Economy is Still Choking on Housing — When Will Obama Act?

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EDITOR’S NOTE: I am tired of reading about how economists express surprise at the sluggish economy. The same goes for when they express hope at slightest uptick in any index that is followed, none of which are real representations of economic activity. As the recent new York Times Editorial stated, as housing goes, so goes the economy. Housing is corrupted by the ongoing fraud being perpetrated by Wall Street. We have fraudulent loans compounded by fraudulent foreclosures, covered over with the appearance of having modification and short-sale programs that fall short of any reasonable expectations. We have a synthetic inventory of homes for sale or in the pipeline that are said to be owned by the banks but legally are still owned by the homeowners who were victims of fraudulent lending, fraudulent foreclosures, fraudulent auctions and other violations of statutory and common law.

The solution lies in housing and being honest about it, going on the facts and getting rid of ideology that creates the myth of a false moral dilemma. Pull back the curtain, let the facts roll in and apply existing law. Stop assuming that the obligation is in default just because some third party comes in and says so. Stop assuming that the obligation still exists.

• Stop assuming that the payments weren’t being made to the investor -lender even as the forecloser declared a default.
  
• Just because the homeowner-borrower didn’t make a payment doesn’t mean the payment was due and doesn’t mean that the payment was not received by the creditor.
  
• Stop assuming that the foreclosure paperwork is just a snafu and take it for what it is — intentional fabrication and forgery in support of a fraudulent scheme for the banks to get a free house damaging both the investors who put up money and the borrowers who put up their homes.
  
• And stop assuming that just because a bank shows up through counsel that they are entitled to buy the property at auction without paying any money and without being the actual creditor; their credit bid is a nullity.

Stop throwing people out of their homes without any evidence that it is legally right and proper to do so. And restore people to their homes with whatever equity is left in the home after Wall Street has trashed the housing market and took down the economy with it. You want an economic recovery? Give the homes back to their real owners and make any would-be forecloser prove their case with real evidence. You’ll end up with virtually no foreclosures and an economy in which the middle class wealth has been restored to the tune of trillions of dollars, without a penny coming out of the treasury from taxpayer money. Now that is a stimulus I can live with.

The Economy Is Wavering. Does Washington Notice?

By DAVID LEONHARDT

The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday. Another report showed that economic growth at the start of the year was no faster than the Commerce Department initially reported — “a real surprise,” said Ian Shepherdson of High Frequency Economics.

Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent.

An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

When the economy weakened in the first quarter, Ben S. Bernanke, the Federal Reserve chairman, and Obama administration officials said the slowdown was just a blip and growth would soon pick up. Today, many Wall Street economists are saying much the same thing: any day now, things will improve.

Maybe they will. But the history of financial crises shows that they produce weak, uneven recoveries, with unemployment remaining high for years. That history also shows that aggressive government action — the kind of action Washington took in 2008 and 2009, but not for most of 2010 — can make the situation much better than it otherwise would be.

The latest signs of weakness suggest that policy makers remain too sanguine. It is easy to see how the rest of 2011 could end up disappointing, much as 2010 did.

For one thing, there are specific forces holding back growth. Oil prices, though down in the last few weeks, are still 40 percent higher than a year ago and continue to siphon money away from the American economy to overseas economies. When I filled my gas tank last weekend, it cost $74, more than I think I have ever paid.

The housing market also remains in terrible shape. Europe is still struggling with its debt troubles. State and local governments continue to cut jobs.

These specific problems worsen the broader insecurity of both households and business executives — insecurity that is typical in the wake of a financial crisis. Long after the crisis itself is over, businesses are slow to hire and quick to fire. Thursday’s report on new jobless claims showed that they rose by 10,000, to 424,000, which is not a number associated with a solid recovery.

“Labor market gains may be faltering somewhat,” Joshua Shapiro, chief United States economist at MFR, a New York research firm, wrote to clients after the report’s release.

For households, already coping with miserly wage growth, that is another reason not to spend. The Commerce Department’s updated gross domestic product figures showed that consumer spending grew at an annual inflation-adjusted rate of only 2.2 percent in the first quarter, not the 2.7 percent rate the department initially reported.

The economy does still have some bright spots, and they could grow in coming months, just as policy makers and private forecasters are, once again, predicting. If North Africa and the Middle East do not become more chaotic, oil prices may continue falling. Vehicle production will probably pick up as the parts shortages caused by the Japanese earthquake end. The falling dollar will continue to help American exporters, as well as any domestic businesses that compete with foreign importers.

But there is no doubt that the economy has performed considerably worse in the last few months than most policy makers expected. The situation is now uncomfortably similar to last year’s, when the economy sped up in the first few months only to stall in the spring and summer.

The most sensible response for Washington would be to begin thinking more seriously about taking out an insurance policy on the recovery. The Fed could stop worrying so much about inflation, which remains historically low, and look at how else it might encourage spending. As Mr. Bernanke has said before, the Fed “retains considerable power” to lift growth.

The White House and Congress, meanwhile, could begin talking about extending last year’s temporary extension of business tax credits, household tax cuts and jobless benefits beyond Dec. 31. It would be easy enough to pair such an extension with longer-term deficit reduction.

Any temporary measures will eventually need to lapse, of course. But the current moment remains a textbook time to use them — when the economy is struggling to emerge from the aftermath of a terrible recession. The one thing not to do is to turn to deficit reduction too quickly after a crisis, as Europe is painfully learning.

Almost four years after the mortgage market first began to quiver and unemployment began to rise, Americans are understandably eager for good economic news. But wishing for it doesn’t make it so. You have to wonder whether the people in Washington have learned that lesson yet.

Tags: bailout, Bank of America, borrower, countrywide, credit crisis, disclosure, Eviction, foreclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, mortgage meltdown, securitization, TILA audit, trustee
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