Article 43
Monday, April 27, 2009
Fool On The Hill
Put on the armor of God so that you may be able to stand firm against the tactics of the devil.
- Ephesians 6:11The doorstep to the temple of wisdom is a knowledge of our own ignorance.
- Benjamin Franklin
Pinter’s Dispatch to Obama
By Mike Whitney
April 27, 2009
About a month before Barack Obama announced his candidacy for the presidency of the United States, former National Security Adviser Zbigniew Brzezinski appeared on PBS’s Charlie Rose Show and was asked whether he thought Obama would be a good choice for president. Brzezinski paused for a minute, peered at Rose out of the corner of his eye, and answered, “Just think of the symbolism.” As soon as he said that, Brzezinski and Rose broke out into laughter as though they were sharing a private joke.
Brzezinski was right, of course. Obama was the perfect choice for president. Not because of his experience. He had none. He was a two year senator with a resume’ small enough to fit on the back of a matchbox. Still Obama had what Brzezinski and Co. were looking for, symbolism; the kind of symbolism that connected him to people around the world and made them feel like one of their own had finally clawed their way to the top. Even better, Obama was a CHARISMATIC POPULIST who could fill stadiums with adoring fans and put a benign face on America’s interventions in Afghanistan and Iraq. What more could Brzezinski hope for? After 8 years of dragging “Brand America” through the mud, the country would finally get the emergency facelift it needed and begin to restore its battered image as the world’s indispensable nation.
For leftists, Obama has been a total bust. He’s escalated the war in Afghanistan, increased the cross-border bombings of Pakistan, hemmed and hawed about prosecuting war crimes, refused to actively lobby House members to make it easier for workers to organize (EFCA), and surrounded himself with bank industry reps who’ve committed $12.8 trillion to sinking financial institutions with no assurance that the money would be repaid. Apart from a trifling bill on stem cells, Obama has done absolutely zero to confirm his bone fides as a liberal. The truth is, Obama is neither liberal nor conservative; he’s simply an inspiring orator and a skillful politician who has no strong convictions about anything. If he achieves greatness, it will be because he was thrust into a crisis he couldn’t avoid and reluctantly acted in the best interests of the American people. That possibility still exists, although it seems more unlikely by the day.
Foreign leaders are clearly relieved to see the last of George W. Bush, and they appear to be willing to give Obama every opportunity to mend fences and break with the past. But Obama has made little effort to reciprocate or show that he’s serious about real change. The emphasis seems to be more on public relations than policy; more on glitzy photo ops, grandiose speeches and gadding about from one capital to another, than ending the chronic US meddling and militarism. Where’s the beef or is it all just empty posturing?
No one’s ready to write-off Obama just yet, but he needs to show he’s the real-deal by taking steps to ratchet-down the war machine and reign in the corporate elites and bank vermin. But is it really possible for one man--however well-meaning--to change the course of a nation by standing up the gaggle of racketeers who pull the strings from behind the curtain? Keep in mind, America’s history of violent interventions, unprovoked wars, color-coded revolutions and coup d’ etats has a long pedigree that stretches from Bunker Hill to Baghdad. That river of blood did not begin with George Bush and it won’t end with Barack Obama. Every generation has produced its own litany of crimes, from Wounded Knee to Nagasaki to My Lai to Falluja. In Harold Pinter’s Nobel acceptance speech, the playwright invokes one such incident which epitomizes the pattern of hostility which has been repeated over and over again wherever the Washington mandarins detect opposition to their iron-fisted rule.
Harold Pinter, Nobel Acceptance SPEECH:
“The United States supported the brutal Somoza dictatorship in Nicaragua for over 40 years. The Nicaraguan people, led by the Sandinistas, overthrew this regime in 1979, a breathtaking popular revolution.
The Sandinistas weren’t perfect. They possessed their fair share of arrogance and their political philosophy contained a number of contradictory elements. But they were intelligent, rational and civilized. They set out to establish a stable, decent, pluralistic society. The death penalty was abolished. Hundreds of thousands of poverty-stricken peasants were brought back from the dead. Over 100,000 families were given title to land. Two thousand schools were built. A quite remarkable literacy campaign reduced illiteracy in the country to less than one seventh. Free education was established and a free health service. Infant mortality was reduced by a third. Polio was eradicated.
