New and Improved OWS with Acai Berry

Christian Science Monitor:

What’s next for Occupy Wall Street? Activists target foreclosure crisis.

The Occupy Wall Street movement, which cut its teeth last fall by occupying streets and parks across the country, is moving into a new phase as it gears up for spring: occupying homes.

The movement that claimed to speak for “the 99 percent” and made income inequality part of the national discussion now is organizing protests at housing auctions to support those affected by the foreclosure crisis.

“At first, we were occupying parks, then homes,” says Sofia Teona, an organizer with Occupy Atlanta, of the movement’s evolution. “We are starting locally, but it’s a national movement.”

On Thursday, dozens were arrested when a group in New York interrupted a foreclosure auction in a courtroom, and Occupy organizers say more events are planned nationally in coming weeks.

According to Michael Premo, an organizer for “Occupy Our Homes” in New York, the movement has carried out 50 similar actions nationally in the past month, including foreclosure disruptions, eviction defense actions, and home re-occupations.

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This article was offered in a comment thread at JWS as proof of what wonderful things OWS was doing. In a fairy tale world where everything is black and white it would be. The problem is the real world is a bit more nuanced.

Here is an example given in the story:

Another case in Atlanta illustrates both the wrenching nature, and the complexity, of the foreclosure process.

The Pittman family thought they were going to inherit the house that their grandmother had lived in since 1953. Instead, they are now occupying it.

Eloise Pittman’s house in Atlanta was foreclosed on early last fall, but her family didn’t find out until shortly before she died in November.

In 2006, Pittman, a retired school secretary whose only source of income was her retirement checks, refinanced her house and got a loan of $300,000, according to her granddaughter. Pittman couldn’t keep up with the high payments and she avoided telling her family.

For the past 51 days, the Pittman family and members of the Occupy Atlanta movement have camped in a tent outside the house and stayed in the house to protest what they call Chase’s policy of predatory lending.

A spokesman for Chase has a different story, saying the bank did not originate the loan.

“We worked with Ms. Eloise Pittman in 2009 to modify her loan, and when her payments stopped in mid-2010, the foreclosure process started,” says Greg Hassell, a spokesman for Chase. According to Mr. Hassell, Chase is offering to let the family buy the house back for the market rate.

According to the Pittmans, the bank offered the family two options. Either they pay $100,000 to keep the house, or else accept $2,500 to leave.

They are choosing a third option – joining Occupy Atlanta to march to the bank to demand the deed back.

“We are going to march to Chase to demand that they give back the deed,” says Carmen Pittman, Eloise Pittman’s granddaughter. “We won’t stop fighting until justice is served.”

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A sad story that tugs at the heartstrings, isn’t it? But I have a few questions.

Why did Ms. Pittman borrow the money? Was it a home improvement loan? Where did the money go? What kind of loan was it? Was it a re-fi or a second mortgage? Why did she default?

How much is the home worth right now? How much is still owed? Is there any specific allegations of fraud or wrong-doing by the bank or loan originator?

Think about this – if she owed $300,000 on the home and the bank is willing to let the family take it for only $100,000, that doesn’t sound like they are trying to rip anyone off. Even if Ms. Pittman bought the house brand new in 1953 it’s now almost 60 years old.

Let’s back up a little bit.

Owning your own home has always been part of the American Dream. Once upon a time 3 and 5 year mortgages were commonplace. 15 and 20 year mortgages were the result of the New Deal:

In 1934 the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby also increasing the size of the market for single-family homes.

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FDR believed that encouraging private home ownership was good public policy. Later the tax code was modified to provide a mortgage interest deduction. Land was fairly cheap and construction costs low, making it relatively easy for most Americans to become homeowners.

At first the idea was simple – buy a home when you were fairly young, pay it off before you retire, and then you would only need to worry about taxes and upkeep in your golden years. (Back then property taxes were fairly low.)

Somewhere in the Fifties people started thinking about “starter homes” and “keeping up with the Jones.” But the basic idea didn’t change much – buy a first home, later move to a bigger home, pay it off and stay there until you die.

