Globalization

NDN Chair Dr. Robert Shapiro today blogged on the Administration's plan for the housing crisis. Here's what David Leonhardt of the New York Times had to say about who the Administration's plan would help:

Certainly, some who took out a reasonable mortgage and later lost their job will be helped. But people who bought too much house — and banks that allowed people to do so, or even encouraged them to do so — will also benefit. As distasteful as this may be, it’s the only way to make a serious dent in foreclosures and, in the process, to help the financial system.

These same political calculations help explain the public emphasis that the White House is giving to the relatively modest steps it is taking to help underwater homeowners — those with a mortgage worth more than the value of their house — who can afford their monthly payments.

These homeowners are precisely the sort who seem as if they have done nothing wrong. They seem like innocent victims of the housing crash.

The new plan will help some of them refinance their mortgage at a lower rate. But only loans backed by Fannie Mae and Freddie Mac — not many of the subprime loans at the heart of the foreclosure problem — will be eligible. And the loan cannot exceed 105 percent of the current value of the property. Since prices have fallen almost 50 percent in some areas, like Phoenix, Las Vegas and parts of Florida, the cap will exclude many homeowners.

More here.

Leonhart and Shapiro both point out that the politics of the housing situation are incredibly difficult. The Administration's plan certainly attempts to deal with this, and Obama was very careful today about the language of who the plan will help. These multiple economic crises have tested the American ethic of personal responsibility many times. One would imagine that attempts to keep people in their homes will not be the last we hear of this conundrum.

Since September, NDN has argued that the federal government must place an emphasis on keeping people in their homes commensurate to that placed on the financial sector, as the housing crisis is at the root of the financial cave-in. Today in Phoenix, President Barack Obama will release his plan to keep people in their homes. In his remarks, he will say:

The effects of this crisis have also reverberated across the financial markets. When the housing market collapsed, so did the availability of credit on which our economy depends. As that credit has dried up, it has been harder for families to find affordable loans to purchase a car or pay tuition and harder for businesses to secure the capital they need to expand and create jobs.

In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen – a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit.  And that’s what I want to talk about today.

The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.

In September, as NDN launched a campaign to keep people in their homes that included strong criticism of the Bush/Paulson Treasury plan, NDN President Simon Rosenberg and Globalization Initiative Chair Dr. Robert Shapiro wrote:

At the base of the pyramid scheme that has infected our financial markets – underneath the credit default swaps and collateralized debt obligations created with borrowed money to "guarantee" mortgage-backed securities created with more borrowed money, in a housing market swollen by a historic bubble — lies the only real assets in the picture, the mortgaged homes of tens of millions of Americans. On that critical score, the Administration plan offers nothing. The only way to stop the cascading financial crisis consuming not only investment banks, investment funds, mortgage lenders and insurance companies, but also pieces of most Americans’ retirement security, is to stabilize the housing market from which all of the rest arises. The Treasury and the Administration propose to use taxpayers to bail out the institutions which speculated in the securities based on that market. Given the system’s current precarious position, a bail out of some kind cannot be avoided. But our government owes at least as much attention to homeowners facing foreclosure. If the Treasury and Fed had been willing to spend $85 billion on loans to strapped homeowners, as they did to AIG last week, the crisis might never have crested into the conditions that now require a system-wide bailout.

These mortgages are at the root of the crisis. It’s their mounting defaults driving down the overall housing market which has brought venerable banks like Lehman Brothers and Bear Stearns. Before Congress leaves this week or next, it should enact legislation that either provides a mechanism for direct loans to people to avoid foreclosure or allows them to renegotiate their mortgages. This single step will keep untold numbers of people in their homes, help stabilize the housing market, help contain the crisis at one of its critical origins, and thereby help shore up the financial system. Paired with a program to provide more liquidity to financial institutions and an orderly way to write down their failing holdings, this step could finally take us past this crisis.

Even so, only a small share of the costs of this historic mismanagement are apparent today. This financial shock, on top of the housing and energy shocks that preceded it, have almost certainly pushed our economy into recession. That will further reduce the value of the assets held by tens of millions of American through their pension funds, retirement accounts, money market and mutual fund investments. The squeeze will be hardest on the rising numbers of Americans who will also lose their jobs. The need to help these people and millions of others keep their homes is urgent, then, for a host of economic and social reasons.

For more on the Obama plan to keep people in their homes, click here. For more background on NDN's campaign to do just that, click here.

A couple weeks ago, I blogged about Recovery.gov, the site the Obama Administration has set up to be publicly accountable on the American Recovery and Reinvesment Act. Well, it's up now, fully equipped with video, information about the planned spending and tax cuts, and a snazzy, draggable timeline laying out the federal government's plans for implementing ARRA. 

Here's President Obama's introductory video to the site: 

I can think of no more important a time than now to understand the particulars of what is happening in the economy. I recommend perusing the Baseline Scenario, which Paul Krugman calls a "must read." Most recently, the site's Simon Johnson provides critical background on Paulson's administration of the TARP, which NDN's Dr. Robert Shapiro warned us about back in September.

