Of course they did. After all, you can't make all those big donors unhappy, right? The amount of corruption in our political system has far outstripped our ability to change it. The NDC thinks our nation is ill-served by state laws that are more difficult to game on behalf of the financial services industry.

Is there anything they won't do to screw us?

The compromise reached late Wednesday between pro-reform House Democrats and the banker-friendly wing of the party could significantly weaken consumer protection in states where lawmakers support tougher rules against tactics such as predatory lending and excessive ATM fees than historically submissive federal regulators.

Members of the New Democrat Coalition -- whose deference to big banks is reflected in the massive amounts of money they have taken from the financial services industry since 2008 -- temporarily blocked the landmark financial regulatory reform bill from hitting the House floor on Wednesday.

At issue was whether federal regulations should be a floor or a ceiling for consumer protection in the states, particularly as they affect big national banks like JPMorgan Chase, Citibank, Bank of America and Wells Fargo.

The Obama administration, Financial Services Committee Chairman Barney Frank, state attorneys general and a coalition of consumer advocates and law professors want states to be able to enforce tougher consumer financial protections.

The big banks, obviously, want federal regulations -- which they have found relatively easy to influence -- to preempt any more onerous state rules for banks operating in more than one state.

Working on behalf of the big banks, the New Dems were able to extract a compromise that will allow federal regulations to preempt state laws on a case-by-case basis.

State regulators have extracted billions of dollars from predatory lenders over the past decade through fines and court settlements, and state legislatures adopted strong anti-predatory lending measures years before Congress. Federal regulators were largely absent from the fight to protect consumers or acted too late, consumer advocates argue.

Those of us out here already know how bad it is. When are the economists going to catch up with reality?

Oct. 2 (Bloomberg) -- The U.S. economic slump earlier this year was so severe it short-circuited the government’s model for calculating payrolls, raising the risk that today’s jobs report may be too optimistic.

About 824,000 more jobs may be subtracted from the payroll count for the 12 months through last March when the figures are officially revised early next year, a Labor Department report showed today. The revision would be the biggest since at least 1991.

The bulk of the miss occurred in the calculations for the first quarter of this year, the Labor Department said. The economy shrank at a 6.4 percent annual pace in the first three months of 2009, the worst performance since 1982.

The figures raise the possibility that the government’s calculations continue to miss the mark.

“We are probably still underestimating job losses,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “There could be another 30,000 to 40,000” that the data isn’t picking up, he said.

That would mean the loss of jobs for September could turn out to be as high as 300,000, rather than the 263,000 reported today by the Labor Department. Today’s report also showed the jobless rate climbed to 9.8 percent last month, a 26-year high.

The potential revision for the year through last March would mean that the economy lost 5.6 million jobs for the period instead of the 4.8 million now on the books.

It really is time for a constitutional convention in California. We can't live in this great state with such a destructive legislative process that has finally run us into the ditch.

If you want to understand how much insanity Prop 13 has wreaked on the state's revenues, just think about DisneyLand:

It's no wonder Disneyland's owners call their amusement park the "happiest place on Earth." For much of its land, Disney pays only a nickel per square foot in property taxes.

In Hollywood, Capitol Records pays a dime per square foot in taxes on the land beneath its famous tower, which resembles a stack of records on a hi-fi. In downtown Los Angeles, owners of the Wells Fargo Center pay about $1.77 a square foot.

And then the problem is compounded by having a hack like Arnold in charge.

It just gets worse and worse.

Today we witness the damage that the line-item veto causes in the hands of a right-wing governor bent on using it to achieve his long-desired destruction of public services. Arnold's vetoes include:

• An additional $6.2 million cut from state parks, which will likely cause as many as 50 more parks to be closed (potentially 1/3 of parks - 100 total - will now have to close)

• Elimination of state funding for community health clinic programs

• $80 million cut to child welfare services

• Total of about $400 million in health care cuts, including further Healthy Families cuts

• Elimination of funding for the Williamson Act programs to preserve farmland from development

• Deeper cuts to HIV/AIDS programs, as Brian noted.

