• Intel has plans to invest during the down-turn. They’ll be retooling some of their facilities for the next generation of chips.

• Supervisors from across the state will be lobbying for a budget in Sacramento. Perhaps some of them can convince a few Republicans.  If they did, it would be a greater contribution than Arnold Schwarzenegger has made to the process.

• And some leaders are heading to Washington. The Mayors of San Jose, San Diego, and LA will be pushing for aid to their cities in the stimulus package.  Perhaps Mayor Sanders could prevail upon Brian Bilbray to vote yes for once?

• There’s a very good investigative series going on by former UK Independent writer Andrew Gumbel at a new site called The Wrap.  Gumbel has two stories up about the Motion Picture & Television Fund and their closing of a convalescent home for aging actors last month.  Gumbel accuses the foundation of lying about the reasons for the closure, and he has the tax returns to prove it (their assets actually increased in 2006 and 2007).  In the companion piece, Gumbel finds that the CEO of the MPTF took a $600,000 salary right before closing the home due to the “financial strain.”  Six former residents have died in the past month, so this isn’t an abstract story.  The MPTF will respond to the charges in a tele-conference tomorrow.  This is a great example of online investigative journalism making a difference.

• Apparently there will actually be a bottom for the home prices in the Sacramento region, we just aren’t close to it yet.  While the crash just seems to continue, Moody’s thinks much of the Sacramento market will hit bottom by Q4 2009, with the remaining coming around by Q1 2010.

• You know how the crisis has been lead by residential foreclosures? Well, economists issued a report in San Diego yesterday warning about commercial foreclosures.  With rising vacancy rates, some commercial real estate interests might not be able to keep up with payments.  

• We have a full-fledged water crisis in Los Angeles, despite the fact that it’s rained almost every day for a week and another three-day storm is on the way.  The word “unsustainable” leaps to mind…

Democratic legislative leaders are in Washington today arguing for increased stimulus money for California.  I’ve been arguing that this is required for some time, and hopefully it will be done in such a way that a) it can be applied to the General Fund deficit (so far Arnold has not asked for budget relief in that way) and b) it can be used without up-front money that will be matched, because the cash crisis limits our ability to do that.

However, there is something else that the Obama Administration can do right away to help the bottom line of the state and its citizens, and that is deal with the crisis in the housing market here.  It’s no secret that California is one of the hardest-hit states by foreclosures; in Stanislaus County, for example, 9 percent of all houses and condos in the county have been foreclosed upon, a staggering figure.  That’s almost $4 billion dollars worth of foreclosures in Stanislaus alone.  In larger counties like San Bernardino and Riverside, you can see how this foreclosure crisis affects new housing starts (there are a glut of cheaper foreclosed homes on the market) and thusly unemployment figures.

Only four years ago, Riverside and nearby San Bernardino, often called the Inland Empire, were California’s economic powerhouse, accounting for more than a fifth of the state’s new jobs. Today, unemployment reigns in the sprawling region east of Los Angeles. The 9.5 percent jobless rate in the two counties matches Detroit’s as the highest of any major metropolitan area in the U.S.

Although there was a surge in construction employment in the U.S., and about a 50% increase in California (as a percent of total employment), construction employment doubled (as a percent of total employment) in the Inland Empire […]

With the housing bust, the percent construction employment has declined sharply and the unemployment rate has risen to almost 10%. Is it any surprise that jobless rate in the Inland Empire matches Detroit’s as the highest of any major metropolitan area in the U.S.?

Nobody is calling on the federal government to prop up a sick housing market that will not see a broad recovery for a while.  But foreclosures have a disruptive effect on the greater economy.  They hurt property values, they hurt banks, and they hurt employment.  The crisis is only slated to grow if nothing is done, with homeowners of every income class affected.  And so foreclosure aid would be a major boost to California, and it can be done both quickly and effectively.  By pledging that $100 billion from the TARP program will go to limit foreclosures, Obama has already begun this effort.  Ted Lieu thinks that the Obama Administration understands the nature of the problem. (over)

Time is of the essence. I commend the incoming Obama Administration for pledging up to $100 billion from the Troubled Assets Relief Program (TARP) to help distressed homeowners stay in their homes. In California, which has the highest number of foreclosures in the nation, we experience one foreclosure filing every 30 seconds to 1 minute. The TARP funds, which the U.S. Senate recently released, should be immediately put to use to rescue homeowners from foreclosure. Our economic recovery will not begin until we slow down the astronomical rate of foreclosures and stabilize the housing market.

