Silver Spring

Here’s the horror:

◦     Before you count on social security payments for your senior years, realize that the government can demand payback on veterans payments for health care, defaulted farm and small business loans, student loans (!), income taxes, and almost any other debt, though I’m not sure about housing loans.  I would bet it could include hurricane recovery loans.

◦     3.1 million Social Security recipients are already having their checks dunned.

◦     The student loan people got the 10 year statute of limitations lifted in the 90’s, so this is now when every federales finally caught up.

◦     They snuck this through in the 2008 Farm Bill.  Hello?  Who was looking there?!?

◦     They can include the debt, interest, and penalties.

The “good” news:

◦     The feds can only take 15% of your check and can’t move you less than $750 per month or about $10000 per year (though good luck living on that!).

◦     There is still a 10 year limit on income tax.  You figure?

◦     They have not allowed credit card companies and banks to attach your Social Security payments.  Yet!  I bet their lobbyists were drooling when they read this.

We talked recently about the problem with student loans, particularly their ability to assign huge, predatory, and unconscionable collection and similar fees onto the total debts for citizen scholars.  To think that these folks had already snookered Congress into making these kinds of obligations eternal into the 65 and older set that might have incurred the debts 40 years before is simply wild!

This all seems to be the modern equivalent of a permanent “work release” debts prison.  We need some kind of a debt holiday or jubilee for citizens on some of these obligations once they have this much age on them.

At the least we need to call it square when the principal is paid off, rather than strapping these burdens on people until they escape to the grave.

What kind of country are we becoming?

New Orleans

Lieber’s slant was that these travelers were thought to be high end and corporate, so in essence Congress was turning a blind eye in their direction in order to allow many of the credit card companies to pick up some excess profits since they were taking them off the gravy train on some of their predatory rip-offs.  His best guess was that the risk was very low:  7 cents on $100.00 against the normal charge of $3 on $100.00!

I notice these charges all of the time on the trail for ACORN International, and they gall me to no end, not being rich and not wanting to carry more cash around than makes prudent sense.  I also am in the great country of Canada 3 to 5 times a year and it is absurd for the credit card companies – which are huge there – to act like they are in the deepest depths of some rain forest somewhere and a target for fraud.  Come on!

When I read someone like Lieber speak about how easy all of this processing is for these giant credit card companies — many of which are of course bank run now through Chase, Citi, American Express, etc – it also reminds me why these charges should also be reduced for remittances the same way.  There’s really no reason for paying so much freight for a simple electronic transfer of funds!

But, Lieber is right.  Congress may not be hearing from the business traveler and the well to do, and it’s a cinch they are not carrying about the migrant workers trying to send money back to their families in the home country.

What does it take to force credit and debit folks to learn about equity.

One happy note:  big props to Capitol One (where I have my money and where I have a debit/credit card) because they DO NOT CHARGE this ridiculous surcharge.  They said something to the reporter about caring about the customer.  Hey now!

New Orleans

The tricks of the trade are seductive:

• Deferrals:  sure seems like a friendly thing to do but the debt accumulates and grows while the payments are postponed.
• Compound Interest:  I forget the movie where the old rich fellow was telling the callow the youth the secret to wealth, and it was “compound interest,” not “plastics.”  The ability to charge interest on top of interest on top of interest, takes the simple debt and its simple interest rate to stratospheric levels once you add time.  You are thinking this isn’t predatory, right?  This is just the way loans work, chump!  If there is no effort to explain the consequences transparently, then over time this morphs into a predatory practice as well.  Get it?
• Penalties and fees:               The story detailed preposterous charges of $20000+ and $50000+ for turning over collection to a debt agency.  What?!?  How can that be possible?

More of this is going to happen to young people given the huge recession.  But according to the story there is over $750 billion and only 40% of the debt is being actively repaid.  This also means the debt (see above on compound interest) is also soaring on that 60% for sure.

There was a story of a doctor who had $250,000 in debt which has now gone over $500000+ in 5 years with what and what.  There was another story of a mother whose unemployment check of $300 is being garnished by the federal lender, Sallie Mae, for $120 because she had signed for her son while he was in school, and he lost his $29000 job, and defaulted because he was unable to keep up.

If trying to own a home is one ticket to trying to achieve financial security for working families, and we are watching much of that dream wash away in foreclosures and fallen prices, then education was certainly supposed to be another investment in a better future.  With eroding jobs, increasing debt, escalating college pricing, and no relief, this looks like a mess.

