Recession

Despite the return of the stock market, the housing market remains a mess and is filled with uncertainty. Scores of families across the country are on the cusp of losing their homes and being displaced from their communities. In many cases, foreclosure is a lose-lose-lose proposition, negatively impacting families, lenders, communities (and taxpayers) alike.

But many foreclosures are avoidable. Given the current scale of the problem, where one in four mortgages are underwater and over a million of foreclosures are predicted for this year, we should be stepping up the pace with implementing policies that can put a stop to the wave of mass foreclosures sweeping the country.

One idea that has shown promise is a reform to the foreclosure process which gets all the interested parties in a room to talk and explore renegotiation. Half the states already have a process in place to facilitate mediation but the process can be made more effective if it is inserted into the process automatically as a default. This approach is working where it has been tried and the next challenge is to get the federal government behind the event.

Alon Cohen and some of his colleagues at the Center for American Progress have been talking up this idea. They note that even though none of the parties are under any obligation to settle in mediation, in practice they settle more than half the time. In previous papers they have explored how foreclosure mediation works and its impacts at the state and local level when it is automatically part of the process.

Alon has just released a new paper describing what the federal government can do to support the spread of this innovative and successful practice. It is an important paper and is worth a read by anyone looking for solutions to the current mortgage mess.

His central proposal is that all mortgages backed by the U.S. government should be forced to go through mediation prior to foreclosure. This means Fannie Mae, Freddie Mac, and FHA will require their loan servicers to implement automatic mediation prior to foreclosure. In this way automatic foreclosure mediation will be added to the list of “loss mitigation” activities already required of them. Further, Congress should make clear that judges in federal bankruptcy cases have the power to require parties to mediate mortgage issues, just as they currently order alternative dispute resolution (such as negotiation or mediation) for other issues. Together, these two provisions would impact the large majority of mortgages under threat of foreclosure and create new means to stabilize the housing market.

In his 2011 State of the Union, President Obama outlined a sweeping program for economic transformation, resting on innovation, education, infrastructure, deficit reduction, and governmental reform. The New America Foundation asks whether these are the right “pillars” of a national agenda.  

During the last three years, youth employment has taken a large hit, absorbing a significant portion of job losses.  One in four unemployed persons is under the age of 25 and nearly one in five young workers is unemployed.¹  The rate of joblessness among individuals aged 16-24 is at its highest level on record.²

The Recession

The great American novelist Mark Twain observed “history does not repeat itself but it rhymes.” Today the rhyme is with the 1930s, and if you don’t hear it, read FDR’s great Madison Square Garden speech of October 1936:

With Republicans poised to sweep into office and obstruct Obama's agenda, is there anything he can do to revive the economy over the next two years? Last week I wrote about the possibility that we’re in a Japan-style recession—a rare form of economic disease that’s largely unresponsive to conventional remedies, like lower interest rates.

The Social Security debate is the longest-running domestic political tug-of-war in Washington. It began in 1981 when President Reagan floated a proposal to drastically cut old-age and survivors' benefits that met with immediate rejection from leaders of both parties in Congress.

In the aftermath of a global economic collapse brought about in part by the corruption of big government by big finance, many pundits expected a voter backlash in America to take the form of a combination of populist anti-elitism and statist anti-capitalism. But that has not happened, nor is it likely to occur. In the United States, the populists are anti-statist and the statists are anti-populist.

Click here to download the slideshow, "A Recovery at Risk."

The Great Recession has undermined the economic security of most Americans and exposed the limits of the existing American social contract. The widespread hardship caused by job losses, stagnant wages, and rising foreclosures makes it urgently necessary for public policies to create jobs, provide essential benefits, and maximize basic economic security.