The United States denounced these achievements as Marxist/Leninist subversion. In the view of the US government, a dangerous example was being set. If Nicaragua was allowed to establish basic norms of social and economic justice, if it was allowed to raise the standards of health care and education and achieve social unity and national self respect, neighboring countries would ask the same questions and do the same things. There was of course at the time fierce resistance to the status quo in El Salvador.
I spoke earlier about ‘a tapestry of lies’ which surrounds us. President Reagan commonly described Nicaragua as a ‘totalitarian dungeon’. This was taken generally by the media, and certainly by the British government, as accurate and fair comment. But there was in fact no record of death squads under the Sandinista government. There was no record of torture. There was no record of systematic or official military brutality. No priests were ever murdered in Nicaragua. There were in fact three priests in the government, two Jesuits and a Maryknoll missionary. The totalitarian dungeons were actually next door, in El Salvador and Guatemala. The United States had brought down the democratically elected government of Guatemala in 1954 and it is estimated that over 200,000 people had been victims of successive military dictatorships.
Six of the most distinguished Jesuits in the world were viciously murdered at the Central American University in San Salvador in 1989 by a battalion of the Alcatl regiment trained at Fort Benning, Georgia, USA. That extremely brave man Archbishop Romero was assassinated while saying mass. It is estimated that 75,000 people died. Why were they killed? They were killed because they believed a better life was possible and should be achieved. That belief immediately qualified them as communists. They died because they dared to question the status quo, the endless plateau of poverty, disease, degradation and oppression, which had been their birthright.
The United States finally brought down the Sandinista government. It took some years and considerable resistance but relentless economic persecution and 30,000 dead finally undermined the spirit of the Nicaraguan people. They were exhausted and poverty stricken once again. The casinos moved back into the country. Free health and free education were over. Big business returned with a vengeance. ‘Democracy’ had prevailed.
But this ‘policy’ was by no means restricted to Central America. It was conducted throughout the world. It was never-ending. And it is as if it never happened.
The United States supported and in many cases engendered every right wing military dictatorship in the world after the end of the Second World War. I refer to Indonesia, Greece, Uruguay, Brazil, Paraguay, Haiti, Turkey, the Philippines, Guatemala, El Salvador, and, of course, Chile. The horror the United States inflicted upon Chile in 1973 can never be purged and can never be forgiven.
Hundreds of thousands of deaths took place throughout these countries. Did they take place? And are they in all cases attributable to US foreign policy? The answer is yes they did take place and they are attributable to American foreign policy. But you wouldn’t know it.”
Pinter’s speech is a somber indictment of US foreign policy; a policy which is now cloaked behind the rock-star facade of Barack Obama. Nothing has changed and, perhaps, nothing will change. The same barbarous campaign that thrived under Bush has been passed along to Obama intact. Wherever there is resistance to US ambitions; there lies the enemy. Whether its Marxists in Bogota, nationalists in Kosovo, Bolivarians in Caracas, Shia militias in Beirut, Islamic moderates in Mogadishu or Quakers in Toledo. They’re all enemies, every one of them, and they need to be dealt with.
Obama is no fool; he knows he’s being used. He knows he wasn’t chosen for his enlightened views on health care and stem cells. He was picked because the men in charge needed a new posterboy to hide behind while they carry out their illicit activities. Obama is not so much of a Commander in chief as he is master illusionist, diverting attention from the stealth war that goes on relentlessly with or without his consent. Here’s Pinter again:
“The crimes of the United States have been systematic, constant, vicious, remorseless, but very few people have actually talked about them. You have to hand it to America. It has exercised a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It’s a brilliant, even witty, highly successful act of hypnosis...It’s a scintillating stratagem.”
Consider how the news was shaped to make it look like the invasions of Iraq and Afghanistan were carried out for altruistic reasons. Thus, the war in Afghanistan became “Operation Enduring Freedom”, stressing the selfless generosity of bombing a country into oblivion and reinstating the thuggish warlords to power. The same strategy was used for the invasion of Iraq which was celebrated as “liberation from a brutal dictator.” Liberation which cost the lives of over 1 million Iraqis and the displacement of 4 million more. Still, no one in the UN or so called international community has pressed for removing the US from the Security Council or prosecuting its leaders for war crimes. It’s a testimony to the success of the US media in upholding the “tapestry of lies” of which Pinter speaks. Under Obama, the charade has only gotten worse. The coverage of the war has stopped entirely. War? What war? What matters now is Obama’s cheery banter with Jay Leno, or Michelle’s well-proportioned arms or Malia’s adorable Portuguese Waterdog. America is whole again. Let the killing resume.
