Wealthy Far More Likely To Default On Mortgages
July 9, 2010, 12:24 pm
Filed under: Economics, Poverty | Tags: , , ,

crossposted at Political Correction

For much of the past two years, Congressional Republicans have wasted few opportunities to blame poor and working class Americans for the financial meltdown and the subsequent recession. They’ve argued that through well-intentioned government initiatives, including the Community Reinvestment Act, the government and those in traditionally underserved communities created much of the foreclosure crisis.

As Rep. Steve King (R-IA) often puts it, by promoting “bad loans in bad neighborhoods,” the government laid the groundwork for a catastrophic meltdown in the financial services sector.  Sen. Jim DeMint (R-SC) has also blamed CRA for decreasing underwriting standards and increasing the number of loans to people who “could not afford to pay them back.”  Often, the sentiment, such as King’s reference to so-called bad neighborhoods, comes tinged with a kind of subtle racism.

It’s all ridiculous.  As Aaron Pressman pointed out back in 2008, “Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA.”  Additionally, as Paul Krugman notes, “Commercial real estate lending, which was mainly lending to rich white developers, not you-know-who, is in much worse shape than subprime home lending.”

Undeterred by such facts, conservatives — who have made their war on workers and the poor central to their platform — continue to blame rising delinquencies on the poor.  In their efforts, they’ve even managed to drag immigrants in the conversation in an effort to tie the worst economic crisis since the Great Depression to their hateful nativist agenda.

But there is more to the story.  The wealthy, the Republican Party’s core constituency, have played a much larger role in the foreclosure crisis then most had assumed.  The New York Times reports today:

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.



Firms Make Money By Disputing Unemployment Claims
April 4, 2010, 10:01 pm
Filed under: Economics, Poverty | Tags: , ,

With unemployment still hovering around 10% and the prospects for recovery still uncertain, millions of Americans are really struggling and most of us who do have jobs still face some sort of economic uncertainty.

The economy is slowly finding its footing, but just barely.  Most economists predict that a so-called double-dip recession is not likely to occur.  The stimulus has had a positive impact.  However, despite the good news that’s slowly starting to come out, rampant unemployment is and will continue to be part of the equation for many more years to come.

The middle-class safety net – unemployment benefits, COBRA and the like – was designed specifically to work best in conditions like these.  Compared to many other industrialized nations, our programs are relatively ungenerous.  COBRA, which allows someone to keep their health insurance coverage after they leave their job, is important but also very expensive.  Health care reform legislation will fix some of these problems, but that will take some time.

Despite their shortcomings, we’d be in a much worse place without such programs.  However, keeping the net in place, expanding it during a recession and guaranteeing that the middle-class has enough to get by on has not come easily.  In the Senate, Republicans are delaying the extension of benefits, and in the private sector, the New York Times reports, companies are hiring firms that specialize in fighting to delay unemployment claims.

Claims can be denied if a worker is fired for some offense, say for example, sexual harassment or stealing.  That’s fair.  But these firms are not trying to keep the system fair.  They are exploiting the rules and disputing claims so as to compel workers who would otherwise qualify to not apply for benefits in the first place.  The fewer people who apply, the lower the tax on the company.  It’s the invisible hand and it’s ruthless.

With a client list that reads like a roster of Fortune 500 firms, a little-known company with an odd name, the Talx Corporation, has come to dominate a thriving industry: helping employers process — and fight — unemployment claims.

Talx, which emerged from obscurity over the last eight years, says it handles more than 30 percent of the nation’s requests for jobless benefits. Pledging to save employers money in part by contesting claims, Talx helps them decide which applications to resist and how to mount effective appeals.

The work has made Talx a boom business in a bust economy, but critics say the company has undermined a crucial safety net. Officials in a number of states have called Talx a chronic source of error and delay. Advocates for the unemployed say the company seeks to keep jobless workers from collecting benefits.

“Talx often files appeals regardless of merits,” said Jonathan P. Baird, a lawyer at New Hampshire Legal Assistance. “It’s sort of a war of attrition. If you appeal a certain percentage of cases, there are going to be those workers who give up.”

When fewer former workers get aid, a company pays lower unemployment taxes.



