The Wealth Gap: Chickens, Pots, and the American Dream

Regardless of how the economy is doing it seems the super-rich come out ahead. The rest of the nation, not so much.

If you’re on the lowest economic rung you might as well just step off now, because your life is getting steadily worse – even if you’re only there “temporarily” while you’re laid off from a job that’s not coming back, waiting for the foreclosure notice, or for the repo-man to come for your car or first-born child – whichever fetches the most money. You folks living in homeless encampments have no worries at all, malnutrition and illness will kill you off soon enough. And hey – no death panels to worry about thanks to the reforms of the healthcare reforms!

You folks in the middle? Sure, you have to work two or three jobs but the foreclosure notice hasn’t arrived yet. You’ll squeeze another 50,000 miles out of your AMC Gremlin, while choosing which meal to forego to pay BP for $3.00 per gallon (and rising) gas. Yes, you’re worried about a leak in the roof, but you’ll cover it with a cheap tarp. Besides, if it causes damage it won’t be your problem when your friendly CitiBank “wealth manager” breaks drops in to get the key.

His house. His leak.

The Express Elevator to Fabulous Wealth
But those folks on the top? They’re not even on the ladder anymore. They’ve  jumped in a plush, express elevator that goes so high it doesn’t even have up buttons. However, they keep the elevator operator because, well, why not? He tells good jokes and they can afford him.

Many people think this outsized upper-end income growth is just fantastic. It’s the American way they say. It’s what the free market dictates they explain. Besides, they can’t be expected to “compete” with Chinese prison labor without the “efficiencies” (layoffs and declining wages) for which they’ve so handsomely rewarded themselves. Oddly enough, this view happens to be most prevalent among those who are making the big bucks.

Who could’ve guessed?

But as the folks in the newly remodelled corner offices take off for their Aspen homes via private dirigible, the US wealth gap grows and their inflated sense of self-worth shines like a new Maserati.

The World According to Greenspan
You hear about the wealth gap sometimes, mostly from those “liberal” media outlets like the Wall St. Journal. But now even Ayn Rand‘s evil spawn, Alan Greenspan, is sensing a little irrational exuberance in the wage disparity.

He understands that when the proletariat complains about The Suits’® penchant for uber-high living and not having a clue about what the average American puts up with, it’s more than just a case of sour grapes. He can see that if we expect to put a chicken in every pot, we need someone to grow the grain to feed the chickens and make the pot in which to cook them. Today, many don’t even have the pot left to piss in and they get their chicken on KFC’s liver and gizzards night.

The thing is that Ayn Rand and hundreds of executives notwithstanding, we’re close to killing the chicken and that’s bad for 100% of workers. The market for chickens and pots is pretty small when it’s restricted to the Top 1 Percenters®. But, the other 99%? Now that’s a big market, but nobody’s going after it except the Top 1 Percenters® who are the only ones left with enough cash to make the weekly chicken and pot-buying trip to the Super Wal-Mart.

Dear rich and powerful persons, feast well because you’re steadily choking your own chicken.

Cross posted at The Omnipotent Poobah Speaks!

 

 

 

The Wealth Gap: Chickens, Pots, and the American Dream

Regardless of how the economy is doing it seems the super-rich come out ahead. The rest of the nation, not so much.

If you’re on the lowest economic rung you might as well just step off now, because your life is getting steadily worse – even if you’re only there “temporarily” while you’re laid off from a job that’s not coming back, waiting for the foreclosure notice, or for the repo-man to come for your car or first-born child – whichever fetches the most money. You folks living in homeless encampments have no worries at all, malnutrition and illness will kill you off soon enough. And hey – no death panels to worry about thanks to the reforms of the healthcare reforms!

You folks in the middle? Sure, you have to work two or three jobs but the foreclosure notice hasn’t arrived yet. You’ll squeeze another 50,000 miles out of your AMC Gremlin, while choosing which meal to forego to pay BP for $3.00 per gallon (and rising) gas. Yes, you’re worried about a leak in the roof, but you’ll cover it with a cheap tarp. Besides, if it causes damage it won’t be your problem when your friendly CitiBank “wealth manager” breaks drops in to get the key.

