|Western Union||Community Reinvestment Policy||Resolution|
|Wells Fargo||Racial Disparities in Mortgage Lending||Resolution|
What's Up with the Bailouts?
The movement against the Wall Street bailout proved that people have power to change the rules of our economy. But we also learned that a spontaneous, reactive, one-time campaign is not very effective.
We need to stay engaged to make fundamental economic changes for the long-term.
- A Sensible Plan for Recovery, by Inequality and the Common Good: Rebuilding Accountability and Trust.
• America's Future's Main Street Economic Recovery Plan signed by UFE and 200 others, December 9, 2008.
Sitdown Strike in Chicago; Bank of America is Targeted
• John Nichols' "Making a New New Deal: Sitdown Strike in Chicago," in The Nation blog, December 7, 2008.
• Jobs with Justice's campaign targeting Bank of America.
• United Electrical Workers' News Coverage, December 7, 2008.
• Peter Bernstein's "Put Away The Wish List, And Help Households Bounce Back." in The New York Times, November 9, 2008.
• Robert Schiller's "The Real Mandate Is To Bridge The Wealth Gap." in The New York Times, November 9, 2008.
• Alan Blinder's "Remember That Capitalism Is More Than A Spectator Sport." in The New York Times, November 9, 2008.
• Naomi Klein's "Real Change Depends On Stopping the Bailout Profiteers." in The Huffington Post, November 4, 2008.
• Joseph Stiglitz' "Reversal Of Fortune." in Vanity Fair, November, 2008.
• "Goldman Sachs Urged Bets Against California Bonds It Helped Sell." in The Los Angeles Times, November 11, 2008.
• Amit Paley's "A Quiet Windfall For U.S. Banks." in The Washington Post, November 10, 2008.
• Pro Publica's Bailout Bucks To Banks, is a running tally of banks given preliminary approval for the capital injection program. November 10, 2008.
October 31, 2008
• Chris Hedges' "Populism Arising–but Will It Be the Killer Kind?" in truthdig, October 26, 2008
• United Steel Workers' letter to Henry Paulson (PDF) criticizing him for paying double what he should have for Goldman Sachs, October 28, 2008.
• Kevin G. Hall 39;s "Bailout funds being spent in ways Congress never foresaw," in McClatchy News, October 30, 2008.
• "U.S. mulls up to $600 billion in home loan guarantees," in Reuters, October 29, 2008.
• "Bailout Expands to Insurers; Treasury to Take Stakes in Firms as Distress Spreads Beyond Banks," in Washington Post, October 25, 2008.
• Institute for Policy Studies' "Talking Points on the Economic Meltdown," October 28, 2008.
• Terrance Heath's "Concentrating the Wealth - Part 1," OurFuture.org, October 29, 2008.
October 23, 2008
• Howard Zinn's explanation on the necessity of direct action. October 22,2008.
• Robert Reich's, "No Company Should be Too Big To Fail," on the problematic aspects of companies becoming too big. October 22, 2008.
• Sarah Anderson and Sam Pizzigati's, "Rewrite Bailout Rules On CEO Pay," examines how the bailout lacks reform to executive pay. October 20, 2008.
• Dean Baker's perspective on ephemeral paycuts on Wall Street. October 21, 2008.
• David Lightman and William Douglas' article, which counters claims that Barack Obama's tax plan is Socialist. October 21, 2008.
• David Sirota's "Here Comes The Onslaught," addresses biased media towards the current financial crisis. October 19, 2008.
October 10, 2008
• SmartMeme's Take on What Story We Should Tell
• Alan Jenkins' "Pre-Inventing History," on countering disinformation from the right, October 7, 2008.
• USA Today's Editorial "In Ways Large and Small, Washington Coddles Rich," October 9, 2008.
• Sarah Anderson and Sam Pizzigati's "Truth, Lies, the Bailout and CEO Pay," October 6, 2008.
• Common Cause's Report: "Ask Yourself Why... They Didn’t See This Coming," September 24, 2008.
October 7, 2008
• "Beyond The Bailout: What We Must Do Now," video interview with William Greider and Robert Borosage, October 4, 2008.
• David Sirota's "Bailout Is Capitalism Murdering Democracy," October 3, 2008.
• Howard Gleckman's "Brother, Can You Spare a Tax Credit?" October 2, 2008.
