Economy -- Rescuing Homeowners...And The Economy

April 4, 2008

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Ali Frick, Benjamin Armbruster, and Sarah Dale

ECONOMY

Rescuing Homeowners...And The Economy

Eighty-one percent of Americans believe the United States has "seriously gotten off on the wrong track," according to a new New York Times/CBS poll. Only 21 percent say the overall economy is good condition, "the lowest such number since late 1992." To rehabilitate the economy, lawmakers are now confronting the urgent need to address the deep mortgage crisis. Subprime lenders recklessly sold risky loans to vulnerable Americans, and 30 percent of subprime borrowers now owe more on their mortgages than their home is actually worth. Housing officials estimate that 8,000 homes are being foreclosed every day, with at least two million more expected over the next two years. Astoundingly, this leaves 43 percent of recent subprime loans ending in foreclosure with an additional 40 million neighboring homes seeing their property value decline as a result. Contrary to the White House spin this week, the crises Main Street and Wall Street are due to years of conservatives' efforts to water down regulatory structures. This week, the Senate went to work to solve this mess. In a bipartisan agreement reached on Wednesday, Senate leaders recognized the urgent need to assist homeowners who have been caught in the middle of the mortgage turmoil and the sudden, rapid downturn of the housing market. The Foreclosure Prevention Act is a first pass by Congress to provide refinancing options, tax credits and counseling to struggling homeowners. "Obviously for millions of people on Main Street who wondered whether or not the Congress is paying attention to their concerns, what's happened to their homes, to their economic well being, this effort that we have put into the last several days, I think, is a major step in the right direction to offering some real hope to people on Main Street," said Senate Banking Committee Chairman Chris Dodd (D-CT).

THE GOOD: The bipartisan legislation, S. 2636, is a good first step, though more is needed to fully address the magnitude of the crisis. "This package addresses the core issues of this crisis, including foreclosure mitigation, mortgage counseling, FHA modernization and homeowner tax credits, among other provisions," said Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) in a joint statement. The list of provisions in the compromised version of the bill include $4 billion in Community Development Block Grant funding to rehabilitate and buy foreclosed properties, $100 million in foreclosure prevention counseling, a $10 billion expansion of tax-exempt bond authority for states to help with refinancing subprime mortgages, and a standard property tax deduction valued up to $1,000. These provisions could be bolstered, however, to offer more support to homeowners. This deduction will give much-needed assistance to the 28.3 million people who do not itemize on their federal income tax returns. Additionally, the bill would expand the role of the Federal Housing Authority, a government agency that insures mortgages, by raising the limit on the size of mortgages it can back. "We helped Wall Street. ... But now is our opportunity to take care of people on Main Street," said Reid.

THE BAD: Unfortunately, the Foreclosure Prevention Act has downfalls. One of the major add-ons to the bill was a "carryback" provision on net operating loss (NOL) for businesses. A company experiences a NOL when its annual expenses exceed its income in a given tax year. Under current law, companies can use NOLs to offset the taxes they owe on profits made in the two previous years. The Senate housing bill would extend the "carryback" period to four years from two. Although some of the corporations who were hit by the Wall Street market meltdown were innocent bystanders, some of the largest losses are on the books of the wealthiest financial players -- the same people who stand to gain from this clause. The housing rescue bill "started off in a very good place for consumers, average Americans," said Andrew Jakabovics, the Associate Director for the Economic Mobility Program at the Center for American Progress. "But it turned into something that was targeted at a narrow sector of the economy. ... The net operating loss provision is basically a handout to the building groups." The NOL stipulation is not the only that damages the American middle class. On Thursday afternoon, the Senate rejected its first and most contentious amendment to the bill, a proposal by Sen. Dick Durbin (D-IL) to allow bankruptcy judges to change the terms of subprime mortgages. Consumer groups see the exclusion of this provision as the bill's biggest setback, arguing that of all the legislative proposals aimed at helping homeowners, this was the most crucial. Absent from this legislation is any provision focusing on preventing future foreclosures and ensuring that responsible homeowners can remain in their homes. In the absence of an effective mechanism for preventing future foreclosures from overwhelming local housing inventories, Americans' home equity and the attendant economic benefits will continue to be in severe jeopardy.