I should stop here and point out that you don’t really own a home until you finish paying for it. The bank owns it until you retire the mortgage. Oh, they are nice enough to let you live in it (and they expect you to take good care of it) but until they give you back the deed of trust you signed it’s THEIR house.

This semantic difference causes problems for some people. But in the inflationary Sixties and Seventies it wasn’t a regular problem. If you managed to make your house payments for a few years you would see your fixed house payment become relatively cheaper as your pay went up each year. You might even be paying less to buy your house than your neighbors were paying in rent.

If you ever looked at the chart for an amortized loan you will see that the interest payments are front-loaded. That means for the first 10 years of a 20 year loan you are paying off more interest than principle. If the value of your home doesn’t decline the reduction in principle is one way to build equity. Equity is the portion of the home’s value that YOU own.

But there is another way to build equity. During the Sixties and Seventies real estate began to rapidly increase in value. My mom bought her house in 1973 for just under $20,000. Within a year or two it had increased 25% in value. By 1980 it had tripled. Assuming she didn’t refinance she would have still owed most of the original $20,000 but would have accumulated $40,000 in equity.

This is when real estate began to change from a place to live to a financial investment. I first heard about “leveraging” in the late Seventies. That is the idea of borrowing against your equity and using the money to buy additional homes as rental properties.

This was when the real estate bubble began to inflate. It popped in 2008 and property values dropped dramatically for the first time since . . . ever. Here where I live was one of the hardest hit areas.

All around me there are empty homes. Most weren’t evicted. People simply walked away from mortgages that were twice or more the value of the property. Some homes are just sitting there because the banks don’t want to foreclose. There are tens of thousands of people in this area who are underwater in their mortgages but are holding on, making the monthly payments and hoping the values will recover soon.

Nobody likes to hear about someone else losing their home. I used to work for a company that did evictions, and it wasn’t a fun job. In the fairy tale version of events it’s the evil, greedy, heartless Mister Potter versus George Bailey.

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Here’s the problem. Banks are not inherently evil.

Yep, I said it.

I’m not saying there are no greedy bankers or that they are all without sin. I still don’t understand why none of them went to jail after the Wall Street meltdown. Well, I understand why, I just can’t believe they actually got away with it.

Banks are businesses. They provide a useful and necessary function in our society. But they are amoral – they exist to produce profits, not fluffy bunnies. They need to be watched and regulated, but they need to be allowed to make a profit too.

If it wasn’t for banks, most people would never be able to buy a home in the first place. So the bank lets you borrow $100,000 to buy a house, and in return you agree to repay the loan with interest. And to guarantee that you will repay them you pledge the property as security with a deed of trust. There are all kinds of laws and regulations controlling everything.

If you repay the loan on time, no problemo. In fact, that’s what the bank wants you to do. If you default they are very probably going to lose money.

If they wanted the house they would have simply bought it in the first place instead of loaning you the money to buy it. If they foreclose on it they will eventually sell it. They don’t want rental properties, but if they did there are plenty of others available.

Right now they will probably lose money on the sale because most foreclosed homes are worth less than what is owed on them. If you owe $100,000 and the house sells for $50,000, they lose $50,000. The bank can get a deficiency judgment for the difference, but they’re unlikely to collect on it, at least not anytime soon. They will also lose all the attorney’s fees and realtor costs incurred in the foreclosure and sale.

But let’s say your house is worth more than you owe. If they foreclose and sell your property for $200,000 what happens to the money left over after they pay off your loan? They have to give it to YOU (minus costs and fees).

I always ask why the mortgage is in default. Usually it has something to do with someone losing their job, or as the result of a death, disability or divorce. They took out the mortgage with the best of intentions but later on shit happened.

What is the bank supposed to do when someone quits paying their mortgage?

Go back up to the story of Ms. Pittman. She took out a loan in 2006. Apparently Chase later bought the loan from another bank. In 2009 Chase worked with Ms. Pittman to modify the loan. In 2010 she quit making payments. It wasn’t until the fall of 2011 that Chase finally foreclosed. That doesn’t sound like a bank that is acting outrageously.

