Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Guardian, Men's Journal, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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Watchdog Rips Obama Housing Rescue

| Wed Mar. 24, 2010 12:12 PM EDT

A top watchdog for the government's bailout programs today blasted the Treasury Department's main homeowner rescue program, a multibillion-dollar effort that's done little to combat the still-roiling housing crisis. The special inspector general for TARP, Neil Barofsky, released the results of a new audit (PDF) today criticizing the paltry results of the Home Affordable Modification Program (HAMP) and the Treasury's efforts to airbrush the effects of its troubled program. As the audit points out, Treasury officials initially said the program would "help up to 3 to 4 million at-risk homeowners avoid foreclosure," but months later the Treasury made a quiet revision. Now, the department says the program aims to extend 3 to 4 million offers to homeowners—not necessarily real help. "Continuing to frame HAMP's success around the number of 'offers' extended is simply not sufficient," the audit says.

Barofsky's audit also highlights the abysmally low number of permanent mortgage modifications—somewhat lasting, legitimate relief for homeowners—which total a meager 170,000 so far. The reasons for HAMP's flop, Barofsky says, are three-fold: vaguely defined rules and constant revising of those rules; allowing mortgage servicers to begin modifications without getting all the required paperwork from homeowners; and a lack of promotion and marketing of HAMP by the Treasury. Too few people, Barofsky concludes, just didn't know about HAMP's offerings, if they know of the program at all.

Meanwhile, as the program limps along, the housing crisis rumbles onward. One telling statistic the SIGTARP audit found was that the average homeowner eligible for HAMP is underwater, meaning they owe more on their loan than their house is worth. And while homeowners make payments and wait for their equity to return, the Treasury, SIGTARP found, has mostly shied away from reducing homeowners' principal owed amounts—arguably the fastest way to help struggling homeowners. The watchdog paints a bleak portrait of a program that's done little to help beleaguered homeowners. And when comparing HAMP to the swfitness and effectiveness of the Treasury's rescue of the nation's banking system, it's little wonder average Americans are so angry with Wall Street and their government.

 

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GOPer: Senate Wall St. Reform "Dysfunctional," Wants to Hold Hands

| Wed Mar. 24, 2010 8:03 AM EDT

Sen. Bob Corker (R-Tenn.), a top GOP negotiator in the Senate, today blasted the Senate's decision to fast-track a financial reform bill out of the banking committee with no negotiations over amendments and with no Republican votes. In remarks at the US Chamber of Commerce today, Corker called the tactic to pass a "very, very partisan bill" by a party-line vote in banking committee a "dysfunctional" move, and said the committee "missed a tremendous opportunity on financial reform." "We had an opportunity this Monday to pass a bill out of our committee in a bipartisan way," Corker said, "and then stand on the Senate floor and hold hands" and begin negotiating together to craft a bipartisan bill.

By choosing to bypass committee negotiations, Senate Democrats have set the stage for a bitter partisan battle on the Senate floor, Corker said, a showdown that's far less likely to produce a bill on which both parties can agree. "It is going to be far more difficult since we missed an opportunity coming into committee to have bipartisan bill," the Tennessee senator said. "It's going to be far more difficult to have a regulatory bill that seeks the middle ground and stands the test of time." Corker lamented that now that the Senate's talks on financial reform were beyond the committee, the talks would likely take place "in a back room someplace." "I think a very strategic mistake has been made," he said. "

He also criticized the Obama administration, calling it "out of balance" for advocating for an independent consumer protection agency. In previous negotiations, Corker has supported enhanced consumer protection but housing it within, say, the Federal Reserve and weaving consumer protection into more traditional bank regulation powers. Overall, Corker said the bill had become a much more liberal bill, and that it will be an uphill struggle to change that. "Now, we've moved way to the left," he said, "and it's going to be difficult to hold people together to get it back in the middle of the road."

Most Americans Despise Wall St.

| Wed Mar. 24, 2010 7:42 AM EDT

A new national poll from Bloomberg today finds that nearly two out of every three Americans dislike top executives in big business, reflecting a broader disdain of Wall Street and Big Finance that wasn't as prevalent as before. 70 percent of those polled, the poll also found, favor giving consumer protection powers to existing bank regulators and not to a new consumer protection agency, as proposed by the House, Senate, and President Obama. And to no one's surprise, a majority of Americans think the government should have the power to limit executive compensation for top Wall Street executives.

Here's more from the Bloomberg poll:

The majority of poll participants—56 percent—say big financial companies are more interested in enriching themselves at the expense of ordinary people, while 40 percent say such firms play a vital role in enabling the economy to grow.

At the same time, Americans are divided over the scope of government regulation. More than 40 percent of Americans say the government has gone too far in measures to fix the financial industry; 37 percent say it hasn’t done enough. Almost six out of 10 people say Wall Street hasn’t gone far enough on its own to protect against future emergencies.

