The U.S. economy is in big trouble right now, and the reform process may be missing a key point. When banks ran into severe trouble late last year, the government responded quickly with a massive bailout, but very little has been done to address a major structural flaw that has left our economy so vulnerable: rampant income inequality. In a system based on consumer spending, we have stretched consumers beyond their limit.

Former Labor Secretary Robert Reich argues that we are in for a long period of economic woe over at Talking Points Memo. Consumer spending accounts for about 70% of the U.S. economy, so when consumers go broke, everything shuts down. Ordinary Americans’ wages have been declining for decades, and the collapse of the housing bubble wiped out roughly $14 trillion in household wealth. Simply rebooting in the hopes that our simultaneous assault and dependence on consumer pocketbooks will work again will not be effective.

“This economy can’t get back on track because the track we were on for years—featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere—simply cannot be sustained,” Reich writes.

Strengthening our labor unions is probably the biggest single step the U.S. can take toward economic stability. And the best way to do that would be passing the Employee Free Choice Act, which would make it much easier for unions to organize by circumventing executive intimidation. Empowered workers can demand fair wages, decent benefits and help build a society that values all labor as an important part of collective existence.

In a profile of AFL-CIO leader David Trumka for The Nation, David Moberg presents a vision of an economy in which policymakers and voters are concerned with how much wealth exists and how that wealth is distributed. Widespread prosperity does not inevitably flow from technological or financial innovation if the resulting gains are diverted to a select few.

“In Trumka’s view, the unionism of the 1930s forged a social compact that made possible the middle class prosperity of the 1950s and 1960s,” Moberg writes. “But since the early 1970s, Wall Street and financial interests have dominated American politics, dismantling the compact and increasing inequality, debt and insecurity as workers struggled to keep up.”

It may be surprising for those of us who don’t work on Wall Street, but there is actually an enormously influential school of thought in Washington, D.C. that believes recessions are actually good for the economy. The reasoning goes something like this: When economies gorge themselves, something has to happen to correct the mistake—to “purge the rottenness from the system,” as Herbert Hoover’s Treasury Secretary Andrew Mellon once said. The idea has some level of intuitive appeal, but as Christopher Hayes writes for The American Prospect, it’s also a complete distortion of how recessions actually work.

“Economic contraction feels quite different to a bond trader and an unskilled worker,” Hayes writes. “A spike in unemployment hits those on the margins of the labor market the hardest, while contractions also usher in deflation, which has a strong tendency to make the rich richer.”

In reality, the government almost never makes the perpetrators of an economic collapse pay serious consequences. When the economy gets into trouble, the government usually takes emergency measures to avert a crisis, and then refuses to adopt reforms that would protect those dealt the most harm. It’s been this way for decades.

Not only have workers been neglected, but billions of their tax dollars have bailed out banks that ran themselves into the ground via predatory loans. But even that bailout money is not being used to help strengthen the broader economy. Writing for The Washington Independent, Mary Kane highlights a host of reports that indicate banks are  booting people out of their homes, and then refusing to care for the houses once they’re vacant. When homes are overgrown and infested with all kinds of critters, the value of nearby properties plummets. Banks are hurting completely innocent homeowners whose tax dollars helped bail them out.

We don’t even know the full extent of the favors the government has performed for financial firms. In a video for the American News Project, Lagan Sebert, Harry Hanbury and Mike Fritz detail some of the Federal Reserve’s unprecedented actions during the financial crisis. The Fed has lent out over $1 trillion to banks over the course of the financial crisis without disclosing who received the loans or what kind of collateral the Fed received in return.

Much of what we do know about the Fed’s rescue plans is disquieting, as William Greider, an economics journalist with The Nation, explains in the ANP video. When Bear Stearns collapsed in March 2008, the Federal Reserve Bank of New York negotiated a rescue plan in which JPMorgan would acquire the failed Wall Street icon in exchange for $30 billion in loss protection from the Fed. But JPMorgan would have been one of the hardest hit by a Bear Stearns collapse, and JPMorgan CEO Jamie Dimon sits on the board of directors at the New York Fed.

“Tim Geithner, who was then President of the New York Federal Reserve Bank and is now Treasury Secretary, was negotiating with his own board member,” Greider says.

Going back to labor: Hourly workers will get some much-needed relief later this month, when the federal minimum wage increases from $6.55 to $7.25 an hour, as Doug Ramsey explains for Public News Service of Arizona. While executives like to argue that raising the minimum wage is a job-killer, the fact is that no serious study has ever linked the two phenomena. Interestingly, the wage increase was not a response to the economic crisis. It was one of the first legislative victories for the Democratic Party when it won back majorities in the House and Senate in 2006.

Anybody who lives on less than $7.00 an hour can attest that the added income is a welcome improvement over the status quo. But $7.25 an hour is just $15,000 a year—not nearly enough to save for the future or pay for a serious medical procedure. Our economy is suffering because many, many ordinary people are living paycheck to paycheck. We have to create an economy where work and workers are given their fair value.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

Another stunning reminder of the U.S. economy’s dire condition arrived last Thursday. The nation shed a total of 467,000 jobs in June according to the Department of Labor. That’s 35% more than it lost in May. Despite talk about “green shoots” from Wall Street, a meaningful recovery with full employment and rising incomes is a very long way off. It’s time to start pushing another round of economic stimulus to help those searching for jobs get back on their feet, according to several independent media outlets.

