The Mortgage Crisis -- The Facts of the Matter: Why It Dwarfs Almost Everything

 

A Must Read Article of the Day...   by Richard Eskow

The mortgage crisis in this country doesn't get much attention in Washington these days, but it's huge. It's so huge, in fact, that it dwarfs most of the economic issues that have Washington in their grip. It's so huge that it's dragging down our entire economy. It's so huge that the numbers can be difficult to picture.

The scale of the crisis is, in a word, staggering.

Here are seven charts (and another that was borrowed from the Wall Street Journal) along with some facts and figures that will help sketch out the scope of the problem. The numbers that follow are most likely understated, if anything, because we've left out some forms of reduced spending (like that which takes place when homeowners who have paid off their mortgages lose home value.)
The budget cutters push the idea that there's a dichotomy between the heart and the brain, and that they're on the "brain" side. But the numbers don't lie: Ignoring the foreclosure crisis is both heartless and brainless.

See for yourself.

By the time you read this ...

How big is the mortgage crisis? Pick an adjective: astronomic, colossal, enormous, gigantic, ginormous, humongous, jumbo, mammoth, massive, monstrous, mastadonic, monumental, prodigious, tremendous, vast, very big, very large, whopping.

Here's how big it is. Let's assume that you're reading these words one day after I wrote them. That means that:

By the time you read this, there will have been approximately 8,500 foreclosure actions in this country [1] - more than one thousand every hour during the working day.

By the time you read this, homes in the United States will have lost more than $13 million dollars in value. [2] During a 24-hour day, this figure comes out to more than $500,000 an hour.

By the time you read this, homeowners will have paid $750 million in mortgage payments for non-existent housing value- that is, the amount on their mortgages that disappeared when the bubble burst - according to our estimate. [3]

By the time you read this, the nation's bankers will have earned nearly $400 million, of which $56 million will be bonus money. [4] Bankers like to say they work 24/7. (They don't, but let's say they did.) That means they will have collectively earned more than $16 million in salary and more than $2 million in bonuses during each and every one of the 24 hours hours before you read these words - morning, noon, and night.

And all of these figures for the last 24 hours will be reached again during the next 24.

Federal Spending vs. the Mortgage Crisis

How do the deficit and the mortgage crisis compare economically?

Here's a fact for you: The amount of wealth American homeowners have lost over the least three years is much larger than this year's entire Federal budget.

Even our conservative estimate shows that the debt that homeowners are paying off to the banks for no-longer-existing home value - "money for nothing" - is greater than the entire projected Federal deficit for 2011.
[5] Those figures could be a little misleading, since they compare a multi-year problem with a single year's Federal budget. So let's look at the mortgage crisis and its impact on 2011. This year's estimated "money for nothing" payments dwarf the annual spending cuts that Washington's fighting over right now:

They're greater than this year's projected savings from the President's spending freeze, and much greater than the $30 billion in additional spending cuts which House Republicans initially demanded (and which they're likely to get.)

What is the "Homeowner Bank Bailout"?
The first column represents my quite rough (but very conservative) estimate of the payments that consumers will make to banks in 2011 for home value that's evaporated.

That's money to repay loans which banks often knew were likely to go bad when they issued. (If they didn't know, they should have.) After their generous bailout (which was much costlier than has been acknowledged), the banks are still collecting payments for that portion of the loan that covers assets which no longer "exist."

That amounts to an additional, invisible annual bailout every year for the US banking industry, funded by some of the people who can least afford it: struggling homeowners. [6] (This figure doesn't even include people who've been foreclosed upon, which means the bank got to keep everything they'd paid into the house - and got the house, too.)

The "homeowner deficit" is strangling the country as the financial sector drains money from the overall economy for its own non-productive coffers. This chart illustrates that by showing that banks are once again grabbing an unhealthy share of our national wealth:


Source: Kathleen Madigan [1], Wall Street Journal

Without this drain, homeowners would be pumping hundreds of billions of dollars into the economy every year. Now that would be a stimulus.

Entitlement Cuts: Misguided Missiles

Instead of addressing the mortgage crisis, politicians (and the journalists who love them) are fixated on entitlement programs. How much sense does that make in dollars-and-cents terms?



The Best Stimulus: Homeowners or Corporations?

What's the best way to stimulate the economy: By giving corporations tax breaks and regulatory relief, or by fixing the housing crisis?

