshing around. To run a multinational organisation, it helps if you have a rough idea of what is going on. It also helps to be on first-name terms with other globocrats. So the cosmopolitan elite—international financiers, bureaucrats, charity bosses and thinkers—constantly meet and talk.

And no need to worry about the rich accruing undue political power. You can’t buy political power, it says, and it proves it by pointing to the electoral failures of people like Steve Forbes, Ross Perot, and eMeg (while ignoring all the successes save Mike Bloomberg). Its efforts to use the Tea Party (whose ideology the Economist loves) as an example to prove the thesis is even more funny. It admits that Dick Armey’s Freedom Works taught TeaPartiers how to run phone banks.

For example, an organisation called FreedomWorks, founded by Dick Armey, a veteran Republican and former House majority leader, offers tea partiers, many of whom are new to activism, practical tips on such things as setting up phone banks.

But it leaves it at that. And while it mentions the Koch brothers’ funding of Libertarian causes, it makes no mention of the ties between the Kochs and the Tea Party. Ultimately, the story it tells–as its proof that you can’t buy political influence–is that the nice TeaPartiers rose from the grass roots, having spent almost no money.

Mr Santelli called for a Tea Party: an anti-tax protest like the one in Boston that heralded the American revolution. The notion caught on. Tea parties erupted everywhere, attracting millions.The Tea Party movement has a cranky fringe, but its core belief—that the government should tax and spend less—is attractive to many mainstream Americans. The tea partiers’ passion helped Republicans to capture the House of Representatives last November.

What’s shaping politics, the Economist says a year after Citizens United, is not money but ideas.

The strongest force shaping politics is not blood or money but ideas.

Now, I mapped this out not because it’s news (the report is over a week old) or because we haven’t heard these myths before. But I find it interesting that an outlet like the Economist–with its audience of the aspiring elite–feels the need to respond to rising concerns about inequality by trying to wrap up the looters in a myth that they’re the smart, self-made people who not only positively affect the world just by nature of who they are, but also bring business and philanthropy benefits.

This is they myth they’re going to use to justify their pillaging of the world.