KeNo's Housing and Economic Portal: Friday October 2 Housing and Economic stories

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Economic growth of Bush era was largely an illusion - (www.nytimes.com) It is sadly predictable that in a recession, the poor get poorer and the middle class loses ground. But even a downturn as deep and prolonged as this one cannot fully account for the desperate straits of so many Americans. The Census Bureau reported last week that the nation’s poverty rate rose to 13.2 percent in 2008, the highest level since 1997 and a significant increase from 12.5 percent in 2007. That means that some 40 million people in this country are living below the poverty line, defined as an income of $22,205 for a family of four. The middle class also took a major hit. Median household income fell in 2008 to $50,300 from $52,200 in 2007. That is the steepest year-to-year drop since the government began keeping track four decades ago; adjusted for inflation, median income was lower in 2008 than in 1998 and every year since then. Clearly, the recession has been brutal. But even before the recession, far too many Americans were already living far too close to the edge. As is now painfully evident, the economic growth of the Bush era was largely an illusion. Poverty worsened during most of the boom years and middle-class pay stagnated, as most gains flowed to the top. In a recent update of their groundbreaking series on income trends, the economists Thomas Piketty and Emmanuel Saez found that from 2002 to 2007, the top 1 percent of households — those making more than $400,000 a year — received two-thirds of the nation’s total income gains, their largest share of the spoils since the 1920s. Because many if not most Americans gained little to nothing from the Bush “growth” years, they have found themselves especially vulnerable to the recession. Federal stimulus spending has helped cushion the blow. The question going forward is whether an economic recovery, when it comes, will help the poor and middle class or whether the top-heavy favoritism of the previous expansion will reassert itself. The answer depends on how policy makers foster and manage a recovery. Economic growth alone does not guarantee job growth. Congress and the Obama administration must extend certain components of the stimulus package until employment does revive, including unemployment benefits, food stamps, tax breaks for working families with children and fiscal aid to states. Policy makers must also resist the reassuring but false notion that renewed economic growth can, by itself, raise living standards broadly. Government policies are needed to ensure that growth is shared. Reforming health care so that illness is not bankrupting — for families or for the federal budget — would be a major step in the right direction. The administration has also said that it would let the Bush-era tax cuts for the rich expire as scheduled at the end of 2010. More progressive taxation needs to be accompanied by more progressive spending, on public education and on job training and job creation. Support for unions and enforcement of labor standards would also help to ensure that in the next economic expansion, a fair share of profits would find its way into wages.

California disability applicant arrested after video shows her bowling‎ - (www.sacbee.com) A state worker who applied for a disability pension claiming that anxiety, chronic pain, and fatigue left her virtually unable to leave home or lift a coffee cup to her lips has been arrested after she was videotaped bowling in Elk Grove. Lisa Trevino-Angelo, 38, was arrested without fanfare and charged by the Sacramento County District Attorney's Office on Aug. 8. She will be arraigned Thursday. The former Department of Motor Vehicles personnel specialist faces a misdemeanor count of filing a false claim and one count of making false statements and submitting false information to get benefits from the California Public Employees' Retirement System, court documents show. Trevino-Angelo did not return calls to her home, but her attorney Michael Wise said she's innocent. "She has a legitimate medical condition," Wise said. "She's not trying to steal anything from anybody." Brad Pacheco, a CalPERS spokesman, declined to comment because the case is in the courts but said criminal charges are rare in disability frauds. "Most are handled administratively," Pacheco said. A CalPERS investigation report stapled to Trevino-Angelo's arrest warrant says she applied for a disability pension in July 2008 after working part time at DMV since 2001…… Her health deteriorated, and she stopped working altogether in 2007, the CalPERS report states. When Trevino-Angelo applied for the disability pension, she complained of chronic, debilitating "head-to-toe pain" that impaired her memory and made it hard for her to focus or work, medical reports show. When she underwent independent medical evaluations in December and January, the woman told doctors that her fibromyalgia and other ailments left her so weak that she couldn't hold a pen or her baby, cradle a phone to her neck or lift a coffee cup. She told doctors she felt like "a hostage in her own home" because anxiety and depression made it hard to leave it. When members of CalPERS investigations unit caught up with Trevino-Angelo in December 2008, she was videotaped bowling and eating pizza at Strikes Bowling Alley in Elk Grove. They also videotaped her shopping "in high energy fashion" at Target, Old Navy and Barnes & Noble, carrying bags, a CalPERS report states. CalPERS investigators also videotaped Trevino-Angelo chasing and lifting a toddler in and out of an SUV, and chatting on a cell phone. One video shows her jumping up at a soccer game "to celebrate some achievement by kids on the field," CalPERS report states. After reviewing her disability application, medical reports that Trevino-Angelo's doctors submitted, and almost four hours of video surveillance, two independent physicians questioned her disability claim. The doctors concluded she exaggerated her symptoms. Dr. Patricia Wiggins added that there were no limits on job duties Trevino-Angelo could perform.