The situation is grim, but not hopeless, as Ruth Coniff notes for The Progressive. The stimulus package Obama signed in mid-February was a good start, but it was designed to tackle a much less drastic economic downturn. Looking at the current slate of unemployment figures, Coniff reaches a clear conclusion: “The situation calls for a big new round of government stimulus spending,” she writes. And she’s right.

Steve Benen at The Washington Monthly offers a great, if depressing, translation of the unemployment data. Economists expected job losses to come in at 365,000, but were off by over 27%. June’s payroll declines pushed the unemployment rate to 9.5%, the highest level in 26 years. That would be bad enough on its own. But if you include people who’ve been out of a job for more than a year and the number of people who are working part-time jobs but want to be working full-time, the total number of unemployed climbs makes a whopping 16.5%. That’s the worst figure of its kind on record. If these figures don’t serve as a reality check for policymakers, nothing will.

In a blog post for The American Prospect, Tim Fernholz explains that the ever-rising unemployment rate is worse than it seems, because so many policies are based on rosier economic expectations. Remember the stress tests the government conducted to figure out how much more money banks would need to operate? The unemployment rate has now exceeded the worst-case scenario contemplated by those tests, meaning that banks are going to be strapped for cash for a long time. And cash-strapped banks don’t make loans. They sit on their money and wait for things to get better.

Banks have behaved very badly over the past decade, but they’re an important part of the recovery mechanism. Lending can get productive businesses off the ground and help existing enterprises meet payrolls and buy supplies. Indeed, the size of President Barack Obama’s economic stimulus package relied very heavily on a healthy financial sector actively lending money out into the economy. We’re watching a destructive feedback loop play out: the financial implosion has created massive job losses, and those job losses have made banks reluctant to lend, which forces businesses to lay off more people.

Some major long-term policy trends are playing out in the unemployment numbers, as Leo Hindery Jr. and Leo W. Gerard note for The Nation. The U.S. economy’s manufacturing base was hardest-hit, and has shed 13% of its workforce since the recession began. But we don’t make very much stuff in the U.S. anymore. The manufacturing sector has declined steadily over several administrations, and now represents just 11.5% of our total economy. Unfortunately, there is a limit to the number of service-sector jobs you can create or save when manufacturing is in a death-spiral.

And while Germany, Japan, South Korea and China all work to preserve their manufacturing operations,Hindrey and Gerard argue that the Obama administration hasn’t learned its lesson. The U.S. is fighting bank bailouts, which is deepening a global imbalance that leaves our economy vulnerable. Sure, we bailed out GM and Chrysler, but the bailout money has been devoted to shutting down dozens of factories and outsourcing jobs to other countries, as Mike Fritz and Harry Hanbury demonstrate in a video spot for American News Project. We have to make a dedicated public commitment to making useful stuff. Green energy and infrastructure are the right place to start.

But what do all these dire statistics and structural imbalances actually mean for ordinary people? AlterNet’s Rachel Neumann profiles Luz Guerra, a 52-year-old unemployed mother of a college student. Guerra left her last job to care for a sick family member and started looking for work in 2008. She has over 30 years of experience as an organizer and adult educator, covering topics from multicultural awareness to popular economics. These are skills that have a lot of social value that could help a lot of people in the current economy, if anyone were hiring. After months of searching in every sector from non-profits to retail, the 52-year old is running out of financial rope. She’s been surviving by racking up tremendous credit card debt and selling off her possessions, one by one. Now she faces foreclosure and the prospect of losing her health insurance coverage. This is what unemployment means. It’s not a lazy life for ne’er do wells. It’s a constant process of searching and interviewing, where even hard-working, accomplished people struggle to make ends meet as a result of enormous structural forces beyond their control.

We can’t just sit back and hope the programs the Obama administration has enacted will work. Air America carries a piece by prominent economist Dean Baker, who explains that the economic stimulus package has already doled out most of its support. Even though much of the government spending hasn’t taken place yet, the majority of the stimulus was composed to lower taxes and expanded benefits. This is as good as the first round is going to get.

If we’re serious about fixing the economy, we need to roll out a second stimulus package to promote plenty of manufacturing jobs and bring work to our workers.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

President Barack Obama rolled out his plan to overhaul financial regulation last week. While much of the Obama plan relies on the same regulators and structures that led to the current meltdown, there is one key exception. The establishment of an independent Consumer Financial Protection Agency would give ordinary citizens a seat at the financial policy table for the first time and prevent the abuses in credit card and mortgage lending that have wreaked havoc on households all over the country.

The new agency is the brainchild of Harvard University Law School Professor Elizabeth Warren. As chair of a key oversight panel for the Treasury Department’s bank bailout program, Warren has uncovered major deficiencies in the government’s handling of the plan, including nearly $80 billion in overpayments to bailed-out banks. American News Project features footage of an interview with Warren, who explains why we need a separate agency to regulate on behalf of consumers.

Several bank regulatory agencies, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision are already charged with writing and enforcing consumer protection rules for credit cards and mortgages, but have generally abandoned these duties to act as cheerleaders for their banks.The current structure’s problems are two-fold. First, the current regulators are funded by fees levied on the very banks they regulate. When there are several different bank regulators, regulators compete to offer the weakest oversight and attract more banks, and, in turn, more funding. The process quickly becomes a race to the bottom. When the subprime mortgage boom was surging in 2003, the OCC, a federal bank regulator, went to court to ensure that the state of Georgia’s tough predatory lending laws could not be enforced.

