Progressive Breakfast: Tax Cut Battle Lines Drawn, Campaign for America’s Future, July 28, 2010, by Bill Scher, used with permission, quoted verbatim:

Battle Lines Drawn On Bush Tax Cuts

President Obama and House Minority Leader Boehner, square off in White House over Bush tax cuts for the wealthy. NYT: “Mr. Obama vowed that Democrats would extend current income tax rates except for the wealthiest taxpayers. But Representative John A. Boehner … said the tax cuts should be extended for everyone … [The President] reminded Mr. Boehner … that the tax cuts’ architects purposely left the deficit problem to a future administration … ‘I wasn’t there,’ Mr. Boehner quickly countered. ‘I didn’t structure that deal.’ The room briefly went quiet as participants seemed to ponder that statement from a legislator first elected in 1990.”

Joan McCarter of Daily Kos reports new poll showing large majorities oppose extending the Bush tax cuts: “Even 40 percent of Republicans say they should be allowed to expire–19 percent say repeal them just for the wealthy, and 21 percent for everyone. That suggests that 40 percent of Republicans, who have been hearing the deficit hysteria since Barack Obama took office, are smarter than your average congressional Republican or deficit peacock.”

Matthew Yglesias looks at the Bush tax cut policies and asks “Where was the growth?”: “…the era during which Bush’s tax policies prevailed was the first in which median household income declined… the worst peak-to-peak economic performance ever, followed immediately by the worst recession since World War II.”

Some House Dems consider breaking with President on permanent extension of middle-class tax cut. The Hill: “While the White House has pushed for making the middle-class tax cuts permanent, Democrats in the House are looking at other options, including temporary extensions that would last more than a year,  according to an aide to House Majority Leader Steny Hoyer (D-Md.) … Senate Finance Committee Chairman Max Baucus (D-Mont.), who is crafting legislation that will extend the tax breaks, has backed Obama’s policy of extending the middle-class cuts permanently … Sen. Ron Wyden (D-Ore.), has also said he’s open to a temporary extension that could set the stage for [broader] tax reform…”

Dodd Cautions Against Avoiding Senate Confirm For Warren

Sen. Dodd argues against appointing Warren without Senate confirmation. TPMDC quotes: “Recess appointments. No, no, no … You’ve heard the Republicans talking about repealing this bill … One of the first efforts they’d need would be to repeal this agency. If it’s not set up and running, the case against it becomes easier. So you want an established entity, as quickly as you can, with credible leadership. And if you don’t have that then you leave it vulnerable to the attacks.”

Rortybomb piles on “Megan McArdle’s Hack Post on Elizabeth Warren’s Scholarship”: “Megan opens her critique by saying that there’s a massive bias in the data sample [from a major Warren study] implied by the low response rate of 20%. A commenter politely responds that the response rate is 50% … Megan then says she meant the interview rate … But notice how Megan just keeps on going. This is one of the major planks of her argument, that the sample is corrupted, and when someone points out that what she stated was factually incorrect she just changing the terms and keeps on going as if she what she wrote wasn’t wrong.”

Prez Push For Small Biz

President prods GOP to pass help for small biz. W. Post quotes: “We shouldn’t let America’s small businesses be held hostage to partisan politics.” President to meet with small biz owners at a NJ sub shop to push bill reports The Hill.

Deal on small biz bill may come soon, allowing for consideration of GOP amendments. CQ: “Unable to advance the legislation without at least one GOP vote, Democrats appeared ready late Tuesday to meet Republican demands, with some limitations. To force action, they released a new substitute amendment and filed cloture on the amendment and the bill. But an amendment deal looks like the only way to ensure passage and dispose of the issue this week.”

W. Post Harold Meyerson’s tackles the problem of profitable companies that are still killing jobs: “Across-the-board business tax cuts make no sense when business is already sitting on oceans of cash. Targeted tax cuts and credits for strategic investment and hiring within the United States, on the other hand, make excellent sense … Another source of jobs would be public, and public-private, investment in infrastructure … A U.S. infrastructure investment bank … could leverage significant private capital to begin America’s rebuilding, though the idea has encountered rough sledding in (surprise) the Senate.”

