Matt Taibbi focuses upon more inconvenient truths about our nation’s ongoing mortgage fraud fiasco from his Rolling Stone blog, yesterday, in: “Obama Goes All Out For Dirty Banker Deal.” Meanwhile, Nobel Prize-winning economist Joe Stiglitz clues even the clueless among us into just one of the many, not-so-obvious, but quite direct byproducts of Wall Street’s unbridled greed, this time as it relates to our younger generation: “STIGLITZ: America's Recent College Grads Face A Bleak Future.”
When one lives in a society where homeowners are a minimum of $700 billion underwater in their mortgages; and, where Main Street’s lost somewhere in the neighborhood of $6.5 trillion in net worth over the past four years, due to the tanking of their primary asset, their home (not the stock market, which is the primary investment of only the top 10% of our society), the sh*t starts to hit the fan.
A question I've heard asked multiple times over the past few months is this: “How much more must Main Street lose for Obama to win in 2012?” And, according to many of the latest polling results, we’re quickly driving Main Street’s economy down to the point where many in the "unwashed masses" are concisely answering that in two words: “Too much.”
Here’s Taibbi on the “…power play that’s underway in the foreclosure arena, 'according to the New York Times.'"
As we’ve read in the MSM, and here in the community for quite some time, and as Taibbi points it out: It’s NY AG Eric Schneiderman vs. “the Obama administration, the banks, and all the other state attorneys general.” (Actually, Delaware AG Beau Biden would remind us, it’s “most -- not all -- of the other state attorneys general.”)
Obama Goes All Out For Dirty Banker Deal
Matt Taibbi
Rolling Stone Blog/Taibblog
Wednesday, August 24, 11:17 AM ET
…This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes
The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.
This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline…
Taibbi reminds us of how a $20 billion settlement amount was originally discussed by our states’ AG’s as “…money that would ‘toward loan modifications and possibly counseling for homeowners,’ as Gretchen Morgenson reported the other day.”
To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.
So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.
But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, “How do I know you’re the last cop I’m gonna have to grease?”…
I strongly urge you to read the entire thing, as only Taibbi could tell it.
Now…I could segue into…
…how our nation’s too-big-to-fail banks pillaged municipal, county and state budgets throughout our country over the past six to ten years, but I’ve already done that. Or…
…how our nation’s mortgageholders are dealing with a housing market that’s worse than what was experienced in the Great Depression, but I’ve already done that. Or…
…how millions of long-term unemployed Americans are being swept under the bus, not just by the Bureau of Labor Statistics, but by the business community, in general, but I’ve already done that. Or…
…how more than 100,000,000 of us are living in poverty or on the precipice of it, every damn day, but I’ve already done that. Or…
…how income inequality between our nation’s haves and have-nots is now even greater than it was in the run-up to the Great Depression, too, to the point where it’s now worse than at any time since our government first arrived at a reasonable set of metrics to even measure this shameful income disparity, but I’ve already done that. Or…
Focusing for a moment upon a brutally inconvenient truth that few within this community have even bothered to mention, especially in the past couple of days, the reality is that our government’s own Congressional Budget Office (CBO) has just forecast that our nation’s U.3 unemployment index will be somewhere around 8% through 2014.
8% unemployment through 2014. Just let that sink in for a moment.
As I have been saying for…years…when one focuses upon old economic models and outdated technical rules and metrics about our economy…they’re inherently (purposefully) ignoring, or downright missing, the greater truths about the changing fundamentals driving our “new normal,” and our new “Two-Track Economy.” These are the folks that would “remind” you that “unemployment is just a lagging indicator of a recovery!” (Sometimes, adding insult to injury, they will throw in spicy words like “ignorance,” and “fool” to underscore their superior intellect…when in fact, it’s just a reminder of their own obliviousness to the world around them.)
CBO: No Recession, But Growth So Slow Jobless Rate To Top 8% Until 2014
David Wessel
Wall Street Journal Blog
August 24th, 2011 9:50AM
The Congressional Budget Office, in its midyear update of its budget and economic forecast, says it “expects that the recovery will continue,” meaning it doesn’t foresee a recession, but it says that slow growth will keep GDP well below the economy’s potential for several years. On the basis of economic data available through early July – which means it doesn’t reflect more recent gloomy date – CBO projects that inflation-adjusted GDP will increase by only 2.3% this year and by 2.7% next year.
