• Intel has plans to invest during the down-turn. They'll be retooling some of their facilities for the next generation of chips.
• Supervisors from across the state will be lobbying for a budget in Sacramento. Perhaps some of them can convince a few Republicans. If they did, it would be a greater contribution than Arnold Schwarzenegger has made to the process.
• And some leaders are heading to Washington. The Mayors of San Jose, San Diego, and LA will be pushing for aid to their cities in the stimulus package. Perhaps Mayor Sanders could prevail upon Brian Bilbray to vote yes for once?
• There's a very good investigative series going on by former UK Independent writer Andrew Gumbel at a new site called The Wrap. Gumbel has twostories up about the Motion Picture & Television Fund and their closing of a convalescent home for aging actors last month. Gumbel accuses the foundation of lying about the reasons for the closure, and he has the tax returns to prove it (their assets actually increased in 2006 and 2007). In the companion piece, Gumbel finds that the CEO of the MPTF took a $600,000 salary right before closing the home due to the "financial strain." Six former residents have died in the past month, so this isn't an abstract story. The MPTF will respond to the charges in a tele-conference tomorrow. This is a great example of online investigative journalism making a difference.
• Apparently there will actually be a bottom for the home prices in the Sacramento region, we just aren't close to it yet. While the crash just seems to continue, Moody's thinks much of the Sacramento market will hit bottom by Q4 2009, with the remaining coming around by Q1 2010.
• You know how the crisis has been lead by residential foreclosures? Well, economists issued a report in San Diego yesterday warning about commercial foreclosures. With rising vacancy rates, some commercial real estate interests might not be able to keep up with payments.
• We have a full-fledged water crisis in Los Angeles, despite the fact that it's rained almost every day for a week and another three-day storm is on the way. The word "unsustainable" leaps to mind...
Democratic legislative leaders are in Washington today arguing for increased stimulus money for California. I've been arguing that this is required for some time, and hopefully it will be done in such a way that a) it can be applied to the General Fund deficit (so far Arnold has not asked for budget relief in that way) and b) it can be used without up-front money that will be matched, because the cash crisis limits our ability to do that.
However, there is something else that the Obama Administration can do right away to help the bottom line of the state and its citizens, and that is deal with the crisis in the housing market here. It's no secret that California is one of the hardest-hit states by foreclosures; in Stanislaus County, for example, 9 percent of all houses and condos in the county have been foreclosed upon, a staggering figure. That's almost $4 billion dollars worth of foreclosures in Stanislaus alone. In larger counties like San Bernardino and Riverside, you can see how this foreclosure crisis affects new housing starts (there are a glut of cheaper foreclosed homes on the market) and thusly unemployment figures.
Only four years ago, Riverside and nearby San Bernardino, often called the Inland Empire, were California's economic powerhouse, accounting for more than a fifth of the state's new jobs. Today, unemployment reigns in the sprawling region east of Los Angeles. The 9.5 percent jobless rate in the two counties matches Detroit's as the highest of any major metropolitan area in the U.S.
Although there was a surge in construction employment in the U.S., and about a 50% increase in California (as a percent of total employment), construction employment doubled (as a percent of total employment) in the Inland Empire [...]
With the housing bust, the percent construction employment has declined sharply and the unemployment rate has risen to almost 10%. Is it any surprise that jobless rate in the Inland Empire matches Detroit's as the highest of any major metropolitan area in the U.S.?
Nobody is calling on the federal government to prop up a sick housing market that will not see a broad recovery for a while. But foreclosures have a disruptive effect on the greater economy. They hurt property values, they hurt banks, and they hurt employment. The crisis is only slated to grow if nothing is done, with homeowners of every income class affected. And so foreclosure aid would be a major boost to California, and it can be done both quickly and effectively. By pledging that $100 billion from the TARP program will go to limit foreclosures, Obama has already begun this effort. Ted Lieu thinks that the Obama Administration understands the nature of the problem. (over)
Everybody at the post-Christmas sales today? Yeah, you and nobody else. Here are a few links to give to you and yours.
• This is really a terrible tragedy in Covina, where a man dressed in a Santa outfit opened fire on a Christmas party at his ex-wife's family's house, eventually pouring lighter fluid on it and burning it down. Nine bodies have so far been recovered at the site, and the assailant, who had $17,000 and a plane ticket to Canada on him, instead drove to his brother's house in Sylmar and took his own life. Stunning and horrible.