“Single Stimulus Program That GOP Wanted To Eliminate Has Created Hundreds Of Thousands Of Jobs,” reports Wonk Room’s Pata Garofalo: “…House Republicans launched a gimmicky website called ‘YouCut,’ which allows people to vote on which item, from a pre-determined list, they would nix from the federal budget … The very first YouCut ‘winner’ was the Temporary Assistance for Needy Families Emergency Contingency Fund … In fact, it is on pace to help 240,000 unemployed individuals find jobs by the end of September.”

Scaled-Back Senate Energy Bill Still Sparks Conflict

The Hill rounds up reactions to Senate energy bill: “The electric car provisions drew cheers Tuesday from the Electrification Coalition, while the Alliance to Save Energy applauded the Home Star program that provides consumer rebates for efficiency overhauls, claiming it will create 168,000 jobs over two years. But giant ethanol producer Poet called the lack of ethanol incentives a ‘missed opportunity’ in a statement Tuesday. And the environmental group Earthworks is worried about the push for more use of natural gas … The American Petroleum Institute … bashed provisions that remove the cap on companies’ liability for damages from offshore spills.”

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Obstructionist conservatives opposing lifting liability cap on oil companies in spill bill. The Hill: “The Senate Democrats’ bill would retroactively lift a $75 million spill liability cap for oil and gas producers — leaving no cap at all. That unlimited liability ‘will be a very significant issue, not just for Republicans,’ [GOP Sen. Lisa] Murkowski said.”

“Surprise” push for electric cars. TNR’s Brad Plumer: “… it’s a tiny bill—the total cost comes to around $15 billion. And it won’t do all that much for the environment: …. the only significant surprise is the electric-car section … It calls on the Energy Department to create a national plan for deploying electric vehicles. It allows electricity to count as an alternative vehicle fuel. It provides grants to local communities that set up their own plug-in networks.”

President says new energy bill is only a step towards broader climate protection and clean energy jobs bill. AFP quotes: ” I want to emphasize it’s only the first step and I intend to keep pushing for broader reform, including climate legislation … We should be developing those renewable-energy resources and creating those high-wage, high-skill jobs right here in the United States of America … That’s what comprehensive energy and climate reform would do, and that’s why I intend to keep pushing this issue forward.”

WH leaves door open to revisiting carbon cap in House-Senate conference committee. The Hill quotes Press Sec. Robert Gibbs: “I don’t think the bill is essentially dead for the year … The House passed a very strong and very comprehensive energy bill last year. The Senate is going to take up a version that is more scaled down, but still has some important aspects … Once a bill passes each house, it doesn’t close the door to having some sort of conference.”

Coal-state Dem Sen. Rockefeller may try to add temporarily block on EPA from regulating greenhouse gases. The Hill: “…he’s mulling whether to try and add his bill that blocks EPA climate change rules as an amendment to energy and oil spill legislation heading for the Senate floor.”

Coal-state House Dems that voted for carbon cap compromise not thrilled with Senate inaction, prepare to defend. Politico: “‘[VA Rep.] Rick [Boucher] took on his own party to protect coal jobs in the energy bill,’ a narrator says in a new ad unveiled last week … Freshman Rep. Thomas Perriello, who won his Charlottesville, Va.-based district in 2008 by fewer than 800 votes, said he made the right decision. ‘The issue of energy independence is much more important than my reelection,’ Perriello said. ‘But every day the Senate doesn’t act, we get our butts kicked by China.’ … Gene Karpinski, president of the League of Conservation Voters, said his group will be airing ads as Election Day approaches, thanking House Democrats for their vote on the climate legislation while also going after its opponents…”

Reid insists there are not 60 votes for stronger renewable electricity standards. The Hill quotes: “I know there are some people saying that, but I’d like them to give me the names, and I’ll be happy to check them off.”

NRDC’s John Walke, in Grist, says an attack on clean air protections is brewing in the Senate: “NRDC has obtained a copy of amendments that Senator George Voinovich (R-Ohio) appears poised to lodge next week in the Senate Environment Committee … The amendments repeal, delay, and significantly weaken clean air safeguards that reduce power plant emissions of nitrogen oxides and sulfur dioxide (pollutants that cause smog and soot), as well as toxic mercury, arsenic, lead, hydrogen cyanide, and other acid gases. The Voinovich amendments represent a complete rewrite of bipartisan legislation to strengthen the Clean Air Act cosponsored by Sens. Thomas Carper (D-Del.) and Lamar Alexander (R-Tenn.) [which] could be brought to a vote in the Senate Environment Committee next week.”