Under current law, it says, federal tax and spending policies will impose substantial restraint on the economy in 2013, so CBO projects that economic growth will slow that year before picking up later to average 3.6% per year from 2013 through 2016. The U.S. economy won’t be operating at potential – meaning that labor and capital are fully employed – until 2017, CBO projects.
That means a lousy job market for years to come. CBO expects the unemployment rate to fall from today’s 9.1 to 8.5 percent in the fourth quarter of 2012—and then to remain above 8% until 2014. “Weakness in the demand for goods and services is the principal restraint on hiring, but structural impediments in the labor market—such as a mismatch between the requirements of existing job openings and the characteristics of job seekers (including their skills and geographic location)—appear to be hindering hiring as well,” CBO said…
As Moyers discussed it, in the link above, this is just ONE of the many inconvenient truths to which we must now be exposed, even if the truth hurts.
And, the reality is that while our bipartisan government continues to plow roughly $200 billion a year in obfuscated welfare for the rich into stealthy Wall Street bailouts, Columbia University economics professor Joseph Stiglitz reminds us that our nation’s youth and young adults are getting savagely thrown under the bus…forever. And, it’s directly related to the now-institutionalized pillaging of Main Street—specifically with regard to our nation’s mortgage/housing crisis—which is obliterating the hope and ambition of an entire generation.
STIGLITZ: America's Recent College Grads Face A Bleak Future
Business Insider.com
Mamta Badkar
Aug. 23, 2011, 1:11 PM
Nobel laureate Joseph Stiglitz warned of a lost decade for America and dire consequences for a generation, in an interview with The Take Away.
Stiglitz pointed out that young workers face record medical bills for their parents, while paying record student loans, and they are entering a dismal job market:
"People with different skills, different background, different education face very different opportunities. If you're one of the very top... your future prospects are very good. If you've gone to one of those for-profit private schools, profit making schools, your future is bleak. The statistics say the likelihood that you will get a job, for which you paid a heavy tuition, is very low. And because of our laws, even if you went into bankruptcy you'll never get rid of those student loans. So they have a lifetime filled with debt, with no future prospects....
Parents used to pay for college education. The house was the piggy bank from which they withdrew. Now 25% of all homes are under water. That piggy bank is empty...
We used to call ourselves the land of opportunity. A country where someone could easily go from the bottom to the middle and the middle to the top. Everybody had some sense of equality of opportunity. Now, that's gone.
And. Bryce Covert, over at New Deal 2.0, provides us with a much deeper dive on the matter over the past 24 hours, via Naked Capitalism…
Bryce Covert: Recession Has Lit the Fuse on Explosive Student Debt
Bryce Covert
New Deal 2.0 via Naked Capitalism
Thursday, August 25, 2011
Yves here. I’ve been surprised that student debt has not become more of a social issue, particularly given high unemployments rates among new graduates. Perhaps that time is coming soon.
By Bryce Covert, assistant editor at New Deal 2.0. Cross posted from New Deal 2.0
Troubling long-term trends have gotten even worse as schools, government, and families cut back and student loans skyrocket.
This week’s credit check: Average student debt can spiral up to $100,000 with interest and late payments. Room and board charges at colleges have doubled in actual dollars since 1982.
It’s no great secret that student loan debt is exploding. The total amount is set to top $1 trillion, more than total credit card debt. But accompanying that post-recession surge in student debt (as all other consumer debt is being paid down) is a surge in delinquencies. As The Wall Street Journal reports, “In the second quarter, 11.2% of student loans were more than 90 days past due and the rate was steadily rising, according to data from the Federal Reserve Bank of New York. Only credit cards had a higher rate of delinquency — 12.2% — but those numbers have been on a steady decline for the past four quarters.”
The rise in student borrowing is a longtime trend, but things have clearly gotten worse in the recession. A lot of it is because of decisions schools are making. In a recent Atlantic Monthly article, Andrew Hacker and Claudia Dreifus explain that higher tuition — paid for by student loans — “keeps most colleges going.” Private colleges Loyola University and Franklin Pierce see 77 and 85 percent of students enroll with loans, respectively. Historically black colleges, which tend to have lower endowments and a poorer population, are closer to 90 percent. Part of this, they report, is not because the actual education is more costly, but because “room and board charges have doubled in actual dollars since 1982 to enhance campus life.” That’s a long-term trend…
…
…The government has taken much the same tack in looking at its own shrunken budget post-recession. Back in March, President Obama proposed a budget that ended an experiment that gave Pell Grants for summer courses and eliminated a subsidy for paying interest on student loans for grad students. His plan was better than the GOP’s, which wanted to cut the maximum Pell Grant payment by $845, end funding to other aid programs, and kill AmeriCorps. This comes on top of a longtime trend in which student debt has come to replace grants. As Roosevelt Institute Fellow Dorian Warren reminded his host Melissa Harris-Perry on MSNBC, “When we were in college, Melissa, Pell Grants paid almost half our college in the 90s. Now Pell Grants barely cover a quarter. It’s all student loans.” Grants used to cover two-thirds of financing an education; now two-thirds comes from loans. Post-recession, the government is looking to shrink that even more.
