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Charter School Cheats: New Report On Charter Industry Exposes $100 million In Taxpayer Funds Meant For Children Instead Lost To Fraud, Waste & Abuse
ProgressOhio - May 16, 2014 - A new report released today reveals that fraudulent charter operators in 15 states are responsible for losing, misusing or wasting over $100 million in taxpayer money...
ProgressOhio - May 16, 2014 - A new report released today reveals that fraudulent charter operators in 15 states are responsible for losing, misusing or wasting over $100 million in taxpayer money.
“Charter School Vulnerabilities to Waste, Fraud And Abuse,” authored by the Center for Popular Democracy and Integrity in Education, echoes a warning from the U.S. Department of Education’s Office of the Inspector General. The report draws upon news reports, criminal complaints and more to detail how, in just 15 of the 42 states that have charter schools, charter operators have used school funds illegally to buy personal luxuries for themselves, support their other businesses, and more.
The report also includes recommendations for policymakers on how they can address the problem of rampant fraud, waste and abuse in the charter school industry. Both organizations recommend pausing charter expansion until these problems are addressed.
“We expected to find a fair amount of fraud when we began this project, but we did not expect to find over $100 million in taxpayer dollars lost. That’s just in 15 states. And that figure fails to capture the real harm to children. Clearly, we should hit the pause button on charter expansion until there is a better oversight system in place to protect our children and our communities,” said Kyle Serrette, the Director of Education Justice at the Center for Popular Democracy.”
“Our school system exists to serve students and enrich communities,” added Sabrina Stevens, Executive Director of Integrity in Education. “School funding is too scarce as it is; we can hardly afford to waste the resources we do have on people who would prioritize exotic vacations over school supplies or food for children. We also can’t continue to rely on the media or isolated whistleblowers to identify these problems. We need to have rules in place that can systematically weed out incompetent or unscrupulous charter operators before they pose a risk to students and taxpayers.”
You can read the report by going to www.integrityineducation.org or www.populardemocracy.org.
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Death Cab for Cutie, Jim James, more protest Donald Trump with new songs
Death Cab for Cutie, Jim James, more protest Donald Trump with new songs
Death Cab for Cutie
After writer Dave Eggers attended a Donald Trump rally this past June, he realized now would be a good time for the “resurrection of the...
Death Cab for Cutie
After writer Dave Eggers attended a Donald Trump rally this past June, he realized now would be a good time for the “resurrection of the political protest song.” So he called up some artists, including Jim James and Aimee Mann, who wrote tracks for a project that would later become a playlist titled 30 Days, 30 Songs. That playlist, touted as being “written and recorded by musicians for a Trump-free America” launched Monday with Death Cab for Cutie’s “Million Dollar Loan.”
“From Woody Guthrie to Public Enemy, we know that songs can change minds, and particularly now, we need to motivate voters to stand against bigotry, sexism, hatred and ignorance,” Eggers said in a statement.
Eggers launched the playlist — available on Spotify and Apple Music — Oct. 10, 30 days before election day. Thao Nguyen, clipping., and Bhi Bhiman, among others, also contributed tracks, along with R.E.M., who offered up a never-before-released live song for the compilation.
A new track will debut at noon ET each day up until Nov. 8, and all proceeds will go toward the Center for Popular Democracy. Hear Death Cab’s entry below.
BY ARIANA BACLE
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Hundreds of Activists Occupy the Capitol to Stop Trumpcare
Hundreds of Activists Occupy the Capitol to Stop Trumpcare
Hundreds of activists from around the country descended on Capitol Hill Wednesday to protest the GOP's latest assault on health care and the Affordable Care Act. As Donald Trump and Mitch...
Hundreds of activists from around the country descended on Capitol Hill Wednesday to protest the GOP's latest assault on health care and the Affordable Care Act. As Donald Trump and Mitch McConnell spent hours twisting senators' arms over lunch and secret meetings trying to whip up votes, nearly 300 Americans, including doctors, nurses, home health aides, and people with chronic conditions, occupied Republican senators' officers, demanding that their elected officials kill the Better Care Reconciliation Act and support a single-payer, Medicare-for-all health care system.
