How a Couple of Citizen Investigators Brought Foreclosure Fiasco to Nations Attention

PALM BEACH, Fla. — More than a year before lenders, law firms and document companies began owning up to widespread paperwork problems with their foreclosure filings, Lisa Epstein and Michael Redman already knew that something was wrong — very wrong.

Redman, a former online automobile consultant, got his first taste of the problem in early 2008, when he tried to help a relative who was facing foreclosure.

As he tried to determine which of three or four supposed lenders held the note, Redman, 35, realized that not only did he not know the answer, neither did any of the companies that were asking for payment.

Epstein, a nurse who cares for cancer patients, also is going through foreclosure. She got her baptism in the world of shoddy foreclosure paperwork in the summer of 2009, however, when she tried to help a brain tumor patient keep her home.

Epstein helped draft a letter challenging the foreclosure because, as in Redman's case, it was unclear from court papers who owned the home's mortgage.

After arriving at the summary judgment hearing in her nurse's uniform, an emotional Epstein, 45, watched as the ill woman read their letter aloud in court. When the opposing attorneys never showed, the judge refused to finalize the foreclosure. The woman remains in her home as the legal wrangling continues.

For Epstein, who often helped her patients navigate disputes with their health insurance companies, the role of advocate wasn't new — but the thrill of a courtroom victory was.

"It was like something struck inside me, like this is what I'm compelled to do.

Read more from McClatchy


See Rikyrah's Previous Post on Foreclosures

Is the U.S. Headed For a Greek Style Economic Collapse?

Financial Historian Niall Ferguson thinks the U.S. could be headed for a big fall- IF it stays on its current course of spending much more than it collects in revenue. Hear discussion from OnPointRadio. (A Must Listen). He points out what I have been saying here since I started... this business as usual nonsense is unsustainable. Business as usual meaning spending billions (now well over a Trillion) on wars that we don't need, being afraid to talk about a sensible tax policy...because Republicans have turned just the mention of taxes into a "taboo", not working fast enough to build and feed a Green industry- continuing to assume that it will magically blossom on its own, not working hard enough to build small/medium businesses and to create jobs, and not investing in educating future generations (why do I have to go $80,000.00 in debt before I even have a chance to live...just because I want an education? True story....my story). Other countries educate their people at very low cost or for free in some cases. They put a priority on people, rather than huge military industrial complex's or phony corrupt stock markets.

I am not as downbeat as some of the voices of gloom and doom. I don't think that the U.S. is headed for a quick collapse - at least not yet. In my mind, I am keeping my fingers crossed that it doesn't happen. The U.S. came close to this in the Fall of 2008. A collapse of the big banks was narrowly avoided. I am skeptical for the future though. The Obama administration can barely get a financial reform bill approved in the House & Senate - in fact, there are currently not enough votes to get the bill through the Senate. Republicans are blocking any efforts to make Progress on reforming an out of date system. With the prospect of clueless American voters returning these same Republicans to power in November of this year and again in 2012, there is no reason to be hopeful. Republicans are talking from both sides of their mouths. On one hand, Republicans say they are concerned about the debt, the deficit, and want to control spending, yet they blocked the Presidents Debt Commission - a commission tasked with steering the Country clear of complete economic collapse. I realize that this is part of the Republican Party's efforts to weaken Obama's ability to govern, so that he fails. But shouldn't they be more concerned about the Country???? Just a little concerned?

I believe the U.S. may be headed for several months, if not years, of stagnant growth and high unemployment which will only make the debt problems worse. With the lack of revenue from business growth and job creation, the U.S. will have to borrow more to maintain basic services. Cuts...and I mean massive cuts, will be necessary if the U.S. is to avoid a Greek-like crisis. But I just don't see that happening. Politicians from both parties are more concerned with their political careers. David Walker, former comptroller general of the United States, warns that by 2035, the U.S. will only be able to afford to pay the interest on the debt and nothing else. Unreal! Why isn't this issue on the front burner?

Why do I believe (am hopeful anyway....keeping fingers crossed) that the U.S. isn't in immediate danger of a complete meltdown?:

1. For now...the U.S. maintains the advantage of being the biggest economy in the World...and the biggest consumer. This means that other nations (who are now the producers) will be cooperative, for the most part, on trade, monetary policy, and will want to make sure that their chief consumer remains stable....so their economies can stay afloat.

2. The U.S. currency is still....for now... the main reserve currency for the globe..... for now.

3. The U.S. isn't as leveraged (debt as % of GDP) as many other nations in Europe.

So there is hope... but there has to be some action. Right now... no real action is on the horizon. That's what bothers me. The U.S. is stuck on stupid...stuck in some sort of perpetual malaise, thanks to the Republican Party and a stupid electorate that keeps supporting these jackasses.

Why Obama Should Have Worked Harder On Economy

Forcing healthcare through Congress at a time when the issue was not a top priority for most Americans will likely cost the Democrats come November....as I have already mentioned. Obama & Co. should have at least been much more aggressive on plans for job growth while pushing for healthcare reform.... this would have helped in making them look less out of touch. His team of advisers are definitely not the most competent.

