Mojo - March 2010

Welcome to America, Sucker

| Fri Mar. 12, 2010 11:55 AM PST

"I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me," Charles Ponzi once told the New York Times. An Italian, who emigrated to the New World in 1903, his glory, such as it was, involved leaving countless immigrants and other Americans with only $2.50 in their pockets and nothing to hope for.

While he was hardly the first Ponzi schemer, he milked his particular con with particular success and dramatic flare in the 1920s. Ever since, his name has been attached to any scam in which you promise outrageous returns—he offered a 50% return on investment in only 45 days—and pay off old investors with the money eagerly offered by newer ones. The aura of success only brings in more money until, of course, it all goes bust. Ponzi's last recorded words to a reporter caught the financial-showman spirit of his time:  "Even if they never got anything for it," he said of those whose lives he destroyed, "it was cheap at that price. Without malice aforethought I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over."

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Dodd Bill = GOP Wall St. Bill?

| Fri Mar. 12, 2010 10:34 AM PST

Mike Konczal makes an intriguing—and troubling—point about how much Sen. Chris Dodd's potential financial reform bill could end up resembling the House GOP's little known financial bill from last year. Case in point: a new consumer protection agency.

The House GOP's bill envisioned a watered-down Office of Consumer Protection placed within a new consolidated regulator called the Financial Institutions Regulator. The OCP would have to jump through a number of hoops to pass new consumer-related rules, would create a new consumer protection hotline, and would report to Congress on consumer-related issues. And in a sign of the OCP's insignificance, its leader would be handpicked by the heads of existing regulators, like John Dugan of the Office of the Comptroller of the Currency and Sheila Bair of the FDIC. The likenesses between the GOP's consumer plan and Dodd's—which would put a regulator within the Fed or Treasury—are striking, Mike says:

Someone in the basement of a more senior regulator, who will need the permission of the banking regulators to do anything, and whose actions will entirely be subject to their review. Actually I’m not sure if the Senate bill will be this strong—nobody has mentioned having a dedicated hotline in the Senate bill.

Now, to be fair, Dodd says he's going to push hard for an "independent" consumer agency—one that might be housed in the Fed or Treasury but would have a presidentially appointed leader, independent budget, and rulewriting and enforcement power. If that's the case, then that's a significant difference between Dodd and the House GOP.

Mike adds that the bankruptcy code changes suggested by the GOP sound an awful lot like those leaked out of the Senate's talks, as does the (lack of) derivatives reforms. Ultimately, we have to wait until Monday to see how much Dodd's bill looks like the House GOP's. But if, come next week, it does, we're in for a war if and when the Senate and House, who passed a relatively tough bill in December, try to merge their two financial reform bills later this year.

Dick Armey Skips Reid Protest

| Fri Mar. 12, 2010 9:49 AM PST

On March 1, California radio talk show host Mark Williams, author of “Taking Back America: One Tea Party at a Time” and chairman of the Tea Party Express, posted a video of a new ad on his blog promoting the third upcoming Tea Party Express bus tour. The tour kicks off March 27 in Searchlight, Nevada, the hometown of Senate Majority Leader Harry Reid and will travel the country promoting conservative politics before finishing up in DC on tax day. The ad touted the all-star lineup for the “Showdown in Searchlight,” where the voice-over invited viewers to “help us kick Harry out of the Senate and send him back to Searchlight.” Among those featured in the ad were Sarah Palin, Libertarian Party presidential candidate Wayne Allen Root, Williams himself, Joe the Plumber, “Saturday Night Live” star Victoria Jackson, and former House Speaker Dick Armey.

Armey, now the chairman of the libertarian-leaning FreedomWorks, has been closely affiliated with the Tea Party movement, so in many ways, his appearance in the ad didn’t seem out of the ordinary. But when word got out that Armey would be linking arms with TPE, it set off some grumbling among grassroots Tea Party activists. Despite the name, Tea Party Express is an offshoot of a political action committee called Our Country Deserves Better that was founded by the California GOP political consulting firm Russo Marsh in 2008 to oppose Barack Obama. After the election, it ran ads supporting Palin for her service to the country. The PAC has raised hundreds of thousands of dollars during the two previous Tea Party Express tours, and purists in the Tea Party movement have taken issue with its lavish spending and accused its leaders of working for the GOP to co-opt the movement.