State Dept. delays decision on Canadian tar sands pipeline. NYT: “The department provided no timeline for completion of the environmental assessment, but at the least, a decision on the permit would be delayed until the end of this year.”

Damage To Gulf Not Yet Known

Understanding Gulf gusher damage will take damage, no need to rush and cut off claims. McClatchy: “Some of the economic consequences of the Gulf of Mexico oil spill may take years to identify, and BP’s compensation fund should be flexible enough to account for long-term losses, a panel of experts from Alaska’s Exxon Valdez tanker spill told a Senate committee Tuesday … The collapse of the herring fishery, for example, couldn’t be fully anticipated until nearly a decade after 11 million gallons of oil spilled into the sound…”

Mother Jones’ Kate Sheppard casts natural gas as the invisible villain in the Gulf disaster: “…the leaked gas could dramatically change the chemistry of the Gulf. When natural gas is present, certain bacteria that digest it flourish out of control and can quickly deplete the oxygen in the surrounding waters, creating ‘dead zones’ where little can exist.”

Expanded Gulf gusher criminal probe. W. Post: “While it was known that investigators are examining potential violations of environmental laws, it is now clear that they are also looking into whether company officials made false statements to regulators, obstructed justice or falsified test results for devices such as the rig’s failed blowout preventer … One emerging line of inquiry, sources said, is whether inspectors for the Minerals Management Service … went easy on the companies in exchange for money or other inducements.”

PreOrder Robert Reich’s new Book Aftershock: The Next Economy and America’s Future, Due out September 21, 2010

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State Budget Crunch Risks Nearly 500,000 Jobs

HuffPo’s Arthur Delaney reports that state and local governments are ready to fire 481,000 state workers: “The National League of Cities, the National Association of Counties, and the U.S. Conference of Mayors found that 270 local governments planned to collectively lay off 8.6 percent of their workforce from the previous fiscal year to the next one.”

GOP blockage of Medicaid aid crushing state budgets. AFL-CIO’s Mike Hall: “A new report from the National Conference of State Legislatures (NCSL) … shows that at least 25 states assumed an extension of the enhanced FMAP [Medicaid] funding for their 2011 budgets. Without it, according to the report, budget gaps could grow by more than $12 billion in the current fiscal year and as much as $72 billion next fiscal year, forcing cuts in vital services and jobs to make up for the shortfalls.”

Health Care Reform Kicking In Despite Attacks

AFL-CIO’s Mike Hall says that having failed to kill health care reform, insurers are now working to weaken it: “After spending tens of millions trying to kill the new health care reform law, the nation’s big health insurance companies now, says Sen. Jay Rockefeller (D-W.Va.), are: ‘sparing no expense to weaken this new law and the protection it promises to America’s consumers.’ According to a new report by the coalition Health Care for America Now (HCAN), big insurers are trying to gut proposed new rules that require they spend a certain amount of premium dollars on actual medical care, not wasteful administration, marketing or executive pay and bonuses.”

Health care law already sparking reforms among doctors. LAT: “… many independent providers across the country are racing to mold themselves into the kind of coordinated teams held up as models for improving care … Three of San Antonio’s hospital systems are competing to form alliances with local doctors who are giving up their private fee-for-service practices in exchange for paid positions on a hospital’s team. Healthcare experts have long argued that such a unified approach to medical care offers the best hope for improving quality and saving money.”

Despite conservative demagoguery, Texas is carrying out health reform. NYT: “Obama administration officials, while noting the incongruity, said they had been impressed that politically antagonistic states like Texas were complying with, and taking full advantage of, the new law. The Texas Department of Insurance, for instance, has applied for a planning grant to create a more muscular process for reviewing proposed premium increases, a White House priority.”