Seems to me that getting these young scholars right sized on their debts would have been a good investment by the government when it was in bailout mode, but perhaps the reason the government is allowing the banks to patty cake around on the foreclosure mess, is the fact that clearly the government is not willing to write down some of this outrageous debt that they are allowing to grow unabated through predatory practices.

New Orleans

There were some new voices speaking plainly though.

“Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP, estimates 7.1 million of the 7.9 million households now behind on their mortgage payments will lose their homes to foreclosure if nothing is done to change current loan-modification programs. “Principal reduction is the only answer,” she says.”

But for many the chairs in the church haven’t changed.  Bruce Marks of NACA and John Taylor of the National Community Reinvestment Coalition have been long allies, and not surprisingly their position mirrors mine:  there have to be write downs.  Jack Schakett, formerly of Countrywide and now in about the same job with Bank of America concedes, as he always has, that there is a place for write downs, and believes they should be extended.  Wells Fargo, as always, continues to keep its head in the mud and believe that someone else will solve the problem they helped create.

Nonetheless, if a headline in the WSJ is going my way, that’s a breakthrough in itself.

There is also finally an admission about the real problem the banks have which is their disastrous balance sheets.  I was arguing about this just last week with an ex-mortgage broker, so I’ll be pleased when he hears this from some other source than me.  Hagerty lays it on the line:

“It is more complicated for financial institutions. U.S. banks, thrifts and credit unions held about $952 billion of home equity and other junior-lien mortgages as of Sept. 30, according to Federal Reserve data. If the principal owed on first mortgages is reduced, the institutions probably would have to write down or write off many of the second-lien loans, potentially sapping their capital.”

Bingo!

One solution offered for the banks was interesting and would involve regulators allowing banks a longer timeframe to write down the mortgages on their balance sheets so that they didn’t go under due to their own capital shortages.   Of course that’s what my CPA father used to call “creative accounting.”  Depositors, investors, and regulators would have to write on their palms to remember that banks are zombie institutions, but since the bailout, most observers have known that without having to make a note.

The only gallows humor in the article was the ridiculously self-serving and anti-political proposition put forward by Black Rock, a major mortgage investor, which in their dreams wants a fairy tale solution where bankruptcy judges would act as their magical godmother and wipe out credit card debts and 2^nd lien mortgages for struggling borrowers before getting to their goodies in the prime mortgage.  Yeah, right!  Not in this world.

But, in this world, 7+ million underwater borrowers are crying for a solution, and writing down principle owed still seems like the only horse to ride.

New Orleans

O’Keefe’s employer, Andrew Brietbart and www.biggoverment.com had one of their fair haired boys, Kyle Olson, write a piece whose headline was “Sorry Wade, James O’Keefe’s Actions Don’t Excuse ACORN.”  Olson probably feels he has the right to do a “Wade” shout out, because he and I are old comrades.  He had been on Glenn Beck helping promote my book, Citizen Wealth, claiming he had an exclusive “interview” with me at the Octavia Book Store book signing.  Dressed in short pants, he and a buddy claimed that they were health care bloggers from Michigan, and wanted to get some video from me for their blog about health care reform.  The highlights of the “interview,” which consisted of Fox viewers watching me talk while signing Citizen Wealth last summer were there question about whether SEIU was working for healthcare reform and my “admission” that yes, by gum, they were (no, duh?!?) and them asking about ACORN and Health Care for America Now (HCAN), where I said I didn’t work for ACORN and asked Marie Hurt, the Louisiana director their question, and she answered in the background.  Olson and O’Keefe come from the same “school” of “journalism,” Olson is just better looking.  The rest of his piece was a rehash of whatever few remaining charges are still outstanding against ACORN back to the 2008 election and the highly documented partisan charges by the Republicans against the organization at that time.

On the other hand I got an email yesterday from Michael Gaynor, a conservative blogger often all over ACORN as the devil incarnate, who took me to task for being too soft on O’Keefe.  Gaynor is a lawyer, so he may take these lawbreaking high jinks more seriously as a member of the bar, but he thought my description of O’Keefe’s lame quasi-apology as “weak tea” was WAY TOO KIND.  A call from the Michael Volpe, who writes the Provocateur blog, wondered why I even cared about O’Keefe, and wondered if I was losing my focus.  I was able to reassure him that I was mainly exercised over bad, pretend “organizing” which was nothing more than a mask for self-promotion no matter the costs and consequences.

I’m not even mentioning the folks who have written about O’Keefe and his bungling buddies who are not conservatives.  Whoa!  Some of the suggestions about what is likely for this callow youth in our nation’s prisons were way too gross for me.   I’m sure that if O’Keefe ends up in the calaboose that he’ll figure out how to implant a camera somewhere and make prison reform his very personal issue sometime in the future.  We’ll welcome his help on that often overlooked issue where most firsthand reports are not filmed and not heard.

