Wonkbook: Foreclosures stopped; Geithner pressures China; Fed may target; Goolsbee on growth
Across the country, we're watching shoddy work on behalf of the banks and mortgage companies do what the government simply couldn't, or wouldn't: Stop the foreclosure crisis in its tracks. The only question is, to what end?
You could see this playing out a number of ways. One is that it gives distressed homeowners breathing room, and more leverage in court to negotiate with their banks. Another is that it collapses the housing market, as no one knows quite what to expect, and no one is quite sure how much inventory is left to trickle out once these lawsuits settle. And then there are the families that are fighting for a reprieve when they'd be better off letting the house go and moving to a community with more jobs. Or maybe people find a way around the problem. Not to sound like a fortune cookie here, but the only certainty is more uncertainty.
Welcome to Wonkbook.
Judges across the country are ruling foreclosures illegal because of faulty paperwork, report Brady Dennis and Ariana Eunjung Cha: "If millions of foreclosures past and present were invalidated because of the way the hurried securitization process muddied the chain of ownership, banks could face lawsuits from homeowners and from investors who bought stakes in the mortgage securities - an expensive and potentially crippling proposition. For the fragile housing market, already clogged with foreclosure cases, it could mean gridlock and confusion for years. And there is concern in Washington that if the real estate market and financial institutions suffer harm, it could force the government to step in again."
Tim Geithner urged the IMF to push China on its currency, reports Howard Schneider: "In seeking to muster a broader coalition, Geithner issued an ultimatum to the International Monetary Fund: take a more aggressive stand on China's currency or potentially lose U.S. backing for a series of efforts pending at the agency. The IMF is debating changes in how it is governed to give greater influence to developing nations in Asia and elsewhere, but Geithner said these steps should be tied to these countries, in particular China, allowing their currencies to more closely adhere to free-market levels."
China will soon lead the world in patent filings, reports David Barboza: http://nyti.ms/cFZVbh
Only nine percent of American companies report any product innovation between 2006 and 2008, says a new National Science Foundation study: http://bit.ly/9Kxx61
The Fed may target an interest rate rather than buy a set amount of bonds, reports Neil Irwin: "Instead of just announcing that it will create, say, $500 billion out of thin air and buy bonds with the money, the Fed could instead announce it will target a certain interest rate and then buy Treasury bonds so that rates in the marketplace reach that level. For example, the Fed could announce that it aims for three-year Treasury debt that now carries an interest rate of 0.56 percent to instead be 0.25 percent. It would then buy Treasury notes in whatever amounts were needed to get rates to the target level. That would help the economy by lowering rates for a broad range of borrowers, including Americans looking to take out a mortgage and companies looking to use debt to finance expansion."
Monetary policy would be a lot likelier to work if combined with fiscal policy, writes Paul Krugman: http://nyti.ms/d1WVKj
Want Wonkbook delivered to your inbox or mobile device? Subscribe!
Austan Goolsbee says we'll need to grow, not tax or cut, our way to fiscal sustainability: "What little countries did to deal with their imbalances are frequently not available for giant economies like the U.S. or Japan. More intense research shows that the primary way countries get out of fiscal holes is by increasing their growth rate. To posit that you have to either substantially cut spending or raise taxes belies the fact that what really matters is debt-to-GDP. In the U.S., we’ve often reduced that ratio without running surpluses by getting the growth rate up."
Got tips, additions, or comments? E-mail me.
Loch rock interlude: Belle & Sebastian play "Piazza, New York Catcher" on Late Night with Jimmy Fallon.
Still to come: US companies are buying back stock rather than creating jobs; the oil spill panel is blasting the Obama administration's response to the catastrophe; deportations are reaching record highs; and the most laser-filled wedding video you've ever seen.
US companies are using their record levels of cash to buy stock, not create jobs, reports Jia Lynn Yang: "So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates, a stock market research firm. But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth. Some companies are buying back shares partly because they don't want to invest in developing new products or services while consumer demand remains weak, analysts said."
