Posts tagged with 'layoffs'
Weekly Audit: Unemployment Fueling Political Storm
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By Zach Carter, Media Consortium Blogger
Unemployment figures in the U.S. are staggering: The official rate stands at 10.2%, the highest in 26 years. A broader measure that includes people who are involuntarily working part-time or who have given up looking for work is at 17.5%. That’s a full-blown economic emergency.
But, as Joshua Holland explains for AlterNet, President Barack Obama’s response to the unemployment crisis has not matched the urgency of his response to the crisis on Wall Street. This isn’t just unfair, it’s bad economics. (more…)
Weekly Audit: Protect Consumers, Not Wall Street
By Zach Carter, Media Consortium Blogger
The economy is still getting worse. Foreclosures are surging above last year’s epic highs and the unemployment rate marches upwards every month. As the misery grinds on, Wall Street lobbyists and their allies in Congress are pushing hard to distract the public from the real causes of the current global economic crisis. Corporate America is trying to pin the blame for our empty pocketbooks on President Barack Obama and the phantom socialist menace, and cable news pundits are taking the bait. (more…)
Weekly Audit: Curbing Credit Card Abuses
by Zach Carter, TMC MediaWire Blogger
While the bank lobby continues to hold significant clout in Congress, President Barack Obama entered the fray on behalf of consumers Thursday, demanding that lenders put an end to abusive fees and predatory interest rates.
Writing for Air America, former Clinton Labor Secretary Robert Reich highlights parallels between credit card problems, which are just now starting to take a serious toll on bank balance sheets, and the subprime mortgage meltdown that triggered today’s economic crisis. In both cases, Reich notes, banks used a vast array of traps to trick people into high-interest loans they couldn’t afford. Now that credit card loans are also going bad and eating up bank profits, lenders have deployed another set of fine-print gimmickry to gouge borrowers and make up for the losses.
Banks are currently jacking up interest rates on previously accumulated credit card debt and charging outrageous fees for simple mistakes, like exceeding the credit limit. There is no law that says credit card lenders have to charge such fees—when a borrower hits the credit limit, the company could simply deny the transaction.
Lawmakers have protected the unfair credit card playing field for years. In 2008, a House bill to ban retroactive interest rate hikes, limit abusive fees and rein in deceptive marketing techniques passed by an overwhelming margin, but the banking lobby successfully prevented a similar measure from coming to a vote in the Senate. Sadly, as Mike Lillis emphasizes in The Washington Independent, policy observers are experiencing déjà vu on the current round of credit card legislation.
Earlier this year, the Federal Reserve finalized new regulations that would ban many abuses by credit card lenders, but the rules don’t go into effect until July 2010. This absurd delay was the source of much of the initial support for the legislation in Congress: lawmakers had hoped to protect consumers in the middle of a dangerous recession. While versions of the bill have cleared key committees in both the House and Senate, Lillis notes that the bank lobby has already exacted its pound of flesh, convincing members of Congress to delay the effective date of the legislation until—you guessed it—the middle of 2010. Lawmakers insist that the battle isn’t over, but we won’t know the result until the bills actually go to the floor for a vote, if they get voted on at all. No vote on the legislation is currently scheduled in either chamber.
Amid this Congressional stalemate, Obama met with credit card executives last week to emphasize his administration’s support for stronger regulations. Ezra Klein argues that the meeting bodes well for consumers in The American Prospect. The banking lobby routinely fights tighter regulation by claiming that stricter rules will lower profits, which, in turn, will force them to raise interest rates on other loans. If you reign in these abusive practices, the lobbyists say, we’ll have to raise interest rates on other borrowers. No administration in recent memory has bothered to challenge banks on the issue. A reporter raised the question at a press conference following Obama’s meeing with executives, asking whether the president believes there is a trade-off between credit card industry profits and consumer protection. Klein notes that Obama’s answer in the affirmative (“We think that it’s been out of balance.”) is a statement that has enormous implications for the policy debate, especially in the context of the president’s other comments on ensuring the extension of economically productive credit.
“We are confident that we can arrive at something that is commonsensical, something that allows the industry to continue to provide loans and to run a stable business model that’s not dependent on bubbles, that’s not dependent on people getting over-extended or finding themselves in over their heads,” Obama said.
Credit card companies clearly make a lot of money from these tricks and traps, otherwise they wouldn’t deploy them. If lenders could easily replace what they currently rake in with income from responsible loans, then there would be no trade-off between consumer protection and bank profits. But for lenders to argue that they need money earned by conning their customers is to admit that their business is dependent on predatory, economically destructive lending. This is not something that a company dependent on taxpayer support wants to acknowledge.
Obama, who has been very lenient with the banking industry, is essentially saying that banks have to earn their profits by playing a useful role in the economy, acknowledging that they have real obligations not just to their shareholders, but to the general public.