GOP Filibusters Campaign Finance Transparency For Corporations

Democrats vow to keep pushing campaign finance transparency legislation after GOP filibuster. The Hill: “…Schumer promised that Democrats would hold additional cloture votes until the legislation passes … Asked by The Hill if he is open to making changes to the bill, the New York senator replied, ‘Yes.’ … Political experts have said the bill needs to be signed into law by August in order to affect the 2010 election. If the Senate passes a version with Schumer’s changes, it would need to be reconciled with the House version. And the House is scheduled to adjourn Friday for the summer recess.”

King Coal ready to use Supreme Court ruling to spend big on election campaigns. Lexington Herald-Leader: “Several major coal companies hope to use newly loosened campaign-finance laws to pool their money and defeat Democratic congressional candidates they consider ‘anti-coal,’ including U.S. Senate nominee Jack Conway and U.S. Rep. Ben Chandler in Kentucky. The companies hope to create a politically active nonprofit under Section 527 of the Internal Revenue Code, so they won’t have to publicly disclose their activities…’With the recent Supreme Court ruling, we are in a position to be able to take corporate positions that were not previously available in allowing our voices to be heard,’ wrote Roger Nicholson, senior vice president and general counsel at International Coal Group…”

Push For Filibuster Reform Hits Dem Resistance

Ezra Klein explains how to end filibuster with 51 votes: “The so-called ‘constitutional option,’ which is being pushed particularly hard by Sen. Tom Udall, but is increasingly being seen as a viable path forward by his colleagues. The constitutional option gets its name from Article I, Section V of the Constitution, which states that “Each House may determine the Rules of its Proceedings.” … Because stopping the Senate from considering its own rules would be unconstitutional, the chair can rule against the filibuster, and the Senate could then move to change its rules on a majority vote. One caveat: Many people, including Udall himself, believe this has to happen at the beginning of a new Congress, then Congress is considered to have acquiesced to the previous Congress’s rules … This is not a radical theory, or a partisan one: Both Richard Nixon, then the vice president and thus the president of the Senate, and Robert Byrd, then majority leader and considered the greatest parliamentarian to ever walk the chamber, have argued in favor of the constitutional option.”

But there may not be 51 votes. The Hill: “Five Senate Democrats have said they will not support a lowering of the 60-vote bar necessary to pass legislation. Another four lawmakers say they are wary about such a change and would be hesitant to support it. A 10th Democrat, Sen. Carl Levin (D-Mich.), said he would support changing the rule on filibusters of motions to begin debate on legislation, but not necessarily the 60-vote threshold needed to bring up a final vote on bills.”

Breakfast Sides

Paul Krugman shreds Mort Zuckerman’s claim the President hold antipathy for business: “… the only actual example of Obama’s alleged demonization of business that Zuckerman offers [is] essentially a mini-Breitbart, a quote taken out of context to make it seem as if Obama was saying something he wasn’t. That’s typical of the whole argument.”

Government intervention averted Great Depression, finds new economic report from Alan Binder and Mark Zandi. NYT: “…the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower … there would be about 8.5 million fewer jobs … and the economy would be experiencing deflation.”

Twenty years after its passage, Alternet’s Sarah Jaffe recounts how the Americans with Disabilities Act did the impossible: “Against all the odds, thousands of people with all manner of special challenges showed they were more than able to do the seemingly impossible. They forced a foot-dragging Congress to pass and a Republican President to sign the most significant civil rights legislation in 20 years. And every time we find a a step replaced by a slope — we have them to thank … Are the rest of us ready to get over our disabled way of thinking about what’s possible?”

House subcmte backs F-35 engine over Pentagon’s request. CQ: “‘I don’t know what more we can say or do to make clear that this is something we don’t want, we don’t need and we can’t afford,’ said Pentagon spokesman Geoff Morrell.”

IMF softens stance on China currency. Reuters: “The International Monetary Fund has chosen not to call the yuan ‘substantially’ undervalued, a move that recognizes China’s efforts to free up its exchange rate and avoids friction with an increasingly influential shareholder … [former IMFer Eswar] Prasad said IMF economists reckoned the yuan was still between 5 percent and 27 percent undervalued depending on the methodologies used.

