What Congress Should Learn from OWS


This post written by me was orginally posted on Policymic and No Labels

 

Occupy Wall Street has taken off. The movement is quickly spreading across the world, with new Occupy movement surfacing seemingly daily. The movement is not without its critics, who point to the vast number of messages coming out of the protests as a sign the movement does not have a singular voice.

While there may be many messages out there from the participants, it is not hard to find some central themes from the movement. Not just Wall Street needs to be listening. Congress can and should learn a lot from the Occupy movement, using the protests as a motivation to end our partisan gridlock and do what is best for the country.

Neither Congress nor Wall Street is innocent when it comes to causes of the current crisis, and because of this, neither has been good at finding solutions. The OWS movement has come clear asks, listed on their website as a series of complaints against the industry.

Here are a couple that Congress should pay particular attention to: stop illegal foreclosures; no more bank bailouts; and create jobs.

All of these have direct links to actions that Congress can take. People are angry that despite the robo-signing scandal, big banks are still trying to foreclose on homes with fraudulent paperwork and/or without being able to produce the note. Congress can pass legislation making this illegal, which would force banks to clean up their paperwork. The robo-signing scandal has banks like Bank of America facing lawsuits that could cripple them.

This leads to another ask of the movement, no more bank bailouts. Congress should listen, stop fighting the provisions in the Dodd/Frank Act that stop too big to fail, and provide a path to winding a bank down instead of bailing banks out.

The biggest grievance of the movement and every other American is creating jobs. Neither side can agree on how to create jobs, but everyone in Congress should take the growing anger as a sign to put aside partisanship and get some legislation passed. Getting people back to work is the single most important demand. Jobs can help homeowners pay their mortgage and avoid foreclosure, help recent grads pay their student loans, can get people spending money to boost the economy, and can create a bigger tax base to generate more tax revenue.

To me, the message is pretty clear: People are clearly angry by the direction of this country. Even though the brunt of the anger is being directed at Wall Street, Congress is not shielded. The messages should not only be heard by the big banks on Wall Street, but also through the halls of Congress. There are specific asks that Congress can act on, and they should listen carefully to the occupiers. Both Congress and OWS are made up of varying people with different mindsets, yet OWS protesters have managed to find a way to work together.

Here is to hoping that Congress is not only listening, but learning from OWS on how to work together, so they can end the gridlock and do what is best for the country.

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Why Obama’s refinance plan is still missing the point


Yesterday, President Obama announced that he used an executive order to revamp the rules for the Home Affordable Refinance Program. The hope is to make it easier for struggling homeowners to refinance their mortgage and take advantage of historic low interest rates.  The new rules include allowing homeowners who owe more than 125% of the value of their home to refinance their homes as long as they are current on their mortgage. The process is also supposed to be streamlined and eliminating some of the fees. White House officials estimate these new changes will help 1 million homeowners (14 million are underwater) get some relief.

Forgive me if I sound skeptical.  The last time the administration announced a refinance plan, they estimated 5 million people would be helped. So far, less than one million have been through the program. Once again there is a lack of standing up to the banks.  The only loans that qualify for the program are those held by Fannie and Freddie.  The reason why the initial version of this plan and other plans to confront the crisis have failed, is because they lack any real pressure on the banks.

I am sure a decent number of homeowners will get relief from this move, but the impact on the crisis will be minimal.  These loans are not the ones hurting the housing market, since they aren’t sitting empty or for sale.  These are homeowners who while underwater are still current on their mortgage and not in danger of facing foreclosure.  The administration has said this will be the first in a series of moves, but once again I will not be holding my breath.

Until the President and Congress are willing to stand up to the banks, hold banks accountable, and force them to  help fix the crisis, any program will have minimal impact.  We can’t continue to use a spray bottle on a wild fire when it comes to finding solutions.  Until someone is willing to stand up to the banks that is all we will be doing.

Policies to Help Address Income Inequality


This is an article I wrote that originally appeared on PolicyMic. It was part of a debate about Income Inequality in this country.  You can read the other side of the debate here.

