I will merely note in passing that Ian Welsh has updated his pessimism. I find this significant, because Ian has always seemed one of the most level-headed of econ bloggers, astute, plain-spoken, and common-sensical. I hold him at the positive (optimistic) pole of my economic confidence interval, whereas Stoneleigh (Nicole Foss) and Ilargi delimit the negative pole. That confidence interval has shrunken considerably, in the direction of negativity. It’s become more Dmitry Orlov-ish and less Krugman-esque. There is less room to maneuver. Time is running out. Two-minute warning, no time-outs.
Category: Economy
Feb 18 2012
Behind the shrinking labor force
There appears to be a lot of confusion and debate concerning the shrinking labor force participation numbers. People seem to have very strong opinions on both sides.
On one side you have the people who believe that the government is messaging the data to hide the unemployment rate by simply not counting unemployed people.
To these people I say: if it is a conspiracy it is a poorly concealed one, since the topic is debated even in the news media.
On the other side you have two groups: a) those who believe that people are simply retiring early, or b) that this is nothing more than a continuation of a long-term trend.
It is this latter group’s beliefs that I would like to address directly
Feb 17 2012
Greece: The Continued Slide Towards Default
Cross posted fromThe Stars Hollow Gazette
It is almost inevitable that Greece will default but in the interim the Eurozone leaders are determined to force more austerity on the country in order to protect the hedge funds profits at the expense of the Greek people. Is America headed down this same road?
Freedom Rider: Greece: Your Money or Your Life
By Margaret Kimberly, editor and senior columnist at the Black Agenda Report
Greece is at the epicenter of an horrific assault on working people and on their democracy. As a result of corruption at the top of the Greek government and world wide finance capital, that nation is teetering on the brink of insolvency. The rescue cooked up by the same people who created the problem is in fact anything but.
The so-called bail out is a plan to destroy the last vestiges of the welfare state and the expectations of humanity that they can have any hope of being treated fairly in capitalist countries. The European Central Bank, the International Monetary Fund and the European Commission have descended like vultures, making it crystal clear where their interests lie. [..]
Beginning in 2008, Americans got a dose of some of the same medicine. We were told that our economy would implode if we didn’t give our money to bail out the very same banks which created the crisis. Four years and trillions of dollars later, we are still in a recession, unemployment remains high, ordinary people have lost their assets and our president and Congress bicker over how much they can cut government spending and ruin our lives even more.
The Greeks are ahead of the curve. At least they stood up and protested. Hopefully more people around the world will be like them instead of like passive Americans. Hopefully Americans will stop being passive before they end up like people in Greece.
Michael Hudson: Greek crisis used to find out how far finance can drive down wages and privatize.”
Michael Hudson is a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).
Transcript:
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.
In Greece, the financial elites of Europe have gotten agreement from the Greek government to another round of what some people are calling savage austerity measures, for example, lowering the minimum wage by 22 percent, a new round of privatizations, and cuts to pensions and many other social programs. This is, I guess, an example of banks and a banking technocrat that now leads the Greek government directly intervening, calling government policy. So what does this tell us here in the U.S., Canada, and other countries that are watching this?
Now joining us to discuss all of this: Michael Hudson is a former Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri-Kansas City, and he writes at Michael-Hudson.com. Thanks for joining us, Michael.
MICHAEL HUDSON, RESEARCH PROF., UMKC: Thank you very much.
JAY: So, Michael, what should we be learning from what’s going on in Greece?
HUDSON: Well, we should be learning what the European bankers are learning, and that is what is the result of a great experiment that’s going on. For the last five years in Latvia, they’ve-the neoliberals have lowered wages by about 30 percent. The basic premise of today’s model builders are: you don’t know how far you can lower wages and pensions until people begin to press back. Well, in Latvia they still haven’t begun to press back when they’ve lowered for 30 percent. Now they’re moving towards Greece on the way to Spain and Portugal and Italy, and they’re trying to figure out how much can we lower wages, how much can we drain an economy until there is pressure to come back.