Pinter:
“What has happened to our moral sensibility? Did we ever have any? What do these words mean? Do they refer to a term very rarely employed these days - conscience? A conscience to do not only with our own acts but to do with our shared responsibility in the acts of others? Is all this dead? Look at Guantanamo Bay. Hundreds of people detained without charge for over three years, with no legal representation or due process, technically detained forever. This totally illegitimate structure is maintained in defiance of the Geneva Convention. It is not only tolerated but hardly thought about by what’s called the ‘international community’. This criminal outrage is being committed by a country, which declares itself to be ‘the leader of the free world’. Do we think about the inhabitants of Guantanamo Bay? What does the media say about them? They pop up occasionally - a small item on page six. They have been consigned to a no man’s land from which indeed they may never return. At present many are on hunger strike, being force-fed, including British residents. No niceties in these force-feeding procedures. No sedative or anesthetic. Just a tube stuck up your nose and into your throat. You vomit blood. This is torture. What has the British Foreign Secretary said about this? Nothing. What has the British Prime Minister said about this? Nothing. Why not? Because the United States has said: to criticize our conduct in Guantanamo Bay constitutes an unfriendly act. You’re either with us or against us.”
Obama doesn’t need to solve the world’s problems. He doesn’t have to reverse global warming or slow peak oil, cure AIDS or end world hunger. All he needs to do is meet the minimal requirement of his job as president, which is to deliver justice to his people. That’s why the prosecution of Bush for war crimes is more important than any other issue on the docket. Justice precedes everything; it’s the thread that keeps the social fabric stitched together. Justice for the victims who were killed in their homes with their families while they were sleeping or eating dinner. Justice for the people who were bombed in wedding parties or going to work or at the mosque praying to God. That’s what people want from Obama. Justice, nothing more. The Reverend Martin Luther King said,
“The arc of the moral universe is long, but it bends towards justice.”
It’s up to Obama follow that arc and take at least one step on the path of legitimacy, accountability and justice.
Pinter:
“How many people do you have to kill before you qualify to be described as a mass murderer and a war criminal? One hundred thousand? More than enough, I would have thought. Therefore it is just that Bush and Blair be arraigned before the International Criminal Court of Justice.”
It’s highly unlikely that a black man with a background in community organizing really believes that expanding the war in Afghanistan is the right thing to do. Nor is it likely that he supports wiretapping, the crackdown on immigrants, penalizing sellers of medical marijuana, trillion dollar bank bailouts or “enhanced” interrogation. He is merely reading from the scriptthat he has been given. But as the economic crisis deepens and the country becomes more radicalized and politically unstable, that scriptwill have to be tossed aside. Obama will have plenty of opportunities to shrug off his handlers and show what he’s really made of. Perhaps he is great man after all.
Pinter:
“When we look into a mirror, we think the image that confronts us is accurate. But move a millimeter and the image changes. We are actually looking at a never-ending range of reflections. But sometimes a writer has to smash the mirror - for it is on the other side of that mirror that the truth stares at us.”
Go ahead, Barack. Smash the mirror.
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Cyber War
U.S. already at war in cyberspace, experts say
By William Jackson
Government Computer Network
April 22, 2009
CYBER WARFARE is a REALITY, and the United States already has been engaged by a number of ADVERSARIES, a panel of experts said today at the RSA Security Conference.
“There is no question we are in the midst of a cyberwar,” added Dmitri Alperovitch, vice president of threat research at McAfee.
Because the war involves INFILTRATION, ESPIONAGE and SABOTAGE rather than conventional weapons, it looks much like the Cold War waged by the United States and the Soviet Union in the post-World War II 20th century. But there are important differences, the panelists said. The Cold War was bipolar, with just two sides; there are many players in the cyberwar, and they each can have different GOALS.
“We knew what the rules of engagement were during the Cold War,” said Ed Giorgio, president of Ponte Technologies, who worked at the National Security Agency for 30 years. “But no one knows what rules we are playing by now. If we play the game by a different set of rules than our adversaries, we are going to lose. The rules of engagement are important.”
One of the greatest differences between the Cold War and the current cyber war is that we knew our Cold War adversaries. Today, we do not necessarily know the source of the cyberattacks that are hitting and sometimes penetrating our information systems.