Fight looms on credit for house buyers - (www.msnbc.msn.com) When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it. As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February. In the view of the real estate industry and some economists, all that money is well spent. They contend the credit is doing what it was meant to do, encouraging a recovery in the housing market that is gathering steam. Analysts say the credit is directly responsible for several hundred thousand home sales. Skeptics argue that most of the money is going to people who would have bought a home anyway. And they contend that unless it is allowed to expire on schedule in late November, the tax credit is likely to become one more expensive government program that refuses to die. The real estate industry, including the powerful 1.1 million-member National Association of Realtors, wants Congress to extend the credit at least through next summer. The group hopes to expand the program to $15,000 and to allow all buyers, not just those who have been out of the market for at least three years, to qualify. The price tag on that plan: $50 billion to $100 billion. ‘A no-brainer’: Joseph and Chassity Myers are among the two million buyers eligible for the credit this year. The newlyweds heard they could get money from the government for something they were tempted to do anyway. “It was a no-brainer,” said Mr. Myers, a commercial underwriter. “Owning something is the American family dream.” The couple bought a two-bedroom condominium here in the spring for $171,000 and amended their 2008 taxes immediately, receiving their windfall by direct deposit a few weeks later. Their home is now a monument to the government’s generosity. They bought a leather couch, a kitchen table, a bed, television stand, china cabinet, kitchen table, coffee table, grill and patio set. “We did exactly what the government wanted us to do,” said Ms. Myers, a third grade teacher. “We stimulated the economy.”

More Crap Legislation Passed: House Passes Two FHA Reform Measures in Voice Votes - (www.dsnews.com) The House of Representatives passed two housing measures this week designed to assist certain borrowers of Federal Housing Administration loans, earning kudos from some of the nation’s largest trade groups in the mortgage and housing industries. The 21st Century FHA Housing Act, approved late Tuesday night, would beef up the FHA on a number of administrative fronts, while the FHA Multifamily Loan Limit Adjustment Act passed Wednesday is designed to make FHA loans more accessible to borrowers in urban multi-family housing projects. “Passage of these two bills is further indication that the House is playing a proactive role in helping people who are being impacted by the current turbulence in the housing market,” David G. Kittle, chairman of the Mortgage Bankers Association , said Wednesday in a press statement. The National Association of Home Builders and the National Association of Realtors also expressed support for the bills. The Housing Act, a Democratic initiative sponsored by House Financial Services Committee Member Jon Adler (D.-New Jersey), gives current HUD Secretary Shaun Donovan broader power to appoint officers and set their pay rates; review and act on market-wide delinquency data; and fund technology updates on the FHA’s aging information systems. The bill passed on a voice vote. “Providing more resources for staffing and technology at FHA will allow that agency to continue to play its critical role in helping borrowers,” Kittle said of the bill’s provisions. “FHA needs to be able to hire and retain top quality staff and utilize 21st century technology if it is going to meet the growing demand for its products.” Also passed by a voice vote, the Loan Limit Adjustment Act was introduced by three Democratic representatives from urban districts: Anthony Weiner of New York, Peter Miller of California and Barney Frank – the House Financial Services Committee’s chairman – of Massachusetts. It Increases the maximum mortgage amount limitations under the FHA mortgage-insurance programs for housing projects with elevators and for extremely high-cost areas. The House’s GOP minority had dragged its feet on the measures. “Some Members may be concerned that H.R. 3527 would authorize the Secretary of HUD to increase FHA’s insurance coverage amounts which would increase the exposure to taxpayers,” the House Republicans wrote of the bill on their Web site. Kittle disagreed, however, calling the bill “an important step to growing this country’s supply of affordable rental housing in urban areas.” “The increased limits will make it possible for developers to obtain financing to build and rehabilitate high-rise housing,” he said.

