January 31, 2010

Analysis of Strategic Defaults – Conclusion

Filed under: Civil Disobedience, Land Reform, Law, Reformism Can't Work — Tags: — Russ @ 4:13 am


(Concluding the discussion of Brent White’s report on underwater mortgages.)
In spite of the destruction of the housing market and the wholesale massacre of jobs across the economy (eight million and counting), the collapse of social services just when they are most needed, and the overall sense of peril, the Obama administration just like the Bush before it has gratified itself solely through bailouts for the same banks who destroyed the economy. This unconcern for the suffering people is epitomized in the administration’s anemic response to the mortgage meltdown.
Obama’s modification plan is like a caricature of fecklessness. In theory it allows a narrowly defined subset of homeowners to refinance part of their mortgages at somewhat lower rates. The bloated principal, usually the result of predatory lending and bubble-blowing, is sacrosanct. And that’s just the theory.
In practice the banks grudgingly grant some temporary mods in order to string people along, but have refused to make any significant number of permanent mods. To help with obstructionism and obfuscation they tend to “lose” the intricate paperwork required for the applications, or play gotcha on technicalities.
All of this was predictable. Everybody knows the one and only real relief would be to write down principal to reality-based values. But this would hurt the banks’ balance sheets and profits. It would also contradict the entire reflate-the-bubble agenda, which is the only policy the Wall Street-Fed system has left.
Government policy has focused completely on making the monthly payments more affordable, which in turn is based on the premise that if homeowners can afford the payments, they won’t walk away even if underwater. This is consistent with data from earlier, less severe housing busts and dovetails with the government’s propaganda program to discourage defaults through reinforcement of guilt and fear.
But even here they’ve been incompetent and venal. The HAMP simply defines “affordable” by the procrustean measure of the monthly payment not exceeding 30% of income, without reference to any other factor including negative equity. There are many ways that 30% may be unaffordable or otherwise irrational, but the government just wants to steamroll people into accepting that this is a good program which has the public’s best interests at heart.
There have been various well-meaning but equally weak alternative proposals, like using stimulus money to buy out underwater mortgages or provide grants to struggling homeowners. These are clearly meant to prop up bank assets. Stiglitz wanted the government to directly write mortgages at low interest rates.
But all this nibbling at the fringes is still designed to ignore the obvious yet illusion-shattering fact that there’s no way out of this but for principal to come down. These “values” were the result of a fantastic bubble, and now reality wants to deflate. Principal must come down, principal must come down, and principal must come down. If lenders won’t write it down, homeowners will have to default, one way or another, voluntary walkaway or final involuntary default.
The only worthwhile policy suggestion was to empower bankruptcy judges to write down the mortgages themselves. But this has been repeatedly rejected by both parties. Anyway, this could directly help only those who were on the verge of involuntary default because they couldn’t afford the payments. It would do little for those saddled with underwater mortgages but who technically can afford to keep paying.
Besides modifications of principal and cramdowns, White suggests several other helpful things the government could do if it really wanted to help people. It could cease from fear-mongering and provide accurate information on the financial and legal implications of default. An excellent reform would be to amend the Fair Credit Reporting Act. As we said in part 3, when the lender rats out the defaulting borrower to the credit rackets, he’s adding an extralegal punitive element which is not a legitimate part of the contract. From p. 45:

The suggestion that Congress should amend the Fair Credit Reporting Act to prevent lenders from reporting mortgage defaults is premised upon the underlying mortgage contract, in which lenders agree to hold the house alone as collateral. In the case of underwater mortgages, however, the portion of the mortgage above the home’s present value essentially becomes unsecured. Lenders compensate for this by holding the borrowers’ credit score, and thus their human worth, as collateral – thereby altering the underlying agreement that the home serves as the sole collateral. As a consequence, lenders are often able to reap the benefit, but escape the costs, of their bargain.

If instead of being able to engage in this blackmail the lender had to either deal fairly with the borrower or take back the property in the event if default, so that the lender had an incentive to work out a deal whereby both parties shared the hit from the debubbling of the loan price, we’d have far more equitable outcomes in individual cases, and take a real step toward tackling the systemic problem.
White comments, “the proposal to eliminate the credit threat is, at heart, a market-based solution. It should thus be preferable to a government bailout of homeowners or a government take-over of the lending industry.” The end result, contrary to the scare stories from detractors, would likely be fewer defaults, as lenders would now have the incentive to seriously negotiate much earlier in the process.
So we have:
1. Amend the act, stop the fear-mongering, give accurate info.
2. People will then be more willing to walk away, which is the point.
3. Yet people still prefer not to walk even when they have this information, so even when underwater they’ll usually still want to stay if they can make a deal.
4. Now lenders would have the incentive to find a mutually satisfactory deal.
5. End result, fewer defaults.
“Moreover, barring the reporting of mortgage defaults could have positive effects on future lender behavior.” (p. 51) Where the outrageous asymmetry between lender and borrower no longer holds, the lender will no longer have such an incentive for such reckless, predatory lending. Doing away with the asymmetry would force lenders, and therefore the system as a whole, back to the responsible conduct everyone in power claims to revere. We’d get back to the basics of lending and borrowing based on realistic price-to-rent ratios and solid down payments.
As White acknowledges, all of this is predicated on a government which actually serves the public interest and a finance sector which isn’t completely psychopathic. In other words, it presupposes a world which does not exist. As we know, we have no such government. The best ideas, principal reduction, forced cramdowns, and ending credit reporting extortion, are all repugnant to it.
White brings up the possibility of bottom-up public education (p.44):

Understanding norm asymmetry suggests other possibilities. One solution that naturally follows, for example, would be for the government – or some consumer advocacy group – to begin a public education campaign encouraging underwater homeowners to walk if their lender is unwilling to negotiate. Whether or not such an approach would be effective, it would likely be so distasteful to most policy makers, and many readers of this article, that this idea will not be pursued further here.

I trust readers of this blog won’t find the idea so distasteful.
(Of course the whole paper is “pursuing the idea”. Is this a contradiction of the claim that education doesn’t work? The answer is that factual education within the existing sociomoral indoctrination regime doesn’t work much. But if informational education was coupled with new moral education, maybe that could work. It hasn’t been tried.)
White concludes:

Regardless of the precise policy prescription, it is time to put to rest the assumption that a borrower who exercises the option to default is somehow immoral or irresponsible. To the contrary, walking away may be the most financially responsible choice if it allows one to meet one’s unsecured credit obligations or provide for the future economic stability of one’s family. Individuals should not be artificially discouraged on the basis of “morality” from making financially prudent decisions, particularly when the party on the other side is amorally operating according to market norms and could have acted to protect itself by following prudent underwriting practices. The current housing bust should be viewed for what it is: a market failure – not a moral failure on the part of American homeowners. That being the case, it is time to take morals out of the picture and search for an equitable solution to the negative equity problem.

A market failure, not a moral failure on the part of homeowners. I only disagree with the final sentence about taking morals out of this completely. For this was not just a market failure but a tremendous moral failure on the part of the system. The big banks are not just amoral but immoral. We need a restored morality, which must grow again from the ground up. We won’t find remnants of it in existing structures.
And as I wrote at the outset, history proves that you can’t fight ideas, however twisted, with reason alone. We need new ideas to completely overcome the discredited ones.
If our great project is to take back the country from corporate tyranny and relocalize our economies for the sake of human freedom and resource sustainability, then taking back the land is a key part of the mission.
Dissolving the false social morality of mortgage debt, and the premise which underlies it, that banks should hold the feudal land monopoly, can be a potent weapon for this mission.
We don’t know exactly how we the people shall flow as water into the crevices of the seemingly impregnable fortress, but we shall do so. We’ll erode, we’ll undermine, we’ll loosen and weaken them, in the end we shall bring them down.


January 29, 2010

Analysis of Strategic Defaults (4 of 5)