And the right wing, who’ve essentially appointed, as you pointed out, a bank lobbyist, which is called a technocrat, in charge of Greece, is: let’s try the experiment to just see how much we can squeeze out-because they’ve realized that the left in Europe is completely fragmented. They don’t have a defense available, they don’t have a body of concepts available to say, wait a minute, this is crazy. When you’re lowering wages, you’re actually shrinking an economy. When you’re cutting the budget deficit, you’re reducing the amount of money that comes into the economy to promote demand. So in effect what Europe is doing is bleeding economies, very much like a medieval doctor would bleed blood on the ground, since this is going to make economies more productive.
Well, the only response that the Greek people have, not simply the left, but the right and the Greek people, is, look, if you think you’re going to increase the surplus, increase taxes by lowering our wages and cutting our pensions and cutting our health care, we’re going to do what the Egyptians are doing and what the Arab Spring is doing. We’re going to tear the economy apart, and there won’t be anything for you. And the PASOK, the socialist party that inaugurated this whole austerity program, now has an 8 percent approval rating in Greece. That’s even lower than Mr. Obama has for cutting wages here.
So what the Greeks are saying: look, when the premier said that they were going to have a referendum for whether we want to cut back the wages to pay the bankers, the first thing Angela Merkel said was, you can’t have a referendum. We’re going to suspend democracy, we’re going to impose a dictator on you, and we’re going to tell you what to do.
Well, under modern international law, if there’s no democratic commitment to pay, then the debt taken on is null and void. Well, the European common market, the European Union, has had its lawyers say, okay, we’re going to get the agreement of congress. Well, the Greek people can say, look, you can come down with bags of money and you can buy all the parliament members that you want to approve the deal, but as soon as there is an election, we’re going to throw them out, and they’re not acting on our behalf, and-.
JAY: Yeah, but it’s not clear by polling that the next election would actually elect a government that wouldn’t go along with this. Most of the parties that seem capable of winning elections in Greece have signed on to this deal. But can I go back to something earlier you said? Is not one of the big objectives here-’cause it’s hard to understand the logic of driving Greece into a decade of depression if you actually want any revenue that’s going to pay some of these debts back, which means, is not the real objective here not more about privatization, that if you can create so much chaos and dependency on the Greek government, on the European financial elites, they’re going to sell everything off? And apparently they’re talking now about selling airports and shipping-seaports, like, a whole ‘nother level of privatizations.
HUDSON: Not only that, but also the water systems, the sewer systems, real estate, the islands. You’re right. They think that if they can create a crisis, it becomes a grab bag area. And bankers and people who have a plan usually do much better in a crisis or a grab bag than people who don’t have a plan. So this indeed seems to be it. Finance today achieves what military invasion used to do in times past. So the new mode of warfare is financial, not military. It’s much cheaper and it’s much safer for the country doing the attack.
So you’re quite right: privatization is a big role. And that’s why yesterday the European Union said, wait a minute, we’re not even going to give you the money to pay us, namely, for us to pay our own banks that have bought your bonds, unless you spell out exactly what you’re going to privatize and commit to it now. And this is a sticking point. In the past, the Greeks have made promises, and thank heavens they haven’t privatized, because once they begin to sell things off, then there’s going to be a real squeeze and even more of an opposition. So you’re right. This is a property grab.
JAY: Yeah. We were joking off-camera. I was saying it’s amazing how the Europeans make Obama’s budget look good. And as critical as you and I and many people we’ve interviewed on The Real News have been critical of Obama, there actually does seem to be some kind of different approach between Wall Street (and, certainly, the sections of Wall Street that helped elect President Obama) and the Europeans. You can hear interviews with Wall Street representatives who actually say, no, you do have to have short-term stimulus before you have these kinds of austerity measures; you can’t force the world into a global depression. You hear that kind of language out of New York and out of President Obama, where the Europeans seem so committed to this severe austerity.
HUDSON: There are two reasons for that. Number one, from the very beginning, from the last century, America has already had in the private sector what was in the public domain in Europe. Europe had its power companies, electric and gas systems in the public domain. America privatized them, but as regulated public utilities. The public utilities were allowed-were regulated as to how much bond and equity they could get, what their rate of return would be. Europe has no body of law to regulate the prices or rent extraction the public utilities can charge, because they’d always had these in the public domain, just like Russia had no and the Soviet Union had no system like this. So the objective of privatizing in Europe, first of all, there’s much more property and public assets to grab in Europe than there were in the United States, and secondly, there is no regulatory body in Europe, because of the fact that in the past, power and sewer and water and public utilities were supplied either at cost or at subsidized rates to make the economy more competitive.
