Tuesday, September 30, 2008

Detroit City Council President Conyers and Member-at-Large JoAnn Watson Oppose Taxpayer Bailout of Wall Street

Press Conference-13th Floor CAYMC

Contact: Monica Conyers, 224-4530
JoAnn Watson, 224-4535

No Bailout for Banks and CEOs with bailouts for Residential Victims of Housing and Mortgage Crisis

In a press release today, Council President Monica Conyers states, “There should be no bailout for banks and CEOs without commitments to help homeowners victimized by the housing and mortgage crisis.”

On September 22, 2008, the Detroit City Council passed a resolution demanding Congress bailout victims of the housing and mortgage crisis by enacting a two-year moratorium on home foreclosures.

Council Member Watson states, “If we can bailout Freddie Mac and Fannie Mae ($200 Billion), AIG ($85 Billion), and the “Big Three” auto companies ($25 Billion), then we should be able to help the people whose tax dollars will be used for these bailouts.” Massive numbers of home foreclosures and predatory home lending by firms in connection with the very Wall Street firms ($700 Billion) being bailed out by the Federal government have devastated Detroit and Michigan.

Unprecedented layoffs along with jobs being exported overseas litter the economic terrain of Michigan. Since 2000, the Detroit metropolitan area has lost over 200,000-auto industry related jobs. Over the past forty years, Detroit has gone from the highest rate of home ownership to the highest rate of home foreclosure in 2007. The economic engine of this country is not working properly because of misplaced economic priorities and corporate greed.

Some companies appear to have deliberately targeted citizens for subprime ARM mortgages with penalties for early pay-off and in some cases outright fraudulent mortgages. $1.3 trillion is the estimated value for outstanding sub prime loans in the nation. Although only 12 percent of loans, they represent 53.3 percent of foreclosures.

Ironically, some of these families actually qualified for close to prime or prime mortgages. Michigan claims both the highest unemployment rate and the highest percentage of sub prime mortgages in the nation.

Watson further states, “When people are working they contribute to the economy by paying for their mortgages, paying local, state and federal taxes. Workers become consumers only when they can pay for home and essential necessities.”

Approximately, 2.5 million homes are in jeopardy of foreclosure in 2008. Yet, the Federal government fails to include a bailout of foreclosed families and citizens in dire economic distress. Ironically, citizen tax dollars will bailout Wall Street banks.

Additional City Council demands include strict re-regulation of Wall Street that prohibits future financial speculation such as that of the last ten years. Furthermore, City Council urges Congress to make sure any new credit lending guidelines do not negatively impact financial centers throughout the U.S. “Only when the U.S. government gives its people a hand up, should the people give Wall Street a bailout,” emphasizes Watson.

Finally, the Detroit City Council insists the U.S. Senators from Michigan and Detroit-based Congressional Representatives contribute to Detroit’s economic recovery by instituting a national moratorium on foreclosures for at least two years; earmarking a one billion dollar economic package to create WPA-style jobs for heads of households in Detroit; and providing tax credits for small businesses.

“We must hold the corporate executives accountable and not reward them for their role in creating this housing mess. However, we must help our residents who were victimized by speculative practices,” exclaims Conyers.

US Economic Crisis Bulletin: World Urges Americans to Get a Grip on Banking Crisis; House Prices Decline; Bailout Doomed

World urges US to get a grip on banking crisis

BERLIN (AFP) - - Europe led a chorus of demands Tuesday that the United States get a grip on its financial crisis, as governments scrambled to shore up fragile banks and restore confidence in nervous markets.

The failure of the US Congress to approve a 700-billion-dollar plan to bail out tottering Wall Street banks rattled European leaders struggling to protect their own institutions from the global storm.

In Berlin, German Chancellor Angela Merkel said: "I expect that the rescue package in the United States will be approved this week, because it is needed so that new confidence can be established in the markets."

French Finance Minister Christine Lagarde said: "It's obvious that there is a lot of hope in various financial markets riding on the success of this plan."

In Brussels, European Commission spokesman Johannes Laitenberger said: "The US must take its responsibility in this situation, must show statemanship for the sake of their own companies and for the sake of the world."

US President George W. Bush has thus far proved unable to persuade lawmakers from his own Republican Party to back the Wall Street rescue plan, but echoed European calls for action.

"The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," he warned at the White House, vowing that efforts to secure a rescue package would continue.

In Asia, the Japanese government has been battling to pass its own 17-billion-dollar supplemental budget to kick-start the economy and, while India insists its stock market is sound, Delhi called for US action.

"It's agreed by everyone a bail-out is necessary. How the US Congress will reconcile the views of two major political parities, it's not for me to comment," said Finance Minister Palaniappan Chidambaram.

In Paris, President Nicolas Sarkozy met bankers to urge them to maintain a supply of credit to business, after France, Belgium and Luxembourg pumped 6.4 billion euros (9.2 billion dollars) into the beleaguered bank Dexia.

"Our ambition was to have very strong political involvement in order to send a signal to the markets," Belgian Prime Minister Yves Leterme told journalists in Brussels after the Dexia deal was reached.

With commercial banks reluctant to risk loaning money to each other, the European Central Bank attempted to release liquidity into the credit market by auctioning off 50 billion dollars (35 billion euros) in one-day loans.

An earlier auction of 30 billion dollars was massively oversubscribed.

Despite government intervention, the failure of US lawmakers to agree on a rescue for failing US banks spread confusion in Europe's markets, in the wake of a rout across Asian markets and on Wall Street overnight.

London's FTSE was up 0.22 percent in late morning deals after falling by three percent shortly after the open. Paris also plunged while Frankfurt was down 0.75 percent.

Outside the European Union, in Russia's emerging economy, trading was suspended on its two main markets, the RTS and the MICEX, a day after they fell 7.11 percent and 5.50 percent respectively.

"Investors everywhere are suffering an almost complete loss of confidence in governments' ability to prevent a systemic failure of the financial system," Moscow-based analyst Chris Weafer wrote in a note before trading was to start.

Following a pre-dawn crisis meeting with Prime Minister Francois Fillon and Lagarde, Sarkozy held talks with France's leading bankers in order to identify weak links in the sector.

The French leader promised in a speech last week that no French depositor will lose so much as a euro in savings and gave an undertaking that the state would rescue failing institutions.

"The French banking system is better protected than the others, but the situation has changed," a senior official in Sarkozy's office said. "Banks are in trouble in Germany, Belgium and Great Britain. We feel a bit surrounded."

Ireland, the only country in the eurozone single-currency bloc to have officially entered a recession, also issued a guarantee. The finance ministry promised to protect savers' deposits in six major banks for two years.

The move came after a record share slump in Dublin on Monday which saw the Irish Stock Exchange Index fall 13 percent.

Irish Finance Minister Brian Lenihan criticised the US government for failing to prevent the collapse of investment bank Lehman Brothers.

"My personal view is that the United States authorities were mistaken in permitting that bank to go to the wall," Lenihan said, defending Ireland's decision to provide state support to the banks.

"Were liquidity to dry up in the Irish banking system in the weeks ahead, the inevitable result would be economic catastrophe for this country," he said.


Why the bailout bill went down

By Gail Russell Chaddock

Washington – A sweeping rescue plan for US financial markets foundered in the US House Monday on a combination of doubts about the plan, reelection concerns, disdain for bailing out Wall Street bankers, and a deep philosophical distaste for massive government intervention in the private sector among conservatives.

The Dow Jones stock index plunged a record 777.68 points on the day ­a reaction that Democrats say could pave the way for a new vote, as early as Thursday.

Despite opinion polls showing that the public was warming to the idea of a rescue plan – and efforts by congressional leaders on both sides of the aisle to round up support – the measure failed 205 to 228, with 95 Democrats and 133 Republicans voting to scuttle the proposed $700 billion bailout. Most lawmakers had been deluged with calls and e-mail from voters angry that, as they see it, taxpayer dollars would be used to bail out Wall Street fat cats.

It was clear from lawmakers’ post-vote comments, especially among conservative Republicans, that the bill represented nothing short of a repudiation of values – such as faith in small government and market mechanisms – that they have cherished since the days of Ronald Reagan.

“Inaction has never been an option, but [Treasury chief Henry] Paulson’s plan should never have been our only option,” said Rep. Jeb Hensarling (R) of Texas, who heads the conservative Republican Study Group. “I fear that under this plan ultimately the federal government will become the guarantor of last resort, and that does put us on the slippery slope to socialism.”

Despite Monday’s loss, major players in the effort to prevent the credit crisis from worsening vowed to have another try at it later this week.

“The legislation has failed. The crisis is still with us,” said House Speaker Nancy Pelosi, in a briefing after the vote. “The lines of communication remain open.”

Secretary Paulson reaffirmed the need for a rescue plan for the US financial system, pledging to keep talking to lawmakers to come up with “a plan that works.”

“We’ve got much work to do and this is much too important to simply let fail,” Paulson told reporters after meeting President Bush to discuss the bill’s rejection. “We need to work as quickly as possible.”

House conservatives had clashed last week with the White House over the shape of the proposed rescue plan, which proposed that the Treasury Department buy up “troubled assets” from financial institutions, including foreign banks. They favored charging Wall Street to fund its own bailout through a government-backed insurance program – elements of which were included in the final rescue plan.

But for most GOP conservatives, the plan would still leave the Treasury secretary picking winners and losers in the US economy.

