Another blogger on the edge — this time, Diane at Cabdrollery. Can you help?
Category: The New Depression
Change you can believe in
Research shows that children of workers who lose jobs and go back to work at lower wages appear to suffer from lower wages, too. In a 2008 study, a group of economists tracked the wages of 60,000 father-child pairs from 1978 to 1999. Children whose fathers went through mass layoffs in the 1982 recession ended up with 9% lower earnings than similar children whose fathers didn’t experience the job cuts.
The impact was concentrated in children from lower-income families. “When someone at the bottom of the income distribution loses their job, the loss of income is much more likely to involve losing things that matter for the family to sustain itself,” says Marianne Page of the University of California, Davis, one of the researchers.
Part of the wage adjustment after a downturn rests on how much workers are willing to give up.
After seven years working in regional sales in Southern California for Diebold Inc., a manufacturer of ATMs and security systems, Virginia May says she was earning $30 an hour plus bonuses when she and 800 colleagues lost their jobs in early 2008. She took a seven-month stint with the Census Bureau last year, earning $25 an hour, but struggled to find the same wage anywhere else. Ms. May says she turned down 10 job offers out of 58 interviews. One of them was as an office manager, similar to the job she had at Diebold, paying $10 an hour.
“When it comes down to it, they want to offer us peanuts to work,” she said last fall.
Ms. May, 63 years old and never unemployed before the latest downturn, runs a group for unemployed professionals in the Los Angeles area. “The first thing we teach all of our members is: ‘Don’t accept the first offer, always go into negotiation with them,'” she says. “Some of the people are afraid to, because the market is so tough out there.”
After cashing out half of her $90,000 retirement account to get by, Ms. May had started eyeing part-time jobs and wages at $20 an hour or less. But she pulled through. A few days after Christmas, just as her unemployment benefits ran out, she got a job as an office administrator in California. Her pay, she says, “is more than I expected” and “just a little above what I was making two years ago.”
Others, like Mr. Cronan, the Starbucks barista in Massachusetts, take whatever work is available. He lost his job in January 2009 at a Boston money-management company, where he says he earned a $100,000 salary and $50,000 annual bonus in recent years. Mr. Cronan, 40, enrolled in adult-education courses and tried to wait out the downturn as he saw other people with MBAs take entry-level, $40,000-a-year jobs.
But once his 19-month severance period ended, Mr. Cronan needed health insurance and decided he couldn’t limit his search to only his field. So, in August, he got a job at his local Starbucks—the one he’d visited daily since losing his job—even though he expects to leave once he finds employment in his field.
He says he’s now earning $8.85 an hour for about 38 hours a week of work.
The Arlington, Mass., resident is continuing his job search with new expectations for how much he’ll earn when finance jobs in his specialty, currency, come back.
“If I’m offered $75,000, that’s a lot more than I’m making now,” Mr. Cronan says. “It’s a realistic approach. You can’t live looking in the rearview mirror.”
Shock waves
This is pretty big. There’s lots of talk on the econoblogs as to whether other states like California, which like Massachusetts, also operates under a non-judicial foreclosure system, are going to follow the lead of Friday’s Massachusetts Supreme Court ruling. The court has a stellar reputation, and that’s going to hold weight on a lot of other judicial circuits. That means that while the repercussions of the ruling are limited to Massachusetts, odds are high that this will quickly be adopted as a template for other states :
NEW YORK, Jan 7 (Reuters) – In a decision that may slow foreclosures nationwide, Massachusetts’ highest court voided the seizure of two homes by Wells Fargo & Co (WFC.N) and US Bancorp (USB.N) after the banks failed to show they held the mortgages at the time they foreclosed.
Bank shares fell, weighing on broader stock indexes, on fears the decision could threaten lenders’ ability to work through hundreds of thousands of pending foreclosures.
The Supreme Judicial Court of Massachusetts’ unanimous decision on Friday upheld a lower court ruling. It is among the earliest cases to address the validity of foreclosures done without proper documentation.
That issue, including the use of “robo-signers” who approved foreclosure documents without reviewing them, last year prompted an uproar that led lenders such as Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and Ally Financial Inc to temporarily stop seizing homes.
“A ruling like this will slow down the foreclosure process” for lenders, said Marty Mosby, an analyst at Guggenheim Securities in Memphis, Tennessee. “They’re going to have to be really precise and get everything in order. It doesn’t leave a lot of wiggle room.”
Wells Fargo and U.S. Bancorp lacked authority to foreclose after having “failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” Justice Ralph Gants wrote for the Massachusetts court.
In a concurring opinion, Justice Robert Cordy lambasted “the utter carelessness” that the banks demonstrated in documenting their right to own the properties.
Courts in other U.S. states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly.
Friday’s decision applies in Massachusetts, and need not be followed by federal judges or by courts in other states.
This is going to mean a HUGE legal mess for a lot of people in the Bay State — except homeowners facing foreclosure, who will get to hit the reset button.
Mortgage companies who lent money to buyers purchasing foreclosed homes with this type of title defect, and the title insurers on those deals? Not so good. (By the way, the decision was applied retroactively.)
If you bought a foreclosed home that has this kind of title issue, you no longer own your home. The previous owner still does. If you don’t have title insurance, you’re doubly screwed. You probably can’t sell or get an equity loan for a long, long time. You can sue the banks, or the attorneys, or try to get the owner to sign over the deed. If you do have title insurance, you can file a claim. Go find a good lawyer.
A tiny bit of wiggle room in the ruling means some mortgages with proper documents may survive.
We’re going to see a lot of class action suits against the banks the lawyers who were supposed to draft the documents, and the foreclosure attorneys. And as I said, the investors of mortgage backed securities will be looking to sue the mortgage trusts — and the companies that were servicing the pools.
