Wonkbook: Foreclosure law vetoed; individual mandate ruled constitutional; IMF takes on China
President Obama vetoed H.R. 3808, the Interstate Recognition of Notarizations Act of 2010, yesterday. The law, which would've allowed banks to speed the notarization process by using out-of-state, electronic firms, passed the House and Senate with virtually no notice, but became unexpectedly consequential as accusations of fraudulent contracts ripped through the mortgage industry. Some thought the bill might help with the current problems, unfreezing some of the contracts and demonstrating the government's intention to push through this. But no, we're stuck in this morass for at least awhile longer. Sorry, recovery.
It's still a bit early to say how much damage the new foreclosure crisis will do to the markets. But even if this one doesn't turn out so bad, the fact that it could've been bad is, well, bad enough. The repeated reminders of this sort of unexpected risk are preventing businesses from investing enough to nurture a serious recovery.
In 2007 and 2008 we had a major financial crisis. That led to a wrenching recession. But what killed the recovery was the European debt crisis. It was proof that there wasn't just one risk that the system hadn't properly accounted for, but many risks. And in a fragile global economy, the impact of any negative event was going to be magnified.
And now there's another major risk that investors weren't expecting We had too much boom because people underpriced risk. They couldn't seem to see it anywhere. We're having too much bust because people are overpricing it. Suddenly, they're seeing it everywhere. We're not going to climb back to normal until businesses feel confident that the economy won't detonate six months from tomorrow, drying up credit and rendering all their new hires and investments terrible economic decisions. But for that to happen, the economy needs to stop offering plausible crises every six months. And on that, it's not cooperating.
Welcome to Wonkbook.
Obama is declining to sign legislation that would expedite foreclosure processes, reports Jia Lynn Yang and Ariana Eunjung Cha: "The vetoed legislation, which is two pages long, would have required local courts to accept notarizations, including those made electronically, from across state lines. Its sponsors said it was intended to promote interstate commerce. Lawmakers saw no problems when the House approved it in April by a voice vote, which leaves no record of votes. The Senate passed the bill unanimously last week. But as the lack of a proper paper trail in mortgage documents came to light, the idea of relying on electronic notaries triggered protests from real estate lawyers and consumer advocates. Relying more on electronic notaries, they warned, could allow more fraud into the system."
A district court judge has ruled the individual mandate is constitutional, reports N.C. Aizenman: "Other federal courts have already dismissed some challenges to the law on technical grounds - ruling, for instance, that the plaintiffs lacked standing. However, the decision issued Thursday by Judge George Caram Steeh of the Eastern District of Michigan is the first to reject a claim based on the merits, marking a notable victory for the Obama administration...Steeh found that 'far from 'inactivity,' by choosing to forgo insurance, plaintiffs are making an economic decision to try to pay for health-care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars...onto other market participants.'"
IMF chief Dominique Strauss-Kahn has condemned China's currency policy, reports Howard Schneider: "'We have been one of the institutions to repeatedly say that we believe the renminbi was substantially undervalued and that something had to be done to fix this problem,' IMF managing director Dominique Strauss-Kahn said in a news conference opening the agency's annual meeting. 'Many do consider their currency as a weapon, and this is not for the good of the world economy.'... World Bank President Robert Zoellick noted that a wave of trade protectionism sparked the Great Depression in the 1930s and cautioned that policymakers needed to calm the current dispute before it gets out of hand."
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'70s funk interlude: Sly & the Family Stone's "Luv 'n Haight".
Still to come: New Fed bond purchases may not do much; BP's oil spill review may have had an ulterior motive; there are costs to the Obama administration's immigration enforcement strategy; and Johnny Depp visits an elementary school.
