Economic historian Gavin Wright has described how the New Deal's high-wage policies forced a complete reorganisation of the South's low-wage economy. In agriculture and industry there was extensive upskilling and mechanisation, a process that launched the South on a path toward convergence with the rest of the American economy. That was very much a good thing. But it was a very different thing from a process in which wages rose for a set of low-wage workers alongside consumer adjustments. The workers that benefitted, for one thing, were often different from those that initially held the low-wage jobs. Whites displaced blacks in many cases, and the period coincided with a great migration of surplus low-wage labour from the South to the industrial cities of the Northeast and Midwest.
Speaking more broadly, an across-the-board increase in wages at the bottom of the wage distribution, which was accompanied by a corresponding increase in prices, would have two big effects. One would be to raise the minimum productivity of the workers on the job, which would be achieved in part by some firing and hiring and in part by some investment in training, new capital, and industrial reorganisation. And the other would be a shift in the geographical distribution of labour toward cities where a dollar is worth less because the cost of living is higher.
These shifts could prove to be a good thing for the American economy
2---Big Banks Conspiracy is destroying America, marketwatch
Goldman Sachs, now the role-model for all global Big Banks
In “The Great Bubble Machine,” Taibbi says Goldman was the mastermind behind every great bubble in American history since it was founded in 1869 by Marcus Goldman and his son-in-law Samuel Sachs. Yes, one bank gets blamed for America’s amazing history: Bubble 1: the Great Depression. 2: tech stocks. 3: the housing craze. 4: $4 a gallon gas. 5: rigging the bailout ... and now the latest Bubble 6: Global Warming.
Example: early on in this indictment, Taibbi focused on a chapter in John Kenneth Galbraith’s classic “The Great Crash, 1929,” titled “In Goldman Sachs We Trust” where the Harvard economist singles out Goldman’s “Blue Ridge and Shenandoah trusts as classic examples of the insanity of leverage-based investment. The trusts, he wrote, were a major cause of the market’s historic crash; in today’s dollars, the losses the bank suffered totaled $475 billion...
The banking industry is engaged in a subtle conspiracy of unethical, immoral, dishonest, corrupt, illegal, and outright criminal behavior, for profits ... cheating investors and taxpayers, conning the government, buying off politicians and setting America up for a massive crash, bigger than 2000 and 2008 combined. Their rationale? That’s the logical next phase for capitalism!
Far worse, this dark behavior has already metastasized far beyond the pre-2008 actions of the Goldman Sachs Bubble Machine. Today this behavior is everywhere. “Everything is rigged.” This corrupt behavior is so pervasive among banks, even the American people seem to accept it as part of our economic “new normal.” ...
The Washington’s Blog on “The Big Picture” is the must-read of 2013. exposing how Wall Street and the banking world are taking over America. Read some of their more than 50 links to all the toxic examples of the banking conspiracy driving our world to the third market crash of the 21st century, a collapse of the economy and the Great Depression II.
Beyond the tens of millions of overcharges in energy markets, Wall Street’s “Big Banks have manipulated virtually every other market as well — both in the financial sector and the real economy — and broken virtually every law on the books.” Yes, they’re corrupt.
3---Banks fight rule to hold capital against dodgy loans, Reuters
The proposed rules are intended to reduce risk-taking by forcing lenders to hold onto a 5 percent stake in any loan bundled for investors in the secondary market.
The law created an exemption for mortgages deemed to be safe enough, but left regulators to define the threshold. Regulators have proposed exempting mortgages when borrowers make down payments of 20 percent.
Shelia Bair, the outgoing chairman of the Federal Deposit Insurance Corporation, said extra costs that some borrowers might incur as a result of the new risk-retention rules will help prevent a repeat of the financial crisis.
In a speech at the National Press Club, she acknowledged pushback from the industry over the proposal from regulators on which loans might be exempt from the requirements.
