Mojo - February 2010

When Cities Battle Wall Street

| Fri Feb. 26, 2010 10:43 AM PST

Fed up with the predatory practices and utter absence of foreclosure help from Wall Street, local politicians, unions, and citizens in Los Angeles have decided to battle the big banks and financial services community themselves in LA's own version of "Move Your Money." While Washington stumbles its way toward financial reform, a bill in the Los Angeles city government right now would crack down on banks and lenders who hang out to dry beleaguered homeowners and would rein in unfair practices; the bill would also create a series of policies calling for the divestment of LA's funds now held by large banks to more consumer-friendly ones. The campaign, led in part by the union SEIU, will be voted on before LA's city council as early as next Friday, an SEIU rep says, and marks a major effort in the "Move Your Money" campaign to yank both consumers and cities' own dollars out of bailed out institutions that aren't helping consumers, and into smaller, often local banks or credit unions.

A representative for SEIU today sent me the latest details of LA's "Move Your Money" bill under discussion by an LA city government committee, which recently took the following actions:

  1. Adopted the standards for banking relationships based on foreclosure prevention, small business lending, neighborhood banking and send to the full Council for approval;
  2. Called for the creation of a “report card” to evaluate the track record of banks that want to do business with the City. This report would include data on the number of small business loans provided, evidence of working with homeowners facing foreclosure, the number and location of branches and ATMs and the use of federal TARP funds. It would also allow LA policymakers the opportunity to choose banks that are giving back to the community;
  3. Directed the Chief Legislative Analyst to mandate a system of periodic assessment in addition to the report card to evaluate whether financial institutions meet the standards of socially responsible investing. This would include an annual, public report to the Council and Treasurer. The city would then give preference to banks in the top two deciles and lead to possible divestment for those that do not;
  4. Instructed the City Administrative Officer (CAO), in coordination with the Treasurer, the Chief Legislative Analyst (CLA) and the City Attorney, to enforce a moratorium on any new swap deals, and renegotiate or cancel current interest rate swap transactions at no cost to the city. The city will not do any business with banks refusing to renegotiate or cancel swaps deals. The city is currently paying $10 million each year on swaps deals and would be forced to pay $29 million to exit them;
  5. Requested that pension funds and proprietary departments with their own investment pools create similar policies to the ones proposed by the committee.

SEIU is also trying to introduce similar legislation in Maryland, and hopes the city-wide "Move Your Money" campaign will catch on. It's an ambitious effort, without a doubt, and while a few hundred depositors moving their money from, say, Citigroup to Weequahic Credit Union is more symbolic than anything, convincing a half-dozen cities to do the same could have a sizeable impact.

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Housing Recovery Hits Brick Wall

| Fri Feb. 26, 2010 10:14 AM PST

Is the housing recovery dead in the water?

The latest news from Foreclosureland sure seems to say that, dealing a death blow to projections that a recovery was imminent. In January, new data shows, new home sales plunged 11.3 percent to a record low, according to the Commerce Department. That drop brings home sales to their lowest point in nearly 50 years, and comes at a time when economists were predicting an increase of around 5 percent or so from December's totals. The budding recovery in the housing sector "has taken another big step back, even with the government aid," said Jennifer Lee, an economist at BMO Capital Markets, in a research note. That aid, including the Obama administration's multibillion-dollar Home Affordable Modification Program, its flagship relief effort, has done next to nothing to quell turmoil in the housing industry—turmoil showing little signs of abating.

Indeed, the housing industry appears to be at something of a crossroads right now. Just in the past week or so we've seen reports saying there are more "underwater" homeowners than ever before, at 11.3 million; that delinquencies (people late on their payments by 60 days or more) have been increasing for three years straight; but also that foreclosures are decreasing, according to recent data from the Mortgage Bankers Association, whose economist—perhaps prematurely—commented, "We are likely seeing the beginning of the end."

Well, if this is third and final act of the housing crisis, which began with subprime meltdown back in 2007, than you'd better get comfortable in your seats because this act apparently has quite a long way to go.

A Health Care Challenge of Olympic Proportions

| Fri Feb. 26, 2010 9:33 AM PST

Even if you couldn't tear yourself away from the Olympics yesterday to watch the equally combative, marathon-like health care summit, you can be assured that the someone from the US Olympic Committee was keeping tabs on the debate. Unlike 46 million of their fellow countrymen, the Americans competing at the Olympics up in Vancouver have health care. But the committee still has some skin in the game when it comes to reforming our health care system.