So the idea in Europe is not only that you cut wages by 30 percent, but you’re now going to raise the price of what you just mentioned, the access to water, sewers, transportation, everything else. You’re going to raise the price to put the real squeeze on wages. And the result in Greece will probably be the same as it was in Iceland, Latvia, and other countries. There’s going to be a large emigration of working-age labor. And the result will, of course, be to make the economy much less competitive.
And in this morning’s newspaper, when it turned out that Greece’s GDP fell at 7 percent annual rate, not the 5 percent expected, as usual the newspaper said, to everyone’s surprise, the situation is worse than projected. Well, of course it wasn’t really to our surprise, because we know that when you’re strangling an economy, of course it can’t cope very well. And they’re strangling the Greeks economy. And they’re using it, I think, as a laboratory experiment to say, what’s going to happen when we really just squeeze labor and squeeze labor? It’s like trying to feed a horse less and less and see whether it’s really going to be more efficient until it keels over dead.
JAY: And I guess it’s always-the way large-scale unemployment is always a good threat against the employed within a country, the more you can beat up Greece and Spain, Portugal, the more you can threaten the working class of France and Germany, where I guess the big targets eventually will be.
HUDSON: Well, if that happens, there’s going to be a renewed nationalism that’s going to cut the common market apart, and you’re going to have, all of a sudden, a realization that when Europe united, the whole idea of it’s united was so that it would never go to war again, military war. But now that it’s united under neoliberal bank rules, they think, wait a minute, we’re uniting and we are going to war. But it’s a class war. It’s an economic war. And this isn’t what we wanted. If the idea of uniting in Europe is for a class war under rules where we’re guaranteed to lose, then we’re saying no to Europe, just as the Icelanders have voted not to join Europe, just as other countries that had planned to join Europe, all the way to Turkey at the other end, are saying, wait a minute, if that’s the Europe that’s coming, an oligarchic Europe whose program is austerity and shrinkage, why on earth would we want to join?
JAY: Thanks for joining us, Michael.
HUDSON: Thank you very much.
JAY: And thank you for joining us on The Real News Network.
End
Greece is being forced out of eurozone, Venizelos claims
by Ian Traynor in Brussels and Larry Elliott of The Guardain UK
Greek finance minister says troika is shifting terms of €130bn bailout deal as part of move to force country out of eurozone
Greece rounded bitterly on its EU paymasters when the finance minister and socialist leader, Evangelos Venizelos, accused the eurozone of deliberately changing the terms of a proposed €130bn (£110bn) bailout because key players wanted to kick the country out of the single currency.
The charge that some eurozone countries were seeking to engineer a Greek sovereign default and exit from the euro deepened the rancour between debtor and creditors in the dangerous standoff.”There are many in the eurozone who don’t want us any more,” Venizelos declared at a meeting with President Karolos Papoulias. “We are constantly being given new terms and conditions.”
Papoulias went even further, denouncing Germany and Greece’s north European creditors after Wolfgang Schäuble, the German finance minister, said that Greece must not turn into a “bottomless pit” for eurozone bailout funds and that Europe was better prepared than when the crisis erupted two years ago to cope with a Greek sovereign default. [..]
Venizelos claimed the crucial debt swap with the banks – which technically requires three weeks to organise – will be announced on Monday provided the eurogroup signs off on the bailout.
The accord has to be in force well before 20 March when Greece is due to redeem €14.5bn of debt or face default.
Feb 14 2012
Economic dark clouds
Everyone that isn’t a partisan Republican is celebrating the recent string of good economic news regarding the GDP, unemployment rate, and manufacturing numbers. And for good reason. After three years of stagnant economic conditions, and all sorts of global financial problems, the working class of America is finally getting some belated relief.
However, let’s not kid ourselves. There are economic indicators that are not only not recovering – they are getting worse.