Second, the regulatory agencies tend to look at the health of the bank, rather than the quality of the loans it makes. If a commercial bank like Citigroup makes a really outrageous predatory loan, then sells that loan to an unregulated investment bank like Goldman Sachs, Citi’s regulator doesn’t particularly care. A new regulatory agency that answers exclusively to consumers rather than banks would be a very meaningful change for the financial system.

The rest of the overhaul is a little frightening. As William Greider explains for The Nation, instead of crafting explicit rules to curb obvious abuses, Obama’s plan relies very heavily on ceding power to the Federal Reserve. Under the new framework, the Fed would both oversee “systemic risk” in the financial architecture and regulate the banks that have become “too big to fail.” This, Greider emphasizes, is a very bad idea. The Fed has repeatedly proven itself to be uninterested in regulating banks. Citi needed $45 billion in direct cash infusions from the U.S. taxpayer and hundreds of billions of dollars in other guarantees to stay afloat, as Nomi Prins writes for Mother Jones. Who was charged with regulating the company and making sure such an outrage never occurred? The Fed.

In a video spot for GritTV, former senior banking regulator William Black argues that it makes little sense to allow banks to become too big to fail at all. Sturdier regulations are better than nothing, but the real solution is to break them up. “Why would we allow banks to be so big that they threaten the global economy?” Black asks.

Going back to Prins in Mother Jones: Elsewhere, the regulatory revamp is simply too vague to be helpful. Regarding derivatives—the financial weapons of mass destruction that destroyed AIG—it’s not clear if Obama wants to regulate the entire industry, or a small, meaningless fraction. Obama’s plan is to require that “standardized” derivatives are traded on exchanges and allow “customized” derivatives to escape investor scrutiny. But the Treasury never explains what the difference is between these “standard” and “custom” products, or how it will make sure banks don’t game the system.

Lest we forget, this crazy finance system brought us the worst economic calamity since the Great Depression. The unemployment rate, by conservative measures, is at 9.4% and rising. You may have noticed the stories about “green shoots” signaling the first inklings of economic recovery circulating through the media. But these signs are only promising, AlterNet’s Joshua Holland explains, if you take them completely out of context and ignore all of the other terrible news. The economy is in great shape … except for the millions of foreclosures that will take place this year, the skyrocketing unemployment rate, the decimated retirement funds, and the mountains of credit card debt weighing down the average U.S. consumer.

Serious consumer protections are nothing to scoff at, especially after watching an outbreak of predatory mortgage lending spawn an economic collapse. It comes as no surprise then, as Tim Fernholz notes for The American Prospect, that the bank lobby is already working to water down the new consumer protection agency’s powers. But even if a regulator for consumers makes the final legislative cut, with so many drastic problems in the current financial regulatory structure, the Obama plan simply does not do what is necessary to fend off another crisis.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

The banking lobby still holds enough sway inside the Beltway to torpedo sensible consumer protection rules, even after releasing a flood of predatory mortgages that kicked off the current economic crisis. On issues ranging from payday loans to subprime mortgages, the banking industry continues to successfully defend itself against new regulations that would protect the consumer. As if that weren’t outrage enough, the finance lobby has also joined other corporate interest groups to fund misinformation campaigns that smear unions and block wage growth.

As Mary Kane explains for The Colorado Independent, the push to rein in predatory mortgage lending appears to be losing steam on Capitol Hill. An extremely complex mortgage reform bill that is conciliatory to the finance lobby passed the House last month, angering consumer advocacy groups. Among the problems: the bill pre-empts many stronger state predatory lending laws and protects the Wall Street investment banks that gorged themselves on mortgage-backed securities.

Consumer protection shortfalls are not limited to messy mortgages. Lagan Sebert and David Murdoch detail the payday loan industry’s continued assault on U.S. consumers for the American News Project. By offering small loans, typically in amounts ranging from a few hundred to a few thousand dollars, payday lenders target consumers who need money for basic necessities, then charge them outrageous interest rates (as in, above 700%).

For years, newspaper editorials have denounced payday lenders for systematically exploiting the most vulnerable members of society, including members of the U.S. military, who are often targeted as a result of their reliable paychecks. The solution to the problem is as simple as the business is repulsive: Capping annual interest rates on all consumer credit products at 36% would make this kind of predation impossible.

Nevertheless, the payday loan industry has been able to escape a regulatory crackdown via an intense and sustained lobbying effort. Senate Banking Committee Chairman Chris Dodd, D-Conn., is now parroting payday lending lobbyists. Since payday loans are supposedly paid back within a matter of weeks, Dodd and the payday lending lobby say that it’s unfair to hold them subject to the same standards as a 30-year mortgage.

The argument is insane. No bank would ever get away with charging a 36% interest rate on a mortgage. Even the most predatory subprime mortgages didn’t have interest rates anywhere near that high. But Sebert and Murdoch go further, highlighting a report from the Center for Responsible Lending which found that payday lenders make 90% of their revenue from borrowers who do not pay their loans off on time. The loans are structured to be so expensive that consumers become trapped into making payments for the long-term, often spending thousands of dollars over multiple years to get out from under an initial loan of just a few hundred dollars.

