Category: Domestic Policy

Why Trump Doesn’t Talk About Jobs Anymore

The Daily Escape:

(Bamboo after snowfall in January, near Kyoto. Photo by Hiroki Kondo)

During the 2016 presidential race, Trump campaigned on populist themes. Now that he is in office, it is clear that his policies will be neither populist nor popular, but strictly pro-business. The first clue was his choice of Cabinet members. Despite promising to “drain the swamp”, nobody realized that he could do that by making lobbyists pointless, as their clients are in charge of the government: The CEO of Exxon is head of foreign policy, a former Goldman Sachs partner heads Treasury, the daughter of a ship owner heads Transportation, a corporate raider is at Commerce, and so it goes.

Two months into his presidency, it is clear that the Trump economic policy is pro-business, not pro-jobs, or pro-little guy. If you still have doubt, the Republicans just rolled back a series of Obama-era worker safety regulations. The Senate voted 49-48 to kill a rule that required federal contractors to disclose and correct serious safety violations.

It’s clear that industry CEOs can’t believe their good luck, despite having opposed Trump at every step before the election. He’s only asking them for some vague promises to add new American jobs in return. Acting normal when they are interviewed after leaving a Trump meeting must be the hardest part of their day.

Trump hardly mentions jobs anymore, because he knows there aren’t many. His bogey man of weak domestic manufacturing needs to be addressed: China’s total exports in 2015 were $2.3 Trillion. The US total exports in 2015 were $1.5 Trillion, second in the world.

And the total value of US manufacturing in 2015 was $6.2 Trillion and we are doing it with fewer people than ever before. Today, US factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.

Trump’s carrot and stick approach with US companies is theater. He is now industry’s number one value creator: When he commended Ford for deciding not to build a new plant in Mexico, the price of its shares rose 4.5%.

Softbank shares went up 6.2% after being praised by Trump for investing $50 billion in the US. Softbank’s motive was simple: Softbank owns Sprint, who would like to merge with T-Mobile. The authority to permit this merger lies with the new head of the FTC, yet to be named by Trump. Trump’s positive tweets feed Softbank’s hopes that the merger will be approved.

The Trump presidency has begun in the worst possible way for all who believed he would be an activist in new jobs creation for the lightly skilled, the people who overwhelmingly helped to elect him.

If the opposition wants to take Trump down, they should stop talking about Russia, and focus on Trump’s record with jobs creation. He made big promises – a job for everyone. It will be a long time (if ever) before a significant number of new manufacturing jobs materialize. This is true because Trump’s plan is to cut the fat out of government, cutting so many jobs that he might never add enough to make up for those he eliminates.

His plan is to use the freed-up funds to do something splashy with infrastructure. This would allow him to boast significant job creation, while downplaying the lost jobs in government. If Trump can figure out how to take unemployed, 50+ year old white males living in small town West Virginia, and make them productive, employed workers, then he’s a genius.

Capitalism hasn’t changed. A subset of oligarchs led by Trump have seized control of the US government. They are “nationalists”. Another subset, the “globalists” lost control of the state.

OTOH, the American people would have lost regardless of who won.

This is being repeated around the industrialized world, from Brexit, to Marine Le Pen’s right-wing challenge in France, to far right challenges to Angela Merkel in Germany.

The chaos described in Naomi Klein’s Shock Doctrine: The Rise of Disaster Capitalism is engulfing the world.

In honor of those who still believe that Trumpy will solve the jobs equation, here is Alan Jackson with “Hard Hat and a Hammer”:

Those who read the Wrongologist in email can view the video here.

Sample Lyrics:

Lace-up boots and faded jeans
A homemade sandwich, and a half a jug of tea
Average Joe, average pay
Same ol’ end, same ol’ day

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February 23, 2018

The Daily Escape:

(Yukon Bear before hibernation)

From the WSJ:

The Trump administration has drafted preliminary economic growth forecasts for its federal budget planning that rely on assumptions that are far rosier than projections made by independent agencies and most private forecasters, according to several people familiar with the discussions.

Imagine. The Trump Team ordered government economists to cook up rosy economic forecasts upon which to base the latest Republican fantasy sales pitch about trickledown economics.