Filed under: Civil Disobedience, Land Reform, Law — Tags: — Russ @ 3:22 am


Public propaganda, internalized false guilt, and extralegal punitive features of the system outside the mortgage contract collude to produce what Brent White calls “the asymmetry of homeowner and lender norms.” (p.35)
Here’s the basic question:  If it’s an equal contract, then why is the borrower’s obligation to pay somehow considered paramount over the lender’s agreed-upon obligation to take back the property in lieu of payment?
The borrower’s “promise to pay” is held to a moral and social norm very different from the lender’s obligation to take back the house if the borrower walks away. These are equal in the eyes of the law and the market, yet only the lender is considered a purely legal, market actor, and absolved of adherence to any moral or social norm. But the borrower is considered to be fully exposed and answerable to both realms.
The moral and social pressure on the underwater borrower to keep paying for as long as he can is meant to remove from the lender legal responsibility to have the contract executed through his taking back the property when the borrower walks.
This is tremendously unjust. The lender generally has a huge advantage in expertise, knowledge, and understanding of the market and the contract. Clearly it’s the lender’s responsibility far more than the borrower’s to ensure that the terms of the contract are equitable in the first place (especially since appraisals, though paid for by the borrower, are usually arranged by the lender; existentially, “expert” “professionals” are always in cahoots on some level).
All the government and media hype about “responsibility” is especially ironic when we consider how the bubble distorted the market. We described earlier how the normal price-to-rent ratio for responsible homebuying was around 15 to 1 (White p.8 ). So how “responsible” were lenders who were writing mortgages at a national average of 23-1 at the peak of the bubble, reaching 38-1 in the most bloated markets? You want irresponsibility, don’t start with the borrowers, start with the lenders. Of course the bubble is completely the responsibility of the banks, the government, and the media. All this violated the most basic economic precepts. As White comments, “if personal responsibility is the operative value, then lenders who ignored basic economic principles (of which they should have been aware) should bear at least equal responsibility to homeowners for issuing collateralized loans that were far in excess of the intrinsic value of the home.”
Lenders traditionally operated according to a model which showed a strong correlation between loan-to-value ratio and default. So they generally only made loans under conditions where it was unlikely default would become the financially rational course for the borrower.
But as they gathered more data they found that in fact few borrowers are “ruthless” the way the textbooks say (meaning they would quickly walk once they went underwater). So they priced borrower ignorance and moral servility into their models and embarked upon ever more reckless lending, departing ever further from any responsible concept of how well these mortgages could maintain positive equity.
Putting all this together – the asymmetry of expertise and information, the departure of lenders from longstanding prudent practice, and their expectation of preying upon the irrational, emotional mindset of underwater borrowers – we can see how lenders deserve the great bulk of the blame for these bollixed contracts, and should have to shoulder the bulk of the burden. “One might argue, in fact, that the value of personal responsibility would require lenders to own up to their share of the blame, and work with underwater homeowners by voluntarily writing off some of the negative equity.” (pp.37-38) This would be the operation of real responsibility, real morality. But as we know lenders haven’t been called to moral account the way borrowers have.
But what about their economic interest in mods? Surely it’s better for their bottom line to modify these mortgages rather than see them default? But as White found, their models have taken borrower complaisance into account. They’re taking advantage of the very fear and guilt their media campaign seeks to nurture. Since according to their models most underwater borrowers will not default as long as they can make the payments, it’s in fact not in the lenders’ interest to make any real mods.
So directly counter to morality and what would be sound economics in a truly capitalist system, lenders and government have conspired to foist the responsibility and the losses onto the reeling mortgagees.
Here’s the way the “negotiation” often goes. Say a homeowner with a good credit score requests a mod. The lender believes the homeowner will do anything he can to avoid the guilt of default, the shame of foreclosure, and the terror of a damaged credit report. So the lender will say he won’t negotiate until the borrower is 30 days delinquent. If the borrower misses that payment, the lender will then say not till you’re 90 days derelict. After 90 days they’ll say your score is already too impaired for you to qualify for a mod. All the while the borrower is harassed with notices meant to shame and threaten him over his deteriorating status and the dire consequences of complete default.
Throughout the process the lender is playing the odds that the borrower will resume paying rather than face the full impact of foreclosure. Only if the lender really believes the borrower will walk, will he seriously discuss a modification. Only then would it be in his interest.
So we can see why Obama’s modification program has been such a failure. Even if the administration was sincere (doubtful), the lender absolutely does not want to modify. He wants to extract full payments as long as possible. He’s betting on the homeowner’s conformism.
White sums up (p.40):

Most lenders will, in other words, take full advantage of the asymmetry of norms between lender and borrower and will use the threat of damaging the borrower’s credit score to bring the borrower into compliance. Additionally, many lenders will only bargain when the threat of damaging the homeowner’s credit has lost its force and it becomes clear to the lender that foreclosure is imminent absent some accommodation. On a fundamental level, the asymmetry of moral norms for borrowers and market norms for lenders gives lenders an unfair advantage in negotiations related to the enforcement of contractual rights and obligations, including the borrower’s right to exercise the put option. This imbalance is exaggerated by the credit reporting system, which gives lenders the power to threaten borrowers’ human worth and social status by damaging their credit scores – scores that serve as much as grades for moral character as they do for creditworthiness. The result is a predictable imbalance in which individual homeowners have borne a huge and disproportionate burden of the housing collapse.

There’s the basic imbalance. Technically, legally, contractually it ought to be 50-50. In practice the system is heavily rigged in favor of the lender.
In part 5 we’ll look at prescriptions for how to correct this injustice.

January 27, 2010

The Real State of the Onion


State of the Union is an odd title unless this speech is going to sound a sincere alarm over the centrifugal forces of crime and antisociality spinning this “union” to pieces. We know we’re not going to hear any such alarm.
The state of the union according to Obama is a joke. We know with absolute clarity that Obama’s state is a nightmare of bailouts, war, secrecy, destruction of civil liberties, the imperial presidency, and the tyranny of corporatism.
We are clear that he and his party don’t care about jobs, health reform, farm reform, food reform, energy reform, or reform of any sort.
I don’t doubt Obama consciously fails to understand himself. His cognitive dissonance looks deeply engrained. Asked to grade his performance so far, he didn’t even demur to answer but leapt to give himself a “B+”. The only reason he didn’t give himself an A is because he thinks, however stellar his performance thus far, there’s always room for improvement.
And we’ve seen ad nauseum how the Democrats think Massachusetts, O’s plummeting approval ratings, and other political boners are all because of inadequate messaging; none of them are about flawed substance.
Today administration flacks say that in tonight’s speech Obama will “take responsibility” but not the blame.
How do you do that? Would you let your ten year old get away with that? “OK, it’s my responsibility, I’m sorry, but it’s not my fault”?
I remember Rumsfeld saying something like, “I don’t know where people get the notion that just because you’re head of an organization that you’re responsible for what happens in it.” (I couldn’t find the quote, but I think it was at the same assembly where he said “you go to war with the army you have, not the one you want”.)  
(I’m often reminded of the “army you have” notion when I hear Democrat hacks saying “you govern with the Democratic party you have, not the one you want”. But then these hacks remind me of Bush hacks with every lying word they say.)
Again: Bailouts, yes we can. War, yes we can. Ever-bloating Pentagon budgets, yes we can. Insurance racketeering, yes we can. Torture, yes we can. Secrecy, yes we can. Disappearing people, yes we can. Anything which empowers tyrannical corporations, yes we can. Anything which empowers tyrannical government, yes we can.
Jobs, no we can’t. Reform, no we can’t. Anything which benefits the people, no we can’t. Morality, spirit, happiness, justice, freedom, no we can’t.
That’s how we can classify, for example, all the lying gambits emitting from his lying “populist” epiphany.
Size limits on banks! No, they’ll just be capped at their existing monopoly sizes. maybe. For now.
No more prop trading for government-backstopped banks! Except for all the loopholes. On second thought, any restriction will be the exception. And of course we won’t touch the structural pathology of prop trading as such, which shouldn’t exist at all; of financial speculation as such, which shouldn’t exist at all.
Help for the middle class! In the form of mere crumbs. Insulting, really, when you compare it to the looting on behalf of the banks, health insurance rackets, weapons contractors, and others.
And now cuts in non-defense spending. That wouldn’t put a dent in the debt, wouldn’t comfort the afflicted, wouldn’t afflict the comfortable, and would on the contrary afflict the afflicted on behalf of the comfortable. No one can even figure out who the political constituency for that is supposed to be. It looks absolutely idiotic from any point of view.
Through it all Obama continues to support “Heckuva job, Bennie” Bernanke.
Bennie is doing a heckuva job for the banksters, as since December the ceiling on the Fed’s MBS purchases on the taxpayers’ bill, the ONLY thing which is still propping up the insolvent zombie system, are now in principle infinite.
(Meanwhile Robert Gates has similarly assured weapons dealers that Pentagon budgets are to be expanded without limit, purely for the dealers’ sakes, as explicit corporatist administration policy.)
That’s what Obama really thinks of the budget and its deficit.
And that’s why he self-refutes all his newfound anti-bankster talk with his support for Bennie.
Meanwhile we’re actually starting to zero in on the first identifiable de jure crime, the Fed’s money laundering through AIG. Testimony is coming up today.
From here the next step is the assault on ALL Fed secrecy. This secrecy is intended to cover up crime, to cover up the magnitude of the Bailout, to cover up how insolvent all the banks are, how the entire premise of the Bailout is a lie.
It’s a refutation on principle of Obama’s claims to “transparency” and confirms his imperial pretensions; that Obama agrees with Cheney on the imperial presidency and executive secrecy as a principle, a privilege, a prerogative.
That they even went so far as to try to claim “national security” as justification for AIG secrecy provides a case study in the general national security lie; how we must assume it’s ALWAYS a lie.
Let’s hope these hearings go somewhere, though the pattern indicates it’ll be a whitewash.
And this can still only nibble at the fringes of the great crime, for which we must someday convene a new Nuremburg Tribunal.
In the meantime we can dispose of Obama’s stupid speech.   
“State of the Union” is an odd title for a speech describing the progress of the class war from above. It’s a document of America’s continuing descent into a gangland cesspool. But since it will be a package of lies, the Orwellian title is blandly appropriate.
This speech, like all the other lying words oozing from this criminal politician and every other politician of the criminal system, will only insult our intelligence and our deepest instinct for morality, our deepest demand for justice.

