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SYNDICATED COLUMN: Toxic Assets

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Ted Rall

Many Foreclosed Houses Are Infested by Mold

The next time someone tells you that capitalism is efficient, remember the mold houses.

I used to be a banker. Some of my customers had trouble making their loan payments. We usually had recourse to some sort of collateral—often real estate. But my bank really didn’t want to foreclose.

“We’re bankers,” my boss told me the first time this issue came up. “Not landlords.”

Back in the 1980s most banks held this view. Bankers sat on their butts in air-conditioned offices. They didn’t want to manage vacated properties, much less try to sell them. They understood banking. Banking was a straightforward business: take deposits, issue loans, collect the difference in interest as profit.

It was boring. Just the way they liked it.

My bank did a lot to avoid declaring a default. We lowered interest rates. We allowed skipped payments. Sometimes we even reduced principal.

Banking became exciting during the 1990s. Glass-Steagall got repealed, allowing formerly staid bankers to compete with high-flying Wall Street financiers in the securities business. Bank consulting firms invented big new fees for services that used to be free, like using an ATM.

Banks issued millions of home loans to borrowers whom they knew couldn’t afford to pay them back. Crédit Suisse estimates that such “liars’ loans” accounted for 49 percent of originations by 2006. Why they’d do it? Like mobsters, bank executives were “busting out” their companies—generating false short-term profits in order to collect annual performance bonuses. By the time the toxic chickens came home to roost, as they did in the form of the September 2008 financial crisis, they and their paychecks had moved on.

As the global financial system was in the midst of total collapse, greedy bankers conjured up a way to profit from the very misery they had caused. Rather than work with distressed homeowners who faced foreclosure (for example, refinancing subprime and adjustable rate mortgages into old-fashioned 30-year fixed mortgages) they dragged out the process in order to collect more late fees.

Banks were eager to foreclose. They were merciless. They evicted homeowners while they were on active-duty serving in Iraq and Afghanistan, a violation of federal law. They even evicted people who didn’t owe them a cent.

Now banks are sitting on top of nearly a million homes. “All told, [banks] own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider,” reports The New York Times. “In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.”

Which is where the wonderful tragic tale of the mold houses comes in.

“In most homes,” reported NPR recently, “as residents go in and out and the seasons change, natural ventilation sucks moisture up to the attic and out through the roof. It’s called the ‘stack effect.’ And in many parts of the country, it’s driven by air conditioning in the summer and heat in the winter. But no one is going in or out of most foreclosed homes—regardless of climate—and the effects can be devastating.”

Far from the profit center imagined by freshly-minted analysts with MBAs, empty houses depreciate faster than a new car driving off the lot. They fall apart quickly. Mildew and mold sets in, some of it toxic.

“In some states, it’s estimated that more than half of foreclosed homes have mold and mildew issues,” reported NPR. “Realtors across the country say they’re seeing the problem in everything from bungalows to mansions.”

Turns out those old-fashioned bankers were on to something. Bankers shouldn’t become landlords.

A minor mold problem starts at $5,000 and can easily run $20,000 or more. Considering that the average house in the Midwest is valued at $136,000, that’s not insignificant. Many houses with toxic mold have to be demolished.

Greed may be good. But it doesn’t always pay.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2011 TED RALL

SYNDICATED COLUMN: Guilty After Proven Innocent

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Ted Rall

Make DSK Whole—Then Jail Him

“Innocent until proven guilty.” We say it. We teach it to our children. But we don’t believe it.

Dominique Strauss-Kahn, charged with ambushing a hotel cleaning person at a hotel in midtown Manhattan and forcing her to perform oral sex on him, has been released.

This was not the usual case of a well-heeled defendant wielding money and influence to weasel out of responsibility for his crime. To the contrary, the NYPD and district attorney believed the alleged victim, initially characterized as a hard-working immigrant struggling to support her family. The cops aggressively pursued DSK, as the French media calls him. They even subjected him to the “perp walk” that signifies official contempt.

But that’s all over. District attorney Cyrus Vance, Jr. says the case has fallen apart. The victim was unreliable at best, a conwoman at worst. The charges are dead. DSK is free.

Innocent until proven guilty, right?

Technically.

But not really.

When you’re accused, the story screams in blood-red 112-point type above the fold on page one for weeks on end. When you’re exonerated, it runs one column-inch buried in the classifieds—on the day all your friends, relatives and colleagues happen to miss the paper.

Strauss-Kahn won’t go to prison. Not for whatever happened or didn’t happen at the Sofitel. (He will face a rape charge filed by a French reporter, who accuses him of going after her “like a chimpanzee in rut” years ago.)