Instead of getting caught up with this brief respite of good economic news, with the implication that we can relax now, we should instead be viewing this interlude as a last opportunity to avoid another economic crisis. We should be pushing harder for reform, not relaxing.
That’s why I want to bring your attention to these issues.
Feb 14 2012
Greece Is Burning
Cross posted from The Stars Hollow Gazette
ATHENS – After violent protests left dozens of buildings aflame in Athens, the Greek Parliament voted early on Monday to approve a package of harsh austerity measures demanded by the country’s foreign lenders in exchange for new loans to keep Greece from defaulting on its debt.
Though it came after days of intense debate and the resignation of several ministers in protest, in the end the vote on the austerity measures was not close: 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders. [..]
But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread – certainly among Greeks, but also among economists and perhaps even European officials – that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the count
The killing of Greece
By Delusional Economics
What makes the situation completely surreal are the numbers. Greek debt in 2008 was approximately 260bn Euro. The first bailout was 110bn, the current one, that appears to be tearing the country apart, is 130bn. Add in the PSI+ haircut of approximately 100bn ( after sweetener deduction ) and you realized that Europe could have simply paid the entire bill in 2008 and saved itself 80bn Euro. Ok, that is an oversimplification of the problem but you can see my point.
However now, after 340bn Euros, Greece is still has an unmanageable debt, is in a far worse position than it was 3 years ago and it appears the country itself is coming apart at the seams.
So basically the Greek politicians and the other Eurocrats took a quarter of a billion euro problem and turned it into a existential trillion Euro one. Worst still their refusal to work cooperatively and misguided policies based around “expansionary fiscal contraction” have plunged Greece into a depression which threatens contagion to other weak economies. Yet at this point I can see absolutely no data suggesting the country is in any way more competitive than it was 3 years ago.
Greece – A Default is Better Than the Deal on Offer
By Marshall Auerback
Pick your poison. In the words of Greek Finance Minister Evangelos Venizelos, the choice facing Greece today in the wake of its deal with the so-called “Troika” (the ECB, IMF, and EU) is “to choose between difficult decisions and decisions even more difficult. We unfortunately have to choose between sacrifice and even greater sacrifices in incomparably more dearly.” Of course, Venizelos implied that failure to accept the latest offer by the Troika is the lesser of two sacrifices. And the markets appeared to agree, selling off on news that the deal struck between the two parties was coming unstuck after weeks of building up expectations of an imminent conclusion.
In our view, the market’s judgment is wrong: an outright default might ultimately prove the better tonic for both Greece and the euro zone.
The only questions that remain to be resolved are these: have all of the parties begun preparations to mitigate the ultimate impact of an outright default by Athens? And will the ECB be sufficiently aggressive in combating the inevitable speculative attacks on the other members of the euro zone periphery, which are almost certain to ensue, once Greece is “resolved” one way or the other.
Greek Bailout Deal, With More Austerity, Poised to Pass Parliament Amid Riots
I’m curious what record unemployment and poverty, bonfires and 100,000 protesters in front of Parliament is, then, if not uncontrollable economic chaos and a social explosion. And Papademos added, strangely, that the deal would allow Greece to return to economic growth in late 2013. I don’t know where this claim was pulled from. Austerity has only brought a deeper recession – and a higher debt-to-GDP ratio – thus far.
About 20 members of the coalition of parties – which control 236 of the 300 seats in Parliament – said they would not agree to the deal. But this leaves a healthy cushion for success. Three members of the Socialists resigned from their party after the bailout terms were announced.
European finance ministers would not agree to bailout terms until Greece passed them first in the Parliament, as they have run out of patience with the Greek’s ability to abide by prior deals. The deal would pave the way for a work-out with Greece’s creditors that would include a nearly 70% haircut on existing debt. European leaders hope this will be seen as a “voluntary” reduction and not a default event that would trigger credit default swaps, but leading rating agencies have already said they won’t see it that way.
Yes, this is a mess with wide ranging global impact.
Feb 04 2012
A Global Lost Generation
When Mohamed Bouazizi set himself on fire in Tunisia he set in motion a series of events that would topple governments across the Arab world. Because of the worlds-shaping events that followed, it is almost forgotten that the reason Bouazizi comitted suicide was simply his frustration and anguish over not having a job and a future.
Across the world today, Bouazizi’s pain is being felt by a global generation. It isn’t limited to any one country, region, or continent. Almost the entire world has turned its back on the youth of the world in one way or another.
It’s not a situation that the global economy or political system is capable of dealing with, and the consequences will continue to echo long after most of us reading this have passed on.
Jan 29 2012
Elizabeth Warren: “Pats Gonna Spank The Giants”
Cross posted from The Stars Hollow Gazette
Democratic challenger for the US Senate seat from Massachusetts and Harvard Law professor, Elizabeth Warren has been a popular guest this week on the cable networks. She appeared on MSNBC Thursday following the Republican debate and assessed Republicans as favoring a policy to “invest in those who already made it”. She specifically addressed wealthy businessman Mitt Romney’s income and his preferred tax rate:
“Mitt Romney pays 14 percent of his income in taxes, and people who get out there and work for a living pay 25, 28, 30, 33 percent. I get it, Mitt Romney gets a better deal than any of the rest of us because he manages to earn his income in a way that has been specially protected for rich folks,” said Ms. Warren.
Her assessment of former House Speaker Newt Gingrich was equally critical on his proposed tax policy of reducing everyone’s tax rate to 15% and expressed her support of “Warren Buffett rule” that would raise taxes on the wealthiest Americans.
Earlier on Tuesday night with Jon Stewart on Comedy Central’s “The Daily Show“, she informed Jon that “The Pats are gonna spank the Giants” and addressed tax policy, lobbying, and investment, her signature issues. She opposes cuts in education research as detrimental and the need to invest in the middle class. In Part 2, she goes on to describe the role that government should play in regulating America’s private sector. This is the unedited interview that is only available on line
There are those who are concerned that Warren, a political novice, will compromise her principles to the pressure of Wall St. hawks like Sen. Charles Schumer (D-NY). After watching her dress down Treasury Secretary Tim Geithner during hearings as chair of the five-member Congressional Oversight Panel created to oversee the implementation of TARP, I think she’ll be able to stand her ground. I’ll forgive her for her support of the Patriots. Nobody’s perfect.
Jan 27 2012
Is This A Sell Out?
Cross posted from The Stars Hollow Gazette
I realize that there has been a lot of speculation about what went down in the 24 hrs prior to the SOTU after Miller announced that there was no bank/state settlement deal. There is a lot of speculation about Schneiderman and not without good reason. When I was writing my article for Stars Hollow I was careful not to join in the “sell out” theme that was running hot with some very respected bloggers. I think Obama is desperate. He knows that he is losing the Independents and moderate Republicans and needed to do something fast, especially in the light of the unpopularity of the 50 state agreement and the massive push to stop it. On the other side, and I somewhat agree with RJ Eskow on this, Schneiderman has the upper hand. He is wildly popular and scares the crap out of Cuomo & company. Schneiderman is not dropping the investigation here in NY, he’s expanding it from what I hear.
That said, I think that if this unit doesn’t move quickly in the evidence they already have, evidence BTW Schneiderman has not had access to, he will drop this like a hot potato and walk. Obama is walking a thin line and realizes that Wall St money alone will not get him reelected. I think Schneiderman is playing on that and hopes to at least hold some of them more responsible and get some better compensation for the homeowners that got screwed along with some regulation of the securitization that caused this all.
I have my doubts. There are better ways to do this, namely appointing a special prosecutor with a budget, investigators and subpoena power. I’m not willing to throw Schneiderman under the bus just yet.
I also think Obama wants him to succeed Holder who said he would leave this year even if Obama is reelected. It’s either him or CA’s AG Harris.
This was a complete surprise, so I’m being very cautious here, knowing what I do about Schneiderman and who is politically afraid of him. Like after Obama was elected, I’m watching and listening very carefully. Hoping that it is not as bad as it looks.
Eskow’s opinion appeared in Huffington Post and he disclosed that he is a fellow at Campaign for America’s Future, a left wing strategy center. (This site, however, is not affiliated with any outside organization and opinions expressed here are solely are own.) He gives a good analysis of the reasons for the skepticism of David Dayen, Yves Smith and Duncan Black (Atrios) who said, “It’s hard to see the Schneiderman thing as anything but bad news.”
Eskow dissects the reasons for the skepticism
The administration’s lack of prosecutions has been inexcusable. His administration has refused to prosecute even the most compelling prima facie cases of and has appointed one revolving-door banker after another to key economic positions. Its financial settlements with Wall Street have been disgraceful. For far too long the president pushed the nonsensical argument that “Wall Street and Main Street rise and fall together.”
And with an election coming up, bankers can write big checks that most other people can’t.
He also points out that if the Department of Justice and the SEC had been doing their jobs in the first place neither the Financial Fraud Task Force or this unit would be necessary. It’s hard not to agree with him that committees are “designed for paralysis and gridlock, not efficiency” and that president who promoted “”streamlining government” and “eliminating bureaucracy” would create this committee. Looking back on what happened with health care and financial reform everyone on the left has good cause to be wary of anything that President Obama does at this point and some groups, perhaps shouldn’t have been so effusive in their praise of this deal. Eskow, as do I, thinks that the White House, left scrambling after Iowa AG Tom Miller announced that there was no settlement with the banks and presented with citizen petitions that had hundred of thousands of names, reversed course in desperation. Then with the announcement that Schneiderman would “chair” the committee, there was a rush of exuberant relief that Obama was finally showing some signs of supporting the 99%.
As to the possibility that Schneiderman “caved”to pressure from the White House, Eskow backs up what I have said, Schneiderman has too much leverage:
Whatever Eric Schneiderman’s goals are, I doubt they include being stigmatized by progressives as a sell-out. His actions over the last few months have not been those of a guy who rolls over easily. It’s safe to assume that he wants to prosecute bank fraud, and that this appointment will give him access to the resources he’s needed to conduct a thorough investigation. [..]
Consider this: What would it do to the White House if Schneiderman labeled the entire effort a sham, resigned in protest, and continued his investigations alone? He must know he has leverage now, and presumably will use it if necessary.
Escow appeared with Cenk Uygur on “The Young Turks” to discuss the unit and Schneiderman with Cenk’s panel:
I certainly don’t agree with Michael Shure and what basically is “the lesser of two evils” meme. It can be just as bad with Obama. That said, could this turn out as the cynics are predicting? Sure and if it does we here at Stars Hollow, like Eskow, will say so.
Another good discussion of this new committee was with Delaware AG Beau Biden who appeared with Dylan Ratigan on MSNBC and his other guest real estate analyst, Jack McCabe:
I’m not ready to throw in the towel nor am I going to get on the cheer-leading band wagon. I will wait to see what transpires and keep my fingers crossed for the best outcome for the most people, the 99%.
Jan 23 2012
Foreclosure Fraud: While You Were Sleeping
Cross posted from The Stars Hollow Gazette
Over the weekend while everyone was distracted by the South Carolina primary circus, the Super Bowl Championship playoffs and the Joe Paterno death watch, the Obama Justice Department is working to stab homeowners in the back and let the big banks off the hook for liability for the fraud they’ve committed and continue to commit.
Talks set out terms of US mortgage deal
By Shahien Nasiripour and Kara Scannell at Financial Times
Banks and government negotiators have cleared a big hurdle in efforts to resolve allegations of widespread mortgage-related misdeeds, agreeing on terms for a settlement that are being circulated to the 50 US states for approval, state officials and a bank representative say.
The proposed pact would potentially reduce mortgage balances and monthly payments by more than $25bn for distressed US homeowners, these five people said.
The tentative agreement still must be approved by all 50 state attorneys-general, and negotiators have previously missed proposed deadlines. Participants described the proposal terms as set, meaning the states will be asked either to agree to them or decline to participate.
The amount of potential aid is contingent on state participation and would decrease significantly if big states do not sign the agreement. New York and California are among several states that have voiced concerns about the terms of the proposed deal with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. New York and California are particularly concerned with the part of the deal that would absolve the banks of civil liability for allegedly illegal mortgage-related conduct.