• On a markedly more hopeful note, here's an LA Daily News story (which made the front page) about state Obama 2.0 organizers who joined together to engage in community service projects throughout the past week. If nothing else, Obama has inspired a generation of activists who will pay deeper attention to their local communities, and I think it's just the beginning. A national Day of service is planned for January 19, the day before the inauguration.
• Another in a series of less-than-meets-the-eye reports about the California housing market shows home sales way up but the median price way down. Close to half of the sales were on foreclosed properties, accounting for the price decrease. This also makes it extremely difficult to sell a non-distressed home, because the competition on price is so great.
• The latest apportionment study by Election Data Services projects that California may not lose a Congressional seat as previously feared. The state has seen an increase in growth relative to the other states lately. I would add that growth by region is probably different than projected models, given the shock to the housing markets. Most of the areas growing the fastest in the state, like the Central Valley and the Inland Empire, are among the worst housing spots in the nation, and their populations relative to the coasts may suffer as a result.
• High-speed rail officials are optimistic about their chances to secure federal funding to finish the projected cost of voter-approved Prop. 1A.
The S&P Case-Shiller Index is one of the leading trackers of the national housing market. It recently reported a 16.6% national drop in home prices for the third quarter, and included projections for 2009 and 2010. Happy holidays- Eight of the ten worst projected housing markets for 2009 are in California:
1. Los Angeles
2008 median house price: $375,340
2009 projected change: -24.9%
2010 projected change: -5.1%
2. Stockton
2008 median house price: $248,050
2009 projected change: -24.7%
2010 projected change: -4.0%
3. Riverside
2008 median house price: $256,540
2009 projected change: -23.3%
2010 projected change: -4.8%
5. Sacramento
2008 median house price: $225,140
2009 projected change: -22.2%
2010 projected change: 2.3%
6. Santa Ana/ Anaheim
2008 median house price: $532,810
2009 projected change: -22.0%
2010 projected change: -3.5%
7. Fresno
2008 median house price: $257,170
2009 projected change: -21.6%
2010 projected change: -3.3%
8. San Diego
2008 median house price: $412,490
2009 projected change: -21.1%
2010 projected change: -2.9%
9. Bakersfield
2008 median house price: $227,270
2009 projected change: -20.9%
2010 projected change: -2.5%
Just the technical populations of those eight cities is a combined eight million people. The metropolitan areas are of course much larger. While Republicans in Sacramento continue to watch the state's financial situation spiral further and further out of control, home owners still have a lot further to fall. Which means that as the GOP tries to force deeper cuts into safety net programs, they're going to be that much more desperately important in the future.
These numbers should be extremely scary. Nine of the state's thirteen biggest cities are on the above list. This morning, Paul Krugman wrote: "Whatever the new administration does, we're in for months, perhaps even a year, of economic hell." That's with the best minds in the nation formulating policy that will find executive and legislative branches working together to pass a recovery plan. On the other hand, California is staring down the barrel of a gun at the freezing of transportation projects, furloughed state workers, wage freezes, and deep cuts to the programs that protect citizens in times of economic downturn.
Nothing is going to be enough to truly counterbalance these grim economic times in the next year. But doing nothing simply can't be an option with California now not only self-destructing, but leading the rest of the country down as well.
Something for the legislature to read while they're on LOCKDOWN.
• We're in a special session of the legislature, separate from their normal work. So while the Yacht Party stonewalls and both sides bicker, they are making $173 a day for the privilege, with the current total at $128,000 and counting. Good work if you can get it.
• Stockton, Merced and Modesto were dead last nationally in home prices, with homes in all three metro areas losing at least 30% of their value in the first nine months of the year. The Central Valley is just getting buried. If you want to know where the rest of the state (and the nation) is headed, look there.
• The state's Healthy Families program, California's contribution to S-CHIP, was on the verge of becoming extinct until First 5 provided a $16 million dollar cash infusion, allowing their enrollment to remain open through the end of the fiscal year in June. This is of course one of the programs on the Yacht Party's chopping block. Because who likes healthy kids?
Today's GOP is a very different party, a hard-line group of self-insulated ideologues, more like a political cult than like an inclusive party that stretches its core principles to be inviting to people at or beyond that core.
Couldn't have said it better myself.
• SD-26: Mark Ridley-Thomas, now an LA County Supervisor, has endorsed Assemblymember Curren Price to fill his seat in the upcoming special election, the primary of which is scheduled for March 24. Price is expected to be challenged by Assemblymember Mike Davis. Either of them winning would trigger ANOTHER special election for their vacant Assembly seat. And on and on.