Misery with plenty of company
Not that I don’t appreciate Krugman (because I do) but I think a so-called progressive movement would do more to emulate Bob Herbert, who is the only person in the national media who ever writes about poor people. Go read all of it, the commenters have some interesting things to say, too:
Consider the extremes. President Obama is redesigning his administration to make it even friendlier toward big business and the megabanks, which is to say the rich, who flourish no matter what is going on with the economy in this country. (They flourish even when they’re hard at work destroying the economy.) Meanwhile, we hear not a word — not so much as a peep — about the poor, whose ranks are spreading like a wildfire in a drought.
The politicians and the media behave as if the poor don’t exist. But with jobs still absurdly scarce and the bottom falling out of the middle class, the poor are becoming an ever more significant and increasingly desperate segment of the population.
How do you imagine a family of four would live if its annual income was $11,000 or less?
During a conversation I had this week with Peter Edelman, a professor at Georgetown University Law Center and a longtime expert on issues related to poverty, he pointed out that the number of people in that tragically dismal category has grown to more than 17 million. These are the folks trying to make it on incomes below half of the official poverty line, which is $22,000 annually for a family of four.
No one talks about these families and individuals living in extreme poverty. Certainly not the Republicans who were having a dandy time this week deliberately misreading the Constitution and promising budget cuts and other initiatives that will hurt the poor even more.
If you’re still having trouble deciding whose side the Republicans are on, just keep in mind that the House G.O.P. bigwig Darrell Issa sent a letter to 150 businesses, trade groups and think tanks asking them to spell out which federal regulations they dislike the most. These are lifeguards on the side of the sharks.
Scared to death of being outdone, President Obama and his sidekicks climbed into their spiffy new G.O.P. costumes and promised in humiliatingly abject tones to shower the business world with whatever government largess they could lay their hands on. The first order of business (pun intended) was the announcement that William Daley, the Chicago wheeler-dealer and former Clinton administration official who landed a fat gig at JPMorgan Chase, would become the president’s chief of staff. Mr. Daley was a loud critic of recent financial regulatory reforms and has been obsessed with getting Democrats to be more subservient to business.
The poor, who have been hurt more than anyone else in this recession, don’t stand a heartbeat’s chance in this political environment. The movers and shakers in government don’t even give a thought to being on the side of the angels anymore — they’re on the side of the millionaires and billionaires.
Nearly 44 million people were living in poverty in 2009, which was more than 14 percent of the American population and a jump of four million from the previous year. Anyone who thinks things are much better now is delirious. More than 15 million children are poor — one of every five kids in the United States. More than a quarter of all blacks and a similar percentage of Hispanics are poor.
Are we doing anything about this? No. Our government officials, from the president on down, are too busy kissing the bejeweled fingers of the megarich.
Coming attractions
Considering that Wall St. has moved its attentions to the commodities market, I expect this is only a matter of time:
Two people have been killed and hundreds injured in continuing protests in Algeria, as the government meets to discuss ways of halting the rising food costs and unemployment that have sparked the unrest.
At least 300 of the 400 people injured in the riots were police officers, Dahou Oul Kablia , Algeria’s interior minister, said on national radio on Saturday.
One of the two men killed was named as 18-year-old Azzedine Lebza. He was shot dead in Ain Lahdjel in the M’Sila region, 300km from Algiers, the capital.
“He died in an attempt to break into a police station,” Kablia said, confirming the incident reported earlier by the Arab-language daily El Khabar.
A second demonstrator was killed on Friday in Bou Smail, a small town 50km west of Algiers, he said.
“He was picked up in the street, wounded. A pathologist said he had died from wounds to the head, but the cause of death has not yet been established.”
[…] Algeria has seen three days of unrest over the rising costs of living and unemployment, which government figures show standing at about 10 per cent, but which independent organisations put closer to 25 per cent.
Hmm. Just like us!
‘Only’ 9.4
Well! I feel much better now, even though we know they’re not counting those of us who have stopped looking for work.
As Dean Baker says, not good.
The retirement age is too damned high
James Galbraith with an idea that’s so sensible, it doesn’t have a chance in hell:
The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less.
This idea is being used to rationalize cuts in old-age benefits in numerous advanced countries — most recently in France, and soon in the United States. The cuts are disguised as increases in the minimum retirement age or as increases in the age at which full pensions will be paid.
Such cuts have a perversely powerful logic: “We” are living longer. There are fewer workers to support each elderly person. Therefore “we” should work longer.
But in the first place, “we” are not living longer. Wealthier elderly are; the non-wealthy not so much. Raising the retirement age cuts benefits for those who can’t wait to retire and who often won’t live long. Meanwhile, richer people with soft jobs work on: For them, it’s an easy call.
Continue reading “The retirement age is too damned high”
The end of his rope
No one ever talks about an increase in the suicide rate, but it’s got to be going up. I read too many stories like this:
SANTEE — A distraught man who told neighbors he was going to kill himself set his Santee home on fire Saturday and then threatened to shoot anyone who came near the burning building, authorities said.
[…] Neighbor Ruth Taloza said the man who owns the home came over earlier in the day to give her children and a friend an air compressor. The smell of gas hung in the air, said Taloza’s visiting friend, Stephen Orman.
When Taloza walked across the street to thank the man through his open garage door, he told her that he and his wife were being evicted from their home.
“He told me they’re being kicked out of their home and they were both laid off from their jobs,” Taloza recalled. “They had tried for a lower loan rate and were denied.”
He also told her his wife was sick with cancer. Their conversation ended, and he closed the garage door.
Happy talk
Do we really need to wait until experts tell us this is a Depression, and that it’s getting worse?