Though legally innocent, DSK will not be restored to his job leading the International Monetary Fund, which he was forced to resign as he cooled his heels at Rikers Island. No reason given. Just: no.

Before getting dragged out of his first-class seat on an Air France jet bound for Paris, the deaccused rapist was widely considered a frontrunner for the Socialist Party’s nomination for the French presidency. Now George W. Bush has a better chance than DSK of moving into Elysée Palace. Too much dirt has come out. Legally innocent he may be, but too many voters harbor doubts.

Like the old Soviet Union, the United States and its Western puppet states (France included) mindlessly repeat too many sweet-sounding slogans devoid of real meaning: “Equal justice under the law.” “All men are created equal.” “One man, one vote.”

“Innocent until proven guilty.”

If legal innocence (i.e. the failure of the state to convict one of a crime) is to rise above the status of hollow rhetoric, people like DSK ought to be entitled to the full restoration of their pre-arrest status. In DSK’s case, he is morally entitled to his old job at the IMF and an open invitation by the French Socialists to run for his nation’s highest office. He also deserves to be compensated for the legal bills and bail costs he accrued during his ordeal.

Not many people reading this will agree with me. Which is my point: as a society, we don’t really believe in “innocent until proven guilty.”

We did not revel in Dominique Strauss-Kahn’s arrest because of the crime that the legal system has since decided not to pursue, rape. We laughed and jeered because we hate(d) him.

We hate(d) DSK because he is rich and evil.

Had DSK been a run-of-the-mill accused rapist, few would have noticed and no one would have been as gleeful about his predicament. Here was the fearsome chief of the mighty IMF, an old, smug, white pig forced to shower with an electronic monitoring device locked to his ankle. “Le Perv!” shouted the New York Post.

How delicious!

After the arrest I published a cartoon showing DSK in a police interrogation room. I pride myself on my refusal to leap aboard media bandwagons, so I didn’t assume he was guilty. “What’s the big deal?” I showed him asking police detectives. “I’ve been raping the world for years!”

It takes a cruel genius to turn big profits on the backs of the world’s poorest people. Meet DSK’s IMF.

First IMF officials such as DSK convince the political leaders of say, Kyrgyzstan, that they could rapidly modernize their Fourth World backwater with a loan. Build some new highways! How about that long-awaited hydroelectric dam? Foreign corporations will rush in to do business! Paying us back will be a breeze!

This is, to be charitable, as overly optimistic as Countrywide telling slum dwellers they’ll never regret an adjustable-rate mortgage. There are good reasons that foreign firms do not invest in dumps like Kyrgyzstan. Those reasons do not change because there’s a new airport road or a new four-star hotel.

Increase in GDP or no, the IMF loans come due. What to do? IMF experts parachute in. Their recommendation: “structural adjustment.” No more profligate spending on social programs. Close those pricy health clinics! The IMF is the world’s biggest loan shark.

Ripped social safety nets cause social unrest. Kyrgyzstan, once relatively stable, was propped up by IMF loans in the late 1990s. They came due, forcing the poor nation to curtail social spending. It has since been swept by a series of riots, coups, ethnic cleansing and even warlordism.

Here in the United States, IMF-style gangster capitalism takes the form of Republican/Tea Party “starve the beast” demagoguery. There’s always money for rich people. And for wars. And for wars that make rich people richer. For the poor and middle-class, Medicare and Social Security are ostentatious and unaffordable luxuries. Socialized medicine, guaranteed cost-of-living increases and unlimited unemployment benefits are off the table.

It is this economic outlook, devoid of humanity and contemptuous of people’s basic needs, that Dominique Strauss-Kahn represents.

We all hate him. We hate those like him. That perp walk looked so…right.

He deserves prison, no doubt about it. Until there’s a revolution, however, DSK will never suffer for the crimes he committed as a globe-trotting financier.

Even as DSK flew first-class and left his most intimate DNA in $450-a-night suites at four-star hotels, his IMF was demanding that the citizens of Greece and Portugal slash pensions and hike college tuition. That is his biggest crime, undeniable and unforgivable, and the one for which he and those like him should someday face justice.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2011 TED RALL

Why No Jobs?

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Ted Rall

It’s his third year in office, yet Obama still hasn’t focused on jobs. Why not?

No Credit

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Ted Rall

60% of employers run credit checks on job applicants.

V-O Day

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Ted Rall

If The Kiss famously caught by a photographer on V-J Day in Times Square happened today, it might look and feel different. The death of Osama bin Laden does nothing to ease the economic pain of depression and collapse.

