News and Reviews
Media and Economic Understanding
In NYC on April 6? Then think about coming to a conference, sponsored by Columbia U’s School of International and Public Affairs and the Roosevelt Institute: “Facing the Fracture: Media and Economic Understanding.”
Featuring a stellar lineup of smart folks, most of whom really really want to make financial issues comprehensible to the uninitiated, including Joseph Stiglitz, Arianna Huffington, Amy Goodman, Peter (no relation to Amy) Goodman, Mike Hudson, Yves Smith, and many more, including yours truly. See you there.
Financial 411: More on Fannie & Freddie
WNYC radio’s Financial 411 had me on yesterday to talk about the future of Fannie Mae and Freddie Mac, and the great mystery I wrote about in Politico last week: Why has the Obama administration been silent about its intentions for restructuring the mortgage finance system? The tape, please.
Why Fannie & Freddie matter most
New from me in Politico: an op-ed stressing that as important as a Consumer Financial Protection Agency is, the most important looming financial reform battle on the Hill is over the future role of the federal government in backing homeownership. The administration knows that any debate touching on Fannie Mae, Freddie Mac and $300 billion or so in public investment is radioactive. It has been silent on the GSEs’ fate for more than a year, even after it promised that it would illuminate its plans this February.
The House Financial Services Committee was supposed to hear something, anything, about the future of housing finance from Treasury Secretary Timothy Geithner at a March 2 hearing that was then postponed to March 23. I’m marking my calendar again but not holding my breath.
Nation Institute Investigative Fund
Over the past year, the Nation Institute Investigative Fund has sponsored my reporting on foreclosure profiteering by loan modification companies and real estate speculators taking advantage of the crisis, at the expense of borrowers and communities. The i-Fund recently relaunched its website, and it’s beautiful.
Check out this Q&A with me (audio or transcript) to learn more about my reporting on the foreclosure crisis. And give a big thanks to the i-Fund for supporting investigative reporting like mine…see its website for links to some stellar reporting you may have missed.
Anthropology of the bubble culture
In The Baffler, an indispensable journal now back from the dead, Moe Tkacik delivers a fascinating anthropology of the bubble culture on Wall Street, based on a reading not just of the big books out there but documents she points out are much more relevant to understanding the colossal failure – the correspondence and recollections of the mavericks who shorted the mortgage markets before they blew up.
What was easy to convey was that something about the past ten years had been unsustainable. But the truth—that an entire ideology had been unsustainable—is one that we have not yet grasped. And that is why so many journalists, economists, intellectuals and financiers now scramble to churn out books that for the most part read like the memoirs of people trying to make themselves feel less stupid. The current financial system was constructed to make us all feel stupid, and in the process of building it the architects allowed themselves to become stupid as well. That ignorance begat infantilization, which bred cowardice and systemic moral decay. The only sustainable way out is to reacquaint ourselves and our fellow citizens with the wisdom of asking stupid questions.
Her all-too-true lament is that banks let machines and formulas do the thinking for them, instead of relying on real knowledge about the world and judgments as human beings. But Tkacik says it better than me.
Housing Watch highlights
I’ve been blogging at Aol’s new Housing Watch site, sharing my take on the mortgage/financial crisis, regulatory reform (what little there is of it so far), and what it all means for consumers.
Some highlights. Dig the traffic-bait headlines! See all my posts here.
The New Mortgage Revolution: Walk Away
Borrowers Pay to Refill FHA’s Pot
U.S. Cracks Down on “Reverse Redlining”
How income inequality caused the crash
Kevin Drum is as excited as Mike Konczal and I are that an economist is coming out with a book blaming income inequality for the financial crisis. In his recent (do read it) New Yorker piece on the death of the Chicago School, John Cassidy describes the heresy of U of Chicago prof Raghuram Rajan as revealed in Rajan’s upcoming book Fault Lines: “the initial causes of the breakdown were stagnant wages and rising inequality.”
Here’s my uncredentialed take on Rajan’s point, from the epilogue of Our Lot:
For the financially skilled and illiterate alike, taking on extreme debt became, in many instances, a rational act. At first the troops selling debt were greeted as liberators— because they sure looked like it. In the de cade that began with President Clinton’s second term, Americans, on the whole, were prosperous as they’ve never been before, making more money and buying more things, no small thanks to the larger economic force of the debt surge itself. At the boom’s peak, home equity loans alone pumped up the gross domestic product by more than 2 percent.
