Housing and Opportunity: A Closer Look

For many, buying one’s first house is a major milestone, both financially and symbolically. The ownership of a home has traditionally led families towards long-term wealth, and a home is the foundation of the American dream, an accomplishment and a source of pride. Unfortunately, despite some talk of an improvement in the economy, there are still various factors preventing many people from realizing this dream.

—Although the foreclosure rate declined for the third straight month in October—decreasing by 3% between September and October 2009 to one in every 385 housing units—this rate is an increase of nearly 19% from October 2008. (footnote: 1)
—In September, 7.7% of all homeowners were behind 30 days or more on their primary-residence mortgages, up about 0.1% since August. This is a record rate comparing to the 5.2% rate of September 2008 and the 3.6% rate of September 2007. (footnote: 2)
—Nearly 4.4% of payments on bankcard accounts were at least 60 days late, compared to 3.4% in September 2008. This is a 28.7% increase since September 2008. (footnote: 3)

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Trumka Demands Real Reform on Wall Street, Across the Economy

On Wall Street today, AFL-CIO President Richard Trumka is calling for tough new regulations on the financial industry and a new approach to making the U.S. economy work for working people.

Trumka spoke today at the New York Stock Exchange as part of the new AFL-CIO leadership team's national tour to set out a jobs-focused, progressive vision for the economy--and to fight back against the corporate agenda that left workers behind.

We've let wealth concentrate for too long, Trumka said. The past decade has shown us the folly of building an unfair and unequal economy that only works for a few, while working people pile up debt to get by. We need to be able to protect consumers from abuses by mortgage lenders and credit card companies and hold accountable those whose greed and irresponsibility have undermined the economy, Trumka said:

Banks and other financial institutions must be held accountable for making this mess that required trillions of dollars of our money to clean up. For the pain they've inflicted on families who face financial ruin--unemployment, wiped out pensions, foreclosures and bankruptcy.

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Weekly Audit: EFCA, Tax Cheats and the Racial Wealth Gap

By Zach Carter, TMC MediaWire blogger

The U.S. economy may finally be bottoming out. But if the worst is really behind us, we are likely facing a painful period of "growth" that looks very much like the present. Without increasing unionization and mitigating racial inequality, our economic progress will prove as hollow as it is slow. While the economy may improve in a dry, statistical sense, the foundation for a productive economy has been decimated over the past three decades.

The economy has shown some encouraging signs of strength lately. Home prices have actually increased and the pace of layoffs slackened quite a bit in July. But that data doesn't signify a strong recovery, as Andrew Leonard notes in a pair of blog posts for Salon. Even in areas where there is some good news--housing and the job market--there is plenty of contradictory bad news. First, mortgage delinquencies are at an all-time high, and the souring loans are not just subprime. Even people with relatively affordable mortgages have problems paying when they lose their jobs, and with the unemployment rate at 9.4%, a lot of people are losing their jobs.

What's worse, Leonard notes, new claims for unemployment benefits escalated in August, suggesting that last month's job market improvements may have been a fluke. And while home prices may be ticking up slightly, they have been abysmal for the past two years. Since many households accumulated debt based on higher home values, the overall ratio of consumer debt to household net worth is perilously high.

Household net worth is a crucial statistic and is often overlooked by a focus on day-to-day measurements of worker well-being, like wage growth. While wages matter for paying the rent and buying groceries, our long-term economic security is defined not by what we make each week, but by the value of the things we own. In a piece for The American Prospect, economists Derrick Hamilton and William Darity Jr. detail the massive racial disparities in household net worth in the U.S. While the median white family has roughly $90,000 to its name, the median Latino family has just $8,000, while the median Black family has only $6,000.

Centuries of discrimination have resulted in today's inequality, but Hamilton and Darity propose a simple, straightforward solution: The government should establish savings accounts for children born into poor families, and fund it with a relatively small amount of money. Children will not be able to access the accounts until they turn 18, but over the years, interest will accrue on the accounts to the point where children should have between $50,000 and $60,000 by the time they can withdraw funds. Since so many people of color are born into households with relatively low net-worth, establishing a policy to use government money to boost the wealth of those born without it would have the effect of promoting racial economic equality.

But we also have to worry about jobs. President Barack Obama's economic stimulus package has succeeded in creating or saving hundreds of thousands of jobs since going into effect earlier this year, but it is important to focus not only on creating jobs, but on creating good jobs. As Laura Flanders of GritTV emphasizes in a roundtable discussion with key academics and labor representatives, our increasingly hostile attitude towards unions has created major barriers to a sustainable economic recovery.

The legislation critical to ending this intimidation is known as the Employee Free Choice Act, one of the most important bills presented to Congress in decades, although it has been overshadowed by the debates surrounding  health care reform and financial regulatory overhaul. Flanders' panelists include Kate Bronfenbrenner, a Columbia University Professor who wrote a recent paper for the Economic Policy Institute examining 1,000 attempts to establish unions all over the country, and found that employer opposition to unionization is more aggressive than ever. A full 30 million workers want to be part of an organized union, but only 70,000 workers successfully organize each year.