• CA-31: Ben Smith is reporting that Xavier Becerra will turn down the position of US Trade Representative. When there was a two-week lull after the rumor leaked with no announcement, I figured as much. All the more reason for Hilda Solis to run for Governor, as the Vice-Chair of the House Dem caucus won't be opening up.
You know how this works, feel free to add anything you found interesting in the comments.
• Blue dog Rep. Dennis Cardoza (D-Atwater) will not seek to replace Xavier Beccera as Democratic Caucus Vice-Chair if Beccera takes the trade representative post within the Obama administration. California progressive superstar Hilda Solis is still considering a run though.
• If you want your heart broken, read this story about the "Gifts for Guns" program in Compton. The short version is that people are turning in their guns for groceries.
• It's not just schoolkids who need subsidized lunches in this economy. Senior citizens are increasingly relying on public and non-profit programs that provide food for seniors.
• An F-18 crash in San Diego (near the Top Gun facility in Miramar) as the result of engine failure killed three yesterday. Our condolences to the families of the victims.
• Sam Zell's deal to buy the Tribune Company, owner of the LA Times, essentially stole from the pension funds of the Tribune employees. The bankruptcy of the Tribune company is a sad chapter in American journalism. One can only hope that the Times emerges stronger out of this disaster, this time without a right-wing idealogue holding them down.
• Arnold has hired his chiropractor, his dentist and now his nanny to various state boards. Good thing this guy is nothing like George Bush or we would expect these people to be unqualified!
• The Supreme Court has now stepped into the battle between the Navy and environmentalists, ruling that the Navy can engage in sonar exercises off the California coast that may endanger dolphins, whales and sea lions. Why courts are arbitrating this case instead of the science is one of the neat little quirks of our system. But sure, why should the Navy be inconvenienced by moving a few miles off the coast? Not in the public interest, you see.
• Mountain House, California, particularly Prosperity Street in Mountain House, offers a cautionary tale about how screwed the housing market is:
This town, 59 feet above sea level, is the most underwater community in America.
This week, a real estate office in Tracy, Calif., near Mountain House, was advertising foreclosure sales.
Because of plunging home values, almost 90 percent of homeowners here owe more on their mortgages than their houses are worth, according to figures released Monday. That is the highest percentage in the country. The average homeowner in Mountain House is "underwater," as it is known, by $122,000.
That is really worse than anyone's projections. This is going to be a brutal downturn, and the recently upgraded homeowner relief looks to be insufficient.
• DiFi, who may be made chair of the Senate Intelligence Committee, is striking hard at the most important, festering problem at the soul of our society today - scalped tickets for the inauguration. But I'm sure that if we were committing torture or illegally wiretapping on Americans or indefinitely detaining prisoners without charges, she'd be all over that, too.
• Gary Miller has been caught with some pretty shady campaign practices again. Well, I take that back, this goes beyond shady:
apparently Congressman Miller paid his "bigger development construction company" a series of 5 payments which equaled $47,360. All this came from his re-election campaign, and when this is taken into perspective, it amounts to his largest campaign expenditure, 22% of the $218,368 that he raised.(LiberalOC)
• Dan Weintraub, hero of High Broderism. I love this line: "Will (redistricting) change the world? No." The better question is "Will it change anything?" I love how these guys never look at the actual registration statistics, with all these seats that have changed between 6-8% in party affiliation, when they intone that legislators pick their voters. Do they pick who changes their registration, who dies and who moves, too?
• Finally, CREDO Mobile is trying to whip legislators to remove John Dingell from the chair of the House Energy Committee and replace him with Henry Waxman. Which is great, and they personalize the message so that each person receiving their email gets the name of their Congressman on it. Only, my Congressman is Henry Waxman. And so my message said "Will you tell Henry Waxman to vote for Henry Waxman for Energy Committee chair?"
Yesterday, Bank of America announced that they would settle their lawsuit with a parade of states Attorneys General that began before BofA bought out the defendant, Countrywide Financial. The initial suit alleged that Countrywide engaged "in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market." At the time I thought it would be difficult to hold Countrywide responsible for what the mortgage market is intended to do, but I suppose they didn't want to face a jury at a time when the financial industry is melting down.