But in the real world, that new wealth was proving illusory. Just try to send kids to a competitive college on $54,000 a year, the income of the typical American family. See if you can find a good school district, career, and home in the same place (without a PhD or an MBA). And pray that you don’t have to deal with a serious illness, with or without health insurance.
Americans coped with increasingly extravagant but necessary expenses through trillions in borrowing against rising property values. In 2004, the nation’s homes were collectively worth $19 trillion, $12.5 trillion of which was home equity yet to be tapped. That year, homeowners took out another $1 trillion in home equity loans and credit lines, and spent most of the money to pay off other debts.
Why did so many borrow so much? There’s no one answer, of course, except perhaps an economic habit that has united a culturally disparate nation for generations. Second only to oil, the U.S. economy runs on anxiety—on the gambles of more than three hundred million people scrambling for security.
Can the bubble’s wounds be healed?
New from me, in the Jan/Feb American Prospect: A look at why reversing the damage caused by urban real estate speculation in the bubble will be easier said than done.
Short answer: Treasury and the FDIC don’t want to force already-teetering banks to take losses. But that leaves cities like New York littered with buildings their owners can’t afford to maintain (or even finish) – and anyone living in or near these structures watching them decay.
Follow the Fed
My latest at Housing Watch: While the nation’s glare and financial industry dollars are riveted on Congress as it ponders financial reform with all the commitment my daughter brings to her potty training, the Fed is plowing ahead with some aggressive fixes to mortgage lending. Proposed changes to Regulation Z would effectively kill yield spread premiums, the kickbacks lenders pay to mortgage brokers to steer borrowers into excessively expensive and risky loans. Even if Congress waters down the Consumer Financial Protection Agency into sludge (which looks more and more likely), the Fed’s rules will serve as a first line of defense protecting borrowers from theft and deception. The folks who support Ron Paul’s bill for Congress to watchdog the Fed oughta think twice about what it could mean for consumer protection.
This is a good chance for me to ladle hosannas on Ryan Grim and Arthur Delaney’s excellent “The Cash Committee: How Wall Street Wins on the Hill” exposé for The Huffington Post. I’d really rather take my chances with Bernanke.
Action Speaks! The Rise of Levittown
This fall I had the pleasure of participating in Action Speaks!, a panel/radio broadcast series in Providence, RI, digging into unsung events in American history. I was invited, along with V. Elaine Gross of the Long Island group Erase Racism and architect Paul Lukez, to talk about the past and future of the suburbs and the American dream of owning a single-family detached home, apropos of Levittown.
Photo: Viera Levitt
We gathered at AS220, a community and arts space in downtown Providence that is a regional and national treasure – a place where any artist in Rhode Island can put on a show (performing, visual, political – all arts and expression welcome) and where performers from outside the Ocean State compete fiercely to get stage time. I know because my husband the booking agent has tried. Artistic director Bert Crenca has nurtured this remarkable institution from its days as a live/work space for himself and other Providence artists into much more than the arts space – upstairs is home to a youth program where teens can mix music, silkscreen, do computer art etc etc etc, and AS220 has lately been rehabbing historic buildings as artist live/work spaces.
The crowd for the panel was appropriately idealistic. Their questions reflected not only intense concern about the suburbs’ environmental impact but also for the cultural and social consequences of car dependence and limited public space. No creativity, TV instead of the arts, you know the stereotype. I warned them not to get complacent about the virtues of the dense urban environment to cultivate creative enterprise, to look at how New York City has effectively evicted its arts from the urban core, except for big-money establishment institutions that are as much about business as art. The city’s creative hub is now Brooklyn – the old ‘burbs. Now admittedly Brooklyn’s creative scenes cluster in walkable areas, and they’re linked by subway lines (yo, G-train). But the point is that that the economics of space, and mobility between spaces, are at least as important as their density. As inner-ring suburbs evolve as more economically and socially diverse communities than they’ve been historically, their combo of relatively inexpensive real estate, mass transit links and and cultural cross-pollination are bound to make them exciting places for the arts.
Okay, here’s the show.
Thank you host Marc Levitt (no relation to Levittown) for inviting me to Action Speaks! and for an inspired series.
How the homes we live in turned into the monsters that ate our economy and the United States became a nation obsessed with real estate.
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