Families have also reacted to the recession by, understandably, socking less away for college and pitching in less for tuition. As Hacker and Dreifus note, “Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings.” Those savings have likely dried up. A typical family spent only about $2,055 on education last year. Only half of freshmen entering college said their parents had put anything aside for their education, and of those who had, half had saved less than $20,000.
With so many sources of aid pulling away either out of necessity or stupidity, students are left hanging at just the time they need more help. The College Board puts average debt at $27,650, but that figure can spiral up to $100,000 due to interest and late payment penalties, which are even more likely in a recession. This is on top of the bleak job market graduating students face…
…
…And don’t forget, this debt isn’t going anywhere, no matter how little students are able to pay it back. Unlike almost all other forms of consumer debt, student loans can’t be discharged. Barmak Nassirian of the American Association of College Registrars and Admissions Officers told Hacker and Dreifus, “You will be hounded for life… They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment.” They can also dock Social Security checks when you retire, he adds. No matter when the economy finally pulls out of this stagnation, students will still be saddled with a heavy load.
Earlier in the month, in an interview with the Daily Ticker, Stiglitz discussed some of his ideas for fixing the economy…
…Stiglitz says "austerity is not only a recipe for pain now, but for more pain in years to come." Stiglitz doesn't see a bounce in the economy, and thinks the U.S. has only two real options - more stimulus or a debt restructuring.
Here are some of his suggestions:
• Repeal tax-cuts for rich Americans.
• End wars in Iraq and Afghanistan that cost trillions of dollars.
• Increase stimulus and programs that would get Americans back to work because it will generate massive tax revenues.
• A Medicare D, with a provision that allows the government to negotiate prices instead of going with those set by pharmaceuticals. He believes this move alone could save the U.S. trillions.
• A "Homeowners Chapter 11" that would allow homeowners to continue to possess their homes, while they restructure their debt and continue to pay down their mortgages.
He says, "It doesn't do anybody any good to force these people out of their homes… An economy in which you have homeless people and empty homes doesn't make any sense, and that's where we're going."
Unfortunately, as I’ve noted it over the past few days, the administration has responded with: a new jobs proposal which is more about taxcuts than it is about jobs, and; a housing proposal which appears to be little more than a rehash of a program that even Calculated Risk has noted was not very successful.
As Stiglitz notes, up above, our nation’s mortgage fraud fiasco has had a cascading effect which has brutally undermined the very foundation of our country’s middle class and our next generation, as well.
And, this all brings us back to Taibbi and his commentary on Eric Schneiderman.
…The Times story claims that HUD Secretary Shaun Donovan and various Justice Department officials have been leaning on the New York AG to cave, which tells you that reining in this last rogue cop is now an urgent priority for Barack Obama.
Why? My theory is that the Obama administration is trying to secure its 2012 campaign war chest with this settlement deal. If Barry can make this foreclosure thing go away for the banks, you can bet he’ll win the contributions battle against the Republicans next summer…
Bold type is diarist’s emphasis.
And, in fact, the President is, quite handily, ahead of his 2008 contribution numbers from those fatcats, and very much winning that Wall Street contribution battle, as you read this.
But, as Bill Moyers would remind us, the truth that hurts here is this: …“this foreclosure thing” might just make America’s underclasses, and it’s youngest generation…go away,” come election day 2012, too.
Many Obama supporters are asking the rhetorical question: “How much more must Main Street lose for Obama to win in 2012?” And, the answer is not just, “too much.” For many—especially our nation’s young--it’s now apparent that it’s approaching ”everything.”
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(DIARIST’S NOTE: For those that have a problem with the headline of this post, I would strongly suggest a read of a piece by Bill Moyers, from earlier in the year: “Bill Moyers: America Can't Deal With Reality -- We Must Be Exposed to the Truth, Even If It Hurts.”)