The Big Picture
• Garrison Keillor's "They're Stealing from You and Me – Where's the Outrage?" October 6, 2008.
• Herb Boyd's "MELTDOWN! When Economy Sneezes, Black America Gets Pneumonia," September 29, 2009.
Debunking the Criticism of the Community Reinvestment Act
• Sara Robinson's "Firing Back at the CRA Libel," September 30, 2008.
• Ellen Seidman's "No, Larry, CRA Didn't Cause the Sub-Prime Mess," April 15, 2008.
• Robert Gordon's "Did Liberals Cause the Sub-Prime Crisis?" April 7, 2008.
Wall Street Bailout Update:
Now A Major Opportunity to Start Rebuilding a Fair Economy
As we write this, Congress is gearing up for another vote on the bailout - as early as tonight! On Monday, they heard a clear, "No!" But based on the proposals being aired this morning, they didn't get the rest of the message.
We think the message is to scrap the whole idea of a bailout and take the opportunity to put in place an economic recovery plan built around the important progressive rule changes we want to see (for ideas, see below).
Please think about what concrete things you want and call both your Senators and your Rep. And especially today, make sure that Congressional staffers listen to your specific concerns.
Call Congress today: toll-free 800-830-5738 or 202-224-3121.
• John Nichols' article for The Nation, examines the "No Bailouts" Act from Rep. DeFazio (D-OR).
• See what the Neighborhood Assistance Corporation of America (NACA) says about the bailout.
• James K. Galbraith's Washington Post article, which examines whether or not a bailout is necessary.
September 24, 2008,
updated September 26
The US and world financial markets are in serious crisis, the end result of many years of bad federal deregulation and lax oversight. A bailout costing upwards of $700 billion is being rushed through Congress.
Make your voice heard. Call Congress today (toll-free 800-830-5738 or 202-224-3121) and demand that any bailout plan include:
- mortgage assistance for those most affected by the crisis.
- controls on excessive CEO pay.
- protection for ordinary taxpayers from bearing the costs of the bailout, by returning a portion of any profits made by bailed-out banks to the American people, and increasing taxes on wealthy investors.
Join our allies:
• Campaign For America's Future is asking people to sign a petition to legislators that rejects a bailout for Wall Street.
• Working Assets is asking people to sign a petition that is against a bailout for Wall Street.
• The Coalition on Human Needs is asking people to call legislators and ask them to reject a blank check bailout for Wall Street.
• SEIU is asking people to sign a petition against the $700 billion bailout.
• RESULTS is asking people to send letters to their local newspapers that speak out against the bailout.
• Truemajority.org is asking people to attend or host events that speak out against the Wall Street bailout.
For More Information:
• Inter Press releases an article that examines the implications and details of the Wall Street bailout. Inter Press.
• Working Group On Extreme Inequality coordinator Chuck Collins' proposal on who should pay more taxes, to help pay for the bailout. The Nation.
• Robert Reich's point of view on what conditions should be stipulated for Wall Street to get a bailout funded by taxpayers. TPMCafe.
• Cash For Trash is an Op-Ed written by Paul Krugman, which examines the bailout and what lead to its implementation. The New York Times.
• For info on federal taxes becoming more regressive, see CBPP’s analysis.
Our Related Issues:
Things that have earning power or some other value to their owner. Fixed assets (also known as long-term assets) are things that have a useful life of more than one year, for example buildings and machinery; there are also intangible fixed assets, like the good reputation of a company or brand. Current assets are the things that can easily be turned into cash and are expected to be sold or used up in the near future.
In a bear market, prices are falling and investors, anticipating losses, tend to sell. This can create a self-sustaining downward spiral.
A debt security - or more simply an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. Banks and investors buy and trade bonds.
A description of rapidly rising equity prices, usually in a particular sector (for example, housing, technology), that some investors feel is unfounded. The term is used because, like a bubble, the prices will reach a point at which they pop and collapse violently.
A bull market is one in which prices are generally rising and investor confidence is high.
The wealth - cash or other assets - used to fuel the creation of more wealth. Within companies, often characterized as working capital or fixed capital.
The term for bankruptcy protection in the US. It postpones a company's obligations to its creditors, giving it time to reorganise its debts or sell parts of the business, for example.
Collateralized debt obligations (CDOs)
A collateralised debt obligation is a financial structure that groups individual loans, bonds or assets in a portfolio, which can then be traded.
