New Orleans

“Federal law says Medicaid rates must be ‘sufficient to enlist enough providers’ so that Medicaid beneficiaries have access to care to the same extent as the general population in the area.”

In other words the law is clear that you cannot discriminate in health care coverage, the decisions of life and death, against the poor.
The Obama Administration, seeking the cowards’ cave, argues that enforcement of that unambiguous standard should be the “exclusive responsibility” of federal health officials.  The Congressional caucus and anyone else caring two cents about the 55,000,000 who are covered under Medicaid, know that the feds simply do not have the resources or bureaucracy to police all of the standards in 50 states down to the nap, so they want poor people to be able to sue California and others when they are chumped and cheaped out.  In past presidential administrations such lawsuits were not greeted with universal cheer, but they were recognized as having a vital role in securing the standards of health care and protecting the poor.
What is the political equation which makes it acceptable for the Obama Administration to aid and abet discrimination against the poor and encourage by passivity killing them with neglect?

New Orleans

But, let’s not pretend there’s a solution by any means, as costs continue to rise and debt for many continues to compound.  I was reminded of all of this as I watched an excellent trailer for a coming documentary called “Default:  The Student Loan Documentary.”  The highlight (lowlight?) was watching one young person after another state obvious:  they took out loans with the dewy eyes of youth buying the American myth that riches were on the other end of the education door, and are now drowning in debt and compound interest charges while navigating well paid jobs, professional jobs ($35000/year) that provide living wages but can’t pay loan shark interest and loans.

It has ceased to be a surprise to me that inevitably if we both to look at any powerless constituency like the young, the old, the poor, or immigrants, it is a certainty that we will find financial predation sucking the citizen wealth out of any groups that can be easily exploited by their acute need or their ignorance.  One of the functions of government is to protect and defend citizens against such practices, but in our current ideology too many blind eyes are turned and banks and others prey without restrain or regard.

Rob Lieber in the New York Times talked about two new student loans being offered by U. S. Bank and Wells Fargo, and his column was almost as sad to read as watching “Default” had been.   Like sub-prime housing loans and refund anticipation loans, I cannot deny that there isn’t a need and market for private student loans.  Part of the reason is that the excellent (3.4% interest) federal loans just don’t carry enough of the weight involved in paying for modern higher education.  All of which opens the door for these absurdly dangerous and risky loans to teenagers desperate to go to college.  Fixed interest rates are a good thing but U. S. Bank offers one for 15 years at 7.8% or with an upfront fee, 8.46%, which right now is knocking on the door of usury, frankly.  Wells Fargo fixed rate product moves from 7.29% to almost double that at 14.21 percent if you are a working stiff trying to go to community college or trade school, which enrages me!  Add to both of these products the likely certainty that a teenager will have to have a co-signer, usually from their family, and it is easy to see how the whole family could go down on the false promises made at the altar of better incomes through higher education.

This is only a fix in the way that the term is used with hard drugs rather than higher education.  Lieber is right to point out that too few students and their families follow the implicit instructions of the federal program and most advisers to first use up the $31,000 that will come at a cheaper vig from the feds and if you need more, realizing that you may be over your head, and need to look at a different school with more affordable debt.

The snowball currently has more chance in hell than we have of getting Congress to expand the federal program to a higher, more realistic level.  Everywhere we read of layoffs and cutbacks at even the relatively more affordable public institutions across the country who are being driven to layoffs and price hikes.

The student loan situation is a travesty.  What kind of a society refuses to protect its young?

New Orleans Sixty odd folks ranging from business, labor,, and even some advocates met with President Obama to talk about a new plan for immigration reform in the troubled political environment we now face and in the still painful wake of last year’s loss of the DREAM Act.  A tongue in cheek tweet from an official at NDLON, the National Day Labor Organizing Network asked if the meeting were a “campaign rally.”

