Special Report: Is America the sick man of the globe? – This is the point of the story where many Americans typically glaze over because they see Michigan as a long-standing financial basket case of a state thanks to the shrinking U.S. auto industry. But the problem is that the broad decline of the manufacturing sector that has been underway in this country for decades now may threaten not just the long-term health of the economy but also the living standards of all but the wealthiest Americans. "The whole country is now seeing the story that Michigan has been living with for a long time," . "We have kicked the can so far down the road that now all we have is a cliff to fall off."

 Rich people have no idea what you’re thinking – Wondering why your fat cat boss seems so clueless about why you don’t want to work extra shifts during the holidays? It could be because he can’t understand the dour looks you keep throwing his way. Upper-class people are less adept at reading other people’s emotions than their lower-class counterparts, according to a new study published in the journal Psychological Science. “We found that people from a lower-class background – in terms of occupation, status, education and income level – performed better in terms of emotional intelligence, the ability to read the emotions that others are feeling,” says Michael Kraus, co-author of the study and a postdoctoral student in psychology at the University of California, San Francisco.

 Survey Finds Banks Still Foreclose on Homeowners Seeking Loan Mods –  In May, we first reported on how disorganization at banks caused homeowners to lose their homes while still in the loan modification process [1] — something that’s not supposed to happen under the rules of the government loan modification program. Treasury officials said they were working to fix the problem, but nine months later the practice is prevalent, according to a new report.  For the report, the National Consumer Law Center and the National Association of Consumer Advocates surveyed 96 attorneys, representing over 2,500 homeowners. Nearly every attorney [2] said that they had clients whose banks tried to foreclose while the homeowner was still negotiating a loan modification. Half of the attorneys said they had represented more than 20 homeowners in that situation. Typically, foreclosures and modifications are processed at the same time in different parts of banks that often don’t talk to one another. This "dual track" became a hot topic [4] this fall as the "robo-signing" scandal [5] highlighted the degree to which banks automated the foreclosure process. In a congressional hearing [6] in November, Bank of America and Chase both admitted to using this system and said it was actually an industry-wide practice.  Diane Thompson, an attorney who works with the NCLC, told us a big hurdle to changing the system is the government-sponsored mortgage giant Fannie Mae, which owns or guarantees a third of all mortgages.

Obama Foreclosure Relief: Even ‘Success’ Is Hellish – But one fact makes Town’s case both unusual and especially troubling: She amounts to a success story. She is among those who have applied for help under the Obama plan and eventually come out with a so-called permanent loan modification–lowered payments for five years.  The Treasury Department counts more than 520,000 people who have secured permanent loan modifications under its Home Affordable Modification Program, or HAMP. Town is among those who have secured permanently lowered payments from Fannie Mae or Freddie Mac, the government-controlled mortgage companies. Since the fall of 2009, they have collectively delivered about 179,000 permanent loan modifications, according to the the Federal Housing Finance Agency. "If I’m a success," Town said, "I feel badly for the failures."

Geithner on Foreclosure Fraud: What’s the Problem? – The Congressional Oversight Panel held a hearing today with Treasury Secretary Timothy Geithner. The issue areas were broad, but the COP’s two most recent reports have concerned the failure of HAMP and the significant systemic risk to the financial system from foreclosure fraud and investor put-backs. So obviously, this was a major subject in today’s hearing. Damon Silvers got at this dramatically, essentially slamming the cheerleaders trying to push the “TARP worked!” line…And the foreclosures that have resulted, often fraudulently, are off-loading that unhealthiness to millions of borrowers facing a life-changing tragedy. So what does Secretary Geithner think about these issues? Not much! He didn’t get around to the housing market in his opening statement until the very end, where he merely touted the failed HAMP program, and cited some additional steps and programs. When asked point-blank about the issues raised by the November COP report, namely about the risk to the banks from investor put-backs and foreclosure fraud, he shrugged it off. Asked whether the mortgage servicing problems could damage institutions and require a “TARP two”, Geithner replied simply: “No.”

A Green Detroit? No, a Guzzling One – Now, nearly a year and a half after the two automakers exited bankruptcy, the administration has defined down the goals of the bailout, focusing on G.M.’s and Chrysler’s return to profitability and job creation. Though these are promising developments that show the bailout has not been an unmitigated short-term failure, the new emphasis shows just how far the industry is from the kind of transformation we were promised.  In particular, what Mr. Obama called his “one goal” — having Detroit “lead the world in building the next generation of clean cars” — is nowhere near being achieved. While the idea of improving G.M.’s and Chrysler’s fuel efficiency was doubtless a politically popular justification for the bailout, American consumers have not embraced the goal with equal fervor. Sales of fuel-sipping compact and subcompact cars have actually dropped this year, while pickup and sport utility vehicle sales grew by double-digit percentages.

Big Banks Bonus BonanzaOnce again, Wall Street is on track to pay astronomical bonuses to its star traders, even as the rest of America is reeling from the devastation the banks have unleashed on the global economy. These billion-dollar bonuses come at our expense, have no rational justification, and only serve to destabilize the larger economy. It is time to rein in banker compensation to get the economy working for Main Street again and to prevent another global economic catastrophe in the near future.  Today SEIU has released a new report, Big Banks Bonus Bonanza.

Ezra Klein – Republicans are not fiscally responsible – In the Clinton era, and then again in the Obama era, congressional Democrats operated under "paygo" rules. Paygo meant, quite simply, that each dollar of spending or tax cuts had to be matched by a dollar of spending cuts or tax increases. They didn’t always follow it — emergency spending, like for the war or the stimulus, didn’t fall under paygo, and nor did the extension of the Bush tax cuts — but generally speaking, they did.  In the Bush years, Republicans didn’t use paygo at all. That’s why neither the tax cuts nor Medicare Part D even pretended to be paid for. But the Boehner Republicans just won an election by fretting over deficits. It would look sort of bad to repeal paygo on day one. So instead, they’re neutering it. House Republicans are adding it with something called "cutgo." Under cutgo, tax cuts don’t have to be paid for, and spending increases can’t be offset by tax increases. The idea is that the only two things you can do are cut spending and cut taxes.
Celtic Creditors and the Future of Europe and the Euro – The struggle within the EU and the European Central Bank (ECB) over the nature of European project continues. The EU continues to be dominated by the French/German tandem. The Euro, once the great hope of the periphery – with Ireland as its brightest star – now poses a triple threat to the periphery. The Euro removes the ability to devalue a national currency. The European stability pact (which Germany and France see as essential to maintain the value of the Euro) sharply limits the use of fiscal policies to respond to a severe recession. The ECB’s sole mandate is to restrict inflation – regardless of its impact on unemployment – so monetary policy may also be pro-cyclical in a recession. Economists warned, before the Euro was adopted, that it would impair the ability of nations to respond to a serious recession and that this impairment could eventually undermine the value of the Euro. The global competition in laxity for national currencies has compounded the EU’s inherent triple threat. The EU is “losing” this competition.

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