Both political parties are turning themselves inside out trying to please corporations - partly, they say, because reports say those corporations are sitting on nearly $2 trillion in cash [2]. If we make the CEO's of those corporations "feel better," the argument goes, they'll cut some of that cash loose for hiring and investment and the economy will pick up.

Let's look at that $2 trillion in comparison to lost housing value, and to our estimate of the mortgages being paid on lost housing value:



Those corporations won't really cut that cash loose until they know there are customers waiting to buy their products. There's a great way to make that happen: by helping consumers (more than 20 million households altogether) escape the burden of all this underwater debt.

Less Is Less

The Administration's response to this crisis has been woefully inadequate ... and the Republicans are much worse than that. The GOP's hard at work trying to end any assistance for underwater homeowners.

Administration programs were insufficient by design and then failed to meet even their own, overly modest goals. The HAMP program, for example, was never intended to help all of the homeowners who are still paying underwater mortgages. It should have been. Here's how limited its goals were, when compared to the problem:


But even when compared to the number of homeowners facing foreclosure, it's been a failure:

It hasn't even spent more than a tiny fraction the money allocated to it!

And yet, incredibly, Republicans want to cut it. And the GOP's Congressional leaders also want to kill several other programs for struggling homeowners, including a principal relief program that might help some of the 14 million underwater homeowners who haven't yet missed a payment.
Source: New York Times [3]
Small Talk
Despite the magnitude of the mortgage crisis, all we've been hearing out of Washington is endless chatter about "deficit emergencies," the need for so-called "entitlement reform" (aka cuts), and the supposed "financial Armageddon" that faces us. [7] We've heard almost nothing about the crisis that is ruining millions of lives, costing us millions of jobs, and strangling the economy.
And by the time you read this, that won't have changed.
_______________
FOOTNOTES:
[1] Based on February's rate of foreclosures [4], rounded down to be make the estimate conservative. Foreclosure actions are defined as foreclosure filings and the sale of foreclosed homes.
[2] Based on January's price decline of 2.5% in total value, divided by a 30-day month, using an estimated total residential real estate value of $16.3 trillion that was derived from Federal Reserve data.
[3] A very rough estimate. Assumes that roughly half of the total housing value lost in the bubble is included in mortgage principal that's still being paid off (as opposed to foreclosures, etc.) This figure was derived from that amount, plus a rough calculation of the interest being paid and some assumptions about the remaining lifetime of the loan.
[4] Based on reported 2010 figures.
[5] It's a critical battle, of course - especially to the people who are counting on the government to serve its function in time of need. This piece addresses our warped financial perspective, not the very vital role government plays in our lives. That should not be in question (although it is).
[6] But wait, as the ads say: There's more. These homeowners can't refinance, either, because they don't have collateral (the houses aren't worth as much as the new loan). Alll the "quantitative easing" in the world won't touch them. So the banks are borrowing money cheaply and collecting it from these struggling borrowers at higher rates. [6]
[7] Nobody disagrees that it will be important to address the the Federal deficit over the long term, and Social Security's funding issues will need to be addressed before 2037, when the program will only be able to fund 75% of its planned benefits. (Any plan that cuts those benefits below that amount, or cuts them by that amount even before 2037, is a hoax designed to raid the money that working Americans set aside for that program.)
_________________________________________________________
This post was produced as part of the Curbing Wall Street [5]project and the Strengthen Social Security [6]campaign

----

This article was written by Richard Eskow, a consultant with private-sector and public policy experience in the U.S. and over 20 foreign countries. He is a Senior fellow with the Campaign for America's Future, specializing in health and financial reform issues. He is also a musician and writer.  This article was published on OurFuture.org (http://www.ourfuture.org/)

The Resistance Has Begun

A Must Read Article of the Day...   by Allison Kikenny

For the past week, I’ve been documenting the plethora of nonviolent protests breaking out across the country in opposition to the government’s proposed radical budget cuts. In another typically excellent article, Chris Hedges recently declared that the resistance he’s been calling for has finally begun. The powerful elite got too greedy and took too much from average Americans, who are now fighting back.

Hedges announced he will be joining protesters in Union Square for a planned tax weekend protest in front of Bank of America.