Trump’s “the economy will be great” promises made during the election are now turning into policy and legislation. The problem is that the future they are cooking up for us is most likely unobtainable. Consider that recent GDP growth has been around 2%, while Trump is telling us to expect growth of between 3.0% and 3.5% for the next 10 years. But the Trumpets have a plan:

Trump officials believe a regulatory rollback and a tax-code revamp will unleash growth that drives a recovery in productivity, sends business investment higher and draws idled workers back to the labor force. They also assume interest rates would remain low because the US would become a more attractive place to park money.

Most economists believe sustained growth at more than 3% will be difficult to achieve unless there is a sharp rebound in productivity growth, while the US labor force also grows. Few are projecting that both of those will happen. Worker productivity growth has slowed to 0.7% a year since 2010, a sharp slowdown from rates exceeding 3% in the late 1990s and early 2000s.

So the simultaneous equations to achieve growth include increased spending on military and infrastructure, tax reform, cuts in regulations, and not touching granny-starver Paul Ryan’s favorite target of cuts to Social Security and Medicare.

The WSJ says that the Trump team gave the Council of Economic Advisers (CEA) staff the growth targets that their budget should produce, and asked them to backfill other estimates to justify those numbers.

Business school logic says that could work if the baseline target is realistic. Matt Yglesias at Vox points out that under Trump’s budget, the deficit would be larger; but the economy would be 17% larger and therefore, the deficit as a percentage of GDP would be smaller (perhaps small enough for the GOP to again say “deficits don’t matter?”).

So, Trump has an overly optimistic budget based upon phenomenal growth which no one else believes will happen, and he will hand off this budget grenade to Congress. If Congress balks, or does not find a way to make Trump’s budget happen, accusations will be tweeted from The White House regarding how Congress can’t get anything done.

It will be everybody’s fault except the Donald’s.

This reminds Wrongo of his days in the Fortune 500. Corporate HQ orders an extremely aggressive budget number. The number is missed, and people are terminated. Things continue to slide, and a new CEO is hired, who gets another “stretch” budget that is again missed.

How many times do we need to watch this movie? Trump has declared bankruptcy six times.

Will this make seven?

Here is Alex Dezen with “A Little Less Like Hell”:

Lyric:

Tell me who I gotta talk to
Tell me who I gotta kill
Just to make this place
Feel a less like hell

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Sunday Cartoon Blogging – February 19, 2017

President Trump is engaged in an open war on the US press. While he can’t be impeached for that, it is time to recognize what he intends: His plan is to neutralize what is our most vital check on authoritarianism. If he succeeds, it will still be called the “free press”, but we will hear only the official story from the White House. Our media must change its game, or democracy will die. Right now, its Trump’s facts first, and THE facts second, if at all. This is a battle the public must make certain Trump loses. Only 47 months to go…

Trump’s press conference was all we needed to know:

The Westminster dog show was controversial in some circles:

There were leaks on both coasts last week:

Netanyahu met with the Donald:

Betsy DeVos hit the ground running:

The conclusion after one month in office:

But it’s a tiny handbasket.

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Congress Greases the Skids for Exxon

(See below for the Daily Escape)

While America’s focus has been on the Orange Overlord’s blizzard of executive orders, and his public love-making with Putin, we were distracted from some of the actions by the GOP’s Congressional worms who are intent on chewing through our regulatory protections.

Did you feel burdened by a Security and Exchange Commission (SEC) rule requiring that American corporations doing business overseas reveal how much money they’re spending in foreign countries? This is called the Resource Extraction Rule, and apparently, it has been a terrible burden for Exxon and other oil firms.

VOX reported that, on the same day the Senate confirmed Rex Tillerson as Secretary of State, the House voted to kill a transparency rule for oil companies that Tillerson once lobbied against while CEO of Exxon Mobil. Now it’s on to the Senate and the Orange Leader for action:

Using the little-known Congressional Review Act, the House GOP voted on Wednesday to kill an Obama-era regulation that would require publicly traded oil, gas, and mining companies to disclose any payments that they made to foreign governments, including taxes and royalties.