"It's always been hard to organize, but employers now have made it harder than ever. They've literally have said to workers that, 'If you try to organize, we will go after you in every way possible,'" Bronfenbrenner said. "They threaten workers, they harass them, one in every three employers fire workers for union activity . . . . There literally is a war on workers who try to organize."

Another panelist, Mark Winston Griffith, Director of the Drum Major Institute, notes that the decline of unionization has weakened the economy. In the 1950s, when one-third of all U.S. workers belonged to a union, the potential foundation for the economy was strong. Workers were well-paid and had excellent job security, which created a strong source of demand. With less than 8% of U.S. workers unionized today, our economic demand is fueled by household debt, which has left families struggling for financial security and has injected a heavy dose of instability into the entire economy.

Writing for The Nation, Sarah Jaffe details the difficulties faced by a group of security officers in Philadelphia trying to unionize under current labor laws.

But while the workers who form the foundation of our economy are gasping for air, the elite have almost never had it better. A recent study found income inequality to be deeper than any period since World War I, and this absurdity plays out in public policy. While workers struggle to get a fair shake from their employers, executives and managers evade taxes through elaborate international financial deception. Swiss banking giant UBS recently agreed to turn over the names of thousands of its clients who allegedly used the company's banking operations to skip out on the bill for Uncle Sam.

UBS has been caught with its hand in nearly every cookie jar labeled "bank scandal" over the past two years, from the subprime mortgage crisis to phony securities peddling to diamond smuggling. But as Robert Scheer explains at Truthdig, former senator and deregulation hawk Phil Gramm (R-Texas), has been an executive at the firm while the company has been destroying its reputation. Gramm helped pass some two key anti-regulation bills later years of the Clinton administration, and was unabashed about jumping to UBS immediately after leaving office. Scheer notes that the public knows almost nothing about Gramm's role at the company, including any potential involvement in its laundry list of scandals.

Real economic progress in the U.S. is impossible without a stronger base of unionized workers. But it's just as important to invest in our future by giving the children of poor families an even economic playing field.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. 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.

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Weekly Audit: Depression-Era Inequality, Only Worse

By Zach Carter, TMC MediaWire blogger

A new study by Economist Emmanuel Saez revealed this week that income inequality in the U.S. is more severe today than at any time since World War I, and the current recession is taking its heaviest toll on the worst-off members of our society. As our government rebuilds the financial sector using taxpayers' money, it's important to remember that both financiers and the government are responsible to our communities, not just bank shareholders. If we want to strengthen our country's economic foundation, we need to demand better wages for workers and an end to all kinds of predatory lending.

Saez's new data on income inequality is, as Paul Krugman put it, "truly amazing." Saez, who teaches at the University of California at Berkeley, found that the top 0.01% of U.S. earners had 6% of total U.S. wages, more than double the level in 2000. Earners in the top 10%, meanwhile, took home an astonishing 49.7% of all wages. That gap is larger now than during the Great Depression or the Gilded Age of the Roaring '20s.

"We're seeing Depression-era inequality again--only now it's slightly worse," writes Steve Benen for The Washington Monthly. Benen also notes that this level of inequality is not an inevitable consequence of a market economy: It's an extreme historical aberration. In the U.S., prosperity for much of the 20th Century was shared. But in 2007, at the economic bubble's peak, the wealthy simply got wealthier.

In that context, it is beyond absurd that the government is allowing 8-figure bonuses to be doled out by bailed out banks. Writing for Salon, Robert Reich dissects the policy implications of Citigroup's plans to pay its top executives an average of $10 million this year and award over $100 million to its top trader, a man who literally owns a castle in Germany. Citigroup was one of the most reckless U.S. banks during the housing bubble, a major subprime offender that received $45 billion in direct bailout money, as well as hundreds of billions in federal guarantees. How much is $45 billion? With the median U.S. home price at $174,100, that's the full market price of over 258,000 foreclosed homes. The company says that $10 million a head is necessary to attract and maintain top "talent," which Reich notes is a somewhat misleading term, given recent history. The problem is not just that Citigroup and other Wall Street firms are paying tons of money to a few people, it's that these people are being rewarded for the same kind of activities that got us into this mess to begin with: Risky, highly leveraged securities trading.

"Over the last several years Wall Street has exhibited a truly astonishing lack of talent," Reich says, noting that, "The Street is back to the same, relentlessly untalented tactics that made it lots of money before the meltdown--which also forced taxpayers to bail it out, caused the world economy to melt down, and tens of millions of people to lose big chunks of their life savings."