Today’s New York Times reported on a covey of Congress folks who were pressuring the President to use various executive powers to establish a goal line, Hail Mary defense for the millions of families and young people caught in the current immigration crises.   Spokes people for the White House jumped all over themselves to disabuse people of the notion that Obama would do diddle for immigration reform.  They argued that he promised nothing and would do nothing that seemed to be an end around on Congress.  These statements were deflating in a “what is it about ‘no,’ you don’t understand?” way.

Listening to a National Immigration Forum conference call among the activists yesterday afternoon, the only real evidence of progress continue to be in the fights, some successful like the victory by CASA de Maryland, in winning and fighting for mini-DREAM benefits for immigrant children for instate tuition.  Disappointingly, too many other speakers continued to assert that the best strategy was for Obama to “fix” the situations through executive orders, once again arguing for political tactics that Obama himself seems to be expressly rejecting.

It’s not that it is impossible to imagine such a strategy being successful, but it is difficult to envision how it might come to pass without much, much stronger local organizing calling the question district by district, city by city, and battleground by battleground.  I would have thought that the one thing that we would have learned in the most painful way, like a tattoo on our arms for a girlfriend long gone, is that any strategy that relied on the President to make a goal line stand or come through with a game changing ;play was bound to lead to even more heartbreak.

Surely we have learned by now that Obama responds to pressure not appeals. When his feet are held to the fire, he bends with the wind like a willow.  When sweet reason, tears of sorrow, or knees bent to the beg, Obama responds with…well, he doesn’t respond at all.

Immigration reform isn’t hopeless.  Strong local work is proving victories are still possible!  But, nothing is going to happen in Washington or the White House.  The whole fight is now in the streets of the city and the labor needs of the countryside.  If we are willing and able to do the work, something might happen.  If it’s all about hope, then welcome back to another room in Heartbreak Hotel.

New Orleans

How?  We could do this by upping the ante and putting protection of collective bargaining on the 2012 ballot with the Presidential election in Ohio, perhaps still the most critical of all battleground states.

Wisconsin has the right of recall and this is being engaged currently by unions and others in reaction to Governor Scott Walker’s moves to eviscerate public sector worker collective bargaining rights.  This was the successful strategy in California several years ago fueled by Congressman Darrell Issa’s resources which dislodged Governor Gray Davis within two years of his election and then replacing him with Arnold Schwarzenegger.  Wisconsin does not have a initiative and referendum procedure at the state level, so despite positive opinion polls in the state currently to protect bargaining there is no way to get there from here.  Neither New Jersey nor Indiana allow statewide initiatives and referenda, though about 20% of New Jersey’s local jurisdictions do so depending on the map this could be an opportunity to construct a tactical and strategic bulwark against some of the more draconian measures being proposed by Governor Christie there.

Were protections for union workers on the ballot in Ohio in 2012 there is no question it would energize the low-and-moderate income base, and this was certainly in evidence several years ago when ACORN and allies moved to put an increase in the minimum wage on the ballot there.  A revitalized labor movement in Ohio aligned with Obama there could make a huge difference in securing his re-election.  Tactical protective initiatives in Missouri, Nevada, Washington, and similar states that are important in the Obama column could also be important, and in several of these states workers are desperate for more protections.

There are two problems.  First, it takes a huge effort to put a measure on the ballot, mount the campaign, and hang on for the victory more than 18 months from now with the same fervor labor is showing today, even though now is the absolute perfect time to be preparing for just such efforts.  Secondly, Ohio is one of the few states that allow off-year initiatives, and given the current assault there are undoubtedly many pushing an immediate effort to place the measure on the ballot in Ohio for the fall of 2011.

A 2011 effort – and victory – might also break well for both labor and Obama if it finally proved again that these were fighting times and we had the will and way to win.  The residue of such a struggle and success might embed deeply enough to secure deeper participation in Ohio and still put Ohio in the best place for a union future and an Obama second term.

