The Double Standards in Bankruptcies - Why Do Banks Get Special Treatment?

With the city of Detroit filing bankruptcy the spotlight is being focused on the unequal application of the bankruptcy laws to seemingly everyone else other than the big banks.  When the financial markets collapsed largely because of the utter recklessness and in some cases outright fraud of the big banks and mortgage companies, the big banks got bailed out with tax payer money and were supposed to pass along relief to beleaguered homeowners - something that from what I have seen in the real estate industry simply never happened.  The banks were quick to take the taxpayer funds but have made a practice of screwing over homeowners in loan modifications and have shown little regard for the properties they tossed off to HUD and the VA to deal with.  Yet in Detroit's case, we are seeing a whole different standard.  The New York Times looks at the troubling situation.  Here are excerpts:

Developments in the Detroit bankruptcy have exposed a double standard in federal bankruptcy law, an injustice in urgent need of congressional reform.

In Detroit, the judge has ruled that under Chapter 9 of the bankruptcy law, the city’s creditors include even municipal pensioners whose payouts are guaranteed under the Michigan Constitution. Accordingly, the pensioners have reached a tentative deal to reduce retiree benefits; along with concessions made by other creditors, the goal is to help the debtor, the city of Detroit, get a fresh start and move forward.

Contrast that with what happened in the housing bust. The creditors in that fiasco — including powerful banks — did not have to cut deals in court with bankrupt homeowners. Under Chapter 13 of the bankruptcy law, a section heavily influenced by the financial industry, lenders cannot be forced to rework most residential mortgages in bankruptcy.

That is where the legal double standard comes in. In Detroit’s bust, even pensioners have to negotiate new terms; in the housing bust, big banks did not have to negotiate, leaving many homeowners in the dust.

That special treatment for banks may have helped them recover from the financial crisis. But it made things worse for borrowers and the economy. Today, 8.6 million homeowners still owe more on their mortgages than their homes are worth, for a total of $430 billion in negative equity, according to Moody’s Analytics. Some 2.1 million of the underwater homeowners are in or near foreclosure, on top of 9.6 million who have lost their homes since 2007.

Congress could have changed the law early in the financial crisis to allow for bankruptcy court relief for homeowners. Its refusal to do so has contributed to unnecessary impoverishment and a protracted weak recovery.

Congress must change the bankruptcy law to ensure that banks have to modify mortgages in court for bankrupt borrowers. Anything less violates bankruptcy’s tough principles of shared pain for creditors and second chances for debtors.

 Yes, I hold the banking industry in low regard.  The banking system and Wall Street created the financial crisis and except in the cases of relative small banks where decision makers have been prosecuted and gone to jail, NO ONE in the big banks or on Wall Street has been similarly prosecuted.  Something is seriously wrong with this picture.

Catholic Archbispop: Catholics Who Support Gay Marriage Not Welcome at Communion

With new stories about sexually abusive priests emerging almost daily, more priest being belatedly removed for past abuse and government investigations of the Church occurring in countries like Australia, what does Archbishop of Detroit, Allen Vigneron (pictured at left) worry about?  Gay marriage and punishing members of the Catholic laity who support gay marriage.  Detroit's horrific economic problems and the many citizens in need of assistance apparently isn't even on the radar in comparison.  Would that all the Catholics whom Vigneron has dis-invited from receiving communion would walk away and no longer the doorways of their parishes.  The Detroit Free Press looks at this latest round in the Church hierarchy's increasingly shrill anti-gay jihad.  Here are excerpts:

A Detroit professor and legal adviser to the Vatican says Catholics who promote gay marriage should not try to receive holy Communion, a key part of Catholic identity.  And the archbishop of Detroit, Allen Vigneron, told the Free Press Sunday that Catholics who receive Communion while advocating gay marriage would "logically bring shame for a double-dealing that is not unlike perjury."

The comments of Vigneron and Edward Peters, who teaches Catholic canon law at Sacred Heart Major Seminary in Detroit, are part of a polarizing discussion about gay marriage that echoes debate over whether politicians who advocate abortion rights should receive Communion.

In a post on his blog last week, Peters said that Catholic teachings make it clear that marriage is between one man and one woman. And so, "Catholics who promote 'same-sex marriage' act contrary to" Catholic law "and should not approach for holy Communion," he wrote. "They also risk having holy Communion withheld from them ... being rebuked and/or being sanctioned."

Peters didn't specify a Catholic politician or public figure in his post. But he told the Free Press that a person's "public efforts to change society's definition of marriage ... amount to committing objectively wrong actions."

Peters has said before that liberal Catholic Democrats, such as U.S. Rep. Nancy Pelosi of California and New York Gov. Andrew Cuomo, should be denied Communion because of their statements and positions.

In 2011, Peters said that Cuomo should not receive Communion because he is an outspoken proponent of gay marriage. Last month, Peters said, "Pelosi suffers from one of the most malformed consciences in the annals of American Catholic politics or ... she is simply hell-bent on using her Catholic identity to attack Catholic values at pretty much every opportunity."