“The political process no longer works,” Kevin Zeese, the director of Prosperity Agenda and one of the organizers of the April 15 event, told me. “The economy is controlled by a handful of economic elites. The necessities of most Americans are no longer being met. The only way to change this is to shift the power to a culture of resistance. This will be the first in a series of events we will organize to help give people control of their economic and political life.”

Hedges implores the one in six workers in this country who does not have a job and the “6 million people who have lost their homes to repossessions” to join the protest. And this isn’t the only event of its kind in the works. Resistance cells have been springing up across the country—some planned, some seemingly spontaneous acts of desperation from citizens at their breaking points.

Albany is braced for a “Wisconsin-style” takeover of the Capitol building. The “People Power” rally includes union members representing state university professors, public school teachers and human services group, who say the state budget will cripple classroom programs, health services and low-income New Yorkers.

Video footage from the budget cut protests in New Hampshire, which organizers claim was the largest gathering of people on State House grounds in twenty-five years, can be viewed here and below.

A similar gathering, though this time protesters actually occupied the Capitol, occurred in Mississippi.
Meanwhile, students in Illinois are organizing to oppose the House of Representative’s recent actions cutting federally funded Pell Grants by 15 percent in 2011. The “Pell Yes!” campaign is designed to heighten awareness of the issue and “help students take a stand.”
In the following video, a UK Uncut organizer gives activists advice on how to form a day of civil disobedience.

In all of these cases of resistance, the participants heed the advice from Hedges, who writes that citizens don’t need leaders, directives from above, or formal organizations.

We don’t need to waste our time appealing to the Democratic Party or writing letters to the editor. We don’t need more diatribes on the Internet. We need to physically get into the public square and create a mass movement. 

That physical action of leaving the computer at home and occupying the bank, street or Capitol is beginning to happen.

///

This article was written by Allison Kikenny, the co-host of the progressive political podcast Citizen radio ( http://www.wearecitizenradio.com/).  The article appeared on Tueday, April 5, 2011 here:  http://www.thenation.com/blog/159664/resistance-has-begun

Are We All Black Americans Now?

A Must Read Article of the Day...   by Melissa Harris Perry

In the months following September 11, my colleague Cornel West offered this insight: national political elites used the devastating attacks to promote the “niggerization of the American people.” West understood that long before 9/11, African-Americans were intimately familiar with terrorism. Through the Jim Crow century, they were routinely and randomly brutalized and murdered by well-organized groups of whites acting beyond the confines of the official state but with the tacit consent of their society. Under the shadow of lynching, black Americans learned what it meant to feel, as West describes, “unsafe, unprotected, subject to random violence, and hated for who they are.” After 9/11 far too many Americans, unaccustomed to this sense of collective intimidation, felt helpless to halt an unjustified war or the erosion of civil liberties. Thus, whether or not they were black, Americans were “niggerized” by the attacks.

In recent months, I have been reminded of Professor West’s analysis because one way to read our current moment is as a blackening of America. The social, economic and political conditions that have long defined African-American life have descended onto a broader population, and it has been instructive to watch how the nation has responded.

Initially, conservatives argued that Tea Party activists had every right to be disgusted with national leadership and to demand swift economic intervention to combat the near 10 percent unemployment rate. Since the mid-1970s, except for a brief dip between 1998 and 2002, unemployment among African-Americans has routinely exceeded 10 percent, yet African-Americans were rarely encouraged to blame systems or organize collectively. Instead blacks were stereotyped as lazy and undeserving. This characterization has been an effective ideological tool for politicians intent on limiting social programs, cutting welfare, ignoring cities, slashing job training and neglecting housing.

Within months, the Tea Party shifted its focus to the deficit. As it did, policy debates about the poor and unemployed came to mirror decades of discourse about black Americans. Extensions of unemployment insurance were decried as “creeping socialism.” Echoing theories of dependency leveled against African-Americans for decades, one conservative blogger suggested that extending unemployment benefits would create “a permanent entitlement and would perpetuate unemployment.” Perhaps, in this moment, Americans understood how dangerously corrosive the characterization of the poor as “idle” is for black people.

This past November the TSA introduced screening procedures that many Americans—liberals and conservatives alike—deemed intrusive, random and demeaning. But for decades urban police forces have regularly employed race-based traffic stops and pedestrian stop-and-frisks in African-American communities. These policing practices have done little to make neighborhoods safer, but they have contributed to massive incarceration rates for black men. Justifying their racially punitive behavior as a reasonable response to potential crime, police forces have acted largely with the consent of white Americans, some of whom later decried the TSA’s new procedures. Perhaps, for a moment, they felt the stinging humiliation that routinely accompanies black life.