“Direct technical attribution is difficult, if not impossible,” said Ed Skoudis, a senior security consultant at InGuardian, who is working at the National Defense University on a project on the use of cyber power. “The lack of knowledge has an impact on the kind of response the United States can make. Although an attack may appear to come from one country, You can’t jump to the obvious conclusion that the country is behind it.”
Alperovitch said that although attribution may be difficult, it is not impossible. “We have a number of capabilities to determine attribution,” he said, including diplomatic and intelligence channels.
”Keeping the cyber war from evolving into a shooting war ultimately will depend on developing a set of rules to play by,” said Thomas Fuhrman, a partner at Booz Allen Hamilton who works with the Defense Department. “Looking forward, what we need are cyber war rules,” Fuhrman said. “Today, there are no rules.”
Issues of state sovereignty, privacy rights, and criminal and international law have not been addressed in this arena. Rules and norms for this new type of war eventually will emerge, Fuhrman said. “The question is, can they be accelerated, so that we don’t end up in a shooting war while were waiting.”
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After cybersecurity review, Hathaway says White House should take lead
By Jaikumar Vijayan
Computer World
April 27, 2009
The federal official who led a 60-day review of the U.S. government’s cybersecurity programs for President Barack Obama last week called for the White House to play a more direct role in coordinating national information security efforts.
Speaking at the RSA Conference 2009 in San Francisco, Melissa Hathaway, who completed her review on April 17, said that collaboration between the private and public sectors is needed to protect critical systems. But, she added, the task of leading cybersecurity efforts “is the fundamental responsibility of our government.”
And in arguing for a larger White House role, Hathaway claimed that the government’s leadership mandate transcends the purviews of individual agencies, none of which has “a broad enough perspective to match the sweep of the challenges.” Based on her review, it’s clear that the government isn’t “organized appropriately” to address cyberthreats, Hathaway said. Many of the agencies that are involved have overlapping authority, she noted.
Hathaway’s comments added to the growing chorus of voices calling for a substantial overhaul of federal cybersecurity processes.
Earlier this month, Sens. Olympia Snowe (R-Maine) and Jay Rockefeller (D-W.Va.) introduced legislation to give federal officials new powers to set security standards and policies for agencies and key industries. A companion bill would create a cybersecurity office within the White House.
The bills are largely based on recommendations made by a commission set up by the Center for Strategic and International Studies. Tom Kellerman, a vice president at Core Security Technologies and a commission member, said last week that White House leadership is “paramount” to the success of cybersecurity efforts.
In another RSA speech, Lt. Gen. Keith Alexander, director of the National Security Agency, said the NSA isn’t looking to take control of the national cybersecurity agenda, as some have claimed. Instead, the spy agency wants to work with the Department of Homeland Security to provide the “technical support” needed to combat cyberthreats, he said
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Where’s My Change?
By Ralph Nader
April 25, 2009
No more fine print; no more confusing terms and conditions.Ӕ This is what Barack Obama told a White House gathering of leading credit card issuers this week.
Right afterward, President Obama told the press that there has to be strong and reliable protections for consumers, protections that ban unfair rate increases and forbid abusive fees and penalties.Ӕ
This soaring rhetoric places a heavy burden on Mr. Obama to stand up to the giant power of the credit card bosses and their monetized allies on Capitol Hill. Yet he has shown little interest in re-instating a Presidential consumer advisor as did Lyndon Johnson with the formidable Betty Furness and as did Jimmy Carter with the legendary Esther Peterson.
Deep recession times are tough for the nations over 200 million consumers. Still, no consumer voice in the White House, though consumer groups asked Mr. Obama to move promptly on this tiny advocacy office months ago.
The corporate chieftains have easy access to the White House and the new President, whether these bosses come on missions demanding power or missions of beggary for bailouts. When will he meet with the leading heads of consumer protection groups with millions of dues-paying members who could give him the base to hold accountable and regulate the democracy-denying, economy-wrecking corporate supremacists?
ғWheres the Backbone?Ҕ asked Ruth Marcus, the usually-restrained lawyer-columnist for The Washington Post. On April 15, 2009 she wrote: When will President Obama fight, and when will he fold? ThatӒs not entirely clearand Iגm beginning to worry that there may be a little too much presidential inclination to crumple. Ms. Marcus asserts that ԓfor all the chest-thumping about making hard choices and taking on entrenched interests, there has been disturbingly little evidence of the new presidents willingness to do that.Ҕ This is the case even with his allies in Congress, never mind his adversaries.