The Center for Public Integrity reports that the committee has hired lobbyists to follow the progress of negotiations:

Like other small organizations that don’t have a lot of employees to spread out the insurance risk, the United States Olympic Committee is finding that covering figure skaters and bobsledders is getting seriously expensive, says Desiree Filippone, the USOC’s director of government relations. That’s why the committee paid $40,000 to the Washington, D.C., lobby firm Monument Policy Group to keep tabs on Congressional health reform efforts and other issues in 2009.
Filippone did not say how much it costs to insure an Olympic star like Lindsey Vonn, who took a spill in the giant slalom Wednesday that required X-rays. American athletes are actually covered through the 46 individual governing bodies for various sports, she said. U.S. Figure Skating covers figure skaters. U.S.A. Curling covers the rock throwers.
"That’s not very cost effective in a lot of ways," Filippone said, because it means higher premiums than if the groups joined together. "We are trying to figure out if there is a better way to do it. We haven’t found it."

The National Football League Players Association and the Professional Golfers Association of America have also hired lobbyists on health care this year, CPI notes.

Fed Fighting Senate Power Grab

| Fri Feb. 26, 2010 9:12 AM PST

Federal Reserve chairman Ben Bernanke went on the offensive yesterday before the Senate committee in charge of crafting comprehensive financial reform, fighting criticisms of the Fed and telling senators they'd be making a "grave mistake" if they neutered the Fed by taking away its bank oversight powers. Bernanke, who's gone from Time Man of the Year to clawing together enough support to win renomination, made his latest comments to Congress come amidst a renewed push by the Fed to save some of its regulatory muscle, which now includes oversight of both smaller banks and larger, too-big-to-fail institutions; another powerful Fed chief, Thomas Hoenig of the Kansas City Fed, also met with Sen. Michael Bennet (D-CO), Bloomberg reported, to lobby for the Fed retaining its existing powers. "The Fed comes to this with an imperfect track record, which I think is widely acknowledged," Bennet told Bloomberg. "The more important question for me is, what are we going to do to make sure we’re never in a position again."

The Fed's regulatory gaffes and disregard for consumer protection in the run-up to the crisis has been well documented. For instance, the Fed ignored years' worth of pleading by Midwestern advocacy groups about the growing waves of subprime lending in low-income communities; the Fed also waited years to enact new rules on predatory practices by credit card companies like excessive overdraft charges and "hair-trigger" interest rate increases. (The recent Credit CARD Act, however, has clamped down on the practices.) Still, the Fed has fielded widespread criticism inside and outside Washington for its laissez faire attitude to regulation in the past decade and in the run-up to the financial crisis. Sen. Chris Dodd (D-CT), chairman of the banking committee, has long called for stripping the Fed of its bank oversight powers, leaving to deal mostly with monetary policy.

One way of doing that would be the creating of an independent, standalone Consumer Financial Protection Agency, a organization to monitor dangerous financial products and practices like the Consumer Product Safety Commission regulates dangerous kids toys. However, the fate of an independent CFPA remains up in the air, and the Fed, it seems, could still retain some of its powers when the dust settles around a new financial reform bill. For one, Sen. Evan Bayh (D-IN), who's set to retire this fall, remarked yesterday, "The Fed should retain a robust role in the supervisory area. My strong impression is that you and your team have learned from the recent past." I guess we'll have to wait and see if that's true or not.

Dems Join Attack on EPA Climate Regs

| Fri Feb. 26, 2010 8:59 AM PST

Two House Democrats are joining the assault on the coming greenhouse gas regulations from the EPA. On Thursday, Agriculture Chairman Collin Peterson (D-Minn.) and Armed Services Chair Ike Skelton (D) introduced a resolution to overturn the agency’s finding that emissions threaten human health. Missouri Republican Jo Ann Emerson is cosponsoring the legislation.

Their measure mirrors the Senate attack on EPA regulations from Lisa Murkowski (R-Alaska), who is using a resolution of disapproval--an obscure procedural maneuver to overturn agency regulations--to block the agency’s scientific conclusion that planet-warming gases endanger humans. The House trio introduced a separate piece of legislation earlier this month to amend the Clean Air Act, but has now synched its efforts with those in the Senate. Murkowski’s measure has 40 cosponsors, including Democrats Blanche Lincoln (Ark.), Ben Nelson (Neb.) and Mary Landrieu (La.).

The EPA's finding has triggered the regulation of gases, with rule for automobiles expected next month and major stationary sources like power plants coming in April. With Senate debate on a carbon cap stalled out, the EPA rules are seen as the last hope for regulating emissions this year.

In announcing the House resolution, Skelton challenged whether the EPA has the authority to regulate emissions, and the Supreme Court’s decision that yes, they in fact do have that authority. He also argues that the House should drop it’s own plan to regulate emissions, which he voted for last June. He said that he hopes the House "will set aside cap and trade in favor of a more scaled back bipartisan bill." In the meantime, said Skelton, the disapproval resolution will "keep EPA from threatening Congress with its own greenhouse gas policy as we write legislation."