Now they want to tackle immigration... thinking (mistakenly) that the healthcare victory has somehow given them momentum for dealing with an issue even more contentious. Obama will end up wasting what little political capital he has left on Immigration Reform. Clueless doesn't seem adequate for describing Emanuel, Axelrod, Plouffe and all the rest.

There is still a little bit of time between now and November. Alot can change in that time. It looks like the economy may finally be creating jobs again.... after losing millions over the last two years. But it will take a long time to change the public's perception... especially when there are TV networks and radio stations dedicated to telling Americans that Barack Obama and the Democrats are devils, socialists, and that they are to blame for the economic collapse. (Americans are incredibly gullible and unfortunately they listen to the nonsense from Faux News and the rest).

Many Could Face Years of Unemployment

A New York Times article calls them "The New Poor".

See Related Post

Great Recession is Actually a Depression for Many When It Comes To Unemployment

Hear an informative discussion from NPR on the impact of the latest recession. Economists Andrew Sum & Barry Bluestone have broken down the unemployment numbers group by group and have been able to show huge disparities in terms of who is being impacted the most. The mainstream corporate media has been almost AWOL on this. Listen Here. See the findings of a new study from the Center for Labor Market Studies at Northeastern University.

I have been writing all along about the weakness of the stimulus efforts since last year when the legislation was passed. I thought that employment would be lacking because there was not enough focus on the creation of lasting, sustainable jobs, particularly in new industries. There was an opportunity to do something big & impressive by creating a public works program and/or grant programs for start-ups in new technologies. There was also a need for aggressive loan programs for small & medium sized businesses.

Even if you have employment, survival is becoming more precarious.

Bonus:

Also hear a discussion about the gridlock and paralysis in the U.S. Congress.

Dr West Speech from Chicago

Dr. West gave his annual (February) speech over the weekend from Chicago's St. Sabina Catholic Church. Of course I didn't agree with everything he had to say. But I generally agreed with his comments about Obama's economic team and their policies so far. Nothing really new here.... but he gave a decent speech as usual...although this was not as good as his three previous speeches. I did like his comments about the plight of Black communities being tied to the wider plight of the U.S. and his comments about the culture becoming even more shallow. He also called a few people out... which caught me a little off guard.

You can watch here, or listen.

BTW.... should there be a "Black Agenda"? And if so.... what exactly should that agenda be? If you watch the speech you will know what I am referring to.

I don't think there should necessarily be a "Black Agenda" per se. There is not much in terms of policy (nothing significant at least) that the government would be able to do just for Blacks or just in minority communities. The policy would have to be applied to classes of Americans (regardless of race) and would have to work for people across the board within those class groups...including for Blacks. That's the only realistic way to get things done from a policy perspective. I think we have to start moving away from race or raced based politics and move towards class based politics.

Blacks should turn to their local officials and members of Congress and ask why their communities are failing and to seek State/Federal relief. But as I have been saying for years, the CBC doesn't work in the best interests of its constituents. The CBC should be disbanded IMO.

Too many Blacks are (wrongly) holding on to this outdated myopic 1960's, 1970's, 1980's view of the relationship between race and politics.

The Story of Sylvia Martinez

NPR has a new segment on Sylvia Martinez. The program is part of a radio series on the experiences of the unemployed as they seek work during the recession mini-depression.

This segment seems to be just as depressing as the last one.

The Watchmen - A Radio Documentary About the Failed Financial Regulatory System

Hear a radio segment from This American Life about the failed (and corrupt) financial regulatory system and how it contributed to the economic meltdown. It really shines a light on why the regulatory system needs an overhaul.

I have my doubts about whether Obama will be able to make any significant improvements to the current corrupt system. Just like with healthcare reform, I don't think that Obama will be able to get his agenda through the Congress...at least not without a fight...and not before his initiatives are watered down so much that they become pointless. These industries (financial and healthcare) have spent millions of dollars literally buying members of Congress....which is why I have a feeling that both initiatives may fail. Certainly healthcare reform... (any real reform) is dead, as I have mentioned before.

The Human Cost of The Broken Economy

Hear an NPR story about the way this economy is impacting everyday people. It shows how brutal this economy can be.

American Capitalism can really rob people of their dignity and humanity. It can rip the spirit right out of you. A cruel system indeed.

I am becoming more and more hopeless everyday (and i'm employed full-time...although under-employed). I guess I should feel lucky...but my employment situation is becoming more precarious with each passing day. Bankruptcy was officially announced this week. I started working when I was 16. And I have been employed continuously... and full-time (except for 3 months) since I was about 19 years old. I'll be 36 pretty soon. The idea of not working is unthinkable to me.

But the hopelessness is real. I have the constant feeling that i'm falling face down from the top of the Sears Tower in super slow motion.... going down a little more everyday....knowing what is waiting for me at the bottom but not being able to stop it.