“If I were looking for a grassroots organization to join, I’d hitch my wagon to somebody else,” says Robin Stublen, head of the Punta Gorda, Florida Tea Party and TPE’s most vociferous critic. (Stublen is also working with FreedomWorks to help organize a protest against the health care bill next week.)

As it turns out, though, Armey won’t be going to Searchlight to help bash his former congressional colleague. Levi Russell, a spokesman for Tea Party Express says, “We had been optimistic about getting him, but unfortunately he wasn’t able to make it. He had some family obligations around that time, but he did say he was sorry he couldn’t be there.” As consolation for the absence of Armey, Russell notes that TPE has just confirmed conservative media icon Andrew Breitbart and Hannah Giles, star of the famous undercover ACORN videos, for the Searchlight lineup. He says most of the Republican Senate candidates running against Reid are also likely to be on hand.

And lest any Tea Party types think that Armey backed out of the Searchlight event because of the controversy over TPE’s GOP ties, Adam Brandon, a FreedomWorks spokesman, says that his group did try to schedule Armey for the event but that Armey had family obligations that made it impossible. He notes that the event is the day before Palm Sunday and that “Mrs. Armey” put her foot down. “There’s only a handful of people we would categorically not work with--Dale Robertson, maybe,” Brandon says. While he recognizes that there are people in the tea party movement who would like to “destroy Tea Party Express,” FreedomWorks will not be getting involved in that fight. “I actually think the bus is a really cool thing," he says.


 

 

 

The Foreclosure Shadow Market Grows

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

It's called the housing industry's "shadow market": those houses where the owner has defaulted on their mortgage but is in mortgage limbo because foreclosure proceedings have yet to begin. Right now, that shadow market looms large. More homeowners are falling behind on their payments but banks, lenders, and servicers are so backlogged and buried in paperwork that essentially they can't foreclose on people fast enough. As the Washington Post points out today, 5 to 7 million are eligible for foreclosure but haven't been taken back by lenders yet. The takeaway here? Despite what you've heard to the contrary, new waves of foreclosures are on the horizon, and the housing industry's quagmire—yes, it's still a quagmire—has a long way to go before getting back to even keel.

Clearing out that shadowy backlog, economists say, could take almost three years. So, on the ground, what you're left with is millions of homeowners living for free in their homes—they're not paying their mortgage because they lost their job or had their hours scaled way back, but they're not being foreclosed on, either. Soon to join that army of homeowners are the record-setting 11 million more people who are "underwater," i.e., they owe more than their home is worth. These people are at risk of falling behind on their payments, too. And if they default, that shadow market will only grow, prolonging the housing mess.

From a economic standpoint, as Dean Baker says, the Post's article is kind of a no-brainer. Think basic economics: The housing bubble inflated demand for building new houses, all those house-in-a-box subdivisions started popping up, then when the market collapsed what's left is a huge oversupply of houses. At this point, home prices are still dropping, and one factor pushing those prices down is new bursts of foreclosures. It also means that talks of the housing market "turning the corner" are most likely unfounded. In reality, the light at the tunnel's end is a long way off.

GOP Hypocrisy on Court-Bashing

| Fri Mar. 12, 2010 9:02 AM PST

The Republican Party's research wing puts out a weekly round-up of all the dirt it's peddling on the Obama administration, and today's edition places this item toward the top of its list:

OBAMA'S SUPREME COURT OBSESSION After criticizing the Supreme Court for their Citizens United decision during his State of the Union Address six weeks ago, the Obama administration has again criticized the highest court in the land, this time taking aim at Chief Justice John Roberts.

Given that it is practically mandatory for GOP presidential candidates to blast the Roe v. Wade decision, the GOP looks falsely prudish in chastising the president for chastising the Supreme Court for a particular decision.

