Posts tagged with 'bankruptcy'
Weekly Pulse: What Would Jesus Insure?
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by Lindsay Beyerstein, Media Consortium blogger
Christian groups are trying to create a run around health care reform by setting up alternative, unregulated religious health care bill collectives—and movement conservatives are cheering them on.
Religious right-watcher Sarah Posner reports on so-called Christian health care-sharing ministries in the American Prospect. Health-sharing ministries (HCSM) bill themselves as godly alternatives to health insurance. HCSM are groups of Christians who promise to cover each other’s heath care costs. About a hundred thousand people nationwide belong to these collectives. The Alliance of Health Care Sharing Ministries and its army of lobbyists convinced Senate lawmakers to exempt HCSMs from health care reform’s individual mandate. (more…)
Weekly Audit: Congress Caves to Bank Lobby on Foreclosures
by Zach Carter, TMC MediaWire Blogger
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.
Bankruptcy Law is Key to Obama’s Foreclosure Fight
President Barack Obama unveiled his administration’s plan to fight foreclosures on Wednesday. Unfortunately, the most important element of the program will require Congressional action—and the banking and business lobbies are already on the attack.
The Homeowner Affordability and Stability Plan has three chief components:
- Offer financial incentives to persuade loan servicers to modify mortgages
- Allow Fannie Mae and Freddie Mac to refinance more mortgages
- Change bankruptcy laws and give judges the power to reduce the amount borrowers owe on their mortgages.
The financial incentives probably won’t help much, as Kevin Drum writes for Mother Jones. When a bank makes a mortgage, it doesn’t usually hold onto the loan. Instead, the loan is packaged into a security with a other loans and sold to several investors. Another bank collects payments on the mortgage for the security’s investors and acts as a point of contact, or loan servicer, for the borrower. To date, servicers haven’t shown much interest in keeping people in their homes, even though foreclosure is the worst option for all parties involved.
“Loan servicers already have an incentive to rework loans that would otherwise go into default, and for the most part they aren’t doing it,” Drum writes. “Will a couple thousand dollars [of incentives] change their internal calculus?”
The provision aimed at Fannie and Freddie will help some. It’s also a good use of the government’s authority over the companies, which were nationalized last summer. But the key to Obama’s plan is the bankruptcy provision. Until now, every government-enacted plan to reduce foreclosures has relied on incentives to encourage the banking industry to keep people in their homes. As Drum notes, bankruptcy is the stick behind those carrots. Obama is supporting a bill in Congress that would enable bankruptcy judges to reduce the amount a borrower owes to the present value of the home. The beauty here is that investors who own the mortgage securities, not taxpayers, will have to eat the losses. In short, investors will be held responsible for making a poor investment.
“The government is essentially presenting a choice for mortgage lenders: take our deal, which is standardized across the entire industry, or let a bankruptcy judge modify the loan however he or she sees fit,” Tim Fernholz writes for The American Prospect.
The bank lobby has been fighting the bankruptcy law change since the foreclosure crisis began in 2007, and they wasted no time lashing out at Obama’s proposal today. Elana Schor of Talking Points Memo highlights a nasty statement released by the U.S. Chamber of Commerce, one of “Washington’s biggest lobbying groups.” The release not only attacks the Homeowner Affordability and Stability plan, but takes a shot at Treasury Secretary Timothy Geithner as well, saying the policy “should have undergone a stress test to determine if it’s ready to stabilize a major portion of our economy.” Stress tests for the financial viability of banks were a big part of the murky bank bailout plan Geithner rolled out last week.
If Congress fails to pass a bankruptcy law overhaul, the entire plan will fall apart. And the record so far is not very promising—last year’s bill garnered only about half of the votes necessary to override a filibuster in the Senate.
Team Obama deserves credit for taking action on foreclosures, as John Nichols writes for The Nation. The Bush administration spent years vilifying troubled borrowers and then dedicated hundreds of billions of dollars bailing out banks. If Congress can’t pass bankruptcy law reform, the government should simply force banks to modify loans. The strategy would be simple—either keep borrowers in their homes, or return your check from the federal government.
“Ohio Congressman Marcy Kaptur and economist Dean Baker have some smart ideas,” Nichols writes. “They argue that the proper role for the federal government is not to fund mortgage negotiations but to insist that banks—many of which have already collected billions in taxpayer dollars—carry them out.”
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.