I supported Hillary Clinton’s 2008 proposal for a new Home Owners’ Loan Corporation (HOLC) to help homeowners refinance their mortgages. Even without HOLC some homeowners can avoid foreclosure with the help of other government programs and/or bankruptcy court.

But the fact is some people don’t deserve help. Others need assistance with refinancing or extensions of time in order to get their shit together. But some people for various reasons will never be able to pay off their mortgages. No matter what we do they will lose their homes.

The bottom line is we can’t just tell the banks to fuck off. If we put a stop to all foreclosures the banks would stop making loans. They would have little or no choice.

So what is OWS doing to help?

Are they championing new legislation like HOLC?

Nope.

Are they raising money to give homeowners advice and assistance in refinancing or other options? What about financial or relocation assistance?

Nope, nope and nope.

They are trying to disrupt legal proceedings and “occupy” foreclosed upon properties much like they tried to occupy public spaces. It worked so well last time.

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I know I’m committing heresy, but reality is more nuanced and complex than depicted by OWS members.

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Gratuitous Clinton Bashing

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Even though it’s been out for a couple months now, Dan Froomkin decided to bring up Ron Suskind’s Confidence Men again:

In the book, Suskind describes how Obama made the conscious choice to staff his economic team with former Clinton appointees whose sympathies were with Wall Street — and that those men were unable to see how drastically out of whack the country’s financial system had gotten both because they helped create it and because it had served them so well.

Then, rather than forcefully impose his campaign’s populist vision on these men, Obama again consciously chose to defer to them repeatedly — and tolerated it even when they slow-walked, pushed back against, or simply ignored his instructions.

[...]

During his 2008 presidential campaign, Obama spoke eloquently and strikingly about the excesses of Wall Street.

[...]

In the midst of the U.S. government’s September 2008 bank bailout, Obama told a Nevada audience: “Let me be perfectly clear. The fact that we are in this mess is an outrage. It’s an outrage because we did not get here by accident. This was not a normal part of the business cycle. This was not the actions of a few bad apples.

“This financial crisis is a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years.”

And although he said it wasn’t time yet, he promised: “There will be time to punish those who set this fire.”

In October 2008, he promise to “take on the corruption in Washington and on Wall Street to make sure a crisis like this can never, ever happen again.”

And one day before he was elected president, he told a Florida audience: “Tomorrow, you can turn the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street.”

Obama’s most seminal speech on the crisis was his March 2008 address at Cooper Union. There, he laid part of the blame for the disaster on Clinton-era financial deregulation, including the 1999 repeal of the 1933 Glass-Steagall Act. That repeal, which broke down barriers between commercial and investment banking, led to the growth of financial behemoths that were able to take enormous risks with impunity because they were “too big to fail.”

“[I]nstead of establishing a 21st century regulatory framework, we simply dismantled the old one, aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight,” Obama said. “In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.”

Among the foremost champions of that deregulatory regime were the key members of President Clinton’s economic team, including Robert Rubin, who was Clinton’s treasury secretary, Larry Summers, who succeeded Rubin, and Timothy Geithner, who worked directly under both of them.

But once Obama was elected, and was staring into the maw of staggeringly large financial crisis, he made a fateful decision: He left most of his progressive economic advisers behind — including such liberal luminaries as Robert Reich and Joseph Stiglitz — and chose to go with name brand Clinton officials instead. Summers became his chief economic adviser, Geithner became his Treasury secretary, and fellow Rubin protégé Peter Orszag became his budget director. (According to Suskind, Obama even offered Rubin himself an office in the White House.)

The “bold visions of the campaign season… resolved into the serious, often risk-averse business of actually governing,” Suskind writes. “In the midst of a battering economic storm, it no longer seemed like the right time to be making waves.”

While the appointments of these men and a slew of similarly pedigreed subordinates reassured the financial markets, their leadership undermined Obama’s populist promises.