North Carolina, Texas, and Connecticut have issued moratoria on foreclosures: http://wapo.st/bmumXX
Long-term unemployment affects even skilled workers, writes Andy Kroll: "According to federal data, however, the hardest hit when it comes to long-term unemployment are older workers -- middle aged and beyond, folks like Rick Rembold who can see retirement on the horizon but planned on another decade or more of work. Given the increasing claims of age discrimination in this recession, older Americans suffering longer bouts of joblessness may not in itself be so surprising. That education seemingly works against anyone in this older cohort is. Nearly half of the long-term unemployed who are 45 or older have 'some college,' a bachelor's degree, or more. By contrast, those with no education at all make up just 15% of this older category."
Cities' fiscal straits are only growing more dire: http://wapo.st/duYJU7
The Fed is running out of options, writes Joseph Stiglitz: "Potentially significant costs offset these small benefits. The Fed has bought more than $1 trillion of mortgages, the value of which will fall when the economy recovers - which is precisely why no one in the private sector wants to buy them. The government may pretend that it has not experienced a capital loss, because, unlike banks, it is not required to use mark-to-market accounting. But no one should be fooled, even if the Fed holds the bonds to maturity. The attempt to ensure that the losses are not recognized might tempt the Fed to rely excessively on untested, uncertain, and costly monetary-policy tools - like paying high interest rates on reserves to induce banks not to lend."
Wells Fargo will spend $772 million modifying mortgages: http://wapo.st/9Rdtmc
Trade presents a dilemma for liberals, writes Matt Miller: "Venting against foreigners when times are hard is only natural, especially when China is in fact guilty as charged. But the question that liberals sidestep for now is what their posture will be toward China and India when times are again good -- and when these nations' economic "crimes" aren't bad behavior but merely a desire to get richer. The mother of all inconvenient truths is this: Global capitalism's ability to lift hundreds of millions of people out of poverty in China, India and other developing countries comes partly at the expense of tens of millions of workers in wealthy nations. This awful, inexorable fact will soon pose an enormous moral and intellectual challenge for the American left."
Republicans promise higher unemployment, worse deficits, and greater inequality, writes Nick Kristof: http://nyti.ms/bGDAj3
Currency warfare isn't a zero-sum game, writes Barry Eichengreen: "It is a misunderstanding to believe that the policies pursued by the BOJ, the Fed, and the Bank of England come at one another's expense. What we are seeing, in all three cases, is not exchange rate manipulation but quantitative easing, actual or incipient...The Bank of England has made no bones about its continued commitment to quantitative easing. The Fed is moving slowly, slowly in the same direction. This, of course, is precisely what is needed in a world where deflation has again become a problem and fiscal policy, for better or worse, is off the table."
Wedding video interlude: Weddings are always better when the bride can shoot laser beams.
The White House withheld dour BP oil spill estimates from the public, report Steven Mufson and David Fahrenthold: "The commission staff's preliminary papers also said that Obama's Office of Management and Budget later delayed a report by government scientists that would have included a 'worst-case' estimate of the rate of the spill, weeks before the government revised its own official estimates upward. The reports delivered a harsh assessment of the administration's later contention that most of the spill was 'gone.' They point to comments by Carol M. Browner, Obama's climate and energy czar, who in a television interview mischaracterized a report as saying that three-quarters of the spill had disappeared."
EPA administrator Lisa Jackson is striking an anti-lobbyist posture: http://politi.co/aTMTVc
West Virginia is suing the federal government over mountaintop removal mining restrictions, reports Erik Eckholm: "Mountaintop removal, in which hundreds of feet of earth and stone are blasted off the tops of hills to gain access to the coal seams beneath, has become a major mining method in West Virginia, Kentucky and nearby states...Federal permits for such mining operations could be obtained relatively easily in the past, but in 2009, the agency, citing evidence of ecological harm as well as a growing public outcry, started requiring more stringent environmental reviews of new mining proposals, and started taking stronger action to protect mountain streams under the Clean Water Act."