DON'T FORGET ABOUT HOMEOWNERS: Billed as boosting the slumping housing market, the Foreclosure Prevention Act actually "showers money-losing businesses with $25 billion in tax relief in the next few years but offers just $3 billion to homeowners." "Benefits to businesses also dwarf $4 billion in the bill that would be given to cities and towns to buy and refurbish foreclosed and abandoned homes in an effort to stabilize communities and preserve neighboring home values." Political leaders must recognize that while this crisis must be dealt with quickly, the legislation must target the communities most greatly affected by high levels of foreclosures and rising foreclosure rates. The NYT/CBS poll reveals that Americans favor "help for individuals but not for financial institutions. A clear majority said they did not want the government to lend a hand to banks, even if the measures would help limit the depth of a recession."

ETHICS -- ANOTHER KBR EMPLOYEE ACCUSES CONTRACTOR OF COVERING UP RAPE: According to an article in The Nation magazine, a female employee of KBR, a contracting corporation operating in Iraq, has now come forward to say she was raped by her co-workers in Iraq in January 2008. Another former employee, Jamie Leigh Jones, alleged in December that she had been "gang-raped" and kept "under guard in a shipping container" while working for the company in Iraq. As of February, 38 women had contacted Jones to say that they were also victims of sexual assault while working for KBR in Iraq. Due to arbitration agreements, most of the women "cannot speak publicly." The latest victim, who requested anonymity, told The Nation that she was instructed "to keep quiet about the incident by a KBR supervisor" and warned that if she spoke up, she would be "in danger." The Department of Justice has not brought any criminal charges against KBR, and the Pentagon's Inspector General has refused to investigate the matter. In January, Rep. Ted Poe (R-TX) requested to speak to Secretary of State Condoleezza Rice in person after stating that written responses from the State Department regarding the rapes were "unacceptable."

IRAQ -- CNN'S WARE SAYS SECTARIAN CLEANSING 'KEY ELEMENT' IN DROP IN BAGHDAD'S VIOLENCE: This week, CNN Baghdad reporter Michael Ware sat down with The Progress Report to discuss his experiences in Iraq, from where he has reported since before the U.S. invasion in 2003. Talking about the security situation in Baghdad, Ware said, "If anyone is telling you that the cleansing of Baghdad has not contributed to the fall in violence, then they either simply do not understand Baghdad or they are lying to you." Just this month, surge architect Fred Kagan of the American Enterprise Institute twice rejected the idea that sectarian cleansing had much to do with the reduced violence in Baghdad, calling it a "myth." Additionally, just last week, former top White House aide Karl Rove said that a long-term U.S. presence in Iraq would positively provide "the projection of American power to maintain stability in a dangerous and difficult part of the world." But Ware suggested that a limited long-term U.S. presence there "could actually ferment further resentment towards the United States."

ADMINISTRATION -- FEDERAL GOVERNMENT ABANDONS PLANS FOR HIGH-TECH CENSUS: The 2010 Census was supposed to be "the nation's first high-tech head count," conducted by workers carrying wireless handheld devices. But enormous costs and technological glitches have forced the government to abandon the project, even as its contract to Harris Corp. to help conduct the survey ballooned from $600 million to $1.3 billion. Testifying before a House panel yesterday, Commerce Secretary Carlos Gutierrez "conceded that the government had accepted early cost estimates from Harris that proved to be wildly wrong. For example, the initial estimate was that a 'help desk' to assist census workers in the field with the computer devices would cost only $36 million. The revised number, after trials in the field, will be about $217 million." Gutierrez also said that the total cost of the census "will skyrocket by as much as $3 billion, bringing the bill for the 2010 Census to $14.5 billion, the highest ever." Census figures are used to apportion seats to the House of Representatives and state legislatures, as well as funding for education and transportation.

On the 40th anniversary of the assassination of Dr. Martin Luther King, Jr., "several scholarly reports have been released charting the nation's uneven social and economic progress during the past 40 years," specifically focusing "on the two issues -- war and poverty -- that were consuming him at the time of his death."