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Youth of Color Demand Racial Justice in Gun Reform During #NationalSchoolWalkout
Youth of Color Demand Racial Justice in Gun Reform During #NationalSchoolWalkout
In the days leading up to today’s protest, young people of color released a petition that calls for gun reform and school safety measures that center racial justice. In the petition, which was...
In the days leading up to today’s protest, young people of color released a petition that calls for gun reform and school safety measures that center racial justice. In the petition, which was signed by several social justice organizations including Advancement Project, American Federation of Teachers and Center for Popular Democracy...
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Major donors consider funding Black Lives Matter
Some of the biggest donors on the left plan to meet behind closed doors next week in Washington with leaders of the Black Lives Matter movement and their allies to discuss funding the burgeoning...
Some of the biggest donors on the left plan to meet behind closed doors next week in Washington with leaders of the Black Lives Matter movement and their allies to discuss funding the burgeoning protest movement, POLITICO has learned.
The meetings are taking place at the annual winter gathering of the Democracy Alliance major liberal donor club, which runs from Tuesday evening through Saturday morning and is expected to draw Democratic financial heavyweights, including Tom Steyer and Paul Egerman.
The DA, as the club is known in Democratic circles, is recommending its donors step up check writing to a handful of endorsed groups that have supported the Black Lives Matter movement. And the club and some of its members also are considering ways to funnel support directly to scrappier local groups that have utilized confrontational tactics to inject their grievances into the political debate.
It’s a potential partnership that could elevate the Black Lives Matter movement and heighten its impact. But it’s also fraught with tension on both sides, sources tell POLITICO.
The various outfits that comprise the diffuse Black Lives Matter movement prize their independence. Some make a point of not asking for donations. They bristle at any suggestion that they’re susceptible to being co-opted by a deep-pocketed national group ― let alone one with such close ties to the Democratic Party establishment like the Democracy Alliance.
And some major liberal donors are leery about funding a movement known for aggressive tactics ― particularly one that has shown a willingness to train its fire on Democrats, including presidential candidates Hillary Clinton and Bernie Sanders.
“Major donors are usually not as radical or confrontational as activists most in touch with the pain of oppression,” said Steve Phillips, a Democracy Alliance member and significant contributor to Democratic candidates and causes. He donated to a St. Louis nonprofit group called the Organization for Black Struggle that helped organize 2014 Black Lives Matter-related protests in Ferguson, Missouri, over the police killing of a black teenager named Michael Brown. And Phillips and his wife, Democracy Alliance board member Susan Sandler, are in discussions about funding other groups involved in the movement.
The movement needs cash to build a self-sustaining infrastructure, Phillips said, arguing “the progressive donor world should be adding zeroes to their contributions that support this transformative movement.” But he also acknowledged there’s a risk for recipient groups. “Tactics such as shutting down freeways and disrupting rallies can alienate major donors, and if that's your primary source of support, then you're at risk of being blocked from doing what you need to do.”
The Democracy Alliance was created in 2005 by a handful of major donors, including billionaire financier George Soros and Taco Bell heir Rob McKay to build a permanent infrastructure to advance liberal ideas and causes. Donors are required to donate at least $200,000 a year to recommended groups, and their combined donations to those groups now total more than $500 million. Endorsed beneficiaries include the Center for American Progress think tank, the liberal attack dog Media Matters and the Democratic data firm Catalist, though members also give heavily to Democratic politicians and super PACs that are not part of the DA’s core portfolio. While the Democracy Alliance last year voted to endorse a handful of groups focused on engaging African-Americans in politics ― some of which have helped facilitate the Black Lives movement ― the invitation to movement leaders is a first for the DA, and seems likely to test some members’ comfort zones.
“Movements that are challenging the status quo and that do so to some extent by using direct action or disruptive tactics are meant to make people uncomfortable, so I’m sure we have partners who would be made uncomfortable by it or think that that’s not a good tactic,” said DA President Gara LaMarche. “But we have a wide range of human beings and different temperaments and approaches in the DA, so it’s quite possible that there are people who are a little concerned, as well as people who are curious or are supportive. This is a chance for them to meet some of the leaders of the Black Lives Matter movement, and understand the movement better, and then we’ll take stock of that and see where it might lead.”
