By Dylan Ratigan on Ratigan Report

  • Is The Federal Reserve Coming Clean?

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    Tune in to the Dylan Ratigan Show on MSNBC at 4pm ET for an exclusive look at the transcripts of meetings of top Fed officials during the financial crisis from 2007-2010.

    As I told you on Friday, the Huffington Post and the Dylan Ratigan Show got some significant internal documents from the Federal Reserve.  We'll be releasing them at 4pm on my show, on the Huffington Post, and at DylanRatigan.com.  They gave us the transcripts of certain internal meetings from 2007-2010, the meetings where their top officials planned their response to the gathering crisis (these are known as Federal Open Market Committee meetings, or FOMC).  Willingly giving away documents isn't how the Fed typically operates, especially documents that might point to serious management problems within the central bank.  They are known as a tight-knit bank-friendly super-secret agency.

    Is the Fed finally coming clean?

    After all, recently, Federal Reserve Chairman Ben Bernanke has engaged in a public relations campaign to improve the image of his vaunted Fed.  The central banker has lectured to college students, gone on a media outreach campaign, and even opened a twitter account.  New York Federal Reserve Bank President William Dudley has also gone out of his way to introduce his part of the system to the public.  The New York Fed has opened up its research team to the world with a new blog.

    Dudley, who runs the enormously powerful New York branch of the Fed, in some ways has gone even further than Bernanke.  At a speech in New Jersey, Dudley argued that taxpayers should forgive mortgage debt owed to Fannie and Freddie, as a way of preventing foreclosures and stimulating the economy.  This was remarkable - the Fed just doesn't get involved in policy disputes like this, and it would be hard to imagine that the Fed would intervene on the side of homeowners.

    It seems like the public pressure on the Federal Reserve over the past few years had an effect.  After a long, protracted battle in Congress, Senator Bernie Sanders and Rep. Ron Paul were able to force an audit of the Fed by the Government Accountability Office.  That audit came out in 2011.  Bloomberg, which filed a Freedom of Information Act to get the Fed's emergency lending data, won its suit to get that data in the courts.

    So is it a new day at the Fed?  The Huffington Post and my research team filed a Freedom of Information Act Fed back in January.  We asked the Fed for the transcripts of the internal meetings of the Fed's open market committee (FOMC) from 2007-2010.  These meetings are where decisions are made, and they are released on a five year time lag.  The Fed released the transcripts from 2006 earlier this year, and that transcript showed that the top officials at the Fed simply were not concerned about the housing bubble.  It was fascinating and useful information, critical for policy-making around our banking system.

    I thought, since the Fed wants to turn over a new leaf, why not ask for the transcripts of the meetings from 2007-2010?  There are no proprietary secrets there.  The Fed will release them in a few years anyway.  Let's just accelerate the timetable, and let everyone know what really went down at those meetings during the crisis of 2007 and 2008.  And we got them.  And we'll show you just what we got.

    Still, in at least one way, it's not clear that the Fed has changed its stripes.  When Dudley argued that Fannie and Freddie should reduce debt owed by millions of homeowners, what he didn't say is that this would help the big banks by making the home equity lines of credit they own on that very same debt more valuable.  Taxpayers should transfer more capital to the big banks.   This proposal is, as Gretchen Morgenson said, a "bailout by another name."  And why wouldn't it be?  Banks are still the Fed's real client.  The board of directors of the New York Fed includes Jamie Dimon of JP Morgan Chase, as well as two other bankers.

  • On the Mortgage Settlement: There Is No Political Solution to a Math Problem

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    -  by Dylan Ratigan and Eliot Spitzer

    Originally published by Huffington Post 2/10/2012 

    http://www.huffingtonpost.com/dylan-ratigan/mortgage-settlement_b_1267710.html

    This week officials from the Obama administration, the banking regulators, and state Attorney Generals announced a settlement of claims stemming from the financial crisis. The nominal amount put forward as the cost of the settlement is $26 billion, and in return the banks will be released from civil claims on origination of mortgages and the falsification of documents in the foreclosure process, or "robosigning". This caps off a month of political noise on the housing situation which started at the State of the Union, when the president announced a task force on financial fraud headed by officials from his administration as well as New York Attorney General Eric Schneiderman.

