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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Obama's New Housing Band-Aid

| Sat Feb. 20, 2010 7:00 AM EST

Is President Obama's latest foreclosure fix, a $1.5 billion program targeting hard-hit states, another boondoggle in his housing rescue?

Earlier today, Obama announced in Las Vegas the program to tackling the housing crisis in states like Michigan, Nevada, Florida, and a few others by asking state and local Housing Finance Agencies, or HFAs, to create innovative new ways to address mounting foreclosures tailored to their areas. HFAs, in Obama's new plan, will submit program designs to the Treasury Department specifically geared to help homeowners who're unemployed, underwater (they owe more than their home is worth), or grappling with second mortgages on their homes. The $1.5 billion in funding will come from the bailout bill passed in 2008 that set aside $50 billion for housing-related programs, including the Home Affordable Modification Program. "The funding announced today will help target resources to those hardest hit markets, promoting innovation that tailors programs to meet local needs and complementing our national foreclosure relief efforts," said Shaun Donovan, the Department of Housing and Urban Development secretary.

The new program arrives at something of a crossroads for the housing industry. While a report by credit analyst TransUnion earlier this week found that mortgage delinquencies—traditionally a precursor to foreclosures—were at record levels, statistics released today by the Mortgage Bankers Association suggest that, as the organization's chief economist put it, we've reached "the beginning of the end" of the foreclosure crisis. Fewer people, the MBA found, are late on their loan payments, which points to a potential upturn on the horizon. With that in mind, Obama's new program could be a catalyst in that budding recovery.

Lending experts, however, voiced doubts over whether the program will really do all that much. "This latest effort is just a Band-Aid," said Kathleen Day with the Center for Responsible Lending. Day said what's needed is a housing relief program in which loan modifications are mandatory, which isn't the case with the multi-billion dollar Home Affordable Modification Program, Obama's flagship relief program. Running with the medical theme, Day went on to say, "Every additional Band-Aid helps, but we need take a more wholistic view of the patient and need a more fundamental diagnosis and prognosis."

But even this new Band-Aid is no guarantee to stop the bleeding in the housing market. As Herb Allison, the Treasury's TARP czar, told reporters in a conference call today, the new $1.5 billion program was created to "foster innovation" and promote outside-the-box ways for addressing housing problems specific to hard-hit areas but potentially applicable on a national level. Innovation, however, is no easy, quick task, and to think that HFAs will generate novel ideas for stemming foreclosures in a month or two is probably wishful thinking. Allison said rules on the program would be issued in two weeks, and that the application process would begin sometime after that, though he declined to elaborate further. All of which is say, even if Obama's new housing Band-Aid generates smart new ideas for helping homeowners, it won't be happening anytime particularly soon.

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Man Bulldozes Home over Foreclosure

| Fri Feb. 19, 2010 5:41 PM EST

A bit of truly bizarre news from Foreclosureland.

Faced with foreclosure, Terry Hoskins, a struggling homeowner in Moscow, Ohio, decided to bulldoze his $350,000 home rather than let his bank, RiverHills Bank, take it from him. "When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it—no, I wasn't going to stand for that, so I took it down," Hoskins told TV station WLWT in Ohio. The story goes on to say:

Hoskins said the Internal Revenue Service placed liens on his carpet store and commercial property on state Route 125 after his brother, a one-time business partner, sued him.

The bank claimed his home as collateral, Hoskins said, and went after both his residential and commercial properties.

The Moscow man used a bulldozer two weeks ago to level the home he'd built, and the sprawling country home is now rubble, buried under a coating of snow.

"As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was," Hoskins said. "I brought it out of the ground and I plan on putting it back in the ground."

(H/T Calculated Risk)

Credit Card Fee Blitz Escalates

| Fri Feb. 19, 2010 7:30 AM EST

On Monday, the second phase of the Credit Card Accountability Responsibility and Disclosure Act of 2009—a major overhaul that boosts safeguards against unfair interest-rate hikes, excessive penalties, and other predatory practices—goes into effect, so of course big banks are doing their best to shift the cost of these new changes onto consumers themselves through higher rates and tricky new fees. Among its many provisions, the Credit CARD Act, as it’s called, will require credit card issuers to offer fair notice of changes in interest rates, ban universal default practices, and let consumers opt in to overdraft protection. The first phase of the CARD Act went into effect last fall; the third and final phase is slated for late August. Not to be outdone, though, banks are ensuring the burden of these new regulations don't fall on them.

Citigroup, for instance, recently sent letters to many of its Citi Card customers informing them of a new annual fee of $60. The only way to avoid that fee, the letter says, is to either spend more than $2,400 each year, after which the fee would be credited back to cardholders, or to pay off your debts and close the account. A Citigroup spokesman said the fee was "necessary given the increasing costs of doing business." The message, of course, is simple: Spend more money through the bank, which in turn increases the likelihood Citigroup will collect late fees and other charges, or take your business elsewhere. As one Citi Card holder told Mother Jones, "What they're doing is getting rid of prudent customers."