The Economy and Job Loss

Down but Not Out: Overcoming Job Loss

Rick Rose did just about everything right with his finances.

He worked hard. He saved well from the $85,000-a-year job he had as communications director for a nonprofit in Washington. He bought a home he could easily afford. In fact, he had saved about a year's worth of living expenses.

But in two months, Rose, 43, could be out of money. He lost his job last spring and has been living off his unemployment and savings ever since.

By contrast, Juan and Bobbie Wilson made many mistakes. When the couple earned $98,000 a year, they admittedly spent too much. They weren't extravagant, but they did what many families do. They ate out too much. They overspent using credit. They didn't budget.

Come May, both Rose and the Wilsons will be in the same position: They will barely have enough money to make their mortgage payments. Rose will also worry about coming up with the money to pay for the expensive medication he takes for HIV. The Wilsons will be wondering whether they can pay for health insurance for their family.

The fact that Rose and the Wilsons are faced with the same financial issues illustrates how cruel this recession has been and how none of us can arrogantly think we're better off than our down-and-out neighbor or friend or family member or former co-worker.

Full article at the Washington Post

Michelle Singletary is one of my favorite finaincial columnists. She puts a human face to many of the issues that we all face as the country (and the world) struggles with the economic recession. Over the next nine months, Singletary will chronicle the story of Rose and the Wilsons in the Washington Post as they struggle to find secure employment and a more secure financial footing.

Women Giving Up Their Dignity To Survive the Economy - What Would You Do In a Desperate Financial Situation?

What Are You Willing to Do If The Going Gets Rougher? What's Your Plan B if you lose your Job? Have you thought about it? If not, you probably should.

A recent MSNBC report highlighted the fact that many ordinary women are now turning to the Sex Trade in order to support themselves and their families in what's being called "The Great Recession" (perhaps soon to be a Depression). To me, this is one of those things that really gives you a true indication of how well an economy is working for the average citizen. It's more powerful than any abstract Labor Department number that rarely gives you a human face.

This latest story follows a story from ABC News which aired late last year.



This really tells the tale about what's going on in the economy more than any other measure. It really shows the kind of nightmare that Bush/Cheney left for us....and it isn't over yet. Sad and horrifying at the same time.

Whether I lose my job this year is basically a toss up. Bankruptcies from businesses are spreading through the economy, since many are finding that they can't meet their obligations to creditors and suppliers or found themselves owing too much for expansions they started 1 or 2 years ago.

But - for the women reading this - could you ever see yourself giving up your dignity and turning to sex work to earn money? How bad does it have to be for someone to get to a place where they have to make this kind of decision?

Things are bad...but it isn't quite the 1930's ...at least not yet (although if the Country keeps bleeding jobs at the rate of more than half a million a month...it won't be long before we get there). I believe that we are likely to reach the technical definition of a Depression sometime this year... I may discuss that more in another posting. But how bad does it have to be for you to consider dehumanizing and objectifying yourself by selling your body? Or is that just not an option for you?


And have any of you made your plan B? Have you thought about what you would do if you lost your job? What are your plans? The NPR program On Point had a great discussion this week where they talked with real everyday folks about their "Plan B's". Take a listen.

I know it's easy to sit in judgment when some of us still have our jobs... even those like myself who hate the jobs we have... but are actually feeling lucky right now (which is a pretty creepy feeling). But I personally couldn't Prostitute myself if I were a woman and if I faced a desperate situation. I would simply take lesser work and work harder... In fact, as a man, I am facing a desperate situation at the moment. I'm currently under-employed...But my attitude is just to keep trying.... I can't trade my dignity for cash... no matter how bad things get. If worse comes to worse, I can try to find a family member to move in with (which would be a crushing blow for me... since I have worked so hard establishing a good work history and have worked so hard putting myself through college...not to mention the fact that i'm extremely independent..hate to admit that I have lost a battle, am a personal failure and hate the idea of needing help. But I would pull a Dr. Kevorkian before parting with my dignity.

But then again, we don't know for certain what we would do if things got truly desperate.

__________________________________

Related Articles & Blog Posts

Gina from What About Our Daughters Argues that All Money Isn't Necessarily Good Money

Additional link for this story from HuffPo

Economic Meltdown 101

I consider myself someone who tries to be informed about current events but sometimes the issues get so complex and events happen so quickly that it is all but impossible to keep up and still keep things in proper context and have a full understanding of what is going on. This is true, for me, of the economic meltdown and the after effects it has had in the worlds of politics and culture.

That is why I am sharing these resources for ordinary laypeople like me who are trying to get a grip on the economic issues. Here are three links that I discovered this morning that I feel are excellent primers on the economic meltdown and the chain of events that led up to it. Hat tip to the Common Cause blog for this information.

Common Cause Blog: The Economic Downfall for Dummies

The economic crisis exposed the myriad ways in which our financial institutions are interconnected in an intricate web of relationships. When one element of this intricate web turns toxic the rest of the web get infected and the whole thing starts falling down like dominoes. For me, the best look at each domino and how its toppling led to the next.