    An investigation, and a multi-billion dollar settlement. That sounds like a lot, until you put it into perspective. Here are the numbers. Roughly half of homeowners with mortgages are underwater, which means they owe more than they own, to the tune of $1 trillion or so. And housing values are still declining so far in this "recovery", throwing more homes underwater. In terms of an investigation, the Savings and Loan crisis used roughly 1000 FBI investigators to uncover fraud -- this task force taking on a crisis forty times more severe will employ 10 FBI agents.

    There's a reason this is so inadequate to the problem at hand. For the last three years, the policy has been to impose a political solution to a math problem. It hasn't worked. America simply has too much mortgage debt to pay back. Serious economic thinkers across the spectrum, from Democrat Alan Blinder to Republican Martin Feldstein to New York Fed President William Dudley, believe that there is only one solution -- writing down the enormous creaking mound of debt. This solution is currently off the table, because writing down these unsustainable debts could cost our fragile banks enormous sums of money and possibly lead to a restructuring of one or more of our major banks. Avoiding this clear policy choice has resulted in our economy falling into a Japan-style "zombie bank" torpor, with debts carried on the books at full value which everyone knows will not be paid back at par.

    This crisis of American political economy in the form of excess mortgage debt is preventing a more powerful economic recovery. Three years after Ben Bernanke used the term "green shoots" to describe a recovering economy, job growth hasn't really revived in any meaningful way. In fact, this is by far the worst recovery we've had since the end of World War II. The best way to measure this is not through traditional unemployment indices (which can be gamed), but by asking the question of how many Americans are working as a percentage of the population. In 2007, this was 63 out of 100. Today, it's a full five percentage points lower. The ratio hasn't been this bad since the early 1980s recession, and remember, we're in a recovery. And the labor force participation rate is dropping, which is a long-term bigger crisis.

    The housing market's vicious deflationary cycle demands serious policy action to match the scale of the challenge. Dropping housing values lead to foreclosures, which damage housing values, and so on and so forth. According to Zillow, roughly half of homeowners with a mortgage are effectively underwater, which means they owe more on their mortgage than their house is worth. So far, the alphabet soup laden set of programs (HAMP, HARP, Hope for Homeowners) put forward by the Bush and then Obama administration have been failures. And this is because, as the Congressional Oversight Panel noted as far back as March of 2009, the single best predictor of default risk is how much equity homeowners have in a home. Many Americans, though considered homeowners, are essentially "renters with debt" (as housing analyst Josh Rosner put it). And Amherst Securities Laurie Goodman noted that with our current housing trajectory, we can expect up to 10 million more defaulted mortgages over the next decade. These foreclosures impacts housing values, reduce consumer purchases, and costs municipalities money.

    The proposals on the table to solve this problem aren't inspiring. The meager mortgage settlement deal cut via furious and dramatic negotiations is unlikely to be meaningful. This settlement is essentially a continuation of previous alphabet soup housing programs, because it would not force banks to fundamentally restructure the trillion dollar underwater mortgage problem. It will generate headlines, but it will fail to address the extent of the problem. State attorneys generals have accepted the settlement for a variety of reasons, one of the most frustrating being that they are substantially under-resourced and this deal moves cash their war. This is not how to make good policy. And the housing market will continue to suffer if our political leaders cannot acknowledge the depth of the problem.

    Instead, we need some serious discussion from both the Republican candidates and the Obama administration about how to write down mortgage debt. Some proposals would reduce principal, while giving the banks an equity appreciation stake in the home. Others would deal with the problematic accounting standards which allow banks to overvalue second mortgages, and imply that one or more large banks needs to be restructured by the government. These are worth considering. We think it's important, regardless of how policy-makers reduce the debt, to force the banking system to appropriately value mortgage debt.

    Anything less would simply continue the deflation and uncertainty in the housing market.

    Ultimately, we need to look at our banking and housing system and engage in a ruthless yet compassionate evaluation of whether it is working to solve our national needs. Serious thinkers in both parties recognize that it isn't, and that we should find a way to write down this mortgage debt. Only then will we head down a pathway to a healthier banking system, and begin generating the roughly thirty million jobs that will bring America back to full employment. It's time that the major presidential candidates, and President Obama himself, be honest with the American public, and openly recognize this as well.

  • My 30 Million Jobs tour: Every problem is a job

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    This week, I'm launching the 30 Million Jobs tour. We're taking the Dylan Ratigan Show on the road, and going all over the country to demonstrate that we are a nation flush with potential. We'll visit what I call "cradles of innovation" all over the place -- in education, health care, and energy -- mini-ecosystems where innovators and pioneers are taking resources and capital and using it to improve the world. We will also show what I detail in my book -- Greedy Bastards -- the systems holding back this potential, starving it of necessary capital.

    30 Million Jobs is the number of jobs we need for full and complete U.S. employment. We start our tour in California's Silicon Valley -- one example of our country's cradles of innovation. Where most people see a problem, the people I'm spending time with see a job. And it's pretty clear that, once we end the corruption in our banking, tax, and trade policies, we will have more than enough work for the 30 million people who need it.

    Let's begin with energy. When it comes to stationary power generation efficiency, we're at 34%, according to the U.S. Department of Energy Information Administration. That means two out of every three units of electricity we use are tossed out, with nothing to show for it. Generating efficiency gains will take work, and thankfully, we have plenty of people that are unemployed. The problem here is that there is no investment in the sector - t's a desert landscape desperate to be irrigated by a flow of capital. Remember, capital isn't just the central banks and governments. It's private businesses, personal accounts and most importantly, all human potential. The river exists -- its massive, some might say even infinite. It is surging with potential if we only release it. Right now, as I document in my book Greedy Bastards, this flow is going into the pockets of status quo interests because of rigged tax, trade, and banking policies. But there's no reason it couldn't instead go towards bumping up our energy efficiency to 60%, 70% or even 90%.

    Or take health care. We all know how screwed up the health care system is. But spending time with Dr. Jeffrey Brenner in Camden, New Jersey, or at the Mayo Clinic, shows that this is a choice. Brenner has demonstrated, through his hotspotting work, that we can dramatically reduce costs by targeting the small number of extremely high cost patients. And the Mayo Clinic, with its innovative team-oriented approach to health, is relentlessly bringing evidence on outcomes into its practice. These are models for us.

    Education is another arena where innovation is bursting out all around us. Take the Khan Academy in San Francisco, which flips the traditional model of teaching on its head. Rather than a teacher lecturing students and assigning homework, the Khan Academy offers supremely good lectures online, and then enables classroom time to be a workshop where students get help from teachers. It lets teachers teach, and students learn at their own pace. But importantly, the philosophy behind the Khan Academy strategy is "expect failure, demand mastery" -- failure is NOT penalized, but getting 70% on a lesson quiz means you don't move on to the next lesson. The lessons are about learning, not bureaucratic testing regimes. Again, reconfiguring our education system will take enormous amounts of work, but fortunately, we have plenty of unemployed people that want to work. All it takes is the right financing flows. And that's what my 30 Million Jobs Tour is about.

    There's plenty of sun to grow these ecosystems of innovation. We have the know-how. But the river of capital that can enable and scale these models is being held back by three major barriers: man-made levies of bank, tax and trade policy auctioned off by our bought election system. We, in our Greedy Bastards behavior are creating these gates and in the process are holding back the flow of capital by incentivizing credit speculation, job outsourcing, and corrupt pricing on almost every major U.S. service. We auction tax benefits and subsidies through the money and political system to ensure that. But this too is a choice. We will also show in this tour the fights in our electoral and political process, the gerrymandering and corruption, the noble activism and citizen work to get money out of politics.

    By using our values of shared visibility, integrity and choice we can achieve aligned interests and demand real, comprehensive trade, tax and bank reform to break down those barriers. And in the process, we will unleash a flow of investments to irrigate these cradles of innovation and yield solutions to our problems while building millions of jobs for America.