According to a Democracy Alliance draft agenda obtained by POLITICO, movement leaders will be featured guests at a Tuesday dinner with major donors. The dinner, which technically precedes the official conference kickoff, will focus on “what kind of support and resources are needed from the allied funders during this critical moment of immediate struggle and long-term movement building.”
The groups that will be represented include the Black Youth Project 100, The Center for Popular Democracy and the Black Civic Engagement Fund, according to the organizer, a DA member named Leah Hunt-Hendrix. An heir to a Texas oil fortune, Hunt-Hendrix helps lead a coalition of mostly young donors called Solidaire that focuses on movement building. It’s donated more than $200,000 to the Black Lives Matter movement since Brown’s killing. According to its entry on a philanthropy website, more than $61,000 went directly to organizers and organizations on the ground in Ferguson and Baltimore, where the death of Freddie Gray in police custody in April sparked a more recent wave of Black Lives-related protests. An additional $115,000 went to groups that have sprung up to support the movement.
She said her goal at the Democracy Alliance is to persuade donors to “use some of the money that’s going into the presidential races for grass-roots organizing and movement building.” And she brushed aside concerns that the movement could hurt Democratic chances in 2016. “Black Lives Matter has been pushing Bernie, and Bernie has been pushing Hillary. Politics is a field where you almost have to push your allies hardest and hold them accountable,” she said. “That’s exactly the point of democracy,” she said.
That view dovetails with the one that LaMarche has tried to instill in the Democracy Alliance, which had faced internal criticism in 2012 for growing too close to the Democratic Party.
In fact, one group set to participate in Hunt-Hendrix’s dinner ― Black Civic Engagement Fund ― is a Democracy Alliance offshoot. And, according to the DA agenda, two other groups recommended for club funding ― ColorOfChange.org and the Advancement Project ― are set to participate in a Friday panel “on how to connect the Movement for Black Lives with current and needed infrastructure for Black organizing and political power.”
ColorOfChange.org has helped Black Lives Matter protesters organize online, said its Executive Director Rashad Robinson. He dismissed concerns that the movement is compromised in any way by accepting support from major institutional funders. “Throughout our history in this country, there have been allies who have been willing to stand up and support uprisings, and lend their resources to ensure that people have a greater voice in their democracy,” Robinson said.
Nick Rathod, the leader of a DA-endorsed group called the State Innovation Exchange that pushes liberal policies in the states, said his group is looking for opportunities to help the movement, as well. “We can play an important role in facilitating dialogue between elected officials and movement leaders in cities and states,” he said. But Rathod cautioned that it would be a mistake for major liberal donors to only give through established national groups to support the movement. “I think for many of the donors, it might feel safer to invest in groups like ours and others to support the work, but frankly, many of those groups are not led by African-Americans and are removed from what’s happening on the ground. The heart and soul of the movement is at the grass roots, it’s where the organizing has occurred, it’s where decisions should be made and it’s where investments should be placed to grow the movement from the bottom up, rather than the top down.”
Source: Politico
Immigrants need sanctuary — and lawyers
Immigrants need sanctuary — and lawyers
Ali, a green card holder and father of three young daughters in Baltimore, was driving his friend home when they were pulled over by police in a routine traffic stop. Ali's friend, who was...
Ali, a green card holder and father of three young daughters in Baltimore, was driving his friend home when they were pulled over by police in a routine traffic stop. Ali's friend, who was undocumented, had a baggie of marijuana in his possession, and Ali, wanting to save his friend, took the blame. Ali believed his own immigration status would protect him even if convicted of possession. But a year later, he was threatened with deportation. He was arrested and, lacking a lawyer, detained for months, keeping him away from his family. Without a breadwinner, his wife, who was undocumented and unable to work, and children were evicted from their home.
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Black Lives Matter coalition issues first political agenda demanding slavery reparations
Black Lives Matter coalition issues first political agenda demanding slavery reparations
A coalition built on the Black Lives Matter movement has issued its first political agenda demanding reforms in the American justice system and reparations for slavery. Some 60 organisations in...