PBS Frontline: Inside the Meltdown (VIDEO SERIES)

Time Magazine: 25 People to Blame for the Financial Crisis

Time for Action to Fix The Banks & Bring Back Confidence - But Geithner Is Coming Up Short

Attention Team Obama - Peter Pan is not meeting the test.

I was skeptical about Obama’s choice for Treasury Secretary from the very beginning. Here is a man who had a hand in bungling the management of the financial crisis on Wall Street last year and who couldn’t keep up with his own Federal taxes. Now he is expected to be the chief financial steward for the nation? But I was willing to wait to see how he would perform. So far I have not been impressed. He has not instilled confidence, at a time when confidence is the key. Treasury Secretary Timothy Geithner has been mostly a failure so far and, in fact, appears to be exacerbating the nations financial situation.

President Obama has not dealt with this situation very well as a whole. We still don’t have a Commerce Secretary a full month after the inauguration. In the middle of an economic situation as bad as this, it seems to me that it would be important for Obama to have a full economic team in place. Obama wasted weeks with the Judd Gregg fiasco and the Lincoln bi-partisan nonsense. Enough already!!! It’s time to get to work. We are on a ship that seems to be taking on more water by the day.

At least half of the problem that Obama, Geithner and the rest of the economic team faces has to do with a lack of confidence… a lack of confidence from investors, from voters, from bankers, and from business owners. It’s psychological. But the actions of the Obama Administration - or lack thereof- have only added to the uncertainty and anxiety in the financial sector. They have not even made any serious efforts to bring calm and confidence to the markets. Instead, Obama has played up the crisis a little too much by talking down the economy at every opportunity. That doesn’t instill confidence.

Investors and voters, uncertain about the intentions of the Bush Administration, took a pause from the panic of last year because they wanted to see what the Obama Administration would propose. Since January 20th, Americans have been waiting for a plan. They want to see details about how Banks will be stabilized. Particularly, everyone has been waiting to hear how the Obama team would deal with taking bad assets off the hands of the banks so that the banking system could rebound. Keep in mind that Americans have already witnessed the bungling of the first half of the TARP funding. Americans have also witnessed the uncertainty from Former Treasury Secretary Henry Paulson, who offered one plan (buying toxic assets or somehow relieving banks of these assets temporarily) but then changed his mind a few weeks later, and failed to follow-up with any sensible cogent alternative plan. That kept the nation in limbo for weeks.

With the inauguration of Barack Obama, people were hoping for a sense of stability and a rebound in stocks. But that hasn’t happened. Geithner tried to offer yet another plan on February 10th, but that plan was rejected outright by observers. There were not enough details offered. The reaction of the markets should have been a clue to someone that another approach was needed.

The Geithner plan calls for a system of “Stress Tests” for the nations biggest banks to determine which institutions have the most toxic assets and the most liquidity problems. According to plan, the Government would buy a greater stake in the banks that are more susceptible to the pressures of the “Stress Tests” and would need more Capital.

But this is not the plan that people were waiting all this time for. People don’t want to hear anything about “Stress Tests”. This doesn’t seem to be a well thought out plan, and in fact, it’s only making matters worse. The lack of detail on what will happen next is also compounding the crisis. Investors and voters want to hear details on what the Obama Administration plans to do to remove the toxic assets from the balance sheets of the banks. This was the single most important thing that observers and investors were concerned with. But Geithner failed to address it.

Dealing with the bad assets is the most logical approach proposed so far. Henry Paulson and Ben Bernanke should have stayed with this original plan of parking bad assets until their values could improve (and they would have improved once the housing market and the overall economy began to recover). So why did the Obama Administration decide to float this idea? It only introduced more uncertainty. The situation is not likely to improve anytime soon unless and until the issue of the toxic assets is dealt with clearly and with certainty.

Obama misfired in his initial attack of the economic crisis. He allowed himself to get bogged down in too much political nonsense, spending far too much time selling the Stimulus bill and impersonating Abraham Lincoln, and not enough time dealing with the task at hand. He lost several weeks on his bi-partisan experiment, which ironically ended up being extremely partisan, when time was of the essence. Obama should have attacked these issues simultaneously - the banking system - jobs/recession - and the crisis in the housing market. Instead, he tried to take on these issues, almost one by one…. And in the wrong order. The fact is, team Obama appears to be just as clueless about how to tackle this problem as the Bush Administration was. Obama has assembled two economic advising committees, made up of what are supposed to be some of the greatest economic minds in the nation. Yet, no one seems to understand that at least half the problem (if not the majority) is psychological and that confidence is key to restoring some semblance of order. Why is this so hard for these people to understand? This problem is just as much about human psychology as it is about economic theory.

And after the pathetic Geithner announcement earlier this month (Feb.) regarding the “Stress Tests”, while the market tanked yet again… the Obama Administration failed to offer any sort of follow-up. We haven’t heard anything from Geithner since then. They allowed the uncertainty to fester….allowed rumors to swirl and left too many unanswered questions lingering. This has only exacerbated the crisis. The stock market has dropped around 700 points since Geithners’ announcement.