California borrowers would be eligible to receive more than $10bn in aid if the state were to agree to the terms, according to several people involved in the talks.
It’s pretty obvious that by offering California 40% of the settlement that the Obama administration is trying very hard to pull their AG, Kamala Harris, back into the agreement. So far the pressure from her constituents is winning out over bribes that in the end would short change California home owners. From Marcy Wheeler at emptywheel:
Remember the “Cornhusker Kickback”? That was the $45 million in expanded Medicaid funding Ben Nelson demanded from the Obama Administration before he’d support Health Insurance Reform. The special treatment for Nebraska gave the reform effort a tawdry feel.
And just as importantly, it did nothing to improve Nelson’s popularity in his own state. When he announced he would not run for reelection in December, reporters pointed to the Cornhusker Kickback as one issue that was making his reelection increasingly unlikely. [..]
Yet it seems like Obama’s trying something similar in his effort to get CA’s Kamala Harris to join in his foreclosure settlement, with $10 billion in aid slated for CA’s struggling homeowners.
It would seem that Obama is having a hard time getting the Democratic AG’s on board.
Foreclosure Fraud Settlement Terms Laid Out, But Holdout AGs Not Signed On
by David Dayen at FDL News Desk
When I started digging into whether this Monday meeting with HUD and DoJ officials to go over a proposal for a foreclosure fraud settlement was legitimate, I couldn’t find one state Attorney General who mattered actually committed to showing up. When I say AGs who “matter,” I mean the ones who have been critical of a settlement in the past. I mean the Justice Democrats. I mean Eric Schneiderman in New York, Beau Biden in Delaware, Martha Coakley in Massachusetts, Catherine Cortez Masto in Nevada, Kamala Harris in California, not to mention the AGs from Hawaii, New Hampshire, Missouri, Mississippi, Maryland, Kentucky, Minnesota, Oregon and Montana who showed up (either themselves or representatives) at the meeting in DC last week to discuss alternatives to a settlement. I mean them. They aren’t going to Chicago, by all accounts. [,,]
But again, I’ve seen no evidence that anyone outside of the small circle of the Administration and the AGs on the executive committee negotiating the deal actually agree to it. Call it the 12-state deal, rather than the 50-state one. This is only closer to getting done in the sense that the folks who have wanted to cave all along are ready to do so.
So what can we do as individuals to get our state Attorney Generals to support homeowners and reject this sell out to the big banks? Yves Smith at naked capitalism lays out three reasons they should oppose this settlement and says to call them:
Here are some of the reasons to oppose a settlement:
1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess
2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didn’t do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.
3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears. [..]
PLEASE call them TODAY. Here is a list of phone numbers. If you can’t get through, send an e-mail.
Please also sign this petition from Campaign for America’s Future (it has some talking points if you need them for the AG calls). Note you can opt out of being put on their mailing list (I know that has been a sore point with some past petitions). I know it is futile to ping Obama, but they will collect the number of people who sign, and that will in turn bolster the dissident AGs.
Please call today. Unlike Congresscritters, who get a lot of constituent mail and phone calls, AGs get much less in the way of messages from state citizens, so your calls will make a difference.
Thanks for your help.
Jan 14 2012
2012: The year of social unrest?
The credit agency S&P cutting the ratings of nine European countries on Friday is normally nothing more than financial news, and it got reported accordingly. But buried deep in its report was an interesting sentence.
Governments are also aiming to put greater focus on growth-enhancing structural measures. While these may contribute positively to a lasting solution of the current crisis, we believe they could also run counter to powerful national interest groups, whose resistance could potentially jeopardize the reform momentum and impede the recovery of market confidence.
S&P doesn’t elaborate on who these “powerful national interest groups” are, or why they would oppose governments trying to grow their economy, but it’s pretty easy to guess. It’s also easy to see the likely consequences of this conflict of interests.
Jan 14 2012
EU: Austerity Policy Making It Worse
Cross posted from The Stars Hollow Gazette
The current policy of austerity that is being forced on the European Union by Germany and England has been called “financially futile, economically erroneous, politically puzzling and socially irresponsible” by economists and monetary experts. Author and derivatives expert, Satyajit Das, writes in the first part of his series on “The Road to Nowhere, Part 1 – Fiscal Bondage” at naked capitalism that the December 2011 European summit to resolve the euro crisis was a failure:
The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.[..]
