Monday, April 04, 2011
As President Obama kicks off his re-election bid, his boosters hail this month's tenth-of-one-percent drop in the nation's unemployment rate - to 8.8 percent from 8.9 percent the month before.
But a statistic more relevant to assessing the national moment was the near 14 percent drop in home prices last month, an historic one month decline. Meanwhile, there is the continued swelling of the ranks of long term unemployed to 6.1 million in March - now 45.5 percent of the 13 million idle Americans - another historic record.
Millions of foreclosures are playing out as the wealth disparity continues to swell and the buying power of wages continues to decline. The U.S. Treasury Department failed in a spectacular fashion to help the millions of American households with underwater mortgages that was a condition for Treasury to bail out the banks that caused the problems in the first place.
Is this the "recovery" we purchased with hundreds of billions of dollars of borrowed federal dollars that will take generations to pay off? Will the President's re-election platform be "it could have been worse?"
Double-digit declines in the value of the most significant asset the average American family owns represents a level of wealth destruction that can not be ignored just because the bipartisan ruling elites are insulated from feeling it. It means short sales, canceled college plans, abandoned homes and scuttled plans for retirement.
So how do we stop the steady quarter-by-quarter bleeding out of Main Street America?
In the corridors of WNYC, I caught up with Joseph Stiglitz, Nobel laureate and a professor at Columbia University's Business School. He was in to discuss his recent article in Vanity Fair with Brian Lehrer titled "Of the 1 Percent, by the 1 Percent, for the 1 Percent," on America's wealth disparity.
HENNELLY: "So what is the Joe Stiglitz 30-second shorthand for saving the struggling American homeowner who can still afford to pay a mortgage not just the one that they ended up with?"
STIGLITZ: "Well we have a legal framework for dealing with these issues in other areas like with corporations. When corporations owe more than they can pay, when what they owe is worth more than the value of their assets we give them a fresh start, we call it chapter 11. And they restructure the debt. And we do it in a way that is very clean and preserves jobs. And it is very important to do it in a way that preserves enterprise and our companies."
"For a reason I don't understand we pay less attention to our families and giving them a fresh start. So what I have argued is we ought to give American families a fresh start.
"Some of them made a mistake. But the lenders made a mistake too. There are always two sides to every loan, the borrower and the lender. And the lender in many of these cases did not just make a little mistake. They actually engaged in predatory lending trying to take advantage of poor and uneducated people."
"So my view is you have a situation like that where today the loan exceeds the value of the home, you write down the mortgage. The lender has a stake in the house. If, subsequently, the homeowner sells the house and makes a capital gain, the lender should get a significant fraction of the capital gain."
HENNELLY: Wouldn't that work to stabilize the price on people's homes?
STIGLITZ: "This would serve to stabilize the asset price. It would not only do that, it would stabilize families. It would stabilize our communities. In many parts of the United States whole communities are being devastated by foreclosure."
HENNELLY:"There are places now where property taxes are going up while the value of peoples' homes are actually going down."
STIGLITZ:"We are facing a situation now where home prices are falling once again and we can see a whole new set of foreclosures going forward. The only reason we have not had more foreclosures is that the banks have been so bad at managing, throwing people out of homes where they don't even owe" the banks money.
"A system of justice, a rule of law? We used to say innocent until proven guilty but with the banks its not that way. Your guilty until you prove you don't owe them money."
HENNELLY: Would you like to be Treasury Secretary?
STIGLITZ: "Our country has some really big challenges ahead. And we saved the banks but we did not save the American homeowners."