"Given the controversy that has surrounded this rule, I have to say I regret that Congress carved out an exemption for ultra-safe mortgages as defined by the regulatory agencies," Bair said.
Critics have argued the rules would keep potential first-time buyers out of the housing market and drive up borrowing costs because lenders would charge higher rates for loans that do not qualify for the exemption. A comment period on the proposed rule expires on August 1.
An unlikely alliance of mortgage and consumer groups -- including the American Bankers Association, the Center for Responsible Lending and the National Community Reinvestment Coalition -- have petitioned for regulators to make changes to the rule, and say it could make it more difficult for borrowers to find affordable home loans.
4---What, Is The SEC Just Giving Up? , Mark Gongloff
5---Mortgage Applications Plummet Throughout July, DS News
According to Capital Economics, mortgage application volume fell 18.6 percent from June to July, doing slightly better than the 22.5 percent drop from May to June. At the same time, the average 30-year fixed mortgage rate rose to 4.62 percent....
Home purchase applications, meanwhile, declined 5.6 percent month-over-month in July—the largest monthly drop in that category in nearly two years (though volume was up 0.7 percent in the last week of the month).
6---Skyrocketing Numbers of Federal Workers on Forced Leave, NYT
7---The taper: let’s not call a retreat a victory, IFR
(Price signals? What price signals?)
The strong arguments for starting to taper purchases of mortgage and government bonds are all about costs and risks. Bond buying works by distorting prices, blunting the already addled risk sensors of financial markets and leading to a sizable, and ultimately costly, misallocation of capital.
In its own sweetly indirect way, the Fed has been upfront about this, as can be seen in the statement released last week along with its decision to keep current monetary policy in place:
“In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.”
8--Obama Says Private Capital Should Take Lead Mortgage Role, Bloomberg
(because they did such a good job last time)
You can’t have a situation in which the government is underwriting and guaranteeing all the mortgage lending that’s taking place around the country and big profits are being made by these quasi-private institutions,” Obama said. Congress should pass housing legislation by the end of the year, he said. ....
The president’s call for a government mortgage reinsurer coincides with administration officials quietly aiding Senate efforts. Tennessee Republican Bob Corker and Virginia Democrat Mark Warner in June introduced the measure, which would require private capital to take at least 10 percent of the first losses on mortgage securities. The government would step in with more aid during a financial catastrophe.
(So for every bad loan, taxpayers pay 90 cents on the dollar. Sounds fair to me.)
In his speech yesterday in Phoenix, Obama blamed “recklessness” on the part of lenders and borrowers for the housing bubble and subsequent collapse of the market as the nation fell into the deepest recession since the 1930s. Now, he said, the market is healing, with prices rising and foreclosures declining.
Rising Values“We’ve got to turn the page on this kind of bubble-and-bust mentality that helped to create this mess in the first place,” Obama said. “We’ve got to build a housing system that is durable and fair and rewards responsibility for generations to come.”
(We have to turn the page by entrusting the system to the people who blew it up and were never held accountable)
Obama said borrowers with foreclosures or bankruptcies resulting from a job loss will be able to finance a home purchase with a Federal Housing Administration mortgage as long as they are back at work, demonstrate 12 months of timely payments, and complete housing counseling. The FHA, a government mortgage insurer, now requires a three-year wait. ...
A new system would replace Fannie Mae (FNMA) and Freddie Mac, which drew $187.5 billion in aid from the U.S. Treasury after investments in risky loans pushed them to the brink of insolvency. The two companies, which were taken into U.S. conservatorship in 2008, provide liquidity to the mortgage market by buying loans from banks and packaging them into securities on which they guarantee payments of principal and interest, freeing up the banks to make more loans.
Fannie Mae and Freddie Mac returned to profitability as the housing market rebounded. They’ve paid the Treasury $131.6 billion in dividends, which count as a return on the U.S. investment in the firms and not as a repayment of their debt to taxpayers. Freddie Mac announced today that it will send an additional $4.4 billion to the Treasury Department after continued housing-market improvements allowed the company to post a seventh consecutive profitable quarter.