With the recent news that the poverty numbers in this country have risen, combined with earlier reports of a widening wealth gap, it is clear that we have an issue with income inequality in this country.

Some will argue that the income inequality is overstated. Others will say that policies designed to minimize the inequality do the exact opposite and negatively impact the poor. However, the real problem is a lack of both financial literacy and the right policies. While income inequality is a product of our system and will always be here, if we couple financial literacy with good policy, then the impact of this inequality can be minimized and have a positive impact on the poor.

The widening wealth gap and the poverty numbers are enough evidence to show that income inequality in this county is not overstated. I want to focus on the policies that are designed to minimize their impact. I will admit that every policy may not be a good thing, while others are debatable. For example, I don’t think the government should be in the business of supplying cell phones, and policies like the minimum wage are debatable.

The Earned Income Tax Credit (EITC) is a refundable tax credit for low-income families that was enacted in 1975. In a nutshell, this is a program that is designed to incentivize work. It accomplishes this by decreasing the tax burden on wages and also serving as an income supplement through the refundable portion.

Recent numbers show that this program pumped nearly $59 billion back into the economy through low-income families. Even with the poverty numbers rising, the numbers would beeven worse without the EITC. This program is further enhanced by 23 states that have varying state versions of the credit, meant to increase the positive impact on low-income families.

While this program has been proven to help people stay above the poverty line, it also shows a glaring weakness in the system. Simply providing an incentive to work through refundable tax credits is not enough. A glaring problem in this country is the lack of financial literacy. The lack of literacy can also be felt in our housing crisis. Families looking to purchase homes compensated for their lack of financial wherewithal by trusting brokers to help them wade the waters. These brokers were focused on their bottom line and not on educating the borrower. This led to loan steering into sub-prime mortgages, because once the loan closed, the broker was off the hook.

An increased investment in financial literacy would have not only helped in avoiding the sub prime crisis, it would also help make successful programs like the EITC even better. The credit maxes out at $5,666, and for a low-wage worker, that is more than they bring home in several months. With little emphasis on financial literacy, it is unrealistic for us to expect every dollar to be spent wisely. However, with a greater emphasis on financial education, families could learn how to better utilize these dollars to minimize the impact of their lack of income.

In North Carolina, the state version of the EITC came under attack during the budget debates. However, even Republican house members had a hard time advocating for the elimination of the refundable portion of the credit, because they had to admit it was an incentive to work. Even those that think eliminating the wage floor and paying lower wages to increase employment would benefit from a program like this as an additional incentive for people to accept these lower wage jobs. I am still not advocating for eliminating the minimum wage but instead want to show the versatility of good policy designed to help the poor.

One thing that all sides of this debate can agree on is that there is income inequality in this country. Even if one side will not admit it, the wealth and poverty numbers support the fact that this inequality is real and not overstated. The fact is that income inequality will always be here and is a product of the capitalistic nature of our society. Even with some questionable programs out there, policies are needed to help limit the impact of the earning disparities that exist.

The EITC is an example of good policy that helps disprove the theory that policies designed to minimize the impact of wealth disparity hurt the poor. When we incorporate financial literacy with programs like the EITC, we won’t eliminate income inequality, but we can help to minimize the impact on low-income workers.

Will the American Jobs Act Go Anywhere?


After all the dust has settled from the speech, a huge question remains.  Will this go anywhere?  As I wrote in my last post, I think the speech did enough to put pressure on both sides.  This increases the likelihood that something gets done, but is it enough?  Maybe the answer is, not so fast.

Nothing in D.C. is ever what it seems.  For most of the off-season Washington Redskins fans thought John Beck was going to be the starting quarterback. Instead Rex Grossman will be under center week 1. Football references aside, things in the nation’s capital tend to change quickly.

During the speech, several items like corporate taxes and entitlement reforms brought republicans to their feet.  In the immediate aftermath they admitted that there was a lot to work with.  No one wants to seem like they are against creating jobs, so the popular thing to do was say let’s get to work.

