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A Housing Fix or a Jobs Fix? Chicken or Egg?

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couple in front of houseNow that health care reform is being given the slow morphine drip which can be characterized as assisted suicide or euthanasia Washington has turned its attention to jobs, jobs, jobs. It seems that everyone has gotten on the bandwagon about the unemployment situation (still in double digits) since there seems to be a “populist” uprising in the country. At least, it seems like everybody.  Personally, I’m a “wait-and-see” kinda guy when it comes to the “‘Just Say No’ to Everything” party that seems hellbent on making sure that nothing happens.  Will they really try to work with Democrats to fashion some kind of program that will help get Americans back to work?

My guess is that the Republicans see continued posturing and bellicose rhetoric as a path to majorities in both houses of Congress and, possibly, the White House.  That may be.  What they forget is that if powers shifts because of these tactics, Democrats will adapt them if they ever become the “loyal opposition”.

Jobs First or Housing?

In a recent post here on AG, Lani Rosales noted the lack of attention housing got in President Obama’s State of the Union address. Lani may be on to something but I’m thinking it may be the other way around.  Jobs will create the income necessary for people to buy homes which, in turn, will spur new home building which, in turn, will create more jobs.  It may actually be a kind of nice upward spiral.  Unfortunately, since employment is a lagging indicator we don’t see the proof of job growth until the recovery is well underway.

That doesn’t address the current issues of massive foreclosures and the huge glut of short sales on the market.  Perhaps with jobs people could make their mortgage payments. This would reduce inventory which would stabilize prices and, perhaps, create demand.  Absent a good jobs program to get people back to work, my guess is that no amount of loan modifications or re-financing will really solve the housing problem.

I agree that there should be a way for people to re-finance out of ARMs and Interest Only loans and other “exotic mortgages”.  To be honest, I’m not sure how that can be done with any great efficiency or that it would really be helpful.

It’s really a perplexing challenge.  In my mind, though, people tend to feel a lot better about themselves and the prospects for the future when they have a job and some income to take care of some of the basics like food and shelter. Once that’s taken care of the rest will follow right along.

“Loves sunrise walks on the beach, quaint B & Bs, former Barbie® boyfriend..." Ken is a sole practitioner and Realtor Extraordinaire in the beautiful MD Suburbs of DC. When he's not spouting off on Agent Genius he holds court from his home office in Glenn Dale, MD or the office for RE/MAX Advantage Realty in Fulton, MD...and always on the MD Suburbs of DC Blog

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16 Comments

16 Comments

  1. ross therrien

    January 31, 2010 at 10:28 am

    Great article and makes perfect sense. Too bad so many repubs, in my area just don’t get it.

  2. Greg Cooper

    January 31, 2010 at 11:01 am

    Ken…..I think recoveries must see job stabilization and growth for housing to stabilize. What are your feelings about specific tax incentives for small businesses as they hire new employees?

    • Ken Montville

      January 31, 2010 at 11:10 am

      Hey, Greg … . It depends on how the incentives are used. If they’re just used to offset the cost of compensation they probably won’t work for very long. If it helps to create incentives for employee health care benefits, it’ll be a big plus. Of course, younger employees probably don’t care that much about health care since they’re invulnerable and employers prefer younger workers because they work for less.

      How about tax incentives for American made products/services which would have a far reaching employment effect? Fat chance.

  3. Dean Ouellette

    February 1, 2010 at 8:43 am

    We need to become a mobile society again. I think we need to fix the housing market to fix the job market. We need to make it easier for people to be mobile again, to make it so they can pick up and travel to the new job if they need to. Now it is difficult because we do not have a mobile workforce who can quickly sell their home and just up and leave for a new job.

    • Ken Montville

      February 1, 2010 at 9:32 am

      Interesting concept, Dean. I’m wondering what that might do for things like stable neighborhoods, schools and the like. I’m also thinking that for people with a traditional FHA or VA mortgage there isn’t really enough equity based on traditional amortization schedules to be able to sell and “break even” after a short period of ownership. We were a highly mobile society once, though.

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Politics

FFEE Act wants to save you from having to pay to freeze your credit

(POLITICS NEWS) The FFEE Act wants to help give consumers more rights more control over how credit agencies use their data.

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Taking action

Following the compromise of consumer data from credit reporting bureau Equifax, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) have introduced the Freedom From Equifax Exploitation (FFEE) Act.

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This act aims to give consumers more rights more control over how credit agencies use their data.

The bill

The bill is available here, but here is a few of the bill’s highlights:

  • Create a uniform, federal process for obtaining and lifting a credit freeze.
  • Preventing credit reporting agencies from profiting off the use of consumer information for the duration of a credit freeze;
  • Strengthening the fraud alert protection from 90 days to a one year, with a year renewable.
  • In ID theft cases, a 7 year fraud alert is created.
  • Require any credit reporting agency who charged a fee to freeze credit in response to the data breach to refund those fees,
  • Allow for an additional free credit report (consumers already get one under the Fair Credit Reporting Act through annualcreditreport.com)

Freezing credit

The most important feature here is the removal of any fee to freeze your credit. Currently, agencies like Equifax charge nominal fees to freeze credit (anywhere from 3-10) dollars. If this bill passes – not only will that service be free, but it will restrict the way credit agencies use that information while the freeze is active.

The idea behind making this free also keeps credit companies, whom many believe are responsible for the security of credit information, from profiting off information breaches. Given that many financial advisors have advised those impacted to freeze their credit, this would be a benefit to consumers.