Private economists don't expect Fed action to help the economy much, report Craig Torres and Scott Lanman: "Firms with large-scale models of the U.S. economy such as IHS Global Insight, Moody's Analytics Inc. and Macroeconomic Advisers LLC project only a moderate impact from additional Fed asset purchases. The firms estimate that the unemployment rate will remain around 9 percent or higher next year whether the Fed buys $500 billion or $2 trillion of U.S. Treasuries in a second round of unconventional stimulus...[one firm's] models show that $500 billion of purchases would boost growth 0.1 percentage point in 2011 and leave the unemployment rate at 9 percent or above for the next two years."
Thousands of stimulus checks went to deceased persons: http://wapo.st/cr2DMT
Tax cut politics make for paycheck uncertainty, reports Peter Whoriskey: "Normally, the Treasury Department issues information on how much to take out of next years paychecks by mid-November, but this year the debate over how much to extend the Bush tax cuts seems unlikely to be resolved by that time, and could drag into December or beyond. The longer it drags on, the more likely it will complicate the processing of millions of paychecks in January. It can take as long as five weeks for some companies to make the adjustments under the new tables, payroll administrators said."
China is warning that Congressional action on currency evaluation could harm ties with the US: http://wapo.st/dtYXcm
Foreclosure confusion is hurting home sales, report Andrew Martin and David Streitfeld: " snapshot of the problems can be seen at the real estate agency that sold Ms. Ducksworth her home, Marc Joseph Realty, based in Fort Myers. The agency had 35 deals that were supposed to close this month. As of Thursday, Fannie had postponed 11 of them. Another handful of homes that did not have offers or were being prepared for market had also been withdrawn. 'If this wipes out half my inventory, that’s a scary thing,' said Bill Mitchell, the agency’s closing coordinator. As he spoke, his computer pinged and another message from Fannie came through about withdrawing a house. It had the subject line, 'Unable to Market Notice.'"
Consumer spending and jobless claims figures are only improving tepidly: http://wapo.st/dvPrCN
Economic recovery plans need to think long-term, writes Jeffrey Sachs: "It’s time to push a long-run perspective, and not the vacuous one of cutting entitlements for the poor and working class, but a serious one of investing in human capital, infrastructure, technology, and the environment. The claim that Social Security and Medicare benefits need to be cut in order to balance the budget is absurd in an era when the richest percent of households now bring in around 25 percent of national income. Before cutting benefits for the poor and middle-class, the rich should first be required to pay in line with their vast incomes and wealth."
American Express CEO Kenneth Cheneault defends his fight against the Justice Department's credit card policy: http://wapo.st/9Nsoxi
Central bankers are in need of an elixir to stop deflation, writes Steven Pearlstein: "At this point, the risks of central banks doing nothing (deflation, continued high unemployment) are greater than the risks of cranking up the monetary printing press (future inflation). But nobody should expect it will prove a magic elixir for the economy. A number of economic modelers estimate that the unemployment rate would remain above 9 percent whether the Fed expanded its balance sheet by $500 million or $2 trillion. The reason is that the normal channels through which monetary easing works are pretty worn out. Interest rates are already so low that pushing them lower won't induce more borrowing."
Celebrities being delightful interlude: Johnny Depp appears in an elementary school as Jack Sparrow.
Energy policy insiders say that an incremental strategy won't work: http://politi.co/9A5JlR
Some made jobless by the BP spill aren't getting help, reports Ryan Dezember: "Some 500 workers have been laid off across the shallow-water sector since the Deepwater Horizon rig exploded April 20, according to Hercules Offshore Inc. general counsel Jim Noe, who is also a spokesman for the advocacy group Shallow Water Energy Security Coalition. Sen. Mary Landrieu (D., La.) recently asked BP to let shallow-water workers tap the $100 million fund. But fund spokesman Mukul Verma said there were plans to add deep-water support workers to the fund's eligible recipients early next year, and there probably wouldn't be enough money to pay them and their shallow-water peers."