The Resource Extraction Rule is part of the 2010 Dodd-Frank Act. Back then, senators from both parties included a provision requiring greater disclosure from mining and drilling companies’ activities abroad. The hope was to cut down on corruption in resource-rich developing countries by increasing transparency.

Over the past six years, the SEC tried to craft a rule that would give the legislation teeth. But the SEC’s first attempt at regulation was struck down by the courts in 2012. The rule didn’t actually get finished until June 27, 2016. As Charlie Pierce says: (emphasis by the Wrongologist)

In other countries, resource extraction is a polite way of describing corruption and bribery on a grand scale, and it’s also a dead serious matter for local activists who are trying to take on international corporations and their native plunderers in local government.

Remember the Congressional Review Act (CRA). It is the mechanism the GOP will use to undo much of what the Obama administration did in the areas of corporate responsibility and environmental justice.

At its core, the CRA states that any “recent” regulation (the Act’s definition of recent means it only applies to those passed by the Obama administration after June, 2016) can be repealed by a majority vote of both houses of Congress. Any repeal vote taken by the Senate cannot be filibustered, and the list includes more than 50 Obama-era regulations.

So far, the Stream Protection rule that restricted coal companies from dumping debris and waste into nearby waterways has been revoked, along with the Social Security gun rule that prevented mentally impaired persons from buying guns.

Now, they’ve gutted the Resource Extraction rule.

Under the CRA, the SEC is barred from crafting a new rule that has “substantially the same form” as the repealed regulation. So, Congress has thrown a rose to the oil and gas and mining industries that will be difficult to reverse.

Despite GOP concerns, similar rules are in place in the European Union. Reporting by the United Kingdom, France, Norway and Canada shows $150 billion in payments to governments in more than 100 countries.

Sounds like something citizens should know about.

The GOP’s argument is that American oil and gas companies need to make these under-the-table payments, in order to compete in third world countries.

This is America under the GOP: We can’t afford to provide the world’s best education to our kids. We can’t afford to take care of our elderly, but we absolutely must have policies that allow Exxon and friends to bribe foreign governments.

 

The Daily Escape: The National Library of China, in Beijing’s educational district.

(Image by Tian-yu Xiong for the National Geographic)

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New FCC Chair Guts Net Neutrality

Today we premiere a new feature, the “Daily Escape”, a photo that hopefully will take you away from all that is wrong just now. Some photos will be by Wrongo, but most will be from professionals. They will not have any particular relevance to the topic of the day. They are here to help you pause for a moment, and go to a different place.

Today’s Daily Escape: George Peabody Library, Johns Hopkins University

Now, on to what’s wrong…

The principle that all Internet content should be treated equally as it flows to consumers is called “net neutrality”. Net neutrality looks all but dead under Trump’s new head of the FCC. From the NYT:

In his first days as President Trump’s pick to lead the Federal Communications Commission, Ajit Pai has aggressively moved to roll back consumer protection regulations created during the Obama presidency.

Mr. Pai took a first swipe at net neutrality rules designed to ensure equal access to content on the internet. He stopped nine companies from providing discounted high-speed internet service to low-income individuals. He withdrew an effort to keep prison phone rates down, and he scrapped a proposal to open the cable box market to competition.

Before he became FCC Chair, Pai served as an FCC commissioner, one of the Republican minority under the Obama administration. In that role, he opposed reclassifying broadband providers as common carriers, which allows the agency to regulate them like utility companies, a necessary step if the FCC was to enforce net neutrality rules. That reclassification might be next to go.

Today consumers can pay Internet service providers for a higher-speed Internet connection, but regardless of the download speed they choose, under new Chair Pai’s plan, they might get some content faster, depending on how much their content provider has paid the service provider.

Tim Wu at the New Yorker offered some insight: (emphasis by the Wrongologist)

With broadband, there is no such thing as accelerating some traffic without degrading other traffic. We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t. They’ll be behind in the queue, watching as companies that can pay tolls to the cable companies’ speed ahead

The new rule gives broadband providers what they’ve wanted for about a decade: the right to speed up some traffic at the expense of others. The motivation is not complicated. The broadband carriers want to make more money for doing what they already do. Never mind that American carriers already charge some of the world’s highest prices for a service that costs less than $5/month to provide.