Just four days later, The New York Times weighed in with a page one news article that said President Obama is well known for bold proposals that have raised expectations, but his administration has shown a tendency for compromise and caution, and even a willingness to capitulate on some early initiatives. ӅHis early willingness to deal or fold has left commentators, and some loyal Democrats, wondering: Whereђs the fight?Ҕ Like the Post, the Times gave examples.
It is not as if Mr. Obama is lacking in public opinion support. Overall he has a 65% approval rating. People know he inherited a terrible situation here and abroad from the Bush regime and they want action. Large majorities believe America is declining, that there is too much corporate control over their lives, and that the two parties have been failing the American people.
But the Presidents personality is not one to challenge concentrated power. A Zogby poll reports that only six percent of the public supports the financial bailouts for Wall Street. The vast majority of people do not think the bailouts are fair.
The upcoming 100 day mark for the Obama administration is a customary time for evaluations by the politicos, the pundits, and the civic community. While his supporters can point to the pay-equity law for women, more health insurance for poor children, and a $787 billion economic stimulus enactment, the general appraisal by the liberal-progressive intelligentsia is decidedly mixed and gentle with undiluted hope.
Mr. Obama nourishes these mixed feelings. He showed some courage when he agreed, as part of an ongoing court case, to release the four torture memos written by BushҒs Justice Department. Graphic photos of prisoner treatment in Iraq and Afghanistan are to be released next week. Yet Obama came out against a Truth Commission regarding the alleged crimes of the Bush regime and said he would look forward and not look back.Ӕ For Obama that means immunity for anyone from the Bush Administration who may have violated the criminal laws of the land.
It is remarkable to read those oft-repeated words by lawyer Obama. Law enforcement is about looking back into the past. Investigation and prosecution obviously deals with crimes that have already occurred. Thats the constitutional duty of the President.
After 100 days it is far too early to render many judgments about Obama. One can, however, evaluate his major appointmentsҗheavily Clintonite and corporate. One can also look at what he hasnt gotten underway at allҗsuch as labor law reform, a living wage, and citizen empowerment.
Next Monday, the INSTITUE FOR POLICY STUDIES releases a detailed report card on Obamas first 100 days titled ғThirsting for a Change. While The Nation held a panel discussion on April 22 in Washington, D.C., the panelists largely gave Obama the benefit of the doubt so far, and declared that only grassroots mobilizing will move him forward on such matters as ԓsingle-payer health care, corporate abuse, and the demilitarization of our foreign policy and our federal budget.
Panelist William Grieder coined the phrase ԓindependent formulations to describe the citizen action needed.
It is important to note that a transforming President has to ask for and encourage this pressure from the citizenry, much as Franklin Delano Roosevelt did in the 1930s.
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Sunday, April 26, 2009
No Light In The Tunnel
IMF predicts world recession will deepen
The International Monetary Fund has slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy’s recovery from a severe recession.
UK Telegraph
April 23, 2009
In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 per cent this year in the deepest post-Second World War recession by far.
Growth is set to re-emerge at a sluggish 1.9 per cent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system.
“The longer this goes on, the longer and the deeper will be the recession,” IMF chief economist Olivier Blanchard said.
Just three months ago, the IMF had projected global growth of 0.5 per cent, although last month it warned of a deep recession.
The Washington-based institution said it revised its forecasts downward because financial markets appear likely to take longer to stabilize than it had thought earlier.
“A key concern is that policies may be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies in the face of limited public support for policy actions,” the IMF said.
The IMF said on Tuesday that banks and other financial institutions around the world faced losses which could amount to $4.1 trillion. It said banks would likely need to raise $875 billion in fresh capital.
In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery.
It said interest rates in major advanced economies are likely to be lowered to or remain near zero, and said authorities should move quickly to cut interest rates where there was room for further easing.
Mr Blanchard said emerging markets were dealing with a sharp drop in capital flows and a collapse in global trade. While, growth is expected to pick up in emerging nations, including China and India, a recovery to previous healthy levels will depend on a pick-up in advanced economies.
The IMF said the United States remains at the epicenter of the crisis, and it said it now expected the US economy to contract 2.8 per cent this year.
It said while there were signs the US recession might be easing, a recovery was unlikely to take hold until next year, which would leave 2010 gross domestic product flat.