Creditors Kicking People While They’re Down
April 2, 2010, 1:08 am
Filed under: Economics, Poverty | Tags: ,

In the middle of a severe recession, you’d expect creditors to make their rules a bit more amendable so as not to overburden those who have already lost their homes and quite possible, their livelihoods.

But of course, where the supposed superiority and wisdom of the market is concerned, such an expectation is pure fantasy. In fact, when people are struggling, it seems, the opportunities to profit off of their miseries become even more plentiful.  Creditors and collection agencies are raking in millions.

The New York Times reports that “[o]ne of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.”

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

In some states, courts allow creditors to charge high interest rates for years after a lawsuit is decided in their favor. In others, creditors can win lawsuits by default and seize wages and bank accounts without a case ever appearing before a judge.

Lack of participation is the most fundamental problem. Some consumers do not even know they are being sued; the people who are supposed to serve them with formal notice have sometimes been caught skipping that step and doctoring the paperwork.

In far more cases, consumers are served but still do not offer a defense. Few can afford lawyers; others are intimidated or confused. In their absence, judges can offer little relief.

What collection companies do is perfectly legal.  But going after those who have the least ability to pay back their debts and garnishing their wages, when they often have just enough to survive, is ruthless.



The Looming Silent Tsunami

Josette Sheeran, Samuel Worthington and Robert B. Zoellick - Photo Credit: World Bank

Yesterday, I attended an event at the Brookings Institution, the focus of which was the “silent tsunami,” a term coined by the World Food Program’s Josette Sheeran to describe the growing global food crisis. The panel was comprised of Sheeran, World Bank President Robert Zoellick and Samuel Worthington, President of InterAction, a coalition of U.S.-based NGOs that deal specifically with issues of poverty. To call the topic of discussion dismaying would be a profound understatement. I’ve covered food security a few times before, especially at the height of the crisis in 2008 when food prices around the world were leading political instability in several countries.. Things were bad then, but they can in fact get much worse in the years ahead.

As it stands, some 17% of the world’s growing population lives in hunger and 90% of malnutrition can be found in only 36 countries. Worse, with a little more than 5 years left until 2015, the Millennium Development Challenge goal of reducing global poverty and hunger by 50% seems highly unlikely. With the current global financial crisis, donor countries are finding it increasingly difficult to contribute to organizations such as the World Food Program. And the programs that do exist have neglected agricultural development. All of this while global food prices have increased by 50% since 2000.

According to World Bank estimates, more than 53 million more people will be pushed into extreme poverty as a result of the current crisis. What, if anything, is the solution? What is needed, according to the panelists, is for governments to take ownership of food security issues by implementing targeted safety nets. Food stamps here in the United States, for example, are an effective safety net. Sheeran mentioned Brasil’s Bolsa Família, a safety net program started in 2003 as part of the countries larger Fome Zero plan of eradicating extreme poverty, as a successful model. One reason that Bolsa Família is so powerful is that it is targeted. Under the program, poor Brasilian families are given stipends, but only on the condition that parents put their children in school and have them vaccinated and that pregnant women seek neonatal care. The highly successful program reaches more than 11 million families in the country, especially those in the Nordeste, where poverty is most acute.

The program’s success has also been credited to the fact that the direct cash transfers are preferably made to the mother. The program is hailed as one of the best anti-poverty measures in the world. According to the World Bank, “Ninety-four percent of the funds reach the poorest 40 percent of the population. Studies prove that most of the money is used to buy food, school supplies, and clothes for the children.”

What is needed is for all governments to adopt a similar strategy that gives agency to the poor but also makes the assistance conditioned on other development goals, such as education. The food security issue must shift from a humanitarian one and into a program of long-term stabilization. Simply put, as the food crisis grows and donors are less capable of dealing with it, national governments must tackle the issue head-on and take ownership of poverty.

One part of the discussion specifically interested me. In discussing the causes of the food crisis, Zoellick, who has long championed free trade, mentioned the current impasse at the Doha Round as a contributing factor to global food insecurity. In fact, he mentioned trade barriers and the practice of hoarding as contributing to the crisis. Both these points are very valid. The disconnect, at least in my eyes, is that while trade barriers do often exasperate some problems and lead to market inefficiencies, free trade itself can also make problems worse. For example, Sheeran mentioned the World Food Program’s program of buying all of its iodized salt from Senegal. Under free trade, iodized salt from Senegal would face a tough time competing with cheaper imported salt from the United States or China, putting Senegalese manufacturers out of business. If trade barriers produce negative results, what then are the shortcomings, if any, to the free trade paradigm advanced by Zoellick? Unfortunately, the question and answer session ended before I could ask him the question.