January 25, 2010

Analysis of Strategic Defaults (3 of 5)


In part 2 of our analysis of Brent White’s paper on strategic mortgage defaults we saw how the homeowner’s decision not to walk away from an underwater mortgage, seemingly irrational on paper, is driven by emotional factors – shame, guilt, and fear. But these aren’t just feelings people naturally have. Rather they are systematically and aggressively drilled into us by the government, the banks, and the corporate media.
Economists shilling for the banks have raised the alarm that if people start to think strategic defaulting is OK, or if mortgage modification policy seems to encourage the act, this may trigger an avalanche of walkaways. It’s true that once defaults become prominent in a neighborhood, they may become contagious as the guilt and fear wear off. (As we discussed in parts 1 and 2, the fact that a region is economically depressed doesn’t seem sufficient to set off this contagion. Rather, it takes time and the sight of others defaulting to wear down moral resistance and trepidation.)
The government has taken (modest) action to try to prevent foreclosures from snowballing in the first place. But they have not sought to do this by lowering the principal on bloated mortgages, which would be disadvantageous to the lenders. Rather, programs like the HAMP claim only to seek to lower monthly payments.
White comments, “implicit in this approach is the assumption that home owners are unlikely to default on their mortgage if they can ‘afford’ the monthly payment.” So even as academic studies pretend homeowners are “ruthless” as per neoclassical theory, and even as these studies are brandished by opponents of real relief, the real life power cadres believe and act as if people are really not so ruthless. On the contrary, they bank on people being conformist, inertial, docile.
Government policy depends upon the effects of fear and guilt to keep people vainly throwing money at an underwater situation, against their own interests.
To sum up:
1. TPTB fear contagious defaults once ingrained fear and guilt wear off. They want to prevent these defaults for as long as it’s profitable for banks not to foreclose.
2. They do not want to lower principal, since this would hurt lender profiteering.
3. They believe that as long as the homeowner can afford the payments he’s likely to stay put and keep paying no matter how underwater he is. This is because of that fear and guilt.
4. So the preferred policy is to at least pretend to permanently modify payments, while reinforcing fear and guilt through propaganda.
White cites further numbers from the Guiso/Sapienza/Zingales study: 45% of homeowners would walk away if they were down $300,000. But only 38% of those who think it’s immoral to default would do so under those circumstances, and that’s for the 87% of the whole who do think it’s immoral. That means over 90% of those who don’t believe it’s immoral to walk away would do so if down that badly.
So we can see how those with a vested interest in preventing strategic defaults must seek to instill and reinforce feelings of shame and guilt. And since shame and guilt alone aren’t enough, they also seek to generate fear of the consequences of default.
White points out how “the clear message to American homeowners from nearly all fronts is that one has a moral responsibility to pay one’s mortgage.” (p. 25) It starts at the top with Obama himself lauding the “responsibility” of those who continue to pay, and the harm to “our common values” wrought by those who do not. Henry Paulson, finding time away from stealing from the Treasury on behalf of his old frat Goldman Sachs, was more severe: “And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator – and one who is not honoring his obligations.”
(This was presumably not a Goldman recruitment pitch, yet many have pointed out how Paulson seems to have a different attitude toward their speculators. As Felix Salmon put it, Paulson would have fired anyone at GS who acted according to the morality he’s proclaiming here.)
The corporate media has constructed a wall of moralizing sound, much of it harsh. Fox News especially calls those who fight back vs. the banks “deadbeats”, “obscene”, and compares them to appeasers of the Nazis. The MSM triumphs words like “responsibility”, “honor”, “contracts”, “ethics”. Needless to say, all such terms are used unironically, with no self-awareness, and completely unanchored from any real moral frame of reference, by a corrupt media whose main purpose by now is to shill for the Bailout and for bank and government policy which are in fact obscene, and utterly irresponsible, dishonorable, unethical. It’s our own government and media who are obscene. But Orwell has never had such a field day.
When the media feature someone who defaulted they often shield his identity to reinforce for the viewers the notion that he’s some kind of derelict. What’s more, even the credit counseling agencies, who in theory should be giving people unbiased information on their options, including the rational upside to strategic default, have joined the propaganda chorus. In fact, such “non-profit” agencies as the National Foundation for Credit Counseling (whose rep goes around to interviews blathering about people’s “responsibilities”) are really funded by the lenders, and serve as funnels for lender propaganda.
So when the system “speaks with one voice” (p.29) in framing this as an issue of individual morality, involving core American values, it distracts the focus from the responsibility of banks and government. It seeks to put the burden of responsibility for the bubble collapse on the individual and remove it from the system. What’s more, when the media and non-profits blare the same message, seeming to speak as if from “among” the people, they misdirect attention away from how the banks and the government are the real organizers of this propaganda, and how that propaganda flows from the top down.
In this sense, the MSM and non-profits serve as classical front organizations. Or today we can also call them Astroturfs.
The same dynamic plays out with the misinformation campaign to instill fear. White quotes the ever-eager Time magazine: “What is real is how completely a foreclosure wrecks your finances. Near term, you might get slammed with a massive tax bill, since forgiven debt can be subject to income tax. Long term, car loans and – you guessed it – home loans will be much harder to come by. How’s that for walking away? This is the American Dream ended in disaster.” (p.30)
Wow. Awful. In part 1 we discussed how exaggerated this is, and how any such damage can be mitigated.
It’s an endlessly repeated set pattern. The MSM story first questions the morality of walking away and then quotes an “expert” on how disastrous it’ll be for your credit.
Guilt and fear in tandem operate synergistically. They reinforce one another. So the system seeks to maximize both to obscure the facts about the financial benefits of walking away. The media seldom gives a detailed account of the rational upside. They’re especially unlikely to give a non-alarmist account of the likely repercussions for one’s credit score. On the contrary it’s precisely here where they seek to raise panic.
Credit scores have been the focus of their own microcosmic social indoctrination. People are encouraged to believe that a good score is a source of pride, a formal validation of character. The government explicitly claims the score measures character, calling it a “mechanism for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers” (in the Fair Credit Reporting Act).
A bad score, on the other hand, is supposed to denote bad character, that one is shifty and disreputable. The system does indeed want the dire warnings in the media to reflect reality. The tyranny of the score is intended to reward or penalize you everywhere. The fact that it doesn’t really live up to this is not for lack of malign intent on the system’s part.
When coupled with moral indoctrination, the stick of a bad score seeks to impose emotional suffering as a transaction cost of any action counter to the interests of the banks.
All of this takes place on an extra-legal basis. The contract should be clear on the responsibilities and recourse of the lender and borrower. The collateral is the property itself, not the good name and general socioeconomic prospects of the borrower. If someone borrows from you and you agree upon collateral for the loan, and he fails to pay you back, and you seize the collateral, you don’t then get to punch him in the face as well.
Similarly, the borrower walks, the lender takes the property, the contract is complete. For the lender to then go and trash his credit is the added punch in the face. Yet the government lets them do that, even though it’s outside what any reasonable contract, any rule of law, would allow.  
In part 4 we’ll go into detail about how this is lawless, how it’s really the lender who conspired against the borrower to write a faulty contract and then shift the onus of that contract onto the borrower.

January 23, 2010

Judicial Abdication

Filed under: Corporatism, Disaster Capitalism, Law, Sovereignty and Constitution — Tags: — Russ @ 2:19 am