Obama’s sheer popularity will make it harder for members of Congress to water down regulations, but his willingness to play legislative hardball has already score a major victory over another key bank lobby priority: student loan subsidies. As Steve Benen notes for The Washington Monthly, the government has been giving money to private student loan companies for years in hopes that the funds are used to make responsible loans. In reality, the subsidies are squandered on executive compensation and shareholder dividends. As a solution, Obama proposed eliminating the bank handouts and replacing them with direct government loans to students.
The plan hit a temporary roadblock when Sen. Ben Nelson, D-Neb., tried to scuttle the legislation to benefit lenders in his home state. As Benen explains, the student loan proposal wouldn’t have cleared the Senate without Nelson’s support. With 60 votes needed for any proposal to clear a filibuster, Obama usually needs every Democrat he can get. But instead of diluting the plan to win over Nelson, Obama just went around him by forging an agreement with negotiators in the House and Senate. The student lending changes will be pushed through the budget reconciliation process, allowing the measure can pass the Senate with just 51 votes, a situation which all but guarantees passage of any measure.
If Obama can win so easily on student loans, he can win on credit cards, but he has to move quickly. Unemployment call centers are being completely overwhelmed by the volume of laid-off workers seeking relief. As Marty Durlin notes for High Country News, The Colorado Department of Labor and Employment is currently taking more than 10 times the call volume it received during the recession of the early 1990s. As job cuts continue to escalate, people are relying more and more on credit cards to fund necessities. The recession is happening right now. Reform can’t wait.
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.
Weekly Audit: Why the Current Stimulus Plan Isn’t Enough
by Zach Carter, TMC MediaWire Blogger
The U.S. economy just keeps getting worse. Given the absolute pummeling the job market has taken over the past five months, we’re going to need some much stronger medicine than policymakers are currently proposing. It’s increasingly clear that President Obama’s stimulus plan was devised for a far milder downturn, and this week we received further evidence of the recession’s high human cost.
The U.S. lost another 663,000 jobs in March, according to a report released by the the Labor Department last Friday. Most of us are getting used to seeing big numbers associated with this recession, but those massive layoffs are perhaps the most distressing statistics of all. Jobs matter most to ordinary people right now, as John Nichols notes for The Nation, and the primary measure of success for any economic policy is whether it will get people back to work. Nichol’s argument stands in sharp contrast to what much of the news media is using as its metric of success: the Dow Jones Industrial Average.
Speculators on Wall Street have pointed to the Dow’s recent upward trend as evidence that things are getting better. We’ll see if that uptick continues after the next round of quarterly banking losses comes in, but even if they do, Nichols emphasizes, happy speculators are not the same thing as a happy economy.
The national unemployment rate currently stands at 8.5% and, without a dramatic increase in government support, will likely be mired in double digits for years to come. Nobel-Prize-winning economist Joseph Stiglitz puts it succinctly in an interview at Salon: “This model no longer works. The Americans are completely over-indebted. They can’t increase their consumption, instead they have to save.”
The recession’s growing severity underscores a host of long-brewing economic problems, not the least of which is access to a college education. The cost of tuition has been steadily soaring for decades, but with the life savings of many families decimated by the housing bust, even relatively inexpensive state schools are out of financial reach, as Andy Kroll illustrates for Mother Jones.
“Simply to ensure that a child attends a four-year public university, a family in the country’s lowest-income bracket now has to pay, on average, 55% of [their] total income,” Kroll writes. That’s not 55% of disposable income, that’s 55% of what the family is taking in, period. President Obama has proposed some solid remedies for this issue—increasing federal grants for low-income students and replacing overpriced private-sector student loans with cheaper government loans, to name a few. But Kroll notes that it’s also important to divert more federal stimulus funds to states to increase the flow of need-based financial aid at public universities.
For many younger students, attending college takes a backseat to making sure they have a roof over their heads. One out of every 50 children in the United States is homeless. This problem will not go away on its own, Randy Jurado Ertll writes for The Progressive. Ending homelessness for children would cost just a fraction of what we’re paying to bailout the nation’s largest banks—there is no excuse for ignoring the issue in the next round of recovery funding.
The housing collapse continues to deepen, but some policies designed to help families keep their homes are quietly expiring. In a story for The Colorado Independent, Mary Kane points out that the moratorium on foreclosures imposed by mortgage giants Fannie Mae and Freddie Mac expired at the end of March. Foreclosure-related evictions are set to resume. Just as depressing: none of the mainstream media seems to have noticed.
As foreclosures escalate, one policy option that would keep families with a roof over their heads is being generally ignored by both the government and the banking world: renting. If, Kane notes, banks rented foreclosed properties to the borrowers who can no longer afford them, the most devastating impact of the foreclosure crisis could be averted.
But instead of dealing with actual problems, some Senators remain more focused on throwing money at rich people. The estate tax has actually surfaced in the recent haggling over the federal budget, Steven Benen notes for The Washington Monthly, a tax that only applies to the richest 0.2% of American families.
We’ve seen enough giveaways to wealthy people in the recent bank bailouts, and we know that they have extremely limited economic benefits. Steering the economy toward recovery will require a much more aggressive investment in the livelihood of ordinary Americans.
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.