Bill Scher is the online editor for Campaign for America’s Future. In addition to his blogging there, he has his own blog at LiberalOasis.com. I’m also the author of Wait! Don’t Move to Canada: A Stay-and-Fight Strategy to Win Back America, a contributor to The Huffington Post and Bloggingheads.tv, and a fellow of the Commonweal Institute.

See Geithner Dismisses Concerns on Letting Tax Cuts Expire, The New York Times, July 25, 2010, by Ginger Thompson, excerpt quoted verbatim:

WASHINGTON — Treasury Secretary Timothy F. Geithner pressed the case on Sunday for letting Bush-era tax cuts for the wealthiest Americans expire later this year.

In appearances on two television programs, Mr. Geithner said that letting tax cuts expire for those who make $250,000 a year or more would affect 2 percent to 3 percent of all Americans. He dismissed concerns that the move could push a teetering economy back into recession and argued that it would demonstrate America’s commitment to addressing its trillion-dollar budget deficit.

On “This Week” on ABC, he said, “We think that’s the responsible thing to do because we need to make sure we can show the world” that America is “willing as a country now to start to make some progress bringing down our long-term deficits.”

Mr. Geithner added, “I do not believe it will affect growth.”

Most Republicans and some Democrats in Congress strongly disagree and have pledged to launch an all-out effort to extend the tax cuts for people of all incomes. The cuts were passed under President George W. Bush in 2001 and 2003. Supporters of extending the cuts for everyone argue that raising taxes on any group, particularly one considered crucial for creating jobs, could endanger a precarious economic recovery.

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Battle Looms in Washington Over Expiring Bush Tax Cuts, © The New York Times, July 24, 2010, by David M. Herszenhorn, excerpt quoted verbatim:

WASHINGTON — An epic fight is brewing over what Congress and President Obama should do about the expiring Bush tax cuts, with such substantial economic and political consequences that it could shape the fall elections and fiscal policy for years to come.

Democratic leaders, including Mr. Obama, say they are intent on letting the tax cuts for the wealthy expire as scheduled at the end of this year. But they have pledged to continue the lower tax rates for individuals earning less than $200,000 and families earning less than $250,000 — what Democrats call the middle class.

Most Republicans want to extend the tax cuts for everyone, and some Democrats agree, saying it would be unwise to raise taxes on anyone while the economy remains weak. If no action is taken, taxes on income, dividends, capital gains and estates would all rise.

The issue has generated little public attention this year as Congress grappled with health care, financial regulation, energy, a Supreme Court nomination and other divisive topics. But it will move to the top of the agenda when lawmakers return to Washington in September from their summer recess, just as the midterm campaign gets under way in earnest. In recent days, intense discussions have begun at the Capitol.

Beyond the implications for family checkbooks, the tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery.

“It has enormous ramifications for the fall and clearly will be one of the dominant issues,” said Senator Ron Wyden, Democrat of Oregon. “This is code for the role of the federal government, the debate over the size of government and the priorities of the nation.”

At a closed-door meeting of the Senate Finance Committee on Thursday, participants said Democrats were clearly divided while Republicans wanted assurances that any bill would be developed openly, allowing them to propose amendments. In a sign of how combustible the issue could be, Senator Max Baucus, a Montana Democrat and the committee’s chairman, has so far refused to make that commitment.

Both parties are still charting strategy, but some lawmakers, Congressional aides and administration officials said Democrats must try to pass a bill before the election and not wait for a lame-duck session. “You can’t play chicken with this much of the tax system,” said a senior Republican Senate aide, who spoke on the condition of anonymity given the sensitivity of even the timing of the debate.

If no tax legislation is passed, all the major tax reductions passed under President George W. Bush in 2001 and 2003 will expire, with rates reverting overnight on Dec. 31. The top marginal income tax rate, for example, would go back to 39.6 percent from 35 percent now, with corresponding increases in rates for lower income brackets.

Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that Republicans are already heralding ominously as the largest tax increase in history and that lawmakers in both parties say could be the worst outcome.

From both political and policy perspectives, the tax issue is dizzyingly complex, and even some of Washington’s most grizzled legislative operatives say they cannot predict the outcome.

