Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

March 23, 2009


Tim Wood, Financial Sense - With the average American consumer tapped out, ask yourself a common sense question. How, are these bailout plans going to stimulate aggregate demand? Did the balance in your checking account increase because of any of these efforts? Did the liability side of your balance sheet change? Do you suddenly feel the urge to go borrow more money or to make a major purchase? As I see it, these efforts are not reaching the consumer and therefore, this is not going to stimulate demand. What it is doing is saving the financial institutions that made the bad loans.

Sacramento Bee - More than 31,000 personal and business bankruptcy petitions were filed in the Eastern District of the U.S. Bankruptcy Court in 2008, an increase of 79 percent over 2007's filings, according to a report released by the federal court. The caseload is such that callers to the U.S. Bankruptcy Court in Sacramento are greeted with a message that says clerical staff are too busy to speak with them. "We have never experienced increases with the number of percent we're seeing," said Richard Heltzel, clerk at the U.S. Bankruptcy Court for the Eastern District of California, based in Sacramento. "With unemployment comes the loss of health insurance - so many of our bankruptcies are triggered by uninsured health care costs," Heltzel said. "I expect to see close to 40,000 cases this year."

Paul Krugman, NY Times -
The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system - that what we're facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved. . .

In effect, Treasury will be creating - deliberately - the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn't, that's someone else's problem. . .

Dollars & Sense - Over 2 million properties went into foreclosure proceedings last year, a number that experts fear could jump to 10 million in the next few years. Foreclosures aren't just pushing owners into the street. According to the National Low Income Housing Coalition, renters make up an estimated 40% of families facing eviction because of foreclosure. And because the shakiest loans are concentrated in inner cities, the impact of vacant buildings on already fragile neighborhoods can be devastating. . . . Families facing eviction are left to fend for themselves, often with little understanding of their legal rights or other options


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