The Supreme Court’s decision in FEC vs. Citizens United is an attempt to roll the final stone over the coffin of democracy. It’s the keystone of the anti-democratic arch the courts have been erecting against the longstanding attempts to build some kind of firewall against corporate money drowning our political freedom.
Apologists for the court have been saying this won’t change much on a practical level; that corporate money has already almost completely corrupted the system. That’s true, and it’s not surprising that process liberals would emphasize the merely incremental effect on process and not the basic, formal civic abdication which this decision signifies.
But what’s pivotal here is that once and for all the “Supreme Court” has abdicated. it has formally declared that it is not the people’s court but the corporate kangaroo court. In a time when corporate tyranny openly extends its grasp on a daily basis wherever our rump institutions are incapable of resisting it, and the banks have even intentionally destroyed the economy in order to generate a pretext for new inroads on looting, for the court to gratuitously declare now to be the time for extreme judicial activism on behalf of corporations and against the people is a extreme statement of abdication.
If we didn’t know it before we know it now, as a political fact – this is no longer our supreme court. The constitutional position is vacant.
(Always remember, there was no need for this decision whatsoever. Last spring they could have, and were expected to, decide the original case within narrow parameters. They aggressively, in an activist manner, chose to make this case their pretext for a sweeping ruling. I guess the calculation was pure shock doctrine: the people are reeling, fearful, their jobs are disintegrating; now’s the time to deal them this blow as well.
Needless to say, there’s nothing even remotely “conservative”, let alone “originalist”, about this decision. It’s a radical extension of corporate anarchism.) 
For over a hundred years, since the 1907 Tillman Act, through many decades of legislation and supportive court action, through the post-Watergate upgrades to campaign finance law, and on through to 2002’s McCain-Feingold act, this firewall has been under construction, seeking to put up a barrier against corporate wealth flooding the electoral space. As elections have become a commodity item, they sought to at least put it behind the glass. The country was not supposed to be quite so brazenly for sale.
But even before McCain-Feingold, the bribe bagmen and extortionists were already getting help from corrupted and ideologically rogue judges who have been infiltrating and subverting the courts since Reagan. Piece by piece, telling the Big Lie that corporations are “persons” with “rights”, they’ve carved out exception after exception. Now, with this decision, the firewall has been breached completely. Although the nominal ban on direct contributions to candidates is still in place, this is a token regulation. Anyone can now buy any amount of ads which clearly say “vote for X”, and “don’t vote for Y”. All you have to do is not literally say so.
(Needless to say, corporations are not people and have no non-economic rights. They have no rights not specified in well-circumscribed charters. This is clearly the way the Constitution wanted it, since otherwise the framers would have been clear in bestowing rights upon them (the issue was already well-known at the time).
The notion that corporations are persons is another lie which was never enshrined in constitutional law but was snuck in through the dog door. It was never part of a decision, but only appended as non-authoritative boilerplate preceding one. But since then corporatist judges have pretended it’s the law of the land.)
This is the final stage of the death of democracy. For decades corporatism, a totalitarian process, has sought the total liquidation of American political life.
* They want to buy elections as directly as possible. That’s the purpose of this decision. Legislators and executives come into office already corrupted and ready to vote how they’re told. This increases the scope for lobbyists to directly write legislation which is then simply rubber-stamped by the “public” system. It’s really just a laundering of dictatorship.
In general the flow of money is meant to co-opt all political participation. Non-governmental organizations, “activists”, are assimilated into the system, become mainstreamed. They all tend to become Astroturfs, whether they started out that way or not.
* At the basic economic level, the overwhelming sense of fear instilled by job insecurity is the main control mechanism against real political action. This socioeconomic isolation was one of the goals of globalization and union-busting.
* More directly, corporate money combines with government power to build up the security-industrial complex of surveillance and databases meant to enforce this conformism. If more severe repression measures are needed, we have the commodified militarization of the police and an increasingly fascist attitude toward protest as such.
On a broad level the entire economy is being integrated with the military-industrial complex, such that even the most seemingly innocuous consumer goods probably come from a conglomerate intimately tied in with the Pentagon and who sees itself as inextricably linked with the military and police.
* The complete prostitution of the mainstream media is an accomplished fact. Both directly, through media consolidation, and indirectly, through captivity to advertisers, the media are by now the stenographers and flacks of neoliberal, neoconservative corporatism in general. In particular they are shills for the Bailout War and the Permanent War (aka the Global War on Terror).
* The educational system, especially at the collegiate level, has been similarly captured. Higher education has been liquidated and replaced by a commodity system. The student, just like the citizen, has been degraded to the level of a consumer. And this “consumer” of a degree, just an expensive piece of paper to get one past an artificial barrier to entry, in turn becomes a raw material for the end consumer, the employer.
Meanwhile lower level public schools are starved of funds in a campaign to deprive the non-rich of educational opportunities.
* In Big Entertainment we see the same things. Consolidation, servitude to advertisers, the blockbuster mentality, the ideologically motivated ratings board, all combine to present a united front which trumpets the corporate line, macho neocon ideology, and escapism, while suppressing all real ideas.
* Advertising itself is a “cultural” force. The brand ideology is hard to avoid. The Big Brother of the “logo” is everywhere.
* Public spaces are either directly privatized and enclosed or otherwise dominated by the intrusion of advertising and other corporate presence.
* The language itself is under assault. They want to destroy the real diversity of language as much as possible, just like in 1984’s Newspeak, but here they seek Brandspeak, Corpspeak. (And at the same time they want to control how such speech is deployed, as we’ve seen with the McLibel case and many other assaults on free speech.)
By now in our governance we’ve experienced nothing less than the liquidation of society and politics, and of the two-party system. By now we have a corporate state with a soiled layer of political paint rapidly peeling off. If there were such a thing as the “Banker Party” it would seek and own one-party rule over the state.
This is basically a one party state, with two factions who differ minimally on some culture war issues. (The point of culture war issues is to divide the people against one another. No one in the power structure really cares about them.) (And with the Democratic health racket bill’s anti-abortion provisions, it seems like where it comes to even abortion there’s no longer a difference between the parties.)
The conscious goal of these parties seems to be conventional tyranny. The real totalitarian processes still seem mostly structural.
The Republicans openly declared they seek a “permanent majority”, and under Emanuelism the Democrats seek the same thing. In different ways each has been so incompetent that it seems no matter how tremendous an opportunity party A gives party B, B will then squander it, as if with the intention of giving A another chance.
But it’s a moot point anyway. Since the death of politics, neither party any longer has any interest in governing. At every moment, on every issue, the one and only concern is to maximize party revenue. Every action is dictated by the lobbies, either directly (to the point of lobbyists themselves literally writing legislation) or by implication. The corporatists probably prefer the two-party scam, which cosmetically is an improvement over the old Soviet one-party system. But the elections have been almost as rigged.
With this court decision the “almost” shall be expunged. There will now be no real limits to buying the election. Every harmful and evil characteristic of the system will be completely enshrined. The only limits to tyranny will now be the limits of the dollar, of oil, and of consumerism itself.
It’s anti-legal, anti-democratic, anti-constitutional, anti-American. The is a renegade decision by a renegade court. Senator Feingold, whose crowning legislative achievement is being gutted, went so far as to call it “a lawless decision from the Supreme Court….that means the whole idea of respecting the previous decisions of the Supreme Court won’t mean anything anymore.”
Or as I put it in a post on this case, Judicial Activism, from last August:

So here we have in prospect every kind of activism. If the court votes to overturn all restrictions on corporate funding, it will be an assault on the wills of Congress, the Court’s precedent, the language of the Constitution, and the will of the people, and this activist decision will have been achieved through activist directives during the argumentation process.

Unfortunately, this outcome is all too plausible. On economic issues, issues of corporate power, this Court and the federal courts in general have long been trending rightward and corporatist. There’s a reason why, for all its sometimes incendiary anti-judge rhetoric, the Right hasn’t made a broad argument for defiance of court decisions. It’s because they expect the courts, by now packed with pro-corporate judges by every president since Reagan, to be one of their last legal bastions of corporatist power, as the politics turn decisively against them. So instead the people’s advocates need to be asking this question.

The Supreme Court has no power. Andrew Jackson – “Marshall has made his decision; now let him enforce it” – had it right. The power of the court depends upon the goodwill of the executive. Since Jackson the issue has barely come up so starkly, but the power facts remain. Thus the court is in the end reliant upon political factors.

We must go further. Under these class conditions, where the court has been captured by the predatory anti-public interest corporate cabal, it has no authority. We must steel ourselves for the possibility of demanding of state and federal legislatures and executives that they defy court decisions which seek enslavement. We must be ready for anti-court civil disobedience.

I know this sounds unpleasant to those who think of the court as a progressive stalwart in the 50s through the 70s, but this ain’t that court any longer.

This court is waging reactionary war, against the will of the people and against the verdict of history itself on finance capitalism. This is a last-ditch attempt to entrench, and it will fail, but for the time being it can still do lots of damage.

This is a renegade court. Historically, the court usually lags somewhat behind the progressive will of the people. This in itself shows its inherent anti-activist tendency. The great culture war decisions followed in the wake of a higher public consciousness. The court usually waited for the people to lead before it issued what would have been the most controversial decisions, and even where it was ill-inclined it usually followed along anyway. When it comes down to it the court is a political institution.

And where a court was bent on reactionary activism, as with the anti-New Deal 30s court, it had to be jolted into compliance with the will of the people through FDR’s packing threat. Although FDR’s scheme failed, it still achieved its purpose, as the court now became more reasonable in its decisions.

So we see how hard political activism on the part of a court can be countered only with hard political activism against that renegade court.

“Judicial activism” is therefore a form of political activism. It must be seen as such and dealt with as such.

At the outset of the First Great Depression, Hoover’s Treasury secretary, arch-corporatist Andrew Mellon, gave this prescription: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…purge the rottenness..”
This is certainly what we should have done with Wall Street and its toxic assets. It’s still what we’ll have to do in the end anyway.
Meanwhile, for everyone except the rich, Mellon’s liquidation is today the program of the Washington system, Democrats and Republicans, Congress and courts, led by Obama. Liquidate the people. Liquidate the future. Liquidate all hopes.
We the people must respond with our own imperative. We need a full liquidation of the polity which has been corrupted beyond redemption. Liquidate Washington, liquidate the Democrats, liquidate the Republicans, liquidate the court, liquidate the banks, liquidate the mainstream media.  
So we see the prison door of the existing system slamming shut. There’s no way out through that door. Anyone who stands there shaking the bars or puzzling over the lock will get nowhere. Most will end up simply curling up on the floor, whining to be let out, and in the end just happy to be fed a starvation diet.
Meanwhile there is another way out. But it’s gonna mean tunneling.