Few events more clearly demonstrated the blackening of America than the standoff in Wisconsin. Like the nineteenth-century leaders of Southern states who stripped black citizens of voting rights, public accommodation and civic associations, Wisconsin’s Republican majority dismantled the hard-won basic rights of Wisconsin workers. Like those Confederate leaders, the Wisconsin GOP used intimidation, threats and even the police against demonstrators and rival officials. As the saga unfolded, many Wisconsin citizens felt stunned that their once-secure rights might be eliminated. For a moment, perhaps, they glimpsed the experience of black men and women who watched the shadow of Jim Crow blot out the promises of emancipation.

The 1880s were also the decade when efforts to create corporate personhood were initiated by wealthy railroad barons. In a 2010 article, James and Tomilea Allison (psych professor at Indiana University and former mayor of Bloomington, respectively) traced how these corporate interests misrepresented past cases so that the Supreme Court eventually relied on nonexistent precedent to twist Fourteenth Amendment protections intended for newly freed slaves to instead offer shelter for profiteering corporations. More than a century later, these arguments were crucial to the Citizens United decision, which putatively endowed extraordinarily wealthy corporations with an “equal” right to electoral influence but in practice gave them breathtakingly unequal representation. Perhaps, as they are reduced to a fraction of a citizen, other Americans now catch a glimpse of what it means to be codified as only three-fifths of a person.

Today corporate greed, conservative ideology, manufactured right-wing populism and progressive complicity are making more and more Americans into, as Professor West might characterize them, “niggers.” Rather than try to escape the pain of experiencing some small familiarity with blackness, Americans could choose to learn from generations of African-Americans who resisted dehumanizing processes of domination and inequality. During the 2008 election Obama’s detractors tried to smear him by suggesting that “Hussein” was a terrorist’s moniker. As a demonstration of solidarity, thousands of Americans informally declared that they too would be known by the middle name Hussein. It was purely symbolic, but it rested on a belief in the power to change meaning by embracing rather than eschewing that which is labeled subordinate, alien, dangerous and shameful. By embracing our collective blackness, perhaps we can find the fortitude and creativity necessary to face the continuing erosion of our national social safety net in the face of a persistent economic crisis.

///

This article was written by Melissa Harris Perry, an associate professor of African-American Studies at Princeton University.  The article will be published in the April 18, 2011 edition of the The Nation magazine

Women Under the Budget Knife

 

A Must Read Article of the Day...   by Katha Pollitt

Remember “shared sacrifice”? Like the rain, the budget cuts were supposed to fall on all alike. But somehow men seem to be ending up with more than their share of umbrellas, and women are getting soaked. Attacks on reproductive healthcare are openly aimed at women and have gotten a lot of attention—like the House vote to defund Planned Parenthood and eliminate the Title X family planning program, which has fortunately been blocked in the Senate. Less visible are the ways federal, state and local government cutbacks, touted as neutral and necessary belt-tightening, will fall disproportionately on women.

The cuts will affect women in three ways. Partly as a legacy of private sector discrimination, a huge proportion of working women are employed by government or government contractors, and they tend to work in the very areas slated for the most drastic slashes—education, healthcare, social services, libraries, legal aid, secretarial and other office work. Moreover, because they are more likely to be poor, old and caring for children or relatives, women are the major recipients of social services. Thus, when a senior center is closed down, not only is the elderly person deprived of care likely to be female, the staffer who prepared her lunch or organized her group activities is probably a woman too—and so is the relative who now must take up the slack. When Head Start and childcare slots are eliminated—the Continuing Resolution for fiscal year 2011 proposed by the House axes 368,000 of them—tens of thousands of teachers and aides, almost all female, lose their jobs, and so do many mothers who rely on them. Add massive proposed cuts in the Women, Infants and Children feeding program and the Maternal and Child Health Block Grant, and the abolition of the Women’s Educational Equity program (which monitors schools’ compliance with Title IX), and it’s almost as if there was some kind of concerted plan to undo forty years of progress for women—and, especially, to make sure poor women stay poor.