His house. His leak.

The Express Elevator to Fabulous Wealth
But those folks on the top? They’re not even on the ladder anymore. They’ve  jumped in a plush, express elevator that goes so high it doesn’t even have up buttons. However, they keep the elevator operator because, well, why not? He tells good jokes and they can afford him.

Many people think this outsized upper-end income growth is just fantastic. It’s the American way they say. It’s what the free market dictates they explain. Besides, they can’t be expected to “compete” with Chinese prison labor without the “efficiencies” (layoffs and declining wages) for which they’ve so handsomely rewarded themselves. Oddly enough, this view happens to be most prevalent among those who are making the big bucks.

Who could’ve guessed?

But as the folks in the newly remodelled corner offices take off for their Aspen homes via private dirigible, the US wealth gap grows and their inflated sense of self-worth shines like a new Maserati.

The World According to Greenspan
You hear about the wealth gap sometimes, mostly from those “liberal” media outlets like the Wall St. Journal. But now even Ayn Rand‘s evil spawn, Alan Greenspan, is sensing a little irrational exuberance in the wage disparity.

He understands that when the proletariat complains about The Suits’® penchant for uber-high living and not having a clue about what the average American puts up with, it’s more than just a case of sour grapes. He can see that if we expect to put a chicken in every pot, we need someone to grow the grain to feed the chickens and make the pot in which to cook them. Today, many don’t even have the pot left to piss in and they get their chicken on KFC’s liver and gizzards night.

The thing is that Ayn Rand and hundreds of executives notwithstanding, we’re close to killing the chicken and that’s bad for 100% of workers. The market for chickens and pots is pretty small when it’s restricted to the Top 1 Percenters®. But, the other 99%? Now that’s a big market, but nobody’s going after it except the Top 1 Percenters® who are the only ones left with enough cash to make the weekly chicken and pot-buying trip to the Super Wal-Mart.

Dear rich and powerful persons, feast well because you’re steadily choking your own chicken.

Cross posted at The Omnipotent Poobah Speaks!

 

 

 

Boosting the Economy--One Big Screen TV at a Time

 

by Walter Brasch

 

          Even the most casual observers would believe that the U.S. is making an economic recovery if they saw the hordes descend upon retail stores on Black Friday.

           Americans began lining up four hours before the stores opened as early as midnight. And they weren't shopping just for necessities. Sale of large-screen TVs and video games were up significantly from two years ago. The consumer Electronics Association predicts a 4.1 percent increase in sales over a year ago.

           About a third of all American adults shopped on Black Friday, up from slightly more than one-fourth of all Americans a year ago, according to analysts from Goldman Sachs.

           About 80 million Americans went into retail stores on Black Friday, according to the National Retail Federation (NRF). These Americans spent about $10.7 billion in retail stores, slightly more than last year, according to research analysts at ShopperTrak. For the three-day weekend, sales were about $20.5 billion. Not included in the ShopperTrak data were sales from major retail discounters, including Walmart and Target. Walmart reported sales up 30 percent from last year.

           Sales were pushed by online purchases. PayPal reports online sales increased 27 percent on Black Friday from a year ago. FirstData says sales from credit and debit cards rose 8.6 percent from last year. Overall, retail and cyber sales are expected to increase 2.3 percent from 2009, to $688.9 billion this year, according to data from the NRF.

           But, Black Friday spending isn't the only indicator of a recovering economy. The non-partisan and impartial Congressional Budget Office (CBO) reports that the Recession that began in 2007 probably ended late last year.

           Overall, the economy is up 2.8 percent in 2010, according to the CBO. Bloomberg, Wells Fargo, and Morgan Stanley, plus dozens of others who track the economy also show at least a 2 percent increase this year, with at least a 3 percent increase next year. Even the conservative Wall Street Journal points out the economy is up 2.5 percent, with a 2.8 percent increase predicted for 2011. The National Association for Business Economics, analyzing data collected by 51 professional economists, notes the gross domestic product grew about 2.7 percent this year, and will rise 2.6 percent next year.

