Economy

PBS Reports On Illinois' "Perfect Storm Of Fiscal Problems"

Josh Kalven — Sat, 11 Oct 2008 11:08:47 -0700

Yesterday, PBS' Newshour with Jim Lehrer featured a report from WTTW's Elizabeth Bracket on how the "ripple effect" of the current economic crisis is affecting Illinois.

In the piece, Bracket talks to the owner of Neptune Construction who had to close his business in South Elgin because his cash flow was hampered by delayed state payments and he lacked access to short-term credit. She later interviews the executive director of Blue Cap, a Blue Island-based social service agency, who worries his organization is in jeopardy because of delayed Medicaid payments. State Comptroller Dan Hynes and Treasurer Alexi Giannoulias appear as well. Watch it:

Halvorson Says She Would Have Opposed Both Bailout Bills

Josh Kalven — Mon, 06 Oct 2008 08:22:33 -0700

Democrat Debbie Halvorson appeared on Fox Chicago Sunday yesterday to discuss the 11th Congressional District race. Not surprisingly, the discussion quickly turned to the two bailout bills considered by the House of Representatives last week and how she would have voted if a member of Congress. Co-host Jack Conaty seemed to expect her to say she would have voted against the first bill and in favor of the second. But in line with her comments at last week's debate, Halvorson instead responded that she would have opposed both bills, saying that neither version assisted "the average person who needs help renegotiating their mortgage." Halvorson went on to describe as "shameful" the fact that incumbent Rep. Jerry Weller was the only member of the House to miss last Monday's vote. Watch it:

Bailout Bill Passes House As Three IL Members Flip Sides

Adam Doster — Fri, 03 Oct 2008 11:13:28 -0700

Minutes ago, the House passed Emergency Economic Stabilization Act of 2008, otherwise known as the $700 billion Wall Street bailout bill, by a margin of 263-171. The New York Times has posted the roll call, which shows there were three Illinois converts. Rep. Judy Biggert, feeling obvious pressure from the administration, voted yes after submitting a "no" vote earlier in the week. So did South Side Democrats Bobby Rush and Jesse Jackson Jr., who each got a call from Barack Obama asking them to reconsider. According to the AP last night, Rush said he was "seriously listening’’ to the presidential nominee, who got in touch with a number of Congressional Black Caucus members urging them to support the measure. Here's Jackson Jr.'s statement:

Congressman Jesse L. Jackson Jr. said today he will support an emergency rescue package for the nation's troubled financial system after getting assurances from Senator Barack Obama that, as president, they "would aggressively regulate predatory lending and force mortgage modifications to prevent foreclosures."

"Senator Obama and I agree that our financial foundation needs reinforcing. We also agree that homeowners need protections. First things first. Congress must stabilize the economy or we'll see more Americans facing foreclosures, layoffs, and bankruptcy," said Jackson, who previously opposed the House bailout bill.

"I have been assured by the top economists in the world, from the right and the left, that this emergency mission is necessary. I have also been assured that the new Administration in Washington will provide unprecedented protections for homeowners," said Jackson, one of Obama's 10 national campaign co-chairs.

Republican Jerry Weller also voted yes after missing the Monday voted due to a "family matter."

You can see the total roll call here. More to come ...

Conservatives Use ACORN Objections To Squash Housing Aid

Adam Doster — Thu, 02 Oct 2008 08:12:25 -0700

Last night, the Senate approved a $700 billion Wall Street bailout bill. Absent from the legislation was a provision aimed at building and rehabilitating affordable housing stock. For that, you can blame conservatives.

For days, Republicans of various stripes have fumed about a section of the bailout bill they believe was written principally to redirect taxpayer money to ACORN, the low-income community group right-wingers love to hate. Earlier this week, the local conservative blog Backyard Conservative flagged a Ken Blackwell article in which the vote purging extraordinaire writes that "repeated rumors leaked out that the Democrats were trying to funnel money to a hyper-partisan organization involved in criminal voter fraud." House Minority leader John Boehner told reporters the trust fund idea was a "left-wing giveaway Democrats are pushing to force taxpayers to bankroll a slush fund for a discredited ally of the Democratic Party.” Even 10th District GOP Rep. Mark Kirk told The Hill last Friday that centrists might not vote for a bill that included funds for ACORN.

So what are they talking about? As originally written, the bill contained a stipulation that promised 20 percent of the government’s profits from the sale of a troubled asset be deposited, with 65 percent of the deposit directed to the National Affordable Housing Trust Fund. Why was it negotiated out? Because conservatives raised a ruckus without understanding the mechanics or aim of the fund.