SYNDICATED COLUMN: Zero Salary for Congress

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Ted Rall

Why Not Link Pols’ Pay Level to Ours?

Most Americans don’t like Moammar Kadafi or Mahmoud Ahmedinejad. But that might change if they knew their paychecks. The leaders of Libya and Iran get $9,516 and $3,000 a year annually, respectively.

Obama collects $5,505,509—a whopping $22,022 per day.

Who’s the real out-of-touch dictator?

As the U.S. enters its third year of economic collapse, real unemployment has surged past levels that triggered revolts in Tunisia and Egypt. Yet neither the President nor members of Congress seem worried. They’re not even discussing the possibility of a bailout for the one-third of the workforce that is in effect structurally unemployed. Do you wonder why?

Maybe they don’t know what’s going on. As the saying goes, it’s a recession when you’ve gotten laid off. For members of Congress, who are raking it in, these are boom times.

Congressmen and Senators are insulated by huge salaries—$174,000 and up—that put them out of touch with and unaware of the problems of the 97 percent of Americans who earn less. Out of 535 members of Congress, 261 are millionaires.

It can’t be easy for Senator Dianne Feinstein, Democrat of California, to feel our pain. According to campaign disclosure documents filed in 2010, her net worth is somewhere between $46 million and $108.1 million—and she’s only the 10th richest member of Congress. The top honor goes to Representative Darrell Issa, also from the Golden State but a Republican. Estimates of Issa’s net worth range between $156.1 million and $451.1 million.

Years ago the SEC floated the idea of a maximum wage for the CEOs of publicly traded corporations. If their pay was capped at, say, 20 times that of the lowest-paid employee, it wouldn’t be long before the whole pay scale went up.

The SEC pay cap didn’t go anywhere. But there’s the germ of a smart—and fair—idea there, one that could help Congressmen feel what it’s like to be an ordinary American during a time of poverty and mass layoffs.

Our elected representatives set the minimum wage, work standards, healthcare benefits, union organizing rules and thousands of regulations that determine the salaries and working conditions for tens of millions of American workers. As things stand now, the president and members of Congress have no personal incentive to improve those things for us. After all, they’re all set. They’re rich.

Paul Abrams writes: “Many Republicans ran for office declaring they would run the government ‘like a business’…

If they are serious, however, there is one way [Congress] can operate like a business. Cut their base pay and provide large incentive bonuses should the economy hit certain goals.” A nice thought, but why not follow this line of thinking to its logical conclusion?

It is high time to set a Maximum Wage for Congress, the president and other high-ranking elected representatives. The Maximum Wage for Congress should be set at the lowest pay received by an American citizen.

As long as one American citizen is homeless and unemployed, the Maximum Wage would be zero.

Similarly public officials ought to receive a Maximum Benefit set at the lowest/worst level received by an American citizen. If one U.S. citizen receives no healthcare benefits, so it would go for members of Congress. If one U.S. citizen does not have free access to a gym, members of Congress would lose theirs.

I have a hunch that our lives would get better in the blink of an eye.

Of course I could be wrong. Perhaps it’s really true that America somehow can’t afford socialized healthcare (even though there’s always plenty of cash for wars). If that’s the case, personal incentives won’t convince Congress.

Still, that’s OK. It’s only fair that our leaders be forced to tough it out as much as we do.

We’re all familiar with the arguments for paying six-figure salaries to politicians:

They have to maintain two homes, one in D.C. and one in their home district. It reduces the temptations of corruption. They should focus on their jobs, not how to pay their kids’ college tuition. People who are not wealthy ought to be able to afford to serve. The best and brightest won’t want the job if the pay is terrible.

To which I say:

Live modestly. Couchsurf. If you take a bribe, you’ll be jailed—so don’t. Everyone worries about bills; shouldn’t Congressmen? The current salary structure has resulted in a Congress full of millionaires. As for attracting the best and brightest—look at the fools we’ve got now.

Besides, there is no reason why the president and his congressional cronies shouldn’t be able to keep their current wonderful salaries and perks under a Maximum Wage. All they’d have to do is create an economy that shared those bounteous treats with everyone else.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

Decision 2012: Jobs

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Ted Rall

Jobs are the big issue in the next election. Which party has the more the credible plan? The GOP, with tax cuts for the rich? Or the Democrats, with nothing whatsoever?

Heckuva Job, Barry

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Ted Rall

The US government opens its wallet to help victims of the Japanese tsunami while millions of Americans who lost their homes to foreclosure get nothing.

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