           In related data, the Dow Jones average, which plunged at the end of the Bush–Cheney years, is up about 10.5 percent in the past six months. The CBO reports that although unemployment is hovering at 9.6 percent, without the Obama Administration's stimulus plan, unemployment would be between 10.4 and 11.6 percent.  By the end of 2011, unemployment is expected to drop to 8.7 to 9 percent, according to several major analysts, including the Wall Street Journal.

           Since December 2009, employment in the private sector has risen

by 1.1 million, according to the Bureau of Labor Statistics. About 2.5 million jobs are expected to be added in 2011, according to the American Bankers Association’s Economic Advisory Committee  Unemployment, according to the ABA, should decline to about 8.5 percent.

           But, there are still almost 15 million unemployed, most of whom saw their companies downsize or send jobs overseas. At the same time that Congressional Republicans blocked extending unemployment benefits, they have protected the wealthiest 2 percent of Americans. Under the Obama plan, individuals earning less than $200,000 a year would continue to receive the Bush-era tax cuts. The cost to protect the rich would be more than $3 trillion over 10 years. It appears that President Obama, under heavy political fire, will yield to the Republicans, who campaigned heavily on a promise to cut spending—except for their own special interests, of course.

           Related to the unemployment problem, more than a million Americans, will lose their homes to foreclosures. The sub-prime mortgage crisis began when government regulators and the Bush–Cheney Administration disregarded numerous warnings and then fell asleep while financial institutions became even more greedy between 2006 and 2009, and lured millions into a false sense of security.

           Overall, America is slowly on the path to recovery. But, to those who lost their jobs and then their homes, it just doesn't seem that way.

  

Weekly Audit: Foreclosuregate Hits Home

 

by Lindsay Beyerstein, Media Consortium blogger

Earlier this month, Bank of America (BOA), the country’s largest bank, announced a moratorium on foreclosures in all 50 states.

The bank promised not to sell any foreclosed homes or take any more delinquent borrowers to court until it had reviewed its potentially defective foreclosure process. Other major lenders soon announced that they too were suspending foreclosures in dozens of states. Why are the biggest banks in the country voluntarily calling for a time-out? It’s a hint that we’re facing a huge problem: The banks aren’t sure if they have the legal right to foreclose on millions of homes.

Here’s what’s new in foreclosuregate since the Audit took up the story last week. The Bank of America announced that it would resume some foreclosures on Oct. 25, having deemed its own methods sound. The stock market begged to differ. BOA’s stock fell over 5% on Thursday and other bank stocks also took a beating, as did mortgage bonds. This pattern indicates that investors are very worried about the effect of the foreclosure crisis on the health of the banks.

Rep. Alan Grayson (D-FL) is calling for a foreclosure moratorium under the new Financial Stability Oversight Council (FSOC), as Ellen Brown reports for Truthout. The FSOC has the power to preemptively break up any large financial institution that threatens U.S. economic security. Grayson wants a moratorium on all mortgages securitized between 2005 and 2008 until the FSOC can determine which foreclosures are valid and which are bogus.

The missing link

So, what kind of “defects” in the foreclosure process are we talking about? Fraud, basically.

Zach Carter of the Campaign for America’s Future explains to Chris Hayes of the Nation why Bank of America and other major lenders are in so much trouble: They are just administering loans for other lenders. You make your check out to the Bank of America, but the bank is just babysitting after the loan for the bondholders.

The real creditors are the investors who own bonds made up of pieces of many different mortgages, including yours. The bond gives the bondholder a share of the money that you and other borrowers pay each month.  If you don’t pay, BOA initiates foreclosure. If you’re late, BOA charges you fees.

However, the bank can’t just hire a foreclosure company to take your home away on a whim. The bank must first show proof that it is entitled to foreclose because you’ve defaulted on your mortgage in the form of a mortgage note. If you hold one of those toxic asset mortgages, there’s a good chance the bank doesn’t have the note.

As Dean Baker explains in Truthout, in many, if not most, cases, “liar loans” (mortgages issued with no proof of income or assets) have become given way to “liar liens” (foreclosures with no proof of default).