Many of them had already spent their interregnum feeding at the Wall Street trough.

[...]

Back in March 2010, I wrote for HuffPost that “people looking for the reasons why the Obama presidency has not lived up to its promise won’t find the answer amid the minor rifts between key players….. The fact is that after a campaign that appealed so successfully to idealism, Obama hired a bunch of saboteurs of hope and change.”

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Why is Froomkin blaming Bill Clinton for what the Obama administration has done (or failed to do?)

Look, if you want to make a case that Bill Clinton is responsible for the financial meltdown, then go ahead and make it. Yes, he signed the repeal of Glass-Steagall. But that bill (Gramm–Leach–Bliley Act) passed Congress with veto-proof majorities. (Senate 90-8, House 362-57) So it’s a little disingenuous to blame it all on the Big Dawg.

But does anyone really think that Bill Clinton wanted to cause a financial meltdown? In hindsight it seems easy to connect the dots, but I don’t recall hearing lots of controversy back in 1999. More importantly, the Big Dawg left office on January 2001, nearly eight years before the shit hit the fan.

What is really ridiculous is blaming Bill Clinton for what his former appointees have done since leaving his employ.

First of all, Obama had limited options if he wanted to appoint Democrats with executive branch experience. There aren’t many former Kennedy/Johnson staffers still above ground, and the Carter people are getting a little long in the tooth.

Obama picked the people he wanted. Once they were in office they were HIS people, not Bill’s. Whether they gave Obama bad advice or ignored his directions, Bill Clinton had no responsibility or control over any of them.

If you read the whole article you will see that the reason why Obama has failed to hold Wall Street accountable is right in front of Froomkin’s nose:

Consider what progressive hero Elizabeth Warren told Suskind in a September 2009 interview:

“You can’t run a policy based on a misdirection, on a fiction,” she said. “I don’t know what the president is thinking. I don’t see the president. He meets with bankers. He doesn’t meet with me. But if he’s involved in this at all, he’s got to know that his angry words at Wall Street, at their recklessness and dangerous incentives in compensation, about how they do their business in ways utterly divorced from what’s actually good for the economy — that he can’t just say that sort of thing, and then dump money in their laps and be credible.”

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Who’s the number one recipient of Wall Street donations?

B-A-R-A-C-K O-B-A-M-A

They didn’t spend all that money for nothing. He’s the best investment they ever made.

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Sacred Tropes and Right-Wing Cows

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Sister Toldjah:

Remember when Barack Obama was upset at the bonuses paid to AIG execs?

[...]

When the bubble burst in 2007, Fannie and Freddie began to lose billions of dollars of investments in mortgage-backed securities (MBS) guarantees. In September 2008, the Federal Housing Finance Agency (FHFA) took Fannie and Freddie into conservatorship as a result of mounting losses stemming from the financial crisis.The Enterprises became de facto government entities, funded by preferred stock purchase agreements from the Department of the Treasury (Treasury). Today, the Enterprises remain a multi-billion-dollar drag on the federal government’s finances. Since they entered conservatorship, Treasury has provided $169 billion to Fannie and Freddie – and the payouts are scheduled to continue with no end in sight. According to recent FHFA projections, by the end of 2014, Treasury assistance to the Enterprises will total $220 billion to $311 billion.

Since the Enterprises have become government-funded entities, lavish payment packages have been doled out to their senior executives, and taxpayers have been footing the bill. In 2009 and 2010, the Enterprises’ top six officers were given a total of more than $35 million in compensation. Of that amount, a total of $17 million in compensation was given to the CEOs of the Enterprises. Additional bonus installments for 2010 may still be forthcoming, and the two CEOs stand to make a total of $12 million in 2011. In addition, an executive has been awarded a substantial signing bonus – $1.7 million – upon joining the Fannie Mae. As these figures indicate, senior executives at Fannie Mae and Freddie Mac have become the highest compensated workers on the federal payroll – making as much as eight times more than the President of the United States. The executives even make more than their conservator, FHFA Acting Director Edward J. DeMarco.