A coalition built on the Black Lives Matter movement has issued its first political agenda demanding reforms in the American justice system and reparations for slavery. Some 60 organisations in the Movement for Black Lives endorsed the platform calling for "black liberation" that had been forged over a year of discussions.
The agenda included six demands and 40 policy recommendations, including a reduction in military spending and a focus on protecting safe drinking water.
It also called for an end to the death penalty, decriminalisation of drug-related offences and prostitution, and the "demilitarisation" of police departments. It seeks reparations for lasting harms caused to African-Americans by slavery and investment in education, jobs and mental health programmes.
The agenda by the Movement for Black Lives came hard on the heel of the Republican and Democratic national conventions, which failed to satisfy members.
"On both sides of the aisle, the candidates have really failed to address the demands and the concerns of our people," said Marbre Stahly-Butts of the Movement for Black Lives Policy Table, which crafted the agenda.
He told the New York Times. "So this was less about this specific political moment and this election, and more about how do we actually start to plant and cultivate the seeds of transformation of this country that go beyond individual candidates."
The overarching mission of the group is to halt the "increasingly visible violence against black communities". Its agenda was issued just days before the second anniversary of the killing of unarmed black teen Michael Brown by a white police officer in Ferguson, Missouri.
Brown's death and the killing of other unarmed black men by white officers was the birth of the Black Lives Matter movement.
"We seek radical transformation, not reactionary reform," said Michaela Brown, a spokeswoman for Baltimore Bloc, one of the organisations that worked on the platform.
"As the 2016 election continues, this platform provides us with a way to intervene with an agenda that resists state and corporate power, an opportunity to implement policies that truly value the safety and humanity of black lives, and an overall means to hold elected leaders accountable."
By MARY PAPENFUSS
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Here's Why The Movement For Black Lives' Demands Came At The Perfect Time
Here's Why The Movement For Black Lives' Demands Came At The Perfect Time
Last week, the DNC took over Philadelphia, television sets, and social media platforms around the country. Viewers tweeted quotes and zingers from prominent elected officials, and celebrity actors...
Last week, the DNC took over Philadelphia, television sets, and social media platforms around the country. Viewers tweeted quotes and zingers from prominent elected officials, and celebrity actors alike. For the most part, it was a vibrant convention with many celebratory acknowledgements for Hillary Clinton becoming the first woman major-party presidential nominee. But here's why The Movement For Black Lives demands, released on Monday, actually came at the perfect time. There's still a long road ahead for full equality, and every political party should continue to be challenged – even during the "glass ceiling"-shattering historic moments.
Many supporters of Vermont Sen. Bernie Sanders and Green Party candidate Jill Stein (or those simply anti-establishment) exercised their right to protest at the DNC, but even still, the underlying message last week was clear: Unite to stop Donald Trump. The Republican presidential nominee poses a real threat to already-marginalized communities in America should he be elected President – but he's not the only threat. For black lives particularly, police violence, and economic freedom are some of the lingering systemic issues that have long oppressed black communities. And it's a deep-rooted problem that continues to need attention – especially as candidates in the general election are eagerly vying for the trust of American citizens from now until November.
The Movement For Black Lives is a collective of more than 50 organizations that represent Black people across the United States, including Black Lives Matter. The collective released a comprehensive platform of demands that aim to combat the systemic marginalization of black communities:
“Black humanity and dignity requires Black political will and power. Despite constant exploitation and perpetual oppression, Black people have bravely and brilliantly been the driving force pushing the U.S. towards the ideals it articulates but has never achieved. In recent years we have taken to the streets, launched massive campaigns, and impacted elections, but our elected leaders have failed to address the legitimate demands of our Movement. We can no longer wait.”
The process to create the demands took one year – beginning last year when 2,000 people gathered in Cleveland to discuss ideas for the movement, the site read. In a breakdown of one the platform demands for political power, the collective called for an end to super PACs, and "unchecked corporate donations" that influence political elections, along with ensuring voting rights, and an increase in funding for HBCUs.
