Recession Rolls On

The stock markets are up and the shills on CNBC are celebrating. But the "real" economy depends on consumer spending for prosperity, and there's little or no positive news on that front other than the continuing depressed price of gasoline. Consumer spending hinges on people having reliable jobs and homes they can count on staying in. When they're living in fear, they hang on to what they've got, and we're doing little or nothing to address the primary sources of people's current fears: the ongoing foreclosure crisis and the ongoing loss of jobs in this country.

Consider:

*The banks own the Senate, which yesterday voted down foreclosure relief legislation. The New York Times reports WASHINGTON — The Senate handed a victory to the banking industry on Thursday, defeating a Democratic proposal that would have given homeowners in financial trouble greater flexibility to renegotiate the terms of their mortgages.

The House of Representatives, meanwhile, overwhelmingly approved a bill backed by the Obama administration that would limit the ability of credit card companies to charge high fees and penalties. The bill, approved 357 to 70, still faces obstacles in the Senate, where — as the action on Thursday illustrated — the industry has more clout, particularly among Republicans and moderate Democrats.

So at least the banks don't own the House of Representatives. But overall the government is refusing to address the elements at the heart of the recession -- foreclosure and still-rising unemployment.

*Foreclosure rates will continue to rise, because the majority of ARM's (adjustible rate mortgages) are still not yet readjusted, but most of them will be in 2010 and 2011. Atrios tells us Option ARM rates are going to be recasting soon and in increasing numbers. That's the magic moment when people can no longer make minimum payments, when they can longer make interest-only or neg-amortization payments.

When that magic moment comes, all of those people are going to look at how high their now unaffordable mortgage payments are. Then they'll look at how much their house is actually worth relative to how much though owe. Then, maybe, they'll try one of the various initiatives to modify their mortgage terms. And then, quite likely, they'll jut (sic) walk away.

Atrios provides a chart documenting what we have to look forward to, then adds This is why cramdown legislation (i.e., legislation defeated by the banks-owned Senate yesterday) was so important. It had the benefit of potentially helping people stay in their homes, but it's also necessary to help ease the pain of the next foreclosure crisis wave which, as the chart tells us, hasn't even really started yet.

It seems to me that dealing with the recession and moving forward into a reconstituted, 21st-century economy, based on production rather than debt and Ponzi schemes, will require us to confront our most fundamental problem -- the massive corruption and corporate penetration of government. And I just don't see that happening.