Given the Church's history of being wrong on scientific knowledge, previous support for slavery, support for brutal repressive regimes, one would think these  homophobes would be a tad more circumspect in their pronouncements.  The sooner they and the views they endorse are thrown on the trash heap of history, the better off the world will be.

Romney Versus the Automakers and the Truth

Throughout this presidential campaign Mitt Romney's dishonesty has been shocking. Many say they have never seen a candidate so willing to lie and make up stories out of thin air.  Sadly, too often the media has aided Romney by lacking to call him what he is: a liar.  Perhaps some of Romney's most incredible lies have involved the auto industry - an industry that Romney was willing to utterly collapse and die.  As noted yesterday, both Chrysler and General Motors have felt compelled to speak out because Romney is running ads and making statements that simply are not true.  And Romney knows they are untrue.  The man simply cares nothing about the truth.  His sole values seem to be amazing more money and power for himself.  Literally not else matters, especially honesty and telling the truth.  I am honestly coming to believe the man is a sociopath.  A column in the New York Times looks at Romney's lies about the auto industry.  Here are excerpts:

When General Motors tells a presidential campaign that it is engaging in “cynical campaign politics at its worst,” that’s a pretty good signal that the campaign has crossed a red line and ought to pull back. Not Mitt Romney’s campaign. Having broadcast an outrageously deceitful ad attacking the auto bailout, the campaign ignored the howls from carmakers and came back with more. 

Mr. Romney apparently plans to end his race as he began it: playing lowest-common-denominator politics, saying anything necessary to achieve power and blithely deceiving voters desperate for clarity and truth. 

This started months ago when he realized that his very public 2008 stance against the successful and wildly popular government bailout of G.M. and Chrysler was hurting him in the valuable states of Ohio and Michigan. In February, he wrote an essay for The Detroit News calling the bailout “crony capitalism on a grand scale” because unions benefited and insisting that Detroit would have been better off to refuse federal money.

When that tactic didn’t work, he began insisting at the debates that his plan for Detroit wasn’t really that different from President Obama’s. (Except for the niggling detail of the $80 billion federal investment.) 

That was quickly discredited, so Mr. Romney began telling rallies last week that Chrysler was considering moving its production to China. Chrysler loudly denounced it as “fantasies,” saying it was only considering increasing production in China for sale in China, without moving a single American job. 

The Romney campaign ignored the company, following up with an instantly notorious ad saying President Obama “sold Chrysler to Italians who are going to build Jeeps in China.”  

Nearly 1.5 million people are working as a direct result of the bailout. Ohio’s unemployment rate is well below the national average. G.M.’s American sales continue to increase, and Chrysler said this week that its third-quarter net income rose 80 percent. These companies haven’t just bounced back from the bottom; they are accelerating. 

What Mr. Romney cannot admit is that all this is a direct result of the government investment he would have rejected. It’s bad enough to be wrong on the policy. It takes an especially dishonest candidate to simply turn up the volume on a lie and keep repeating it..  .  .  .  .  Mr. Romney is providing a grim preview of what kind of president he would be.

What I find deeply disturbing is that Romney claims to be a deeply religious man.  Yet he lies with impunity.  As with the Christofascists and the Catholic Church hierarchy, the truth simply doesn't matter.   No wonder the younger generations are fleeing organized religion in record numbers.  Increasingly, being a Christian or in Romney's case, Mormon, is synonymous with being a liar.

Exposing More Romney Lies About the Auto Industry

Mitt Romney continues to spin lies about both what he wrote in his November 18, 2008, op-ed in the New York Times and what Barack Obama has done to revive the U.S. auto industry.  Signs like this need to not only blanket the Mid-West by every state.  An Obama ad adds this:

When the auto industry faced collapse, Mitt Romney turned his back. Even the conservative Detroit News criticized Romney for his 'wrong-headedness' on the bailout. And now, after Romney's false claim of Jeep outsourcing to China, Chrysler itself has refuted Romney's lie. The truth? Jeep is adding jobs in Ohio.

 Here are highlights from Chrysler's statement:

Let’s set the record straight: Jeep has no intention of shifting production of its Jeep models out of North America to China. It’s simply reviewing the opportunities to return Jeep output to China for the world’s largest auto market. U.S. Jeep assembly lines will continue to stay in operation. A careful and unbiased reading of the Bloomberg take would have saved unnecessary fantasies and extravagant comments. 

What Mitt Romney Really Said About Allowing Detroit to Go Bankrupt

During last night's debate, Mitt Romney again tried to rewrite history in terms of what he said about allowing General Motors and Chrysler go bankrupt back in 2008.  Like almost everything the man says, last mights song and dance did not reflect reality.  Here are highlights from Romney's actual op-ed in the New York Times on November 18, 2008 which was captioned "Let Detroit Go Bankrupt":

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed. 

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check. 

I have several prescriptions for Detroit’s automakers. 

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations. 

Starving research and development is like eating the seed corn.  

I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others.  . . . .But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.  In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check. 