What's especially interesting about the platform, is that some of the demands, like, reparations, are often viewed unfavorably and do not make the conversation in major-party platform settings like the DNC. But some polls suggest that significant percentages of black Americans support reparations – therefore making it an important conversation, at the very least, for all political candidates.
In an interview with The New York Times, Marbre Stahly-Butts, a leader in the Movement for Black Lives Policy Table, explained why the demands "go beyond individual candidates."
"On both sides of aisle, the candidates have really failed to address the demands and the concerns of our people," she said.
And as police violence continues to disproportionately affect Black lives, among other systemic issues, it continues to be important to push for justice, during and after the general election.
By KIMBERLEY RICHARDS
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Eminent Domain: A Long Shot Against Blight
New York Times - January 11, 2014, by Shaila Dewan - You can’t fight city hall, the saying goes. But Gayle McLaughlin, the mayor of Richmond, Calif., a...
New York Times - January 11, 2014, by Shaila Dewan - You can’t fight city hall, the saying goes. But Gayle McLaughlin, the mayor of Richmond, Calif., a city of 100,000 souls, would tell you that fighting Wall Street is harder. Even for city hall.
Ms. McLaughlin has a plan to help the many Richmond residents who owe more money on their houses than their houses are worth, but it’s one that banks like Wells Fargo, large asset managers like Pimco and BlackRock, real estate interests and even Fannie Mae and Freddie Mac, the mortgage finance giants, have tried to quash. Her idea involves a novel use of the power of eminent domain to bail out homeowners by buying up and then forgiving mortgage debt.
But the financial institutions have warned that mortgage lending would halt in any city that tried eminent domain — and they have lobbied Congress to ensure that the threat is not an empty one. Opponents have filed federal lawsuits, while real estate interests have made robocalls to residents and sent mass mailers warning that the plan would allow “slick, politically connected” investors to “take houses on the cheap.” (The idea is actually to buy mortgages, not houses.)
Under similar pressures, at least four other cities that considered the eminent domain strategy have backed away, deeming the risks too great. But advocates in Richmond say their city is different. They hope a unique alignment of anti-corporate political leadership, a concerted grass-roots campaign and union support will lead to a different outcome in this working-class, largely black and Hispanic community in the Bay Area. For a dozen or so other cities that have similar demographics and are also plagued by foreclosures, Richmond has become a national test case.
Those cities, scattered in states from New Jersey to Washington, have watched as the controversial proposal has threatened Richmond’s access to capital: When the city tried to market a highly rated set of bonds in mid-August last year, there were no takers.
In September, the Richmond City Council was preparing to take one of a series of votes on the eminent domain proposal. Before the meeting, opponents amassed at a hot-dog stand near city hall. A local real estate association, backed by money from the National Association of Realtors, offered free dinners to those who showed up to don red “A Bad Deal for Richmond” T-shirts; the group included a huddle of fraternity brothers brought in from Berkeley. If eminent domain were used, a young man who declined to identify himself was telling them, a for-profit company would make big money, and teacher and firefighter pensions would be hurt.
The eminent-domain strategy is not a fabulous idea. Like virtually every other proposal to help homeowners hurt by the housing crash, it tries for simplicity but falters in the face of the enormity of the post-financial-crisis mess, and, as markets improve, it may come too late to make much difference. The plan’s legality and wisdom have been debated in editorials and blog posts, with questions ranging from the true value of the mortgages to whether the chosen homeowners deserve the help.
But to advocates, eminent domain offers perhaps the only chance to remedy the failure of the federal government and mortgage servicers to offer widespread, meaningful relief to the hardest-hit communities.
Housing markets around the country may be improving, but about 28 percent of all mortgages in Richmond are deeply underwater (meaning that the homeowners owe significantly more than their homes are worth), compared with 19 percent nationally, according to RealtyTrac.
The local foreclosure rate is declining, but it’s still much higher than the national one. In light of this, the mayor shows no sign of backing down. “The risk that is really confronting us,” she said, “is waiting on the sidelines for the next wave of foreclosures.”
When the council first voted on eminent domain, in April, members were unanimously in favor. But then the opposition campaign began. Ms. McLaughlin predicted that her motion that September night would pass with five of seven council votes, but it squeaked by with just four. Jeffrey Wright, a real estate broker who is leading the local opposition, was satisfied.