Consider New York: newly elected Governor Andrew Cuomo plans to cut more than $300 million in human services. According to a devastating report by the Fiscal Policy Institute prepared for the New York Women’s Foundation, “A Harder Struggle, Fewer Opportunities,” the Cuomo budget will slash funding for nonresidential domestic violence programs and summer youth employment programs; defund 105 New York City senior centers; cut $7 million in childcare services for welfare recipients; eliminate transitional jobs programs and childcare for low-income college students; and reduce funding for after-school programs as well as the Nurse-Family Partnership home visiting program. There will be huge cuts in housing help for homeless families, four out of five of which are headed by single mothers; in public schools; and in SUNY and CUNY, where nearly 60 percent of the students are female. In many cases, these cuts come on top of previous ones—since 2008–09, almost 13,000 teachers and support staff have been laid off. As Judith Kurens pointed out in the Gotham Gazette, homeless women, many of whom are fleeing domestic violence, will be forced to choose between their abusers and the streets.

It’s worth noting that Governor Cuomo is a Democrat, and that he is insisting on letting the so-called “millionaire’s tax” on high earners lapse. That tax would bring in around $5 billion—enough to prevent all of these cuts and alleviate much of the pain caused by the recession. Instead of making the well-off shell out a bit extra in hard times (in New York City, the top 1 percent receive 44 percent of total income), Cuomo prefers to plunge struggling mothers deeper into poverty—and their children along with them. Never mind that the state will be living with the long-term consequences—violence, sickness, educational failure, joblessness and every kind of misery—for years to come.

Consider Wisconsin: Governor Scott Walker sparked widespread outrage for limiting the bargaining rights of public sector unions to wages. Less noted was the curious fact that public safety workers—cops, firefighters and security officers—were exempted from his ire. The obvious, cynical reason is that unions representing teachers, nurses and social workers tend to support Democrats, while public safety workers are solid for Republicans. (That also explains why right-wingers like Walker feel free to bash teachers as incompetent, lazy freeloaders but never allude to the well-known romance between cops and doughnuts, let alone their generous retirement packages.)

But is it entirely an accident that the workers deemed unworthy of full bargaining rights are overwhelmingly women, engaged in stereotypically female caring work, and that those whose rights are sacrosanct are men? In a statement on the budget, the University of Wisconsin System women’s studies consortium notes that union membership is crucial for a working woman’s advancement: it not only raises her wages by as much as a year of college but improves her chances of having healthcare even more than earning a college degree would have done, and gives her a measure of job security and a voice in the conditions of her work. Apparently Governor Walker thinks only men deserve those things. After all, this is a man who wants to repeal the state law requiring health insurers to cover birth control, eliminate the Title V family planning program, cut funding for sexual assault victims services and even reduce funding for a pregnant women’s smoking cessation program—oh, and eliminate Badgercare, the state healthcare plan, for 55,000 families a bit over the poverty line.

In state after state, the same gender dynamic is shaping budget cuts. In fact, this is also happening in Britain. The Fawcett Society, a women’s rights group, brought (and unfortunately lost) a gender discrimination lawsuit against the government, claiming that the cuts “risk rolling back women’s equality in the UK by a generation.” It’s not such a stretch to think that’s what may happen here.

///

This article was written by Ktha Pollitt, and appeared in the April 18, 2011 edition of The Nation magazine

The Nowhere Man

A Must Read Article of the Day...   by William Rivers Pitt

President Barack Obama records his weekly address from a UPS customer center as part of the new public-private Green Fleet Partnership, April 1, 2011. (Photo: Pete Souza / White House Photo)

So, yeah, Obama is in. The President of the United States officially threw his hat into the 2012 election ring on Monday morning, and the nation reacted with a resounding, "Oh."

What a mess.

It wasn't even two and a half years ago. Can you believe it? Two and a half years ago, there was a detonation of optimism that echoed across the country once the returns were in on that November night. People took to the streets here in Boston, literally banging pots and pans together as they danced and shouted in celebration.

The scene was repeated in city after city and town after town, and even the "mainstream" media gushed from election night to Inauguration Day about the spectacular moment in American history we were all witnessing together.