And that's just one example of what banks and credit card companies are up to in reaction to legislation like the Credit CARD Act. According to IndexCreditCards.com, a comprehensive site with data on credit card offerings, interest rates for consumers jumped by 0.42 percentage points in the past month, and the average rate offered to new customers, 16.7 percent, is the highest since 2005, with rates for both reward and non-reward cards continuing to climb. "We're clearly seeing one of the unintended consequences of the new law," IndexCreditCards.com founder Adam Jusko said in a statement. "We seem to be going from a marketplace in which a relatively few cardholders got into deep trouble to one in which the misery is more evenly spread."

What consumer advocates hope, however, is that the savings from the CARD Act will outweigh the banking industry’s efforts to pass costs along to consumers. By cutting retroactive rate increases and “hair-trigger” penalty interest rates, the CARD Act could save consumers more than $10 billion a year, according to the Pew Charitable Trust’s Safe Credit Cards Project. Pew also is pushing for an overhaul of late fees charged to cardholders, which the organization says are far too excessive right now. “We are seeing instances where Americans are being charged excessive penalties for exceeding their credit limits by even one dollar," Nick Bourke, the head of the Safe Credit Cards Project, said recently. "A $39 fee for exceeding a credit limit by just a few dollars, or for missing a $70 minimum payment deadline by a few hours, is difficult to justify as 'reasonable' or 'proportional' under the factors identified in the new law."

In late August, the Federal Reserve will issue a definition of what "reasonable and proportional" penalties for credit cards should be, which will be the third and final phase of the CARD Act. "We encourage regulators to implement strong rules that directly address disproportionate penalties," says Pew's Bourke.

GOP Goes Solo on Financial Reform

| Thu Feb. 18, 2010 10:04 AM EST

Sen. Richard Shelby (R-AL), whose financial-reform negotiations with Senate banking committee chair Chris Dodd (D-CT) broke down recently, is crafting a Republican version of financial reform with other GOP senators on the banking committee, Bloomberg reported today. The ranking member on the banking committee, Shelby had previously led financial-reform talks with Dodd, but those talks ended with an "impasse" between the two lawmakers. (Dodd has proceded with the talks with Sen. Bob Corker (R-TN) since the schism.) Some attributed the breakdown to Shelby's opposition to a standalone Consumer Financial Protection Agency that would oversee financial products, like subprime mortgages, and would consolidate consumer protection in a single independent agency.

Shelby's new, GOP-only reform efforts, Bloomberg reported, would create a consumer protection division within an existing bank regulator, not a standalone agency. Shelby aides also told Bloomberg that the senator's version of financial reform would protect taxpayers from the cost of unwinding too-big-to-fail financial institutions. Also getting a look in Shelby's financial reform would be a consolidated bank regulator, an idea that's gaining steam in Dodd's financial-reform plans as well. Aides to Shelby said a lot of the details have yet to be ironed out, but that talks had been ongoing for a couple of months now.

Senate Bank "Super Regulator" Gains Steam

| Thu Feb. 18, 2010 7:45 AM EST

The Senate's plan to create a "super regulator" through its financial reform package appears to be gaining momentum in Congress and the White House. The new watchdog, which would actually be a council of regulators, would be led by the Treasury Secretary and would assume responsibility for monitoring systemic risk in the financial markets, i.e., when a particular bank or several them become so interconnected and powerful that failure would pose a threat to the entire economy. The super-regulator plan, the New York Times reports, has a fair amount of support on both sides of the aisle in the Senate, including backing from Sen. Chris Dodd (D-CT), Sen. Mark Warner (D-VA), and Sen. David Vitter (R-LA). The details on the council are still fuzzy at this point as to who'd be on the council, but hopefully there will be updates on that soon.

A main point of contention with the super-regulator plan is that it would strip the Federal Reserve of much of its regulatory and systemic-risk powers, a move that's not surprisingly drawn the ire of the Fed's leaders and allies. Sen. Judd Gregg (R-NH) disagreed with giving away the Fed's bank oversight powers—which, as it's been widely reported, the Fed made scant use of—saying the Fed deserves to keep its bank-regulating role. Fed chairman Ben Bernanke said in October, however, that he supported a Treasury-led regulatory council, stressing the importance of moving "from an institution-by-institution supervisory approach to one that is attentive to the stability of the financial system as a whole," despite the consequences it would have on the Fed's role in watching over banks' products and practices.

The council of regulators proposal first surfaced in negotiations last summer, when the idea was first floated by the White House and the Treasury. That proposal, however, reserved far less power for the council—"You don't convene a committee to put out a fire," Treasury Secretary Tim Geithner said in June—but later conceded that some kind of council could advise the Fed and have a more complimentary role in bank oversight. Those previous talks—like so many other subjects—fell by the wayside as health-care reform took over the Senate's deliberations, but bits and pieces of those earlier negotiations are now resurfacing.

Still, as was the case in last summer's debate, the fine print with these new super-regulator talks needs to be ironed out, like whether the council would report to Congress and issue reports and whether it would draw on other agencies like the SEC. And speaking of the SEC, the new council is likely to have the backing of people like SEC chair Mary Schapiro and FDIC chair Sheila Bair, who backed the earlier proposal in July of last year. Perhaps they see this council as a chance for them to extend their jurisdiction and clout—so of course they're going to support it. Which raises the question: If what lawmakers fear is the fragmented, do-nothing approach to financial regulation, will creating a glorified committee made of a bunch of different regulators really make much of a difference?

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