It is important to note here that Equifax has suspended the fees to freeze credit for the next month.

A credit freeze restricts access to your credit report. Simply put, it requires the credit agency to contact you first to ensure it was you who applied for credit, thus making it harder for you to apply for credit. You would need to unfreeze your account to apply for new credit. You must also freeze credit with each bureau, which can lead to some expenses as you must pay anytime to lift a freeze.

Remember: a credit freeze doesn’t impact current accounts or your credit score. If you apply for credit often, or open new accounts often, then a credit freeze may not be for you.

Lots of names

The bill has several original co-sponsors, including Senators Sanders, Franken, and Blumenthal. Companies like the National Consumer Law Center, Americans for Financial Reform, CREDO, and the Consumer Federation of America all have also endorsed the bill.

#CreditFreeze

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Politics

President Trump disbands his business councils with one tweet

(POLITICS) President Trump has disbanded the councils that he previously very adamantly supported, so what happened?

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We interrupt this regularly scheduled program

Huge news on the domestic policy front – per a Twitter announcement, President Trump’s two business advisory councils – the Strategic and Policy Forum and the Manufacturing Jobs Initiative – have been disbanded.

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The sequence of events has been fast and difficult to follow, but here’s how things went down.

See ya later

On Monday, Kenneth C. Frazier, the CEO of pharmaceutical giant Merck, resigned from the Manufacturing Jobs Initiative in protest at President Trump’s comments on the recent violence in Charlottesville. By the evening of the same day, Brian Krzanich of Intel and Kevin Planck of Under Armour had done the same. They were quickly followed by Thea Lee and Richard Trumka of the AFL-CIO, Scott Paul of the Alliance of American Manufacturing, Denise Morrison of Campbell Soup and Inge Thulin of 3M.

This morning, in response to the sudden exodus, Stephen Schwartzman, chief executive of the Blackstone Group and longtime Trump business and political ally, led a conference call of the remaining council members this morning to debate how to proceed.

By the end, all members had resigned.

In short, President Trump is not disbanding his advisory councils in the sense of (no “The Apprentice” jokes, please) firing their members. The members already quit. The President’s Tweet simply announced that had taken place, and that, as it states he “disbanded” the now-vacant groups, there are presumably no plans in the near future to replace them.

Bold move

This is a surprising move from the President. Historically the role of business advisory councils has been to keep an open communication pipeline between the President and the American business community, something this president has consistently identified as a priority. President Trump has always positioned himself as passionately pro-business, particularly concerned with global competitiveness and the loss of jobs and revenue in American manufacturing.

The Strategic and Policy Forum and the Manufacturing Jobs Initiative were founded specifically to address those issues.

The business community in particular had expected the President to draw heavily on their advice.

On the other hand, that advice has repeatedly conflicted with the President’s other policies. Well before Charlottesville, the Strategic and Policy Forum had seen high-profile resignations: Bob Iger of Disney and Elon Musk of Tesla (who served on, and resigned from, both the SPF and the Manufacturing Jobs Initiative) resigned over the President’s withdrawal from the Paris Climate Accord, and ex-CEO of Uber Travis Kalanick departed over restrictions on immigration from the Middle East.

New directions

President Trump’s elimination of his business advisory councils clearly indicates a new direction in the relationship between the White House and the American business community.

What that direction will be, and what consequences it will have for the economy, remain to be seen.

#ByeByeBusiness

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Politics

The House just voted to take away some important consumer rights

(POLITICS) If adopted by the Senate and the President, our banks, credit card companies, student loan companies, and other financial services will have a hall pass on all sorts of bad behavior.

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Same story, different day

Big banks have won again, as they and other financial institutions continue to restrict consumer rights all in the name of “choice.” Well, choice for the companies that is.

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The GOP controlled House just voted to introduce a Congressional Review Act Resolution that if passed by the Senate, will make it harder for consumers to have their day in court.

Bump the consumers, right?

The Resolution would overturn rules from the Consumer Financial Protection Bureau (CFPB) aimed at protecting consumer rights and keep financial institutions – like banks, credit card companies, and loan services – in check.

The rules center on the forced arbitration clause that is hidden among many contracts.

This clause allows consumers and companies the chance to settle issues behind closed doors without going through the legal system. That doesn’t sound too harsh at first glance, right? Well, of course there are a few caveats that allow the pendulum to swing in favor of financial companies.

Like the fact that there are no public records of these arbitrations, even if the company was found at fault.

Also, that consumers can choose between arbitration and the court system unless the company wants arbitration, then the choice is gone. Most importantly, forced arbitration severely limits class action lawsuits, which results in a lot less individual suits.

Wall Street wins again

Many bank-backed House representatives argued that class action lawsuits only result in a miniscule payout for consumers.

This may be true, but it is a smaller amount for a lot more people.

This means the company pays a larger amount to more mistreated consumers overall. House Democrats, none of which voted in favor of the Resolution, feel that this is another way for Wall Street to benefit from their ties to lawmakers. Without a chance to go to court, consumers are deprived of their rights simply by signing a contract.

There’s still hope

Consumers still have a chance if the Resolution is rejected by Congress. It will be more of a debate, since it would only take two opposing votes from the GOP side to reject it. Hopefully they will consider who the CFPB rules protect.

No consumers have raised issues to repeal them. It is a wish from the financial companies they have affected, and unfortunately their wish just may come true.

#RestrictingRights

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