“I’m resolute in my opposition,” said Rep. Darrell Issa (R) of California. “Today we are ending the Reagan era if we vote for this, and we can’t come back and fix it next year.” The bill was also a tough call for Democrats, who resented being seen as lining up to bail out Wall Street just before an election, as their GOP challengers claimed to side with Main Street.

“We could lose seats over this,” said Rep. Carolyn Maloney (D) of New York, who nonetheless voted for the plan.

Some Democrats on the left wing of the party repudiated the plan. “What we are considering today is still built on the Paulson-Bush premise that buying up Wall Street’s bad bets will solve the liquidity problem. I don’t buy it,” said Rep. Peter DeFazio (D) of Oregon.

There are less expensive, less risky ways to solve the problem, he said. “We can do better. We should start again on a new package.”

Rep. Emanuel Cleaver (D) of Missouri, a member of the House Finance Committee, delayed his vote until the last minute to see if GOP leaders could deliver a majority of their own caucus. They did not, and he voted against the bill. “There’s no reason for us to go in and bail Bush out if his own party rejects him,” he said.

Monday’s vote marked the sharpest repudiation ever of the Bush White House by House Republicans, who voted against the plan by a margin of 2 to 1.

In a press briefing after the bill failed, House GOP leader John Boehner said Speaker Pelosi’s floor speech before the vote “poisoned” the GOP caucus and cost as many as a dozen Republican votes that had previously been committed to the rescue plan. In her speech, Pelosi blamed America’s financial woes on eight years of the Bush administration’s “reckless economic policies.”

Responding to the bill’s failure, Mr. Bush said: “Our strategy is to continue to address this economic situation head on, and we will be working to develop a strategy that will enable us to continue to move forward.”

Meanwhile, Monday’s vote sent the US Senate back to intraparty and interparty discussions on how to proceed.

“We need to have conversations. We don’t know what the next steps are,” says Jim Manley, a spokesman for Senate majority leader Harry Reid. The Senate had planned to vote on the bill on Thursday.

“The problem is not going away. We’re going to stay here until we find a solution,” said Senate Republican leader Mitch McConnell. “It’s time to fix the problem, not the fix the blame.”

Associated Press material was used in this report.


US home prices fall at record rate

By James Politi in Washington
September 30 2008 16:55

US home prices posted a record annual decline of 16.3 per cent in July, disappointing economists and delivering the latest setback to the search for signs of recovery in the US housing market.

According to the closely watched Case-Shiller index, produced by Standard & Poor’s and released on Tuesday, home prices in 20 large US cities fell faster than both the 16 per cent drop expected by most economists and the previous record of 15.9 per cent in June.

On a monthly basis, the readings were mixed. Although the pace of the home price drop accelerated in July to 0.9 per cent from 0.5 per cent in the previous month, declines over three months have eased significantly from earlier in the year.

“House prices are tumbling down a hill but the slope is elevating,” said Patrick Newport, US economist at Global Insight in Massachusetts.

The steepest drops in home prices continued to be concentrated in sunbelt cities such as Las Vegas and Phoenix, which have been at the heart of the US housing bust. They respectively recorded monthly drops of 2.8 per cent and 2.7 per cent and annual drops of 29.9 per cent and 29.3 per cent.

Some cities did report improvements, with Minneapolis recording a 1.3 per cent gain on a monthly basis, compared with a 0.9 per cent rise in June, while the Tampa, Florida area posted flat house prices, compared with a 1.1 per cent decline in the previous report.

Meanwhile, a measure of US consumer confidence showed its highest reading since September, moving up to 59.8 from 58.5 in August, according to the Conference Board. However, the data was discounted by some economists given that it was expected to fall as the dispiriting impact of the financial crisis offset a brighter outlook deriving from lower energy prices.

Copyright The Financial Times Limited 2008


Atlanta Fed’s Lockhart Assumes Bailout Plan Is Dead

Federal Reserve Bank of Atlanta President Dennis Lockhart on Tuesday put low odds of success on congressional efforts to pass a government program aimed at stabilizing financial markets.

“I’m working under the assumption that it is most realistic at this stage that there will be no comprehensive program as was envisioned in the Treasury proposal,” Lockhart said at a luncheon for regional economic alliance Greater New Orleans Inc. “The most realist approach is to assume we are moving forward dealing with whatever developments come up on a one-by-one basis.”

The $700 billion plan, in which the government would buy distressed mortgage securities to restore markets’ health, suffered a spectacular defeat in the House on Monday. Congress is expected to vote again later this week on a modified version of the legislation, which is supported by the Fed.

In his prepared remarks, Lockhart said he expects the financial-market turmoil will likely weigh heavily on the economy, although he added he was less worried about the outlook for price pressures.

“We’re in the midst of very stressed financial markets with the potential of doing serious damage to the broad economy - Main Street in the current jargon — both here in the United States and abroad,” Lockhart said. “I believe problems in our financial system add significant risk to the downside for the economy,” he said.

Market troubles are constraining borrowing and “Main Street is being affected” by Wall Street’s troubles, Lockhart said. He continues to expect “a very weak second half” of 2008 for the U.S. economy, with “contracting” consumer spending, “weaker” business investment and reduced export-sector gains.

The central banker devoted considerable attention to developments in financial markets. He described credit markets as “quite strained” and said “there has been a widespread withdrawal of confidence” between financial-market participants. While the troubles in the financial system have been around for some time, “the situation in September has been one of accelerating deterioration of the institutional and market landscape of our financial system,” Lockhart said. He added “these conditions are still with us and, as of yesterday, show no signs of relenting.”

If markets stay impaired “they will surely evoke public policy responses in an effort to restore confidence in financial markets,” he said. Then, “confidence will return with improved liquidity, more clarity on the value of troubled assets, and the recapitalization of financial institutions.”

Any prospective response to the financial sector trouble should be done “pragmatically and as a national community,” Lockhart said. –Michael S. Derby
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Article printed from Real Time Economics: http://blogs.wsj.com/economics
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DRC President Officially Acknowledges PM Gizenga's Resignation

KINSHASA 29 September 2008 Sapa-AFP

DR CONGO'S PRESIDENT 'OFFICIALLY ACKNOWLEDGES' PM'S RESIGNATION

Democratic Republic of Congo's President Joseph Kabila has
officially acknowledged last week's resignation of prime minister Antoine Gizenga, a member of Gizenga's cabinet told AFP Monday.

"The head of state officially ackowledged this resignation in a letter delivered on Sunday to the prime minister by the deputy head of the president's office," said the source, who did not want to be named.

Gizenga, 83, who is leader of the socialist-leaning Unified
Lumumbist Party (PALU), handed in his resignation to the president last Thursday, saying he was no longer strong enough for the job.

The veteran politician was appointed prime minister in December 2006 by the current president under an electoral deal to see off the threat from opposition leader Jean-Pierre Bemba in the second round of the presidential vote.

Last week PALU said it expected the 2006 electoral agreement to be respected to allow someone from their party to replace Gizenga.

Monday, September 29, 2008

Meeropol: Government Abuse Persists in Rosenberg Case

Meeropol: Gov’t abuse persists in Rosenberg case

By Naomi Cohen
Published Sep 26, 2008 11:20 PM

On Sept. 12, the New York Times ran an article based on an interview with Morton Sobell, the co-defendant of Julius and Ethel Rosenberg in the “atomic spy” case that led to the execution of the Rosenbergs on June 19, 1953. The article gave the impression that Sobell for the first time admitted he and Julius Rosenberg were guilty of the charges against them.

This is not true. A close reading shows Sobell said that, while he and Julius Rosenberg had passed on military information to the Soviet Union during World War II to help it repel the Nazi invaders, they were not “atomic spies,” as the prosecution against them claimed.

The context behind what happened is extremely important. The United States was supposedly an ally of the Soviet Union in the war against Nazi Germany. Yet when the Nazi armies invaded the USSR and millions were dying under the assault, the European and U.S. “Allies” did nothing to open a second front from the West. Only when it became clear that the Soviets would defeat the Nazis on their own, after the battle of Stalingrad, did the Allies launch the invasion of Normandy in June 1944.

In August of 1945, the U.S. demonstrated to the world the terror of nuclear weapons by dropping atom bombs on Hiroshima and Nagasaki, killing hundreds of thousands of Japanese civilians in the space of a few days.

After World War II ended, the U.S. and European imperialists launched a broad political, ideological and economic assault on the Soviet Union, including military encirclement by NATO forces—the Cold War. In 1949 after the Chinese Revolution drove the Japanese and Western imperialist powers off the mainland of China, a wild witch hunt was unleashed in the U.S. In the same year, the Soviet Union tested its own nuclear weapon, sending a message that it would not be a defenseless victim of nuclear threats.

The anti-communist witch hunt intensified in 1950 with the opening of the Korean War. Trade unionists, teachers, scholars, writers, actors, artists, journalists and even some government officials were subpoenaed and dragged before the congressional committee headed by Sen. Joseph McCarthy. Many went to jail for refusing to testify before this committee. Others were forced underground or into exile. Many more were targeted for political repression, losing their jobs and livelihood in a broad FBI sweep aimed at driving all leftists out of the labor and progressive movements.

This was the atmosphere in which Julius and Ethel Rosenberg were arrested in 1950 and charged with having given the “secret” of the atomic bomb to the Soviet Union. They were even blamed by the trial judge for the Korean War. In the hysteria created by the media, the FBI, Congress and the courts at the time, it was impossible for the Rosenbergs to get a fair or impartial trial.