New Orleans

The Wyman calculations were based on credit bureau data and derived from the number that went from being “current on their mortgage to default, rather than making spotty payments.”  Accurately this is a walk away profile, abandoning any pretense of looking for remediation based on inability to pay.  These are homeowners that could and had been paying, but who looked at the bottom line, read the paper, and realized it was going to be decades before they got their money back.

Wall Street continues to walk away.  Big time real estate operators are walking away.   The spinners are trying to say the feds won’t bail out the homeowners, but the truth is that the feds are bailing out the banks and letting them not restate the value of the mortgages that are underwater yet.  Somebody’s getting paid, just not the little guy – again!

The banks are still in denial reporting on 1991 statistics that indicate that people do not walk away.  Hello!  They knew in 2006 and 2007 that people were paying their credit cards before they paid their mortgage.  Get the message?  People no longer see the mortgage as life and death when they don’t have much skin in that game and were playing for the uptick of the value to refinance on a 2-28 or 3-27 or an ARMS.

The stampede to get away from these bad deals will crush a lot of these Wall Street cowboys and push them over the cliff, as people swim hard to get back to the surface and right size their investments.  Unless there is real help, which no one sees on the horizon yet.

New Orleans

It’s hard to be happy even with a small victory because there is so much more.  Even with the online capacity being installed for Scotia customers, the costs are still way out of line with the reality of the bank’s costs, making this a huge profit center, and therefore almost certainly predatory.

Scotia now trumpets that it will charge $9.00 plus 1% on any transaction.  On $100 bucks the minimum charge would be $10.00 or 10% of the total transaction.  Oh, no, that’s not right!

On the Scotia website they advertise the savings:

• $10.20 from Toronto to China on a $580 remittance
• $16.80 from Montreal to USA on a $420 remittance
• $4.00 from Calgary to Philippines on a $100 remittance
• $7.80 from Toronto to India on a $320 remittance
• $7.70 from Vancouver to Jamaica on a $130 remittance

Since most of this is being done via Western Union, the real revelation when you examine these new Scotia transfer cost savings is how much Western Union is charging for what should be trivial transfers within the region, like the ones from Montreal to the USA, which is next door, or Vancouver to Jamaica which is right off the Florida coast.  Normally, a transaction would have cost another 3% from Canada to USA and another 6% to Jamaica.  Of course there is another 4% they are making on the Philippines without this new Scotia reform.   The savings in the other countries are fairly trivial, though not insignificant to China and India, but as Scotia’s advertising folks boost the level of the remittance to $300 and $500 plus, all of us can tell what is going on.

But, let’s celebrate the small victory with Scotia, since there are many large banks that have not yet conceded this much, and let’s keep in mind how long we – just like this money – are still forced to travel to really win significant savings.

Western Union is obviously at the heart of this issue!

New Orleans

At one level it’s a case of life imitating art and thinking it is life imitating life.  What the O’Keefe’s think they are taking from Alinsky, according to their statements on web interviews quoted in the Times is a sense of tactical extreme or taking a contradiction to its outer limits.  Most of these favored stories in Rules though were exactly that:  stories.  They were well timed and pointed tactical threats, boring on a common organizing principle (though I can’t remember if this were a “rule”) that the “threat is always more powerful than the action.”  Many of these colorful and oft told tales of Alinsky actions from Rules were only tales that demonstrated what might have been or backroom threats at what could have been, and certainly never were what actually happened.  It’s one thing obviously to threaten that you will bring busloads of African Americas to the Chicago Symphony or whatever after having filled them full of beans, but it is a whole different thing to actually organize people to do such a ridiculous stunt that most would find demeaning and even racist.  Never happened, captain!

What O’Keefe and the rightsters are missing is the power of the threat and the force of irony and paradox, both of which Alinsky understood exceedingly well.  Theirs is a misreading of the text.  They have taken bad jokes and turned them into wrongheaded tactics, as the Landrieu debacle well illustrates for one and for all.

What surprises me as an organizer is not just the bad reading of Alinksy, because who really cares about that, but the fact that these are bad tactics because even for the rightwingers involved the tactics seem chosen not to create change, but simply for narcisstic self-aggrandizement of the worst kind.  Threatening to monitor Landrieu’s office’s handling of their complaint calls – and generating more of them – might have actually moved Landrieu to do something.  Now, if anything, they have made her a warrior for health reform, which is something the left was never able to do in Louisiana or in Washington.  They have written her a free political pass and allowed her to move forward on health care in a protected bubble forever.