On another note, if you're looking for someone who doesn't understand the economy, I'd recommend talking to former Rep. J.D. Hayworth, Republican of Arizona. Courtesy of the good people at TPM, some entertaining video from last night's Hardball: 

More evidence of how unprecedented this moment is.  From the NY Times: 

The state of California - its deficits ballooning, its lawmakers intransigent and its governor apparently free of allies or influence - appears headed off the fiscal rails.

Since the fall, when lawmakers began trying to attack the gaps in the $143 billion budget that their earlier plan had not addressed, the state has fallen into deeper financial straits, with more bad news coming daily from Sacramento. The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects.

After negotiating nonstop from Saturday afternoon until late Sunday night on a series of budget bills that would have closed a projected $41 billion deficit, state lawmakers failed to get enough votes to close the deal and adjourned. They returned to the capital late Monday morning only to adjourn until the afternoon, though it was far from clear whether they would be able to reach a deal.

California has also lost access to much of the credit markets, nearly unheard of among state municipal bond issuers. Recently, Standard & Poor's downgraded the state's bond rating to the lowest in the nation.

California's woes will almost certainly leave a jagged fiscal scar on the nation's most populous state, an outgrowth of the financial triptych of above-average unemployment, high foreclosure rates and plummeting tax revenues, and the state's unusual budgeting practices.

On Friday, I posted some of our recent breakthroughs in the media, including Morley Winograd and Mike Hais's piece in the National Journal and Simon's commentary on Judd Gregg's withdrawal in the Huffington Post, the Economist, the Guardian, the Washington Post, and the Hill. That commentary picked up more steam over the weekend, appearing in Gather and even the Spanish-language Sendero de Peje. From the original Huffington Post feature piece:

During the Clinton administration, Judd Gregg fought hard to deny the Commerce Secretary the ability to use the latest techniques to ensure the most accurate Census count. The goal of this effort was to make it harder for the Census to count minorities, young people and the poor, groups the Republicans do not view as part of their coalition.

Rob's last blog post was also picked up by Reuters and internationally syndicated, appearing in papers worldwide. From the Reuters article:

Some economists argue globalisation, in the sense of the increasing integration of different countries in the world economy, is the cause, acting as a transmission belt from one suffering economy to the next.

"With globalisation, the world can suffer the central cost of protectionism -- a deep fall in trade -- without passing any new laws or regulations," Robert Shapiro, head of progressive think tank NDN's globalisation initiative, said in a blog.

...

"The crux of it is that as the share of what the world produces that's traded across borders rises -- 18 percent of worldwide GDP was traded in 1990, compared to 30 percent in 2006 -- a serious recession in a few large places moves quickly around the world, driving down global trade," said Shapiro of NDN, a former undersecretary in the U.S. Commerce Department.

In other words weak demand in one country increasingly affects others because they are more dependent on exports.

With the economic recovery plan on the verge of final passage, please find some of NDN's best and latest thinking on the plan, the great recession, and the financial system: 

• The Fallout of the Great Recession for Trade by Dr. Robert Shapiro, 2/11/2009 - Shapiro argues that the world is currently experiencing the economic symptoms of protectionism without actual protectionist measures being put in place, which could have dangerous consequences for the global economy.

• Optimism and Hope by Michael Moynihan, 2/11/2009 - Moynihan points out that an optimistic message is the best way for the Obama Administration to lead the country through these difficult economic times.

• Spend? Save? The debate continues by Simon Rosenberg, 2/11/2009 - Building on a previous post, Rosenberg follows the growing debate about whether American families should be focusing on saving.

• Stabilizing the Financial System by Michael Moynihan, 2/10/2009 - Moynihan examines the reaction to Treasury Secretary Tim Geithner's speech and the necessary next steps for the financial system.

• Recovery Without E-verify and Buy American by Simon Rosenberg, 2/10/2009 - Rosenberg advocates for the removal of "Buy American" and E-verify provisions from the stimulus, provisions that will not stimulate the economy and will do more harm than good. 

• The Utter Bankruptcy of Today's Republican Party by Simon Rosenberg, 1/28/09 - Rosenberg argues that Republican opposition to the economic recovery package represents the ideological bankruptcy of the party.

• Clearing the Decks for the Next Expansion by Michael Moynihan, 1/26/2009 - Moynihan envisions the economic situation he would like to see in 2012 and lays out the policy steps necessary to get there.

• NDN: Economic Recovery Package Signals New Priorities, Development of a 21st Century Economy, 1/15/2009 - NDN applauded the new direction signaled in the draft release of President Obama's economic recovery plan that will invest in technology, clean infrastruture, and a low-carbon, 21st century economy.

• Politics and the Economic Crisis by Dr. Robert Shapiro, 1/9/2009 - Shapiro argues that, for an economic recovery plan to be effective, we must also address the underlying causes of the "Great Recession," including the housing crisis.

• A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.

• Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure by Michael Moynihan, 10/18/2008 – NDN Green Project Director Michael Moynihan outlines a strategy for investing in clean infrastructure that will help create long-term prosperity.