In the large-scale server market, Internet traffic is nearly free. In that market, a terabyte of data costs about $1/month. That’s 1000 gigabytes/month, if you are not familiar with usage of that size.  The home user pays 10x to as much as 1000x more than that per month; $100 for 100 gigabytes of traffic is not uncommon. A recent offer from AT&T for 45 M/bit internet is $30/month, which includes 1TB of data/mo. So 1000 gigabytes costs $30, or $1 per 33 gigabytes, but, if you exceed ATT’s limit, the price goes up dramatically: You would have to pay $10 per each additional 50 GB.

No volume discount for you, but Netflix will get one.

Requiring access fees for faster service will be good for Netflix, since it won’t have to worry as much about competitive traffic, particularly from small companies. The ultimate result will be to lock in the current set of incumbents who control the internet, ushering in the era of big, fat, (and possibly) inefficient monopolies.

Republicans and big corporations like to say that they are against regulation because the free market should rule. That economic efficiency brings lower prices.

It is always a lie.

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Saturday Soother – February 4, 2017

“True terror is to wake up one morning and discover that your high school class is running the country.” – Kurt Vonnegut

Welcome to the weekend, we should be at least concerned, if not terrified. After all, look at who is in charge. Its those jerks you knew back in the day.

We have just driven into a long, dark tunnel in the back seat of the Trump Express. Will we ever see light at the other end? When a president is out of his party’s mainstream by this much, he just provides cover for the rest of them to act out accordingly.

A few things that happened this week that you should consider, none of which will be the worst thing that Trump puts in motion over the next four years:

  • The House and Senate approved a measure that scuttles a new regulation aimed at preventing coal mining debris from being dumped into nearby streams. The Senate’s 54-45 vote on Friday sends the measure to President Trump. What’s more, the law prevents the executive branch from imposing substantially similar regulations in the future.
  • On Thursday, the House repealed a Social Security Administration regulation to keep people with severe mental illnesses from buying guns. Rep. Kevin Brady, R-Texas, and Chair of the House Ways and Means Committee said:

The agency should be focused on serving all of its beneficiaries, not picking and choosing whose Second Amendment rights to deny…

On the gun issue, the GOP is taking away Obamacare, so you won’t be able to afford treatment for your mental illness, but hey – go buy a gun!

To paraphrase Mitt Romney, coal companies are people too. They need the profits from dumping industrial waste in the water supply just as much as a human needs clean water. Why should we prioritize humans over corporate folks? Maybe you’re just prejudiced against legal persons.

Republicans seem to know intuitively that the faster and more boldly they move, the harder it will be for Democrats to change the rules later. As long as Republicans control both the House and the Senate, Trump will leave big, black heel marks all over our democracy.

So, calm down. It’s gonna get worse. Take a break with a hot cuppa DECAF coffee and settle back for half an hour to listen to music. Here is Mendelssohn’s Violin Concerto E Minor OP 64 first performed in 1845. It took Mendelssohn six years to write. Today we hear it performed by three-time Grammy Award-winning violinist Hilary Hahn playing in June 2012 with the Frankfurt Radio Symphony Orchestra at the Korean Art Centre Concert Hall, Seoul Korea:

https://www.youtube.com/watch?v=o1dBg__wsuo

Those who read the Wrongologist in email can view the video here.

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Is Climate Change Real?

Wrongo has never written about climate change, but will make an exception today. NASA recently released a series of then and now photos called “Images of Change” which reveal how our world has changed (not for the better) over the past 30+ years. The series provides a comparison of satellite images that depict everything from Arctic ice retreat to island building, to urbanization.

The series shows how rapidly our planet has changed in recent decades, due largely to urbanization and climate change. Perhaps, with the Trump administration firmly in control of a climate denial narrative, these photos will soon disappear from the internet, so please go and see all of them while it is still possible.

Here is one photo that shows the Arctic’s sea ice. It is clear that the ice has been shrinking for decades. The picture below compares September 1984 (on the left) with September 2016:

The total area of persistent (4 years or older) ice has declined from 718,000 square miles to 42,000 square miles in the 32 year time period. In the images, blue/grey ice is younger whereas white ice is older. But please calm down, you can’t stop the Trump express to climate Armageddon unless:

  • We take control of the Senate from the Republicans, and
  • Win the White House in 2020.