The devil will be in the details though. The president promised that everything would be paid for, but failed to deliver the details.  He promised in the coming week that the details would be revealed.  Those details will determine how much support republicans give him for paying for this.

He talked about improving on the corporate tax rate by closing loopholes.  What loopholes will be closed and how will that lower the highest corporate tax rate in the world?  He mentioned entitlement reform, which will upset his base, and in theory draw support from republicans.  However, we need to know what that reform will look like.  Is it just making cuts, or eliminating waste?

When talking about rebuilding our infrastructure, the key is shovel ready projects.  The last stimulus promised similar construction projects, but found a lack of shovel ready projects.  For this to work, there needs to be a plan at improving the number of shovel ready projects.  The other issue is dealing with foreclosures. While it is great to talk about helping struggling homeowners refinance and capitalize on low rates.  We need to know how we get this done.  What is the plan to help those whose credit scores are too low?  What is the plan for those who are unemployed or underemployed?

The point of all this is that the details still are coming out, and depending on what these details say will determine if this goodwill continues.  I for one, am worried about these details.  I am not sure that both sides are going to hear what they want.  Once all the goodwill is gone and they get to work, we could be setting ourselves up for another nasty stalemate.  No one wants to be seen as stopping job growth, but they also don’t want to create jobs at any cost.

My Quick Take on the Jobs Speech


While under ordinary circumstances, this night would have been all about football these aren’t normal times.  The current crisis calls for action to create jobs and address the foreclosure crisis in order for us to move forward. People have been waiting for a comprehensive jobs plan to come out of D.C. and the speech was to deliver that plan.

President Obama was back to his old campaign form.  The speech felt like one of the moving speeches from the campaign, where you were captivated even if you didn’t agree. I think he played both sides well.  For his base, he focused on stimulus through tax breaks for the middle class, and job creation through rebuilding infrastructure.  He also played to republicans by mentioning the corporate tax rate, entitlement reform, and a mention about regulations.  He catered enough to both sides that I think there is real pressure to get something done. Even in a post speech interview Eric Cantor ( R-VA), couldn’t disagree much and admitted there was a lot to work with in the speech.

With all that being said, I think there were some specifics that could have used some more details.  He mentioned that everything would be paid for, but left us waiting for the specifics.  Yes, he mentioned cuts already made, and promised a detailed plan in the coming week, but some of those details would have been useful. When talking about eliminating loopholes to lower the corporate tax rate, while I know there are many options, but mentioning one or two of the possibilities would have been nice.

My biggest issue with the speech, was the plan for the foreclosure mess seemed like an afterthought.  He mentioned a refinance plan to capitalize on the low rates, but left it at that.  I have been critical of his foreclosure prevention plans in the past, and feel that more attention needs to paid to this issue.  I wanted to hear a strategy to address the refinance plan in the speech, but will have to wait for future speeches I guess.

Overall, I though the speech hit the right points, and had Obama in campaign mode, which really helped him shine.  Once the dust settles from this it will be important for us to hold congress accountable to get this done.

More Evidence Banks Do What They Want


Every day the anger against banks is stronger.  It seems like banks can do what they want, when they want, and how they want, with no consequences.  They make risky bets, they get bailed out by taxpayers.  They get involved in bad loans, and aren’t required to modify loans.  It seems like at every turn they get a pass, mounting more evidence that banks can do what they want.

The latest piece of evidence is deals with the robo-signing phenomenon that came to light at the end of last year.  For those that don’t know, all the big banks put foreclosure proceedings on hold after members of their staff admitted in court that they signed documents without reading them.  These signatures became known as robo-signings as hundreds of these documents would be signed every hour.  A big stink was made of the whole thing and industry was supposed to have this under control.