• Cut 80% of funding for domestic violence shelters

• Elimination of funding for California Conservation Corps

• Cut half of Cal Grant funding, but could be restored "contingent upon enactment of legislation that authorizes the decentralization of the Cal Grant Program and other financial aid programs as warranted."

The state legislature could try and override these vetoes. But as we've seen time and again, this legislature appears to have forgotten that the override power actually exists. It would be a very good chance for Democrats to force Republicans to take a stand on these programs. Either they vote to restore the funding, or they vote to kick kids off of health care and close beaches and parks, giving Dems a set of issues to run on in 2010.

It seems doubtful that such an override will even be attempted. And so California slides deeper into ruin.

I have been considering a run at Jane Harman's seat, but seeing what's happening on the state level has really caused me many sleepless nights.

Digby weighs in:

I sure hope the wealthy won't have reason to tread beyond their gated communities for the next few years because it's going to be a disease riddled, environmental hellhole out here for the rest of us. I suppose they can have supplies helicoptered in and bring their "concierge medicine" behind the fences. They're going to need to.
It's going to be expensive, but at least the losers won't be getting things they don't deserve.

This is more bad news for the state in the sun---run by Arnold.

From the WSJ: Big Banks Don't Want California's IOUs

A group of the biggest U.S. banks said they would stop accepting California's IOUs on Friday ... if California continues to issue the IOUs, creditors will be forced to hold on to them until they mature on Oct. 2, or find other banks to honor them.
...
The group of banks included Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and J.P. Morgan Chase & Co., among others.

I guess the banks don't think the 3.75% annual interest rate is worth the risk for a "BBB" rated debtor on the Rating Watch Negative list.

What a mess.

Duncan has a plan:

As I've said, I'm not sure what the Feds should do for California, but perhaps having the Fed guarantee California's IOUs, assuming they have that authority, so that banks will cash them for their customers might not be such a bad idea. It's just a bandaid for the overall problem, but will help some pretty needy people who need the cash.

I asked for California to get a bailout from President Obama in an earlier post instead of the IMF because soon, the money will dry up completely. I know a bailout won't solve the problem because we have the most frakked up legislative process in the US and that needs to really, really, really be fixed. Conventional thinking is that if we were to receive help then we'll never fix the problem. I agree with that, but what happens when the state is broke and nobody will play with us? As for Arnold, I'll take a phrase that Chief Brenda Leigh Johnson of The Closer commonly uses: Thank you, thank you so much.

Such poetic irony, don't you think? The deaths of the little people working for corporate behemoths goes to pay bonuses to their company's top earners. Hey, it may be legal - but it sure lacks class.

Banks are using a little-known tactic to help pay bonuses, deferred pay and pensions they owe executives: They're holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries.

Banks took out much of this life insurance during the mortgage bubble, when executives' pay -- and the IOUs for their deferred compensation -- surged, and banking regulators affirmed the use of life insurance as a way to finance executive pay and benefits.

Bank of America Corp. has the most life insurance on employees: $17.3 billion at the end of the first quarter, according to bank filings. Wachovia Corp. has $12 billion, J.P. Morgan Chase & Co. has $11.1 billion and Wells Fargo & Co. has $5.7 billion. (Wells Fargo acquired Wachovia at the end of last year.)

The insurance policies essentially are informal pension funds for executives: Companies deposit money into the contracts, which are like big, nondeductible IRAs, and allocate the cash among investments that grow tax-free. Over time, employers receive tax-free death benefits when employees, former employees and retirees die.

Though not improper, the practice is similar to what is known as "janitors insurance," an insurance-on-employees technique that has long been controversial. Critics say the banks' insurance contracts are a way for companies to create tax breaks for funding executive pensions. And some families have complained that employers shouldn't profit from the deaths of their loved ones.