Hindsight, however, tells us today that much of that optimism was wildly misplaced. The long shadow of George W. Bush still hung low and dark over the land, as it does even now. That was part of it, of course, part of the sense of expiation and purgation so many felt once the deal went down; on that November night, the national nightmare of Mr. Bush's presidency was writing its final pages, and then came January, and he was gone. Despite all the failures and disappointments that have since come, those were two very good days.

And there have been disappointments. A great, great many of them. The words we heard were beautiful back then, soaring and sure, and many believed. How could they not? Here was this new president who could sing the birds down from the trees, who was introduced to the country in 2004 by way of aconvention keynote addressthat blew the roof off the joint. Some years later, along the jagged, wending path of a brutal primary campaign, candidate Obama was carried to the nomination by the power of his words, and yes, many believed, even in spite of themselves.

But then he won it all, and two and a half years later, many of his most ardent supporters now hear his words and taste ashes in their mouths. You campaign in poetry, someone once said, but you govern in prose.  The poetry was magnificent. The prose, in far too many ways, has been dreck, and those who believed now find themselves more demoralized than they can easily describe.

He and his fellow Democrats all but folded on health care, leaving us with less than half a loaf.

Hebacktrackedon Guantanamo, and doubled down on Afghanistan.

He promised to erase Bush's tax cuts for the wealthy, and broke his oath shamelessly, to his party's great lament in 2010.

Wall Street stands unmolested at the center of his counsel, while Main Street withers on the vine.

He is flipping missiles into Libya while flipping off the American people by racing to "compromise" with brigands and thieves on the matter of how many billions to cut.

He has, to be sure, had hisshare of victories, but in so many critical ways, he has been the Nowhere Man, the absence of what was so seemingly present when he was elevated to his current station.

What galls the most, what infuriates and confounds, is the brazen clarity of the situation at hand. Mr. Obama has not been losing policy arguments to reasonable people. He has been losing policy arguments to people who are, in many instances, absolutely and unabashedly barking mad. He is losing policy arguments to people who sought elected office in government in order to denude and destroy that very government.

Listen to them talk and the matter is plain: they got the job to destroy the job, and are so blinded by the fervor of their political catechism that they cannot be reasoned with under any circumstances. They are destroyers and usurpers, but Mr. Obama has time and again bared his neck to them, and we have all suffered with their sundry victories, and his sundry defeats.

They cannot be reasoned with, but can only be defeated, and after two and a half years, it is the President of the United States alone who appears to have not received the memo. Now he's running for re-election - not that anyone suspected he would do otherwise - and the machinery of campaign war is grinding to life in Chicago and Washington DC. Last time around, Mr. Obama's vast campaign war chest was filled with donations from millions of regular folks all across the country. The Obama campaign took money from the big boys, too; lots and lots of money. But what ultimately brought him to victory came from average Americans who could not afford to give but did. That, as much as anything else, was part of that sense of optimism felt by so many at the beginning.

Now?

Well, now is a different story. A great many of those who gave willingly the last time are two and a half years older today, two and a half years poorer, and two and a half years wiser. They will not be as quick to reach for their wallets and checkbooks when the piper calls them to campaign charity with his well-worn cadence. The Obama 2012 brain trust seems to know this, and are preparing a financial strategyfar more dependent on big moneythan last time. They aim to raise a billion dollars this time. Thus, the political DNA of campaigner Obama and President Obama will even more closely resemble the CEOs and bankers that tore this nation to shreds and tatters.

The feeble fiction of the Democrats vs. Republicans paradigm has been falling to dust for a long time now, inexorably being replaced by a simple truth. There is but one paradigm in this reality, one core fact to be reckoned with: the struggle in America is between the Have's and the Have Not's, between towering wealth , towering greed and everyone else.

It is about a class struggle that has been three centuries in the making, and even those who are today moderately comfortable will not be able to escape calamity. When it comes down, it will come down on all of us...all, of course, except the fortunate few who caused it all in the first place.

But who knows? Mr. Obama could choose to steer back into the wind, challenge his demented opposition with a will, and prevail in a way that inspires those who have waited all this time for the man they gave to and voted for to show up. The odds of re-election favor him in any case; it is hard to defeat an incumbent, and when considering the ludicrous carnival of nonsense that is the presumed Republican field, Mr. Obama's chances only improve. In many battlefield states, demographics favor the president in ways the GOP is not prepared to deal with. The 2012 election campaign promises, above all else and with absolute certainty, to be one of the most deranged political affairs to be seen since time out of mind.

