Dems Waging ‘Class Warfare’ Over Tax Cuts, Republicans Complain

Several top Republicans have said recently that President Obama’s plan to allow the expiration of Bush-era tax cuts for the wealthiest two percent of Americans is “class warfare.”

“Instead of resorting to tired old class warfare rhetoric, pitting one working American against another, the president and the Democratic leadership should start working with us this week to ensure a fair and open debate to pass legislation to cut spending and freeze tax rates without any further delay,” said House Republican Leader John Boehner on Sunday.

And Rep. Mike Pence (R-Ind.) reportedly also used the term during a Tea Party rally in Washington Sunday: “We will not compromise our economy to accommodate the class warfare rhetoric of this administration.”

On Monday, the second-ranking Republican in the Senate elaborated: “I don’t think Americans should be pitting Americans against each other,” said Sen. Jon Kyl (R-Ariz.) on the Senate floor. “Americans agree with President Kennedy’s formulation that a rising tide lifts all boats. And Americans believe — it’s our basic idea of a country — that we want everyone here to succeed, to do well and not to pit one group of us against another group.

“We all aspire to be in the very top groups of whatever we’re talking about. And because of the kind of country we have, we have that opportunity and people do move from one income tax bracket up to the next one for example, as we increase our incomes,” Kyl continued. “So we don’t want to punish anyone for being successful. That class warfare went out of style when the Cold War ended.”

Who’s been waging war against whom? Democrats might say it’s the other way around. Over the summer, when Senate Republicans filibustered a bill to reauthorize unemployment benefits for the long-term jobless, Rep. Jim McDermott (D-Wash.) characterized the obstruction as a “class warfare issue,” as Kyl led his caucus in suggesting that unemployment benefits actually discourage people from looking for work.

“The Social Security Act of 1935 made these entitlements, Social Security and unemployment insurance and welfare,” McDermott said. “The Republicans have been after all three of those programs ever since 1935. They got welfare a few years ago, because that’s poor people. They could jump on them. But unemployment and Social Security is middle-class people — they haven’t been able to get them, but it isn’t because they’re not willing to try.”

Extended unemployment benefits lapsed for more than a month, affecting 2.5 million people, and a half as Republicans and some Democrats insisted that the cost of the benefits not be added to the deficit — though the GOP has abonded talk of deficit discipline for the proposed tax hike, which is worth nearly $700 billion over 10 years.

“It’s ironic, to say the least, that less than two months ago, Senator Kyl fought so hard to block extending a meager $300 a week in unemployment benefits to those hardest hit by the recession because it would increase the deficit by $30 billion in the short term,” wrote Judy Conti, a lobbyist for the National Employment Law Project, in an email to HuffPost. “Yet today, he and other anti-deficit hawks are more than willing to increase the deficit in a long-term and structural manner that would result in $700 billion in non-offset spending… The tax cuts were set to expire for a reason — because we might not be able to afford them any longer. We have reached that point and recognizing the reality of the situation isn’t class warfare; it’s just good common sense.”

Read more: Politics News

Janis Bowdler: Safety in Numbers: Creating a Fairer Housing Market

This blog post was coauthored by the Woodstock Institute and the National Council of La Raza.

Pages and pages of ratios and figures don’t usually fire up a crowd, but they do affect the rash of foreclosures our country is experiencing, and Americans are fired up about that. One of the driving factors behind the foreclosure crisis was lenders putting unsuspecting borrowers into loans they could not reasonably afford. Borrowers of color, women, the elderly, and low-income families were favorite targets for these practices. Thankfully, legislators recently passed a bill that includes the modernization of a tool that is critical to fighting discrimination in the housing market.

The Home Mortgage and Disclosure Act (HMDA) requires mortgage lenders to provide detailed reports of their lending activities to regulators and the public. HMDA data have long served as a powerful mechanism that identifies unfair lending practices, such as discriminating against minority families, women, and low-income borrowers. HMDA is 35 years old, however, and Congress recognized it was time for a tune-up. Now it is the job of the Federal Reserve to revamp HMDA to keep pace with an ever-evolving mortgage market.

Next Thursday, September 16, the Woodstock Institute and the National Council of La Raza (NCLR) will testify at the Federal Reserve Bank of Chicago about enhancing HMDA data collection. Woodstock, which seeks equal opportunity for modest-income families and communities of color to achieve economic security, and NCLR, focused on helping Latino families find safe loans and equality in the mortgage market, share the following three recommendations to enhance HMDA and better serve vulnerable communities.