January 22, 2010

Obama’s Ploy


On Tuesday the voters of Massachusetts delivered a drubbing to Obama and his entire agenda. The blow was against the system, even if too many people still think the right way to express anger is to vote against the incumbent but for another system criminal.
However lousy a candidate Coakley was, nothing changes the fact that her original wide margin (coming at a time when voters were familiar with her stances on the war and the banks) evaporated as she conformed more and more with the administration agenda, in particular its health racket bailout.
And when Obama made a big show of campaigning for her, this only hurt her further. So we can add Coakley to Corzine and Copenhagen (the Olympic bid) to the list of Obama’s personal appeals with were met with expectorate to the face. It seems he doesn’t do well with “C”s, and that people don’t like him, they really don’t like him.
Another C is CEOs. Obama has been repeatedly publicly snubbed by the bank leaders, most recently when most of them couldn’t be bothered to personally attend his childish lecture at the White House, but instead literally phoned it in.
Obama has plenty of his own personal Cs – Corporatism as his ideology, Corruption as the water he swims in as a slippery fish, going back to his Chicago days. He was considered a phony as a Community organizer. He personally embodies Cowardice. But no one but a hack would ever put a big C on his lack of character.
Obama’s response to the Massachusetts debacle has been novel in at least being a response, as opposed to his normal “everything’s fine, stay the course” mindset. He’s generally a prisoner of the status quo preference which is his main personality and political trait.
It must be difficult for him to now pretend to have found populist religion, and not just in the sense of throwing a hissy fit about “fat cats” as he did some weeks back, but actually having to make nominally anti-bank policy proposals.
And so we have the Volcker plan. Obama trotted out the long-neglected Volcker to stand beside him as he announced a plan to both cap bank size and force a split of proprietary trading from commercial banking.
The institutional segregation of part of the casino from commercial activity would represent a version of Glass-Steagall restoration. That and the cap on size would be two of the measures real reform activists have been demanding since the crash, and long before. If the administration is really, enduringly sincere, has really seen the error of its ways, and if the government really goes through with this, it would achieve significant, necessary, though not sufficient reform.
(Glass-Steagall achieves separation but doesn’t ban radioactive derivatives as such.)
Not even 24 hours in, and one of the two centerpieces, the size cap, already looks bogus even in concept, as the administration is being reported to want to simply freeze the monopolies “as is” and just not let them get bigger.
This is absurd; the TBTF banks are already way too big and way too concentrated. Leaving them in existence at anywhere near the current size can only ensure that they’ll use their intact lobby power to get this restriction and any other new regulation gutted. Part of the way they got so big in the first place is that three of them have been granted “waivers” allowing them to concentrate more than 10% of the regulatory limit on deposit share. So letting them stay as big as they are only enshrines the enact-regulation-then-gut-it-with-waivers-and-loopholes scam. Far from being real reform, this is standard anti-reform dressed up as reform.
It’s very similar to the “resolution authority” scam, which contends that you can leave the big banks as they are but set up an a priori mechanism to dictate how they’ll be wound down without a taxpayer bailout when they crash again in the future. This is obviously a political lie, since we know that in the next crisis the banks will scream that there’s no time for the orderly resolution, and TPTB will cry out “we need to bail them out NOW, and we’ll fix everything according to the plan later”. There already existed perfectly good resolution authority via the Prompt Corrective Action law. They simply didn’t want to use that because it would’ve forestalled the plunder of the people via the Bailout. So they disregarded it and screamed “Stampede!” That’s the way disaster capitalism works. So if the plan really is “As is”, that signifies that the real plan for the next collapse will also be another Bailout as is.
The prop trading and bank hedge fund limits sound better in theory. Banks engaged in such activities would be ineligible for FDIC protection. But the details already look sketchy.
Given the record of this administration and this Congress, I think the only way to look at this is to be skeptical. We know Obama doesn’t really believe in any of this and is making these proposals only under the duress of Massachusetts, bad approval ratings, and other political setbacks.
Given the evidence, we have to assume this is a reprise of the “public option” scam in health “reform”. Big talk at the outset, then by design they let it be first watered down and then, they hope, gutted completely.
That was always the purpose of the Swedish-style “nationalization” idea, flogged by Krugman and others. If they had been politically pressed enough, they would have made a big show of enacting that plan, but it really would’ve been just a farce, just a pretense, to buy time, try to put on a good political show, while further enabling the looting.
This proposal probably has the same goal. Besides, according to Obama it has to be enacted through Congress, as part of the already-gutted finance “reform” bill currently oozing its way through there. That would be the same finance bill whose already-compromised CFPA is now on the verge of being cast out completely.
Does the path of the CFPA repeat the history of the public option? So far it’s tracking it almost perfectly.
We can induce an algorithm for every such “great idea”, trotted out with such fanfare, then steadily enervated, and then killed completely.
So until we see this proposal be:
1. Strong and severe in concept (so far the alleged Glass-Steagall revival is quite hazy, while the size cap already looks like a scam);
2. Enacted (By this Congress? That sure sounds intended to fail. Right there we can deduce bad faith on Obama’s part.);
3. Aggressively enforced (which can’t be done so long as the rackets exist at anything near their current levels of power; if they’re not going to smash up the banks outright, if they expect to keep them “as is” but somehow regulate them in a different way, it will definitely fail);
we mustn’t believe the hype. We’ve had the misfortune of having to live under them for too long to still be willing to believe their lies and scramble for the feel-good political crumbs they toss out to us when the heat is on. Those crumbs are poisonous.
That’s the great historical villainy of “liberal reformism”. It’s always a lie, it’s always a sellout. The only way it ever temporarily worked was when there was so much surplus wealth subsidized by plentiful oil that even the feudal criminals were sated enough to consider it in their interest to share.
But that was a unique historical circumstance, and now the Oil Age is ending. That’s why corporatism has resumed its former viciousness since the 70s.
The real historical dynamic is for liberal reformism to always be a political gambit on the part of moneyed interests, a political scam meant to misdirect the people and split and blunt the resistance. Meanwhile it has never accomplished anything, ever, except where subsidized by oil.
That dynamic now resumes in full force. “Reform within the system” is dead, once and for all. Real activists must resolve to resist the corporatist system as such, and not let themselves get suckered by pretty-sounding “reform” proposals coming from charismatic* politicians.
[*I’ve never “gotten” Obama’s alleged charisma myself, but evidently all too many people even now still believe in it.]
So the right line on things like this is for real reformers: 
1. To understand how it’s promulgated only under what they hope will be temporary duress, and is designed to fail. It’ll be weakly conceived and is expected to be worn down and then destroyed through the “process”.
2. For public consumption, to take an open-minded “Show Me” stance, even though we don’t really need to be shown anything; but since most people still want to believe in the system and have a ways to go before they finally realize that they have been believing in vain, we need to empathize and concede that “anything’s possible”, while we exhort them to say Show Me and to watch carefully what then happens, to see how every supposedly new thing then falls into the same old pattern.
Education takes time and effort and empathy.

January 21, 2010

Analysis of Strategic Defaults (2 of 5)

Filed under: Civil Disobedience, Land Reform, Reformism Can't Work — Tags: — Russ @ 4:20 am


In part 1 we discussed Brent White’s finding that people were irrationally unlikely to walk away from their underwater mortgages. But is this really what the numbers say? Economists and pundits who want to deny the bubble and justify the bubble prices confabulate notions about the “large financial, emotional, and psychological investments” (as White quotes one commentator) people have made in their homes. (I wonder – are these the same commentors who otherwise insist on “GDP” as the right measure of economic health and scoff at e.g. happiness indices? It’s always heads-I-win-tails-you-lose, ain’t it?)
They also say homeowners may be risk averse and unwilling to bet their credit rating and other legalistic variables vs. the likelihood of big savings from walking away. They may also dread the hassles of moving. Based on these factors, pro-system economists claim, contrary to their normal ideology, that there’s nothing irrational about failing to walk away even if on paper it looks like the rational move.
But these economic assertions ignore what behavioral economists understand, that people make irrational decisions because they’re inclined to misperceive things in certain characteristic ways. These include the status quo bias, the assumption that things will continue as they are and that this is a good thing; an aversion to complex calculations; a tendency to have more fear of immediate costs than expectation for longer-term gain. Then there’s selective perception, such as failing to notice declining home values in one’s own neighborhood. There’s unjustified overconfidence that things will automatically get better, for example  that the housing market will rebound (the status quo bias, where overridden, tends to be overridden on the optimistic side), as well as that their own income will keep growing. Many of these fed into the bubble in the first place. (Also, given how mobile Americans have been in modern times, few must really have any such motivation as, “I really like the neighborhood, so I’ll stay put.)
So, contrary to the claims of bubble defenders, people are in fact prone to be ignorant of the facts. It’s false and tendentious to rationalize irrationality the way these mercenaries do in their Orwellian way.
But far more important than the existence of this cognitive bias is how it is erected upon and reinforced by an emotional foundation. White says, “as a large body of work in the neurosciences has revealed, much of what passes for cognitive bias is actually emotional bias, reached with no cognitive process whatsoever.” (p.16)
The misperceptions are grounded in homeowners’ emotional tendency to not want to understand and believe in the real situation. They want to believe their homes have retained their value and that this value will continue to increase. They focus on evidence and ideas that seem to confirm this and reject what contradicts it. Contrary evidence may cause them to dig in with their beliefs, a classical feature of cognitive dissonance.
“Thus, if one is to understand how homeowners think, one must understand how they feel.” (p. 17) But so far default modeling has sought to correlate default with just about everything but emotion. Thus we have studies on default vis initial loan-to-value, current equity, credit scores, geography, and unemployment, but few correlating it with shame, guilt, or fear. But the findings here are key.
The important study on this was last year’s report by Luigi Guiso, Paola Sapienza, and Luigi Zingales. They found that 81% of homeowners think it’s immoral to default on a mortgage, and that those who feel that way are 77% less likely to claim they would default under a given circumstance. The study found that once negative equity exceeds 10% of the loan’s value, “moral and social considerations” become the most important factor in predicting strategic default. They also found that knowing someone who has strategically defaulted renders one 82% more likely to declare the willingness to default.
These findings indicate that emotion and social conformity are the most important factors here. So it follows that to the extent propaganda and policy serve to intensify these emotions and guide them along a certain path, to that extent they can affect the incidence of default.
Guiso, Sapienza, and Zingales (GSZ) focus on the herd effect and worry about how modification programs for distressed borrowers may encourage more people to default. This is a longstanding complaint among those opposed to mods. But as White points out, by the same logic one could just as easily predict that the example of the Bailouts, and how wall Street continues to rake in stolen taxpayer money while jobs continue to be destroyed, would be the real incitement to default: “If they can do it, why can’t I?”
To understand which of these is more likely we must look to the evidence that emotion is the primary motivator of both moral beliefs and decision making. Here the evidence is clear – people are less likely to default if they feel it is immoral to do so, and especially if they believe others will also think them immoral. This effect is strong even where people understand on a rational level how they were victimized by predatory lending. Their moral mechanism still fails to direct its fire in that direction.
But there’s another important factor at work here. The GSZ study found that even among those who claim to have no moral qualms about defaulting, only 41% would walk away at $100,000 negative equity. So the reluctance to walk must run even deeper than moral and social guilt.
This leads us to the other great demotivator – fear. As White describes it:

The voices of those who have actually faced foreclosure suggest another powerful emotion that may be keeping homeowners from defaulting: fear. Indeed, the term commonly used to describe foreclosure by those who face it is “terrifying”. As one commentator on foreclosure has noted, “foreclosure is that terrifying word no homeowner ever wants to hear, let alone experience.” People not only fear losing their homes, but fear having ruined credit for life, not being able to find a decent place to live, to buy a car, to get a credit card, to get insurance, to ever buy a house, or even get a job. Foreclosure is seen as the end of life as one knows it: financial suicide to be avoided at all costs.