Some liberals want Mr. Obama to keep his promise to raise taxes on the rich, and the White House’s budget forecasts rely heavily on rolling the top income tax rates back to their pre-2001 levels. Some fiscal hawks warn that extending the tax cuts would add more than $2 trillion to the federal budget deficits at a time when the national debt is becoming an economic concern and a political issue. Political economists are fiercely divided.

So are Democrats. In recent days, fiscal conservatives like Senators Kent Conrad of North Dakota and Evan Bayh of Indiana expressed support for extending the tax cuts at all income levels, at least temporarily.

Senior administration officials said there was no interest in such a plan at the White House, which intends to have Treasury Secretary Timothy F. Geithner lead an effort to make the case that continuing tax breaks for the rich will not help lift the economy, but eliminating them will help reduce the deficit. ….

Read the full article here.

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With today’s scheduled announcement by the Treasury Department of new efforts to pressure lenders to lower mortgage costs, progressive economists, advocacy groups and legislators are pushing for tougher measures to keep homeowners in their homes – and to force banks to take losses on their exploding mortgages.

In contrast, the Obama administration’s response to a crisis that is causing two million families a year to face the loss of their homes has been widely derided as ineffective. The programs so far have been voluntary plans that proved too costly for homeowners, too cumbersome for all parties involved and have offered few effective incentives. As a result, only a tiny fraction of homeowners at risk of foreclosure – as little as 3 percent for some programs – have been helped in any way.

Yet the administration instead is going to focus on a new drive to “shame” the shameless bankers and financial institutions that have already gouged trillions in bailouts and guarantees from the taxpayer. This is the same industry that has also torpedoed or weakened mortgage and financial reforms in Congress. Still, the New York Times reported:

“The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.”

Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments. The Treasury Department also will wait until reductions are permanent before paying cash incentives that it promised to mortgage companies that lower loan payments.

“They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.

Liz Ryan Murray, the policy director for National People’s Action, a network of community advocacy groups, said bluntly of the announcement, “It’s a joke. There’s still no talk of reforming the program, or using TARP money to bail people out. It’s just a plan to make servicers feel bad.”

And as Dean Baker, co-director of the Center for Economic and Policy Research and a proponent of a “right-to-rent” approach to aid at-risk homeowners, told Truthout, “We need to change the law rather than haranguing lenders. When someone’s running drugs, we don’t try to shame them – we put them in jail.”

Unfortunately, getting tougher on crooked lenders – then and now – doesn’t seem to be a priority, either. Some reform-minded legislators, especially Ohio Democrat Marcy Kaptur, have contended that homeowners should stay in their homes in part because many of the loans were fraudulent and deceptive. In addition, she’s been seeking additional law enforcement resources devoted to prosecuting lending fraud. As she told The Nation recently:

“Mortgage fraud is at the heart of the housing crisis, which is at the heart of the financial crisis. After 9/11, the FBI redeployed financial special agents to anti-terrorism, but they have yet to replace those agents in the White Collar Crime Division – even though the division had warned in 2004 of the threat of a mortgage fraud ‘epidemic.’ We were under the understanding that [the Department of] Justice was under 200 prosecutors and investigative agents in the area of mortgage and securities fraud, and so we were pushing to increase that number. Our goal was 1,000 agents – we didn’t come anywhere near close to that – but 1,000 agents is the number that were in place during the savings and loan crisis back in the late eighties.”

Equally troubling, in the absence of any real mortgage reform, is the spread of bogus foreclosure-assistance companies that are stealing yet more money from homeowners under the guise of renegotiating their mortgages.

Even as criminal lenders and scam artists remain unpunished, the program the administration is hoping to salvage has several built-in flaws that could doom its ability to help the millions needing it – especially with one in four homeowners now owing more than their homes are worth. That’s a sign of potential foreclosures to come. For instance, as Dean Baker and other experts point out, the HAMP initiative was designed for employed homeowners who were victimized by predatory, subprime loans they just couldn’t afford to pay in full. It excludes today’s struggling homeowners who are unemployed and who are “underwater,” faced with paying off a mortgage that is worth far more than the house’s now-collapsed value. “If you owe $300,000 on a house that’s worth $200,000,” Baker notes, “the banks won’t write down that much.”