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Yeah, I know, I’m tap-dancing in a mine field for even bringing this stuff up. Somebody will point to this as evidence we’re all a bunch of tea-kissing whip-baggers or something. But since everybody already hates us what the fuck.

I’ve been trying to figure out the housing crash/financial meltdown for a couple years now. Here’s what I know:

1) It didn’t happen overnight, it took years for everything to get in place. Democrats and Republicans are both in it up to their eyeballs. Banks were involved but they weren’t the only ones.

2) I’ve read lots of explanations for what went wrong. All of them seem to make sense, but none of them seem to agree with the others. I’m not an expert so I don’t know who is telling the truth. Maybe none of them.

3) Cry racism all you want, but when you make loans to people who can’t afford to pay them back you’re going to have a high rate of defaults. On the other hand it makes no sense to pay bonuses to executives who drove their companies into a ditch.

4) Things aren’t going to change as long as we keep sending the same people back to Washington.

5) Obama is the worst president ever.

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Where did the money go?

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Let’s say it’s 1986, you’re in your mid-twenties and you and your spouse decide to buy a home for you and your two young children. You live in a medium-large city and you both have good jobs. With a little help from your parents and in-laws you manage to get a modest 3 bedroom tract home for $100,000, most of which you finance with a 30 year mortgage.

About fifteen years later you borrow against your home’s equity to put your kids through college. You support them and pay their tuitions at a nice (but not great) university. This costs you approximately $100,000 but you don’t mind.

In 2006 both your kids have finished school and are starting new careers. You and your spouse have a house bigger than your needs and you’ve grown tired of the rat race. You want to move to a smaller community with a slower pace of life.

A realtor tells you your home is now worth $300,000. If you sell it you can pay off your first and second mortgages along with your credit card debts and have enough left over to buy a small home in the rural community where you grew up nearly free and clear.

You sell the house and move. You’re not retired, but your financial situation allows you and your spouse to take lower-paying jobs without reducing your standard of living. You’re both in your early fifties and looking forward to early retirement.

One problem. You sold your old house at the peak of the housing bubble. Now that the bubble has popped the house is worth $100,000 again, and the new buyer walked away from it leaving the bank holding the note.

Are you going to give back your $200,000 ill-gotten gain?

There is a lot of anger at the housing crash and bankers are an easy target. While they certainly deserve their fair share of blame, they weren’t the only ones who cashed in during the boom.

Realtors, appraisers, inspectors, construction contractors, building supply stores, painters, roofers, and landscapers are just some of the people who profited from the housing boom. It was all good for years, then the music stopped.

People bought books and paid to go to seminars on how to “flip this house” and get rich quick. It was like a nation-wide Ponzi scheme. The people who got out before the bubble popped made out like bandits. Everyone else got left holding the bag.

Lots of people walked away from underwater mortgages. Lots of others tried or are trying to hold on to properties they can’t afford. What are we supposed to do about it?

Some people think the government should step in and fix things so they can keep their homes and have some or all of their debt forgiven. “I can’t pay my $2,000 month mortgage but I want to keep my house anyway!”

The “show the note” defense to foreclosure is based on the fact that sloppy recording practices make it hard for some banks to prove they hold the note to a property. But the hard fact is that in most of those cases the buyers really are in default and will never be able to catch up.

The banks didn’t hold a gun on anybody and tell them to borrow money. They didn’t force anyone to run up thousands of dollars in credit card debt. They didn’t make anyone take out student loans for a degree in interpretive dance.

I have no problem with investigating the housing crash and jailing those who deserve it. But a lot of what took place was legal, and the constitution prohibits ex post facto laws. We can and should make those practices illegal in the future, and we should also break up any bank that is “too big to fail.”

Banks will not change the way they do business no matter how many protesters march up and down Wall Street. They will change their ways when the law is changed. Law making takes place in Washington D.C., not New York City.

BTW – No investigation will take place while the candidate from Wall Street sits in the Oval Office.

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