This goes way beyond a cognitive misconception about the detriment to one’s credit score. Here we’re talking about FDR’s “fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”
This fear doesn’t just spontaneously generate itself. It is socially manufactured and indoctrinated from the top down, as a mode of social control.
So we have the three basic elements in the decision whether or not to default: shame, guilt, fear. White says we need more study to tease out the statistical effects here. But what’s clear is that these are well understood in principle by all rational observers, and in particular by those who stand to profit. “As such, those who benefit from underwater homeowner decisions not to default have not waited for statistical proof of the efficacy of those emotions to cultivate them.” (p. 23)
Lenders, government, and their lackey media have systematically cultivated shame, guilt, and fear. In part 3 we’ll analyze this.

January 19, 2010

Analysis of Strategic Defaults (1 of 5)

Filed under: Civil Disobedience, Land Reform, Law, Reformism Can't Work — Tags: — Russ @ 7:02 am


I’ve previously mentioned University of Arizona law professor Brent White’s report on strategic mortgage defaults. I want to delve into this paper further.
One of the great challenges we face is resetting the moral thermostat of this country. It’s been lounging at the most frigid levels.
The place to start with this reform, as with all reform, is with the land. Nothing will work without Land Reform.
In today’s case the question is walking away from your mortgage when you’re underwater. This refers to where people took out home mortgages at the peak of the bubble, where the nominal prices were absurdly bloated beyond anything supported by market fundamentals. When the bubble inevitably burst and housing prices began to seek their real levels (a process nowhere near complete), millions found themselves owing more on their mortgages, in many cases far more, than the home is now worth on the market, or likely ever will be worth again. This is called being “underwater”, or in a state of negative equity.
The people we’re talking about are mostly not “flippers” or those who knowingly took on debt they could never possibly afford. The vast majority were simply Americans looking to buy a house, just like Americans have long been doing as an everyday activity. Just like the government, the corporations, and the media hve been drumming into their heads and supporting with every sort of incentive for many decades now.
Home ownership, the keystone of the American Dream.
And over the last decade the bank-government-media nexus has relentlessly pumped up and cheered on the housing bubble. The subprime craze was instilled and enabled from the top down. No amount of irresponsibility on the part of ignorant borrowers could be meaningful compared to the systematic recklessness of lenders and government, recklessness as policy.
No, 100% of the blame for the bubble and the crash lies with the establishment, while the underwater homeowners are victims. If a con man takes advantage of an ignoramus, and the result is disaster, there’s no point blaming anyone but the crook.   
In this case, for many homeowners the rational thing to do would be to simply stop paying the mortgage and either walk away or wait to be foreclosed upon. But so far relatively few people are making this decision.
At least in part this is because of false social conditioning and inaccurate media propaganda.
White’s abstract describes the situation well:

Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

The “social control agents” try to enforce a potemkin moral norm in place of a reality-based market norm. But this is really the abdication of morality. We shall recover true morality only when we rediscover our communities and recognize the federal and corporate system as an alien, immoral tyranny over us.
We must be clear that reason alone will not work against this top-down social fraud. White’s paper provides a case study in how the Enlightenment pretense is really the Enlightenment Myth. We need an idea to fight an idea, morality to fight immorality, vision to fight meanness.
Let’s start with the data (from White’s paper).
As of June 2009, nationally 32% of homeowners were underwater on their mortgages. This is expected to rise to 48% by the first quarter of 2011, by which time prices in the hundred biggest metropolitan areas will have plunged 42% from their peak.
Regionally it’s far worse. As of 6/09 66% in Nevada were underwater, in Arizona 51%, Florida 49%, Michigan 48%, California 42%. Many metro areas in these states are running above 70%, some above 80%.
As of the second quarter of 2009 22% of homeowners were in negative equity greater than 10% of the home’s mortgage value. 16% were underwater more than 20%.
Again it’s worse regionally. 47% of Nevada homeowners were down deeper than 25%. In Florida 30%, Arizona 29, California 25. In these cases, where the bubble prices were really extraordinary, many of these homeowners are now down by hundreds of thousands of dollars.
All this has led to a combined foreclosure plus 30-day-or-greater delinquency rate of greater than 13% of all mortgages, an all-time high.
But these aren’t from strategic defaults. Rather, 75% are on account of hardship – job loss, medical disaster, divorce. “In other words, for the vast majority of homeowners, negative equity is a necessary but not a sufficient condition for default.” (p. 5)
Put it all together, and although over 32% of US homeowners were underwater, the strategic default rate was only 3%.
The pattern is similar in the hardest-hit regions, where the default rate tracks the unemployment rate more closely than it does the underwater rate. So here too, people aren’t walking away just because they’re in the red.
White comments, “Given the striking disparity between the percentage of underwater homeowners and the percentage of defaults, the real mystery is not – as media coverage has suggested – why large numbers of homeowners are walking away, but why, given the percentage of underwater mortgages, more homeowners are not.” (p.7)
White goes into the textbook explanation of when and why economically rational people would walk away. Basically, it’s when the net cost of renting is lower than the net cost of buying. Many variables go into this calculus – mortgage payments vs. rent payments, but also tax implications, expectations for the housing market, potential to accrue equity, costs of maintenance, homeowners insurance, selling transaction costs, etc.
Put it all together, and “as a rule of thumb, a potential homebuyer is generally better off renting when the home price exceeds 15 or 16 times the annual rent for comparable homes.” (p.8)
If it’s a question of walking away from a mortgage, there’s the considerations of a realistic view of the real current value of the house, existing negative equity, cost of foreclosure, cost to rent a similar space, how long one intended to stay, and a realistic assessment of what you expect the market to do during that time. You need to calculate the various current balances and monthly payments, and based on all that calculate how much you’d save or lose by walking away, monthly and in the long run.
If everyone calculated this way, then millions of homeowners, especially in the most beleaguered states, “could save hundreds of thousands of dollars by strategically defaulting on their mortgages….Homeowners should be walking away in droves.” (p.11)
It’s also untrue that you’d be likely to have your credit permanently ruined. The hit could be temporarily harsh. Generally, the penalty is 100-150 points on account of foreclosure, as well as demerits per late payment. The total hit is likely to be from 300-400 points, which could take 7 years to completely clear.
But if your credit was otherwise good, you could see significant improvement within 2 years.
(In a subsequent post we’ll get into how the credit rating regime is unjust in principle, and why defying its veto over our actions is in itself a valuable action.
Beyond that, there’s the general campaign to get out of debt completely, in which case the credit rating issue would become moot, especially if enough people did it. That’s beyond the scope of White’s paper.)
The basic point is that for most underwater homeowners the cost of an impaired credit rating is likely to still be dwarfed by the savings from walking away.
White concludes: “While a good credit rating might save an average person tens of thousands of dollars over the course of a lifetime, a few years of poor credit shouldn’t cost more than a few thousand dollars.” (p.12)
White goes on to add, in a much misunderstood and misrepresented quote:
“Moreover, one who plans to strategically default can take steps to minimize even this marginal cost. For example, one could purchase a new vehicle, secure a new home to rent, or even purchase a new house before beginning the process of defaulting on one’s mortgage. Most individuals should be able to plan in advance for a few years of limited credit.” (p.12)
Bank flacks rushed to paint this as some wicked incitement. In fact it’s perfectly sound, legally and morally. White is not proposing that people default on their credit cards or other debts, but only on their underwater mortgages. What he’s saying here is that if you’re planning any large purchase or expenditure, you should make it before you default, before your credit rating takes the hit and your rates go up.
Even in a recourse state, it’s rare for the lender to seek a deficiency judgement unless you have valuable assets beyond your house. As far as tax liability for “forgiven” mortgage debt (for which the banks would certainly rat you out to the taxman), the Mortgage Debt Relief Act of 2007 excludes principal residences from this, for debt forgiven in the calendar years 2007-2012. So at least through 2012 that’s not an issue for a primary residence.
So to sum up: In most cases the benefits of walking away from an underwater mortgage far outweigh the costs. If homeowners were “rational” the way the economics textbooks say we all are, they’d be “walking away in droves.” So why aren’t they?
Behavioral economists think it’s on account of “cognitive bias”, a fancy way of saying people simply don’t understand the situation. But in fact people fail to act “rationally” even where they know what’s in their best interest. This is because of moral concerns.
They don’t just come up with these concerns on their own. Rather, the whole bank-government-MSM-NGO complex actively seeks to indoctrinate them with certain alleged “moral” concepts.
Meanwhile the lenders are under no such restraint, cognitively or morally. They are allowed and encouraged to act in an anti-social way.
The result is that individuals are more likely to do what they’re falsely told is morally responsible and socially beneficial, even as this is against their interests, individually and socially. Meanwhile lenders consistently do what is in their short-term financial interest even though their behavior is socially harmful and morally despicable.
What’s the answer, socially and morally? Permanent mortgage modifications. That means reduce the principal. The bubble price was a scam to begin with, as we know. The loans based upon it constituted fraud. If the government refuses to indict the fraud, the system can at least rectify the principal on these mortgages.
But of course they refuse to do that as well. They won’t legislate it themselves, they won’t give bankruptcy judges cramdown power. Obama won’t even use the bully pulpit. It’s scorched earth. So the people need to take matters into their own hands. 
In part 2 we’ll analyze homeowner choices.