Of course, as Romney - a vulture capitalist himself - well knew at the time given the collapse of the financial markets, financing during a bankruptcy of either automaker such has he proposed was non-existent.  Giving "post bankruptcy financing" to companies that had collapsed and had ceased to operate would have been too little, too late and many millions of Americans would have found themselves unemployed.  In short, Romney's plan would have been a disaster and GM and Chrysler would be out of business had his approach been pursued.  So once again. last night we heard Romney suffering from "romnesia" and rewriting his own words.  Thankfully, Bush and Obama rejected Romney's plan.  The American people need to remember what Romney proposed for Detroit and reject Romney on November 6th.

American Energy Policy, Asleep at the Spigot

As I have noted in previous posts, the current energy crisis and soaring gas prices really should be a surprise to no one who has any knowledge of the last 35-40 years and any meaningful knowledge of the exploration and production segment of the oil industry. The USA now finds itself in more or less the same situation as at the time of the first energy crisis of the 1970's which saw gas rationing and a radical shift to smaller vehicles. Despite what occurred back then, the USA's political leadership in both parties chose to basically ignored the long term picture and out of perceived political expediency and deference to auto industry lobbyists and pretended that all could be normal again forever. The consuming public was no better as vehicles shifted back from smaller and more fuel efficient to the huge SUV so popular with the soccer mom set in neighborhood like the one I once lived in even though they have ZERO need for a huge gas guzzling off road vehicle. Yes, I confess to owning Jeeps, but each one of them has been actually used for off road purposes on many occasions, principally on the beach on surfing trips, and none of them come close to rivaling a Chevy Suburban for in terms of consumption.

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Even now, most Americans cannot grasp that just maybe the oil prices we are seeing are here to stay, which is perhaps the ONLY thing that will force some sort of comprehensive energy policy to be put together. I believe the next few years will be turbulent economically, and if gas prices remain high, we will see a whole revamping of the US auto industry, assuming the domestic auto makers survive the change over since they put all of their eggs in the high profit gas hogs instead of making serious investment in more fuel efficient vehicle. As for living patterns, numerous stories are already cropping up as to the sudden loss of attractiveness of far flung outer suburbs which will likely have a negative impact on home prices in amny communities. In short, it's a mess that will not be rectified easily or quickly. Here are some highlights from a story that looks at the head in the sand approach that has been the USA's hallmark:

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Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.

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Even as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways. Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress.

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SO despite the fierce debate over what’s behind the recent spike in prices, no one differs on what’s really responsible for all that underlying demand here for black gold: the automobile, fueled not only by gasoline but also by Americans’ famous propensity for voracious consumption.

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“Much of what we’re seeing today could have been prevented or ameliorated had we chosen to act differently,” says Pete V. Domenici, the ranking Republican member of the Senate Energy and Natural Resources Committee and a 36-year veteran of the Senate. “It was a bipartisan failure to act.” Mike Jackson, the chief executive of AutoNation, the country’s biggest automobile retailer, is even more blunt. “It was totally preventable,” he says, anger creeping into his affable car-salesman’s pitch. . . . . the impact of that change will affect everyone from home builders and homeowners in exurbs to corporate leaders, landlords and commuters in cities.

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[O]n Capitol Hill, members of both parties now say they are furious with Detroit for fighting so hard, and for so long, against higher fuel-efficiency standards. Though analysts say automakers who shoveled out highly profitable and highly inefficient road hogs like S.U.V.’s and pickups deserve much of the blame, they also criticize legislators who failed to provide an incentive for consumers to switch to fuel-sipping cars.

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“We’ve got to fix it or our standard of living will change within a decade,” says Senator Domenici, who is retiring this year. “Oil was too damn cheap, it’s too high now and it’s going even higher. I hope I’m wrong, but the problem is, we can’t catch up soon enough.” According to energy policy experts, it was in the late 1980s and early 1990s — during the administrations of President George H. W. Bush and Bill Clinton — that things began to go wrong. Before that point, the country reaped the benefits of the first fuel-economy standards, passed in 1975, known as corporate average fuel economy, or CAFE.

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[A]dded drilling is unlikely to generate sharply lower prices. A recent study by the federal government’s Energy Information Administration estimated that under the best-case scenario opening up the Arctic National Wildlife Refuge would reduce prices by $1.44 a barrel by 2027. Drilling in broader swaths off the continental United States wouldn’t affect prices until 2030.

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“The 1990s were something of a lost decade for American fuel efficiency.” With oil prices low, consumers began snapping up pickup trucks and sport utility vehicles, which were governed by less stringent fuel economy standards, thanks to a loophole in the original 1975 law. These carried higher sticker prices and profit margins, and both Detroit and foreign automakers were happy to oblige. Although oil prices remained low through the 1990s, consumption patterns were taking an ominous turn.

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What Congress didn’t or couldn’t do, the free market is now doing in the form of higher gas prices: forcing Americans into more fuel-efficient cars. Ms. Cischke of Ford says that in the last two months, “We have seen more of a shift in the market than in 20 years of CAFE. People are buying what they need.” Unfortunately, the shift is happening too fast for a company of Ford’s size. That is among the reasons Wall Street expects Ford to lose more than $2 billion this year.