Listen up, business press: Zero Hedge runs a great guest post by Graham Summers looking at why Average Joe and Jane America are constantly battling to keep their heads above water. It’s intentionally over-simplified but still insightful.
Summers looks at 2008 household median income of $50,300 (much lower now, but that’s the latest data) to estimate take-home pay. He uses the median house price to subtract estimated mortgage payments, takes out average health premiums, food bills, utilities, and vehicles, and guess what? Median American Family is in the hole.
Remember this when you’re tempted to make that lazy argument that the credit crisis (and let’s face it, the two decades before it) was caused by mass moral failure on the part of regular Americans, rather than structural problems with the economy that sent most or all of its income gains to the top handful of earners.
— In how-healthy-is-the-banking-sector news, Bloomberg reports that three big banks may be in line to take a $30 billion hit from second mortgages. Why might Bank of America, Wells Fargo, and JPMorgan Chase have to actually take the losses rather than push them forward with mark-to-myth accounting?
Action in Washington could spur banks to act. U.S. Representative Barney Frank, chairman of the House Financial Services Committee, is scheduled to hold a hearing tomorrow on how second-lien loans are getting in the way of reworking homeowners’ debts and easing the foreclosure crisis. Frank sent a letter March 4 asking banks to recognize more losses in order to clear the way for mortgage modifications.
Second-lien mortgages and most home-equity lines of credit rank behind first-lien debt, meaning they get wiped out in a foreclosure if the sale of a home doesn’t raise enough to pay off the first mortgage. Second liens are often closed-end loans in contrast to home-equity lines of credit, which can remain open for borrowers to withdraw money when needed, much like a credit card.
— Newser’s Michael Wolff takes on The Wrap’s Sharon Waxman on CNN’s “Reliable Sources” over his site’s parasitic aggregation policies. Wolff, perhaps the least sympathetic witness on the planet, loses badly, even while misrepresenting (to those not familiar with the dispute) what his site actually did with Waxman’s stories: