Monday, May 7, 2012

A Closer Look at the Swing States Obama Must Win: Nevada


by Nomad
Back in February of this year, Republican presidential candidate Mitt Romney won by a substantial margin over his Republican rivals in the Nevada caucus. Referring to the state’s economic woes in his speech, he told the people of the Silver State,
"Mr President, America has had enough of your kind of help.”
For some voters, the remark must have hit home. Nevada was hit hard by the economic meltdown and both its once prosperous gaming and construction industries went into free fall. At 14 percent, Nevada has the nation’s highest unemployment. If that weren’t bad enough, the state has seen the steepest drop in home values. 
Obviously Romney’s game plan is to exploit the issue of the slow economic recovery and the perception that the president has failed to deliver on putting the economy back to together. 


It won’t be as easy as that. Nevada isn’t Arizona or Texas. Unlike many other states, Nevada barely felt the Tea Party quake of 2010. While Republicans picked up a seat in Congress and held the governorship, both houses of the legislature remained in Democratic hands.

As an important swing state, a state that the president needs to win for his re-election, Obama will have to convince the voters there that economic recovery really and truly is beginning to take shape, that some problems are so large that they take longer than four years to resolve. If that doesn’t persuade them to vote him back into office, then it might be easier to point out that Romney’s solutions are far worse. And the man who has assisted in that effort is Romney himself.

Romney's Kind of Help
Many of the remarks that Romney during the Nevada caucus provide insight to the man running for president. They show a candidate with a blind spot for the human side of politics, a favoritism toward big business and a devotion to free market principles that is positively Darwinian. 

Let’s take the home mortgage crisis. Nevada is one of the five states in which foreclosure is concentrated, the others being California, Michigan, Arizona, and Florida. One out of every 114 homes has entered into foreclosure. Yet, here is Romney’s take on the subject, courtesy of a local broadcaster in Nevada:
"The best thing we can do for home values in this country is to get people working again so they can afford to buy homes, so they can afford to come on vacations to places like Florida and Las Vegas and other spots."
Romney says he doesn't support President Obama's relief programs HAMP and HARP. Instead, he believes the housing market must bottom out to repair itself.
So it appears that Romney’s solution to the slump in the housing market is.. to do nothing. Let the market forces take care of the problem? For intelligent Nevada voters, Romney’s position leaves a lot to be desired in terms of presidential leadership. (And regardless whether Obama was 100% successful in his approach, doing nothing at all isn’t what we expect from leaders.)

Also, some voters may see any talk of buying homes and vacations as severely out of touch with the problems of losing your home and being cast out onto the street by bankers. The image that Romney is a product of inherited wealth, (pretending to be otherwise) and completely out of touch with the middle-class is one that Obama must drive home at every opportunity. We can be sure that Romney will assist. 

Romney’s view also pretty fairly represents what to expect from him if he were elected. Empathy will take a backseat to the free market approach. If families lose their homes, then this is how the unregulated capitalism system works. 
Besides, not everybody agrees with Romney’s diagnosis. According to a recent article in The Las Vegas Journal Review:
Most economists associate high foreclosure rates with high unemployment, but that is not the case in Nevada, said Sean O'Toole, chief executive officer of ForeclosureRadar.com.
"Clearly, unemployment is not helping the foreclosure crisis, but the foreclosure crisis -- especially in Nevada -- is about prices that were unsustainable and correcting and 70 percent negative equity," O'Toole said Thursday. "A lot of people talk about unemployment as what's driving foreclosures, but I think that's mostly driven by banks that don't want to admit stupid lending practices are the primary driver of foreclosures. We'll be clearing that mess up whether unemployment is high or low."
(The subject of exploitative banking practice will come up again in a moment.)
At any rate, unemployment is just one factor in the the foreclosure epidemic. Other reasons are a sluggish housing market and falling home values. What is Romney’s fix for that?


Here’s what he has said:
Are there things that you can do to encourage housing? One is, don’t try and stop the foreclosure process. Let it run its course and hit the bottom, allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up. The Obama Administration has slow-walked the foreclosure processes that have long existed, and as a result we still have a foreclosure overhang.”
So, the two solutions that Romney has offered the people of Nevada are “to do nothing” and “Let foreclosures run their course.” That’s it. Meanwhile families are losing their investment home and being thrown into the street? 
While Romney's kind of help is indeed practical (in a cut-throat sort of way), that’s not going to be very comforting message to voters. What Romney calls “slow-walking” is what the rest of the nation calls relief and assistance in crisis
Even one CNN host Ashleigh Banfield was shocked by some of Romney's remarks 
"[H]ow is it that anybody in Nevada, conservative or not, could connect with Mitt Romney when he says something about foreclosures to this effect? "I know Republicans and really strong conservatives like the free market economy, but I'm not so sure they like it when it applies to their home and they're underwater. How is this going to play in Nevada?"
The answer is: it will not play at all.