Eight years of the Bush Administration and the constant negative news reports have led to a sort of psychological malaise among Americans. People are now sitting around waiting for the next batch of bad news to react to, rejecting anything positive. And we have been stuck in this mindset for years. Obama managed to use his hope message to break through some of that during the campaign, but now, when hope is needed more than ever, he seems to be embracing the old politics of fear.

And I’m afraid that the temporary reprieve that investors and voters gave Obama might be about to end. Americans might resume their panic, now that they see that the toxic assets won’t be managed as originally thought and since plans keep changing. Geithner’s “Stress Test” approach will likely only lead to more speculation (and less certainty and confidence) about which banks might be in trouble. This could lead to crashes in bank stock and potentially a run on those banks. A run on any major bank may spread to even the healthy banks, causing a run on those banks as well. Remember, much of the problem is psychological and Americans, especially investors, are not behaving rationally at the present time. Anything can spook the financial markets.

The stock market…and banks may tank even further in the next few days and weeks… unless Obama and his economic team can find their voice and begin to instill some kind of confidence. Obama will be giving a big speech on Tuesday and it will be a chance to instill confidence & hope. And it would be nice if he offered a plan to fix the financial mess.

Passing Garbage will not help us

Houston, we have a problem. Stupidity in Congress.

I continue to remain dumbfounded over what Congress is doing. Our problem, in a nutshell, is that Americans saw the financial disaster that the crash in the housing market and financial institutions have created. Americans response to this was to stop buying. Therefore, we have an economy that has plenty of supply and no demand. The purpose of a stimulus bill would be to increase demand. As President Barack Obama said last night, the purpose of the stimulus plan is to spend money. Thus, increase demand and get the economy going.

The new job numbers are out and they are awful. 598,000 jobs were lost last month alone. Over 1.5 million jobs lost in last three months. We've now had 14 straight months of job losses. 3.7 million people have lost their jobs since the start of this recession. The unemployment rate is now 7.6%. The employment rate for men 66.1% is the lowest level ever recorded. The unemployment rate for blacks is 12.6%, Hispanics -- 9.7% and for whites 6.9%. We can take these numbers and slice them and dice them and dissect them but the bottom line is it looks ugly. It looks ugly from every angle.

So, a reasonable person would expect that the Senate will look at these numbers and act quickly to increase spending in the economic stimulus plan. We would expect that our senators, knowing at least a little something about the economy and economic principles, would come to their senses and pass a spending plan to help state and local businesses and governments and more importantly to help us, the American people. But no. The Senate is one place where logic and facts cannot penetrate those cold stone walls. The package that appears to have come out of this "compromise" has over 40% of the overall spending is made up of tax cuts. Not infrastructure. Not aid to states.

Addressing the economic issue, again

One of my commenters suggested that I was going after Joe the Plumber. Well, he actually said, "this is so typical how the weak intellectually deficient left wing liberals address an issue." This brings up two issues -- first, I did not say that "Joe the Plumber" is a bad guy or was a terrorist or was morally deficient. Instead, I pointed out the facts as they stand. "Joe the Plumber" may not be a plumber nor a contractor since he is not licensed to do either in Ohio. Secondly, I've addressed the issues in several posts (here, here). I addressed these issues long before John McCain made Joe the Plumber a household name.

Trickle-down economics doesn't work and has never worked. Republicans have been unable to create jobs in comparison with the success of the Democrats. Since Truman, Democrats and their policies have consistently been able to create more jobs than Republicans. This isn't my opinion. This is fact.

Creating incentives to get more money into the hands of the middle class stimulates the economy and causes small business to grow. Again, this isn't my opinion. This is fact.

John McCain and the rest the Republican Party have proposed nothing new for our country's economic woes. Their answer to every crisis is tax cuts for the rich. That is their answer. We've learned over the past 27 years that what happens is that the rich get richer and the rest of us are left behind.

Finally, I would like to address the notion that empowering the middle class is something akin to Marxism, socialism or whatever other derogatory term the right wing is using today. The middle class is the fiber of our country. As such, they are the engine that makes industry great. Under Franklin Roosevelt we saw increased taxes on the rich and a government that supported unions. Yes, I mentioned unions. Unions work to increase wages for the middle class. Unions are sometimes the only leverage that the middle class has against management. Unions also work to suppress inflated CEO salaries. So in the "40s and "50s, as a result of these forces, there was a compression of our society. The rich were a little less rich but the benefits of these policies made the poor a little less poor. Anything that benefits the middle class directly is something that I will support because it is good for America and good for our economy.

Please fasten your seatbelts...the economy will be going through a little turbulence...

