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

April 3, 2009


Phil Mattera, Dirt Diggers Digest - The Financial Times has posted an article on its website headlined "Bailed-Out Banks Eye Toxic Asset Buys." In it the London paper reports that major U.S. financial institutions that received bailout funds and capital infusions from the federal government are giving serious thought to buying up toxic assets from one another under the "Public Private Investment Partnership" scheme proposed by Treasury Secretary Timothy Geithner last week.

Yes, that's right: the banks we've been told desperately need to rid themselves of those mortgage-backed securities are thinking about buying more of them. There are only two possible explanations for this. Either the banks have been bamboozling the federal government and U.S. taxpayers from the start about the supposed burden of these holdings. Or the Geithner plan is such a lavish giveaway to major investors that the banks believe they can potentially make a killing simply by reshuffling their portfolios.

The FT mentions that Goldman Sachs and Morgan Stanley are among the banks looking at toxic asset purchases. That's not surprising, since Goldman, for example, is in good enough shape that it reportedly wants to buy out the $10 billion holding that the feds acquired in the firm last year. Yet also mentioned is Citigroup, an out-and-out basket case. If Citi thinks it can find a way to participate, you know this is the deal of the century.

This bizarre development further highlights the profound disparity between the way the Obama Administration is treating the banks and the troubled auto industry. If Detroit were getting the same kid-glove treatment as Wall Street, General Motors and Chrysler would be receiving big federal subsidies to buy each other's unsold vehicles.

- An estimated 6 million families could be facing this question in the next three years, with nearly 1 in 10 mortgage holders either delinquent or in foreclosure. And although we've heard a lot about trying to help people stay in their homes - like President Obama's $275 billion foreclosure-prevention package - it's been far more difficult to follow what happens to these families once they've been forced out.

"We haven't done a good job of tracking those people who were not able to stay in their homes," admits Douglas Robinson of Neighbor Works, an umbrella organization for more than 230 local nonprofits focused on community development. . .

According to Robinson, those victims of foreclosure who do wind up being pushed out of their homes can be roughly divided into two waves.

The first wave consists of those who lost their homes because they were unable to keep up with payments on poor mortgages, often with cripplingly high interest rates. There's no hard research as yet, but anecdotal evidence indicates that, although these people didn't have the financial resources to keep up with their mortgage payments, most were able to rent apartments or even homes in their same communities.

But for the second wave, the transition hasn't been nearly so seamless. These are the people who are unable to make mortgage payments because they've lost their jobs. They no longer have the incomes to afford rentals.

This second wave is creating a strong demand for social services, including homeless shelters - a demand that far exceeds supply. Again, as yet there is no hard data, but anecdotal evidence indicates a far higher percentage of these people are winding up in hotel rooms, with friends and relatives, in shelters, or even sleeping in cars or on the street.

A recent report from the National Center on Family Homelessness estimates that 1 in every 50 American children was homeless between 2005 and 2006, about 1.5 million kids. And the numbers are likely to get worse as the economy continues to decline.

Detroit News - People are leaving Michigan at a staggering rate. About 109,000 more people left Michigan last year than moved in. It is one of the worst rates in the nation, quadruple the loss of just eight years ago. The state loses a family every 12 minutes, and the families who are leaving - young, well-educated high-income earners - are the people the state desperately needs to rebuild. Long treated as a symptom of Michigan's economic woes, outmigration has exploded into a massive problem of its own, a slow-motion Katrina splintering families, gutting state coffers and crippling an already hobbled economy, one moving van at a time.


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