Below are excerpts from a statement released by Robert Meeropol, a son of the Rosenbergs, who was six years old when his parents were executed. Meeropol is now executive director of the Rosenberg Fund for Children, which raises money to aid the children of political prisoners and targeted activists in the U.S. suffering from the same kind of repression and terror that he and his brother Michael experienced.

Excerpts from Robert Meeropol’s statement

Over the last week I have read all 930 pages of Grand Jury testimony that have been released, and my brother has spoken to Mort [Sobell] directly to clarify Mort’s statement. Many of you are wondering about my reaction to these revelations.

Here are my initial thoughts after integrating the information from this last week with the rest of the historical record.

(1) Since the 1980s I have maintained that it is possible that my father engaged in non-atomic espionage, but that he did NOT participate in ANY activities that resulted in him obtaining or passing the “secret of the Atomic Bomb” to the Soviets. Mort’s statement moves me to acknowledge that it is virtually certain that Julius did, in fact, participate with others in passing along military information. But at the same time, I believe the still-evolving record makes it even clearer that Julius did not “steal” or transmit the “secret of the Atomic Bomb,” the crime for which he was executed.

(2) Ruth [Greenglass] and her husband David (my mother’s sister-in-law and brother) cooperated with the prosecution in exchange for a comparatively light sentence for David, and for no charges being brought against Ruth. It was Ruth’s trial testimony that provided the one, key piece of evidence that led to my mother’s conviction. Ruth stated at trial that Ethel typed David’s handwritten notes describing the Atomic Bomb, an act that would have made Ethel an active participant in the alleged spy ring.

However, despite being a cooperative witness trying to remain in the prosecutor’s good graces, Ruth’s Grand Jury testimony included NOTHING about Ethel ever typing any notes; included NOTHING about Ethel even being present at the meeting involving the notes.

(3) All that I have learned in the last week, coupled with all that I have gleaned from the information already available, reinforces the biggest lesson to be taken from my parents’ case—that the U.S. government abused its power in truly dangerous ways that are still very relevant today. Those in power who were involved in my parents’ case:

* Created and fueled anti-communist hysteria

* Capitalized on that political climate by targeting my parents, then making them the focus of the public’s Cold War-era fear and anger

* Manufactured testimony and evidence

* Hounded witnesses for their political beliefs and associations rather than about any alleged illegal activities

* Arrested Ethel simply as leverage to try to get Julius to cooperate with the prosecution

* Used the ultimate weapon—the threat of death—to try to extort a confession from my parents and to force them to name and testify against others.

Ultimately, these new revelations have made me even more steadfast in my commitment to helping those whom the Rosenberg Fund for Children supports: today’s families experiencing similar targeting and suffering similar personal tragedies.

For Robert Meeropol’s full statement, go to www.rfc.org.
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Beware of Right-wingers Denouncing "Wall Street"

Beware right-wingers denouncing ‘Wall Street’

By Caleb T. Maupin
Published Sep 25, 2008 9:07 PM

As banks fail, jobs disappear and the economy sinks deeper into a horrific crisis of poverty and misery, the television channels and political campaigns have suddenly become full of the most unlikely people denouncing “big business.”

Lou Dobbs, Glenn Beck and even Sarah Palin and John McCain have suddenly become “defenders of the working people” against “Wall Street greed.”

Dobbs and Beck are broadcast nightly on CNN, a privately owned, corporate-funded network. Their programs are paid for many times over with advertising dollars from the biggest banks and corporations.

Dobbs and Beck often criticize big business—but in totally distorted ways really meant to confuse workers and the middle class about the source of all their pain.

Dobbs rails at big business for hiring immigrant workers. But he is silent about the way U.S. corporations, through pushing for so-called “free trade” agreements, have ruined the economies of Latin America, forcing workers in those countries to come here just to survive. This is a crime of big business he has clearly forgiven.

Beck’s way of being “anti-establishment” was to run an hour-long interview with Bob Barr, the Libertarian candidate for president. Barr’s platform calls for complete deregulation of big business and the abolition of every social program and protection won through progressive struggle, from children’s services to college financial aid.

Beck has given no airtime to the campaigns of Cynthia McKinney or Ralph Nader, although they are clearly much more anti-establishment than Barr and ahead of him in some of the polls. How anti-establishment can Bob Barr be? He is author of the “Defense of Marriage” Act, which makes it seem like same-sex couples are the big problem confronting families in this country. Meanwhile, families of all kinds are torn up by housing foreclosures and evictions, unpayable debts and health crises because of lack of affordable health care. What’s Barr doing about that?

Among these right-wing demagogues who preach against big business is Ron Paul, who held his “Rally for the Republic” as a counter to the Republican National Convention. In his speech to this seemingly anti-establishment rally, Paul claimed that U.S. schools don’t teach “free market economics” any longer. He also claimed that the U.S. needs to stop following ideas like “corporatism and socialism.”

Is he at all in touch with reality?

Any youth who has attended school in the U.S. knows that “free market economics,” not socialism, is shoved down your throat at every opportunity. And anyone who has ever been unemployed should know that the U.S. economy has nothing to do with socialism. Every socialist revolution has immediately led to guaranteed jobs for all. Unlike capitalism, which is totally built around providing profits for a few and needs a reserve of millions of unemployed to keep down wages, a socialist economy is publicly owned and can plan production to meet people’s needs.

While these voices that play on people’s frustration are now emphasizing pseudo anti-corporate rhetoric, they haven’t let up on their attacks on immigrants, calls for militarization of the border or hatred of affirmative action.

Beck has defended the racist Philadelphia police and gave free publicity to the hate book “Murdered by Mumia.” In his interview with the author, Maureen Faulkner, she was never confronted or challenged on her claims, all of which were made with the motive of having Mumia Abu-Jamal executed for a crime he did not commit. How anti-establishment is it to side with racist cops in their drive to kill an innocent man?

Lou Dobbs continues to spin John Birch-style fairy tales about the U.S. being conquered by globalist conspiracies while ignoring the terrorism that the U.S. government is committing against people in countries like Iraq and Afghanistan—wars initiated by the Bush administration on behalf of the huge oil and “defense” companies, the one sector of the U.S. economy still turning in huge profits.

The Republican Party presidential candidate, John McCain, and his running mate, Sarah Palin, have been pro-big business from day one and get their funding from the same big banks and corporations as Barack Obama, but now they are attacking the first African-American nominee of the Democratic Party as “elitist.”

Are we to believe that these folks are the answer to big business?

If anything, this should prove that running your mouth off and saying what’s popular, as all these forces do, doesn’t mean you are really fighting against the powers that be.

If a Dobbs or a Beck or a McCain is being paid by big business to speak against them, can he really be a threat to those footing the bills?
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Amid National Protests and Opposition, US House Rejects Wall Street Bailout: Shockwaves Sent Through Financial Markets

House rejects $700B bailout

By Kathy Kiely and Sue Kirchhoff, USA TODAY

WASHINGTON — In a stunning rebuke to President Bush, congressional leaders and Wall Street, the House rejected a $700 billion financial bailout package Monday, with a coalition of conservative Republicans and liberal Democrats refusing to grant the government sweeping powers to buy up distressed loans.

The vote was 228-205 against the measure, with one member not voting. There was broad bipartisan opposition to the measure, with more than 90 Democrats and more than 130 Republicans voting against the bill. Republicans voted more than 2-1 to oppose the bill.

The vote came even though the measure was backed by Bush and House leaders in both parties. But opponents said the package granted the U.S. government too much power and and was beyond the cost the government should pay to address the worldwide financial crisis.

Wall Street reacted immediately to the news. The Dow Jones Industrial Average fell by more than 700 points at one point as the outcome became clear. After the vote, the Dow remained down by more than 550 points.

Lawmakers were prodded all day by President Bush and leaders from both parties before voting began in the early afternoon.

"We have an imperfect product, but we have a product that may work — a product that may work if we have the votes to pass it," said House Republican leader John Boehner of Ohio.

"This Congress has to do its job. None of us came here to have to vote for this mud sandwich...but let me tell you this: I believe Congress has to act."

"No one is happy that we have seen the failures that we have seen in our economic system," House Financial Services Committee Chairman Barney Frank, D-Mass., told the House. He argued that Main Street, not Wall Street, now would suffer if there was no action.

"Any purchase that requires credit of any size — people will get hurt," Frank said, arguing that inaction would make it difficult to impossible to finance the purchases of cars and homes.

The measure will "keep the crisis in our financial industry from spreading," across the economy, President Bush said Monday from the White House, as he pressed anew for its passage. "We'll make clear that the U.S. is serious about restoring confidence and stability in our financial system."

"There are no other choices — just this one choice," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. "This will be the most difficult decision I will make in my 16 years in this body, and I have decided that the cost of not acting outweighs the cost of acting."

As the House debate continued all morning Monday, opponents were skeptical that the bailout would staunch the financial bleeding.

"I feel that it is too much bailout and not enough workout," said Rep. Jeb Hensarling, R-Texas.

On the opposite end of the ideological spectrum, liberal Democrat Lloyd Doggett of Texas called the bill too generous to the nation's financial kingpins. "The vultures have no come home to roost," he said.

"It's like a big cowpie with a little bit of marshmallow inside and I don't want to eat the cowpie," said Rep. Louie Gohmert, R-Texas.

Other members of Congress were vexed by the decision they faced. Less than an hour before the vote was scheduled, Rep. Bill Pascrell, D-N.J., said he was still undecided and likely would make up his mind as he walked to the House floor.