I remember being about 10 years old, flying with my family to South America. I was in the restroom when I heard over the loudspeaker, "Please fasten your seatbelts. We might be experiencing a little turbulence." I was standing there, doing my business, and I couldn't just stop. Suddenly, the plane fell violently and my head hit the ceiling. The plane shook up and down and back and forth for about a second or two. Then the plane leveled out. As I came out of the bathroom, I could see that several passengers had cuts and bruises but it appeared that everyone was okay.

I mention all this to say that our economy will be going through the same type of turbulence. I do not think that our economy will fall out of the sky. On the other hand, I don't believe that this $700 billion "rescue package" will fix everything immediately either.

After 28 years of bleeding the economy dry, we have some work to do to get it back on the right track. We have a deficit that has just exploded over $10 trillion. We have to convince foreign investors that we are serious in paying off our country's debt. We need balanced budgets, which means we'll need a tax increase to increase revenues. The tax increase can be levied on the upper five to 10% of wage earners since they make more than the bottom 50% of wage earners.

Consumers have to understand that the credit markets will tighten. For a while, banks are going to be reluctant to hand out loans of almost any kind. Small businesses are going to be in a vise grip for a while. It may be 12 to 18 months before credit loosens up significantly.

I suspect there will be more bank failures. The one extremely positive thing that has come out of this "rescue bill" is that the FDIC will cover deposits up to $250,000.

The underlying problem with our economy is not fixed by a $700 billion redistribution. There is a grave imbalance between wages and home values. This imbalance can be fixed by one of two methods -- increased wages or decreased home values. Floyd Norris writes an economic blog for the New York Times. A couple of days ago, he posted a solution that someone had sent to him:

Here is a simple idea that might help address part of this this very un-simple mess. Take $100B and buy 500,000 empty homes for an average of $200,000, and destroy the homes. A shortage of available housing will push the market value of existing homes up, building trades will boom, mortgages will start to happen again (with new terms that NEVER offer less than 15% down) and then we can go to work on how to split up A.I.G. and the three remaining banks in the country…

Having had nine straight months of job loss, it is hard to say that we're not sitting in a recession. It is going to take a while for us to extricate ourselves from this financial disaster. Black Monday, which was back in 1987, caused some economic hardship but because we made things in this country back then it was relatively easy to pull ourselves out. Now we don't make anything. Large portions of cars are made overseas. Computers are assembled in Malaysia and Singapore. The factories which produced all of the furniture and garments in Virginia, North Carolina and South Carolina have been shipped overseas. The making of appliances like washers and dryers has been shipped either to Mexico or to China. We have turned ourselves into a service country. We need to reinvent ourselves as a people who make things because things have value.

Barack Obama has rightly suggested that companies which ship their goods overseas to be made and then ship them back in the country need to have all of that merchandise taxed. Companies who stay in the United States and make a product from beginning to end here in the US need to be rewarded with tax breaks. This is what Barack Obama has proposed. He has also proposed that we invest in alternative energies. Through a combination of tax breaks, grants and tax incentives, we will begin to make things again in this country. Whether it is nuclear plants or solar panels or large wind turbines, we will make things of value in the US again.

We need to buckle our seat belts and prepare for a bumpy ride.

The (Black) Congressional and Presidential Politics of the Bailout

Last Friday's re-vote in the House on the financial bailout (excuse me, rescue/recovery) succeeded because 33 Democrats and 25 Republicans switched their votes from no to yes (one Democrat from Washington state switched from yes to no).

Many members of the Congressional Black Caucus credit the personal intervention of Senator Obama as motivating their switch. Correct me if I am wrong, but even though Senator McCain briefly "suspended" his campaign to deal with the financial crisis, can he actually point to how his efforts facilitated passage of this legislation?

The NY Times has a graphic of all the vote switchers.


Analysis

This bill is painful by any measure. When deciding whom to be angry with regarding this crisis recognize that Congress is only partially responsible for this mess. Congress is somewhat culpable for the bailout - its' policies fed aggressive and irresponsible policies at Fannie Mac - and a Republican-fed ideological call for deregulation, deregulation, deregulation did not properly balance independence for the markets with concern for the public good. Yet, most of the blame for this crisis rests with the private sector.

Let us not forget our own greed in buying homes we could not afford. True, bankers snookered many homeowners with false promise of easy loan terms, but far too many Americans knew they were living beyond their means. The era of personal responsibility is over.

We can be mad at how Congress responds to the near collapse of our financial system, but we should not be mad that it must respond. To not respond would be to invite ruin on the national economy. Ruin because credit will become tighter and even more expensive. Credit is the grease in our national economy and without it, the American economy would ground to a halt. Ruin because rising unemployment will become the de rigueur economic news.

Some will say that we (the average taxpayer) should not have to bail out Wall St. for its' excesses. I agree, but I can think of no better alternative. However, the taxpayer should be recompensed with ownership in these new companies in the form of divided earnings until the $700 bn is repaid (really it is much more when you factor in Freddie, Fannie and AIG).

Finally, there is a reason President Bush fought so hard for this bailout. His reputation is already in the toilet because of the abject failures of Iraq and Hurricane Katrina. When faced with a crisis starting to mirror the Great Depression he did not want to go down in history as the next Herbert Hoover. President Hoover, if you remember, was the president who sat idly by the first three years of the Depression, insisting it was not the federal government's role to maintain order in the financial system.