Strategic direction is of the essence. The haphazard strategy of the Bush Administration’s use of the initial $350 billion in TARP funds resulted in the following: more foreclosures, less market confidence, and zero benefits for the ordinary citizen. How does giving yet another $20 billion to Bank of America so it can complete its purchase of Merrill Lynch’s brokerage arm help anyone on Main Street? Answer: it doesn’t. The only people this TARP money under the Bush Administration has been helping have been Wall Street firms. It is time for change and January 20th cannot come soon enough.

State efforts are of the essence. Helping our economy recover will require the combined efforts of both state and federal resources. In California, I introduced the California Foreclosure Prevention Act to provide immediate foreclosure relief. This Act imposes a foreclosure moratorium, but allows lenders to avoid the moratorium if they have a comprehensive loan modification program designed to keep people in their homes. Swift passage of this Act will complement and enhance proposed federal efforts. We need action and we need it now.”

However, more needs to be done.  Earlier this month, Democratic Senators got Citigroup on board for what is known as “cramdown” legislation, which would allow bankruptcy judges to restructure mortgages that would give homeowners the ability to pay them.  The lenders take a haircut but it’s a better situation for them than foreclosure, and those who get to keep their homes can continue to contribute to the economy.  It’s a great idea and a major step toward reforming the hideous 2005 bankruptcy bill.  Yet despite supporting it, Obama’s team doesn’t want to include this reform in the economic recovery package, which I think is a mistake.

President-elect Obama and his advisers are resisting attempts to include a provision in the economic stimulus bill backed by congressional Democrats that would allow bankruptcy judges to shrink mortgages.

In a hastily convened Democratic Caucus meeting last week, Obama economics adviser Jason Furman made it clear to lawmakers that Obama thinks the so-called “cramdown” provision would cost GOP votes and endanger bipartisan support in the Senate.

He committed to dealing with the issue after the bill passes, as did House Speaker Nancy Pelosi (D-Calif.).

Lead supporters of the cramdown provision say the time to deal with the issue is now. Rep. Jerrold Nadler (D-N.Y.) said it’s worth losing some Republican support to help homeowners.

“I would take that risk,” Nadler said. “I don’t think you’re going to get a lot of Republican votes anyway.”

This is absolutely correct by Nadler, and risking a few votes on the margins is no reason not to limit foreclosures now.  There is an urgency here, because each foreclosure hurts the housing market more and makes it less liable to recover quickly.  We cannot wait a few months for the sake of political expediency.  Cramdown needs to happen fast, particularly for us in California.

The S&P Case-Shiller Index is one of the leading trackers of the national housing market. It recently reported a 16.6% national drop in home prices for the third quarter, and included projections for 2009 and 2010. Happy holidays- Eight of the ten worst projected housing markets for 2009 are in California:

1. Los Angeles

2008 median house price: $375,340

2009 projected change: -24.9%

2010 projected change: -5.1%

2. Stockton

2008 median house price: $248,050

2009 projected change: -24.7%

2010 projected change: -4.0%

3. Riverside

2008 median house price: $256,540

2009 projected change: -23.3%

2010 projected change: -4.8%

5. Sacramento

2008 median house price: $225,140

2009 projected change: -22.2%

2010 projected change: 2.3%

6. Santa Ana/ Anaheim

2008 median house price: $532,810

2009 projected change: -22.0%

2010 projected change: -3.5%

7. Fresno

2008 median house price: $257,170

2009 projected change: -21.6%

2010 projected change: -3.3%

8. San Diego

2008 median house price: $412,490

2009 projected change: -21.1%

2010 projected change: -2.9%

9. Bakersfield

2008 median house price: $227,270

2009 projected change: -20.9%

2010 projected change: -2.5%

Just the technical populations of those eight cities is a combined eight million people. The metropolitan areas are of course much larger. While Republicans in Sacramento continue to watch the state’s financial situation spiral further and further out of control, home owners still have a lot further to fall. Which means that as the GOP tries to force deeper cuts into safety net programs, they’re going to be that much more desperately important in the future.