For all Obama's talk, US has failed to wind in Wall Street - (www.guardian.co.uk) With a blank cheque from taxpayers and no real reform the perverse incentives for risk-taking are bigger than ever. What went wrong? Have the right lessons been learned? Could it happen again? The anniversary of the Lehman Brothers' bankruptcy and the freezing of the credit markets that followed is an occasion for reflection. I fear that our collective response has been mistaken and inadequate – that we may just have made matters worse. The financial sector would like us to believe that if only the Federal Reserve and the Treasury had leapt to the rescue of Lehmans all would have been fine. Sheer nonsense. Lehmans was not a cause but a consequence: a consequence of flawed lending practices, and of inadequate oversight by regulators. Financial markets had lent on the basis of a bubble – a bubble in large part of their making. They had incentive structures that encouraged excessive risk-taking and shortsighted behaviour. And that was no accident. It was the fruit of vigorous lobbying, which strived equally hard to prevent regulation of changes in the financial structure, new products like credit default swaps – which, while supposedly designed to manage risk, actually created it – and ingenious devices to exploit poor and uninformed borrowers and investors. The sector may not have made good economic investments, but its political investments paid off handsomely. Lehmans was allowed to fail, we were told at the time, because its failure did not pose systemic risk. The systemic consequences its failure entailed, of course, were used as an excuse for the massive bailouts for the banks. Thus the Lehmans example became at best a scare tactic; at worst it became an excuse, a tool, to extract as much as possible for the banks and the bankers that brought the world to the brink of economic ruin. Had more thought gone into how to deal with Lehmans, the Treasury and Fed might have realised that it played an important role in the shadow banking system, and that it was important to protect the integrity of the shadow system which had come to play such an important role in the US and global financial payments system. But many of Lehmans' activities had no systemic importance. The administration could have found a path between the false dichotomy of abandonment or bailout. That would have protected the payments system, providing the minimum amount of taxpayer money. Shareholders and long-term bondholders would have been wiped out before any public money had to be put in. Bailing out the US banks need not have meant bailing out the bankers, their shareholders, and bondholders. We could have kept the banks as ongoing institutions, even if we had played by the ordinary rules of capitalism which say that when a firm can't meet its obligations to creditors, the shareholders lose everything.

