Mailbag: Foreclosure Fixes, Taxing the Rich and Obama as a Randian
Plus: Dick Fuld's good qualities, Chuck Schumer and Wall Street dollars
Long-time fan. Really excited to see you try this new format to interact
with your readers. On to my question:
Say you're about to embark on a cross-Atlantic flight, and the plane's packed to the gills. You're just settling in, ready for takeoff, and just then, walking in at the last minute, is your flight companion.
He awkwardly fits his carry-on luggage inside the overhead bin, secures his belts, finally turns to you, extends his hand and says, "Hi, I'm..." Given your extensive coverage and experience with a wide-range of characters, who would you pick as the one most guaranteed to make your flight memorable? You have the pick of the litter: Jack Abramoff, Lloyd Blankfein, George Bush Jr., Dick Cheney, Alan Greenspan, Sarah Palin... etc. etc. None of them will know who you are. Or at least when the conversation starts. I'll leave it to you to play it out.
In that situation, as a journalist, you'd naturally like to pick someone who knows a lot and is a bombastic, stupid narcissist as well as a loose-lipped drunk. And for my purposes, I also want someone who knows what actually happened behind the scenes in the fall of 2008, when I'm pretty sure a string of Watergate-sized crimes were committed as the Treasury and the Fed were marionetting the survival of the big banks using taxpayer money and state power. So combining those two prerequisites... Well, we probably have to rule out a Christian Scientist like Hank Paulson, but there are plenty of other interesting candidates. Dick Fuld? He seems dumb and impolitic enough. John Thain? Ken Lewis? John Mack? I'll probably go with Fuld.
Do you have any upcoming public appearances?
As a matter of fact, I do. I'll be speaking in Maplewood, New Jersey on Saturday, January 29, at a bookstore called Words. A good friend of mine set this one up, and we're having dinner with the wives afterward, so I need a big crowd -- otherwise things are going to get weird between us, dinner will be awkward, lots of staring at the menu in silence, etc. So please do come out if you're in the Tri-State area. More details here. I'll also be speaking at Columbia in early March; details on that one to come.
I don't know if you saw this story or not, but I just came across it on the online edition of the New York Times. Apparently, two families in MA that had been foreclosed on were both allowed back into their homes and given full ownership of the property after the court found evidence of shoddy paperwork. Now the banks either have to pay them for the property or the investors must simply take a loss on the value of the security. Incredible!
I really appreciated your work in raising awareness about the foreclosure shams a few months back, and I think you were important in raising awareness about that issue. Thought you might be happy to know there are tiny inklings of progress being made in that bleak, bleak story!
I got a number of letters about this court decision. I'm not sure I completely understand the ramifications of it, but certainly it sounds like a great thing on the surface -- at the very least, I'm sure the partners of every one of the major Wall Street banks developed 5-6 new hemorrhoids at the news of this decision.
There's a flip side, of course, which is that decisions like this, and ones that invalidate the MERS transfers -- they may forestall unjust foreclosures and keep people in homes, but they won't actually do much to fix the situation. Preventing bad foreclosures is great, but I'm pretty sure they need to come up with some sort of legislative solution to a) properly compensate the investors in the MBS who are usually the true owners of the mortgage b) negotiate new payment schedules so that homeowners who win these applications don't feel like squatters but legitimate owners c) preserves as much as possible the credit scores of the homeowners in question, and d) create a modern registry system that does make sense, that both compensates the state for taxes and makes sales of mortgages efficient. I don't think they can do this through the courts; we're going to need a federal law that creates a logical procedure for dealing with the bad mortgages from the bubble period, an amnesty or a federal review or something. The problem is, of course, is that any move to legally change the status of these mortgages would affect the value of all these mortgage-backed instruments still floating around, which would leave these banks more or less instantly bankrupt, which would set the stage for another round of bailouts. If this decision means the banks have to take a big loss, they'll find a way somehow to put that bite back onto the taxpayer. As I saw a commenter on Zero Hedge (with the apt handle what_a_mess_man) write, "cue another back-door, taxpayer-funded bank bailout in 3...2...1!"