“There has been some improvement in business confidence, some signs of bottoming out in the housing market, but these are early days and we should not expect a return to growth any time soon,” IMF economist Charles Collyns said.
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A Housing Crash Update
By Mike Whitney
Information Clearinghouse
April 24, 2009
Why is the press misleading the public about housing? The housing market is crashing. There are no “green shoots” or “glimmers of hope”; the market is worn to a stump, it’s kaput.
Still, whenever new housing figures are released, they’re crunched and tweaked and spin-dried until they tell a totally different story; a hopeful story about an elusive “light in the tunnel”. But there is no light in the tunnel; it’s dark as pitch as far as the eye can see. Theres no sign of a turnaround or a “bottom” in housing at all; not yet, at least. The real estate market is freefalling and it looks like itҒs got a long way to go. So why are the media still peddling the same “rose-colored” claptrap that put the country in this pickle to begin with? Here’s an example of media spin which appeared in Bloomberg News on Wednesday:
“US home prices rose 0.7 percent in February from the month before, the Federal Housing Finance Agency said in Washington today, a sign that low interest rates may be moderating declines in real estate values....Housing market data indicates prices are starting to stabilize,Ӕ and households available cash should improve through each quarter of 2009 and into 2010.” (Bloomberg)
This report is complete gibberish. The only way to get a fix on what’s really happening with housing is to compare prices year over year (yoy) not month to month. Clearly, the journalist decided to spin the story from this angle because it offered the one flimsy sign of hope in a sector that’s been reduced to rubble. But, don’t be fooled, housing isn’t staging a comeback. Not by a long shot.
This is from Marketwatch:
“The Case-Shiller index of 20 major cities fell 2.8 per cent in January, the fastest decline on record. The Case-Shiller index rose more than the Federal Housing Finance Agency (FHFA) index did during the bubble, and it’s fallen faster since the bubble burst....The index was down 19 per cent year-over-year in January.”
So, the only reason that housing prices rebounded (slightly) in February was because, one month earlier, they were “declining at the fastest pace on record.” That’s not a sign of “green shoots” like the Pollyannas say. It’s a sign of a ferocious ongoing contraction.
The only thing that’s keeping housing from collapsing completely is the Fed’s purchases of Fannie and Freddie mortgage-backed securities. (MBS) Bernanke’s action has pushed interest rates to record lows giving homeowners a chance to refinance rather than default on their loans. Struggling homeowners have been granted a one-time reprieve courtesy of the US taxpayer. That’s great, but the fact that the Fed is subsidizing the industry to the tune of $1.25 trillion is hardly cause for celebration. What Bernanke should have done is prevented the credit bubble from inflating in the first place.
Check out THIS CHART on The Big Picture to see a chilling illustration of a market in capitulation-phase.
As the caption states:
“We are now in uncharted territory җ new home starts have never fallen to these levels for as long as the Commerce Department has been tracking this data (since 1959). Note also the magnitude of the drop it is unprecedented, having easily surpassed the 1982 collapse, the present circumstances have now become slightly worse than the 1973-75 fall.”
Housing will continue to deteriorate no matter what the Fed does; the downward momentum is too great to resist. And although the refi-business is booming, new home sales are still flat. Buyers are just too scared or too broke to take advantage of the ultra-low interest rates. (4.80 per cent 30-year fixed) And now that Obama’s foreclosure moratorium is over, delinquencies are stacking up faster than ever before, auguring another wave of foreclosures. This is from DataQuick: “Golden State Mortgage Defaults jump to record High”:
“Lenders filed a record number of mortgage default notices against California homeowners during the first three months of this year, the result of the recession and of lenders playing catch-up after a temporary lull in foreclosure activity ...
A total of 135,431 default notices were sent out during the January- to-March period. That was up 80.0 percent from 75,230 for the prior quarter and up 19.0 percent from 113,809 in first quarter 2008, according to MDA DataQuick.
And from Bloomberg:
“Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 per cent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.
The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.” (Bloomberg)
So, even top-of-the-line prime borrowers are having trouble making their payments. The debt-virus has now spread to all loan categories. But what about Obama’s mortgage relief program; won’t that help keep people in their homes?
In the last two months, roughly 9,000 mortgage modifications have been worked out under Obama’s Streamlined Modification Program. At the same time delinquencies have increased by roughly 195,000 per month. That means there are 186,000 more delinquencies than modifications per month. Obama’s program is like a re-staging of grunting Sisyphus pushing his boulder up the hill; utter futility.