NPR's New Pet: A Toxic Asset

| Fri Mar. 12, 2010 8:07 AM PST

You've got to hand it to the reporters over at NPR's Planet Money—they're always cooking up clever new ways to report on the big business and economic issues of the day. For their latest feature, two Planet Money reporters sought to better explain what a "toxic asset" was, one of the jargony words you hear bandied about but never simply defined. (I'd try to lay it out for you here, but their cuddly, toxic-asset, Where-the-Wild-Things-Are creature is unbeatable.) So those reporters put together $1,000 between themselves and bought a toxic asset. Their plan is to track the health of their asset over time as a way of describing what a toxic asset actually is. Their opening video is below:

 

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We're Still at War: Photo of the Day for March 12, 2010

Fri Mar. 12, 2010 7:05 AM PST

'Lightning' duo overcomes obstacles, represents Afghans

U.S. Army Maj. Christian Jenni, right, greets a local resident at Jani Kheyl, Afghanistan, during a civil assistance mission, on March 1, 2010. Photo via the US Army by Sgt. Andrew A. Reagan.

Chamber PR Helping its Foes?

| Thu Mar. 11, 2010 3:08 PM PST

The US Chamber of Commerce, a huge, controversial player in the battle to reform Wall Street and beef up consumer protection, launched its latest attack on financial reform efforts today, criticizing a proposed small tax on financial transactions. The tax would take something like 0.1 percent or 0.25 percent of financial transactions such as stock trades, and could use those funds to offset the cost of, say, health care reform or to lower the federal deficit. One liberal policy center said the tax could raise $100 to $150 billion a year.

Today, as part of its PR push, the Chamber released a study (PDF) claiming the tax would damage US markets and hurt Main Street by reducing investments and retirement savings. "This proposal would starve cash-strapped companies and cripple our efficient, transparent, and liquid markets," said David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness. "The good news is that a majority of Americans agree that it’s a bad idea." (Mind you, that "majority of Americans" claim is based on poll of 800 people; everyone can agree that 0.000002 percent of Americans speak for all of us, right?)

Asked about the Chamber's latest PR move, Dean Baker, an economist at the left-leaning Center for Economic and Policy Research who favors the tax, actually thanked the Chamber for releasing the study and making the conclusions it did. For instance, one of the report's biggest conclusions is that the new tax would raise trading costs to what they were in the 1980s—something that Baker says is far from a bad thing. He also said the poll accompanying the report (PDF) actually shows there's a fair amount of public support for the tax. 31 percent of respondents said they thought the tax was necessary because of the damage big financial institutions did to the economy—and that's with polling language clearly intended to sway people against the tax. Tweak the questions a bit, and you might've seen majority support for the tax. "I'm kind of happy," Baker says. "They're doing our work for us. And we didn't have to pay anything."

Stupak's Abortion Fight Spills Onto the Campaign Trail

| Thu Mar. 11, 2010 2:25 PM PST

Rep. Bart Stupak's polarizing abortion fight has stalled the health care bill—and now it's started to spill over into the midterm elections. Stupak has attracted a primary challenger who launched her campaign because of his anti-abortion stance. Now even moderate Democratic candidates are  speaking out against Stupak's anti-abortion maneuvering, which has become a major roadblock to passing the bill. Rob Miller, who is running in what's likely to be a competitive contest against Rep. Joe “You Lie!” Wilson in South Carolina's second district, said in a meeting this week with local Democrats that he would have opposed Stupak's amendment to restrict abortion access in the House version of the bill.

"It’s an excessive piece of legislation that I think would strip from some areas—some of the life-saving aspects of the previous legislation," Miller said on Tuesday. "I thought it was unnecessary, I think that’s the biggest thing for me. So I would have voted against it."

Miller is a fairly moderate, fiscally conservative Blue Dog running in a conservative district that broke for McCain. His comments highlight just how extreme Stupak’s demands are. Though Miller hasn't taken a vocal stance on abortion in the past—his campaign hasn't yet responded to questions regarding his views on the issue—Miller is certainly drawing a bright line between himself and Wilson, whose campaign is hauling out the Republican attack line. "It's up to folks to say whether they want government-funded abortions or not," Brian DeRoy, the communications director for Wilson's campaign, tells Mother Jones.