"We're flipping coins here," he said. "What happens if this goes down today — the markets tank and you are an accessory to the crime? But what happens if you vote 'yes' and the market tanks anyway?"

He added, "Most of my constituents are against this, but when I prod them they don't really understand. It's a very complex issue. But I've got to make a decision here — otherwise I'm an automaton."

Wall Street reacted negatively as the debate was underway. The Dow Jones Industrial Average dropped more than 300 points when markets opened Monday and remained there at mid-day.

Backers of the measure continued to press their case in the hours before the vote. On Monday, Senate Banking Committee Chairman Chris Dodd, D-Conn., again said failing to act would make the situation much worse for all taxpayers. "This is not just about Wall Street," he said in a broadcast interview.

Sen. Judd Gregg, R-N.H., who represented fellow Republicans in the hard-fought 10 days of talks that culminated in a deal early Sunday morning, called it a "tourniquet" for the ailing financial industry and slow-moving economy.

Still, both men said the necessity of such massive government action is a sad day for the nation. Asked if the legislation would pass, Dodd said only: "We hope so."

Contributing: John Fritze and Fredreka Schouten in Washington; Douglas Stanglin and Randy Lilleston in McLean, Va.; Associated Press


House poised to reject $700B bailout

By Kathy Kiely and Sue Kirchhoff, USA TODAY

In a stunning rebuke to President Bush, congressional leaders and Wall Street, the House is poised to reject a $700 billion financial bailout package Monday, with a coalition of conservative Republicans and liberal Democrats refusing to grant the government sweeping powers to buy up distressed loans.

The vote was 207-226 against the measure, with one member not voting, half an hour after voting began. Voting remains open even though the "official" time has expired for casting a ballot.

There was broad bipartisan opposition to the measure, with 95 Democrats and 133 Republicans voting against the bill. Republicans voted more than 2-1 to oppose the bill.

The vote came even though the measure was backed by Bush and House leaders in both parties. But opponents said the package granted the U.S. government too much power and and was beyond the cost the government should pay to address the worldwide financial crisis.

Wall Street reacted immediately to the bad news. The Dow Jones Industrial Average fell by more than 700 points as the outcome became known, then settled near a 450-point loss.

Lawmakers were prodded all day by President Bush and leaders from both parties before voting began in the early afternoon.

"We have an imperfect product, but we have a product that may work — a product that may work if we have the votes to pass it," said House Republican leader John Boehner of Ohio.

"This Congress has to do its job. None of us came here to have to vote for this mud sandwich...but let me tell you this: I believe Congress has to act."

"No one is happy that we have seen the failures that we have seen in our economic system," House Financial Services Committee Chairman Barney Frank, D-Mass., told the House. He argued that Main Street, not Wall Street, now would suffer if there was no action.

"Any purchase that requires credit of any size — people will get hurt," Frank said, arguing that inaction would make it difficult to impossible to finance the purchases of cars and homes.

The measure will "keep the crisis in our financial industry from spreading," across the economy, President Bush said Monday from the White House, as he pressed anew for its passage. "We'll make clear that the U.S. is serious about restoring confidence and stability in our financial system."

"There are no other choices — just this one choice," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. "This will be the most difficult decision I will make in my 16 years in this body, and I have decided that the cost of not acting outweighs the cost of acting."

As the House debate continued all morning Monday, opponents were skeptical that the bailout would staunch the financial bleeding.

"I feel that it is too much bailout and not enough workout," said Rep. Jeb Hensarling, R-Texas.

On the opposite end of the ideological spectrum, liberal Democrat Lloyd Doggett of Texas called the bill too generous to the nation's financial kingpins. "The vultures have no come home to roost," he said.

"It's like a big cowpie with a little bit of marshmallow inside and I don't want to eat the cowpie," said Rep. Louie Gohmert, R-Texas.

Other members of Congress were vexed by the decision they faced. Less than an hour before the vote was scheduled, Rep. Bill Pascrell, D-N.J., said he was still undecided and likely would make up his mind as he walked to the House floor.

"We're flipping coins here," he said. "What happens if this goes down today — the markets tank and you are an accessory to the crime? But what happens if you vote 'yes' and the market tanks anyway?"

He added, "Most of my constituents are against this, but when I prod them they don't really understand. It's a very complex issue. But I've got to make a decision here — otherwise I'm an automaton."

Wall Street reacted negatively as the debate was underway. The Dow Jones Industrial Average dropped more than 300 points when markets opened Monday and remained there at mid-day.

Backers of the measure continued to press their case in the hours before the vote. On Monday, Senate Banking Committee Chairman Chris Dodd, D-Conn., again said failing to act would make the situation much worse for all taxpayers. "This is not just about Wall Street," he said in a broadcast interview.

Sen. Judd Gregg, R-N.H., who represented fellow Republicans in the hard-fought 10 days of talks that culminated in a deal early Sunday morning, called it a "tourniquet" for the ailing financial industry and slow-moving economy.

Still, both men said the necessity of such massive government action is a sad day for the nation. Asked if the legislation would pass, Dodd said only: "We hope so."

Contributing: John Fritze and Fredreka Schouten in Washington; Douglas Stanglin and Randy Lilleston in McLean, Va.; Associated Press

SEPTEMBER 29, 2008, 1:56 P.M. ET

Bailout Vote Uncertain

By MICHAEL R. CRITTENDEN
Wall Street Journal

WASHINGTON -- U.S. lawmakers took the final steps towards to the most dramatic federal intervention in the financial markets since the Great Depression on Monday, taking to the floor of the House of Representatives to give impassioned pleas for and against a $700 billion Wall Street rescue plan.

The bill appeared short of the necessary support, however, and the Dow Jones Industrial Average dropped more than 700 points as "no" votes mounted. The Dow later recovered part of those losses, trading down around 380 points to 10760. As of around 1:52 p.m., nays stood at 227 and yeas stood at 206.

After a weekend of tense negotiations, Congress settled on a tentative $700 bailout plan. WSJ's Washington Bureau Chief John Bussey looks at the deal and how markets are likely to react.

The House is scheduled to vote Monday afternoon on the legislation, which was finalized Sunday after exhaustive negotiations between lawmakers and the Bush administration over the past week. A Senate vote to pass the bill and send it to President George W. Bush for his signature is expected on Wednesday at the earliest.

"It will be an effective intervention to restore the confidence necessary to avoid the kind of panic we haven't seen in this country for decades," Rep. Adam Putnam of Florida, the chairman of the House Republican Conference, said during a floor speech.

House Financial Services Chairman Barney Frank (D., Mass.) said lawmakers need to act to avoid a "more dismal future" for the nation's economy. "The consequences will be severe" if we fail to act, said Rep. Frank, who was the key negotiator for the House on the legislation.

House Financial Services Committee Chairman Barney Frank, Senate Majority Leader Harry Reid, Speaker of the House Nancy Pelosi and Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd.

But it was clear that lawmakers from both sides of the aisle were skittish about voting on such a dramatic piece of legislation a little more than a month before the November elections. Polls have shown voters are wary of the plan to rescue financial firms by having the federal government buy up hundreds of billions of dollars of toxic assets, and many members described Monday's decision as a "legacy vote" similar to the decision to authorize the use of force in Iraq.

"Only a couple of a times in a decade are we asked to stand up and be counted. This is one of those historic moments," Rep. Paul Kanjorski (D., Pa.) said.

The Bailout Deal

Rep. Gary Miller, a Republican from California, called it "probably the hardest vote" many lawmakers would take. His colleague, Rep. Tom Davis (R., Va.), agreed, but said it was a necessary evil. "I wish there was a better way but I haven't seen it," Rep. Davis said. "If this bill goes down I don't think most of my colleagues want ownership of what follows."

Still, both Democrats and Republicans made clear they would oppose the legislation despite efforts of negotiators to satisfy a number of constituencies.

"Why isn't Wall Street paying for the mess they created?" Rep. Lynn Woolsey, (D., Calif.), asked during a floor speech.

Michigan Republican Thaddeus McCotter was more philosophical, making what he said was a reference to the Dostoevsky novel "The Brothers Karamazov" in expressing his opposition to the bill.

"These interests who want your money threaten your prosperity," Mr. McCotter said. "You are being asked to choose between bread and freedom and I suggest the American people have chosen freedom."

Write to Michael R. Crittenden at michael.crittenden@dowjones.com


Bailout Doubts Spook Stocks

By PETER A. MCKAY
Wall Street Journal

Bailout or no bailout, America's financial industry and its economy are ailing.

That glum realization permeated Monday's trading session, leaving major stock-market measures sharply lower despite progress in Washington toward passage of a $700 billion federal rescue of Wall Street. The Dow Jones Industrial Average was recently down more than 275 points, or 2.5%, at 10867.79, down nearly 5% since crisis erupted a few weeks ago on Wall Street following the meltdown of Lehman Brothers Holdings.

As Congress moved closer to approving a bailout package on Monday, traders grew hopeful that an economic calamity can be averted. However, many remain nervous that a U.S.-led global slowdown -- ugly and persistent but shy of an all-out disaster – is still underway.

Likewise, analysts said financial firms around the world are likely to continue to struggle awhile longer with soured credit bets – a point underscored as four European institutions sought rescue plans from their local governments and Wachovia became the latest struggling U.S. bank to sell itself off in order to survive.

