Tales from the Trail

Washington Extra – Just “okay”

It was a long slog to the government’s mortgage abuse settlement with top banks, one in which officials slept in their offices and worked round the clock. And yet, a consumer advocate looking out for those who lost homes to foreclosure can only muster an “it’s okay.”

You don’t need an expert to tell you how little of a dent the $25 billion deal makes in a mortgage morass that President Obama reminded us is one of the biggest drags on the economy. It took 16 months to get to a settlement that helps roughly 1 million borrowers, while 11 million Americans owe more money that what their homes are worth. People who lost their homes to foreclosures will get payments of $2,000. Home prices, meanwhile, are still 33 percent lower than 2006.

It’s a lot of work for a little relief. But if there is one constituent that walks away satisfied it has to be the state of California. Attorney General Kamala Harris held out for a better deal right to the end. What she won was 45 percent of the settlement spoils, and she only came to the table with a third of the nation’s foreclosures in her portfolio. It pays to play hard to get.

Here are our top stories from Washington…

U.S. banks agree to $25 billion in homeowner help

Five big U.S. banks accused of abusive mortgage practices have agreed to a $25 billion government settlement that may help roughly one million borrowers but is no magic bullet for the ailing housing market. The record state-federal settlement will spread relief widely in the form of mortgage relief and $2,000 payments to borrowers who lost their homes to foreclosure.

For more of this story by Aruna Viswanatha, read here.

For a factbox on U.S. efforts to combat foreclosures, read here.

Biden says contraceptives fight can be worked out

Vice President Joe Biden said the White House was working to address concerns raised by the Catholic church over a new rule on contraceptives, and he believed an escalating election-year battle over the issue would be resolved. Top Republicans, including the party’s presidential candidates have condemned the rule as an assault on religious liberty. Prominent Democrats and women’s health groups have urged President Barack Obama to hold his ground.

from Summit Notebook:

ABA’s Yingling sees danger in rhetoric: it’s Wall Street, not banks

REGULATION-SUMMITEd Yingling, president and CEO of the American Bankers Association, is a little worried about the rhetoric that's been flying around as Congress tries to produce financial reform legislation.

And he wants people to be clear that the problems are with Wall Street, not banks.

Though, the differentiation gets a little tricky here because some of the largest banks in the country and biggest players on Wall Street are members of his organization and received taxpayer bailouts. The thousands of other banks that his trade association represents did not.

Warren sees dark times if financial reform fails

USA/

Elizabeth Warren paints a disturbing picture of the realities facing the United States and the Obama administration as Americans claw their way clear of the worst recession since the 1930s.

Lobbyists for the financial industry have put the kibosh on market reforms that would aid the recovery. Banks, saved from Tartarus by taxpayer money, are using a free government guarantee against failure to rebuild profits and credit ratings, while either not lending to business or trying to milk American consumers of every dime they’ve still got.

“That’s our plan to rebuild the American economy. Think about it,” says the bespectacled Harvard professor who chairs the Congressional Oversight Panel set up to investigate the $700 billion banking bailout.

First Draft: Jobs, jobs, jobs

USA/Today, as ever, it’s all about jobs. War, pestilence (in the form of the H1N1 flu), a big gas explosion at a shopping mall outside Washington, the re-opening of the Statue of Liberty’s crown – all these take a back seat to jobs, especially in a recession. And especially after this week’s “stress test” results for banks, when the unemployed might well be asking, “OK, the big banks got their bailout. Where’s ours?”

The latest jobless numbers offered some signs of relief: U.S. employers cut 539,000 jobs in April, thousands fewer than the 590,000 jobs analysts predicted. But the unemployment rate rose to 8.9 percent from 8.5 percent in March, the highest in more than a quarter-century.

President Barack Obama is largely out of sight today, but is due to emerge for a late-morning speech on job creation and job training.

The First Draft: Details

OBAMA/The devil’s in the details, the saying goes, and we’ll find out plenty of details today about two big initiatives of the Obama administration: the budget and the bank bailout.