Either way these are not times for holding your cards, but demand laying down big bets while it’s still possible and it’s we are still a player in the game.

Mexico City

So far this seems more of an effort to reframe the housing debate, than fix much of anything.  This is more about politics than it is about finance or markets.

The burn in the housing meltdown was the claim that somehow there had been wild, easy  money thrown at undeserving, hustling families regardless of income and affordability which then sank the market when these poor, working families could keep up with the bills.  There is little factual support for these claims, especially when they are pushing the blame towards lower income and working families.  The facts support an understanding that most of the money moved towards hot housing for solidly middle and upper middle class families who pushed the bubble higher and higher as prices flipped in the same direction and money invested became lower and lower for such families.  Certainly we have found in Arizona and Florida a lot of working families were caught short when the music stopped, but largely because of the overall recession and the slashing of their jobs and income, rather than some kind of excessive liberalism on financing.  Meeting with many families in Phoenxix with Advocates and Actions, it was startling how much money families had lost when they lost their houses.  These were speculators, but homeowners.

In short both the housing interest exemptions and the mortgage support from Fannie Mae and Freddie Mac are by and large huge middle class federal benefits.  In the first case a huge entitlement for everyone, and in the second a low entry support for financial institutions who were able to slide off risk, keep mortgages out of their own portfolios, and therefore allow middle class families to become homeowners more easily.  My bet is that as the clock ticks down on Fannie and Freddie, the Administration will hear the right and the Republicans crying like stuck pigs when the real narrative is a loss of a huge and expensive middle class benefit.  The most ridiculous proposals have been advanced by banks who have suggested that they would jointly own a mortgage finance organization with the feds, basically claiming the rewards, sharing little real risk, and undoubtedly leaving the government holding the bag on any downside.  The various mortgage associations are also screaming because they understand that the middle class has been buying houses and know that this will make it all harder.

Lower income and working families need a real housing program and none really exists now.  The subprime market has been gone (and that is what Geithner is offering the middle class now…a higher interest rate for the same house) and credit scores are through the roof for home financing.  Rental supports are inadequate and are still being developed outside of a few major cities for short term rather than permanent housing.

We will have to wait for HUD Secretary Donovan to announce the real plan.  So far we are just seeing the big politics kick around the housing football and reframe the issue so that heads the President wins (fiscal restraint, debt reduction) and tails the President wins (an eventual compromise continuing to provide some middle class opportunities with benefits from those friends).

Eventually we are really going to have to address the desperate need for adequate and affordable housing for everyone, but it seems now is not quite the time yet.

New Orleans

Q: Another area the CFPB will be reviewing is services for people who don’t have a bank account. How do you regulate services like payday loans and still ensure people have access to small loans?

A: Well you know, access to small dollar loans is critical to many families. The notion that we somehow try to eliminate that, it’s just not going to happen.

It can force people into unregulated markets, including “Jimmy the Leg Breaker,” which is not where we want people to be.

So it is important from a regulatory standpoint that people are not at the mercy of lenders who build business models around fooling people. They’re drawn in the front door thinking they’re going to pay one price and then beat about the head and ears, financially speaking, so that they’re paying much, much more.

On the other hand, there’s a real problem. And that is how to get good, small dollar lending started in areas where there’s great need.

Sometimes that’s going to be by community banks. Sometimes it’s going to be by non-bank lenders and sometimes it’s going to be innovations and new technology that’s going to open up markets for the currently underserved population.

I anticipate a lot of change in this area.

This was Warren’s longest answer to any question, and she was certainly transparent about the fact that she was weighing pros and cons, but it is equally clear if one really reads her remarks that she is stuck here.  If she wants the CFPB to be “market facing,” her answer indicates that the street level, honest, and non-predatory market does NOT yet exist for lower income families needing small loans.  There’s no real indication that “community banks” are willing or able to step into this market in a way that competes with payday lenders yet.  Efforts to encourage such lending by the FDIC and Sheila Bair at the end of the Bush reign have been little more than a footnote on this market thus far.  Warren also seems not to have gotten a grasp on the fact that the big banks she is dealing with on her other issues are also the factors supplying most of the dollars and owning significant shares in many of the payday lenders.  It is a stretch to call them non-bank lenders, when they couldn’t lend without being long arm extensions of some of the biggest banks in the country.