This settlement, which could provide up to $8.68 billion dollars for as many as 400,000 homeowners nationwide (and up to $3.5 billion in California), has some very laudable parts to it:
Under the terms of the settlement, eligible subprime and pay-option mortgage borrowers with loans from Countrywide will be able to avoid foreclosure by obtaining modified and affordable loans. Here is the information released by Brown's office:
The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America's foreclosure crisis. Assuming every eligible borrower and investor participates, this loan modification program will provide up to $3.5 billion to California borrowers as follows:
• Suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans pending determination of borrower ability to afford loan modifications;
• Loan modifications valued at up to $3.4 billion worth of reduced interest payments and, for certain borrowers, reduction of their principal balances;
• Waiver of late fees of up to $33.6 million;
• Waiver of prepayment penalties of up to $25.6 million for borrowers who receive modifications, pay off, or refinance their loans;
• $27.9 million in payments to borrowers who are 120 or more days delinquent or whose homes have already been foreclosed; and
• Approximately $25.2 million in additional payments to borrowers who, in the future, cannot afford monthly payments under the loan modification program and lose their homes to foreclosure.
This is exactly what should have been in the bailout bill - a large-scale workout for homeowners on the brink of foreclosure to modify their loans and stay in their homes. It's arguably costlier to the bank at this point for the mortgages to go completely bust and to deal with the foreclosure. In addition, BofA is SUSPENDING subprime loans and negative amortization loans as well as loans with little or no documentation from the borrower, which is in a way more significant because that's at the root of the financial crisis.
These are also the kind of steps that Ted Lieu sought in his AB 1830 which was vetoed by the Governor - banning predatory lending and unsustainable mortgage loans. Ultimately, Attorney General Brown was forced to seek remedy in the courts because the regulatory structure had broken down and the Congress was unable or, more likely, unwilling to give struggling homeowners a hand.
This shouldn't be Jerry Brown's job, but the systemic failure fell to him, and he performed brilliantly. And he's not done:
And this is not the end of this chapter. The settlement does not include Angelo Mozilo, the former Chairman and Chief Executive of Countrywide Financial Corporation or David Sambol, formerly the President of Countrywide Home Loans and the President and Chief Operating Officer of Countrywide Financial Corporation. Brown will continue to prosecute separately his case against Mozilo and Sambol.
Lawmakers like Dianne Feinstein and others should be a little ashamed that they were able to do so little in the wake of this crisis while Jerry Brown did so much more.
That's the only explanation I have for him vetoing AB1830:
Gov. Arnold Schwarzenegger vetoed a proposal today that would have imposed tougher restrictions on mortgage brokers, such as banning them from issuing exotic loans to subprime borrowers that cause balances to grow rather than shrink over time [...]
The bill by Assemblyman Ted Lieu, D-Torrance, would have banned subprime borrowers from obtaining "negative amortization" loans, agreements that offer low initial payments but increase the principal balance over time, boosting interest costs and making them difficult to pay off.
AB 1830 also would have specified that mortgage brokers owe a "fiduciary duty" to borrowers. It would have prohibited brokers from steering borrowers toward higher risk loans than they would qualify for based on their income and credit. And it would have capped prepayment penalties for borrowers who want to refinance their loans to seek better terms.
Schwarzenegger, in his veto message, said the bill had laudable goals but that it "overreaches and may have unintended consequences."
Overreaches into the profits of his mortgage lending industry buddies, that is. Schwarzenegger's concerns about putting state mortgage brokers at a "competitive disadvantage" compared to their unregulated federal counterparts is easily managed (like forcing anyone who does business in the state to work under one standard) and just a pathetic excuse.
We are in crisis mode on Wall Street right now because mortgage lenders, pressured by investment banks and securities markets, abused the process and came up with all sorts of exotic schemes to get borrowers into homes. This bill would have curbed the worst practices of the industry. The Governor would rather they continue. He would rather mortgage lenders rip off their customers. He would rather the economy sink into a deep recession.
One unexamined aspect of the Governor's character is how much of a mindless puppet he is for Chamber of Commerce interests. Let this be another example.
First Rep. Laura Richardson was having problems making house payments, defaulting six times over eight years.
Then after a bank foreclosed on her Sacramento house and sold it at auction in May, the Long Beach Democrat made such a stink that Washington Mutual, in an unusual move, grabbed it back and returned it to her.
This week, in the latest chapter in the housing saga, the Code Enforcement Department in Sacramento declared her home a "public nuisance."
The city has threatened to fine her as much as $5,000 a month if she doesn't fix it up.
Neighbors in the upper-middle-class neighborhood complain that the sprinklers are never turned on and the grass and plants are dead or dying. The gate is broken, and windows are covered with brown paper.