However, an AP report, shows that the practice is continuing.  County Court Clerks in Michigan and North Carolina reported receiving hundreds of forged or robo-signed documents since this debacle was supposed to be ended.  In fact, the same people who testified in courts signatures are the ones still showing up.  The continued forged signatures no longer simply apply to foreclosures either.  The report mentions that the documents included transfers of loans and documents certifying a loan had been paid off.  So not only was the practice not stopped it has continued in other aspects of loan documents.

Despite settlements that were supposed to curb this practice, it is still in existence.  So much so that Guilford County, NC they have stopped taking questionable documents.  All this is more evidence that banks can and will do what they want.  Hopefully, on July 21, when the CFPB goes live, they can curb this lack of ethics coming from the banks.

Obama Gets “C” on Financial Report Card


This posting while written by me was originally published on www.policymic.com.

With Congress working to end the administration’s programs to scale back the foreclosure crisis, RealtyTrac and Trulia released the results of a study that show 54% of adults believe the housing crisis is here until at least 2014. When I think about grading President Barack Obama on financial justice issues, I must decide what should be defined as financial justice. Understand the state of the country when he first took office: America faced a housing crisis due to the lack of regulation of banks and the subprime market, and foreclosures were about to rise not just from bad loans, but from homeowners losing their jobs. I would give the president a C on financial justice; Obama has succeeded when it comes to regulating banks to prevent a future crisis, but he has lacked when dealing with current foreclosure issues, leading to an uncertain future for the long-term health of the housing market and prices.

Foreclosure Prevention Programs

The housing market began to deteriorate and foreclosures began to rise in 2007, but the bottom came in the fall of 2008, catapulted by the fall of Lehman Brothers. In March 2009, the administration made a decision to step in and help save some mortgages. It launched a series of programs under the Making Home Affordable Program. The Home Affordable Modification Program (HAMP) was one of these programs to be run out of the Treasury Department. HAMP set guidelines for what was needed to modify a mortgage, and banks and servicers were invited to participate. One key component here was that nothing was mandatory for the banks; their participation was strictly voluntary. The program was supposed to help save millions of homes from foreclosure and hold off the crisis. In reality though, the program has been a failure.

According to the latest scorecard, there are only 609,615 active permanent modifications from 2,684,832 eligible delinquent loans. Early in the process, trial modifications lasted three months, and could last longer than six months without a permanent modification being offered. Housing counselors still have issues with aged trial modifications.

No program under the Making Home Affordable Program has had the level of impact that was hoped for. Though some homes have been saved, the expectations were to save millions of homes. That has not been the case.

Grade: F

Bank Regulation

Once Obama finished dealing with Health Care Reform, he turned his attention to financial reform. The House and the Senate debated numerous proposals before the Dodd/Frank Act took center stage as the bill of choice. This bill was massive in scope and covered almost every facet of the banking industry. The biggest component of this reform in bill was the creation of the Consumer Financial Protection Bureau (CFPB). This all-encompassing regulatory body was to be independent from Congress and would be the one regulatory body that covered banks. Many of the rules relating to the CFPB will go into effect on July 21, 2011 — they recently launched a website, and the implementation team is working to lay the initialgroundwork. The Republican leadership in the House, who have always opposed the creation of CFPB, is trying to weaken the agency before it can even get off the ground. The banking industry has not been very excited about this, and spent millions of dollars trying to defeat it.

There are some components of this reform bill that may not be great for consumers. Banks are going to find a way to pay for increased costs that are a result of more regulation, and pass that cost on to consumers. There are some amendments, like the Durbin Amendment, that may increase the cost of goods for low-income families as a result of capping interchange fees for big banks. But it will not cap these fees for small banks, which include many providers of prepaid cards. These added costs of reform make it difficult to give the highest grade possible, but I believe that the majority of these reforms are a step in the right direction.

Grade: A-

Final Grade

You can see from my perspective, the president has been hit or miss on financial justice. He has been successful on bank regulation, while his performance on the foreclosure crisis has been abysmal at best. I think his overall grade is right in the middle, and there is definitely room for improvement. Even though I have been a supporter of Obama, I am not sure this is one of his strongest successes so far.

Overall Grade: C