HMDA should:

  • Collect “back-end ratios” that take debt into account. These include other types of monthly payment obligations in addition to the mortgage, and are a better reflection of a borrower’s overall debt burden.
  • Require lenders to report how they documented a family’s income when underwriting the mortgage, and how they measured a borrower’s debt load. A strong concentration of “no-doc” loans in a low-income community, for example, could indicate that a lender might be systematically using lax documentation requirements to put borrowers into loans they are unable to afford.
  • Collect loan performance and servicing records. The bursting of the housing bubble and the subsequent rise in foreclosures have demonstrated that initial loan origination is only half of the story. Lenders were able to skirt regulations and disclosure requirements by adjusting the initial payment structure of a loan. The initial origination told us little about the potential success or failure of the loan, which is critical to determining whether a lender is meeting the community’s mortgage needs or whether discrimination is occurring.

HMDA is a crucial tool in the fight against predatory lending. If you’ve read any of Woodstock’s reports on mortgage lending or used the community lending fact book, or followed NCLR’s banking reform updates, then you’ve seen how important clear data can be in targeting discriminatory lending practices. If done right, improved HMDA data will be the most effective portal of information that tracks and ultimately helps prevent a ballooning crisis. Without this increased transparency and lender accountability, whole neighborhoods, and minority homeowners in particular, will again bear the brunt of risky lending practices.

HMDA certainly proves that there is safety in numbers. First, with proper updates, HMDA will generate critical numbers that can ultimately prove disparate practices among specific lenders. Second, the more practitioners, advocates, and members of the concerned public who get involved, the better. Call your local bank regulator. Register here to attend the Chicago public hearings on HMDA. And don’t forget to keep an eye out in this space for further HMDA activity.

Read more: Foreclosures, Federal Reserve, Foreclosure Crisis, Foreclosure, Predatory Lending, Nclr, Home Mortgages, Politics News

Dodd-Frank Does Little To Help Investors Analyze Big Bank Results: Bloomberg

The Dodd-Frank Act, designed to prevent future financial crises, does little to improve investors’ ability to analyze results at the five biggest U.S. firms that trade securities, which together lost $38.6 billion as markets froze in the fourth quarter of 2008. Since taxpayers may have to bail out banks again, firms should be forced to disclose more, said Tanya Azarchs, former head of North American bank research at Standard & Poor’s.

Read more: Goldman Sachs, JP Morgan, Wall Street, Standard, Mortgage Securities, Bank of America, Wall Street Banks, Dodd Financial Reform Bill, Trading, Dodd-Frank Bill, Investors, Business News

David Sirota: The Great Education Myth & the Neoliberal Bait-and-Switch

In simplistic, Lexus-and-Olive-Tree terms, the neoliberal* economic argument goes like this: Tariff-free trade policies are great because they increase commerce, and we can mitigate those policies’ negative effects on the blue-collar job market by upgrading our education system to cultivate more science, technology, engineering and math (STEM) specialists for the white-collar sector.

Known as the bipartisan Washington Consensus, this deceptive theory projects the illusion of logic. After all, if the domestic economy’s future is in STEM-driven innovation, then it stands to reason that trade policies shedding “low-tech” work and education policies promoting high-tech skills could guarantee success.

Of course, 30 years into the neoliberal experiment, the Great Recession is exposing the flaws of the Washington Consensus. But rather than admit any mistakes, neoliberals now defend themselves with yet more bait-and-switch sophistry – this time in the form of what in my newest newspaper column I call the Great Education Myth. You can read the full column here.

No doubt, you’ve heard this fairy tale from prominent politicians and business leaders who incessantly insist that our economic troubles do not emanate from neoliberals’ corporate-coddling trade, tax and deregulatory policies, but instead from an education system that is supposedly no longer graduating enough STEM experts. Indeed, this was the message of this week’s New York Times story about corporate leaders saying America isn’t producing “enough workers with the cutting-edge skills coveted by tech firms.”

As usual, it sounds vaguely logical. Except, the lore relies on the assumptions that 1) American schools aren’t generating enough STEM supply to meet employer demand, 2) the education system — not neoliberalism — is driving this alleged STEM drought and 3) if America came up with more of such specialists, they would find jobs.

To know these suppositions are preposterous is to consider a recent study by Rutgers and Georgetown University – a study I break down in my column. Read it here.

* Note: “Neoliberal” is very different from “liberal.” The former, a term of economic characterization, refers to what we might more colloquially call “corporatists” or “corporate conservatives” in both parties. As the article states, neoliberals dominate both parties, but they are very different from genuine liberals. Indeed, genuine liberals are among the most vocal critics of neoliberalism. And of course, most foreign policy neoconservatives are economic neoliberals.

Read more: Neoliberalism, Free Trade, Education, Wall Street, Politics News

Robert Auerbach: Malpractice at the Bernanke Federal Reserve

During September 2008 hysteria hit the financial markets and the economy dived. Hundreds of billions of Lehman Brothers’ liabilities dried up when it went bankrupt on September 16. A day later the Federal Reserve gave AIG an initial bailout of $85 billion. AIG was unable to pay its huge losses on insurance products that were exempt from insurance regulations. The following week the Fed announced that two large investment banks, Goldman Sachs and Morgan Stanley, would be made commercial banks allowing them readily available borrowing authority from the Fed’s “discount window.”