It is tempting to comfort oneself with the notion that there are worst things in the world than a second Obama term, and there is a fat, cynical dollop of truth in that. After all, given the array of challenges this administration has faced since taking office, it is daunting to imagine the sorry condition we would be in under a President McCain. Now imagine watching Vice President Michele Bachmann, tapped by the Republican nominee in two years to shore up the Tea Party vote, taking the oath a heartbeat shy of the biggest chair in the country. Think it can't happen that way? Want to bet on it?

I don't.

Two and a half years ago, it was all about hope and change. Remember that? I am, personally, waiting with baited breath for the next battery of slogans to be deployed by the Obama campaign. No, seriously, I am. Nowhere Man 2012: Because Everyone Else Is Worse. That'll send them racing to the polls.

Yup. Here we go.

Again.

///

This article was written by William Rivers Pitt, and appeared on Tuesday, April 5, 2011 at http://truthout.com/nowhere-man

Big Banks Go After 401(k) Trillions

A Must Read Article of the Day...   by Margaret Collins and Elizabeth Odie

 

JPMorgan Chase, BofA, and Wells Fargo are gearing up to compete with Fidelity and Vanguard to administer retirement plans

Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) are adding staff, creating easier-to-use technology, and competing on fees in an effort to win a bigger share of the trillions of dollars in 401(k) savings plans. JPMorgan almost doubled its sales force dedicated to selling retirement plan services to employers in 2010, according to Michael Falcon, whose job as head of retirement in the U.S. and Canada for the bank's asset management unit was created in January. "It's one of the top priorities" at JPMorgan, he says.


Americans held $2.9 trillion in 401(k) plans as of September, and the total may reach $4 trillion by 2015, according to Cerulli Associates, a Boston research firm. Increased competition from banks may lead to lower costs and more choices for employers and savers, says Laura Pavlenko Lutton, an editorial director in the mutual fund research group at Morningstar (MORN). And it may mean less revenue for the top three 401(k) administrators: Fidelity, Aon Hewitt (AON), and Vanguard, which together had 43 percent of the market at the end of 2009, compared with a combined share of less than 10 percent for Bank of America, JPMorgan, and Wells Fargo, according to Cerulli.

The most expensive plan administrators charge fees equal to more than 6 percent of the amount of money in employee accounts annually, while the lowest-cost providers charge less than one-tenth of one percent, says Ryan Alfred, co-founder of BrightScope, a San Diego firm that rates 401(k) plans. In most cases, the money comes out of employees' assets, but some companies shoulder a portion or all of the fees. Bank of America, JPMorgan, and Wells Fargo would not disclose the average fees for plans they serve. Michael Kozemchak, managing director of Institutional Investment Consulting, says the employers he works with that sought bids on their 401(k)s in the last year were able to realize average cost savings of 31 percent.

Hallmark Cards switched its plan to JPMorgan last year to reduce costs and improve services for employees, says Tresia Franklin, head of benefits and compensation for the Kansas City (Mo.) company. JPMorgan had the best pricing for the services Hallmark wanted, she says. Franklin declined to disclose how much Hallmark pays the bank in fees or to quantify its savings. The plan had been administered by Aon Hewitt, the consulting and human resources outsourcing firm, which declined to comment on the change or its fees.

Banks are searching for new ways to make money as losses on mortgages and increased regulation of fees have curbed their revenue sources, says Terry Moore, managing director of the North America banking practice for consulting firm Accenture.

"We've been upping the ante on retirement," says Andy Sieg, head of retirement services for Bank of America Merrill Lynch. The bank has beefed up its retirement services staff with executives brought over from Fidelity and other rivals, including Rich Linton, who had overseen Fidelity's adviser retirement group and now has a similar role with Bank of America
.
Wells Fargo has added features that allow employers to more closely track their employees' saving and investing, says Laurie Nordquist, director of institutional retirement and trust for the bank. In 2010, Wells Fargo added $6.2 billion to the defined-contribution assets it administers. Bank of America gathered an additional $14.5 billion, and JPMorgan Chase added $10 billion in 2010. The total market grew by about $125 billion in the first nine months of last year. Not all banks are rushing into the business. Citigroup (C) doesn't have a 401(k) administration operation.