These numbers should be extremely scary. Nine of the state’s thirteen biggest cities are on the above list. This morning, Paul Krugman wrote: “Whatever the new administration does, we’re in for months, perhaps even a year, of economic hell.” That’s with the best minds in the nation formulating policy that will find executive and legislative branches working together to pass a recovery plan. On the other hand, California is staring down the barrel of a gun at the freezing of transportation projects, furloughed state workers, wage freezes, and deep cuts to the programs that protect citizens in times of economic downturn.

Nothing is going to be enough to truly counterbalance these grim economic times in the next year. But doing nothing simply can’t be an option with California now not only self-destructing, but leading the rest of the country down as well.

Something for the legislature to read while they’re on LOCKDOWN.

• We’re in a special session of the legislature, separate from their normal work.  So while the Yacht Party stonewalls and both sides bicker, they are making $173 a day for the privilege, with the current total at $128,000 and counting.  Good work if you can get it.

• Stockton, Merced and Modesto were dead last nationally in home prices, with homes in all three metro areas losing at least 30% of their value in the first nine months of the year.  The Central Valley is just getting buried.  If you want to know where the rest of the state (and the nation) is headed, look there.

• The state’s Healthy Families program, California’s contribution to S-CHIP, was on the verge of becoming extinct until First 5 provided a $16 million dollar cash infusion, allowing their enrollment to remain open through the end of the fiscal year in June.  This is of course one of the programs on the Yacht Party’s chopping block.  Because who likes healthy kids?

• Peter Schrag tore the Yacht Party a new one today, and it was most satisfying.

Today’s GOP is a very different party, a hard-line group of self-insulated ideologues, more like a political cult than like an inclusive party that stretches its core principles to be inviting to people at or beyond that core.

Couldn’t have said it better myself.

• SD-26: Mark Ridley-Thomas, now an LA County Supervisor, has endorsed Assemblymember Curren Price to fill his seat in the upcoming special election, the primary of which is scheduled for March 24.  Price is expected to be challenged by Assemblymember Mike Davis.  Either of them winning would trigger ANOTHER special election for their vacant Assembly seat.  And on and on.

• CA-31: Ben Smith is reporting that Xavier Becerra will turn down the position of US Trade Representative.  When there was a two-week lull after the rumor leaked with no announcement, I figured as much.  All the more reason for Hilda Solis to run for Governor, as the Vice-Chair of the House Dem caucus won’t be opening up.

It is Wednesday.  Here is a list of links.

• Arnold has hired his chiropractor, his dentist and now his nanny to various state boards.  Good thing this guy is nothing like George Bush or we would expect these people to be unqualified!

• The Supreme Court has now stepped into the battle between the Navy and environmentalists, ruling that the Navy can engage in sonar exercises off the California coast that may endanger dolphins, whales and sea lions.  Why courts are arbitrating this case instead of the science is one of the neat little quirks of our system.  But sure, why should the Navy be inconvenienced by moving a few miles off the coast?  Not in the public interest, you see.

• Mountain House, California, particularly Prosperity Street in Mountain House, offers a cautionary tale about how screwed the housing market is:

This town, 59 feet above sea level, is the most underwater community in America.

This week, a real estate office in Tracy, Calif., near Mountain House, was advertising foreclosure sales.

Because of plunging home values, almost 90 percent of homeowners here owe more on their mortgages than their houses are worth, according to figures released Monday. That is the highest percentage in the country. The average homeowner in Mountain House is “underwater,” as it is known, by $122,000.

That is really worse than anyone’s projections.  This is going to be a brutal downturn, and the recently upgraded homeowner relief looks to be insufficient.

• DiFi, who may be made chair of the Senate Intelligence Committee, is striking hard at the most important, festering problem at the soul of our society today – scalped tickets for the inauguration.  But I’m sure that if we were committing torture or illegally wiretapping on Americans or indefinitely detaining prisoners without charges, she’d be all over that, too.