Peterson, who has also reversed his position on the House bill after wringing a litany of incentives for Big Ag out of the measure last summer, said the disapproval resolution will prevent the EPA from imposing "unwarranted regulations on all of us."

Murkowski cheered the House resolution in a statement on Friday, calling it evidence of the bipartisanship. "The Administration has urged members of Congress to work together and across party lines," she said. "This action adds to the evidence that we are doing just that, and we do not want EPA imposing economically-harmful climate regulations."

Somehow, I’m pretty sure this isn’t the kind of bipartisan action the Obama team has in mind.

The Health Care Summit Was Fine. Question Time Would Be Better.

| Fri Feb. 26, 2010 8:22 AM PST

The health care summit hosted by President Barack Obama on Thursday predictably did not yield any bipartisan breakthrough. But as I explained in my PoliticsDaily.com column, it was quite valuable:

It clarified the situation. Though much of the conversation consisted of participants pushing pre-existing talking points, the debate made the obvious really obvious: Obama and his Republican foes are miles apart in ideological and policy terms. As the hours went by, Obama engaged in wonky exchanges with the Rs—sometime calling them out on key factual disputes, such as whether the Congressional Budget Office said his overhaul would lead to higher premiums. (Obama got the better of that argument.) But all this back and forth kept illustrating the basic divide. The Republicans do not believe it is Washington's mission to take major action to challenge the insurance industry and extend coverage to most of the nation's citizens without health insurance. Instead, they want to move, as they repeatedly said, "step by step." But the Democrats believe that the only way to cure the health system of its ills is to adopt comprehensive change.

This gabfest highlighted the irreconcilable differences. The Rs don't think the Ds and government can handle such a big and expensive job. The Ds don't think the Rs and the insurance industry can remedy the problems with small measures. And the meaning of all this unavoidable: if the president and the congressional Democrats want to pass any version of comprehensive health care reform, they will have to do it by themselves, using whatever legitimate legislative procedures are available. The summit clarified the situation.

The health care summit also showed the value of direct engagement between the president and the opposition—and the need for establishing the practice of Question Time. After Obama and House GOPers last month held a gripping Q&A at a Republican retreat, a cross-partisan group of bloggers, techies, and political consultants (myself included) initiated the Demand Question Time campaign, calling on Obama and the Republicans to hold such public and televised sessions on a regular basis. Neither the White House nor the House Republican leaders have yet signed on. But the health care summit has been cited by political observers as a sequel to that earlier face-off.

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We're Still at War: Photo of the Day for February 26, 2010

Fri Feb. 26, 2010 7:47 AM PST

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US Soldiers from 3rd Heavy Brigade Combat Team, 3rd Infantry Division and Iraqi Security Forces interact with children in Babil Province, Feb. 15. Photo via the US Army.

Feb Madness: the NCAA, CBS, and Focus on the Family

| Thu Feb. 25, 2010 12:30 PM PST

Just weeks after CBS came under fire for airing a pro-life Focus on the Family ad staring Heismann-Trophy-winning quarterback Tim Tebow, the National Collegiate Athletic Association—CBS' broadcast partner for college men's basketball's upcoming March Madness tournament—is now taking heat for a FOF ad on NCAA.com, reports Inside Higher Ed's Doug Lederman. 

The ad featured an image of a grinning father holding his baby boy next to the words "Celebrate Family. Celebrate Life." Beneath the photo: "All I want for my son is for him to grow up knowing how to do the right thing." Though the message may seem benign at first, if you know anything about Focus on the Family and its mission, then its clear the "family" the ad references is a traditional, heterosexual one and the "right thing" the ficticious father hopes his son will come to understand is that women should not have abortions. Internet turmoil over the ad erupted Monday when professor-turned-blogger Pat Griffin first noticed it on NCAA's site. Other blogs and organizations that support gay and lesbian athletes picked up on Griffin's post, a Facebook group formed, and by midday Tuesday, the ad had been removed from the NCAA's site. Did the NCAA really not know what it was getting itself into after the fracas over Focus' Superbowl spot? It must have.

NCAA spokesman Bob Williams told Chronicle of Higher Ed reporter Libby Sander that its officials work "closely" with CBS to approve and schedule online advertisements, "regularly" review the content of those ads, and "make adjustments as appropriate." And according to Lederman, the controversial Super Bowl ad and this NCAA.com ad are both part of a larger advertising deal struck between CBS and FOF which may mean more controversial commercials are to come during March Madness TV timeouts.