And at a time when we won’t let most Muslims into our country, and absolutely zero Syrians, maybe it’s time we chill out with a beautiful song by a Syrian national currently based in Paris, Lena Chamamyan. Here she is singing “Love in Damascus”. The accompanying video has many photos of Damascus; probably most taken before the rebellion. Wrongo could not find a reliable translation from Arabic for you, but the singing is beautiful:

Those who read the Wrongologist in email can view the video here.

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Monday Wake Up Call – Immigration Edition

Everyone knows by now that Trump signed an Executive Order (EO) on Friday barring people from seven majority-Muslim countries from entering the US. But many people traveling to the US from those countries, including some who are legally permanent US residents, were in the air at the time of the ban, and couldn’t turn around.

By early Saturday evening, several federal judges in NY, MA, and including Leonie Brinkema of the Eastern District of Virginia, made rulings that would at least stall the implementation of portions of Trump’s anti-refugee executive order. The Daily Beast reported:

As a result, airports across the country turned into Lawfare zones, with cadres of volunteer lawyers squaring off against bureaucrats in the Customs and Border Protection agency. Late-night rulings from federal judges made a legally unprecedented situation even more dramatic, with all three branches of the federal government—congressional, executive, and judicial—warring with each other.

There are three things to consider in this fast-developing story. First, how unprepared the Trump administration was to actually carry out their own EO. From CNN: (emphasis by the Wrongologist)

Homeland Security Secretary John Kelly and Department of Homeland Security (DHS) leadership saw the final details shortly before the order was finalized, government officials said. Friday night, DHS arrived at the legal interpretation that the executive order restrictions applying to seven countries — Iran, Iraq, Libya, Somalia, Syria, Sudan and Yemen — did not apply to people who with lawful permanent residence, generally referred to as green card holders.

CNN further reports that the White House overruled that guidance, with the order coming from Stephen Miller and Steve Bannon. They decided that, on a case by case basis, DHS could allow green card holders to enter the US. It was decided by DHS that green card holders could fly to the US and would be considered for re-entry on a case-by-case basis after passing a secondary screening. But CNN reports that the guidance sent to airlines on Friday night said:

Lawful permanent residents are not included and may continue to travel to the USA.

It gets worse for Trump: Before he issued the EO, the White House did not seek the legal guidance of the Office of Legal Counsel, the Justice Department office that interprets the law for the executive branch.

CNN indicates that the EO did not follow the standard agency review process overseen by the National Security Council.  That inter-agency process would have asked the Justice Department and homeland security agencies to provide operational guidance, but it didn’t happen.

The second issue was that the Customs and Border Protection (CBP) agents, at least at Washington DC’s Dulles Airport apparently disregarded the stay orders from Judge Leonie Brinkema of the Eastern District of Virginia. More from the Daily Beast:

Brinkema…ruled that the travelers detained by Customs and Border Protection had a right to see lawyers.

After the judge’s ruling, lawyers standing by at Dulles expected they would be able to see the detainees and try to help them get into the US. But, the CBP would not let them see their would-be clients. The Daily Beast reports that it’s unheard of for government agencies like CBP to prevent people who have the legal right to live in the US from seeing their lawyers.

But, that’s what happened. In fact as the evening wore on, it became clear that CBP was defying, or at best slow-rolling Brinkema’s ruling. The lawyers at the airport believe that meant someone must be in contempt of court. The judge could theoretically have sent in federal officers to force CBP to let the lawyers meet with the detainees, but, that would have been unprecedented, and it didn’t happen.

The third issue is that Saudi Arabia was not on the banned country list. That’s right, the country most responsible for supporting and sustaining both ISIS and Al Qaeda skated. Our past few presidents found it convenient to cozy up to the Saudis, but should Trump be continuing that coziness?

If Trump’s intention was to punish sponsors of terrorism, the ban should have hit Saudi Arabia and Egypt, which is where the money and most of the actual 9/11 terrorists came from.

This is what the next 4 years are going to be like. But the question is, are the Trumpets going to become more competent as they go along, or is this what we should expect going forward?