"I would call it an eyesore," said Peter Thomsen, a retired bank executive who lives nearby.
I think "embarrassing" is the best word for it. Laura Richardson has no need or use for a home in Sacramento anymore, and in her letter to supporters trying to give an alibi for her recent conduct, she says that she isn't rich and doesn't have a second income to afford her lifestyle. Then why the useless home in Sac'to that's become decrepit?
If this was the only thing wrong with Richardson, it'd be enough, frankly. But the fact that she voted to sink the Fourth Amendment and provide amnesty for lawbreaking to the telecoms in the FISA bill means that her votes are as embarrassing as her home upkeep. It's really unacceptable to have her as a representative of this state, honestly.
Following up on Dave's post below, take a look at the delegation for the Republican National Convention (PDF). Wow, real grassroots there guys. Check out CA-18, where the delegats are, drumroll please, Jeff Denham and his wife Sonia. Or CA-19, where Sen. Dave Cogdill and former SoS and gubernatorial candidate Bill Jones are the delegates. Good work on getting the activists inspired, GOP!
To your right, you'll see an ad against the "bag tax." Just a reminder that an ad on Calitics does not mean we support the message. Speaking for myself, I'm pretty comfortable with an outright ban on plastic grocery bags. We should all be using reusable and other more sustainable options, but plastic bags, with their devestating impacts on wildlife and the ocean, are a particularly bad choice.
John Myers has a written and audio story about the plan to raid the lottery. Long story short: it's an extraordinarily bad idea. It counts on huge growth in the lottery despite a worsening economy. Furthermore, the lottery is essentially a tax on the poor who dare to dream. It's regressive and a poor way to be financing our state. As the late, great TX Gov. Ann Richards said at a debate against W, "It's just a cheesy way of making money."
This is astonishing. LA home prices are falling TWENTY-FOUR PERCENT year over year. That's the fourth-largest decline in the country (and San Diego is fifth), and a whole lot of lost equity. The acceleration of price drops has been dramatic over the last year, too.
California is starting to integrate their prisons for men for the first time. Given overcrowding they probably have no choice. I actually think this is a good idea - the segregation probably did more to INCREASE tensions than defuse them.
PG&E has really stepped up, donating $250,000 to the No on 8 campaign. As they have a separate ballot measure with respect to public power in San Francisco, the move to curry favor with the LGBT community makes sense. But for businesses to contribute to stopping the measure is something very new.
The family of Janet Rivera, 46, wants to keep her alive in a Fresno hospital. The county, acting as her legal guardian, wants the issue decided in court.
Among the questions her situation has raised: Should a government agency be able to overrule family members and withhold life support when the patient's wishes are unknown?
The Schiavo family has taken an interest in this case. The Terri Schindler Schiavo Foundation helped find a lawyer to represent the Rivera family, said Schiavo's brother, Bobby Schindler.
Sometimes, there's progress. It's usually a game of inches. But yesterday California signed into law mortgage legislation that at least makes a start on getting a handle on this housing crisis and will help homeowners facing foreclosure a chance to stay in their homes. Hopefully this is a first step, which is how everyone at the bill signing ceremony is terming it.
The measure, SB 1137, requires lenders to contact property owners to attempt to avoid foreclosure, provide tenants additional time to move from a foreclosed property and maintain foreclosed properties to diminish the impact on the value of neighboring homes. The legislation becomes law immediately although some provisions are phased in over 60 days.
The Sebastopol City Council kicked off deliberations of a controversial redevelopment plan Tuesday with a majority of members voicing support for higher-density buildings as the most environmentally sound approach.
"Density is what makes transit feasible, giving us the option of getting out of our cars," said Councilman Larry Robinson [...]
The redevelopment plan would allow 300 residential units and nearly 400,000 square feet of new business and civic space between the Laguna de Santa Rosa and downtown.
Supporters have said the plan encourages the most environmentally sound method of development and would help add economic vitality to the city.
This approach is not without critics. There remain those who consider tall buildings an urban blight, think that all development comes with traffic woes and want to maintain local "character" when talking about growth.
The point here is that we have to start to re-orient to a different kind of lifestyle. If basic necessities are within walking distance and a strong transit spoke can build out from denser development, the traffic problems are eliminated, the quality of life goes up, and people can get around and get to work without the need for their cars. Santa Monica is a pretty dense city, with several points of interest and commercial shops within walking distance and a strong bus system. It's not Manhattan and it doesn't have to be. But there's less of a reliance on the automobile, and ultimately reducing that reliance is the key to making us energy secure.