California's domestic violence shelters prepare for funding fight - (www.contracostatimes.com) California's domestic violence shelters, hit with a huge budget loss when Gov. Arnold Schwarzenegger cut all their state funding in July, pledged Tuesday to continue pressing for that money to be restored after a bill that would have done just that failed in the state Senate. Six of the state's 94 domestic violence shelters have closed since Schwarzenegger used a line-item veto July 28 to cut the $16.3 million California provided across the system, said Camille Hayes, a spokeswoman for The California Partnership to End Domestic Violence. SBX3 13, a bill by Sen. Leland Yee, D-San Francisco, passed through the Assembly by a wide margin before failing to get the votes needed in the Senate last week when Republican senators abstained from voting on all bills requiring a two-thirds majority to pass. "It feels that we've been defeated, but we haven't," said Carolyn Johnson, executive director of A Safe Place, Oakland's only domestic abuse shelter. "Our bill still has an opportunity to go back, and it will. So we know it's going to be a struggle, but we have not given up." Shelters are overwhelmed with a growing need for their services at the same time funding is disappearing, said Michelle Davis, director of development at Concord's STAND Against Domestic Violence advocacy group. "We're getting hit from both ends, and as we're struggling to provide services. The death toll continues to mount," Davis said. "We're now at 19 domestic-violence-related deaths in Contra Costa County from last August until now. That's about 500 percent above historical numbers. In a normal year we might have three deaths. We're partnering with everyone we can, but death toll tells us people are falling through the cracks." While some shelters are trying to make up for staff layoffs by recruiting volunteers, that comes with additional problems, Hayes said. "Volunteers don't enjoy confidentiality privileges and could be subpoenaed, so they can't provide the same kind of crisis counseling a staff member could," Hayes said. Niko Johnson, executive director of the Domestic Violence and Sexual Assault Coalition of Grass Valley, closed one of the program's six shelters in early August. "With the funding that was lost, about $207,000, we couldn't continue to keep the doors open," she said. "There are no longer any shelters in Western Nevada County. And in such a large geographic area, for women to leave their county with their children is virtually impossible because they're usually in situations with custody and can't take their children over county lines."

County's social services slashed by another $3 million - (www.contracostatimes.com) Contra Costa County supervisors on Tuesday cut more than $3 million from health care for AIDS patients, needy children and women trying to move off welfare and also voted to close the Chris Adams Center, a care facility for at-risk teenage girls at Juvenile Hall in Martinez. The cuts are due to a loss in state funding for the programs and come on top of about $20 million in health department budget cuts this year. The vote was unanimous. The board asked the county Family and Human Services Department to report back where the 17 girls at Chris Adams will be transferred and look into why referrals to the center from juvenile court declined, jeopardizing a plan to qualify it as a licensed group home. "We have been struggling to keep Chris Adams open, but the choices have been taken out of our hands," Supervisor Mary Piepho said. Health Services Director William Walker told supervisors that it will be difficult to reopen the home once it closes, given the difficulty of raising the money for it in the first place. Girls at Chris Adams receive extensive mental health treatment, including group psychotherapy and anger management training. The AIDS prevention and support cutback will reduce by half the county's mobile HIV testing. An in-home nursing program that serves 28 AIDS patients will be eliminated and the number of patients in a program that helps them with routine tasks, such as paying bills, will be slashed from 180 to 90. The board also took away $400,000 from a program aimed at reducing infant mortality and birth-related diseases in African-American children. A mental health and drug treatment program for women moving from welfare to work will also take about a 40 percent cut, from $1.7 million to $1 million. In addition, seven health department jobs were eliminated, two of them vacant positions

OTHER STORIES:

Lehman collapse: winners from the financial crisis - (www.telegraph.co.uk) For a lucky few, Lehman Brothers' bankruptcy on September 15, 2008, meant an opportunity. Below are a list of people, companies and places which have gained fame and fortune on the back of the "end of capitalism".

US Cracks Down on Two Mortgage Companies - (www.cnbc.com)

Housing Recovery Falters With Waning Govt. Stimulus - (www.cnbc.com)

Corporate Corruption Killing America - (www.informationclearinghouse.info)

Is your bank underwater? Check its debt level here - (www.msnbc.msn.com)

The Recession's Racial Divid - (www.nytimes.com)

Carter Sees Racism in Wilson's Outburst - (www.nytimes.com)

Media Notice Race Elephant in the Room - (www.miller-mccune.com)

Gold Jumps to 18-Month High As Dollar Slides - (www.cnbc.com)

Faber Report: Vivendi Likely to Sell Stake in NBC - (www.cnbc.com)

Kauai highest in foreclosure rate - (www.starbulletin.com)

Smaller is better in new housing market - (www.cantonrep.com)

Renters rejoice - (www.bendbulletin.com)