Fidelity, which dominates the industry, is "very comfortable" with the increased competition, says James MacDonald, head of workplace investing for the Boston-based mutual-fund company. Fidelity administered 27 percent of all assets in 401(k) plans as of 2009, or three times more than Aon Hewitt, its closest competitor. Fidelity's client retention rate is 97 percent, and it runs the plans of General Electric (GE), Microsoft (MSFT), and IBM (IBM), among others, according to BrightScope.

Bank of America's Sieg says his company will be able to claim market share by winning the plans of corporate customers of its banking business. "We have access to more client companies than any other firm in the marketplace," he says. "We're just beginning to scratch the surface of that opportunity."

///

This article was written by Margaret Collins and Elizabeth Odie,and appeared on March 31, 2011 in
http://www.businessweek.com/magazine/content/11_15/b4223053701239.htm

401(k)s Fail Millions of Retirees

A Must Read Article of the Day...   by Demos.org

 Hidden Fees Swallow 20% of Balance, Yield Low Growth, Susceptible to Market Volatility--According to New Report

 

New York--The ability to retire with economic security is a cornerstone of the American dream, but that great promise could elude millions because of widespread failures of the 401(k) system, according to a new report by Demos.

.

The Failure of the 401(k): Why Individual Retirement Plans are a Costly Gamble for American Workers, by Demos policy analyst Robert Hiltonsmith, finds that moving from pension systems with fixed returns to risky 401(k), the aspiration to retire after a lifetime of work into a secure, middle-class-lifestyle has become all too elusive, and could be out of reach for millions of Baby Boomers on the cusp of reaching age 65.

"The retirement security of American families has crumbled in the past generation," said Hiltonsmith. "Workers retiring in the next 20 years can expect to make only 65 percent during retirement of what they made during their working years--16 percent less than their parents. And now, millions of American are out of work and not building retirement equity, and in the middle of what seems, on a personal level, like a never-ending recession. Like these families' financial security, 401(k)s have taken a nosedive for far too many. It's time to put retirement security back on the national agenda."
The report underscores several trends among today's workers that forecast a shaky retirement and illuminates key problems with the 401(k) system. Findings include:

• Only 59 percent of full time workers have access to retirement plans at work, leaving a large part of the workforce to rely solely on Social Security benefits that are inadequate for a comfortable retirement and are under further attack by political opponents. Much of the decline in retirement security is due to the shift in the private sector from providing retirement benefits through traditional pensions, which guaranteed a lifetime stream of income at retirement, to less secure individual retirement accounts, whose benefits vary with the size of employer and employee contributions, and the volatile swings of the stock market.

• Of the many workers lacking access to a retirement plan at work, already economically disadvantaged groups-minorities, young people, and low-income workers-have the lowest access rates. Among full-time employees, just 38 percent of Latinos, 54.4 percent of workers aged 25-43, and 38.4 percent of workers in the lowest income quintile have access to a retirement plan.

• A description of the many risks to which individual retirement plans expose workers. The significant possibility of outliving retirement savings or losing them to a turbulent market, high fees, or poor investment decisions make 401ks and other individual retirement plans unfit to be the private supplement to Social Security.

• An analysis of the large effect that high fees can have on workers' retirement savings. These hidden and opaque charges for investment management cost an average worker 20 percent of the overall value of their 401(k). Put another way, that's about $70,000 in fees for a 401(k) with a value of $350,000 at retirement, the recommended amount for a median income retiree. That equals about four years of mortgage payments for the average home loan borrower.

"Basically what we've learned is that, even if you do everything by the book--contribute heavily to and don't borrow against your 401(k) over a working lifetime--you're still not guaranteed a secure retirement," said Hiltonsmith. "The massive hidden fees, the twists and turns of the market, and the fact that, let's face it, most of us are not Gordon Gekko and have no clue about the risks associated with the various investment options we tick-off when we sign on to our 401(k). It has turned out to be a failure, and a clear sign that we need to a solid, pension-style plan with steady growth, security and guaranteed returns."
The report examines several proposals for private retirement reform. Though all these proposals contain elements that would improve access to benefits, only one, Guaranteed Retirement Accounts (GRA), would provide a secure foundation for the dignified retirement that should be the right of all American workers.

This article was printed on November 10, 2010 at http://www.demos.org/press.cfm?currentarticleID=36A60745-3FF4-6C82-50F9120F7489C6EB
.

---