Tuesday, Oct 26, 2010, 9:18 am
Weekly Audit: Surprise! Bailed Out Banks Backing Anti-Bailout Candidates
by Lindsay Beyerstein, Media Consortium blogger
Some of the banks that got bailed out during the financial crisis of 2008 are backing Republican candidates running on an anti-bailout platform. The Republican National Committee is running attack ads against Democrats who voted for the Troubled Assets Relief Program (TARP), better known as the bank bailout, but as Steve Benen of the Washington Monthly notes, Republicans were for TARP before they were against it:
But the details matter here. The financial industry bailout was passed in October 2008. It was requested by a conservative Republican administration (George W. Bush and Dick Cheney). It was enthusiastically endorsed by the House Republican leadership (John Boehner, Eric Cantor, and Roy Blunt), the Senate Republican leadership (Mitch McConnell and Jon Kyl), both members of the Republican presidential ticket (John McCain and Sarah Palin), and assorted, high-profile conservative voices (Mitt Romney and Glenn Beck).
Running against the bailout is meaningless. The payouts have already happened. The Republican candidates who retroactively oppose the bailout are also opposed to tougher financial reforms that would prevent a repeat of the 2008 debacle. This is typical of the incestuous relationship between corporations and politics. These banks were saved by the bailout and having been restored to solvency by U.S. taxpayers, proceeded to funnel money to political candidates who rail about the last bailout without lifting a finger to prevent the next one. Talk about redistribution of wealth.
AlterNet is running an exclusive excerpt from Michael Hudson's book The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis. Hudson takes us inside the boiler rooms at Ameriquest Mortgage, where ambitious twenty-somethings pushed mortgages by phone.
"Subprime" is a dirty word now, but in those days, Ameriquest was admired for breaking new ground in the debt industry by lending large sums of money with few questions asked to borrowers with bad credit. They had one big problem to work around: A lot of people are reluctant to take on huge debts they aren't sure they can repay. So, Ameriquest hired aggressive salespeople to help overcome their resistance and then put immense pressure on the sales force to sell as many loans as possible. According to Hudson, salespeople would routinely resort to forged signatures and other tricks to close deals that never should have been struck.
Those who oppose government assistance for struggling mortgage-holders like to promote a stereotype of the irresponsible borrower who took on more debt than they could handle. This never made a lot of sense to me. Nobody takes out a mortgage they know they can't afford. At some point, someone must have convinced these borrowers to bite off more than they could chew. Hudson's book tells part of that story. Ameriquest aggressively sought out people with bad credit and bombarded them with high pressure sales tactics to convince them to take on unreasonable debts.
We're accustomed to thinking of lenders being conservative about who they lend money to. So, if a mortgage broker says that you can afford a mortgage of a certain size, the fact that they're offering to lend you the money is tacit reassurance that they think you can pay it back. What most consumers didn't know was that Ameriquest wasn't holding these mortgages, it was selling them off to become mortgage-backed securities. So, it didn't care whether borrowers could make their payments. If these borrowers defaulted, as Ameriquest surely expected many of them to do, their toxic loans would long since have been sold to some unexpected mortgage backed bond holder.
The Kroll files
Andy Kroll of Mother Jones has been doing groundbreaking reporting on the foreclosure crisis. In this video, Kroll discusses the prospects for a foreclosure moratorium, the impact of the foreclosure crisis on the larger economy, and political responses to the foreclosure crisis.
We spend a lot of time dissecting the failures of the old economy. We don't spend nearly as much energy envisioning more constructive, humane, and stable alternatives to the old system.
Sarah van Gelder outlines her vision of a family-friendly economic policy in Yes! Magazine. One key component to keeping families in their homes involves allowing judges to modify the terms of mortgages to make payments more affordable. Next, fund job programs and increase the minimum wage. The economy won't revive until large segments of the population that are currently scrimping and saving have enough money in their pockets to buy goods and services.
As we've discussed in previous installments of the Audit, benefits for working families and the unemployed get spent very quickly. The average low-wage worker is probably going to spend extra money on groceries, rent, gas, and other necessities. Unlike tax cuts for the rich, food stamps aren't going to get squirreled away in an offshore tax haven. To make money that actually pays back into the economy, van Gelder suggests eliminating the payroll tax on incomes up to $20,000 and making up the difference by adding payroll taxes to income in excess of $250,000, which are currently exempt.
Winning back the white working class
David Moberg of Working in These Times takes a look at what Democrats can do to win back the support of the white working class in the coming election. These voters used to be the Democratic party's base, but many have drifted to the right in recent years. It shouldn't come as a surprise that job creation is high on this demographic's agenda.
As retired nurse Virginia Kimble told Moberg in Elyria, Ohio: “I just want them to listen to the people. Obama was going to do all this for the middle class. But I’m not seeing it. Even on housing—where’s the help? Could the Republicans do a better job? No."
"Maybe both parties should look more at how to create new jobs and not outsource so much. It’s like all our jobs are shipped to other places so companies can make more money,” Kimble said.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Lindsay Beyerstein is an award-winning investigative journalist and In These Times staff writer who writes the blog Duly Noted. Her stories have appeared in Newsweek, Salon, Slate, The Nation, Ms. Magazine, and other publications. Her photographs have been published in the Wall Street Journal and the New York Times' City Room. She also blogs at The Hillman Blog (http://www.hillmanfoundation.org/hillmanblog), a publication of the Sidney Hillman Foundation, a non-profit that honors journalism in the public interest.