“Anything the government gets their fingers in, they mess it up,” said poll participant Norman White, 60, a community college electronics instructor who lives in Colfax, Louisiana. “I don’t have a very high opinion of the government running anything.” ...

The Fed could use some marketing help, the poll shows. More than a quarter of participants don’t have an opinion about the central bank, while 42 percent have a favorable view and 31 percent hold an unfavorable view.

Chamber Brass to Lead GOP Group

| Tue Mar. 23, 2010 5:56 PM EDT

A top lawyer with the US Chamber of Commerce, the right-wing lobbying behemoth fighting climate change legislation and tough financial reforms, is now spearheading a deep-pocketed GOP group for this fall's election. Former Chamber counsel Steven J. Law has become the head of a conservative 527 political organization dubbed American Crossroads, National Journal reported today. The up-and-coming group, the Journal's Peter Stone reported, "hopes to raise some $60 million to help dozens of congressional Republican incumbents and candidates in this year's elections," an effort surely made easier by having a former top Chamber official at the helm:

Law, who has been at the chamber for about two years, will be leading a group that seems poised to play a big role this fall, according to two sources familiar with the new 527. It recently raked in millions of dollars with the help of ex-RNC chairman Ed Gillespie and one source says it has received pledges for $40 million. Gillespie recently made fund raising stops in Texas and New York City to help American Crossroads get off the ground, although he has told National Journal that he doesn't intend to be formally affiliated with it.

Law is a former chief of staff to Sen. Mitch McConnell, R-Ky., served as executive director at the National Republican Senatorial Committee under McConnell and was a deputy secretary at the Department of Labor during the George W. Bush administration. Law is known as a tough advocate and is respected for his fund raising prowess. He's bagged big money for the chamber's campaign to defeat "card check" legislation, a top priority of labor unions that, if enacted, would expand their ability to organize.

Toxic Swaps Deals Sinking Cities

| Tue Mar. 23, 2010 11:01 AM EDT

Around the country, cash-strapped cities are facing a harsh reality: They lack the money to pay their employees, keep their schools open, and maintain public services for their citizens. Making matters worse for dozens of metropolitan hubs are obscure, toxic deals with the world's biggest banks called "interest rate swaps," a peculiar kind of financial contract that provided city governments with easy cash before the crisis but has now turned sour and cost taxpayers more than $1.25 billion a year, according to a new report (PDF) from labor union Service Employees International Union. Cities like Detroit, Chicago, and Denver will in 2010 pay big banks—Citigroup, Goldman Sachs, and JPMorgan Chase, among them—tens of millions of dollars in swaps payments, SEIU found; meanwhile, those same cities have previously cut tens and even hundreds of millions of dollars from their budgets to stay afloat. "These deals amount to the biggest taxpayer bailout of Wall Street you've never heard of," says SEIU Secretary-Treasurer Anna Burger.

National swaps data via SEIUWhat's an interest rate swap, you ask? Well, they're contracts that allow, say, Baltimore to enter into a deal with Bank of America to pay for public infrastructure projects. In that deal, Baltimore and BofA will "swap" interest rates with each other: the city will pay the bank a fixed rate—3 to 5 percent, say—to borrow money, and the bank will in return pay the city cash based on a floating, variable interest rate. (This is determined by some underlying source, like the LIBOR rate for short-term lending.) The point of a swap deal is that, when the economy was booming, cities could borrow from banks on the cheap, because their fixed payment rate was on par with or better than the bank's floating rate. But after the economy tanked, and the LIBOR rate dropped with it, banks emerged as the winners: Their variable payment rates to cities are now basement-low because overall interest rates are low. Cities, however, are still stuck with those higher fixed rates. Essentially they're getting fleeced.

And banks want to keep it that way. To do so, they've imposed steep termination fees to get out of an interest rate swap. To wit: Detroit, which has annual swaps payments of $103 million and faces a crippling budget shortfall, would have to pay $303 million to exit its swap deals. The same applies to most swaps deals throughout the country, which means most cities are saddled with onerous payments with no reprieve until the contract ends some years down the road. (That said, there have been a few instances where cities and banks renegotiated; Los Angeles' City Council voted earlier this month to terminate their swaps deals altogether, a decision that's catching on throughout the country.)

Of course, a swaps deal is a contract. Cities willingly entered into these deals with the likes of Goldman and JPMorgan. There's no doubt they're getting screwed now, paying banks way more than they're getting in return, but they agreed to the swaps back when everyone was binging on credit and living beyond their means. However, their citizens are the same people who bailed out the world's biggest banks, so perhaps everyone would be better off agreeing to kill the swaps deals and go their separate ways.

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