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Guest Post: Double Dip In Housing Largely Caused By Failure to Prosecute Mortgage Fraud There’s a double-dip in housing prices (and see this). As CNN points outs: U.S. home prices fell 2% in the third quarter after having gained steadily since early 2009. The S&P Case-Shiller Home Price Index has recorded gains in four of the previous five quarters, including a 4.7% jump between April and June 2010. That leaves national home prices down 1.5% year over year and off 2% compared to the second quarter, according to the Index, which was released Tuesday. The inventory of homes is high with nearly 3.9 million on the market in October, according to the National Association of Realtors. That means it would take 10.5 months to sell through all of the current inventory. In a normal market, there is usually a six-month supply. Plus, there’s a massive shadow inventory of homes waiting in the wings. These are homes that are deeply in the foreclosure process or even repossessed by banks but not yet put back on the market. Much of the massive shadow inventory of homes is due to the fraud involved with mortgage documents. CNN notes in a second article: Big banks are having trouble restarting the foreclosure process after this fall’s “robo-signing” scandal, and the once booming market for foreclosed homes has been hit hard as a result.

 Having recently entered into homeownership, I am now in the unhappy state of having to advocate against my own interest. As someone whose freelance expenses make it worthwhile to itemize, I plan to take the mortgage interest tax deduction until they phase the damn thing out, or I pay off the house, whichever comes first.  But as an economics journalist, I retain my deep hatred for the thing.   The idea behind the tax deduction is . . . well, actually, scratch that.  There is no idea behind the tax deduction.  The reason that we have a special deduction for mortgage interest is not that politicians sat down and calmly, reasonably, worked out a way to reach certain social goals they thought were desirable.  The mortgage interest deduction is an artifact of changes to the tax code in the 1980s.

Those dreadful new unemployment numbers are even worse than they look. – Unemployment clocked in at 9.8 percent in November, according to the Bureau of Labor Statistics, up from 9.6 percent in October. More than 15 million Americans remain jobless. And 6.8 million Americans report being out of work for more than six months. These are terrible statistics no matter how you look at them. But in some ways, the headline numbers do not go far enough in capturing just how bad the labor market is. Digging deeper into the report, the numbers do not get any better. It’s miserable job growth, more so than a flood of re-entrants into the labor market, that accounts for the rising rate. The economy added a measly 39,000 jobs in November, down from 172,000 in October. It needs to add about 125,000 jobs a month just to keep up with new entrants to the labor market (recent graduates, for instance). Excluding workers hired for the decennial census, the economy has done so in only one month in the last three years. The private sector did add jobs for the 11th straight month. But it added just 50,000 positions, the worst number since January.  Plus, the report showed that many segments of the population already disproportionately hit by the recession got smacked again. The number of Americans out of work for more than six months increased as a percentage of all jobless, to 41.9 percent. Unemployment among college graduates, whose degrees often insulate them from jobs woes, hit its highest level in 40 years, at 5.1 percent. Moreover, the employment-to-population ratio—a broad measure of how economically productive the population is—fell back to its recession-era low.

Let’s Take Back Our Money – Our goal should be total relocalized control of money. The optimal amount of centralized (“federal”*) currency and taxes is zero. Even at this early stage we should look to pioneering projects like the Brixton pound (which can be used to pay local taxes). (We also ought to think in terms of economic relocalization in the form of co-ops. This would have many advantages which I’ll discuss in future posts, but the one I want to mention here is the possibility of bringing as much diversification and exchange as possible under the rubric of cooperative share schemes, so that the parasitic central structure would have trouble getting after us even through trying to tax barter.)Before I get to my affirmative ideas on money reclamation, let me quickly dispose of some negation, what I’m not really advocating. As I wrote in my MMT posts (parts one and two), I do want the knowledge to spread, that in principle deficit spending is unconstrained and beneficial where the economy is depressed. There Is No Deficit Problem. It’s a fiscal terrorist lie. We know for a fact that no one among the elites who claims to care about the deficit of the debt actually does. The Bailout, the wars, the Pentagon budget, Big Ag subsidies, and corporate welfare in general, all prove this.
 