Wonk Room provides some specifics about how the resources are allocated:

But conservatives are completely mischaracterizing this part of the bill. Directing funds to the Housing Trust Fund does not mean that money is being given to ACORN. In fact, state and local governments - not the federal government - choose which organizations receive money from the fund.

While it is conceivable that ACORN would receive money, it “was not specifically directed any funds in the previous proposal.” For its part, ACORN, in order to maintain independence, “does not accept government funding and is not tax exempt.”

So if it's not an "ACORN slush fund," what does the trust fund actually accomplish? The National Low Income Housing Coaltion explains:

The Housing Trust Fund was established on July 30 when President Bush signed the Housing and Economic Recovery Act of 2008. It is a new federal housing program that will provide funds to state governments for the purpose of building and rehabilitating homes for the very lowest income people in the United States. These are the people who work in the low wage work force, as well as seniors and people with disabilities and people who are homeless. The states are to make grants to housing developers with demonstrated capacity and experience who will build and operate these homes.

The Housing Trust Fund is the first new federal housing production program since 1974 that is specifically for extremely low income renter households. The need for this new program is acute. Today in the United States, there are 9 million extremely low income renter households and only 6.2 million homes with rents these families can afford. Consequently, 71% of extremely low income renters spend more than half of their income for housing, leaving them without enough money for other essentials and at high risk of losing their homes and joining the ranks of the homeless. This is a housing crisis of major and longstanding proportions that the federal government must address.

So thanks to conservatives' scare tactics, we may see even more tent cities spring up across the country.

Oberweis Joins The Community Reinvestment Act Chorus

Adam Doster — Wed, 01 Oct 2008 12:51:04 -0700

We've done our part to point out that the 1977 Community Reinvestment Act (CRA) did not -- I repeat, did not -- lead to the current economic crisis. But the myth just keeps cropping up in conservative circles. Last Friday, the Daily Herald published a bevy of interviews with suburban congressional candidates, as well as those at the statehouse level. Lo and behold, when asked what steps Congress should take to promote economic recovery, 14th District Republican candidate Jim Oberweis blamed the CRA for all the nation's problems.

From the Q&A:

In large measure, the financial crisis we're now facing is a crisis created by the unintended consequences of earlier Congressional and governmental action - so before we go about creating new "fixes," let's all take a breath and figure out how we got here in the first place, and do what we can to avoid mistakes the second time around. [...]

So, how did we get here? The Clinton Administration's decision to take a Carter-era law -- the Community Redevelopment Act -- and pump it up, made it easier for sub-prime borrowers (read: greater credit risks) to obtain loans, while simultaneously making it harder for lenders to deny them such loans. The result? Lots of bad loans were made.

Here's a tip, Jim: if you're going to baselessly suggest that a 30-year old law precipitated our current meltdown, you should probably remember the correct name of the legislation.

On a related note, the Campaign For America's Future released an exhaustive, point-by-point rebuttal of the CRA myth last night. Definitely worth a read.

McCain's Empty Earmark Pledge

Adam Doster — Wed, 01 Oct 2008 10:00:12 -0700

When asked what he would do to lead the U.S. out of its financial crisis, John McCain fell back on his bete noir: earmarks. Calling them a "gateway drug" in the first presidential debate, McCain vowed to "veto every single spending bill that comes across my desk," if it contains just one pork barrel project. In what has become a constant refrain, he added: "I will make them famous. You will know their names."

Let's put aside the fact that earmarks had nothing at all to do with the mortgage meltdown, just as they had nothing to do with the Katrina disaster or the Minneapolis bridge collapse. McCain's claim that he will significantly cut spending by eliminating earmarks is simply hogwash. FactCheck.org issued this rejoinder back in May:

McCain seems to say that he can save $100 billion by cutting out earmarks. But budget experts say that cutting earmarks would actually save very little. And questioned more closely, McCain's campaign now says that his planned savings have nothing to do with eliminating earmarks.

For more perspective, check out this graph (via the The Plank) that shows the miniscule slice of federal spending devoted to earmarks:

More to the point, earmarks are not by definition evil. While they can fund corporate giveaways, earmarks also support libraries, police departments, schools and laboratories across the country. As Lindsay Beyerstein writes, "earmarked spending is only as wise or as wasteful as the project itself." That may be why legislators like Republican Ray LaHood aren't so keen on giving them up:

Lawmakers retiring from Congress at the end of the year are asking their colleagues to save their earmarks. [...]