Many economists believe that “cramdowns” are the only way to slow the rate of foreclosures and stop the precipitous decline in housing prices. Cramdowns allow a judge to modify mortgages by marking down the face-value (the principle) of the loan. When mortgages accurately reflect current market prices, people tend to stay in their homes. But when prices fall sharply and homeowners owe more on their mortgage than their home is worth, (negative equity) they simply stop making their payments and leave.
So far, cramdown legislation has passed the House, but has stalled in the Senate where it looks like it will be defeated. Powerful groups of bond holders have taken their case to Capital Hill where they’re waging a pitch-battle against the Obama plan. At this point, it doesn’t look good for supporters of debt-relief even though cramdowns are desperately needed to stop the hemorrhaging of foreclosures.
The backlog of homes on the market is still in the vicinity of 10 months. But that excludes the vast “shadow inventory” the banks are keeping off the market. Here’s what the SF Gate had to say on the topic:
“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage."("Banks aren’t Selling Many Foreclosed Homes” SF Gate)
Inventory has dropped from its peak in 2008, but if the estimates of the shadow inventory are accurate, than the backlog of vacant homes is still about the same. Any recovery in housing will show up first as falling inventory, since the heart of the problem is oversupply.
On Wednesday, the New York Times reported that fewer people are moving because of the troubles in housing. In fact,
“Fewer Americans moved in 2008 than in any year since 1962, according to census data released Wednesday, and immigration from overseas was the lowest in more than a decade....It shows that the U.S. population, often thought of as the most mobile in the developed world, seems to have been stopped dead in its tracks due to a confluence of constraints posed by a tough economic spell.” ("As housing Market Dips, more in US are Staying Put”, Sam Roberts, New York Times)
Diminished mobility is just another of the unpleasant side-effects of the housing bust.
The problem with housing goes far beyond the supply/demand imbalance. True, buyers are staying away because they know that prices could fall another 15 to 20 per cent, but it’s more than that. The housing crisis has been a shock to the psyche. The dream of home ownership, which is so closely linked to the so-called American dream, has turned into a nightmare. The trauma of watching one’s life savings and retirement vanish in a matter of months has been devastating. It’s not an experience that’s easily forgotten. Naturally, people will be more skeptical in the future about seductive interest rates and other inducements. Keep in mind, that after investors were burned for $7 trillion in the dot com swindle, tech stocks swooned and the NASDAQ plunged 80 percent over the next year and a half. Housing is headed down that same bumpy path. There probably won’t be an uptick in housing until the market is flat on its back and given up for dead.
Section Dying America • Section Next Recession, Next Depression •
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Saturday, April 25, 2009
Auto Pensions And You
Plight of Carmakers Could Upset All Pension Plans
NY Times Dealbook
April 24, 2009
Decisions that the government will make soon on the future of General Motors and Chrysler could accelerate the decline of traditional pension plans, which have sheltered generations of workers from an impoverished old age, The New York Timess Mary Williams Walsh reported.
Pension experts predict that a government takeover of the two giant plans would spur other auto companies and all types of manufacturers to abandon such benefits for competitive reasons.
For hundreds of thousands of retired auto workers, a federal pension takeover would mean sharply reduced benefits. For the federal agency that insures pensions, it would mean a logistical nightmare in the short term and most likely a slow demise eventually as fewer and fewer small plans remain in the system and pay premiums.
So far, the prospect of a grueling grind through bankruptcy court has been a major deterrent to companies that might want to rid themselves of pension obligations. But retirement and labor specialists are watching closely to see whether the administrationגs auto task force will give either of the auto companies an easier way to shed their huge pension funds, blazing a simplified trail for others to follow.
With or without a bankruptcy filing, the government is quietly making the preparations that would be needed to take over Chryslers pension plan, with its 255,000 participants, according to government officials.
Even if Chrysler manages to strike a deal to sell many of its assets to Fiat, perhaps in conjunction with a bankruptcy filing, experts doubt Fiat will agree to take on its pension plan without extraordinary assistance. One possibility being considered is a cash infusion of $1 billion from Daimler, which previously owned Chrysler and had agreed to backstop a pension failure for several years.
The future of General MotorsҒ pension plan is also unclear. G.M. has until June 1 to come up with an acceptable business plan. If it declares bankruptcy, it still may try to keep its pension plan afloat. G.M.s plan for hourly workers, which covers 485,000 people, was in reasonably good shape until last fallҒs market turmoil, and would not require cash contributions until 2013.