The government’s weak incentives so far – and verbal tongue-lashings being promised today – aren’t likely to remedy this crisis. It’s not just that it took quite a while for Treasury Secretary Tim Geithner’s department to realize it wasn’t such a bright idea to essentially pay all the renegotiating incentive money up front to financial institutions still determined to kick people out of their homes. On top of that, the amount of fees that mortgage companies can generate by servicing delinquent loans often exceeds the incentives the government offers out of its floundering $75 billion program. As the New York Times reported back in July, “Many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.” The paper noted:

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue – fees for insurance, appraisals, title searches and legal services.”

The lack of meaningful pressure on financial institutions to either increase lending or renegotiate mortgages has hampered everything from the wasteful $700 billion TARP bailout to the bungled foreclosure programs.

As I had earlier reported in In These Times, and widely noted by everyone from the New York Times to the Congressional Oversight Panel on the TARP program, the current programs have flopped so badly they’ve only reached – let alone permanently helped – as few as 3 percent and, at best, less than half of eligible homeowners.

The programs include a now-abandoned fiasco in HUD that only aided a few hundred homeowners in its early months, and the better-known “Home Affordable Program” (HAMP) and a related refinancing effort in Treasury that have offered permanent aid to only a few thousand homeowners. As The New York Times reported Sunday:

From its inception early this year, the Obama administration’s program, called Making Home Affordable, has been dogged by persistent questions about whether it could diminish a swelling wave of foreclosures. Some economists argued that the plan was built for last year’s problem – exotic mortgages whose payments increased – and not for the current menace of soaring joblessness. Lawyers who defend homeowners against foreclosure maintained that mortgage companies collect lucrative fees from long-term delinquency, undercutting their incentive to lower payments to affordable levels.

Yet another program in Treasury is even more of a failure, if that’s possible. As The Washington Post reported last month:

A seven-month-old government program to help homeowners with little or no equity refinance their mortgages has so far reached fewer than 3 percent of those targeted, with many struggling borrowers deciding that the benefits of a new loan aren’t worth the closing costs.

This lackluster performance reflects the difficulty of helping the growing segment of “underwater” homeowners – those who owe more than their home is worth.

The program is a key component of the Obama administration’s efforts to stabilize the housing market and arrest the nation’s growing foreclosure rate. But the initiative has received far less public attention than its companion, a loan modification program that pays lenders to lower the payments of delinquent borrowers who are in imminent danger of losing their homes.

The refinancing program targets borrowers who are not in trouble on their mortgage now but, because they are underwater, are at risk of falling into trouble later.

Dean Baker and other reformers, including leaders of theNational People’s Action advocacy network and the Center for Responsible Lending, are promoting what could be better ideas. They aim unabashedly to keep homeowners in their homes and force financial institutions to take losses on their loans, but so far there has been little Congressional or administration action on them. Nor are Washington insiders willing to take on the financial industry on this issue, even as they’re trying to pass often loophole-laden financial reforms against a lobbying blitzkrieg by Wall Street.

Baker’s right-to-rent proposal, he argues, offers benefits that even other reform ideas don’t necessarily provide. For instance, earlier in the spring, a law designed to spur “cram-down” decisions by judges to force lower mortgage payments failed in the Senate after passing the House. Senator Dick Durbin (D-Ill) said of the fierce financial industry lobbying that defeated the bill: “Frankly, they own the place.” Yet Baker’s approach to allow homeowners to pay fair-market rent rates doesn’t depend on hoping that a bankruptcy judge after a drawn-out process will finally give a homeowner a break.

So, as with other reforms, “the banks hate it,” Baker admits.

As previously reported in In These Times, reform groups are offering a wide-ranging agenda for mortgage relief that is largely being ignored. For instance, at its Save the American Dream web site and in other materials, National People’s Action has outlined the basic principles of reform, including fixing HAMP. Few of them appear to be on their way to being effectively implemented:

IMMEDIATE RELIEF TO KEEP FAMILIES IN THEIR HOMES
Mortgage industry must:
• Disclose ownership of loans before foreclosure.
• Modify loans to be permanently affordable.
• Halt massive interest rate hikes.
• Allow servicers the greatest flexibility to modify these loans.
• Create a refinance loan for homeowners stuck in unaffordable loans.
• Employ salaried loan officers, not commissioned-based loan officers.