“This underwater mortgage bailout program,” he said later, “is on life support.”
The day after the vote, Ms. McLaughlin was in her office, working on an entirely different project: getting ready for a trip to Ecuador, at the invitation of that country’s president, to tour the damage that courts there have ruled was caused by oil drilling by Texaco, now owned by Chevron.
It is Chevron, not mortgage debt relief, that has defined much of Ms. McLaughlin’s tenure. The company, which has a large refinery in Richmond, is the city’s largest taxpayer and employer, and Ms. McLaughlin has led the fight — first as an activist, and then as mayor — to force Chevron to pay higher taxes and to pay more damages after a refinery explosion last year sent thousands of area residents to emergency rooms.
A longtime advocate of left-wing causes, Ms. McLaughlin, a Green Party member, is part of a Richmond political alliance that has vowed not to accept corporate campaign donations. In 2010, she was re-elected over a Chevron-backed challenger. She helped ease policies that criminalized homelessness and harried illegal immigrants, and brought a solar panel factory and a branch of the Lawrence Berkeley National Laboratory to town.
But Richmond was staggered by the recession. Homes in the city lost 66 percent of their value, on average, and are still worth less than half what they were at their peak, in January 2006. Some 16 percent of homeowners lost their homes in foreclosure, leaving so many scars on neighborhoods that the city began fining banks $1,000 a day if they failed to maintain their property; the city has collected $1.5 million so far.
Richmond held sessions where homeowners could meet with bank representatives and legal aid groups, but too often, the mayor says, the efforts came to naught. Last summer, underwater homeowners owed, on average, 45 percent more than the value of their homes, according to the city manager.
So the mayor was all ears when she heard about the eminent domain plan, from both Mortgage Resolution Partners, a company that hopes to make money by administering and financing the plan for many cities, and from her longtime ally, the Alliance of Californians for Community Empowerment, an offshoot of Acorn.
The A.C.C.E. thought an earlier attempt to use eminent domain, in San Bernardino County, had failed because of a lack of grass-roots support. So in Richmond it held a door-knocking campaign. Its success was seen when more than 100 people, most in favor, signed up to speak at the September meeting. It lasted seven hours.
Using eminent domain to heal the wounds of the mortgage crisis has been called crazy, unconstitutional and even “one of the worst ideas ever.” But it is not so far removed from mainstream thinking. In 2008, Senator John McCain of Arizona, then the Republican presidential candidate, suggested using $300 billion in federal bailout money to buy troubled mortgages and write them down.
The problem was that the mortgages had been bundled into pools and resold to thousands of investors all over the world. The rules governing many of the pools forbade the investors’ representative, known as the trustee, from selling off mortgages or modifying them unless they were already in default, even though it might be in the investors’ interest to do so.
Scholars suggested that eminent domain could give trustees the legal cover they needed to get rid of the bad loans. So far, though, the investors have not seen it that way. In Richmond, investors (including BlackRock and Pimco) asked their trustees, Wells Fargo and Deutsche Bank, to sue the city to stop the program.
Eminent domain allows governments to condemn property for a public purpose, like building a road or eliminating urban decay, and applies to intangible property like mortgages as well as to real estate. Richmond argues that its public purpose is to prevent foreclosures and the blight of vacant properties. The idea is to buy those mortgages out of the bundles and restructure them, restoring equity to the homeowners and keep them from defaulting.
Opponents of the plan argue in legal briefs that the risk of default now, so long after the crash, is vastly overstated. More than half of the 624 homeowners initially identified for the program are current on their payments. Not only that, 91 of the loans have already received a modification that included debt forgiveness — though many early modifications were unsustainable. Then there is the question of whether homeowners who got cash by refinancing their homes during the bubble — taking out new, riskier mortgages, as many of these did — deserve help now. (Ms. McLaughlin says the homeowners fell prey to unscrupulous lenders.) Lastly, opponents calculate that with rising home values, almost a third of the homeowners aren’t even underwater, a figure that Mortgage Resolution Partners disputes.