Unease in Zimbabwe’s Barracks
December 19, 2008, 12:15 pm
Filed under: Africa, Poverty | Tags: , , , , ,
An unidentified man carries some cash for groceries in Harare, Zimbabwe Wednesday, March, 5, 2008. The Zimbabwean currency tumbled to a record 25 million dollars for a single US dollar Wednesday as Zimbabwe battles with the worlds highest inflation currently pegged at over 100 000 percent. (AP Photo/Tsvangirayi Mukwazhi)

(AP Photo/Tsvangirayi Mukwazhi)

Militaries are often immune from the tragedies of everyday life, especially in impoverished countries, where their ability to use force gives them a special power and position over civilians.  In many places, while the orphans and landless go to sleep with empty stomachs, the barracks often enjoy a modicum of stability.

In Zimbabwe however, soldiers from the ZNA have begun rebelling against the government of Zanu-PF leader Robert Mugabe, precisely because they too are feeling the effects of the government’s tragic mismanagement of the economy.  Though largely confined to Harare thus far, and comprised of lower ranking soldiers, the situation is worrisome for Mr. Mugabe and the ZNA.  Earlier in the week, Air Force Commander Perrance Shiri was shot in the arm in an apparent ambush.  Frustration with the longstanding economic crisis, which has made the Zimbabwean dollar worthless, has pushed segments of the military onto the streets, where they have battled with their fellow soldiers in violent street clashes.

Earlier in the day, the Reserve Bank of Zimbabwe introduced a $10 billion note, which is the equivalent of $20 dollars. Banks have increasingly been unable to meet withdrawal demands and while new currency, according to the Reserve Bank, will “ go a long way in improving workers’ access to cash”, unless the political impasse is solved, it is likely that the Reserve Bank will be forced to take more action in the coming weeks and months.  The government has blamed some of mess on black market currency dealers.

To make matters worse, while Mr. Mugabe has offered to make his opposition rival, Morgan Tsvangirai the Prime Minister, Mr. Tsvangirai’s Movement for Democratic Change (MDC), has threatened to withdraw from a possible unity government unless 42 abducted members of the party are freed in the coming weeks.

“The MDC can no longer sit at the same negotiating table with a party that is abducting our members and other innocent civilians and refusing to produce any of them before a court of law”

Al-Jazeera’s Jonah Hull speaks with several disillusioned soldiers in the South African town of Pietermaritzburg in KwaZulu-Natal.



Greentrification: Good Intentions and Bad Results of ‘Green’
December 16, 2008, 5:56 pm
Filed under: Environment, Poverty | Tags: , , , ,

This is an extended and edited version of a brief presentation I recently gave at a dinner for DC Green Muslims, a group of environmentally minded Muslims from around the Washington Metropolitan area. The discussion was geared around the concept of space and my portion of the program dealt with community space. I tried to guide the topic away from the euphoric and existential and focus more on the failures of ‘green’ and to make some criticisms of the green movement’s current community development paradigm, which I see as not taking into account the realities of disparate communities, specifically, the urban poor and communities of color.

At the most basic level, a community space is somewhere that people live and work together. School, mosques, grocery stores and neighborhood are all community spaces in that people come together to create a place, and that space is defined by its individual component parts. For example, one can say that a neighborhood is defined by the sum of all the buildings, roads, parks and trees which it contains. Remove any single part of the equation and you have altered that community space to some degree. Of course, altering is not always a negative thing and many communities need to be developed and changed in order to become more sustainable and livable. In the era of environmental degradation, ‘green’ discourse seems almost unchallengeable precisely because an alternative model is so badly needed.

Certainly, those who are not too fond of the environmental movement come up with their usual complaints, but internal criticism if rare, and where it is found, it has yet to pick up any steam. This is because planting trees, opening cafes, building walkways, using recycled bags to do our shopping, planting community gardens, installing solar panels on traffic lights, all these things are needed in order to develop a community space and make it sustainable.

