Being poor is expensive. A winter heating bill that comes due before the paycheck arrives can compel a trip to a payday lender who charges 350 percent interest. It takes the entire paycheck to pay off that loan in a week—emptying out the bank account and requiring yet another visit to the lender. A child who is too sick to go to school for a week may need her single father to stay home with her, costing him a quarter of his monthly income. He’s overdue on the rent and the bills, so he’s responsible for late fees as well.
In Brussels they had a word for it: Shutdownfreude. As the standoff between the President and Congress reached its fever pitch last week, officials at the European Commission were relieved that, this time at least, it wasn’t their political system at the center of a potential global meltdown. Now that the United States won’t default on its debt due to a few dozen Tea Party radicals, things are returning to normal. Or should we say the new normal in Europe—serial crisis.
Sometimes, Tom Friedman writes a column that is such complete baloney it makes you want to retch. Rather than risking soiling my shoes, here is a point-by-point rebuttal to Friedman’s opus du jour, titled: “Sorry, Kids. We Ate It All.”
Friedman’s column swallows whole the budgetary malarkey of the corporate Fix-the-Debt lobby and its Wall Street sponsors. Namely, the reduced horizons of the next generation are the result of the gluttony of old folks—and of unions.
Here we go again: Financial markets are plummeting thanks to the threat of a government shutdown and, beyond that, another debt ceiling crisis. One of the great bull markets of recent years is being derailed by a bunch of extreme conservatives in Congress.
When it comes to the Affordable Care Act, you have to give Republicans credit for sheer sticktoitiveness. They tried to defeat the law, but it passed. They tried to get the Supreme Court to declare it unconstitutional, but that didn't work. So now, as the open enrollment period for the exchanges approaches on October 1, they're thinking creatively to find new ways to sabotage the law. Sure, at this point that means screwing over people who need insurance, but sometimes there's unavoidable collateral damage when you're fighting a war.
Their latest target is the Obamacare "navigators." Because not just the law but the insurance market itself can be pretty complicated, the ACA included money to train and support people whose job it would be to help people get through this new system, answering consumers' questions and guiding them through the process. Grants have been given to hospitals, community groups, charities like the United Way, churches, and the like in the 34 states that are relying on the federal government to operate their exchanges in whole or in part. You can see the problem: If there are folks out there helping people get health coverage, that will mean that people will get health coverage. And that won't do.
Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first.
Who becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition.
Revelations from Bank of America whistleblowers show widespread and ongoing abuse of homeowners seeking loan modifications to avoid foreclosure. Customer service representatives were told to lie about pending modifications and were given bonuses for pushing homeowners into default. The allegations mirror continued complaints about “dual tracking,” where mortgage servicers pursue foreclosure while deciding whether or not to grant a loan modification. And yet, servicers at the five biggest banks were required to pay $25 billion in fines and agree to dozens of new guidelines to curb these abuses as part of last year’s National Mortgage Settlement. While the banks argue that they have fixed any outstanding problems, a recent report from the settlement’s oversight monitor, Joseph Smith, showed continuing violations of settlement terms in several key areas, though not to the degree that housing advocates claim.
In the election of 1952 my father voted for Dwight Eisenhower. When I asked him why he explained that “FDR’s debt” was still burdening the economy—and that I and my children and my grandchildren would be paying it down for as long as we lived.
I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks.
Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it.
The financial services industry is second to none in dreaming up ways to rip off Americans. Show me a a financial product—credit cards, mortgages, checking accounts, 401(k)s, annuities—and I'll show you a stack of consumer complaints documenting how banks and other firms have sought to bleed dry the American public.
These are heady times for the bipartisan group of reformers seeking a safer and more manageable U.S. financial system. The leaders of this movement, Senators Sherrod Brown and David Vitter, introduced legislation yesterday to force the biggest banks to foot the bill for their own mistakes by imposing higher capital requirements.
Three developments in finance cropped up in the last days that must be read as a single story.
First, Blankfein, Dimon, and the rest of the Wall Street bigwigs visited the White House to meet with the president and his team. That team consisted of Denis McDonough (Chief of Staff); Valerie Jarrett (Senior Adviser); Cecilia Munoz (Domestic Policy Adviser); Gene Sperling (National Economic Council Director); and Alan Krueger, (Chairman, Council of Economic Advisers). The meeting was secret, but we can deduce much from its attendance.
I recently published an article in response to a study of high-frequency trading (“HFT”) by Professor Charles M. Jones of Columbia Business School and an opinion piece he published simultaneously in Politico. My article focused on the funding of the research by Citadel LLP, a major HFT user. It also pointed out broad concerns about the study, which asserts that computer-based algorithmic trading provides substantial net value to the economy.
Last week, Professor Charles M. Jones, a noted economist at Columbia, published an opinion piece in POLITICO claiming to enlighten readers on the realities of high-frequency trading (or “HFT”), computer driven trading at millisecond speeds driven by complex algorithms based on complex trading strategies. This has surfaced as the subject of politically charged debate in the context of of a proposed financial transaction tax that would, among other things, curb the most excessive forms of HFT.