Dodd has received major campaign contributions from the banking industry, but sometimes the lobbying effort is much more subtle. Several major corporate lobby groups have united under the misleading moniker of “Alliance to Save Main Street Jobs” to finance shoddily researched projects that defend the interests of the executive class in economic policy. An Alliance for Main Street Jobs report written by Anne Layne-Farrar has received quite a bit of attention for its claim that the Employee Free Choice Act (EFCA) would kill 600,000 jobs by making it easier for employees to organize. Several major news outlets have cited the allegation, including Fox News, MSNBC, The Wall Street Journal, and CBS News. As Art Levine reveals for In These Times, however, this research relies on completely meaningless statistical trends and disingenuous research design that render its findings utterly hollow.

Corporate executives are not afraid of EFCA because they think it will kill jobs or disenfranchise workers. They are afraid because it will empower workers to fight for living wages and provide safe working conditions—things that leave less money around for big executive bonuses at the end of the year and give workers a greater say in how companies operate.

In some respects, EFCA also represents the other side of the predatory lending problem. It is important to ban abusive loans, but it is just as important to make sure people are paid fairly for their work to ensure they don’t need to seek out shady credit just to make ends meet.

When so many brewing legislative battles relate to the economy, it’s easy to forget about the programs that have already been enacted. Some of the tax cuts included in the economic stimulus package were aimed at fostering investment in low-income and minority neighborhoods—a worthy goal. But as Michelle Chen notes for ColorLines, the program has some significant flaws. Chen highlights a report from the Government Accountability Office (GAO) which found that minority-owned community development entities are largely being excluded from the program, with approval rates about 67% lower than other applicants. The GAO could find no reasonable explanation for why minorities were not making the cut, especially when some recipients of the tax credits have a history of consumer exploitation. Capital One Bank, for instance, is receiving $90 million of these tax credits, despite its long history of abusive subprime credit card lending.

There have been some successes this year in the push for an economy that answers to workers and consumers. Much of the stimulus bill is designed to make sure important jobs don’t disappear during the recession, and Sen. Dodd’s credit card reform bill passed both chambers of Congress by comfortable margins and included some very strong improvements. But we know what caused the economic crisis: stagnant wages and predatory lending. A true recovery will have to empower workers and protect consumers, both of which will require breaking with the corporate status quo.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

Earlier this month, President Barack Obama rolled out a new plan to limit the use of offshore tax havens and crack down on corporate abuse of the tax system. These tax havens siphon over $100 billion a year from the government, and have allowed many U.S. banks to duck paying taxes despite receiving massive, taxpayer-funded bailouts. The president’s plan is far from perfect, but comes as a welcome acknowledgment of the unfairness embedded in the current tax code.

Corporate taxes are precisely the type of issue that mainstream media outlets prefer to avoid. Even though the government’s tolerance of corporate tax evasion is a major scandal, it takes time to explain the issue’s intricacies, and it’s easier to resort to pundit-jousting than to provide a detailed report on how companies are cooking the books.

Most discussions of corporate taxes are quickly distorted by focusing on the overall income tax rate for the wealthiest corporations. This rate is 35% in the U.S., which is relatively high when compared to other developed nations with complex economies. But corporate lobbyists have successfully pushed thousands of complex loopholes into the U.S. tax code, making the actual, paid tax rate much lower. In a battle between pundits, a talking head screaming “Thirty-five per cent!” tends to be more persuasive than an academic talking about offshore deferred compensation.

This sheer density of the tax code creates a destructive feedback loop for policymakers. “If the loopholes are very complicated, then the only people who know enough to argue over them will be the lobbyists dedicated to their preservation,” Ezra Klein writes for The American Prospect.

As a result of this information imbalance, lobbyists can convince Congress to gouge ordinary citizens, even when those lobbyists are representing companies dependent on taxpayer largess for their very existence. Financial firms are particularly fond of establishing small sub-corporations in the Caribbean to shield their income from the U.S. Treasury. By registering their headquarters in these tiny nations, companies pay tiny fees to their “home” country and shirk being taxed in the U.S.

Citigroup has received over $45 billion in direct capital injections from taxpayers and billions more in federal insurance, but as Jim Hightower notes, the banking behemoth has a total of 427 sub-corporations scattered around the globe, and they serve no purpose other than avoiding taxes.

It’s not as if these companies have actually moved their employees or their trading houses or their factories to these remote locales. Their existence outside the United States entirely a fiction of paperwork crafted by clever corporate lobbyists. About 400,000 companies are headquartered in the British Virgin Islands, and none actually do any business there.

“All 400,000 companies are located in one gray, two-storey building in the town of Tortola,” Hightower notes.

Similar situations exist in dozens of other tax-haven nations. The Cayman Islands have over 12,000 companies “housed” in a single building. As David Cay Johnston explains in The Nation, the Caymans bar these pseudo-firms from engaging in any business beyond hiding profits.

Corporate tax-dodging has real consequences. “Honest taxpayers have to make up for the revenues lost through this offshore cheating in three ways: we pay more in taxes, we get fewer government services and we incur rising government debt,” Johnston writes.

The practice also helps artificially inflate corporate profits—and fake profit-taking was one of the chief drivers of the current financial crisis. In an illuminating interview with GritTV’s Laura Flanders, former banking regulator William Black explains how top-level executives at major financial institutions used accounting gimmicks to score record bonuses at the expense of the greater economy.

“It was an epidemic of fraud lead by the CEOs, and they were using accounting to commit that fraud,” Black says.