• Gary Miller has been caught with some pretty shady campaign practices again. Well, I take that back, this goes beyond shady:

apparently Congressman Miller paid his “bigger development construction company” a series of 5 payments which equaled $47,360. All this came from his re-election campaign, and when this is taken into perspective, it  amounts to his largest campaign expenditure, 22% of the $218,368 that he raised.(LiberalOC)

• Dan Weintraub, hero of High Broderism.  I love this line: “Will (redistricting) change the world? No.”  The better question is “Will it change anything?”  I love how these guys never look at the actual registration statistics, with all these seats that have changed between 6-8% in party affiliation, when they intone that legislators pick their voters.  Do they pick who changes their registration, who dies and who moves, too?

• Finally, CREDO Mobile is trying to whip legislators to remove John Dingell from the chair of the House Energy Committee and replace him with Henry Waxman.  Which is great, and they personalize the message so that each person receiving their email gets the name of their Congressman on it.  Only, my Congressman is Henry Waxman.  And so my message said “Will you tell Henry Waxman to vote for Henry Waxman for Energy Committee chair?”

I think he can be trusted to do the right thing.

Yesterday, Bank of America announced that they would settle their lawsuit with a parade of states Attorneys General that began before BofA bought out the defendant, Countrywide Financial.  The initial suit alleged that Countrywide engaged “in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market.”  At the time I thought it would be difficult to hold Countrywide responsible for what the mortgage market is intended to do, but I suppose they didn’t want to face a jury at a time when the financial industry is melting down.

This settlement, which could provide up to $8.68 billion dollars for as many as 400,000 homeowners nationwide (and up to $3.5 billion in California), has some very laudable parts to it:

Under the terms of the settlement, eligible subprime and pay-option mortgage borrowers with loans from Countrywide will be able to avoid foreclosure by obtaining modified and affordable loans. Here is the information released by Brown’s office:

The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America’s foreclosure crisis. Assuming every eligible borrower and investor participates, this loan modification program will provide up to $3.5 billion to California borrowers as follows:

• Suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans pending determination of borrower ability to afford loan modifications;

• Loan modifications valued at up to $3.4 billion worth of reduced interest payments and, for certain borrowers, reduction of their principal balances;

• Waiver of late fees of up to $33.6 million;

• Waiver of prepayment penalties of up to $25.6 million for borrowers who receive modifications, pay off, or refinance their loans;

• $27.9 million in payments to borrowers who are 120 or more days delinquent or whose homes have already been foreclosed; and

• Approximately $25.2 million in additional payments to borrowers who, in the future, cannot afford monthly payments under the loan modification program and lose their homes to foreclosure.

This is exactly what should have been in the bailout bill – a large-scale workout for homeowners on the brink of foreclosure to modify their loans and stay in their homes.  It’s arguably costlier to the bank at this point for the mortgages to go completely bust and to deal with the foreclosure.  In addition, BofA is SUSPENDING subprime loans and negative amortization loans as well as loans with little or no documentation from the borrower, which is in a way more significant because that’s at the root of the financial crisis.

These are also the kind of steps that Ted Lieu sought in his AB 1830 which was vetoed by the Governor – banning predatory lending and unsustainable mortgage loans.  Ultimately, Attorney General Brown was forced to seek remedy in the courts because the regulatory structure had broken down and the Congress was unable or, more likely, unwilling to give struggling homeowners a hand.  

This shouldn’t be Jerry Brown’s job, but the systemic failure fell to him, and he performed brilliantly.  And he’s not done:

And this is not the end of this chapter. The settlement does not include Angelo Mozilo, the former Chairman and Chief Executive of Countrywide Financial Corporation or David Sambol, formerly the President of Countrywide Home Loans and the President and Chief Operating Officer of Countrywide Financial Corporation. Brown will continue to prosecute separately his case against Mozilo and Sambol.

Lawmakers like Dianne Feinstein and others should be a little ashamed that they were able to do so little in the wake of this crisis while Jerry Brown did so much more.