Nonetheless, comparisons between Hoover and Bush are unfair to Hoover. At least Hoover did not start a war he could not finish.

Special Comment From Keith Olbermann - Palin's Dirty Politics

Special Comment from Monday, October 6th.



Great commentary. But I wish he would have mentioned Palin's Church - The Wasilla Bible Church - and its association with an anti-Judaism group, Jews for Jesus, led by evangelical preacher David Brickner. This group has been repudiated by just about every major Jewish religious organization. In fact, the group Jews for Jesus is facing fierce protest in Israel RIGHT NOW! (See previous link). But you won't find this information in the mainstream American media. Read more here.

David Brickner made the following comments, while preaching at Palin's church as a visiting minister (at the invite of her current Pastor, Larry Kroon):

Palin now attends the Wasilla Bible Church. David Brickner, the founder of Jews for Jesus, was a speaker. He told congregants that terrorist attacks on Israel were God's "judgment" of Jews who haven't embraced Christianity. Brickner said, "Judgment is very real and we see it played out on the pages of the newspapers and on the television. When a Palestinian from East Jerusalem took a bulldozer and went plowing through a score of cars, killing numbers of people. Judgment -- you can't miss it." Source Cnn.com

In other words, Brickner believes that violence and murder is simply God's punishment for Jews who have not converted to the proper religion - Christianity. Sarah Palin was in the church on August 17th when these comments were made.

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More on Pastor Larry Kroon

Supply-side Economics Never made any Sense

As we see the collapse of Wall Street, AIG, Bear Stearns, Merrill Lynch, Washington Mutual and Lehman Brothers, we all must wonder what happened. We have been told that our economy was strong. Yet within the last seven to eight months we've seen 19 banks collapse and the kind of volatility in the stock market that makes us all queasy and seasick.

Within 20 years, we went from being the most prosperous nation on the earth to the nation carrying the most debt. Personally, I think we have to look back to the 1980s for the answers. This was the so-called Me Generation. It was all about nicer clothes, nicer cars and the biggest house in the gated community. It didn't matter if you obtained all of this through credit cards, six mortgages and a loan from Guido down the street. The bottom line was it was all about Me.

Some of this thinking came from supply-side economics. The theory behind supply-side economics: tax cuts for the wealthy and for businesses will free up capital; the wealthy would spend more money; business and the wealthy would hire more people. This prosperity would trickle down to everyone. On the surface, this makes a lot of sense but upon further reflection we see it is a magician's trick. Before we get the hard data, let's just think about this. If you're a wealthy businessman who makes $10 million a year, for argument's sake, you pay 40% of what you make in income tax. This comes to $4 million. With tax cuts, your tax rate is changed from 40% to 35%. You take home an extra $500,000. What are you going to do to spur the economy? You already have a new car, maybe two or three. You have a house, possibly two. You already have a maid and someone to cut your grass. Most likely, you will do what most multimillionaires would do, which is to invest that $500,000. The logic for business is about the same. Businesses don't hire people just because there's extra money lying around. Extra money from tax cuts can be paid out as bonuses (remember upper management is very fond of bonuses and stock options) or distributed as increased dividends to stockholders. Therefore, in this example, it appears that supply-side economics lines the pockets of the rich.

With President Bush, President Clinton and President Reagan, we are able to look at two eras of supply-side economics. Squeezed in the middle is a more traditional economic approach. Real investment growth was greater in the period of 1993-2001 at the rate of 10.2%. President Reagan had a growth of 2.8%. President Bush has had a growth of 2.7%. Gross Domestic Product, a measurement of economic growth, increased at an average annual rate of 3.9% during the era of President Clinton. Reagan and Bush had rates of growth of 3.9% and 2.5% respectively. For me, the most important indicator of how we are doing is real average annual median income. With the tax increases during Clinton's presidency, real average annual median income grew at a rate of 2.0%. Reagan's presidency spurred an increase 1.4% and under President Bush the increase was only 0.3% (data from Center from American Progress).

There are multiple excuses that true supply-side believers will give us as to why supply-side economics did not work. They will claim that any change in the economy takes years to make an effect. This plainly contradicts the father of supply-side economics, Art Laffer, who stated that we would see changes in our economy "before the ink is dry" on the legislation for tax cuts. They will argue that there weren't enough government spending cuts. There's further data to support a more traditional economic approach. This approach includes higher wages, higher employment growth and results in decreased federal deficits. Such was the case during Clinton's years in office, as compared with either supply-side era. In spite of all this data, though, some still advocate tax cuts for the rich. Why? Why indeed.

Supply-side economics simply does not work for America. Maybe, this Me first, everything else second mentality helped cause the craziness that we're seeing on Wall Street. I'm just askin'.