Subprime loans have much higher interest rates than ordinary prime loans. This means subprime loans are actually worth more to banks, provided the borrower can actually pay the loan. An executive with an eye to his own paycheck might urge his company to gobble up massive quantities of subprime loans, according to Black, enabling the bank to book record profits for the few months or years that borrowers could actually keep up with their mortgage payments. Giant profits generate gigantic bonuses for the executives, so even when the company is destroyed by all this subprime binging, the executive walks away rich.

Executives also aligned the pay incentives of employees lower on the corporate food chain with this strategy, ensuring that lenders churned out as many loans as possible, regardless of quality. The result is a devastating chain of fraud starting at the Wall Street CEO and ending at the mortgage broker. In the below video for American News Project, Lagan Sebert outlines the operations subprime mortgage giant Ameriquest and their Wall Street enablers, Citigroup.

Obama deserves some credit for acknowledging that corporate tax-scamming is a problem—Presidents Bill Clinton and George W. Bush were happy to sign-off on laws that made it easier for wealthy companies to evade taxes. But Obama’s crackdown doesn’t go nearly far enough. His plan would only bring in about 10% of the revenue the U.S. Treasury Department thinks it is losing through these scams. If Obama is serious about restoring accountability to Wall Street, that commitment does not end with the tax code. It is equally essential for Obama to secure new regulations on CEO pay that tie compensation to meaningful, long-term profits instead of short-term risk-taking, and to hire financial regulatory officials who will not tolerate endemic fraud.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

On Thursday, lawmakers bowed to pressure from the bank lobby and killed a crucial piece of anti-foreclosure legislation, poisoning the economy in an effort to keep money flowing to Wall Street. Meanwhile, jobs continue to disappear, retirement accounts are evaporating and families are struggling to cope with economic hardship.

Last week’s turn of events proved that the U.S. Senate remains utterly beholden to the financial predators that created the current mess. You might think that after destroying the economy, bankrupting itself and then going on corporate welfare, the banking industry’s clout on Capitol Hill would have diminished. But you’d be wrong.

The American News Project’s Lagan Sebert recorded a lobbying strategy session at the Mortgage Bankers Association annual meeting in Washington, D.C. This is the lobbying team that  torpedoed the anti-foreclosure legislation, which would have given judges the power to revise the terms of unaffordable mortgages in court—a process the bankers refer to as a “cram-down”—and level the playing field for homeowners. As it stands, when borrowers fall behind, banks can use the threat of foreclosure to deny a sustainable long-term loan modification and continue to squeeze them for high monthly payments.

Snippets from the bank lobby meeting seem like some absurd surrealist parody of the U.S. political system, with lobbyists urging other bankers to give money to politicians and claiming credit for holding the economy hostage. “The cram-down vote may come tomorrow, and wouldn’t it be beautiful for it to go down to defeat while we’re up on the Hill,” says an animated David Kittle, Chairman of the Mortgage Bankers Association.

Such bad behavior on Wall Street, of course, has lead to the worst economic downturn since the Great Depression. The unemployment rate currently stands at 8.5% and is likely to go much higher when the Department of Labor makes its monthly report on the job market this Friday. As Emily Steinmetz explains for High Country News, high unemployment levels are much more than a statistic: They mean real hardships for ordinary people. In Arizona, food banks and churches have been overwhelmed by those seeking basic necessities like food and diapers. Steinmetz profiles St. Mary’s Food Bank, which distributed upwards of 19,000 emergency food boxes across the state in September alone. The boxes contain bare-bones items like canned vegetables, jars of peanut butter and bags of rice for families that cannot afford to eat.

In the below video, GRITtv’a Laura Flanders interviews Heather Boushey, senior economist at the Center for American Progress, about how the unemployment crisis is impacting families based on gender. Typically women are much more likely than men to dropout of the labor force when they lose their jobs, but in the current recession, record numbers of men are being laid off.

That’s creating not just a loss of income, since women still face a significant pay gap, but serious schisms when men find themselves unable to perform the role in the family they’re accustomed to playing. It’s also sowing seeds for political unrest: when people find themselves out of a job thanks to structural economic forces beyond their control and facing problems at home as a result of being laid off, it generates a lot of anger.

As University of Texas Economist James Galbraith writes for the Texas Observer, evaluating the economy means examining the links between the lives of ordinary workers and the operation of major institutions like the banking industry and government. When we pretend that there is no public interest in overseeing economically critical firms, when bank regulators hold press conferences in which they literally attack stacks of regulations with a chainsaw, Galbraith says, a resulting calamity for workers and families is predictable.

If this crisis has taught us anything, it is that what Galbraith refers to as “the ritual confidence of public officials and the dry numerical optimism of business economists” simply cannot be trusted without a deeper analysis of the plight of everyday citizens. Powerful people on both Capitol Hill and Wall Street spent the last decade insisting that everything was just fine, when in fact the entire financial system was falling off a cliff.

Writing for Mother Jones, James Ridgeway sketches a brief history of the retirement industry, revealing the steady migration from employer-provided pensions to 401(k) plans outsourced to Wall Street professionals. Ridgeway makes it hard to view the 401(k) industry as anything but a decades-long scam that has been shielded from serious scrutiny by the stock market growth from the early 1980s to 2007. Even the name “401(k)” comes from a covert loophole that was originally designed to help big banks avoid paying taxes.