In theory, CDOs attract a stronger credit rating than individual assets due to the risk being more diversified. But as the performance of some assets has fallen, the value of many CDOs have also been reduced.
Unsecured, short-term loans issued by companies. The funds are typically used for working capital, rather than fixed assets such as a new building.
Commodities are products that, in their basic form, are all the same so it makes little difference from whom you buy them. That means that they have a market price. You would be unlikely to pay more for iron ore from a particular mine, for example.
The situation created when banks hugely reduced their lending to each other because they were uncertain about how much money they had. This in turn resulted in more expensive loans and mortgages for ordinary people.
Credit default swap
A swap designed to transfer credit risk. The buyer of the swap makes periodic payments to the seller in return for protection in the event of a default. A bank which owns a lot of mortgage debt could swap it, but would have to make a pay-out if those mortgages were not repaid.
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Derivatives are a way of investing in a particular product or security without having to own it. The value can depend on anything from the price of coffee to interest rates or what the weather is like. Derivatives can be used as insurance to limit the risk of a particular investment. Credit derivatives are based on the risk of borrowers defaulting on their loans, such as mortgages.
In a business, equity is how much all of the shares put together are worth. In a house, your equity is the amount your house is worth minus the amount of mortgage debt that is outstanding on it.
Fundamentals determine a company, currency or security's value. A company's fundamentals include its assets, debt, revenue, earnings and growth.
A futures contract is an agreement to buy or sell a commodity at a predetermined date and price. It could be used to hedge or to speculate on the price of the commodity.
A private investment fund with a large, unregulated pool of capital and very experienced investors. Hedge funds use a range of sophisticated strategies to maximize returns - including hedging, leveraging and derivatives trading.
Making an investment to reduce the risk of price fluctuations to the value of an asset. For example, if you owned a stock and then sold a futures contract agreeing to sell your stock on a particular date at a set price. A fall in price would not harm you - but nor would you benefit from any rise.
Investment banks provide financial services for governments, companies or extremely rich individuals. They differ from commercial banks where you have your savings or your mortgage.
Leveraging means using debt to supplement investment. The more you borrow on top of the funds (or equity) you already have, the more highly leveraged you are. Leveraging can maximise both gains and losses. Deleveraging means reducing the amount you are borrowing.
London Inter Bank Offered Rate. The rate at which banks lend money to each other.
Confines an investor's loss in a business to the amount of capital they invested. If a person invests £100,000 in a company and it goes under, they will lose only their investment and not more.
The liquidity of something is how easy it is to convert it into cash. Your current account, for example, is more liquid than your house. If you needed to sell your house quickly to pay bills you would have drop the price substantially to get a sale.
Loans to deposit ratio
For financial institutions, the sum of their loans divided by the sum of their deposits. Currently important because using other sources to fund lending is getting more expensive.
These are securities made up of mortgage debt or a collection of mortgages. Banks repackage debt from a number of mortgages which can be traded. Selling mortgages off frees up funds to lend to more homeowners. See securities.
The act of bringing an industry or assets like land and property under state control.
Refers to a situation in which the value of your house is below the amount of the mortgage that still has to be paid off.
A class of shares that usually do not offer voting rights, but do offer a superior type of dividend, paid ahead of dividends to ordinary shareholders. Preference shareholders often also have superior status in the event of a liquidation.
When a company issues a statement indicating that its profits will not be as high as it had expected.
Bonds are rated according to their safety from an investment standpoint - based on the ability of the company or government that has issued it to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted.
To inject fresh money into a firm, thus reducing the debts of a company. For example, when a government intervenes to recapitalize a bank, it might give cash in exchange for some form of guarantee, such as a stake in the company. Taxpayers can then benefit if the bank recovers.
A period of negative economic growth. In most parts of the world a recession is technically defined as two consecutive quarters of negative economic growth - when real output falls. In the United States, a larger number of factors are taken into account, like job creation and manufacturing activity. However, this means that a US recession can usually only be defined when it is already over.
Money not paid out as dividend and held awaiting investment in the company.
Security lending is when one broker or dealer lends a security to another for a fee. This is the process that allows short selling.
Turning something into a security. For example, taking the debt from a number of mortgages and combining them to make a financial product which can then be traded. Banks who buy these securities receive income when the original home-buyers make their mortgage payments.