The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.[..]
The fiscal compact did not countenance any writedowns in existing debt. It also did not commit any new funding to support the beleaguered European periphery. Germany specifically ruled out the prospect of jointly and severally guaranteed Euro-Zone bonds. Instead, there were vague platitudes about working towards further fiscal integration.[..]
Instead of dealing with the financial problems of the central bailout mechanism (the EFSF – European Financial Stability Fund), European leaders chose the re-branding option.
Actions, or rather inactions, have consequences.
by Edward Harrison
As I predicted in a message to Credit Writedowns Pro subscribers on Monday, statistics have shown that the German economy has finally succumbed to the deflationary economic policy of the euro zone.
Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
Gross domestic product (GDP) grew 3.0 percent in 2011, preliminary Federal Statistics Office data showed on Wednesday, below the previous year’s growth rate of 3.7 percent – the fastest since reunification – and in line with a Reuters poll estimate.
But GDP contracted by around 0.25 percent in the fourth quarter of 2011, an official from the Statistics Office added.
“Germany cannot isolate itself so easily from tensions within the euro zone. In addition the export sector is facing a difficult period given the fall in global demand,” said Joerg Zeuner, chief economist at VP Bank.
Harrison wrote in November in the New York Times
that Europe is already in a double-dip recession. Already two months ago, the Markit Eurozone Manufacturing Purchasing Managers Index, which measures activity across Europe in services and manufacturing, had fallen to 50.4, the lowest since September 2009. The divider between expansion and contraction is 50, so Europe was still expanding. But last Wednesday, Markit data indicated that the situation has since deteriorated; the latest data showed a drop in private sector activity in the euro zone for the first time since July 2009. Moreover, the data are poor in the core of the euro zone as well as in the periphery, with Germany and France’s economies stalling as well. The sovereign debt crisis and the fiscal consolidation implemented to deal with it have taken their toll.[..]
Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.
The downward spiral is evident throughout Europe with even the strong German economy feeling the effects of erroneous policies
The German economy expanded faster than any other Group of 7 nation last year, official data showed Wednesday, but the stress of the euro crisis and a slowing global economy appear to be already weighing on output.
Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.
Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.
And austerity measures in Greece are making their budget deficits even worse:
Greece’s budget deficit widened last year as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Thursday. The central government budget gap widened 0.8 percent year-on-year to 21.64 billion euros ($27.45 billion) last year, according to figures from the finance ministry.
David Dayen at FDL News Desk thinks it is probably worse since “the EU uses a different measure to assess the Greek budget.” He points out that even with increased taxes, the fall in tax compliance from an already lax system has reduced income. It all looks good on paper but that’s not the reality of what is actually in the treasury.
There is some hope that Europe’s leader are waking up to reality that there needs to be a growth strategy, although it may not be enough, or soon enough, to reverse the spiral.
It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an “optimum currency area”
It’s not just government, to “sovereign debt” but also excesses in the financial sector, real estate etc.
We must do everything to avoid recession. … We need a fiscal strategy that is “growth friendly”
Fiscal consolidation will not tell us to say “no” to all or which is cut everywhere. We must “prioritize”
We ask each member state to establish a “job plan”, we make commitments we can evaluate
The next meeting of the Eurozone member is the end of this month where a tax on financial transactions will be considered and, hopefully, they will discuss job creation and debt reduction.
Jan 03 2012
A stimulus plan for both the economy and democracy
For four years, since the start of the financial crisis, people have been asking the question, “Why is the economy so sluggish?”
There are all sorts of reasons, all sorts of reforms that could be implemented, but weren’t. However, one of the most important reasons seems to have been forgotten by almost everyone.
The experts keep telling us not to worry because “America has the most dynamic economy in the world.” Roughly translated, that means “Companies can lay off people at will.”
Those experts have forgotten that there are two factors in a “dynamic economy” and only one of them is labor. The forgotten factor is – competition – and the primary enemy of competition is monopolies, not labor.