In truth, Reich argues, most large financial firms in the U.S. are much more like public utility companies than private-sector businesses. Even in good times, they depend on government guarantees and other support systems to function. In bad times, we bail them out. Instead of paying financiers tens of millions of dollars to reinforce a flawed system, Reich argues that we should impose rules that result in salaries similar to the public utilities sector, where top earners are generally restricted to 6-figure incomes.

The American Prospect features two pieces emphasizing problems in the current financial sector. Under a law known as the Community Reinvestment Act (CRA), enacted in 1977 we require banks to make loans in communities where they collect deposits. The loans have to be to dependable borrowers and they have to be relatively inexpensive. The law works very well--institutions covered by it made only a tiny fraction of the high-interest subprime loans that brought down the financial sector, as National Community Reinvestment Coalition President John Taylor notes for the Prospect. But CRA only applies to actual banks. You know, the places where you deposit your paychecks. CRA does not apply to subcompanies owned by the same corporation, and it does not apply to giant Wall Street securities firms like Bear Stearns and Goldman Sachs. Taylor says we need to expand CRA to cover these other big players in the financial world.

Why? As Alyssa Katz details in a piece for the Prospect funded by The Nation Institute, many Wall Street firms are bidding on foreclosed properties and selling them at rip-off rates to low-income borrowers.

But as Mary Kane notes for The Washington Independent, banks have also devised several methods of making money without making a loan. By charging tremendous fees on borrowers for minor infractions, banks generate billions of dollars without producing anything of social value. One of the worst forms of abuse, Kane writes, comes in the form of overdraft fees. When you withdraw too much money from your bank account, the bank fronts you the money, and then charges you a fee for this "protection." The trick is, banks almost never tell you that this has occurred, and often play around with the timing of your charges and deposits to maximize the fees they collect. Banks are on track to collect $38.5 billion in such fees this year alone. The worst part is, the fees come from the poorest customers--rich people don't overdraw their bank accounts, because they have tons of money.

In the case of credit cards, banks routinely slap borrowers with outrageous fees and interest rate hikes when the borrowers are making payments on time. Over the years, banks have targeted younger and younger credit card customers, as Adam Waxman notes for WireTap. After years of declining wages for all but the wealthiest citizens, consumers have been turning to pricey plastic to finance basic necessities.

Sadly, corporate America does not seem very focused on helping workers establish their financial independence. The Real News talks with Richard Wolff, an economist with the New School who emphasizes that, while worker productivity has jumped in recent months, wages have not made the corresponding increases. Quarterly productivity numbers tend to jump around a lot, but the trend of not compensating workers for improved efficiency has been around for years.

In a consumer-driven economy, major problems can't be fixed by giving lots of money to a few people, especially if those few people are already rich. To support broad, meaningful economic growth, we need to tailor our policies that empower those on the lower rungs of the economic ladder. And when we bail out giant corporations with taxpayer money, we need to make sure those companies arrange their business to improve the lot of taxpayers.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. 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.

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I Lost My Home. Help Me Take on the Mortgage Bankers.

I'm posting this diary on behalf of Dan Smith. We got to know Dan while fighting back against the Mortgage Bankers Association opposition to foreclosure assistance. This is what he has to say...

My name is Dan Smith, and I'm an electrician with IBEW Local 952 in Ventura, California.  I lost my home because my mortgage broker lied to me about my interest rate.  I'm working with Progressive Future to take on the Mortgage Bankers Association and urge Congress to save millions of homes.  You can help by clicking here.

My wife and I sold the comfortable condo for which we had saved for years. We had figured out that we could afford to pay $2700 per month to share a bigger home with our one-year old daughter, with plans to have another child.  Our third month, we got a bill for $3600--33% more than we signed up for.  I called my broker and he said "didn't I tell you that you had a `teaser rate' that would go up?" No, he hadn't told me.  I was angry, but stuck--whatever they'd buried in the fine print was threatening everything I'd worked for.

After selling my truck and camper, working 80-hour weeks, and struggling to pay the increased rate for 16 months, I lost my home, I was left with a mountain of debt, and I ended up declaring bankruptcy.  I went in with a great credit score and a shot at the American dream.  I ended up deep in debt, bankrupt, with my credit shot.  You can view my full story here.

But, I'm not just sitting back.  I'm working with Progressive Future to confront the Mortgage Bankers Association and help make sure other families like mine don't end up out on the street.

The House recently passed a bill--at President Obama's request--to allow bankruptcy judges to adjust the terms of troubled mortgages.  Experts estimate this common-sense solution could save nearly 2 million homes--and I know it could have saved mine.

The Senate will vote on the same provision soon, but the Mortgage Bankers--the same people who got us into this mess--are fighting it.  They've spent nearly $20 million lobbying in Washington in the past decade, so they've got plenty of clout.  Progressive Future is collecting petitions telling the Mortgage Bankers to "back off" and I'd like as many people to sign as possible.

Thanks for helping out...and I hope you never have to go through what my family has over this past year.

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