One reason LaHood might not be worried is that he spoke with Senate Majority Whip Dick Durbin (D-Ill.), a member of the Senate Appropriations Committee who will be in a position to save LaHood’s earmarks next year.

“He said he would try to help with some of these projects,” LaHood said.

A spokesman for Durbin confirmed the conversation and praised LaHood for his 12 years of service on Capitol Hill.

“No one exemplifies the ability to set aside partisan differences in favor of Illinois’s priorities better than Congressman LaHood,” said Joe Shoemaker, Durbin’s communications director. “He and Sen. Durbin talk often and work together on dozens of Illinois projects every year — and those projects reflect the consensus and priorities of the entire Illinois congressional delegation.”

Because earmark abuse is a reality, reform and transparency is needed in the process. But if McCain thinks he can pass meaningful legislation and right our nation's economic ship by demagoguing on two percent of discretionary spending, he's nuts.

Check out more of our earmark coverage here and here.

Local Conservative Piles On The Community Reinvestment Act

Josh Kalven — Wed, 01 Oct 2008 08:35:48 -0700

Chicagoan Jonathan Hoenig, who runs Capitalistpig Asset Management, is a frequent guest on conservative outlets like Fox News, as well as numerous financial networks. He's previously burnished his reputation as a hardcore right-winger by urging a military strike on North Korea in order to boost the stock market and arguing that the economy's ability to "thrive" depended on the execution of convicted September 11 mastermind Zacarias Moussaoui. Now he's on the national airwaves spreading the bogus claim that the Community Reinvestment Act (CRA) is a root cause of the current financial crisis.

Here's his plan for how to deal with the meltdown, as explained during a recent appearance on Bill O'Reilly's radio show (as captured by Media Matters):

HOENIG: Let the bad actors fail, let bad banks fail, kick deadbeats out of their homes, get rid of the Community Reinvestment Act that makes banks give loans to bad risks, no more easy money from the Fed, no more bailouts for anybody, and no Fannie, Freddie ...

Media Matters provides a great rebuttal to the idea that the CRA is to blame for the current situation. For more, check out Adam's post from earlier this week in which he explains why the act is worth preserving.

Bean, Jackson Jr. Provide Contrasting Views On The Bailout Plan

Angela Caputo — Tue, 30 Sep 2008 16:21:28 -0700

Democratic Reps. Melissa Bean and Jesse Jackson Jr. both hit the airwaves today, adding their two cents to the ongoing conversation about a proposed Wall Street bailout. While the pair cast diametrical votes on the House floor yesterday -- Bean supported the plan, Jackson rejected it -- they each say they're looking for the same thing in an economic recovery package: A good deal for the average American.

But clearly, the "average Joe" isn't the same guy in Illinois' 2nd and 8th congressional districts.

In the South Side neighborhoods and suburbs that Jackson represents, people are facing some of the highest foreclosure rates in the state. Incomes have remained virtually flat. And poverty rates are on the rise.

During an interview today on WIND's John & Cisco In The Morning, Jackson said he'd support a plan that eliminates the adjustable-rate mortgages that have fueled the foreclosure crisis. And he wants to see an economic stimulus component for taxpayers. Listen:

Internal mp3

Meanwhile, on MSNBC this afternoon, Bean made clear that her top priority is stabilizing the market in order to protect 401(k)s and credit card accounts. Watch:

Spilling Ink: Bailout Goes Bust

Adam Doster — Tue, 30 Sep 2008 11:43:32 -0700

After the failure of the bailout negotiations on Capitol Hill yesterday, a bevy of local newspapers analyzed the fallout this morning. The consensus? The bill was a necessity and both parties must muster the courage to get it passed.

Providing a list of "difficult truths," the Tribune considers the political risk in supporting the bill but argues lawmakers must act now to avoid "dangers to our jobs, our credit transactions and our savings":

Democrats and Republicans can continue to fire the blame gun at one another, as they spent way too much time doing Monday ... Or the leaders of both parties can recraft the administration's plan, perhaps to lower its price tag or otherwise shift some of the responsibility away from taxpayers who've followed every rule in the book. That would let Monday's opponents claim a justified measure of victory: "I demanded changes in this plan to protect you, and Congress agreed!" Then they could vote in good conscience to approve that revised version.

The Sun-Times agrees that "this rescue package, or something like it, is the necessary medicine to restore the nation's economic health." And because neither President Bush or Congress has the credibility to persuade Americans of the bill's necessity, they call on the presidential candidates to step forward:

Only two politicians have the confidence of the public -- Barack Obama and John McCain. They are the leaders of this nation at this crucial moment. As important as electioneering is to them and the crucial decision the voters must make Nov. 4, it's vital that they take the lead in convincing Americans that their future -- and not just the fate of the fat cats on Wall Street -- is at stake in Congress passing an economic recovery bill.