Today’s wake up is for Donald Trump and his administration.They need to govern, not play pretend president.

To help them wake up, here is Xenia Rubinos performing “Mexican Chef“, from her album “Black Terry Cat”. It’s her ruthless critique of the undervalued labor that immigrants perform every day in America:

Sample Lyrics:

French bistro

Dominican chef

Italian restaurant

Boricua chef

Chinese takeout

Mexican chef

Nouveau America

Bachata in the back

 Brown walks your baby

Brown walks your dog

Brown raised America in place of its mom

 Brown cleans your house

Brown takes the trash

Brown even wipes your granddaddy’s ass

 

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Are Donald Trump and Andrew Jackson Soul Mates?

President Trump has hung a portrait of Andrew Jackson in the oval office. Several of Trump’s spokespeople have heaped praise on Jackson, so Trump has picked Old Hickory as his populist role model.

Really? Did anyone on Trump’s staff even read the Cliffs Notes about Andrew Jackson? Here is the surface view:

A presidential candidate who strikes a wide range of observers, including leaders of his own party, as dangerously abrasive, arrogant, and racist. Partly because of those qualities, the candidate appeals stylistically to common-man voters who feel threatened by change, despite his being one of the super-rich himself. While this is Donald Trump in 2016, it also describes Andrew Jackson in the 1820s.

According to Benjamin Studebaker, when Jackson was elected, the accepted view was America needed strong economic growth to compete with Europe. Most thought the country needed to be industrialized quickly to turn us into an independent power. Tariffs should protect infant American industries from their established British competitors. Infrastructure investments should be directed towards transportation.

Jackson was uninterested in industrialization. He won the election because of slaveholding, agricultural states. The southern states had not industrialized, and they hated tariffs. Tariffs made British manufactured goods expensive, and made the price of Southern cotton uncompetitive. South Carolina attempted to nullify the tariffs, which led to tough talk and threats by Jackson to invade. But, ultimately, he signed legislation to reduce the South’s tariffs.

At the time, Jackson was praised for averting a violent confrontation, but his compromise left the issue of nullification unresolved. This eventually led to our Civil War.

The Second Bank of the United States (created by John Q. Adams, Jackson’s predecessor), was designed to stabilize prices and facilitate commerce. Jackson refused to renew the charter of the Second Bank of the US. Public monies were then directed to state banks, called “pet banks” since they were located in states that were Jackson’s core base of support. This deprived the industrial northeast of the investment funds it needed to grow.

The favored state banks began lending the new money feverishly, inflating land prices, and exposing the banks to undue risk.

Jackson blamed the resulting inflation on paper money, so he issued the “Specie Circular”, an executive order requiring all land purchases from the federal government to be made in gold and silver. This destroyed the value of the country’s paper currency, causing land prices to crash.

Executive orders can come back to bite you, Donald.

There is supreme irony that Jackson waged war on the Second Bank of United States, but he is on our $20 bill. Jackson found support for his economy policies among white men who felt threatened by changing from an agrarian to an industrial economy. But his war on the Bank, and the Democrats’ commitment to limited federal government helped propel the country into a four-year depression after the Panic of 1837.

Jackson created the spoils system. Thereafter, newly elected presidents would purge the civil service and hand out government jobs to friends, supporters, and even relatives. Jackson fired 10% of the federal workforce, replacing experienced hands with his buddies and lackeys. This practice continued for decades, ensuring that the federal government was consistently full of incompetents.

Jackson drained the swamp, and then recharged it with camp followers. Just like Trump!

Many on the right revere Jackson for the same reason they admire Donald Trump – he acts like a badass. Jackson killed people in duels. He spoke his mind. He may have rolled over on tariffs, but he used the word “treason” to describe South Carolina before he compromised. That made him seem tough.

The Right lets Jackson’s tough manner obscure the reality, that often he had little notion of the consequences of his actions. He sank the country’s economy for a decade, and handed its civil service over to generations of mismanagement.

A reappraisal of Jackson’s presidency forces us to look at the now-infamous policy of Indian Removal, whereby Jackson approved the confiscation of Native lands and then forcibly evicted them to the far West. He ignored John Marshall’s Supreme Court ruling that his Removal policy was unconstitutional.