January 18, 2010

Bring ’em On!

Filed under: Law, Reformism Can't Work, Sovereignty and Constitution — Russ @ 3:39 am


America’s ongoing train wreck sometimes affords examples of tragicomedy, and we woke up to find one this morning: Wall Street Weighs a Challenge to a Proposed Tax.

Wall Street’s main lobbying arm has hired a top Supreme Court litigator to study a possible legal battle against a bank tax proposed by the Obama administration, on the theory that it would be unconstitutional, according to three industry officials briefed on the matter.

In an e-mail message sent last week to the heads of Wall Street legal departments, executives of the lobbying group, the Securities Industry and Financial Markets Association, wrote that a bank tax might be unconstitutional because it would unfairly single out and penalize big banks, according to these officials, who did not want to be identified to preserve relationships with the group’s members.

I thought in our entrenched corporatist age it was only reckless peasants who went around calling things “unconstitutional”. This sounds like a glorified example of a police riot.
This is in response to Obama’s anodyne bank tax. The administration is a pure flunkey of Wall Street and has done everything possible to loot the country on its behalf. It has also been spectacularly inept at the politics of this, so that the people have quickly figured out that these are not public servants but public enemies.
Finally,  belatedly, Obama has dusted off the Politics 101 textbook and discovered that you actually have to pretend to be working for the people as you plunge in the knife. You have to pretend you’re doing something, however anemic, to penalize history’s worst financial criminals.
So they came up with this bogus tax, which would be meager in its effect (if any) and would studiedly not touch or even question a single element of the Wall Street bonus casino structure. It’s meant to do nothing but appease the peasants. Here’s some more commentary on that.
Part of the reason such appeasement is necessary is because the banksters have also lost control of themselves. There seems not to be even any sense of political self-interest to place any limit on their public psychopahty, as they award themselves record-setting “bonuses” after having crashed the economy, and as the Second Great Depression sets in.
As jobs continue to disappear, as the very future continues to vaporize for most Americans, these capital thieves have stolen $14 trillion and counting. And now, as a public emblem of their infinite crimes, they award themselves bonuses beyond any conception of obscenity.
It’s in fear of the public rage that Obama has finally decided to try to play politics with this phony tax. He’s trying to save himself and the banksters from themselves.
But true to form, the banksters are so drunk with greed and power that they’re pondering making a Supreme Court case out of this. They’ve hired a bigshot lawyer, “Carter Phillips” (that’s some name; sounds like a character in a movie) who’s a real amicus of the court, if you get my meaning. He’s argued over sixty cases before them going back decades, especially when he was a Reagan DOJ cadre. He’s a real crony capitalism system insider. A fixer.
(To be fair, Obama sure doesn’t sound serious:

Indeed, President Obama urged the financial lobby to stand down when he introduced the tax proposal last week: “Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities.”

If I were a bank cadre I would’ve taken that as a wink and a signal that he wants us to challenge it.
Needless to say, when you’re serious about something like this you (1) make it absolutely clear in private, and (2) your public statement is affirmative and clear and will brook no dispute: “I will Smash anyone who opposes the will of the people on this”. Something like that.
But maybe the cultists who still believe in Obama’s Master Plan will think he was just luring them into a public fight.)
The legal reasoning is flimsy enough. It’s “retroactive”. It “would penalize a specific group”. But:

Mr. Phillips’s primary argument, however, might be that a tax so narrowly focused would penalize a specific group. Legal scholars say the Supreme Court has overturned only a handful of laws on those grounds, and those were typically rules that singled out political outcasts like former members of the Confederacy or people accused of being communists.

Well, except for the money and the corrupt political system they would be such political outcasts, so there you go. They may be onto something. “Communists” – they certainly believe in and practice Limousine Communism. Corporate Welfare Communism. “Members of the Confederacy” – they are rebels and secessionists. They are trying to steal every piece of the country, including literally the land, and secede with it, from all political, social, and rule of law accountability. They would leave the American people merely working the land as serfs.
Picture the Confederacy being a small cabal seceding with the entire physical body of the Union, leaving all civics, politics, and democracy to disintegrate and blow away with the wind, leaving behind only the zombie of a government and an “election” process, while no true society or government or law any longer existed. You wake up one morning and find you are a citizen of a Union in name only, while in fact you are homeless, stateless, and have to beg for a work permit which, if you get it, will pay only a starvation wage while you break your back and endure the whip.
This is our situation, and here this prospect seems to actually be the banksters’ legal concept of the case, if they do go to the courts with this. The Confederacy is their precedent.
The article quotes the usual suspects from the administration and Harvard saying the legal argument is flimsy, but that may not matter given the captured courts.
Which leads to my hopes for this charade. I’d love to see them very publicly fight this out. I’d love to see them shine the sunlight on their own corrupted “law”. Highlight how captured the courts are. (The article says there’s some debate among their ranks regarding the wisdom of this measure. So they’re not all completely oblivious.)
This is an absurdly picayune attempt to appease the peasants, and they’re going to engage in a high-profile fight? Sounds good to me. I always hope none of the stale crumbs a corrupt government tries to toss to the people get taken seriously as a meal. That could only impede the evolving public consciousness of the crime.
From the point of view of real activists, nothing’s more insidious than treacherous ad hoc liberal “reforms” which may have some superficial political appeal.
If they go through with this, the two lessons the public must take are these (not yet written here in slogan form):
1. The banks are absolutely incorrigible, literally totalitarian, and will never even compromise on the outer limits of capital crime. They can never be reformed. They can never be regulated. They can never be rehabilitated. They can never be redeemed. They will keep stealing, literally every cent they can, until they are absolutely destroyed.
2. The courts have abdicated the rule of law. They are rogues. They are renegades. They are bank-bought judicial activists. They cannot be reformed through the system. The law cannot be recovered here. if we want our rule of law back, we have to rebuild it from the bottom up. Just like we have to rebuild everything else.

January 16, 2010

Krugman: Hack Number One


In the fight of the people against corporate tyranny and a corrupt government it’s important to identify and condemn to worst liars on the side of the enemy. Since Paul Krugman is a highly influential commentator, and since he evidently now aspires to the role of “progressive” corporate Obama Hack Number One, it’s important that we train our fire on him.
We should range him alongside Rush Limbaugh as being one of the most obnoxious corporate shills with, unfortunately, the biggest audience. 
Glenn Greenwald wrote a chilling piece on totalitarianism within the Obama administration. Obama cadre Cass Sunstein continues to express his hatred for all forms of decentralization of power and information and to advocate ever more evil means in the struggle against freedom.
(Read Greenwald’s piece and look at the quotes. Sunstein wants to tear up the Constitution in order to silence all non-conformist voices.)
Well, Paul Krugman has no problem with Sunstein. But he does object to Greenwald calling him out on his own hypocrisy and corruption.

Today Glenn Greenwald accused me of being a hypocrite for defending Jonathan Gruber, the health care economist who has become a target of some progressive opponents of the health care plan. He writes:

Paul Krugman, for instance, in 2005 angrily lambasted right-wing pundits and policy analysts who received secret, undisclosed payments, and said they lack “intellectual integrity”; he specifically cited the Armstrong Williams case. Yet the very same Paul Krugman last week attacked Marcy Wheeler for helping to uncover the Gruber payments by accusing her of being “just like the right-wingers with their endless supply of fake scandals.” What is one key difference? Unlike Williams and Gallagher, Jonathan Gruber is a Good, Well-Intentioned Person with Good Views — he favors health care — and so massive, undisclosed payments from the same administration he’s defending are dismissed as a “fake scandal.”

What’s wrong with this accusation? Everything. Armstrong Williams received a contract specifically to promote Bush administration policies; his duties under the contract were to “regularly comment” on these policies on his program, and to interview Bush administration officials. In short, he was being paid to serve as a propagandist.

Yes. That’s what Greenwald said. Gruber was paid to serve as a propagandist.

What was Gruber contracted to do? He emails:

I was contracted with HHS for technical modeling assistance. When designing a policy like this, policy makers want to consider a million different permutations: different AVs, tax credit amounts, employer assessments, etc. Basically, in a perfect world, we would all just rely on CBO for all these permutations. But CBO has limited resources and can’t work directly with the administration. So I provided the administration & congress (mostly senate finance) with the kind of modeling that CBO does to help them narrow options to a more manageable list that they could send to CBO.