The alternative is areas like the Inland Empire, where runaway sprawl and persistent construction of single-family homes is not only unsustainable, it's unaffordable, as the mortgage crisis and soaring energy costs turn these developments into ghost towns. With 200 dollar-a-barrel oil on the horizon, urban planning simply cannot retain the status quo and expect to survive. There isn't one complete answer here - telecommuting and Internet delivery, increased mass transit (I can't wait for my subway to the sea), and density will all play a role. But we cannot sacrifice any of those options in the name of NIMBYism.
Yesterday, the Assembly passed SB 1137, which would alter the mortgage industry in California and aid those in danger of losing their homes. It got through the Assembly by one vote, with 10 Republicans voting with the Democrats. The Senate will need to pass it again to conform to some amendments and then this will go quickly to the Governor's desk. As Frank Russo writes:
The bill that passed, SB 1137 is authored by Democratic Senators Don Perata, Ellen Corbett, and Michael Machado, and coauthored by Speaker of the Assembly Karen Bass and principal coauthor Assemblymember Ted Lieu, who presented it on the Assembly floor. It goes beyond federal laws and received broad support from consumer groups. The legislation requires lenders and servicers to: 1) contact borrowers (or engage in a prescribed process to do so) to schedule telephone or in-person meetings on restructuring options before beginning the foreclosure process, 2) requires a 60-day notice to be given to tenants of buildings facing foreclosure before they can be removed from a rental housing unit; and 3) allows fines of up to $1,000 a day for owners of foreclosed properties that fail to adequately maintain them.
I like aspects of this legislation, particularly the steps toward removing blight in homes that aren't properly maintained, which is a big problem in heavily foreclosed areas. But this bill is a watered-down supplement to the raft of bills presented by Ted Lieu earlier this year, which would have really reformed the mortgage market. There would have been enhanced regulation, limits to penalties for prepayment, a requirement to translate loan terms to non-English speaking customers (yes, that's not current law), eliminate yield spread premiums (which rewarded lenders for getting their customers into higher interest-rate loans) and gotten rid of weasel language in mortgage documents like involuntary legal waivers. Almost all of those bills were gutted to the delight of the lending industry. What's in its place is vaguely helpful to borrowers, but not at all the industrywide reform that is needed to ensure that a runaway market like we saw a few years ago will never be repeated. Lieu modeled his reforms after those in North Carolina, where they work very well. This was a case of the lobbyists getting a hold of legislation before it could actually do any good.
Lucas mentioned it in Quick HIts but this needs to be amplified. Turns out that John and Cindy McCain are the same kind of irresponsible conservatives who are so unpatriotic they don't believe the country (and in this case, this state) is worth paying for.
When you're poor, it can be hard to pay the bills. When you're rich, it's hard to keep track of all the bills that need paying. It's a lesson Cindy McCain learned the hard way when NEWSWEEK raised questions about an overdue property-tax bill on a La Jolla, Calif., property owned by a trust that she oversees. Mrs. McCain is a beer heiress with an estimated $100 million fortune and, along with her husband, she owns at least seven properties, including condos in California and Arizona.
San Diego County officials, it turns out, have been sending out tax notices on the La Jolla property, an oceanfront condo, for four years without receiving a response. County records show the bills, which were mailed to a Phoenix address associated with Mrs. McCain's trust, were returned by the post office. According to a McCain campaign aide, who requested anonymity when discussing a private matter, an elderly aunt of Mrs. McCain's lives in the condo, and the bank that manages the trust has not been receiving tax bills on the property. Shortly after NEWSWEEK inquired about the matter, the McCain aide e-mailed a receipt dated Friday, June 27, confirming payment by the trust to San Diego County in the amount of $6,744.42. County officials say the trust still owes an additional $1,742 for this year, an amount that is overdue and will go into default July 1. Told of the outstanding $1,742, the aide said: "The trust has paid all bills shown owing as of today and will pay all other bills due."
Keep in mind, California Republicans want this type of tax-dodging for those who can most easily afford it to be the LAW. They think it's perfectly fine for wealthy yacht and private plane owners to avoid their taxes.
There's also the question of whether people, who are so ridiculously wealthy that they forget about properties where their relatives are living for four years, can be credibly seen to be at all in touch with the concerns of the average American.
California Attorney General Edmund G. Brown Jr. today sued Countrywide Financial, its chief executive Angelo Mozilo, and president David Sambol, for engaging in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market.
"Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market," Attorney General Brown said. "The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today's lawsuit seeks relief for Californians who were ripped off by Countrywide's deceptive scheme."
It is certainly true that lenders like Countrywide had to feed the beast of mortgage-backed securities, which investors were gobbling up at the height of the housing boom. They absolutely valued getting a mortgage into the secondary market over securing a mortgage that the buyer could actually pay back. The question is the level of criminality here. Atrios, an economist who's been following "Big Shitpile" for quite a while, isn't fully convinced:
We do know that at some point the product that mortgage companies were selling essentially flipped. They went from providing mortgages to people, to providing bundled mortgage securities to Wall Street. While it's quite possible that there was actual fraud going on with respect to mortgage borrowers, the greater fraud might have been perpetrated against the investors which eagerly bought up their chunks of big shitpile. Obviously I sympathize less with the latter who are paid big money to, you know, have some idea what they're doing.
Tanta at Calculated Risk is similarly unimpressed with a similar lawsuit out of Illinois, saying that it it trying to sue over established industry practice.
Volume-based compensation structures? There have been volume-based compensation structures in this business since long before Tanta got into it. Does it create perverse incentives? Sure. Do we have to like it? No. Has it operated all these years in plain sight of regulators, investors, and the public? Yes. Is CFC's pay structure all that different from anyone else's? I profoundly doubt it.
And if anyone who has ever underwritten a loan in 30 minutes has to go to jail, the jails will be full indeed. I wonder if they'll let me take my new Kindle. Jesus H. Christ on a Process Re-engineering Consultant Binge, folks, anybody who didn't tell the analysts on the conference calls that they'd got their average underwriting time down to 30 minutes was Nobody back in 2000. Not to mention the AUS side of the business where underwriting had gotten down to 30 seconds.
The problem with Countrywide valuing volume over quality is that they appear not to have to pay the price for that. In a traditional system, Countrywide getting stuck with a lot of bad loans would hurt them, creating a disincentive. Now, they're passing on that pain to investors, and the feds are swooping in to bail the financial institutions out anyway, so it's guilt-free. I don't know that the remedy here is a lawsuit, other than allowing the market to punish bad actors, something we never do in this country, because for decades we have socialized risk and privatized profits.
California is starting to look more and more like the factory states in the 1980s after everybody pulled out.
California's deteriorating economy is demonstrated anew by a sharp jump in the state's unemployment rate to 6.8 percent in May.
The Department of Employment says 60,000 fewer Californians held jobs last month than in April, and 18,000 fewer than in May 2007. Unemployment, meanwhile, hit 1.3 million, up by 300,000 from May 2007.
That's an over 30% increase in the unemployed in just one year.
The paralysis of the state's government is slightly more manageable when job growth is expanding, sectors are booming and money is flowing into the coffers. When you have a dramatic downturn like this, government simply must have the flexibility to act. It actually needs that flexibility all the time, but in a downturn people suffer visibly from the structural stasis.
If the Democrats can use the Youngstown-ization of the state economy as a lever to argue for legitimate, long-lasting structural changes, they'd gather a lot of support. The LA Chamber of Commerce is talking about restoring the car tax, fercryinoutloud. The problem, of course, is that California's government is being held for ransom, in a bipartisan way, and it simply eliminates any opportunity for moving forward.
The backers of a package of bills to overhaul subprime lending regulations pointed to a deepening crisis that has put one of every 242 California homes into foreclosure in February, the second highest rate in the nation [...]
The package of subprime bills had been approved by the Assembly. But it hit rough waters Wednesday in the Senate banking committee, chaired by Sen. Mike Machado, D-Linden.
Machado has dealt with mortgage issues for years. His district is one of the national epicenters for foreclosures. But Machado is seen by some consumer advocates as overly sympathetic to the industry.
"The arguments he makes are certainly quite similar to those made by the industry folks we are negotiating with, and in many cases don't seem to put the protection of consumers at the forefront," Leonard said.
Machado isn't alone in being bought and paid for, of course. The lobbyists talk about "regulatory nightmares" that will stop anyone from getting credit and stunt job growth. They spend lots of money to ensure their argument will be heard. And they water everything down.
This is why we have a bitter, angry electorate. Democrats have the opportunity to channel that anger. But the universe of those who put their constituents first is narrow indeed. Broken government leads to broken lives.
Welcome to Youngstown.
(alternatively, you could call it Bankruptsville, USA. But I like Youngstown.)