At 10:35 a.m., Obama will propose slashing $17 billion from the U.S. budget in 121 programs ranging from weapons systems to mine cleanup. Republicans are likely to say that’s not enough to tame his $3.55 trillion budget.

At 5 p.m., the Treasury Department will reveal the results of its “stress tests” of major banks, and is expected to say that about half of the 19 largest banks will need to raise more money to stay financially should.

First draft: Talking to Afghans, Pakistanis

AFGHAN/KARZAIPresident Barack Obama will jump into the thorny issue of Afghan-Pakistani relations today as he meets with President Hamid Karzai of Afghanistan and Pakistan President Asif Ali Zardari.

The visiting leaders will meet with Secretary of State Hillary Clinton before heading over to the White House where they will have separate meetings with Obama and Vice President Biden before a trialateral gathering.PAKISTAN-AID/ZARDARI

Though the administration has doubts about the capability of both men, Obama is expected to urge Karzai and Zardari to put aside a history of mistrust and join Washington in an alliance against Islamic extremists.

Obama looks to end banks’ role in federal student loans

Poor bankers. Just as they’re catching flak for everything from the global financial crisis to high credit card interest rates, along comes the president and adds another grievance. Barack Obama, it seems, thinks using banks to dole out federal college loan funds is a waste of taxpayer money.OBAMA/ So on Friday he discussed his scheme to boost the flow of federal dollars to those looking to get a higher education. To pay for it, he said, “we’re going to eliminate waste, reduce inefficiency and cut what we don’t need to pay for what we do.” Look out banks. Obama said there are two kinds of federal education loans — direct loans and Federal Family Education Loans. Under direct loans, tax dollars go directly to help students pay for tuition, “not to pad the profits of private lenders,” he said. But under the FFEL program, “taxpayers are paying banks a premium to act as middlemen — a premium that costs the American people billions of dollars each year,” he added.The loans are federally backed, so the banks don’t even have to take on significant risk. Cutting out the middleman, Obama said, could save the government tens of billions of dollars that it could use to help more students. But making that change won’t be easy, he said. ”The banks and the lenders who have reaped a windfall from these subsidies have mobilized an army of lobbyists to try to keep things the way they are.” ”They are gearing up for battle. So am I,” Obama said. “For those who care about America’s future, this is a battle we can’t afford to lose. For more Reuters political news, click here.Photo credit: Reuters/Larry Downing (President Obama discusses federal education programs in front of a portrait of George Washington)

First Draft: Afghan plan

President Barack Obama to announce plan to send more troops to Afghanistan to help stabilize the country after Democrats for years criticized his predecessor, George W. Bush, of ignoring that war because of Iraq.

But the plan won’t overshadow White House focus on U.S. economic issues always lurking in the wings.USA/

Obama to meet with bankers and talk about regulation. Sort of like a doctor meeting with a patient and talking about medicine that is not going to be very pleasant.

Bold budget boosts bailout

USA-OBAMA/How do you buy $750 billion of toxic bank assets with only $250 billion of taxpayer money?

If you know to play U.S. budget rules like a violin.

President Barack Obama told Congress in passing this week he might need more money than lawmakers have already approved to stabilize banks and pull the economy out of the ditch. 

How much? His budget virtuoso Peter Orszag said on Thursday he could support buying up to $750 billion in bad assets but only needed to set aside $250 billion to do it.

Fed Chair: No Night of Living Dead Banks

They won’t stay dead!

 

Members of the U.S. Senate grilled Federal Reserve Chairman Ben Bernanke on Tuesday on whether the next gruesome episode in the U.S. economic horror show could include an appearance of “zombie” banks. 

 

During Japan’s economic stagnation in the 1990s, the government propped up failing banks and firms that came to be known as zombies.  The failure to let such institutions expire prolonged Japan’s agony, many analysts believe.

 

Now that the U.S. government is struggling to keep the banking system alive, Senator Bob Corker worried aloud that the government is propping up banks that deserve to die.