The FTC is tightening rules for labeling products "green": http://nyti.ms/bNaKEw
Obama's environmental agenda won't work, write Michael Shellenberger and Ted Nordhaus: "In truth, the president’s strategy was flawed from the start. Cap-and-trade would not have birthed a domestic clean-energy economy--indeed, it wasn’t designed to. Meanwhile, the administration’s green stimulus spending was split between short-term, if worthy, investments in green technology, to which far too little money was allocated, and overhyped public-works projects that would never have delivered the new industrial economy Obama promised as a candidate."
There is no moderate right on global warming, writes Bill McKibben: http://bit.ly/cIvjqv
The BP spill is compounding damage done by Katrina in Alabama, writes Adren Wilson: "According to the Federal Emergency Management Agency (FEMA), 3,177 housing units in Mobile County sustained major or severe damage from Hurricane Katrina. According to available data sets, 1,179 individuals in Mobile County applied for disaster recovery Community Disaster Block Grants (CDBG) rebuilding assistance. Of those, only 301 homeowners have been or will be served. At least 359 homeowners qualified for funding, but won't receive it because they missed an application window that was open for a short period of time by design. Due to depleted federal funding, at least 346 qualified, eligible homeowners will not receive assistance."
Hobbyist interlude: A homemade spacecraft makes it to the upper stratosphere.
Deportations of illegal immigrants are at a new high, reports Shankar Vedantam: "The Obama administration announced Wednesday that in the past year it has deported a record number of unauthorized immigrants - more than 392,000, about half of whom were convicted criminals...Officials said that they had also stepped up audits of employers suspected of using unauthorized immigrants as workers, part of a strategy to undercut the jobs magnet that draws many migrants. Officials said that 180 owners, employers or managers had been criminally charged and $50 million had been levied in fines."
Al Franken wants an FCC investigation into foreign spending the midterm elections: http://politi.co/aWeEDP
Sen. Ted Kaufman warns of a coming retirement spree in the federal government, in an interview with Ed O'Keefe: "Q: Is the government equipped to fill 40,000 jobs in six months? A: No, no! And not the 40,000 jobs we're going to lose. This is my favorite subject, STEM: Science, technology, engineering and math. Think of the number of engineers and scientists that are getting ready to retire from the federal government with nobody to one to take their place in the private sector or the public sector. And this is going to be a gravy train, because there are so many scientists and engineers out of work who with some retraining can come back and do it. But when we use up those folks, where are we going to find the people to do it?"
Labor relations in hospitals are worsening, reports Lena Sun: "The country's more than 3 million nurses already make up the largest segment of the health-care work force. Millions more will be needed to take care of the 32 million additional people who are estimated to get health insurance coverage in 2014. The quality of care nurses provide will also be crucial as hospitals will increasingly be paid for how well they take care of patients rather than how many procedures and tests they perform. Better nurse staffing and work environments are linked to fewer hospital readmissions, hospital-acquired infections and bedsores, experts say."
Tom Daschle warns the health care law is still vulnerable: http://politi.co/dsxmgQ
A county with privatized fire fighting shows the need for universal health care, writes Jonathan Cohn: "To me this is a classic case for requiring payment up front--that is, an individual mandate. People shouldn't have the option to decline fire protection if protection is available. If they refuse to pay the fees, assuming they are reasonable relative to their means, they should be subject to financial penalties. The same goes for health insurance. Don't let people go without basic coverage, but make them pay for it, to whatever extent their income allows. Does that make me a little paternalistic? You bet. And I'm ok with that."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Eric Gay-AP
Posted by: obrier2 | October 7, 2010 9:35 AM | Report abuse
Posted by: dbw1 | October 7, 2010 9:53 AM | Report abuse
Posted by: dbw1 | October 7, 2010 9:59 AM | Report abuse
Posted by: msoja | October 7, 2010 10:33 AM | Report abuse
Posted by: justin84 | October 7, 2010 11:00 AM | Report abuse
Posted by: rjewett | October 7, 2010 12:16 PM | Report abuse
Posted by: bgmma50 | October 7, 2010 1:39 PM | Report abuse