So he was a hired shill for the Democratic Party Plan. Just like Greenwald said.
(I like the touch that Gruber e-mailed Krugman. So K knows him personally – that means he’s gotta be a great guy!)

That is, he was hired as an economist, paid to provide technical analysis — not as a pundit, paid to promote policies to the public. Maybe Glenn Greenwald can’t see any difference between the two — and the more of this I read, the more sense I have that the attackers are deliberately obfuscating the difference — but they really aren’t the same.

Now that’s cute. Suddenly Krugman wants us to believe again in the wisdom of “economists”! After all that’s happened! Is there any group of alleged experts in all of history whose claim to be credible has been more utterly trounced than that of “economists”? Has any passel of pseudo-scientific pretension ever been more completely unmasked as mercenary political flackery? Krugman would have a better shot at rehabilitating alchemists.
“Deliberately obfuscating the difference”. Yup – always claim your opponent is doing exactly what you’re trying to do. Oldest trick in the book.
In this case what Thugman’s deliberately obfuscating is the fact that there’s NO difference between Gruber and Armstrong Williams. He’s propagating the lie that they aren’t equally paid propagandists.
(We still don’t know what Krugman’s own secret financial interests are. But the fact that he’s so solicitous about this secret payoff is grounds for suspicion. He seems quite emotionally invested in the Gruber affair. And in retrospect could his anger at Williams maybe have had some element of professional jealousy? There’s sure a lot of health insurance racket money floating around. Lots for a hack shill for this bill.)
Krugman goes on to propagate Gruber’s “credentials”. K whines that Gruber is actually some magisterial, Olympian authority beyond any taint of political corruption; how dare you peasants question his heavenly integrity; he’s like a kind of god.
Again, it’s quaint how, after all that’s happened, Thugman still wants us peasants to repose faith in “expertise” among system hacks.
I don’t doubt Krugman is trying to figure out how to rehabilitate Geithner and Goldman Sachs as we speak. It’s the logical extension of the argument we’re seeing from him.

Given that Gruber was providing this kind of technical consulting, should he have recused himself entirely from the public debate? Should he have stopped writing op-eds and, more important, technical papers read by the likes of Ezra Klein and myself? If he had, the public debate would have been much poorer; again, there aren’t many people in a position to do the kind of quantitative assessments Gruber does.

And one more thing: what Gruber has had to say about health reform in the current debate is entirely consistent with his previous academic work. There’s not a hint that he has changed views, or altered his model, to accommodate the Obama administration.

We just got done hearing how Gruber is an objective “expert”. Now suddenly he’s the opposite – a spirited participant in the public debate. A minute ago it was wrong to call Gruber corrupt because he’s an “expert” technocrat, not a political cadre. Now suddenly it’s wrong to call him corrupt because of the opposite – he’s not a paid “expert”, but on the contrary a political fighter of such integrity and principle that no level of payment could ever corrupt him; he only took the Obama job because his principles matched up so felicitously with Obama’s.
Or, as Greenwald already said,

What is one key difference? Unlike Williams and Gallagher, Jonathan Gruber is a Good, Well-Intentioned Person with Good Views — he favors health care — and so massive, undisclosed payments from the same administration he’s defending are dismissed as a “fake scandal.”

Of course, Krugman himself is a “Good, Well-Intentioned Person With Good Views”. And if the views themselves happen to change suspiciously with the change of the party in power, pay no mind. The “Intention” is always “Good”.

Can we fix health care?
Health policy experts know a lot more about the economics of health care now than they did when Bill Clinton tried to remake the US health care system. And there’s overwhelming evidence that the United States could get better health care at lower cost if we were willing to put that knowledge into practice. But the political obstacles remain daunting.

A mere shift of power from Republicans to Democrats would not, in itself, be enough to give us sensible health care reform. While Democrats would have written a less perverse drug bill, it’s not clear that they are ready to embrace a single-payer system. Even liberal economists and scholars at progressive think tanks tend to shy away from proposing a straightforward system of national health insurance. Instead, they propose fairly complex compromise plans. Typically, such plans try to achieve universal coverage by requiring everyone to buy health insurance, the way everyone is forced to buy car insurance, and deal with those who can’t afford to purchase insurance through a system of subsidies. Proponents of such plans make a few arguments for their superiority to a single-payer system, mainly the (dubious) claim that single-payer would reduce medical innovation. But the main reason for not proposing single-payer is political fear: reformers believe that private insurers are too powerful to cut out of the loop, and that a single-payer plan would be too easily demonized by business and political propagandists as “big government.”

These are the same political calculations that led Bill Clinton to reject a single-payer system in 1993, even though his advisers believed that a single-payer system would be the least expensive way to provide universal coverage. Instead, he proposed a complex plan designed to preserve a role for private health insurers. But the plan backfired. The insurers opposed it anyway, most famously with their “Harry and Louise” ads. And the plan’s complexity left the public baffled.

We believe that the compromise plans being proposed by the cautious reformers would run into the same political problems, and that it would be politically smarter as well as economically superior to go for broke: to propose a straightforward single-payer system, and try to sell voters on the huge advantages such a system would bring. But this would mean taking on the drug and insurance companies rather than trying to co-opt them, and even progressive policy wonks, let alone Democratic politicians, still seem too timid to do that.

So what will really happen to American health care? Many people in this field believe that in the end America will end up with national health insurance, and perhaps with a lot of direct government provision of health care, simply because nothing else works. But things may have to get much worse before reality can break through the combination of powerful interest groups and free-market ideology.

Who wrote that? It sounds a lot like what happened this past year. But no, that couldn’t be the case, because that was none other than Paul Krugman expressing his Good Intentions back in 2006 when the Republicans were still in power. As he would lecture any peasant stupid enough not to understand, things are different today.
(I guess it’s an example of Sorel’s “social myths”. What you say you want to do when you’re out of power doesn’t necessarily have anything to do with what you really want to do once you’re in power.)
Anyone who wants some nauseating reading should go back and read K’s blog entries for December. Look over how the aspiring Hack Number One contorted and squirmed and dodged to somehow justify the racket bill and even claim it as a world-historical “progressive” victory.
And now let’s return to the end of Hackman’s latest:

Yes, Gruber has been commenting on health care while doing technical consulting for the administration. But there is nothing wrong with that. More disclosure would have been a good idea — but there is no scandal whatsoever.

And here’s the thing: by claiming that there’s a huge scandal when nothing worse happened than insufficient care about disclosure, Greenwald and the people at FDL are actually reducing our ability to call foul on real corruption. After all, if everything is a scandal, nothing is a scandal. One of these days, perhaps soon, we’ll have a genuinely corrupt administration again — but when whistleblowers try to call attention to the misdeeds, you can be sure that there will be claims that “even liberals said that Obama did things just as bad or worse.” The crusade against Gruber is getting really destructive.

So there it is. Republican corruption is “real corruption”, while in Krugman’s deliberate obfuscation Democratic corruption isn’t corruption at all.
What was the maneuver here? It’s very clear that when Bush was doing stuff like this Krugman objected on principle and rightly refused to entertain any lying explanations and mitigations. But now that Obama’s doing the same thing he suddenly scoffs at principle and deliberately obfuscates via every lie and excuse he can come up with, and with no greater credibility than the Bush hacks ever had.
It’s ironic that Krugman started out as an Obama skeptic (that is, when he was a Hillary hack) but now wants to be Hack Number One for this administration.
That’s why every lie is meant to bolster the bottom line lie that the Democrats are somehow better than the Republicans. We now know for a fact that Krugman never objected to any Bush action on grounds of principle or policy. he objected, always and only, out of Democrat partisanship.
(Needless to say, I and others who actually care about America object to Obama precisely on account of how he has done nothing but continue and intensify Bush corporatism. We object always and only on grounds of principle and policy. And that’s why we condemn Obama for the same sleazy political practices as Bush engaged in. But since hacks like Krugman opposed Bush only as partisans, never as the principled, therefore they always lied when they objected to the practices, and they now don’t object to the same practices once it’s their guy doing it.)
We have to sweep the scene clean of Krugman. Even his complaints about the stimulus are now revealed to be a crock. It wasn’t big enough? But what good would, say, $2 trillion worth of reactionary ratholes like Cash for Clunkers or the homebuyer credit have been? And in spite of his whining Thugman always supported the Bailout. 
Either resources are going to be used for decentralization and relocalization, or they’re going to be wasted and stolen. Obama policies, identical to those of Bush, have been 100% stupid and larcenous.
But as we know, Sunstein and Krugman are die-hard enemies of decentralization of any sort.
Krugman claims he’s worried about an “if everything’s a scandal, nothing’s a scandal” effect? Then why isn’t he blaming the scandalous Obama administration for engaging in such scandalous behavior? Why is he incompetently trying to shoot the messenger? Why, if he ever had a shred of principle, isn’t he joining the fight to hold government accountable? Why is it not a problem to him that Obama and the Democrats came in promising “Change”, came in with a tremendous mandate for Change, came in with one of the rare opportunities in history to actually fight back and reverse the hideous trend of a monstrous crime, and instead chose to join the crime? Chose to take their place among the worst criminals in history?
In the end it’s going to be his fault. Krugman’s fault, among others, when things continue to get worse. They had their chance, and they threw it away with great malice.
In the end, Paul Krugman is just as wretched and snivelling a partisan hack as Armstrong Williams. And in the end, when we the people finally take back our country, all the hacks going to end up rotting on the same trash heap of history, where they belong. ALL of them. 
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