"Bailouts only work when the economy is going in the right direction," said Bill King, chief market strategist at M. Ramsey King Securities in Burr Ridge, Ill. "That's not the case here, and the package they're talking about does nothing to address the underlying weakness in the economy," caused by high energy prices and other issues away from Wall Street.

The prospect of a bailout package for Wall Street has dominated trading for more than a week, with proponents of an intervention arguing that government action is necessary to keep banks willing and able to extend credit to an array of businesses in other sectors that drive economic growth.

Of course, whether those companies will feel confident enough about the demand outlook for their goods and services to want to expand their operations is a separate matter.

Concerns that many companies, at best, will remain on pause in the months ahead hampered stock indexes across the board on Monday.

The S&P 500 fell 4% to 1164.93. All of the broad measure's sectors traded lower, led by a nearly 8% slide in its financial category.

The small-stock Russell 2000 was down 3.7%, trading at 678.88. The technology-focused Nasdaq Composite Index fell 4.7% to 2081.00.

In the meantime, lawmakers debated a bailout plan hammered out over the weekend by the Bush administration and senior congressional leaders. The latest version calls for $250 billion upfront to be given to the U.S. Treasury to buy troubled assets, which then, subject to Congressional disapproval, could rise to as high as $700 billion.

Markets on the Move

Members of the House voted 220 to 198 Monday morning to move the bill forward. They approved ground rules for its consideration in the chamber, including three hours of general debate and a final vote, expected shortly.

Investors flocked to U.S. government debt looking for safety. The yield on the 3-month Treasury bill, considered the safest short-term investment, fell near 0.70% from 0.87% late Friday. The price of the benchmark 10-year note jumped 1-8/32, pushing the yield down to 3.701%, compared to 3.827% late Friday.

In another worrisome sign for the financial sector, Wachovia joined the growing list of U.S. financial giants that have either been seized by the government or sold off to stronger firms. The Federal Deposit Insurance Corp. announced early Monday that Citigroup will acquire Wachovia's banking operations. The deal was reached in concurrence with the Federal Reserve Board and the U.S. Treasury Department. Citigroup was nearly flat in the wake of the announcement.

Last week, Washington Mutual was seized by federal regulators in the largest as the bulk of the bank was acquired by J.P. Morgan Chase. WaMu's failure, the largest in U.S. banking history, followed the collapses of mortgage titans Fannie Mae and Freddie Mac, insurer American International Group and Wall Street's storied investment banking giants Lehman and Merrill Lynch.

Investor sentiment on Monday also suffered a blow from aggressive selling in European markets after four financial institutions there sought rescue plans. Three governments bailed out Fortis, the U.K. government nationalized mortgage lender Bradford & Bingley, Germany's Hypo Real Estate Holding was rescued by a consortium, and Iceland stepped in to save a local bank. All major European indexes were down more than 4%, with financial stocks leading declines.

The troubles in Europe sent the dollar rallying against the euro and the British pound. The U.S. Dollar Index, which measures the greenback's value against a basket of six overseas denominations, rose 0.7%.

Oil futures dropped slid almost $8, trading under $100 a barrel in New York as fears about slowing demand due to global economic weakness gripped the commodity markets. The broad Dow Jones-AIG Commodity Index slid more than 4%.

Analysts said the flurry of developments around the world is confirming fears that the global financial contagion is likely to spread further before any recovery. "There's an increasing realization that the cleanup and the mending of all that's gone wrong is going to take an extended period to work through, and we're going to see an extended recovery period," said Jamie Spiteri, senior dealer at Shaw Stockbroking in Sydney.

In addition, the troubles at Wachovia and Fortis signal the first time that major commercial banks are now facing forced sales or breakups since the onset of the credit crisis a little more than a year ago.

Morgan Stanley and Mitsubishi UFJ Financial Group have reached an agreement whereby Japan's biggest bank by market value will buy a 21% stake in the Wall Street firm.

Write to Peter A. McKay at peter.mckay@wsj.com.

US Economic Bulletin: Fortis Given 11.2 Billion; Paralysis deepens, etc

Fortis thrown €11bn lifeline by governments

By Peter Thal Larsen in London, Michael Steen in Amsterdam, and Tony Barber in Brussels
September 28 2008 19:56

Fortis was thrown an €11.2bn (£8.8bn) lifeline on Sunday night as the Belgian, Dutch and Luxembourg governments combined to inject capital into the embattled banking and insurance group in a last-ditch effort to shore up confidence among savers.

The partial nationalisation was announced in Brussels by Yves Leterme, Belgium’s prime minister, after a frantic weekend of talks involving ministers, central bankers and financiers.

Under the terms of the deal, the Belgian, Dutch and Luxembourg governments will inject capital to buy 49 per cent of Fortis’s banking subsidiaries in each of the three countries. Fortis is also expected to sell its stake in ABN Amro, the Dutch lender it agreed to buy as part of a break-up bid last year. Maurice Lippens, Fortis’s chairman, is expected to step down.

Fortis is the largest European financial institution to be bailed out as a result of the turmoil in the credit markets. The group, a giant of the Belgian and Dutch financial landscape, had become the latest focus of investor fears about the stability of the industry after ructions on Wall Street.

The decision to partly nationalise Fortis came after attempts to sell all or part of the group to BNP Paribas of France or ING of the Netherlands broke down when the governments balked at their demands for guarantees against possible future losses. Policymakers were desperate to announce a deal before markets opened Monday in an effort to avert a full-fledged crisis of confidence.

Fortis on Friday announced plans to speed up a €10bn disposal programme and the appointment of Filip Dierckx as chief executive – its second new chief executive in three months. However, bankers said the extent of the loss of confidence in Fortis meant a more far-reaching solution was needed.

Wouter Bos, Dutch finance minister, and Nout Wellink, president of the Dutch central bank, travelled to Brussels for talks with their Belgian counterparts Sunday afternoon. Meanwhile, Jean-Claude Trichet, European central bank president, was in Brussels to meet Mr Leterme.

The market turmoil has raised far-reaching questions about the ability of European governments to co-ordinate the rescue of an institution whose assets are several times the size of Belgium’s gross domestic product.

Fortis was scheduled to take full ownership of ABN’s private banking and Dutch retail banking arms next year but questions about its ability to finance the purchase have contributed to its woes. ING may yet emerge as a buyer for Fortis’s stake in ABN.

BNP was mainly interested in Fortis’s Belgian operations. But BNP was wary of assets on Fortis’s balance sheet, most notably its mortgage-backed securities, and sought government guarantees for a full takeover. Such a move was controversial, and the Belgian government favoured temporarily taking Fortis into state ownership rather than supporting a foreign takeover.

Belgium is desperate to prevent a panic because Fortis is the country’s biggest private sector employer and handles the bank accounts of half the population.

The bank has been under scrutiny since it announced plans to raise €8bn through a share issue and the sale of assets.

Additional reporting by Ralph Atkins in Frankfurt and Chris Hughes in London

Copyright The Financial Times Limited 2008


Payback provision in US bail-out plan

By James Politi, Krishna Guha, Daniel Dombey and Harvey Morris in Washington
September 28 2008 21:36

The US financial services sector could be forced to reimburse the US government for any losses on its $700bn rescue plan under a breakthrough agreement that paves the way for congressional approval as early as Monday.

After a weekend of frenzied talks, Hank Paulson, the Treasury secretary, and Nancy Pelosi, the Democratic House speaker, announced early on Sunday that a tentative deal had been reached authorising the government to buy up to $700bn of troubled assets from financial institutions.

The deal envisages historic restrictions on executive pay for banks involved in the programme and opens the door for the government to take equity warrants in those institutions.

Both Republicans and Democrats tried to claim credit for defending the interests of tax­payers amid public outrage at the prospect of spending $700bn to bail out Wall Street.

House Republicans, the most vocal opponents of the rescue plan, remained wary even after their leaders signed up to the agreement.

It remained possible that a significant number of House Republicans could refuse to back the bill.

The two presidential candidates gave their qualified support on the basis of the outline of the deal. John McCain said: “Let’s get this deal done, signed by the president, and get moving.” The Republican came under fire from Democrats last week who claimed he slowed the outcome by intervening in the talks. Barack Obama, his Democratic rival, said if concerns on issues such as executive pay were addressed, “my inclination would be to vote for it, understanding that I’m not happy”.

Democratic legislators said they had earlier spoken by telephone to Warren Buffett, the billionaire investor, who warned them of “the biggest financial meltdown in American history” if they failed to act.

Although final details of the legislation were still being worked on throughout the morning, Capitol Hill aides said they expected the House and Senate would both approve the measures early in the week.

On Saturday night, negotiators found a way to address concerns that the bail-out plan insufficiently protected taxpayers. If, after five years, losses were incurred by the government on the sale of the troubled assets it purchases through the programme, the US president would have to present a plan to recover the money from those who benefited from it.

While imposing curbs on the compensation of executives at companies participating in the bail-out, Democrats dropped demands that shareholders be given a vote on pay. The $700bn would be authorised fully but released in three stages, beginning with an initial $250bn. Congress would review and could in principle block the final $350bn disbursement.

Copyright The Financial Times Limited 2008


Grip of paralysis adds to threat of recession

By Chris flood
September 28 2008 19:55

The European Central Bank is expected to keep eurozone interest rates unchanged at 4.25 per cent at its monthly meeting on Thursday but the extraordinary storm battering global financial markets has complicated hugely the problems facing policymakers.