Essentially, a contract that can be assigned a value and traded. It could be a stock, bond or mortgage debt, for example.
A technique used by investors who think the price of an asset, such as shares, currencies or oil contracts, will fall. They borrow the asset from another investor and then sell it in the relevant market. The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference. Also shorting.
The dreaded combination of inflation and stagnation - an economy that is not growing while prices continue to rise.
These carry a higher risk to the lender (and therefore tend to be at higher interest rates) because they are offered to people who have had financial problems or who have low or unpredictable incomes.
An exchange of securities between two parties. For example, if a firm in one country has a lower fixed interest rate and one in another country has a lower floating interest rate, an interest rate swap could be mutually beneficial.
Debts that are very unlikely to be recovered from borrowers. Most lenders expect that some customers cannot repay; toxic debt describes a whole package of loans where it is now unlikely that it will be repaid.
When used of a rights issue, the institution pledging to purchase a certain number of shares if not bought by the public.
A document entitling the bearer to receive shares, usually at a stated price.
Reducing the book value of an asset to reflect a fall in its market value. For example, the write-down of a company's value after a big fall in share prices.
Refers to a financial institution with an economic net worth that is less than zero, but which continues to operate because its ability to repay its debts is shored up by implicit or explicit government credit support.
By James K. Galbraith in The Washington Post, September 25, 2008
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.
Is this bailout still necessary?
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory?...
The current financial crisis is disproportionately affecting people of color. In our search for solutions, we must remember that deregulation led us to this crisis and that those who are traditionally the hardest-hit are people of color.
Our current financial crisis reeks with the smell of hypocrisy. We have traded the rights of people for the rights of profits, and continue to watch the house of our economy crumble, due to its rotten foundation of deregulation. As foreclosures continue to reach an all-time high and more than $290 million of housing wealth is lost in the next year; housing values are likely to fall another 15% during this period.
Read the full article on Movement Vision Lab.
Evaluating Candidates on Taxes
Whether at the state or federal level, candidates for public office are crafting proposals and taking positions on tax policy.
While tax policy can be used for a wide range of purposes, in our view one of its most important functions is addressing economic inequality.
Some candidates, but not all, share this value. But often it's difficult to see through the rhetoric and evaluate a candidate's position – especially on topics as complex as taxes.
That's why we created Action Tools for evaluating candidates on taxes. They contain short descriptions and definitions of key progressive principles and sample questions that you can ask as you research candidates' proposals and positions.
Tax Fairness Action News - Back Issues
Spring 2008 Issue (PDF): Unprecendented Victory in WA | Virginia Defeats Give-a-ways | Better Choice Budget in NY | Subsidizing the Rich | TFOC Members
Spring 2007 Issue (PDF): Tabor Takes Beating | Reframing "Budget Surpluses" | Success on State Estate Tax | Conference Reports | TFOC Members
There was electric excitement in Washington, DC, during the UFE co-sponsored Estate Tax Lobby Day, where participants inspired each other and advocated for their belief in a strong estate tax. One participant said, "Speaking with other thoughtful advocates made me feel both powerful and knowledgeable. It made me feel like an effective citizen." He and others intend to continue advocating for the estate tax.
On the first day, March 18, 2008 participants gathered for a talk featuring Bill Gates, Sr. and author Barbara Ehrenreich, moderated by UFE-founder Chuck Collins, who is currently a Senior Fellow at the Institute for Policy Studies (IPS). The talk, entitled Challenging the Second Gilded Age, was part of the Take Back America conference. The talk was followed by an in-depth training for people planning to meet with Congressional staff.
Early on March 19, 35 estate tax supporters assembled in the Dirksen Senate Office Building for more training. They were grouped into teams of 4-5 people, and each team held between 4 and 7 meetings with staff in the offices of Senators and Representatives to press for preserving and strengthening the estate tax. These teams were often composed of business owners, inheritors, young people and senior citizens, and included many UFE and Responsible Wealth members. They came from as far as Washington state and California, and included at least one Republican. In all, the teams visited 23 Senate and 18 Representatives' offices during the day.
After meeting with staff and talking about the future of the estate tax, most participants were inspired to continue similar advocacy. One participant noted that, "all day long, we heard from staffers of supportive legislators that they were very very happy to see us," because they rarely meet estate tax supporters.