Here Comes The Skulldruggery (Fed) — Well that didn’t take long: It may have taken 34 years, but Ron Paul has arrived, and he doesn’t plan to squander the moment. His agenda includes landing the chairmanship of the House Financial Services Committee panel that oversees monetary policy—a job that will give him the power to push legislation reining in the central bank and to haul Fed governors up to Capitol Hill for hearings. The prospect has Wall Street, Fed officials, and even Republican House leaders worried that Paul’s agenda could roil the markets and make a mockery of the U.S. financial system.  Notice the slant: Ron Paul will make a mockery of the financial system. Not expose the mockery that is the US Financial system. No lawmaker on a committee can "make" an industry a mockery of that thing.  That takes the acts of real people in the actual industry.

 

Bernie Sanders: Worth Listening To – A nice rant on the tax system. Unfortunately Bernie gets this one wrong.  Taxing rich people doesn’t matter if the rich people can steal.  Tax ’em and they’ll just steal more. The solution is to start stuffing those millionaires and billionaires who cheated people in prison where they make nothing and get to take some of the boffing personally they have served up on everyone else. Start calling for that Bernie and I’ll support you.

 
How to boost employment – Given the urgency of boosting employment and reducing unemployment, we need much more than vague ideas about training and apprenticeship. The good news is that there are at least two very good ideas which could be implemented quite easily and which would have a direct effect on employment. The first—and this can’t be stressed enough—is simply extending the federal unemployment extensions. As Menzie Chinn notes, the CEA has scored this, and the numbers are enormous: already, the program has increased the level of employment by 793,000 jobs. If the extensions are kept dead, there will be 593,000 fewer jobs in a year’s time than there would be if they were resuscitated, including more than 46,000 jobs in Florida and more than 26,000 jobs in Michigan. This is not intuitive, especially to economist types who think that incentives matter and that at the margin, paying people to remain unemployed is not going to increase their chances of getting a job. But the fact is that those unemployment benefits are spent, and the extra economic activity naturally creates employment.
 
Hoenig Gets It Right (But For The Wrong Reasons) – This is an interesting opinion piece: THE world has experienced a severe financial crisis and economic recession. The Treasury and the Federal Reserve took actions that saved businesses and jobs and may very well have saved the economy itself from ruin.  It did?  Does covering up fraud make it go away?  Does denying debt and insolvency make you less insolvent?  No, it in fact makes you more insolvent, since the new "money" you cover it up with is created via debt, and that debt comes with an interest cost.   Therefore, taking more debt to cover an incipient default makes you more insolvent, not less. Still, the public seems ungrateful, expressing anger at these institutions that saved the day. Why?  Americans are angry in part because they sense that the government was as much a cause of the crisis as its cure. Americans are angry because:
  • The banks knew they were making bad loans and didn’t care.  The people who took those bad loans went under.  The lenders who made them got bailed out, which effectively means that the people got billed twice – first they got bilked, then they were assessed to pay for the losses that the robber created.  That’s backwards – the robber should be fined (e.g. his yacht and home in the Hamptons confiscated) and jailed for his conduct, not bailed out.
  • The fraud hasn’t stopped.  Not only were the robbers not punished they continue to steal.  Foreclosuregate anyone?  Foreclosing without the legal paperwork, telling people to intentionally default to get a modification and then refusing it, 150,000+ admitted cases of perjurous documents filed with state courts, the list goes on and on.
 

Will Thousands of Foreclosures Be Voided Because Non-Lawyers Prosecuted Them? – Yves Smith – If you thought robo signing was bad, you ain’t seen nothin’ yet.  The website 4ClosureFraud presents the gory details of a potential major new front in the foreclosure mess. A Pennsylvania foreclosure mill, Goldbeck McCafferty & McKeever, is accused by Patrick Loughren of allowing non-attorneys to file and prosecute foreclosures. A DailyFinance story gives the overview: If Loughren prevails, this case will prove to be vastly more significant than robo-signing. Robo signing, while a fraud on the court, does not necessarily invalidate the underlying legal action. The practice of law by non-lawyers is a far more serious matter. In Pennsylvania it is a crime. In the case against GMM and its apparently unsupervised paralegals, the plaintiff is seeking disgorgement of falsely billed “attorney’s fees”.  But even more important, the lack of attorney involvement would render the foreclosures void. Pennsylvania courts have found “proceedings commenced by persons unauthorized to practice law are a nullity”. Federal courts interpreting Pennsylvania law have supported this point of view.

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