If one or both of these plans collapse, the federal agency that insures pension benefits, the Pension Benefit Guaranty Corporation, will lose a big source of the premium revenue it collects from companies with pension funds. But more important, the demise of the bellwether auto plans might set a template for other companies seeking to cut costs and stay competitive.
If one of these companies solves its pension problem by shunting it off to the federal government, then for competitive reasons the others have to do the same thing,Ӕ said Zvi Bodie, a professor of finance at the Boston University School of Management and longtime observer of the governments pension insurance system. ғThat is the death spiral.
Though the automakersԒ plans each have a gap between what they have on hand and what they owe their retirees over the years, if they failed, most of that shortfall would be made up by workers in the form of smaller benefits not by the companies or the government.
The government estimated that Chryslerגs plan was $9.3 billion short as of last November but said it would be responsible for only about $2 billion of that. Most of the shortfall would be sliced from workersג benefits. At G.M., the estimated shortfall was $20 billion as of last November, but the government would assume $4 billion of obligations and G.M.s workers would lose the rest.
When Daimler sold a majority stake in Chrysler in 2007 to a private equity firm, Cerberus, it promised to pay $1 billion into the governmentҒs pension insurance program if the pension plan failed within five years. The Treasury could try to persuade Daimler to put some of that money into the plan to avoid a failure.
For years, traditional pensions those that shield workers from market risk ח have been in a slow decline, with troubled sectors like aviation and steel shedding their plans in bankruptcy court as new types of individually managed benefits like 401(k) plans have taken hold.
But big sectors, particularly manufacturing and financial services, have clung to the old plans. The Pension Rights Center, a consumer group in Washington, estimates that 18 million Americans are still building up such benefits every year, and millions more retirees are receiving guaranteed payments from their former employers.
Those that are fortunate enough to have those plans are sleeping soundly,Ӕ said Karen Ferguson, director of the center.
The loss of the auto pensions would be devastating partly because Detroit sustains many other businesses and partly because of their history. It was the United Automobile Workers union, more than any other force, that pushed Congress to enact laws forcing companies to put money behind their pension promises and creating the federal guarantor. The failure of a major auto workers plan would be a blow to the whole system.
Not only would Ford have reason to opt out of the expense of maintaining a pension plan, but so would Toyota and Honda, which also have pension plans at their American plants, said Teresa Ghilarducci, a professor of economics at the New School for Social Research and former member of the P.B.G.C.s advisory board.
Professor Ghilarducci said she believed the Obama White House had selected people for its auto task force who understood these stakes, and would strive to find some middle ground.
The pension insurance agency, currently operating with an $11 billion deficit, has long viewed the automakersҒ plans with anxiety, though its officials declined to discuss the situation. G.M.s plan alone is bigger than the guarantor. The agency has roughly $67 billion in assets to cover the benefits of nearly 4,000 failed pension plans; G.M. has $84 billion in trust just to cover promises to its own workers.
In a failure of that size, the agencyҒs immediate challenge would be logistical, not financial. Its insurance covers a simple benefit, not the much richer pensions negotiated over the years by the U.A.W. It would have to process applications from thousands and thousands of workers, most of whom would get the bad news that they were going to get less than promised.
The governments maximum benefit is $42,660, but coverage falls off rapidly for workers who are younger when their plan fails. For a 55-year-old, the maximum is only $24,300.
Calculating which workers would bear how much of the losses would be fiendishly complex. The governmentҒs rules favor older participants and contain tripwires and arbitrary cutoffs that can leave similar workers with sharply different benefits.
None of this can be sorted out in advance, because the calculations also depend on the amount of money in a pension fund on the day it terminates something the pension benefits corporation does not yet know.
Some pension specialists, aware of these difficulties, are hoping the Obama administrationגs auto task force will spare at least the G.M. pension fund. Not only would that let laid off workers keep receiving full benefits, but it could also break the death spiral among other plans.
For traditional pension plans, maybe this is their last stand,Ӕ said Jeffrey B. Cohen, a partner with the law firm Ivins, Phillips & Barker in Washington who was chief counsel for the Pension Benefit Guaranty Corporation from 2005 to 2007. If the automakers plans fail, he added, ғthe biggest domino will have fallen for the P.B.G.C.
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