Pat Griffen nailed the crux of this problem on her blog: "The issue here is not the right of CBS, a for-profit organization, to set their own advertising standards around so-called 'advocacy' ads, even if we don’t like them. The issue is the involvement of the NCAA, a non-profit educational organization made up of hundreds of member institutions across the USA, allowing itself to be associated with advertising that is in contradiction to the NCAA’s own written standards and organizational mission." The NCAA's core values includes "an inclusive culture that fosters equitable participation for student-athletes" and "respect for philosophical differences," values that are compromised when it promotes advertisement of an organization like FOF.

New Torture Memos Mystery

| Thu Feb. 25, 2010 12:00 PM PST

When Office of Professional Responsibility's long-awaited report on the torture memos was released last week, it noted that the nearly 5-year investigation had not been "routine." The inquiry was hampered by a number of factors, including an "unprecedented" case load, but the most eyebrow raising impediment was this:

OLC initially provided us with a relatively small number of emails, files, and draft documents. After it became apparent, during the course of our review, that relevant documents were missing, we requested and were given direct access to the email and computer records of [REDACTED], Yoo, Philbin, [Assistant Attorney General Jay] Bybee, and [Assistant Attorney General Jack] Goldsmith. However, we were told that most of Yoo's email records had been deleted and were not recoverable. Philbin's email records from July 2002 through August 5, 2002—the time period in which the Bybee Memo was completed and the Classified Bybee Memo...was created—had also been deleted and were reportedly not recoverable.

On Thursday, Citizens for Responsibility and Ethics in Washington (CREW) requested that Attorney General Eric Holder launch in investigation into the deleted emails. CREW notes that at the very least the destruction of the emails flouts the Federal Records Act (FRA). But if the emails were deep-sixed intentionally, CREW says, there may be criminal implications.

In a statement, CREW executive director Melanie Sloan said:

Given the disappearance of millions of Bush White House emails, we shouldn’t be surprised that crucial emails also disappeared from the Bush Justice Department. The question now is what is the Attorney General going to do about it? Even if Mr. Yoo and Mr. Philbin did not violate their professional obligations by writing the torture memos, they—or others seeking to hide the truth—may have broken the law by deleting their emails.
 

Don't Call Me Madoff!

| Thu Feb. 25, 2010 11:30 AM PST

Citing safety concerns, Bernie Madoff's daughter-in-law Stephanie has legally petitioned to change her name—and those of her young children—to "Morgan," the New York Post reports. It's unlikely, of course, that anyone would hurt a couple of toddlers (the children are one and three). But more than a few who lost their life savings to history's biggest swindler probably fantasize about taking a broken bottle to Stephanie's husband, Mark Madoff, who filed an affadavit in support of the name change.

In our January/February issue, reporter Erin Arvedlund, the first non-trade journalist to question Madoff's unusually consistent returns, provided a still-current update on the status—legally and otherwise—of Madoff's inner circle, including his two boys, Mark and Andrew. Here's one snippet from our report, "Meet the Madoff Minions." (Picard is Irving Picard, the court-appointed trustee in the Madoff bankruptcy case.)

Papa Madoff claimed his boys, who codirected trading at the firm, learned of the fraud only when he told them, days before his arrest. Alternate theory: Madoff knew the jig was up and took the fall to protect his family. Mark Madoff withdrew nearly $67 million from company accounts over the years, trustee Picard alleges, and divides his time between a $5.6 million Manhattan apartment, a $6.6 million Nantucket home, and a $2.2 million pad in Greenwich, Connecticut. All told, Mark got more than $29 million in salary and bonuses, and racked up $797,000 in personal expenses on the corporate AmEx. Andrew Madoff received more than $31 million in compensation, Picard claims, and used another $32 mil to cover expenses such as a $300,000 investment in Blow Styling Salon, LLC, and a $75,000 payment to Lock and Hackle, a members-only fly-fishing and hunting club. And waiter beware: After dropping more than a grand on the corporate card at Manhattan's swank Per Se, Andrew left a miserly $60 tip. Picard is suing Mark and Andrew, along with Bernie's brother Peter and his niece Shana, to recover some $199 million. But their assets are not frozen, and none of them has yet been charged with any crime.

Arvedlund, whose book about the Madoff affair is titled, Too Good to Be True, similarly details the exploits of Bernie's wife, older brother, niece, right-hand man, and key enablers—including the keystone cops at the SEC who ignored enough red flags to supply a Soviet political rally. As for the grandchildren, the Madoff name isn't so much a safety issue as one of shameful notoriety. If you happen to live in New York City and your name happens to be Madoff, well, best of luck in your future prospects.