In 401(k) accounts, workers have their money invested in stocks and bonds picked by a Wall Street fund manager, rather than receive guaranteed benefits from their employer. In return for this precious investment advice, the fund manager takes a bite out of any profits the worker’s 401(k) fund reaps, in some cases as much as 50% of the actual gains. This might not be so egregious if the fund manager made amazing stock picks that garnered huge returns for the worker, but most of these funds underperform index funds. Even high-performing funds are subject to the often arbitrary movement of financial markets. So when, say, stocks take a beating thanks to years of excessive risk-taking on Wall Street, worker accounts are devastated.

This continued influence of the banking establishment in Washington imperils not only our economy but our political legitimacy. When an industry transforms itself into a vehicle for economic destruction, the appropriate response is to crack down on abuse with new rules and regulations. Instead, lawmakers have ignored public cries for accountability and capitulated to the culpable elite, making it increasingly difficult to view Congress as a group of representatives acting for the public good.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

Some of the largest U.S. banks may be on the ropes these days, but the disparity between the plight of financial executives and ordinary Americans has never been starker. Over the past two decades, the banking system has grown accustomed to scoring massive profits by preying on its own customers, making 2009’s transition to pilfering taxpayer wallets an easy one. After burying the economy under a mountain of unaffordable debt, bank CEOs are now finding ways to subsidize their own paychecks with taxpayer bailout funds.

With over $550 billion in government money already dedicated to shoring up the financial system under the Troubled Asset Relief Program (TARP), it’s easy to wonder just what Wall Street and its highly-compensated executives actually do for the economy. Federal Reserve Chairman Ben Bernanke offered one explanation in a speech last week in Washington, D.C. At its best, Bernanke claimed, Wall Street innovates, creating new financial products that expand access to credit, making it easier to run small businesses and improving living standards for households. Armed with ever-expanding paydays, Wall Street has indeed innovated over the past thirty years, radically altering the economic landscape in the process.

But as Ezra Klein emphasizes for The American Prospect, much of Wall Street’s so-called innovation is sheer gimmickry. Financiers have intentionally designed loan contracts to be mystifying and complex to the ordinary consumer, tricking bank customers into racking up unaffordable levels of debt. From credit cards to credit default swaps, these new products have indeed signaled progress for bank balance sheets, but in many cases, banks have enjoyed outsized profits at the expense of the broader economy.

“Innovations are not always win-win,” Klein emphasizes. “They’re often win-lose.”

Of course, some financial stunts were so convoluted that many of the nation’s most revered financial brands– including AIG, Lehman Brothers, Bear Stearns and Wachovia– crumbled under their complexity. Today, something as simple as mortgage has become a byzantine, hard-to-value security, once Wall Street wizards bundle it together with hundreds of other mortgages and sell it off to dozens of investors. In the below video for American News Project, Lagan Sebert and David Murdock put a human face on Wall Street’s toxic assets, telling the story of Sandra Berrios, a mother of two who was conned into a predatory loan by a deceptive mortgage broker. The broker provided Sandra with documents promising her a 30-year fixed-rate mortgage, but instead sold her an outrageous adjustable-rate mortgage in order to collect a fee from Flagstar Bank, which actually funded the loan.

“We believed the broker . . . but what they were telling us was not the truth,” Berrios says.

Even though Flagstar has received $266 million in government bailout money, the company still refuses to renegotiate Berrios’ loan. While some money from TARP went to healthy banks, but Flagstar was truly desperate for the funding. The company’s stock is trading at around $1.00 per share thanks to fears over its financial stability, and Flagstar recently agreed to be acquired by a private equity company for still less to avoid complete financial ruin. The source of the company’s difficulties? Losses on loans like the one Sandra Berrios is struggling with.

Writing for The Nation, Christopher Hayes highlights a letter from a reader who questions malfeasance on the part of Goldman Sachs, which received $10 billion in taxpayer funds under the Troubled Asset Relief Program. Executives at Goldman recently decided to pay back the government before it paid off the investment from billionaire Warren Buffett, even though Buffett is reaping double the interest rate that the government is receiving from Goldman.

The scenario speaks volumes about just how lousy a deal taxpayers got under the bank bailout. Paying Buffett back first would clearly be the better deal for shareholders of the Wall Street titan, as it would save them years of payments at higher interest rates. But Buffett’s plan does not involve the same restrictions on executive compensation that are included under TARP. By prioritizing the TARP repayment, Goldman’s top brass are screwing their own shareholders to guarantee a bigger payday.

Exorbitant CEO compensation, especially on Wall Street, has played a major role in deepening income inequality in the United States. But even the onset of the worst recession since the Great Depression was cause for little alarm for top executives at American corporations last year, as Laura Flanders explains for GritTV.

“While wages and benefits have been going down for most Americans, more U.S. chief executives got pay raises than had their pay cut in 2008,” Flanders said, noting that “CEO’s weren’t just making more, they were making more while laying their workers off.”

Flanders notes that Citigroup CEO Vikram Pandit slashed 74,000 jobs at his company in 2008, but did not object to paying himself a whopping $38 million salary. The outrage is compounded by the fact that Pandit allowed his company to collapse last year, ultimately tapping taxpayers for multiple bailouts that have reached $45 billion in scope, an amount nearly three times Citigroup’s current stock market value.