In just days after Wilson's outburst during the State of the Union address, in which he accused the president of lying about the health reform bill, Miller raised over $1 million from the liberal netroots. After the massive influx of support, the Democratic Congressional Campaign Committee sensed the chance for an upset and designated the race as a "Red to Blue" target. And Milller's opposition to Stupak could now win him more support from liberal groups. "I was very encouraged," said Terry O'Neill, president of the National Organization for Women. "It's absolutely exciting that people are stepping up to challenge [Wilson], especially those who are willing to recognize that women’s reproductive health care is health care."

Elizabeth Warren Won't Rule Out Senate Bid...Kinda

| Thu Mar. 11, 2010 1:51 PM PST

On Thursday afternoon, I participated in an event at the New America Foundation with Elizabeth Warren, the head of the Congressional Oversight Panel, which monitors the TARP bailout, and the No. 1. advocate for creating a Consumer Financial Protection Agency, which would regulate credit cards, mortgages, and other financial products. Warren spoke first, focusing on the need for a CFPA, which has been the subject of intense, behind-closed-doors negotiations in the Senate recently. Warren, who is also a Harvard law professor, was her usual folksy self and boiled down complicated financial issues to easy-to-understand matters. Slamming the big banks that have raised credit card interest rates the past year—after being rescued with tens of billions of dollars in taxpayer money—she made a simple but damning point: "We lend our money to them at 0 percent interest and they lend it back to hard-working families...at interest rates that have doubled or tripled." (You can watch a video of the event.)

Warren also eloquently explained how the financial industry has perfected "a complexity machine." First, she said, credit card firms began developing very complex products so consumers could no longer compare them and determine which were cheaper, and mortgage companies did the same. Next, the financial titans went hog-wild with complex derivatives and other instruments that even CEOs of the big companies couldn't completely understand, and this allowed those who were in-the-know to make massive amounts of money. Finally, the financial industry's lobbyists, looking to beat back reform after the crash of 2008, have contended that high finance is a "complex" world and establishing a CFPA would be more "complex" than it seems. "The point of the complexity machine," Warren remarked, "is to create a smoke screen to permit people in Congress to vote with the banks against families."

After Warren spoke, it was my job to toss her a few questions. I noted that she could well soon be an arbiter—"the influencer," I put it—regarding the Senate version of the CFPA, for a lot of people will look to her to decide if this version is good enough. (Sen. Christopher Dodd, the Democratic chairman of the Senate banking committee, has announced he will release his financial reform package on Monday.) Was Warren prepared to say kill the CFPA—which was oiginally her idea—if Congress doesn't establish a sufficiently vigorous agency? "I'm not the influencer," she said, too modestly, adding, "But if you're asking me the question—if it has no clothes, are you willing to say, 'Naked?'—you bet, sure. I'm just not interested in one more bureaucracy."

We continued to chat, and at one point, I asked if she has been talking to Dodd and his staff about the CFPA. "No, not at all," she said. ("Do they have your number?" I asked.) Then I posed a final question: "Do you have any interest in running for Senator from Massachusetts?" (After Republican Scott Brown defeated Democrat Martha Coakley in the special election to fill the Senate seat left vacant by Ted Kennedy's death, Ethan Porter in a Boston Globe op-ed contended that Warren would be the Democrats' best candidate to take on Brown in 2012.) The following exchange ensued:

Warren: Are you asking me if after a year and a half here, I am more attracted to coming to Washington?

Corn: That's one way of putting it.

Warren: That's one way of putting it. Yes, that, or I can stab myself in the eye.

Corn: Is that a no?

Warren: It's my view about Washington.

That didn't strike people in the room as a door-is-closed-and-slammed-shut-and-locked-with-the-key-thrown-into-a-bog no. And Warren said no more on this matter. Earlier in the event, she had remarked that if the Senate is "incapable" of backing American families and reining in Big Finance, then "the government is broken." So perhaps what happens with her baby, the CFPA, will affect Warren's thinking on whether her next step ought to be as painful as a stab in the eye.