Opponents argue that the plan may help certain homeowners but hurt other working-class people whose pension funds invested in the loans. But pensioners and those stuck in underwater mortgages are often the same people, said Stephen Abrecht, an official of the Service Employees International Union, which supports the use of eminent domain. “We have members who are locked into these kinds of situations and can’t get out of it,” he said. “We think it’s a drag on the economy and we’re interested in seeing the economy take off again.”
Mr. Wright, the real estate agent, said that what bothers him most about the plan is that it will help so few; no one with loans backed by Fannie Mae or Freddie Mac, which guarantee a majority of mortgages, is included. “They’re bearing these placards saying, ‘Save our homes’ and they don’t even realize that this program won’t benefit them,” he says. “There’s a lot of false hope and that irritates me, that really irritates me.”
Wall Street also objects to the plan on principle, portraying it not as a targeted response to an extraordinary event — the housing crash — but as a dangerous precedent that disrupts contracts and would all but end mortgage lending.
“Why would anybody think that private investors would provide additional capital to the mortgage finance market when somebody thinks it’s O.K. to take it from them?” asked Tim Cameron, the head of the asset management group for the Securities Industry and Financial Markets Association, the Wall Street trade association that has been spearheading the campaign against eminent domain.
Sifma and its allies have lobbied Congress to obstruct lending in any area where mortgages are vulnerable to government condemnation and have urged support for a bill from Representative Jeb Hensarling, a Texas Republican who is chairman of the House Financial Services Committee, that would bar any federal guarantee for such loans.
After Richmond voted to pursue eminent domain, Sifma officials flew out to meet with city officials, providing them with a thick binder of analysis and research reports warning of potential negative consequences. Then these officials went a step further, said Bill Lindsay, the city manager, by placing a phone call to the city’s bond underwriter and complaining that the disclosure language in a coming offering — to refinance some old economic development bonds — did not adequately disclose the legal risks of the mortgage plan.
Cheryl Crispen, a spokeswoman for Sifma, said the call was routine. “Sifma staff regularly inquire with underwriters to understand market trends, and did so to better understand the impact the threat of taking mortgages was having on the offering and consequently the municipal bond market more broadly,” she said. The underwriter, RBC Capital Markets, concurred that Sifma did not try to interfere in the offering, which was halted when there was no interest from investors.
But Mr. Lindsay said all the attention was unusual. “I’ve handled 40 different bond issuances,” he said. “I never even heard of Sifma before this.”
In 2002, the Georgia Legislature passed the toughest predatory-lending law in the country. Hailed as a victory for consumers, it was intended to prevent abusive practices like steering customers to high-interest loans. Lenders immediately started trying to dismantle the law, warning that the “good guys” would no longer make loans to people with poor credit.
Some lenders did pull out of the state, and two of the three ratings agencies said they could no longer rate Georgia loans for resale to investors because they could be sued under the law. The state banking commissioner estimated that the mortgage market shrank by 15 percent. The following year, after a nasty fight, lawmakers gutted the statute.
Sifma officials point to this affair as proof that messing with housing finance can have ruinous effects. But it is an example that offers other lessons, too.
The loans that disappeared from the market after the law was passed were the same kinds of subprime loans that set off the foreclosure wave; conventional 30-year mortgages were not affected. The lenders whose departure was met with such alarm included Countrywide Financial, whose practices during the housing boom have cost billions in legal settlements.
In an article in The Atlanta Journal-Constitution, experts concluded that had the law stayed intact, the housing crisis would have been less dire in the state, which became one of the hardest-hit. The article even implied that the whole country might have fared better, because “the Georgia drama also stemmed a tide of similar laws that were being considered in other states.”
Richmond has not yet tried to use eminent domain. The City Council must vote again before that happens. But the beating the city is taking from financial institutions makes the idea less likely to catch on in places like Irvington, N.J., and El Monte, Calif., which have expressed interest.
Richmond’s mayor says she has always known it would be a slog. “I’m not trying to minimize what we’re dealing with; it’s just like, if you’re willing to buck up against an unjust set of circumstances, you’re going to have those attacks coming at you,” Ms. McLaughlin said. “And in some sense that says you’re doing your job.”
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