The financial system doesn’t have to be a contest between citizens and executives. There is no good reason why responsible regulations cannot be enacted to rein in CEO pay, ban socially destructive lending practices and reduce the influence of banking behemoths on public policy. We’d all be better off with that kind of innovation.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

While the national economy struggles under the weight of a massive bank bailout effort, the banking lobby’s ability to influence public policy is more problematic than ever. The too-big-to-fail bankers may be dependent on U.S. taxpayers for their survival, but corporate lobbyists still have members of Congress, the Treasury Department and the Federal Reserve asking the banks’ permission to bring the Big Finance behemoths under control. The relationship between Wall Street and the government is so out of whack that it’s difficult to distinguish the political players from the panhandlers.

In Mother Jones, Daniel Schulman and Jonathan Stein detail the ease with which important congressional staff switch careers and move into the banking sector. In recent years, dozens of key staffers for powerful Senators have left the political arena to work for as lobbyists for the financial sector, and policy gurus from both sides of the aisle are jumping ship for lucrative careers as influence peddlers on Wall Street.

“Financial firms seeking big bucks and favorable terms from Congress and the White House are deploying Capitol Hill aides turned lobbyists to win favorable treatment from the congressional lawmakers,” Schulman and Stein write. Many lawmakers, including Senate Banking Committee Chairman Chris Dodd, D-Conn., are refusing to disclose whether they’ve had contact with former staff who now work for Wall Street. Small surprise, then, that so many of the recent bailout packages have allowed failed bank CEOs to stay in power and saved their shareholders from bad investments in inept, even predatory, companies.

Sometimes these reinvented bank defenders are even former Senators. Susan Douglas of In These Times highlights the career of former Sen. Phil Gramm, R-Texas, who is currently a lobbyist for UBS. The Swiss banking giant has been plagued by a seemingly endless stream of scandals over the past year, for everything from diamond smuggling to tax fraud. And Gramm helped push for looser predatory lending laws—including those pertaining to the now-decimated mortgage sector—while he on the UBS payroll.

This would be a shameful legacy for any former public servant, but for Gramm, Douglas notes, this behavior is particularly disgraceful: his two chief legislative “accomplishments” helped create and intensify the current financial crisis. Gramm co-authored the Gramm-Leach-Bliley Act of 1999, which compounded the financial world’s too-big-to-fail problem by letting traditional commercial lenders like Bank of America and Citigroup buy up riskier, unregulated investment banks like Merrill Lynch. Gramm then pushed the Commodity Futures Modernization Act of 2000 through in a midnight budget amendment, a tactic which made sure that “credit default swaps” were not subject to either securities regulations or gambling laws. Just eight years later, credit default swap gambling destroyed insurance giant AIG, to the dismay of taxpayers everywhere.

When lawmakers stop cowing to the bank lobby and start answering to their constituents, the result is a big boost for the entire economy. Last week, committees in both the House and Senate dealt the credit card industry a rare defeat by approving bills that crack down on abusive credit card billing practices. Even though Sen. Dodd insists keeping his lobbying contacts a mystery, he is capable of crafting responsible legislation. The bills were introduced by Dodd and Rep. Carolyn Maloney, D-N.Y., but still face major uphill battles clearing the full House and Senate.

As Harry Hanbury details for the American News Project, conservative lawmakers and bank lobbyists are already hard at work watering down the legislative language to ensure that it will not actually curb any abuses if enacted. Take a look:

The bills would ban dozens of billing gimmicks that are as outrageous as they are common, including raising interest rates on credit card debt after it has been accumulated and hiking rates due to completely unrelated activity, like returning a library book late. The banking industry deploys a lot of clever words to mask the predation inherent in the tactics, and most common of all are the terms “price according to risk” and “risk-based pricing.” These phrases make it sound as if all the poor little credit card companies want to do is set interest rates at levels appropriate for a borrower’s credit profile. Of course, that’s not what’s actually happening: lenders are radically changing the terms of loan agreements for no other purpose than to gouge borrowers, and give borrowers no say in what happens.

It’s crazy that banks are legally permitted to raise interest rates on cardholders after they have charged debt to their credit card. If you pay full price for anything else—a shirt, a bag of groceries, a guitar—it would be laughable if the shop clerk demanded more money from you months later.

Banker apologists insist that banning these practices will restrict the flow of credit. But more credit cards will not fix a problem caused by massively over-indebted consumers. We need higher wages, not a fresh flood of predatory, high-interest debt.

But if taxpayers can win on credit cards, we can win on the bailout, too. Yes! Executive Editor Sarah van Gelder posted an open letter to President Barack Obama this week, citing half a dozen economic experts and urging him to change his bailout strategy before it’s too late. “Watching your appointees’ latest bank bailout makes me wonder if all your administration’s good work on health care, education, and jobs will be swept away by the extraordinary giveaway of trillions in taxpayer money to a group of powerful Wall Street operatives,” van Gelder writes.

And indeed, in other arenas of economic policy, the president has made significant steps in the right direction. While Obama’s proposed federal budget is less than perfect, it moves away from some of the worst trends of the past eight years. GritTV’s Laura Flanders details some of this progress in a roundtable discussion with Irasema Garza, President of Legal Momentum, former New York Times reporter David Cay Johnston, and New York City Coalition Against Hunger Director Joel Berg. By implementing robust job creation plans and a massive increase in anti-hunger and nutrition programs, Obama has signaled that the plight of those hardest hit by the recession cannot simply be ignored.