While they understand why taxpayers were hesitant to foot the bill for a bailout of Wall Street, the State Journal-Register's editorial board echoed the Tribune, writing "Congress must act to avoid the potentially disastrous consequences of this financial turmoil." They also called out members of the Illinois congressional delegation who voted "nay" because of public opinion:

This is one of those votes where members of Congress must, for the good of the nation, look their constituents in the eye and disagree with them. They may be kicked out of office, but if they don’t do the right thing, history’s judgment may be much harsher than a lost election.

Although they were short on specifics, the Daily Herald stressed that all Americans stood to lose from Congress' inaction. They were also frustrated that dissenting politicians offered few answers to why they opposed the bill, other than shallow political considerations. Instead, they called on suburban lawmakers to "put up or shut up":

As leaders now look to fashion a rescue approach that can protect what is left of the nest eggs of tens of millions of American families, no observations could be more clear than two points for politicians. They must act with the political courage that extends beyond the whims of the ballot box. They must set aside the drive to make partisan political points off whatever occurs.

The Peoria Journal-Star makes a few valuable points, noting that the bill was indeed flawed and the "doomsday rhetoric surrounding this issue" wasn't helpful. Even so, they called on lawmakers to pass a bill soon to protect those on "Main Street":

Americans cannot afford for their Congress to do nothing now. Banks have stopped lending, and access to credit is the lifeblood of this economy, especially for small business. Reportedly, lawmakers want to go home so they can campaign for reelection. If they leave Washington without at least a workable, short-term package to calm the markets and buy some time - this week - not a single incumbent who voted "no" Monday should keep his or her job.

Unfortunately, none of the local papers called a spade a spade, stating that Republican ideology got us into the crisis, and Republican ideologues poisoned this bill's passage. Thankfully, we have that elitist New York Times:

Republican no votes were rooted less in analysis or principle than in political posturing and ideological rigidity. The House minority leader, John Boehner, conceded as much: “While we were able to move the bill drastically to the right, it wasn’t good enough for our members.”

It’s not clear what would be good enough for the Republicans since there was very little talk of substance on Monday after the bill died on the floor of the House. Instead, the Republicans tried to blame their revolt on a speech given before the vote by House Speaker Nancy Pelosi, who connected the current crisis to the fiscal and economic mismanagement of the Bush years. It may not have been the perfect moment to say that, but it was true.

Republicans were also upset that serial bailouts represent a rejection of free-market principles. They do. That’s because the free market in finance, unregulated and unsupervised, has failed. And, in its failure, it is inflicting greater damage on an already weak economy.

Schakowsky On The Bailout Bill

Josh Kalven — Tue, 30 Sep 2008 08:18:31 -0700

Yesterday, Rep. Jan Schakowsky was among the seven Illinois Democrats to vote in favor of the proposed $700 billion Wall Street bailout package. What's interesting about her vote is that, on September 24, she and 15 other members of the House's progressive caucus signed a letter demanding better homeowner protections in the bill. The large majority of this group ultimately voted against this bill. Schakowsky, obviously, was an exception.

Here's her explanation on the House floor prior to the vote:

Today we are saying “NO” to a blank check! Congress cut in half the Administration’s automatic $700 billion, requiring Congressional review for future payments. We are making sure that none of the CEO’s who have run their companies into the ground and created this mess will retire with a “Golden Parachute”. We make sure that taxpayers get a share of the profits of participating companies, and require the next President to submit a plan to ensure that taxpayers are repaid in full by Wall Street. We help prevent home foreclosures destroying our neighborhoods by allowing government to work with loan servicers on new mortgage terms. Finally, we ensure tough, independent oversight and transparency, including judicial review of the Treasury Secretary’s actions.

Unfortunately, because of the need to obtain bipartisan support to move a bill quickly, this bill is by no means perfect. I believe that this legislation should have included bankruptcy protections and mandatory mortgage restructuring for homeowners in or at risk of foreclosure. I believe that we need to crack down on the lobbying practices and stop campaign contributions from companies which are clearly too irresponsible to manage themselves.

I am extremely disappointed that, even as we address part of the economic crisis, we failed to enact a second economic stimulus that would immediately create jobs and put money in the pocket of middle class families and struggling state and local governments. Unfortunately, the plan to extend unemployment compensation, increase food stamp and health care funding, and create jobs by rebuilding our infrastructure failed in the Senate last week. This is clearly unfinished business.