80,000: Number of jobs the U.S. economy shed in March, "the biggest monthly job decline in five years. ... The March unemployment rate jumped to 5.1% from 4.8%, highest since a matching rate in September 2005." These numbers were "more bleak than expected"; economists had predicted a decline "of 60,000 in non-farm payrolls and a rise in the unemployment rate to 5%."

"Americans are more dissatisfied with the country's direction than at any time since the New York Times/CBS News poll began asking about the subject in the early 1990s." The new survey found that "81 percent of respondents said they believed 'things have pretty seriously gotten off on the wrong track,' up from 69 percent a year ago and 35 percent in early 2002."

Sens. Carl Levin (D-MI) and Ted Kennedy (D-MA) have asked Director of National Intelligence Mike McConnell "to release an unclassified summary of the latest National Intelligence Estimate" before Gen. David Petraeus testifies on April 8. The public does not "have the essential information needed for an informed public debate," they wrote.

A new report has found that Improvised Explosive Devises (IED) -- common in Iraq and Afghanistan -- are on the rise in other countries, prompting concerns by military experts that the tactic is becoming the weapon of choice by terror groups worldwide. There are 200 to 300 IED attacks each month outside Iraq and Afghanistan.

On Wednesday, the House voted "to triple to more than $10 billion a year U.S. humanitarian spending on fighting AIDS, malaria and tuberculosis in Africa and other stricken areas of the world." CQ reports (sub. req'd) that Tom Coburn (R-OK) has now said that he will block the bill in the Senate, calling it "irresponsible" to spend so much on these humanitarian issues "in the middle of a war."

"A bipartisan group of 20 senators unveiled a $6 billion bill that would extend renewable-energy tax credits for one year" that could "save as much as $20 billion in new project investment planned by renewable-energy companies."

The Senate killed a housing proposal sponsored by Sen. Dick Durbin (D-IL) by a vote of 58-36 "that would have provided the most direct aid to homeowners facing foreclosure," instead "keeping alive a delicate compromise on a sweeping housing bill."

"Members of Congress have as much as $196 million collectively invested in companies doing business with the Defense Department, earning millions since the onset of the Iraq war," according to the Center for Responsive Politics.

And finally: House Minority Leader John Boehner (R-OH) has "returned from Libya with a new pair of sunglasses courtesy of his host, Col. Muammar Gaddafi. ... En route to Tripoli, Boehner's plane was diverted to Surt, Gaddafi's hometown on the Gulf of Sidra." Boehner eventually met the colonel inside "a big white tent" in the desert. At one point, a Gaddafi aide "entered the tent with a box of sunglasses." Gaddafi told Boehner that the "desert [is] not kind to blue eyes."

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"Birth control options are growing for women 40 and older -- a group that once viewed its choices as pretty much limited to tube-tying surgery and condoms."

NEW JERSEY: "Immigration agents systematically entered homes and made arrests without proper warrants during raids to round up immigration fugitives in New Jersey, according to a federal lawsuit."

MISSOURI: "Senators endorsed legislation Thursday that adds restrictions on illegal immigrants, their employers and the cities in which they live."

WEST VIRGINIA: "West Virginia Supreme Court ruled Thursday that Massey Energy does not have to pay a multimillion-dollar verdict to a bankrupt Boone County coal company and its owner."

THINK PROGRESS: Homeland Security Secretary Michael Chertoff's hypocrisy on the border fence.

WONK ROOM: Bush-Exxon flak claims global warming debate is "environment vs. economy."

CROOKS AND LIARS: NBC's David Gregory claims President Bush "didn't jump to invade Iraq" after 9/11.

AFL-CIO WEBLOG: As paychecks stall, medication prices rise.

"The Bush administration will use its authority to bypass more than 30 laws and regulations to finish building 670 miles of fence along the southwest U.S. border by the end of 2008."
-- AP, 4/2/08

VERSUS

"[P]eople who are here illegally...have got to comply with the law."
-- Homeland Security Secretary Michael Chertoff, 4/2/08

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Rescuing Homeowners...And The Economy

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