It's so heartening to see workers fight back against the amoral decisions of the big bankers. Here's hoping they get the outcome they want:

DES PLAINES, Ill. (CBS) ― Five hundred workers at the Hartmarx suit factory in northwest suburban Des Plaines have authorized a sit-in over the threat that the company's largest creditor may shut it down.

Employees want the largest creditor for the 130-year-old Chicago area company, Wells Fargo Bank, to help it reorganize instead of shutting it down. In the event that the factory closes or is liquidated, they will not leave.

As CBS 2's Susan Carlson reports, just months ago, the company formerly known as Hart, Schaffner & Marx, which has its factory at 1680 E. Touhy Ave. in Des Plaines, was best known for making the favorite suits of President Barack Obama. But that has changed.

Wells Fargo has received $25 billion in federal bailout money, and has the option of either selling the bankrupt Hartmarx to bidders or forcing the company to shut down. If that happened, the 600 workers at the factory would lose their jobs.

"We are all upset that, they should give us another chance to make sure that somebody comes in who actually wants to bid," said Workers United Local President Ruby Sims. "Take the bid. Let us work. We deserve to finish paying those bills, paying for our houses, taking care of our children."

"We will not leave the factories if they move and push to liquidate it and close down our jobs," said Midwest Workers United Treasurer Joe Costigan.

[...] Hartmarx could be following in the footsteps of another Chicago-based company that staged a sit-in to get financing last December.

Employees at Republic Windows & Doors employees refused to leave the company, and it worked. The sit-in at the factory at 1150 N. North Branch St. on Goose Island sparked international attention, and the company Serious Materials announced in March that they were purchasing Republic, rehiring all the workers, and plan to reopen within the next few months.

Hartmarx is hoping to have a similar positive outcome to keep their 600 employees – and 1,000 across the state – collecting their paychecks.

Imagine. These statements are made by one of their biggest shareholders:

May 2 (Bloomberg) -- Berkshire Hathaway Inc. Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society.

“This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”

Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the recession.

“We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been -- and as stupid as they’ve been.”

As if the foreclosures alone weren’t wreaking enough havoc on our economy, we also find out the whole process is starting to hurt our local cities in other ways we didn’t imagine:

Cincinnati wants Deutsche Bank and Wells Fargo to pay for what officials say is neglect of foreclosed-upon properties that's worsening blight in city neighborhoods.

The banks own more than 100 properties in Hamilton County.

Representatives appear often in local courts to prosecute foreclosure actions against property owners, the city says in a lawsuit, but don't show up when Cincinnati asks them to maintain abandoned properties titled to them. The city wants repayment for boarding up, demolishing and the other work done to Deutsche and Wells Fargo properties. The suit didn't specify an amount.

It really upsets me when I hear people on the right try to say the foreclosure problem is from greedy people trying to live outside of their means, and we should let them suffer. Sure there are a lot of foreclosures that are the product of people over-extending themselves, but just ignoring that leads to these costs being passed onto struggling local governments. Not only that, but it also effects the former neighbors of these foreclosed homeowners. People sit there and pay their mortgages on time, take pride in their home ownership and try to make something good out of the largest investment they will most likely ever make. In turn, they get rewarded with lower property values, because of a foreclosed house turned abandoned by the bank, now devaluing up their neighborhood.

I got a feeling the lawsuit being brought on by Cincinnati is only the start of it. We will see more cities follow suit (no pun intended) down the road as they realize how much this nightmare is costing them. Then the banks will want to recoup the costs of these lawsuits and having to actually maintain the properties they couldn’t wait to foreclose on. Of course the banks are only worried about their own well being. Why should they worry that your own property value is also being decreased, or that your local government is having to absorb some big costs associated with the foreclosures?

Pandora’s Box is just now opening, and without interaction by Congress, in the form of a homeowner bailout/rescue, we will be facing a vicious cycle that will continue for some time to come and cost all of us more than we could imagine. Until that happens, merry Christmas from the Bush/Republican economy.

(cross posted at IntoxiNation)