The world's biggest banks have been given another plum cash cow by the Democrats and the Obama administration. In addition to making the GSAs ( Fannie Mae and Freddie Mac) into ATM machines for the banks by sticking the taxpayer with modified debts for home loans (see http://www.dailykos.com/...), we now find that the new distressed debt scheme has been a tremendously profitable program for the banks. The program, The Affordable Refinance Program (HARP) was supposed to allow homeowners with negative equity to refinance into cheaper mortgages. The program was passed after it gave participating lenders immunity from paying compensation on loans that broke underwriting guidelines and helped fuel the subprime and securitization crisis. HARP has been a remarkable generator of fees for the banks according to an article by Shahien Hasiripour and Tom Braithwaite of the Financial Times published on 13 April 2012. Average borrowers are paying 30 to 75 basis points more than the base rate available to other borrowers.
At the same time union pensions are in the hole to the tune of over $369 billion according to a new report by Credit Suisse (article by Dan McCrum and Ajay Makan in the Financial Times 9 April 2012). While some of these companies are reporting record profits, they are not sufficiently funding pensions, the future of these pensions are likely to go the way of past examples where they are bankrupt or shoved onto the taxpayers plate (see Fran Hawthorne's book on this and the American Airlines' attempt: http://www.dailykos.com/...). Today's Financial Times (14 April 2012) has a report showing that the banks profiting from HARP like Wells Fargo are reporting record profits for 2011. All to show that the 1% are still in the government welfare till. But as Michael Kumhof and Romain Ranciere show in the article in Finance and Development for September 2011 that higher income inequality in developed countries is associated with higher domestic and foreign indebtedness. The solution to our problems is no an increase in the upper 5% earners to 39% as Obama is proposing but a return to the Eisenhower rate of 90%. The sooner the better. So voting for the Democrats and Obama in the fall can have nothing to do with Obama as a president, but a vote for fair taxation.