Thanks to all who participated, including co-sponsors Fair Economy Action Fund and IPS, and to all who support our work to keep the estate tax!
Amy Goodman and Juan Gonzalez interviewed co-author Dedrick Muhammad. Broadcast on both radio and TV.
Racism and inequality are not relics of the past. Both historical and contemporary barriers to wealth creation among communities of color have resulted in a disproportionate wealth divide among people of color that exists today.
UFE’s Racial Wealth Divide (RWD) program seeks to deepen the public’s understanding about boundaries to economic parity among communities of color. It does this by providing resources that emphasize the importance of wealth and wealth-building strategies among communities struggling to attain greater economic equality.
The RWD program has become well known for its annual State of the Dream report, released each year in honor of Martin Luther King, Jr. Day. The report examines the state of racial inequality in America as it relates to contemporary political issues, such as foreclosure, the austerity agenda, and unemployment.
In addition to the State of the Dream report, the RWD program creates and shares resources around innovative strategies, public policies, communications work and grassroots organizing that fight against the growing racial economic divide. Our goal is to help educate and empower community leaders, activists, organizations, media, and the public at large. Through workshops, publications, primary research, policy initiatives, and community empowerment strategies, our goal is to help create a network of individuals and groups that will work together to abolish the racial wealth divide.
The estate tax is a tax on the transfer of assets at death (inherited wealth). It applies only to large accumulated fortunes.
When someone dies, his or her assets (the "estate") are distributed to heirs. If the total value of the estate is larger than the tax-exempt amount, an estate tax is imposed on the portion above the exemption before the remaining assets are distributed. Any amount given to a spouse or charity is tax exempt.
Since 2002, the estate tax has been paid only by millionaires. Rates have varied, since the Bush Tax Cuts of 2001 and 2003 resulted in frequent changes to the estate tax exemption and rate.
The individual estate tax exemption—the amount of money an individual can pass to heirs tax free—has been as low as $1 million in 2002 and as high as $5 million in 2011. The exemption is effectively doubled for married couples who engage in basic estate planning.
Rates on the amount above the tax-free exemption have varied from 55 percent to 35 percent. Below you can find a table listing the estate tax exemption and rate since 2002.
Who pays the estate tax?
The estate tax is reserved only for society's wealthiest elite. In 2009, just one-quarter of one percent (0.25 percent) of all estates were expected to owe any estate tax at all.
Very few family farms and small businesses are affected by the estate tax. The Congressional Budget Office estimates that with a $2 million exemption, only 123 farms per year in the U.S. would owe any estate tax, and the number of small businesses is similarly small. In 2001, the New York Times reported that American Farm Bureau Federation (who was in favor of repealing the estate tax) could not cite a single case of a family farm lost due to the estate tax.
On average, those few small business and farm estates will owe only 14 percent of the estate, so it is unlikely they will have to sell the business or farm. Plus, they can spread any payments over 14 years. They also benefit from special use valuation, and minority interests and marketability discounts.
Moreover, gutting the estate tax would actually hurt family farms. The estate tax helps make family farms more competitive against mega-scale agriculture, because it moderates ever-larger concentrations of wealth and economic clout. Repeal of the estate tax or exempting farms completely will only encourage further concentration of farm ownership, which reduces competition. An unlimited exemption for farm assets could create a giant loophole from the estate tax because wealthy individuals who expect to owe estate tax could use much or all of their wealth to buy farms before they died.
The estate tax raises billions of dollars each year. The estate tax, at 2002-2009 rates and exemptions, raised $15-26 billion per year. The variations are due to the changes in exemption and rates caused by the Bush tax cuts, as well as fluctuations in the overall economy that affect the value of assets like stocks and real estate. The table below summarizes estate tax revenue since 2002, using IRS data and an estimate by the Tax Policy Center.Why is it important to preserve a strong estate tax?
Weakening the estate tax would mean billions of dollars in tax breaks each year for the exclusive benefit of multi-millionaires. The responsibility of paying taxes for public services will shift from millionaires to low- and middle-income taxpayers. A strong estate tax is one of the best remedies for economic inequality because it reduces dynastic wealth and helps ensure more broadly shared prosperity.
A strong estate tax law will have a graduated rate structure that taxes very large fortunes at a higher rate and an exemption that results in 98 percent of Americans paying no estate tax. A strong estate tax would raise substantial revenue for our government.