According to Carter, all the big banks have been hiring foreclosure mills to rubber-stamp their claims without checking. Unscrupulous foreclosure companies are admitting to “robo-signing,” i.e., foreclosing without even checking whether the bank’s claims were legit.

Foreclosuregate

According to Andy Kroll of Mother Jones, the Bank of America stands to lose up to $70 billion over what’s come to be known as “foreclosuregate.” A mortgage starts out with an originator, typically a bank or a mortgage broker. In the heyday of mortgage-backed securities, investment banks were buying up hundreds of thousands of mortgages, making them into mortgage-backed bonds, and selling them to investors.

Unfortunately, if the bank doesn’t have the note, who does? The mortgage originator may have gone bankrupt, many were fly-by-night operators that folded when the housing bubble burst. Many mortgages were bought and resold more than once before they found their way into a mortgage-backed bond.

So, the question is whether the bank really owned the mortgages it made into mortgage backed-securities and sold to individuals, pension funds, and other institutions. If not, the banks stand could be on the hook for selling assets they didn’t actually own to investors.

Moratorium now

The scandal affects so many mortgages that some lawmakers are calling for a nationwide moratorium on foreclosures until investigators can sort out who owns what once and for all. Rep. Edolphus Towns (D-NY) told Amy Goodman of Democracy Now! that Congress needs to stop banks from putting people out on the street until there is some way to differentiate between fraudulent foreclosures and justified ones:

And so, I just think that people who are saying that this is going to hurt—I think that it’s going to help, because once people gain confidence in the fact that they’re being treated fairly and that there’s no discrepancies in the records, then people will feel very comfortable in terms of trying to move forward. But until that happens, you’re always going to have these comments about the fact that that was not done right, it was done unfairly. And, of course, I think there’s enough here for us to stop and to pause and to say, let’s take a look here before we move forward. So a moratorium is definitely in order.

The Obama administration opposes the moratorium on the grounds that it would hurt the housing market and thereby slow the economy. Towns counters that what would really be bad for the economy is letting banks take people’s homes away without any semblance of due process. If the government doesn’t act to protect the innocent, foreclosuregate could shatter the confidence of potential home buyers. Would you want to invest in a house if you were afraid the bank could just take it away from you?

In AlterNet, Mike Lux argues that fraudulent foreclosures are one more assault on poor and middle class Americans. He argues that the banks are so used to being coddled by Washington that they’re counting on legislators to retroactively change the rules to protect them from the consequences of their own devious behavior.

At this point we don’t know what percentage of foreclosed-upon homes have simply been stolen by banks to pay bondholders, but we do know the problem is vast and systemic. The Obama administration is content to let the banks seize private property first and ask questions later. We need a moratorium to take stock and restore the rule of law.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

Weekly Audit: Will Obama Save Homeowners From Wall Street’s Latest Fraud Scheme?

by Zach Carter, Media Consortium blogger

A massive foreclosure fraud scandal is rocking the U.S. mortgage market. Wall Street banks and their lawyers are fabricating documents, forging signatures and lying to judges—all to exploit troubled borrowers with enormous, illegal fees, and in some cases, improperly foreclose on borrowers who haven’t missed any payments.

The fraud is so widespread that it could put some big banks out of business and even spark another financial collapse. Fortunately, things haven’t fallen apart just yet. With strong leadership from President Barack Obama and Congress, the government can help keep troubled borrowers in their homes and prevent another meltdown.

One fraud begets another

As Danny Schecter emphasizes in an interview with GRITtv’s Laura Flanders, this mess is just one element of a broader, criminal fraud at the heart of the foreclosure fiasco and resulting financial crisis. Banks pushed fraudulent loans onto borrowers during the housing bubble because the loans could be packaged into mortgage-backed securitizations and pawned off on hedge funds and other banks. Banks made a lot of money from this process, until the mortgages went bad and the fraud-packed securities plummeted in value.