Central banks round the world have aggressively stepped up their efforts to support financial markets, co-ordinating their efforts to provide additional liquidity. But the political deadlock blocking progress with the US government’s radial plans to deal with toxic assets has sapped confidence badly and money markets have been gripped by a growing sense of paralysis.

As a result, financial conditions in the eurozone have tightened significantly over the past two weeks with the three-month euro Libor rate hitting 5.14 per cent on Friday, the highest level since the credit crisis began and well above the 4.29 per cent low for 2008 reached in late January.

This has prompted dire warnings from analysts about the eventual repercussions for household borrowing, consumer spending and corporate investment.

This week’s data releases will underline the growing threat of a recession in the eurozone as the crisis affecting financial markets continues to spill over into the wider economy.

The European Commission’s monthly survey has shown both consumer and business confidence declining sharply over the past 15 months, reflecting high oil prices and growing concerns about the impact of the credit crisis. September’s survey, due today, cannot be expected to register any improvement in confidence.

The purchasing managers survey’s for manufacturing (due on Wednesday) and the service sector (due on Friday) will show how falling confidence is translating into reduced activity levels, lower orders and weakening employment expectations.

The ECB recently cut its forecasts for gross domestic product growth in 2008 and 2009 but inflation remains a thorny problem, running at its highest rate since the creation on the single currency in 1999. Fearing inflationary pressures remain untamed, policymakers have frequently thrown cold water on any suggestions that interest rates should be cut.

However, eurozone inflation has come off its peak, retreating from 4 per cent in July to 3.8 per cent in August, helped by the pull back in oil prices this summer recent.

Hopes that inflation has indeed peaked have fuelled expectations that the ECB could start to cut rates in early 2009. Eurozone inflation data for September, due tomorrow, are expected to show a further fall to 3.6 per cent but this remains well above the ECB’s 2 per cent “comfort zone”.

In the US, consumer confidence data for September, due out tomorrow, are likely to fall from 56.9 in August to 55, reflecting ongoing deterioration in the American housing market and rising unemployment. Friday sees the release of US labour market data, with a fall of 90,000 expected for non-farm payrolls in September – which would push the unemployment rate up from 6.1 per cent to 6.2 per cent.

Copyright The Financial Times Limited 2008


Leaders call for tighter financial rules

By Sundeep Tucker and Jamil Anderlini in Tianjin
September 28 2008 19:23

The global financial system is in urgent need of more scrutiny and greater co-operation between national regulators if it is to avoid repeated crises, top policymakers and bankers warned at the World Economic Forum at the weekend.

As influential decision-makers from the US, Europe and Asia assembled in Tianjin, China, for the annual summer meeting, a consensus emerged over the need for more government regulation of financial markets in the wake of the global credit crisis.

Liu Mingkang, chairman of the China Banking Regulatory Commission, lambasted as “ridiculous” the approach of US regulators to permit 100 per cent-plus mortgages, which he identified as a major cause of the crisis. “The degree of leverage nowadays is dangerous and indefensible. Worse, it is not regulated by any prudential supervision.” He urged greater international co-operation among regulators. “The current crisis is global in nature but regulation is still national.”

Blame for the meltdown should rest with leaders in the financial sector, who needed to refocus efforts on risk management and governance. “A fish doesn’t stink from the tail,” he said.

Bill Rhodes, a senior vice-chairman of Citigroup, urged action to prevent further damage to the real economy. “One of the things that must come out of this crisis . . . is some form of international accounting standards.”

The WEF meeting is the first major global forum for policymakers after the recent mass financial panic.

The debates underscored the sense of shock at recent developments and the scale and depth of discussion necessary to fix the problems.

Mr Rhodes said he feared a repeat financial crisis unless regulators took decisive action to police the gigantic market for credit default swaps.

Many participants said the US-led global financial order faced a crisis of confidence that would lead to a rebalancing of financial and political power between nations, massive deleveraging and the end of easy credit.

There was also widespread acceptance among delegates for developing economies to be allowed to participate in the co-operative bodies that monitor financial stability.

Stephen Roach, chairman of Morgan Stanley Asia, said: “The asset bubble binge is over and that means a multi-year adjustment for the US economy as the excesses are unwound. The US will have its version of Japan’s lost decade.”

Copyright The Financial Times Limited 2008

Sunday, September 28, 2008

Foreclosing on the Free Market: How to Remedy the Subprime Catastrophe

Foreclosing on the Free Market: How to Remedy the Subprime Catastrophe

By John Atlas, Peter Dreier, and Gregory D. Squires
New Labor Forum
Fall 2008

URL: http://www.newlaborforum.org
email: newlaborforum @qc.edu

It's now official. In January 2008, the American Dialect Society selected 'subprime' as 2007's Word of the Year. 'Everyone is talking about subprime,' said Wayne Glowka, a society spokesman. 'It's affecting all kinds of people in all kinds of places.'

The word is likely to gain even more currency in the next few years with the accelerating number of foreclosures creating chaos in the housing and stock markets, the banking industry, and the global money markets, triggering skyrocketing consumer debt, tight credit, massive lay-offs, neighborhoods in decline, serious fiscal woes for states and cities, and families and neighborhoods upended by the turmoil.

Business leaders, activist groups, and politicians are calling for our government to do something before the situation worsens. The Bush administration proposed a bail-out for big Wall Street firms, but as of this writing (May 2008) has done little for homeowners except asking banks to voluntarily restructure troubled loans.

The subprime crisis has been a hot-button issue during the 2008 presidential campaign. The Republican candidates were conspicuously silent, while the Democrats offered reasonable ideas for coping with the symptoms (especially regarding homeowners facing foreclosure), but no major candidate proposed the sweeping reforms needed to address the root causes- four pillars of which are outlined below.

Make no mistake-it is a crisis. More than seven million borrowers now hold subprime loans, according to the Center for Responsible Lending (CRL). Most of them involved adjustable-r ate mortgages (ARMs) that include an initial low interest rate that quickly 'balloons' to a higher rate. The Federal Reserve reported that 2.1 percent of residential mortgage loans held by banks were delinquent at the end of 2006.

In 2007, 405,000 households lost their homes, an increase of 51 percent in 2006. CRL projects that two million families are likely to lose their homes in the next few years. More than 80 mostly subprime mortgage lenders went bankrupt by the end of 2007. Regulators anticipate that between 100 and 200 banks will fail over the next two years.

But it isn't just borrowers and lenders who are losing. Home prices dropped by over 12 percent during a 12 month period beginning in February 2007. A Congressional committee projected a loss of $71 billion in housing wealth as a result of the mortgage meltdown. The U.S. Conference of Mayors projected that ten states alone would lose $6.6 billion in local tax revenue.

This mortgage crisis was preventable. Like most economic problems, it was due to corporate greed. Top executives at major banks, mortgage companies, and rating agencies saw an opportunity to increase corporate income and their own compensation by engaging in risky practices. In the short term, their personal compensation was not connected to corporate performance, so they could get away with irresponsible behavior.

Eventually, however, these perverse incentives caught up with them. Several CEOs-Countrywide's Angelo Mazilo, Citicorp's Charles Prince, and Merrill Lynch's Stanley O'Neill were forced out or faced criminal investigations, but not before their firms suffered huge losses. Indeed, they put the entire financial system in jeopardy.

Government is necessary to make business act responsibly. Without it, capitalism becomes anarchy. In the case of the financial industry, government failed to do its job, for two reasons-ideology and influence-peddling. The federal government was dominated by people who didn't believe in the regulation of business.

Rather, they preferred the burdens of economic change to fall on individuals and families-what Hacker terms 'the great risk shift.' In addition, the financial services industry - utilizing campaign contributions and lobbyists-wielded influence to weaken regulations and oversight.

While federal regulators looked the other way, banks engaged in an orgy of risky loans and speculative investments. Every aspect of the financial industry was so short-sighted and greedy that they didn't see the train wreck coming around the corner.

It Started with Deregulation

At the heart of the crisis are the conservative free- market ideologists whose views have shaped public policy since the 1980s, and who dominated the Bush administration. To them, government regulation is a misguided interference with the free market. In 2000, Edward Gramlich, a Federal Reserve Board member, urged Federal Reserve Chair Alan Greenspan to crack down on subprime lending by increasing oversight, but his warnings fell on deaf ears.

By the early 1980s, the industry used its political clout to push back against government regulation. I n 1980, Congress adopted the Depository Institutions Deregulatory and Monetary Control Act, which eliminated interest-rate caps and made subprime lending more feasible for lenders.

The savings and loan institutions (S&Ls) balked at constraints on their ability to compete with conventional banks engaged in commercial lending. They got Congress-Democrats and Republicans alike-to change the rules, allowing S&Ls to begin a decade-long orgy of real-estate speculation, mismanagement, and fraud.

The deregulation of banking led to merger mania, with banks and S&Ls gobbling each other up and making loans to finance shopping malls, golf courses, office buildings, and condo projects that had no financial logic other than a quick profit. When the dust settled in the late 1980s, about a thousand S&Ls and banks- including Lincoln Savings-had gone under, billions of dollars of commercial loans were useless, and the federal government was left to bail out depositors whose money the speculators had looted to the tune of about $125 billion.

The icing on the cake was the Gramm-Leach-Bliley Act of 1999, which tore down the remaining legal barriers to combining commercial banking, investment banking, and insurance under one corporate roof.