Alinsky in his own desire to popularize at the time asked for some of this problem of misreading.  He would fill the college halls and retell the stories over and over as if they were gospel for the sake of his evangelism.  He fervently believed that the ends justified the means, which is both wrong, and now a banner easily unfurled by the right as well.  Furthermore, he used to continually say – to my chagrin and others – that he didn’t care where the organization went once it was built, he was simply the organizer, which was a weak defense for the racism that erupted from the famous Back of the Yards, but was an ideological weakness that had to be corrected in building ACORN and so many other modern community organizations.

But, even if Alinsky in some ways asked for this kind of trouble, there is no excuse for the bad work now being done in his name.

Houston

• Fifty-nine (59) seats in the Senate is still a majority, but it’s a signal that we need to get busy. We should not accept 59 as a rationale to step back or tone down the demand for reform in critical areas, but instead should turn up the heat before it’s too late.
• Politics teaches us to never be seduced by “premature certainty” and that was starting to happen as issues fell lower and lower in the queue and beltway “wisdom” cautioned a waiting game as if we had forever.  I think particularly of the dilemma of immigration reform that now seems sidetracked for years, if there is even an Obama 2^nd term.
• The Tea Party protests when I spoke in Amherst and Springfield were a clarion call of deep seated populist anger.  It was a mistake to write it all off.

• There is no satisfying the beast.  Feed him and he’ll come back.  Pet him and he’ll know your weakness.  Positions need to be taken in stone, not written in sand.  We can’t just bargain “high-low” on principled positions.
• We need to find our fall back positions on labor law reform.  There’s no EFCA in our future.
• We need to seize on Obama’s sudden understanding that banks matter and need to be both policed and taxed.  We need to push for Geithner to be out after the midterms (if not before), because all of this mess is on his shoes and Obama will never be able to wipe it off in his re-election campaign.  We need to push Dodd hard so that he doesn’t get confused about his job now while thinking about his future job search with the industry.
• We need to learn that there’s a huge price to pay by throwing important popular (as in “for the people” not by the polls) institutions “under the bus,” like ACORN.  We lose more than is saved in such cowardice.  (See above on the beast).

Our clock is ticking away and our moment is almost gone whether it’s measured in months or years.  When we have a minute we will hear a million other things we should learn, but we need to start cookin’ with grease and do it now!

New Orleans

The central change in the bill is to extend the reach of the CRA requirements barring racial discrimination in mortgage lending to many of the financial institutions that have grown up in recent years and are unregulated by the Federal Reserve and do not have federally insured deposits.  One of the great ironies of the right wing blame-game around the housing meltdown of the current Great Recession has been to try to exonerate Wall Street and other get-rich-quick tactics and blame CRA for having “forced” institutions to write mortgages for homeowners unable to pay.  The truth which Johnson’s bill understands is that only about 25% of the mortgages being written at the time of the meltdown were by institutions that were in fact covered by CRA!  Most of the sub-primes for example that fueled much of the mess were totally outside of the CRA coverage.  On the conservative side of the fence, Mike Volpe who writes the Provocateur blog, is one of the few voices on the right who seems to understand that fact.  [Incidentally, some of the pundits and bloggers mistakenly claim that Countrywide was outside of CRA coverage – it was not, since Countrywide was also chartered as a bank.]

We need to bring all of these fast dealers under CRA obligations.  Many understand this.  Remember that H&R Block when trying to start a national bank voluntarily was willing to meet CRA non-discriminatory requirements (and won a charter), while Wal-Mart when trying to start a national, Utah based “industrial” bank was not willing to guarantee it would abide by CRA non-discrimination standards (and failed to win a charter.)

Johnson’s bill would bring all the non-depository institutions that are now (or will again?) write mortgages under the CRA including credit unions, insurance companies, and mortgage banks.

All such lenders would have to buckle up, disclose data so that there lending policies, procedures and impacts were clear, and therefore prove that their underwriting does not discriminate.  God knows they might even someday have to establish that they actually serve the needs of the community, rather than just their investors, but that’s a star I’ll keep wishing on.

Johnson has 60 sponsors, and as a member of the House Financial Services Committee, I’m hopeful that she will get Chairman Barney Frank to set a hearing on this bill and let it begin its progress into law.

We need to protect the CRA and extend its reach, and this bill is an important step in that direction.

More details are in the bill: Community Reinvestment Modernization Act of 2009 (H.R. 1479).