Warner said in a statement that the bipartisan Senate proposal “will end the current Fannie and Freddie model of private gains and public losses...
We can’t go back to the housing-finance system that we had before,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said on Bloomberg Television yesterday. “We can’t go back to a place where trillions and trillions of dollars of wealth is wiped out and the world economy is put at risk.”
(We don't have to "go back"; we're already there. Nothing changed. The foxes are still guarding the henhouse. And--guess what--They're the same foxes.)
9---Did Fannie Mae and Freddie Mac cause the financial crisis?, Think Progress
In a word, no. The housing bubble that precipitated the financial crisis was inflated by private companies at various levels of the housing finance market. Unscrupulous lenders issued large mortgages with predatory features like adjustable rates that would skyrocket shortly after the ink dried on the paperwork, then sold those loans to financial firms that packaged them up, got them rated as safe investments by ratings agencies, and re-sold them to other firms. After years of escalating subprime lending by private companies that eroded Fannie and Freddie’s market share, the companies were lured into a “race to the bottom” that exposed taxpayers to the risks Wall Street had been packaging up and reselling for profit. As Center for American Progress housing expert Janneke Ratcliffe said in her March testimony before the Senate Committee on Banking, Housing and Urban Affairs, “The housing bubble was driven by the development of a ‘shadow banking system’ in which mortgage lending and securitization was largely unregulated and certainly undisciplined.” The Financial Crisis Inquiry Commission examined conservatives’ claims that the GSEs were responsible for the housing bubble and found them statistically unsound. Despite efforts by Republican members of the commission to ban words like “shadow banking,” “Wall Street,” and “deregulation” from the FCIC report on the crisis, the commission rightly concluded the crisis was caused by Wall Street malfeasance and years of deregulation that prevented government agencies from correcting the industry’s abuses....
If the GSEs didn’t cause the crisis, why is the president talking about changing the government’s role in the mortgage market? The way that the secondary mortgage market does business shapes how the primary mortgage market works. The question of who can get a home loan from a bank depends in large part on who the bank can sell that loan to in turn, which is heavily influenced by how the government participates in the secondary market. The idea is to avoid future taxpayer bailouts of the whole housing finance system without turning homeownership into something only the wealthiest can achieve by completely removing the government from the equation.
What changes is the president proposing to the government’s mortgage market activities? Part of his proposal is to replace the implicit government guarantee of mortgages that Fannie and Freddie provided to Wall Street with an explicit and more limited sort of guarantee. President Obama will propose ending Fannie and Freddie completely and instituting a new, more limited, and clearly stated government role in guaranteeing housing finance. Under this proposal, taxpayer dollars would be the last-resort source of funding to cover losses, stepping in only after all available private-sector funds have been absorbed. ...
If the private sector is going to take over primary responsibility for the mortgage market, won’t that make it harder to get a house? Unwinding Fannie and Freddie is only half of the story. If the private market won’t insure the traditional sort of home loan to a broad swathe of Americans, homeownership and the economic security it’s historically brought could slip out of reach for much of the country. To avoid that pitfall, reform has to include incentives for the private market to continue to make housing affordable and accessible. CAP has called on Corker and Warner to make some changes to their bill that would “provide flexibility for the system to serve low-wealth borrowers,” who pilot programs have shown to be reliable investments when loan terms are tailored to their ability to repay. The president’s proposal includes a small fee on mortgage securities that would fund loan programs targeted to poorer borrowers and rules for the new, mostly private mortgage financing system to ensure the most traditional loans continue to be made (In other words, the "unsophisticated borrowers --particularly people of color --will be targeted again as they were the last time.)
9---White House rolls out Obama housing plan (The gory details)
10---Obama’s housing program: A windfall for Wall Street, wsws
11--Examining the big lie: How the facts of the economic crisis stack up, Big Picture