The industry consolidated. Between 1984 and 2004, the number of FDIC-regulated banks declined from 14,392 to 7,511. The proportion of industry assets held by the ten largest banks increased from 21 percent in 1960 to 60 percent in 2005. The stable neighborhood S&L became a thing of the past.

Banks, insurance companies, credit card firms, and other money-lenders became part of a giant financial services industry, while Washington walked away from its responsibility to protect consumers with regulations and enforcement.

Into this vacuum stepped banks, mortgage lenders, and scam artists, looking for ways to make big profits from consumers desperate for the American Dream of homeownership. They invented new 'loan products' that put borrowers at risk. Thus was born the subprime market.

Wall Street financed many of these mortgages by purchasing loans from originators, packaging them into mortgage-backed securities and selling them to investors who stood to make substantial profits as long as home values kept rising and borrowers paid their mortgages. Because originators sold most of these mortgages, they were less concerned with borrowers' ability to repay than with access to investors to whom they could sell.

In effect, the interests of borrowers and lenders were no longer aligned; underwriting standards became much looser (that is loans were made to borrowers who could not afford them). Everyone profited until the housing bubble burst and loans starting 'nonperforming.'

Surging Inequality and Persistent Segregation: Incubator for the Mortgage Meltdown

The mortgage crisis is best understood in the context of rising inequality and persistent racial and economic segregation. America is experiencing a new Gilded Age-a frenzy of corporate mergers, widening economic disparities, and deteriorating social conditions. It now has the biggest concentration of income and wealth since 1928.

Under the Bush administration, the incomes of most Americans fell, but the average income of top wage earners (those above the 95 percentile) increased from $324,427 in 2001 to $385,805 in 2006. Wealth has long been much more unequally distributed than income; that inequality has recently increased.

The American Dream-the ability to buy a home, pay for college tuition and health insurance, take an annual vacation, and save for retirement-has become increasingly elusive. American workers face declining job security. The cost of food, health care, and other necessities is rising faster than incomes. Between 2000 and 2006, for example, the median worker's weekly earnings increased by 0.7 percent, while the cost of a typical home grew 80.6 percent. A growing number of families are in debt.

Economic and racial inequality is also reflected by where people live. Between 1970 and 2000, the number of high poverty census tracts (where 40 percent or more residents are poor) grew from 1,177 to 2,510. The number of people in those tracts grew from 4.1 million to 7.9 million. The isolation of rich and poor families is also reflected by the declining number of middle- income communities.

Between 1970 and 2000, the number of middle-income neighborhoods (census tracts where median family income is between 80 percent and 120 percent of that for the metropolitan area) dropped from 58 percent to 41 percent of all neighborhoods. More than half of lower-income families lived in middle-income neighborhoods in 1970; only 37 percent of such families did so in 2000. The share of low-income families in low-income areas grew from 36 percent to 48 percent.

Longstanding patterns of racial segregation persist, the result of decades of discrimination by banks, real estate agents, homebuilders, and landlords. Few blacks live in predominantly white neighborhoods. Middle- income blacks are almost as segregated from whites as lower-income blacks.

Poor black families are much more likely than poor whites to live in high-poverty neighborhoods. The median census tract income for the typical black household in 1990 was $27,808 compared to $45,486 for whites. A similar pattern exists for Latinos.

Uneven Distribution of Financial Services

These patterns have adverse consequences. Residents of low-income and minority communities live the greatest distance from areas of major job growth. They live in areas with fewer health care services and physicians, lower quality public schools, fewer retail services such as supermarkets and pharmacies, higher prices, and poorer air quality.

Class, race, and geography compound the uneven distribution of financial services and access to credit. Some of these disparities are visible-such as the concentration of such 'fringe bankers' as check- cashers, payday lenders, pawnshops, and others located in low-income and predominantly minority urban communities. Some disparities are less obvious-such as the kinds of loans targeted to low-income and minority residents who live in these neighborhoods.

In fact, a two-tiered system of financial services has emerged, one featuring conventional products distributed by banks and savings institutions primarily for middle- and upper-income, disproportionately white suburban markets and the other featuring high-priced, often predatory products, offered by 'fringe' lenders as well as mainstream banks to borrowers in disadvantaged neighborhoods.

In addition to what was formerly a conventional fixed-rate 30 year loan, today there are many options including interest only, payment optional, variable rate, and many other types of loans. This two-tiered system is the result, in part, of the failure of government to adequately regulate the evolving financial services industry.

The mortgage meltdown is the result of the dramatic growth in subprime lending and the wave of predatory lending. The media has typically confused these two phenomena.

Responsible subprime lending can help families who would otherwise be considered too risky for a conventional loan to become homeowners. These include middle-class families who have accumulated too much debt and low-income working families who want to buy a home in what was an inflated housing market. These loans have higher interest rates and other fees to compensate lenders for the increased risk posed by such borrowers. But the costs are not excessive.

Predatory lending involves an array of abusive practices, targeting those least likely to be able to repay. Predatory loans typically charge excessive fees relative to the risk involved, are aggressively marketed to unsoph isticated buyers, and are frequently unaffordable to the borrowers, often resulting in default and foreclosure.

Predatory loans have some or all of the following characteristics: interest rates and fees that far exceed the risk posed by the borrower; loans with low initial 'teaser' rates that adjust rapidly upward within two or three years and quickly become unaffordable for borrowers; high pre- payment penalties that make it difficult or impossible for borrowers to refinance when interest rates decline, trapping borrowers in unaffordable loans; loans based on the value of the property with little regard for the borrower's income and, therefore, ability to repay; loan flipping whereby a loan is frequently refinanced, generating fees for the lender but no financial benefit for the borrower; and negative amortization whereby the loan balance increases as borrowers make payments that are sufficient to cover only a portion of the interest but none of the principal that is due.

Borrowers face hidden fees masked by confusing terms such as "discount points," erroneously suggesting that the fees will lower the interest rates.

Banks were so eager to pro fit on these loans that they often failed to require the documentation needed to evaluate the risks, sometimes not even requiring borrowers to report their income or failing to verify it when this information was provided.

Many borrowers who were eligible for conventional fixed-rate loans got snookered into taking subprime loans. Other borrowers were talked into taking loans whose terms they barely understood because the documents were confusing. In many cases, lenders simply lied about the costs of the loans and whether borrowers could really afford them.

Only a decade ago, subprime loans were rare. But, starting in the mid-1990s, led by the Household Finance Corporation, subprime lending began surging. Between 1994 and 2005, the annual dollar volume of such loans grew from $35 billion to more than $600 billion. They comprised 8.6 percent of all mortgages in 2001, soaring to 20.1 percent by 2006. Since 2004, more than 90 percent of subprime mortgages came with exploding adjustable rates.

By 2005, the nation's homeownership rate reached a record level of 69.1 percent. But the argument that subprime lending increased homeownership is misleading. Most subprime loans are for refinancing rather than purchase, and the number of families losing their homes as a result of default and foreclosure on these loans, which are often predatory, far exceeds the number who became homeowners.

The CRL reported that between 1998 and 2006, approximately 1.4 million first-time homebuyers purchased their homes with a subprime loan but projected that 2.2 million borrowers who took out subprime loans have or will lose their homes as a result of foreclosure. By 2006, the homeownership rate was declining as a result of the spiralling wave of foreclosures; the rate had fallen to 67.5 percent by the first quarter of 2008.

Federal Reserve Board researchers found that in 2006, 53.7 percent of blacks, 46.6 percent of Hispanics, and 17.7 percent of whites received high priced loans. In minority areas, 46.6 percent obtained high-priced loans compared to 21.7 percent in white areas.

Given current levels of economic and racial segregation, and the prevalence of 'fringe' lenders in poor neighborhoods, it isn't surprising that foreclosures have been concentrated in low-income and minority areas, although they have spread to working-class areas and even some affluent areas, such as Greenwich, Connecticut.

The costs are severe. Families can lose their home and their life savings that went into purchasing the home. The costs are not restricted to unfortunate borrowers. Many spill over into the neighborhood and metropolitan area. Houses become vacant, deteriorate into eyesores, and detract from the=2 0feeling of neighborhood well-being.

Vacant houses attract crime and make it more difficult for neighbors to purchase homeowner insurance. Property values, and thus local property-tax revenues, plummet. A number of cities, including Baltimore and Cleveland, have recently sued lenders, contending that their practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased municipal costs.

The consequences are harshest in depressed communities, particularly the Gulf Coast and industrial Midwest. Subprime foreclosure rates in the fourth quarter of 2006 ranged from less than three percent in Washington DC, Maryland, and Virginia, to over seven percent in Mississippi and over nine percent in Indiana, Michigan, and Ohio. The weak housing market, lay-offs in the financial industry, and the reluctance of lenders to make loans are careening the nation into a recession.

Not all subprime borrowers are innocent victims. Some were speculators, seeking to profit from the real estate housing bubble with their eyes wide open. They expected to rent their houses or quickly flip them to another buyer in a rising housing market.

Others were simply living dangerously above their means, taking on too much debt and occupying houses that, by any reasonable standard, they couldn't really afford. But it would be a mistake to place the primary blame on families who were seeking shelter in what was becoming a financial storm.

Who Is Responsible?

Who is responsible for the mortgage meltdown? In addition to the large-scale economic and social forces- rising inequality, widening economic segregation, persistent racial segregation, stagnant wages, and rising home prices-there are also the key players that have played a role in this economic tsunami.