• Obviously everyone is going to be working hard for their causes and candidates, so it may be a little quiet around here. I'll be out walking all day tomorrow. Oh, and don't vote for the racist guy, Bill Johnson, as a Judge of the Superior Court (Office number 125) in LA County.
• Yesterday was the deadline for bills to get passed out of their chamber of origin, and the Assembly passed major subprime mortgage legislation, without help from Republicans (6 of them abstained despite being seated right in the chamber). This bill has some good homeowner assistance elements that will allow people to restructure their financing before foreclosure. A mortgage bill has also passed the State Senate, so some form of legislation will hopefully get to the governor post haste.
• One of the biggest problems with the housing crisis is that, as home sale prices lower, homeowners are reassessing their value and getting their property tax lowered, decreasing state revenue yet more.
• Sticking in the shiv before riding off into the sunset, Fabian Nuñez writes a puzzling op-ed in the Sacramento Bee approving of the Governor's horrible idea to borrow against future lottery revenue. Considering that the only sustainable solution to the permanent crisis mode that we have in our budget is to reorganize the tax structure instead of constantly borrowing, I have no idea why any Democrat would veer so far off message and undermine the new Speaker's ability to move forward. What's more, lotteries are regressive taxes on the poor.
• One spot where there will be a lot of action on Tuesday is in Ventura County, where Democrats now outnumber Republicans and which could have contested elections in the Assembly, Senate and US Congress. However, the LA Times shows its political acumen by writing:
One of the more closely watched contests on Tuesday will be the Democratic primary in the 24th Congressional District. Insurance agent Mary Pallant of Oak Park; Marta Jorgensen, a Solvang educator; and Oxnard businesswoman Jill Martinez are running.
Marta Jorgensen quit the race over a month ago and endorsed Martinez. Way to go, LAT.
• Excellent news out of Los Angeles: there's been a $1 million dollar settlement with Hollywood Presbyterian Medical Center for their dumping homeless patients on Skid Row. They will also be monitored by a US Attorney for five years. This unethical practice has reached a reasonable conclusion. Hollywood Presbyterian deserved punishment.
• Trying to get rid of marijuana grow houses in Arcata is like trying to get rid of the Pacific Ocean on the California coast.
This Laura Richardson (CA-37) loan default story is growing. The Hill is reporting that she's had three homes in default and is currently renegotiating with her lender to save one of them. It seems like she's engaging in what amounts to a pyramid scheme - buying new homes with little money down, and at the same time loaning her campaigns for state Assembly and Congress tens of thousands of dollars. So the money that would be used to pay off the loan is paying for her political upward mobility.
A third home that Richardson borrowed heavily to move into in Sacramento was sold at auction earlier this month -- at a $150,000 loss to the bank that issued her the $535,000 loan. ...
Even as that was happening, ethics watchdogs were crying foul over Richardson's personal finances and questioning how she was able to lend her campaign to Congress $77,500 in the midst of multiple home loan defaults. ...
Federal Election Commission (FEC) reports show that Richardson loaned her campaign a total of $77,500 -- in three installments -- between June and July of 2007.
Richardson's year-end FEC filing showed that her campaign still had $331,000 worth of debt but $116,000 cash-on-hand. ...
Meredith McGehee, policy director for the Campaign Legal Center, said it would be reasonable for the FEC to look into the timing of the loan against the timeline of Richardson's home loan defaults.
"In situations like this it's very important for whoever loaned her the money to demonstrate that they treated her equitably, not favorably," McGehee said. "Otherwise, you're getting into a situation of a corporate underwriting of a campaign."
It was pretty clear last year, when Richardson ran a divisive, racially-toned campaign to win the Congressional seat against State Senator Jenny Oropeza, based in part on saying how this was "our" seat (referring to African-Americans), that she was potentially bad news. This confirms it. I won't defend her because these types of financial improprieties are unaceeptable. Getting behind on one loan because it's a fact of life that you need to practically go broke to win a political campaign is one thing. But this to me looks like a series of efforts to possibly use borrowed money and plow it into political activities. And that's wrong. I don't think she's in danger of losing her primary next week, but she should be.
I noticed that when she won election last year, it was surmised on this site that she would hold the seat for 20 years. Perhaps that prediction was premature.
It doesn't seem as if she has been doing anything much different from a lot of real estate speculators in California, and it looks as if she is about to suffer some of the same consequences. I do have to say that I am kind of curious as to how she was able to get all those loans, based on her explanation that she got into trouble after changing jobs four times.