Immediately after the recession took a dramatic dive in September 2008, the Bernanke Fed implemented a policy that continues to further damage the incentive for banks to lend to businesses. On October 6, 2008 the Fed’s Board of Governors, chaired by Ben Bernanke, announced it would begin paying interest on the reserve balances of the nation’s banks, major lenders to medium and small size businesses.

You don’t need a Ph.D. economist to know that if you pay banks ¼ percent risk free interest to hold reserves that they can obtain at near zero interest, that would be an incentive to hold the reserves. The Fed pumped out huge amounts of money, with the base of the money supply more than doubling from August 2008 to August 2010, reaching $1.99 trillion. Guess who has over half of this money parked in cold storage? The banks have $1.085 trillion on reserves drawing interest, The Fed records show they were paid $2.18 billion interest on these reserves in 2009.

A number of people spoke about the disincentive for bank lending embedded in this policy including Chairman Bernanke.

I spoke against this policy in January 2009 at the National Press Club and at Chapman University Law School. Jim McTague, Washington Editor of Barrons, wrote in his February 2, 2009 column, “Where’s the Stimulus:” “Increasing the supply of credit might help pump up spending, too. University of Texas Professor Robert Auerbach an economist who studied under the late Milton Friedman, thinks he has the makings of a malpractice suit against Federal Reserve Chairman Ben Bernanke, as the Fed is holding a record number of reserves: $901 billion in January as opposed to $44 billion in September, when the Fed began paying interest on money commercial banks parked at the central bank. The banks prefer the sure rate of return they get by sitting in cash, not making loans. Fed, stop paying, he says.”

Shortly after this article appeared Fed Chairman Bernanke explained: “Because banks should be unwilling to lend reserves at a rate lower than they can receive from the Fed, the interest rate the Fed pays on bank reserves should help to set a floor on the overnight interest rate.” (National Press Club, February 18, 2009) That was an admission that the Fed’s payment of interest on reserves did impair bank lending. Bernanke’s rationale for interest payments on reserves included preventing banks from lending at lower interest rates. That is illogical at a time when the Fed’s target interest rate for federal funds, the small market for interbank loans, was zero to a quarter of one percent. The banks would be unlikely to lend at negative rates of interest — paying people to take their money — even without the Fed paying the banks to hold reserves.

The next month William T. Gavin, an excellent economist at the St. Louis Federal Reserve, wrote in its March\April 2009 publication: “first, for the individual bank, the risk-free rate of ¼ percent must be the bank’s perception of its best investment opportunity.”

The Bernanke Fed’s policy was a repetition of what the Fed did in 1936 and 1937 which helped drive the country into a second depression. Why does Chairman Bernanke, who has studied the Great Depression of the 1930’s and has surely read the classic 1963 account of improper actions by the Fed on bank reserves described by Milton Friedman and Anna Schwartz, repeat the mistaken policy?

As the economy pulled out of the deep recession in 1936 the Fed Board thought the U.S. banks had too much excess reserves, so they began to raise the reserves banks were required to hold. In three steps from August 1936 to May 1937 they doubled the reserve requirements for the large banks (13 percent to 26 percent of checkable deposits) and the country banks (7 percent to 14 percent of checkable deposits).

Friedman and Schwartz ask: “why seek to immobilize reserves at that time?” The economy went back into a deep depression. The Bernanke Fed’s 2008 to 2010 policy also immobilizes the banking system’s reserves reducing the banks’ incentive to make loans.

This is a bad policy even if the banks approve. The correct policy now should be to slowly reduce the interest paid on bank reserves to zero and simultaneously maintain a moderate increase in the money supply by slowly raising the short term market interest rate targeted by the Fed. Keeping the short term target interest rate at zero causes many problems, not the least of which is allowing banks to borrow at a zero interest rate and sit on their reserves so they can receive billions in interest from the taxpayers via the Fed. Business loans from banks are vital to the nations’ recovery.


Read more: Federal Reserve, Ben Bernanke, Bailout, Fed, Business News

eBay defeats Tiffany in counterfeit jewelry suit

NEW YORK (Reuters) – EBay Inc on Monday won dismissal of a Tiffany & Co lawsuit accusing the auctioneer of deceiving customers by allowing the sale of counterfeit Tiffany jewelry on its website.

Clinton: both sides must move on Jewish settlements

SHANNON, Ireland (Reuters) – Israel and the Palestinians need to resolve a dispute over the expiry of an Israeli moratorium on West Bank settlement construction that threatens to scupper their nascent direct peace talks, U.S. Secretary of State Hillary Clinton said on Monday.

Obama: Tough decisions post-election on debt

FAIRFAX, Virginia (Reuters) – President Barack Obama said on Monday Washington faces tough decisions on containing its spiraling debt and he hopes Democrats and Republicans will declare a post-election ceasefire to work together on it.