Document drama

At the heart of any mortgage is a document called “The Note”, which lays out the terms of the mortgage and the kinds of fees that banks can levy against borrowers if they fall behind on their payments. Owning the note also gives banks the right to foreclose when a borrower stops paying.

The trouble is, in an effort to cut costs and boost bonuses, banks haven’t kept actually kept track of the note—in fact, they’ve actively destroyed the document so they don’t have to deal with filing it. Now that mortgages are going bad, banks are taking advantage of the documentation vacuum they created to levy massive, illegal fees on borrowers both before and during the foreclosure process. They do this by manufacturing fake documents, forging signatures, and getting bogus signatures from notaries to approve sham documents.

This is all terribly unfair to borrowers. In some cases, illegal fees push borrowers over the edge into foreclosure, while in others, borrowers get saddled with tens of thousands of dollars in illegal fees after getting kicked out of their home. The situation is a national disgrace.

Failure to produce

But the situation also creates legal liabilities that can push banks into failure. If banks can’t pony up the note, they don’t have the right to foreclose—not without some serious, expensive legal maneuvering. And what’s more, if the banks who created these shoddy securities can’t supply notes, investors who bought the securities can force losses back on the banks that created them. Given that there are $2.6 trillion in mortgage-backed securities out there, banks are very worried that losses and lawsuits stemming from shoddy documentation could spark another round of major financial turmoil.

The sheer lack of documentation makes it very difficult for investors to decipher which banks are exposed to loads of red ink, and which banks are not. That’s a recipe for financial panic.

Silencing employees

The banks know they’re in serious trouble. That’s why, as Andy Kroll notes for Mother Jones, mortgage servicers like GMAC are trying to silence employees who can testify about the extent of these frauds. GMAC employee Jeffrey Stephan confessed to robo-signing 10,000 foreclosure documents every month without actually examining them. His acknowledgment sparked the current public scrutiny of foreclosure fraud, which has expanded to banks including JPMorgan Chase and Bank of America.

Kroll was one of the first to report on these fraudulent foreclosure mills and their illegal fees, and his coverage of the issue is essential reading for anybody following the unfolding crisis. Kroll also highlights the wave of new investigations and inquiries being launched by attorneys general in eight states, a phenomenon that is likely to expand as the crisis widens.

As Annie Lowrey details for The Washington Independent, one of those states is Ohio, where Attorney General Richard Cordray is suing GMAC, seeking $25,000 in damages for every fraudulent document the company has filed. In Ohio alone, there have been 190,000 foreclosures over the past two years.  Cordray hasn’t won his suit, and not every foreclosure will include fraud, but that’s a potential loss of over $7 billion to GMAC from foreclosures in Ohio alone over the past two years. And that doesn’t include what would be much higher losses to banks who packaged the mortgage securities, who are forced to repurchase them by burned investors.

Banks are doing their best to minimize the appearance of scandal, but the scope of potential losses from outright fraud is quite clearly a threat to the viability of the financial system. It’s easy to imagine a disaster scenario in which the government has no choice but to take major action to prevent the economy from imploding (yes, it can actually get worse).

Obama needs to pick up the slack

So far, President Obama is sending mixed signals about his intentions. As Steve Benen notes for The Washington Monthly, Obama vetoed a bill that would have made it harder for borrowers to show that banks were engaging in fraud during the foreclosure process. That was on Friday—but by Sunday, top Obama adviser David Axelrod was telling the press that the administration was not ready to support a foreclosure moratorium, dismissing the fraud crisis as a set of “mistakes” with lender “paperwork.”

As I note for AlterNet, Axelrod’s comments are a complete mischaracterization of what’s going on in the foreclosure process, and of what can be done. The housing market is a mess because banks have been systematically committing fraud. We cannot rely on such fraudsters to fix the mess– some kind of government action is going to be necessary. Whatever the solution, the administration cannot stand with big Wall Street banks against the borrowers and investors that are being defrauded. Any solution must take the interest of troubled borrowers as paramount. We’ve already tried saving the banks without saving homeowners, and as the unfolding foreclosure fraud crisis illustrates, it didn’t work.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Diaries

Advertise Blogads