In my lifetime, Reagan and both Bush administrations cut taxes for the top bracket and the economy suffered. Trickle-down economics failed miserably. However, as part of Johnson's Great Society (actually it was a Kennedy plan, but was enacted three months after his death), taxes for the rich were dropped from 91% to 71%. As a result, Gross National Product rose 10% in the first year, and economic growth averaged a rate of 4.5% from 1961 to 1968. Disposable personal income rose 15% in 1966 alone. Federal revenues increased dramatically from $94 billion in 1961 to $150 billion in 1967. So my question is, what did Kennedy and Johnson do right? Or more accurately, what did Reagan and the Bushes do wrong?
Thanks for your time and keep up the great work.
I don't think it's as simple as saying that Johnson taxed the rich and Reagan cut taxes for the rich, and those moves led to a rise and fall, respectively, in overall disposable income. Obviously the big factor here was the disappearance overseas of the private manufacturing economy during the time period in question, and let's not forget that Clinton played a major role in that phenomenon as well, being the first Democratic president to aggressively slash trade protections (hell, even Reagan stepped in to protect the U.S. machine tool industry from the Japanese). I'm not sure that the best way to fix the income disparity question is through more aggressive taxation, but let's put it this way -- clearly there was a time in our history where there was a lot more policy emphasis on making sure that the bulk of the population had a solid, baseline standard of living. And back in those days, the rich paid more taxes. They also just weren't as rich to begin with. In 1965 the average CEO made about 24 times the salary of an average worker. Today it's what, 275 times as much? I doubt the entire decline in American living standards is hidden in that extra coin up in the very top tax brackets, but some of it has to be there. I'm not sure how we walk that money back, but I think a good start is halting policy that goes in the opposite direction, i.e. taxpayer-funded bailouts, finance and pharma-industry subsidies, and so on.
Obama is probably the most exceptional example of American Exceptionalism in his rise, and one of the themes you hit in your book is how baffled the "Masters of the Universe," even those who have risen from the janitorial closet, are at the venom aroused by their actions. It almost seems now as if Obama is your cookie-cutter Randian, a more striking example than even Greenspan, whose campaign lies and subsequent administrational decisions portray him as almost a Machiavellian Randian, whose sole purpose was to rise to the global elite, message some shoulders, and cement his position. His golf, vacations, aloofness, obfuscations, and blatant pandering fit the mold nicely (and disappointingly). Did he simply fool everyone?
Just a thought.
Note: This thought essentially comes from near-simultaneous digestion of
Griftopia, "The Rise of a New Global Elite" at The Atlantic, Gregg Easterbrook's "American Exceptionalism and the DMV Factor," and seeing that President Obama has appointed Bill Daley as Chief of Staff.
I'm not sure how much of a Randian figure Barack Obama is, but since I already whaled on Gregg Easterbrook last week, I might as well answer at least that part of your question: that DMV column of his reads like something stolen from Tom Friedman. If I'm reading it correctly, Easterbrook's thesis is that Americans lack class anger toward the rich because their more immediate experiences lead them to be angry with the government. In other words, Americans lack class anger toward the rich because Gregg Easterbrook recently had to wait on line at the DMV.
In one of your recent posts you linked to open secrets which showed that Sen. Chuck Schumer is far and away the biggest beneficiary of Wall Street dollars. I'm a lifelong New Yorker and grew up liking Schumer but I find the sheer amount of money Sen. Schumer has received, and the disparity between him and other pols, kind of disturbing. My question is how do you think that manifests itself? I understand that this calls for speculation but, in your opinion, what are these donors (investors?) getting exactly?
Stay tuned for a large feature article that will be coming out in Rolling Stone next month. Schumer is a central figure in a crazy story explaining exactly what those people get for their money.
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