But these positive budget strides do not involve the banking lobby, which still maintains a stranglehold on any realm of U.S. public policy it can loot for a profit. Obama standing up to the financiers is not an improbable pipe dream, it’s a prerequisite for economic recovery and a necessary step toward rebuilding the integrity of our democracy.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

The stimulus package may be an absolutely essential step for fending off economic catastrophe, but it does nothing to overhaul the deeply flawed structure of our economic system. “In unleashing a flood of deficit spending and avoiding tax increases, the legislation didn’t threaten moneyed interests, didn’t alter the existing economic topography, and therefore didn’t attract the withering hostility from business groups that typically prevents ‘hope’ from becoming ‘change,’” David Sirota writes for Salon.

The Obama team seems to be considering nationalizing big, troubled banks temporarily, a prospect which was politically unthinkable just a few weeks back. Progressives have been pushing nationalization hard and it seems to be working. Several Republican Senators are supporting the idea, as temporary nationalization is already government policy for smaller banks that don’t employ massive lobbying teams.

But getting Obama and Treasury Secretary Timothy Geithner on board is only half the battle. In a piece for The Nation, Thomas Ferguson and Robert Johnson detail how hedge funds and private equity firms hope to capitalize on a big bank nationalization policy by using political clout to score unfairly cheap prices from the government.

“Much of the wind in the sails of this new push comes from private equity firms like KKR, Blackstone, or their political allies, mostly, though not entirely within the Republican Party,” Ferguson and Johnson write.

When the government nationalized troubled banks with the Resolution Trust Corp. under President George H.W. Bush, politically connected investors made out like bandits when the government resold the banks into the private sector. It is important that this corruption not be repeated. We don’t tolerate our politicians doing favors for wealthy constituents, and we shouldn’t allow our financial regulators to do so either.

The current recession has roots in excessive consumer debt—some of it predatory, some of it spawned by consumerism run amok. U.S. economic well-being has depended on destructive and environmentally unsustainable spending habits of its citizens for too long. Writing for In These Times, Terry Allen notes that “our own addiction to consumerism and failure to save tie us to debt and stress.” While consumer spending kept the economy from crashing until last year, it was very bad for individual households.

Over at The American Prospect, Matthew Yglesias discusses the global implications of lower levels of U.S. consumption. As the U.S. consumes less product, there will be major consequences for economies that rely on U.S. demand. Yglesias emphasizes that the current downturn is fully global, unlike every U.S. recession since the Great Depression. Potential solutions will have to involve coordinating policy responses with other countries to ensure that everyone is shouldering the stimulus load—and to help everyone adjust to an era in which U.S. consumers buy less stuff.

As Nomi Prins explains in Mother Jones, Wall Street bankers have always had a knack for bestowing lavish compensation upon themselves. Bonuses are routinely based on ill-conceived criteria that focus on short-term gains and create unnecessary risk. The key reforms, Prins says, do not merely involve capping executive compensation for bailed-out firms, but regulating bonus compensation and imposing heavy taxes on it in both good times and bad.

In recent years, Wall Street has dealt homeowners an absolutely devastating blow with various exotic mortgage schemes, but another major housing crisis is now looming for renters. Despite an overabundance of sprawling suburban developments, U.S. cities are facing a dramatic shortage of affordable rental housing. As hard as the economic crisis is for homeowners, those who rent in urban areas are being hit even harder. Many renters who cannot afford to buy a home under still face housing hardships today.

In the below video for American News Project, Garland McLaurin and Mike Fritz reveal the dire straits currently facing federal affordable housing programs. The Department of Housing and Urban Development, known as HUD, received a significant funding boost under Obama’s economic stimulus package—its $40.4 billion 2009 budget was supplemented by $13.6 billion. But thanks to years of neglect and political cronyism under the Bush administration, HUD housing units have a backlog of at least $22 billion in needed repairs, which severely hinders HUD’s ability to expand operations.

And the number of affordable rental housing units falls well short of what is needed. McLaurin and Fritz highlight Baltimore in their video, a city that has roughly 30,000 subsidized housing spaces, but will require 60,000 more to built in order to meet the city’s needs.

The proliferation of subprime mortgages was one of the chief drivers of the foreclosure epidemic. They seem absurd in retrospect. Lenders charged people with relatively weak credit scores higher interest rates to counter the risk in making loans to people with bad credit. But since credit scores are fairly closely linked to income level, lenders were essentially charging people with less money more than they would have charged an ordinary borrower. Not surprisingly, that business model is now completely destroyed.

But, as Daniel Fireside reveals in Yes! Magazine, there is a more effective way to expand access to homeownership, one that relies on charging—shock!—less for homes. Several U.S. cities now make use of non-profit land trusts to lower the costs of homeownership.

Here’s how it works: The land trust purchases a swath of property and builds housing on it if none already exists. The trust then sells homes to new homeowners, but does not sell the underlying land. The trust negotiates mortgages with banks on behalf of low-income borrowers. By using the land equity as part of the mortgage calculation, the necessary down payment is dramatically reduced. As a result, the home never falls into the hands of real estate speculators and the cost of owning a home falls by around 25%. If borrowers ever run into trouble on their loan, the trust works with them and the bank to fend off foreclosure. Land trusts feature foreclosure rates 30 times—not 30 percent, 30 times—lower than the national average.

Each of these initiatives is absolutely essential and will, unfortunately, involve brutal policy battles. Many people make a lot of money from the status quo. Let’s hope Obama has the political clout to tell corporate opportunists that the times are a-changing.

This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.