• Back to Basics: The Treasury Plan Won't Work by Dr. Robert Shapiro, 9/24/2008 - As the financial crisis unfolded and the Bush Administration offered its response, Shapiro argued that, while major action was needed, the Treasury's plan would be ineffective.

• Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 – At the beginning of the financial collapse, NDN offered this narrative-shaping essay and campaign on the economic need to stabilize the housing market.

• Making the Struggle of Every Day People the Central Focus of the National Debate by Simon Rosenberg, 8/17/2008 - As the 2008 presidential campaign entered a crucial phase, Rosenberg argued that political leaders must focus on raising the wages and incomes of Americans.

For additional recent thinking from NDN on the economy, click here for last week's backgrounder and click here for more on NDN's work to keep people in their homes.

There are many good reasons to fix our broken immigration system this year. But there is one reason that may end up driving Congress to act this year more than any other: the growing weariness of lawmakers as the year moves on of battling over immigrants and immigration on issue after issue, something I call the immigration proxy wars. 

Our broken immigration system is a national disgrace, yet another terrible vexing governing challenge left over from the disastrous Bush era. Legitimate workers have a hard time getting legal visas. Employers knowingly hire and exploit undocumented workers. Our immigrant justice system is a moral outrage. And of course, the scapegoating of the undocumented migrant has become the staple for right-wing politicians and media, giving them something to rail against as the rest of their agenda has collapsed all around them. It is long past time to fix this broken system and replace it with a 21st century immigration system consistent with traditional American values and the needs of our modern ideas-based economy.  

This year we have seen how this national failure has infected debates about other vital national priorities. SCHIP was held up. The stimulus was loaded up with a provision to use our broken and dangerous worker verification system that would undoubtedly disrupt the orderly flow of money to the states. And now Judd Gregg withdraws in part over the coming battle over the Census next year, which we know will include an effort by the right to exclude undocumented workers from the every 10-year head count of those living in the United States. Any future legislative initiative at the federal or state level that confers benefits to a population could conceivably invoke a battle over immigrants: will states require schools receiving school construction money from the stimulus to validate that only legal kids are covered with it? Will families who want to weatherize their homes have to prove their legal status? Will kids getting a laptop in a demonstration project have to prove their legitimacy? And of course, moving on universal health care coverage will require the immigration system to be fixed first. Passing comprehensive immigration reform may very well be the key that unlocks progress on a wide variety of other domestic challenges.  

State judicial and law enforcement systems across America are already overwhelmed by the murky problems of our broken and irrational system. Schools and health care providers are desperate to not become an arm of the immigration police. Mexico's drug problems are growing in severity, and will raise the importance of a comprehensive solution to removing any illegal activity from the border region. Next year, the Census is likely to become one long and huge fight about undocumenteds and immigrants if the system is not fixed this year, perhaps even causing years of future battles over the legitimacy of the count if it includes the undocumenteds (which it clearly should). And the proxy wars in Congress and in the states will continue. There is simply no way to duck this one, wish it away. Inaction is not an option any longer. By the fall, the pressure on lawmakers and the President to address a very visible national problem, and the fatigue of battling this out in proxy war after proxy war, will create a climate in which progress on this tough issue I think will be more than possible. 

To talk more about this compelling national challenge, come join NDN next Thursday, February 19, for a forum, Making the Case: Why Congress Should Pass Immigration Reform This Year. For those not in DC, we will be Web casting it live and recording it for future review. Stay tuned to this blog for more information about both.

From the Washington Post:

The Office of Thrift Supervision today called for the mortgage lenders it regulates to halt foreclosures until the Obama administration puts in place a program to help struggling homeowners.

After presenting a plan to boost the financial sector yesterday, Treasury Secretary Timothy F. Geithner said that a $50 billion initiative to help homeowners facing foreclosure is not expected for at least a week. The delay and the price tag -- it was the low end of expectations -- disappointed consumer advocates and lawmakers anticipating the announcement.

OTS is joining consumer advocates and some in Congress, including Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, who have called for lenders to institute a moratorium on foreclosures in the meantime. This adds to the pressure facing the administration as it finalizes details of the plan amid growing frustration about the ineffectiveness of government and industry efforts to stem foreclosures.

NDN has long argued that more must be done to keep people in their homes. We look forward to the Obama Administration's program to do just that, but, in the interim, the additional attention placed on staunching foreclosures and stabilizing the housing market is incredibly important. For more of NDN's thinking about the need to keep people in their homes, please see:

• In support of The USA Mortgage: Why Gary Becker is Wrong by Michael Moynihan, 2/10/2009

• The USA Mortgage by Michael Moynihan, 2/6/2009

• What America Needs is a 4% Fixed Mortgage by Michael Moynihan, 2/3/2009

• Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 

• NDN to Congress: "Keep People in Their Homes" by Simon Rosenberg and Dr. Robert Shapiro, 9/17/2008

"Dear America, please remember how you got to be the wealthiest country in history. It wasn't through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat."

A New York Times op-ed today by Tom Friedman - quoted above - brings up some interesting points.  Enjoy.