Monday, February 18, 2013

Today's links

1---Disposable Workers: Why Throwaway Employees are Bad Policy, naked capitalism

The media increasingly appears to define the state of the economy based on corporate bottom lines and the experience of the upper echelon, reflected in the way it glosses over the anxiety and distress outside the top 1% of the population. The fact that this disconnect isn’t a figment of our imagination was confirmed by a recent study by Edmund Saez that reported that 121% of the income gains from 2009 to 2011 went to the top 1%, meaning they pulled further ahead while everyone else (in aggregate) became worse off. The big cause is the state of the labor market. And that isn’t just a product of the global crisis but also of a long-term restructuring of the relationship between employers and employees... 

Look at that chart closely. People are draining their retirement accounts, neglecting medical care, and relying on food stamps to get by. Yet we read much more about how the economy (read the bottom lines of public companies) is getting better, while the desperate state of the un and underemployed shows up in anecdotes decorating the occasional story on those topics alone, and is underplayed when the media ventures out to see how the remnants of the middle class are doing.


2---With the world watching, Bernanke gives a go-ahead to the currency war, sober look

3---Avoiding the Sequester Isn’t Rocket Science, Bloomberg (Is this what Obama is planning?)

Then, it should put in place a long-term $1 trilliondeficit-reduction package, half of which is achieved through entitlement cuts, one-third through tax increases and the rest by shrinking discretionary programs, chiefly defense, which are funded through annual appropriations from Congress. That would send an encouraging sign to markets and help the economy, but only if it’s a long-term plan, rather than the one-year fix that Senate and House Democrats are proposing.

Entitlements or mandatory programs such as Medicare and Social Security make up almost 60 percent of the federal budget, and are the engine of chronic deficits. Getting $500 billion over 10 years wouldn’t be pain-free, though it doesn’t have to hurt those who can least afford to sacrifice.
The president has said he would go along with the scope of the Bowles-Simpson deficit commission’s proposed cuts to Medicare. That’s about $350 billion. It wouldn’t require cuts for the most needy, but would contain a means test for more affluent senior citizens. A sensible deal wouldn’t increase the eligibility age and would introduce more stringent cost controls and hit up drug companies for a little more.

Inflation Calculation

Half the remaining savings could come from changing the formula for the cost-of-living increases for Social Security and other inflation-adjusted entitlements. That’s a realistic proposal if protections are carved out for the very poor and the very elderly. The Center for American Progress has offered workable specifics. The rest could come from cutting agricultural subsidies and other entitlement programs.

4---Thanks Banksters - You Cost the Economy $22 Trillion, economic populist

Nowhere is the evidence of unbridled corporate greed stronger than in what the financial crisis did to the U.S. economy. The losses are staggering. Economic growth was killed to the tune of over $13 trillion. Homeowners lost a whopping $8.1 trillion in home values. Personal income nose dived.

   Between 2007 and 2010 median household net worth fell by $49,100 per family. That's a 39% loss.
What's worse is most have assumed the economy will eventually recover. There is an increasingly more real possibility. It never will. The reasons are a loss of private investment and since the U.S. worker has been scuttled, all of the expertise and skills have become atrophied. As the phrase goes, use it or lose it and businesses refusing to hire are making sure American workers are losing their skill sets.

5---The Second-Mortgage Shell Game, NYT

Consider the last big mortgage settlement. Last February, the federal government and 49 state attorneys general reached a $25 billion deal with the country’s five largest mortgage servicers — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC). They promised to help save homeowners from unnecessary foreclosure.
      
A year later, it’s clear that the settlement hasn’t worked as planned. Banks have dragged their feet in modifying first mortgages, much less agreeing to forgive part of the principal on homes that are underwater. In fact, the deal contained a few flaws. It has allowed banks to push homeowners into short sales, an alternative to foreclosure whereby the distressed homeowner sells the property for less than the debt that is owed. Not all short sales are bad — some homeowners are happy to walk away with the debt cleared — but as a matter of social policy, the program has failed to keep people in their homes.
      
A lesser-known but equally grave problem is that banks have been given a backdoor mechanism to continue foreclosures at the same pace as before.
      
The problem involves second mortgages, which millions of homeowners took out during the housing bubble. It’s estimated that as much as a quarter of all mortgage debt in the United States is in the form of second mortgages. Some of these loans were taken out to finance home improvements; others were part of a subprime product known as an “80/20 mortgage,” in which 80 percent of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage, often with a much higher interest rate.
      
The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, larger primary mortgages.
It’s a real problem: when it comes to keeping your home, it’s the first mortgage that counts....
 
The five banks covered under last year’s settlement are wiping out second mortgages in record numbers. In New York State, for example, during the first six months of the settlement period, three times as many homeowners received second-mortgage forgiveness (2,933) as received permanent modifications on first mortgages (967).
 
 
  • It will keep corporate margins high and possibly even rising.
  • It will keep inflation low.


  • 7---Housing stakeholders warn against strict mortgage down-payment requirements, The Hill

    Housing industry leaders and congressional lawmakers are ramping up their push for regulators to resolve a residential mortgage rule without placing strict down payment requirements on borrowers...

    They argue that mortgage lenders will need flexibility in making loans under the new qualified mortgage (QM) rules, and that specific down payment requirements in a still-developing qualified residential mortgage (QRM) rule will hamper home purchases and lock out many qualified buyers
    8---Affordable house prices are the best economic stimulus, oc housing

    9---Majority of working Americans have no retirement savings, wsws

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