An Ordinary Person's View of the Bailout

The Mess We Are In

I am not an economist nor do I claim to be an expert on finance and economic matters. I am, however, an ordinary citizen, a voter, and a taxpayer who is being asked to bear the brunt of paying for the mess created by the greed, irresponsibility, and recklessness of those who made out like bandits in the deregulated atmosphere of the financial system for decades.

When I make mistakes with my money and finances, or if me and my family get into financial trouble we don't get a bailout. But now we, the taxpayers are being asked to do that very thing -- supposedly, for the sake of the country's financial well-being and survival -- at the behest of those who created the conditions for the financial crisis and who mismanaged the economy in the first place.

Voting on the Bailout

I opposed the bailout as it was originally drafted and which was defeated in the House of Representatives vote. There were many good reasons to oppose the original bill as this list from David Sirota points out.

After the bill was defeated in the House revisions were made to the legislation and a vote was taken in the Senate where it passed.

Regarding the second version of the bill, economist Paul Krugman agrees with James Galbraith’s assessment:

In short, as I said at the beginning, the bill is a vast improvement over the original Treasury proposal. Given the choice between approving or defeating the bill as it stands, I would urge supporting the bill. I do so without illusions. There need be no pretense that it will solve our underlying financial and economic problems. It will not. The purpose, in my view, is to get the financial system and the economy through the year, and into the hands of the next administration. That is a limited purpose, but a legitimate purpose. And it may be the most that can be accomplished for the time being.

Alternatives to the Bailout Are Out There

Contrary to leaders like Bush, Paulson, and leaders within the Congressional Republicans and Democrats that say pass the bailout as it stood or face certain catastrophe, there are alternatives to the bailout and I supported taking a good, long look at these alternatives and make them part of the criteria by which any bailout should be structured.

Here are a few examples from the Progressive sphere:

• The Service Employees International Union
• The Congressional Progressive Caucus
• Campaign for America’s Future
• Robert Reich guidelines
• Bernard Sanders guidelines
• James Galbraith guidelines

The Main Point

Paul Krugman and James Galbraith, among many other economists, agree that this latest revision of the bailout is, at best, a stopgap, band-aid gesture so that the economy does not collapse completely—for the short term. They estimate that short term being establishing the next administration after the November elections. For such an important bill and vote, that doesn’t inspire much confidence in me as a citizen.

Senator Bernard Sanders argues:

This bill does not effectively address the issue of what the taxpayers of our country will actually own after they invest hundreds of billions of dollars in toxic assets. This bill does not effectively address the issue of oversight because the oversight board members have all been hand picked by the Bush administration. This bill does not effectively deal with the issue of foreclosures and addressing that very serious issue, which is impacting millions of low- and moderate-income Americans in the aggressive, effective way that we should be. This bill does not effectively deal with the issue of executive compensation and golden parachutes. Under this bill, the CEOs and the Wall Street insiders will still, with a little bit of imagination, continue to make out like bandits.

This bill does not deal at all with how we got into this crisis in the first place and the need to undo the deregulatory fervor which created trillions of dollars in complicated and unregulated financial instruments such as credit default swaps and hedge funds. This bill does not address the issue that has taken us to where we are today, the concept of too big to fail.

And THAT’s the point. Any bailout or any solution to the financial mess we are in must address these underlying causes that led to the crisis in the first place. And nobody who is in a position of power or leadership seems to be listening to the glaringly obvious common sense of people like Sen. Sanders.

The bailout may very well pass the House on its second go round, but the underlying causes for the crisis will remain and will be unaddressed. As one of my friends put it to me in an e-mail:

There will be NO addressing of stronger regulatory action on Wall Street down the road. There will be no punitive measures against the speculators who caused this mess in the first place. You will not see any Congressional checks on executive power from the Treasury Department. There is NO later. It doesn't matter if it is McCain or Obama who sits in the White House either.

Once the bailout money jump starts the credit flows between the banks, all of the talk about changing the culture of Wall Street and reigning in the excesses of market capitalism will die away. Finance industry lobbyists will shower members of Congress with un-reported gifts and reported campaign contributions. It's business as usual once again.

The Final Word

So if you are in favor of the bailout there is good news for you in that momentum seems to be on the side of the Senate version passing the House. But you better not have any illusions that what you are supporting is THE solution to the crisis. I agree with the Krugman-Galbraith camp that says what the bill represents is, at best, a stopgap measure designed to have the economy limp its way along until the next administration is established.

I’m in the camp of Sanders and others who offered alternatives to the bailout and who argued that the underlying causes of the finance crisis must be addressed. The only reason the Progressive vision cannot be articulated into a viable alternative to the bailout as it was presented by Bush, Paulson, and Republican and Democratic Congressional leaders is that the Progressive movement does not have the political juice to set the agenda. That doesn’t mean they are wrong. That just means politically, they largely function in the margins and are not players.

Don’t let the debate begin and end along the terms of whether the bailout bill should be passed or not. The problem goes much deeper than that and doesn’t deserve to die down whether or not the bill passes.

Cross-posted in An Ordinary Person