The OMB was involved in blocking oil spill estimates from being released: http://wapo.st/bHsxPo
Polluters have always tried to fight science, writes Chris Mooney: "Ross and Amter label the most effective strategy 'spill, study, and stall': If you don't want to stop polluting, just insist that the science is uncertain and there's no basis for action. Cook up a few questionable studies that reanalyze the data, divert attention to other possible culprits, or call for new research. The tobacco industry didn't invent these gambits; as Ross and Amter show, the chemical industry used the same techniques to fight the regulation of tetraethyl lead in the early 20th century and the regulation of air pollution in the 1940s. The agenda is the same in the current climate debate."
Industry has always overestimated the costs of the Clean Air Act, writes David Roberts: http://bit.ly/di4f8Y
Anti-science sentiments hurt policymaking, writes Michael Mann: "Challenges to policy proposals for how to deal with this problem should be welcome -- indeed, a good-faith debate is essential for wise public policymaking. But the attacks against the science must stop. They are not good-faith questioning of scientific research. They are anti-science. How can I assure young researchers in climate science that if they make a breakthrough in our understanding about how human activity is altering our climate that they, too, will not be dragged through a show trial at a congressional hearing?"
Graphic design interlude: A generator for terrible company logos.
The Obama administration's immigration enforcement "successes" have costs, writes Seth Freed Wessler: "The enforcement programs that Obama supports purport to target immigrants convicted of serious crimes and to stop guns and drugs from crossing the border; the reality is that they are driving a system that’s come unhinged. In the three years since Hossain was expelled from Texas, a million other people were removed from the U.S. An enforcement structure that looks anything like the one both parties have built can do little better than indiscriminately deport any non-citizen caught in its expanding net, no matter their ties to the U.S. or their immigration status."
New Jersey governor Chris Christie has canceled the largest infrastructure project in America: http://bit.ly/b91qJ4
The FCC is reforming cell phone bills, reports Cecilia Kang: "Consumers are complaining in record numbers about their wireless bills, and the FCC has promised to act. Next week, the agency will unveil a proposal to address 'bill shock' by requiring that carriers notify users of overcharges and sudden increases in their bills. But advocacy groups say the FCC has barely begun to address the massive problems generated by increasingly bewildering phone bills. As cellphones are 'bundled' with television and Internet services, and with the exploding number of applications available for smartphones, consumer groups say bills have become multi-page puzzles."
HHS is backing away from claims that health care reform will expand Medicare choice, reports Jennifer Haberkorn: "Sebelius had told an AARP conference in Orlando last week that next year 'there will be more Medicare Advantage plans to choose from,' according to prepared remarks e-mailed to reporters and posted on HHS’s website on Monday. Grassley’s staff asked HHS to back up the statement, an aide to the senator, who has long been skeptical of Democrats’ claims about the health law’s impact, told POLITICO. As Grassley’s office was drafting a formal letter to Sebelius questioning the claim, the speech text was altered on the HHS web site without noting the change. The statement about more Medicare Advantage plans was deleted and now reads, 'there will be more meaningful choices.'"
New Jersey's transit cuts are short-sighted, writes Paul Krugman: "Here’s how you should think about the decision to kill the tunnel: It’s a terrible thing in itself, but, beyond that, it’s a perfect symbol of how America has lost its way. By refusing to pay for essential investment, politicians are both perpetuating unemployment and sacrificing long-run growth. And why not? After all, this seems to be a winning electoral strategy. All vision of a better future seems to have been lost, replaced with a refusal to look beyond the narrowest, most shortsighted notion of self-interest."
Food stamps shouldn't pay for sodas, write Thomas Farley and Richard F. Daines: "The federal government bars the use of food stamps to buy cigarettes, beer, wine, liquor or prepared foods like hot deli sandwiches and restaurant entrees. Still, the program, which is supposed to promote nutrition as well as reduce hunger, has a serious flaw: food stamps can be used to buy soda and other sweetened drinks. Medical researchers have increasingly associated the consumption of sugar-sweetened beverages with weight gain and the development of diabetes. Over the past 30 years, consumption of sugary beverages in the United States has more than doubled, in parallel with the rise in obesity, to the point where nearly one-sixth of an average teenager’s calories now come from these drinks."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.
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