He thought those in the abolitionist movement were traitors. His Postmaster General suppressed their mailings, and his party passed the Gag Rule in 1836 suppressing all antislavery petitions and discussion in Congress.

Trump’s new Gag Rule on Abortion limits the funding of global family planning providers if in any aspect of their work, they recommend, discuss, or even mention abortions to clients.

In most ways, it’s a fool’s errand to compare Trump to Andrew Jackson. Although there are gross similarities, Trump isn’t Jackson. Jackson was a military hero, but a failure at national policy. Trump has no heroic resume, and the jury is out on the success of his national policy.

For one thing, Trump confuses military school with military service.

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All Aboard The Bailout Train

In February 2014, Wrongo alerted that hedge funds and other Wall Street firms had been buying up single family homes, many of which had been foreclosed on during the housing crisis between 2007 and 2010:

Most rental houses in the US are owned by individuals…but a new breed has emerged: Wall Street-backed investment companies with billions of dollars at their disposal. In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out.

Tim G, a Wrongologist reader who is an expert in mortgage finance, commented at the time that he hoped that:

Fitch/Moody’s and any other rating agencies learned their lesson from 2007, and won’t (as you suggested) just slap AAA ratings on these. By definition these rental properties carry much more risk, since if they are vacant for any period, the incentive to keep paying drops quickly.

Well, slap they did. You know the drill from 2008; the new game was just like the old game: The new bundled securities were AAA rated by the same rating agencies. The bonds were sold to those seeking high yield without commensurately high risk.

Now we have a new wrinkle. Wolf Richter is reporting that Invitation Homes (owned by private equity giant, Blackstone) today owns 48,431 single-family homes. This makes Invitation Homes the largest landlord of single-family homes in the US. They just obtained government guarantees for $1 billion in rental-home mortgage backed securities. From Richter:

The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.

The plan is to have a successful IPO, and then refinance some of the debt with the sale of $1 billion of government-guaranteed rental-home mortgage-backed securities.

Fannie Mae, a government-sponsored entity (GSE) that was bailed out, and then taken over by the US government during the 2008 financial crisis, is providing the guarantee of bond principal and interest, and the offering documents call them “Guaranteed Certificates”. More from Wolf: (emphasis by the Wrongologist)

This is the first time ever that a government-sponsored enterprise has guaranteed single-family rental-home mortgage-backed securities, issued by a huge corporate landlord. It’s an essential step forward in financializing rents: taxpayer backing for funding the biggest landlords.

These government guarantees allow Invitation Homes to pay lower interest rates. The bottom line is that Invitation will have cheap financing for future home purchases, and thus lower costs and greater profits.

It’s a sweet deal: low-cost funding made possible by government guarantees, is a special gift that was agreed to by the Obama administration. Other corporate landlords will want to follow in Blackstone’s footsteps, and it is difficult to see how Fannie Mae will choose not to guarantee the other firms.

Bloomberg reported on a Dodd-Frank mandated stress test conducted by the Federal Housing Finance Agency. It showed that during the next severe economic downturn, Fannie Mae and its sister Freddie Mac would need between $49 billion and $126 billion in taxpayer bailout money.

Socialize the losses, Part Infinity.

The Blackstone deal looks like new policy: The government subsidizes the largest landlords, helping increase their profits from renting out the same single-family homes that individual homeowners lost to the same financial thugs during the housing foreclosure crisis. The mission of Fannie Mae is to promote home ownership, not to give real estate entrepreneurs a way to limit their losses.

This guarantee was worked out under Obama’s watch, but Blackstone did not make it public until it updated its filing with the SEC this week. The timing is curious. The public disclosure comes after the Trump team is in charge, meaning Obama wouldn’t face criticism, and the Trump Administration will certainly let the deal stand.

This is worse than the government’s gift of TARP to Wall Street. That at least had optics that said it protected Main Street. But, this securitized mortgage market doesn’t involve Main Street, and the market isn’t even in big trouble.

This isn’t a bailout. It’s a grift. The Kleptocracy is now more entrenched than in 2008.

How ironic. Big business gets a sweetheart government deal, while the GOP moves to cut social programs.

Will this add new jobs to the Trump economy?

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