But what often goes unnoticed and sometimes even ignored is the idea that no matter our intentions, the present green development paradigm has dramatic consequences on the urban poor. In order for the green movement to be successful in developing sustainable community spaces, the community which is most impacted and which defines the space MUST be at the forefront of all projects.

In Islam, our deeds are judged by our intentions. Good rarely comes from a bad intention.

The Prophet Muhammad (saw) said:

“Surely actions are by intentions and each will get that for which they intend”

But what if a good intention actually produces a negative consequence for some? Examples of this abound here in DC and in urban centers around the country where the dominant green discourse is said to clean up areas and promote sustainability while actually accelerating the process of gentrification. Communities may be developed but seldom do the current residents of these spaces benefit from such development.

The reason that the urban poor are often left out of the equation is because the development paradigm began not as a movement to make cities more sustainable, but rather, to stop the spread of and reverse the process of urban sprawl. This movement, almost from inception was led by the middle and upper class. Susana Almanza, in her article, Removing the Poor through Land Use and Planning published in Race, Poverty and the Environment, asserts:

People of color, the poor, and the working poor were not at the table and thus, the impacts on these communities did not receive meaningful consideration. Urban planners and developers began developing the urban core as if people of color were not living in them. New zoning codes and policies were adopted to make room for the new urbanisism. Communities of color throughout the United States began to see condos, lofts, McMansions, and live/work buildings pop up in low-income and people of color neighborhoods. A tidal wave of gentrification began to engulf people of color communities.

Columbia Heights is but one example.

B. Jesse Clarke, editor of Race, Poverty and the Environment admits to me that the current system is doing nothing more than “greenwashing and smart development at the expense of established poor communities.” The solution, according to Clarke, is to put political power in the hands of the poor and communities of color who have historically been disenfranchised. In short, “it takes political power to win social and economic rights for communities of color and low income people”, a power which often takes a backseat while we figure out the next project that will make us feel good about ourselves.

The fundamental issue is that the green movement is perceived as, and in many ways actually is, a movement of the elite, or rather, to be less critical, a movement that is, more often then not, led by those who have the ability and the time to care. If we are to move beyond just feeling good about ourselves because we recycle, reuse and reduce and towards developing communities, the urban poor, the residents of these neighborhoods MUST be at the forefront and we MUST work towards their political rights and their power. Unfortunately, the poor often don’t have the means or ends to participate, just as they do not have the means to shop at Trader Joe’s or buy organic products.

If the people most impacted by environmental degradation are not considered, then green projects ultimately fail in their goal of sustainability. We must make sure that our good intentions result in good deeds which benefit the poor rather then making their communities unlivable.



The Role of Media and Piracy in Somalia
December 12, 2008, 1:14 pm
Filed under: Africa, Poverty | Tags: , , ,

My friend Joe Le Sac at The Melon Online recently published a comment on the state of anarchy in Somalia and how piracy is being painted in the international press. He writes:

Somalia is making headlines for all the wrong reasons. While international eyes scorn the recent hijackings of over 40 shipping vessels off Somalia’s coast and berate the perceived “lawlessness” of the pirates who hold them for millions of dollars ransom, Somalis themselves seem more concerned about the destruction of human life caused by corporations and blood money from Western governments.

Very little attention is given to the fact that Somalia is, by the UN’s own admission, the worst humanitarian crisis in Africa. Rather, the focus on piracy seems to avoid contextualization.

Al Jazeera’s The Listening Post analyzes the sensationalist coverage of piracy across the international media.

The AP reports that the commander of the U.S. Navy’s 5th Fleet, U.S. Vice Adm. Bill Gortney, is showing reseveration on the recent idea of attacking the pirates by land.

Since Somalia has no effective government, there is no international consensus on what to do with the pirates if they are detained.  The government they do have seems to be on the brink of collapse.

The New York Times reported last week that:

Somalia’s transitional government looks as if it is about to flatline. The Ethiopians who have been keeping it alive for two years say they are leaving the country, essentially pulling the plug.

To make matters worse, BBC reports that about 15,000 Somali soldiers and police have deserted.  Furthermore:

Mr Kumalo, the South African ambassador, also said most of the Somali government’s security budget – supposedly 70% of its total budget – disappeared through corruption.

 

Walid Zafar