First, and at the bottom rung of the industry ladder, are the private mortgage brokers and bank salespeople who hound vulnerable families for months, soliciting and encouraging them to take out a loan to buy a house or to refinance. There are also independent mortgage brokers who operate in the netherworld of the lending industry, earning fees for bringing borrowers to lenders even if borrowers could not always afford the loans.

These street hustlers earned fees for bringing borrowers to lenders-the larger the mortgage, the larger the fee. They were often in cahoots with real estate appraisers, who inflated the value of homes (on paper) to make the loans look reasonable.

Second, big mortgage finance companies and banks cashed in on subprime loans. In 2006, ten lenders-HSBC, New Century, Countrywide, CitiMortgage, WMC Mortgage, Fremont Investment and Loan, Ameriquest, Option One, Wells Fargo, and First Franklin-accounted for 60 percent of all subprime loans, originating $362 billion in loans.

The top 20 lenders accounted for 90.4 percent of all subprime loans. Executives of some of these companies cashed out before the market crashed, most notably Angelo Mozilo, Countrywide's CEO, the largest subprime lender. Mozilo made more than $270 million in profits selling stocks and options from 2004 to the beginning of 2007. Between 2004 and 2006, the three founders of New Century Financial, the second- largest subprime lender, together realized $40 million in stock-sale profits.

Third are the investors-people and institutions that borrowers never see, but who made the explosion of subprime and predatory lending possible. Subprime lenders collected fees for making th e transactions and sold the loans-and the risk-to investment banks and investors who considered these high-interest-rate loans a goldmine.

By 2007, the subprime business had become a $1.5 trillion global market for investors seeking high returns. Because lenders didn't have to keep the loans on their books, they didn't worry about the risk of losses.

Wall Street investment firms set up special investment units, bought the subprime mortgages from the lenders, bundled them into "mortgage-backed securities," and for a fat fee sold them to wealthy investors worldwide. (For example, some towns in Australia sued Lehman Brothers for improperly selling them risky mortgage- linked investments).

When the bottom began falling out of the subprime market, many banks and mortgage companies went under, and major Wall Street firms took huge loses. They include Lehman Brothers (which underwrote $51.8 billion in securities backed by subprime loans in 2006 alone), Morgan Stanley, Barclays, Merrill Lynch, Goldman Sachs, Deutsche Bank, Credit Suisse, RBS, Citigroup, JP Morgan and Bear Stearns. These investment banks are now accusing the lenders and mortgage brokers of shoddy business practices, but the Wall Street institutions obviously failed to do their own due diligence about the risky loans they were investing in.

Fourth, the major credit agencies-Moody's and Standard & Poor's-made big profits by giving these mortgage- backed securities triple-A ratings. According to Roger Lowenstein, 'By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance.

No longer did mortgage banks have to wait ten or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and-their capital thus replenished-wrote new loans at a much quicker pace.' Almost all of the subprime loans wound up in securitized pools. But the credit agencies had little knowledge of how risky the original mortgages were. Their triple-A ratings were bogus.

Moreover, they had a serious conflict of interest, because these ratings agencies get their revenue from these Wall Street underwriters. The entire financial and housing food chain -brokers, appraisers, mortgage companies, bankers, investors, and credit agencies-participated in this greedy shell game. Some of what they did was illegal. But most of it was simply business as usual.

The Job for the Next Congress So, what to do now?
Washington needs to put a short-term tourniquet on the banking industry to stem the damage, and to get back into the business of protecting consumers, employees, and investors from corporate greed.

First, the federal government should help homeowners who have already lost their homes or are at risk of foreclosure. It should create an agency comparable to the Depression-era's Home Owners' Loan Corporation (HOLC), buy the mortgages, and remake the loans at reasonable rates, backed by federal insurance. Created in 1933, the HOLC helped distressed families avert foreclosures by replacing mortgages that were in or near default with new ones that homeowners could afford.

A modern version of the HOLC would focus on owner-occupied homes, not homes purchased by absentee speculators.
Second, Washington should not bail out any investors or banks, including Bear Stearns and its suitor, JP Morgan, that do not agree to these new ground rules. The Fed brokered the deal between Bear Stearns and JP Morgan without any conditions for the consumers who were ripped off.

There will be more Bear Stearns-like failures in the foreseeable future-institutions that the Fed considers "too big to fail." But if the federal government is about to provide hundreds of billions from the Federal Reserve, as well as from Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, to prop up Wall Street institutions, it should require the industry to be held accountable for its misdeeds.

Specifically, such lenders should agree to underwrite all loans for the full terms of the loan, not just for the initial teaser rate (this should apply to originators and purchasers), eliminate all pre-payment penalties, and recommend loan products that are suitable and in the financial interests of borrowers.

Third, Washington should consolidate the crazy-quilt of federal agencies that oversee banks and financial institutions into one agency. Federal oversight has not kept pace with the dramatic transformation of the financial services industry. Four federal agencies-the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation-have some jurisdiction over mortgage lending.

States have jurisdiction over the growing number of non-bank mortgage lenders (which accounted for about 40 percent of new subprime loans) and have no agreed-upon standards for regulating them. States are responsible for regulating the insurance industry (including homeowner insurance), and do so with widely different levels of effectiveness. It is absurd to have so many competing and overlapping agencies involved in regulating these financial services institutions, often at cross purposes.

Fourth, the federal government should be a financial services industry watchdog, not a lapdog. Part of that effort involves supporting (financially and otherwise) initiatives currently being implemented or proposed by several a dvocacy groups.

The Community Reinvestment Act (CRA), a federal ban on redlining, should be strengthened to sanction institutions that engage in predatory practices and to reward those that engage in responsible lending. The CRA now applies only to federally-chartered depositories (e.g. banks and thrifts).

This statute should be expanded to cover credit unions, independent mortgage bankers, insurers, and other entities that now account for well over half of all mortgage loans.

The Community Reinvestment Modernization Act of 2007, introduced by Eddie Bernice Johnson (D-TX) and Luis Gutierrez (D-IL) would accomplish this objective. In addition, the Home Mortgage Disclosure Act (HMDA), which facilitates enforcement of the CRA, should be expanded to include pricing information on all loans.

A strong national anti-predatory lending law should also be enacted. Currently 36 states and Washington, D.C., along with 17 other local jurisdictions have such laws, leaving most consumers in other states less protected. Again, this statute should apply to those who originate loans and those who purchase loans and mortgage-backed securities for investment purposes.

As of this writing (May 2008), the Fed had issued proposed regulations and Congress has debated several bills to address the immediate foreclosure problems and mitigate their recurrence, but so far no final regulations have been issued and no legislation has been passed.

Congressman Barney Frank and Senator Chris Dodd (chair of the Senate Banking Committee) introduced legislation to address some bu t not all of these concerns. In May, the House voted 266-154 in favor of Frank's bill. Although the vote went mostly along partisan lines-all 227 Democrats voted "yes" and 154 Republicans voted "no"-39 Republicans bucked pressure from their party leaders and from the White House and voted "yes." (Thirteen members didn't vote.)

Most of the Republicans who supported the bill represent districts that have been particularly hard-hit by the mortgage meltdown. The bill would allow homeowners to shift from subprime mortgages they can no longer afford to federally backed mortgages. It would provide $300 billion in federal loan guarantees to lenders who agree to reduce the outstanding principal on loans.

In exchange for a new mortgage, backed by the FHA, homeowners must share profits on a subsequent sale of their home with the government. The bill also includes a one-time $7,500 tax credit for new homeowners to be paid back over 15 years, and $15 billion for states and localities to buy and rehabilitate foreclosed properties.

Frustrated with the delayed federal response, many states have acted on their own. Nine states have created refinance funds to help borrowers avoid foreclosure. Ten have banned or limited pre-payment penalties. Twenty have created consumer counseling programs. Nine require lenders to represent the interests of borrowers. And 14 states have created foreclosure task forces bringing together lenders, consumers, regulators, and other experts to develop solutions.

There is a critical role for state and local governments to play. But an effective, comprehensive solution will require a far more active federal government.

From Uneven to Equitable Development

Getting Congress to adopt regulations to require the financial services and real estate industries to act more responsibly is an important part of the solution. But Congress also needs to address the underlying causes that made so many Americans unable to afford decent affordable housing and vulnerable to the practices of brokers, banks, and others.

These include raising the federal minimum wage to the poverty threshold (about $9.50 an hour) and indexing it to inflation; expanding the Earned Income Tax Credit by adding a housing component to it in order to account for the significant difference in housing costs in different parts of the country; enacting the Employee Free Choice Act, which would strengthen workers' rights to unionize; adopt the Income Equity Act, sponsored by former Minnesota Rep. Martin Sabo, which would deny corporations tax deductions on any executive compensation exceeding 25 times the pay of the firm's lowest paid workers.

Congress should also reverse the almost three decade decline in federal housing assistance to low- and moderate-income families. It could also, by using a variety of carrots and sticks, encourage states and localities to site more mixed- income housing, to increase the supply of rental housing in the suburbs, so that families with rent vouchers could live closer to where jobs are expanding.

States and localities could require the adoption of inclusionary zoning laws that require developers to set a side a specific share of housing units to meet affordable housing objectives. Such laws have already been implemented in hundreds of localities, particularly in California, but also in Maryland, New Jersey, and several other states.

The success of any of these proposals will depend on the capacity of community organizations, labor unions, and consumer groups to mobilize Americans in the political arena.

As Frederick Douglass famously observed, "Power concedes nothing without a demand. It never did, and it never will." http://www.newlaborforum.org