As far as new technology, she’s talking about a fantasy here that is thus far even more farfetched.   The families under discussion are still on the wrong side of the digital divide in terms of access and even more miles away if we think about being comfortable with technology.  I would hate to harp on remittances, though I will at more length in the future, but this is a classic example in which banks have shown no hurry to reduce predatory pricing and utilize technology they already have at hand.

These remarks by Warren were simply scary and disheartening.

On the huge related problems of the “unbanked,” the news from Warren is even worse though more grounded.

Q: Is the idea to bring the unbanked population into the traditional banking world? Or is there a valid place for services like check cashing?

A: I think the traditional banking world concept is going to change over the next 10 years. I think technology changes it and I think the needs of an unmet population change it.

I’m going to take a little bit of a side step from the question. The basic paradigm in which we’ve thought about this is actually starting to break apart.

I all I can say is YIKES!  That answer is not exactly a “side step,” but more like a hail Mary pass and nothing more than a hope and a prayer.

New Orleans

I also get why so many were lined up against her:  first, she’s an equal-opportunity offender zinging left, right and in-between on the issues whether banks or unions, and, secondly, she’s an iconoclastic feminist arguing a totally womanist line with women and children in front, but questioning the normally unchallenged assumptions about women in the workplace.  That’s a deadly set of variables for any political calculation.  No doubt she only got this far because most people – like me! – didn’t ever bother to read the book!

Some examples:

• She zings Citibank before the meltdown for an average mortgage interest rate of about 17% and in a tell-all story relates the tale of a one-day consulting gig she did for them about bankruptcy and families in which she argued that Citi should simply not lend to people overstretched, and a senior executive dismissed the entire argument because jacking the overextended with more products and predatory interest rates was essentially their golden goose and business model.
• She tells a moving story of a meeting with Hilary Clinton as a former First Lady and how quickly Clinton got the importance of opposing the passage of a proposed new corporate-backed bankruptcy law and committed her support to the fight, but then once elected as a U.S. Senator from New York, turned around completely to support her new constituency on Wall Street rather than women.  She everything but says that Clinton and senior Senator Chuck Schumer were bought and paid for by campaign contributions.
• She comes out for universal school vouchers and total school choice for good reasons perhaps, but based on the fuzziest of political and economic premises about what would really create “equity” in school offerings, all of which must have driven the teacher unions up a wall.

Generally she drives the hammer hard on the nail.

Over-consumption is roundly dismissed as the economic trigger of the debt crises, which she argues sprang directly from middle class parents trying to find two critically essential things for their children:  good schools and safety.  In the midst of a national education crises and too often random urban crime, both parents were not only forced to work, but also ended up doubling down on inflated house mortgages in the best school districts:  the two-income trap.  Unfortunately, doing so eliminated in the Warrens argument, the historic bench strength of having a reserve worker ready (the wife) that could go to work in a crisis brought on my job loss, medical bills, or family breakups.  Folks were already stretched over the line so tautly that the least twist and they were pulled under.

I can’t say how happy I was to read this book and find out that Elizabeth Warren is fellow traveler on the citizen wealth bus.  I could go on and on, but every once in a while it’s such a pleasure to go back to the first sources and find with total surprise that someone is even better than I could have imagined.

Props to President Obama for stepping up and finding a way for Warren to work in the White House and make the Consumer Financial Protection Agency happen!  The beginnings always prejudice the ends, so she’s in the right space, regardless of whether or not she can run the show.  Better to have a toe smasher than a tiptoe dancer protecting the financial futures of desperate families!