    Join us, as we explore this fascinating place called America. It is brimming with potential. And it is us.

  • Why this election feels wrong

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    Tomorrow night, we'll see returns from the New Hampshire primary, the second contest in the Republican Presidential nomination. Most people think of this as an election, where voters go to the polls and select their preferred candidate. But I believe, and an increasing number of viewers believe, that our political system has become an auction in which the highest bidder wins.

    If something about this election feels wrong to you, you're not alone. Here are 10 headlines about the political process that show why we need to end the auction by getting money out of politics.  

    1) The candidate with more money wins: From OpenSecrets.org on the 2008 elections: "In 93 percent of House of Representatives races and 94 percent of Senate races that had been decided by mid-day Nov. 5, 2008 the candidate who spent the most money ended up winning."

    2) Congress's main job is to raise money, not govern: A political director at a PAC shared this on Quora: "Here is a general rule of thumb for US House incumbents. They need to raise roughly $10,000 a week started the day they are elected."

    3) 48 percent say most members of Congress are corrupt: A new Rasmussen Reports national telephone survey shows that 48 percent of "likely U.S. voters" believe that most members of Congress are corrupt. Just 28 percent disagree, and another 24 percent are not sure.

    4) Voters think that cash is king: A CNN/Opinion Research Corporation survey released Thursday indicates that 86 percent of the public thinks elected officials in the nation's capital are mostly influenced by the pressure they receive from campaign contributors.

    5) No trust in elected officials: According to Pew Research, less than 25 percent of people believe they can trust our government at all, particularly our elected officials.

    6) Outsider movements are quickly co-opted: According to Open Secrets, Tea Party House Members are even wealthier than other GOP lawmakers.

    7) Faith in all institutions is collapsing:

    • 83% say of American adults say they have less trust in "politics in general" than they did 10 or 15 years ago;
    • 79% say they have less trust in big business and major corporations;
    • 78% say they have less trust in government;
    • 72% report declining trust in the media.
    • A surprising majority, 54%, "believe that my freedoms are being taken away."

    Pew Research confirms this.

    8) People don't like horse race coverage.  Meanwhile, distrust in media reaches an all-time high. (Coincidence?)

    9) Cash determines voting. What shaped the House vote on the proposed Keystone Pipeline? Oil industry lobbying.  Writes environmentalist Bill McKibben on TomDispatch of The Nation Institute: "Within minutes of the vote, Oil Change International had calculated that the 234 Congressional representatives who voted aye had received $42 million in campaign contributions from the fossil-fuel industry; the 193 nays, $8 million." 

    10) The middle class is collapsing.

    As we watch our way of life change radically, as we see our great country consumed by corruption and greed, we must have our own debates about what to do. You won't find these discussions in our presidential debates, dominated as they are by money that separates the voters from their candidates with a wall of cash. That's why those contests feel so empty.

    The debates we need are the ones happening around tables all over the country. They're the ones I seek to host on my show. And they're the ones I wrote my book to support, offering a guide to this country's structural problems -- and solutions.

    I'm profoundly hopeful about where these debates can take us, because I'm not the only one who wants a better way. We all do. And together, we'll make that better way a reality.

    Dylan Ratigan, host of msnbc's "The Dylan Ratigan Show," discusses his new book, "Greedy Bastards: How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry."

     

    Want to learn even more? I go in depth in my new book "Greedy Bastards."  Read an excerpt of the book.

About The Dylan Ratigan Show
Dylan Ratigan is the host of msnbc's "The Dylan Ratigan Show," an opinion and analysis-fueled daily broadcast program airing weekdays at 4pm on MSNBC. Ratigan also writes regularly for the Huffington Post and produces one of America's most insightful and provocative podcast's "Radio Free Dylan" and dylanratigan.com.
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Infuriated by government corruption and corporate communism, incensed by banksters shaking down taxpayers, and despairing of an ailing health care system, an age-old dependency on foreign oil, and a failing educational system, Dylan Ratigan sees an America that has allowed itself to be swindled and robbed. Available January 10, 2012! Read an excerpt.