This Hard Line
No doubt this hard line view made him a fortune at Bain Capital
That company made its profits from the bottom line, cutting costs, and mercilessly reducing waste (extra workers, wage increases, and benefits). When all else failed, the vampire approach was applied: selling out, declaring insolvency after everything has been stripped. For a president who is charged with protecting the public’s interest and not merely the interests of industry, Romney doesn’t quite measure up to that task. Looking at it this way, his experience in business- that kind of business- is NOT a recommendation for the position of president.

It is that hardened attitude that provides the Obama campaign strategists with their greatest weapon. Romney has said he isn't worried about the poor in American because we have "safety nets." But later he talks about doing away with those safety nets when he spoke of eliminating programs to help families facing foreclosure, HAMP and HARP. For working families who were unable to make mortgage payments, President Obama’s relief program, Home Affordable Modification Program (HAMP), brought down those payment to roughly a third of their monthly income.

The other relief program, "Home Affordable Refinance Program'' (HARP), offered homeowners who were not behind on their monthly payments  a chance at refinancing when banks had refused to consider loans because of the fall in the home values. (On March 17, a improved version took effort called HARP 2.0 which worked out some of the kinks in the earlier version.)

According to one source, Tammerlin Drummond, writing for the Oakland Tribune, here is how the Bank of America responded to one applicant of the HARP 2.0 relief program:
As soon as I got wind of the new program, I hustled into Bank of America, my loan servicer, to find out whether I was eligible. A loan officer told me that I met all of the requirements...I was ready to sign right then and there. That is until BofA quoted a 5.25 percent interest rate -- a total ripoff. Current market rates for conventional refis were about 4 percent.
Under HARP 2.0 however, lenders automatically charge a .75 percent higher rate for LTV's greater than 125 percent -- which was my case. They can also ding you for bad credit and other things. Yet I had excellent credit and little debt. This was the best BofA could do?
This is how big banks are rewarding their good customers? By offering rates that are off the charts because they know underwater borrowers are a captive audience?
Mortgage services like BofA, JP Morgan Chase and Wells Fargo have been deluged with applications since HARP 2.0 started. According to American Banker, they are making a mint off the program. Some have suggested HARP 2.0 might be better named the bank assistance program.
I told BofA no thanks. Instead, I went with CMG Financial, a San Ramon company. The rate was still higher than for a conventional mortgage but better than BofA. I'm saving $300 per month. My broker... was extremely professional, and I closed in 30 days.
If you're shopping for a HARP 2.0 refi, you don't have to stick with your current lender. Do your research, call around and find the best deal.

Good advice. But then the question is why are banks allowed to run roughshod over consumers? On this point, the president’s policy on tightening controls on financial institutions makes a lot more sense than anything Romney has to offer. 

The consumer protections in the Dodd-Frank legislation signed into law by President Barack Obama on July 21, 2010 should, at least in principle, reduce such sharp practice by lending institutions. 

One feature of the the Dodd-Frank Act was the creation of a consumer watchdog agency called the Consumer Financial Protection Bureau (CFPB) and one of its duties is the ability to autonomously write rules for consumer protections governing all financial institutions – banks and non-banks – offering consumer financial services or products. 

Additionally, the Bureau offer further protections for consumers. With this Bureau on the lookout for bad deals and schemes, consumers won’t have to wait for Congress to pass a law to be protected from bad business practices. Finally, the CFPB creates a national consumer complaint hotline so consumers will have, for the first time, a single toll-free number to report problems with financial products and services. It is no wonder that lobbyist from big banks have been working so hard to water down re-establishing the regulator controls and protections in Dodd-Frank. 

Mitt Romney will no doubt play the familiar meme about Big Government. As a spin it has had a proven track record. It helped create the Tea Party revolt in 2010. However, since 2010, the notion that regulation kills jobs seems to have been wearing a bit thin. The flip side- that regulations, when thoughtfully-crafted, offer the only protection against unscrupulous money lending practices- must be the president’s response in order to win Nevada and other states with foreclosure problems. 
At least, as the Washington Post reported,
The CFPB has made it clear that they intend to crack down on abusive practices by mortgage servicers, among other non-bank firms in the financial underground. Its rules on that issue, like most others, are still forthcoming, so it’s still too early to reach many conclusions about the bureau’s direction.
If Romney had his way, all of those proposed protections would vanish when Dodd-Frank was repealed.

Romney’s Position on Dodd-Frank
It’s pretty clear how Romney feels about the legislation that was drafted to bring financial institutions under governmental oversight. Under Romney, Dodd-Frank would be eliminated totally and the nation would return to the same conditions that caused nearly caused the collapse of the international banking system.
"I'll get rid of Dodd-Frank, of course, we have to have regulation, it needs to be updated and modern, but the idea of frightening banks into making loans is a very bad course. We need to get the banking industry encouraging small business, entrepreneurship and development."

Allowing banks to charge their most desperate customers an unfair rate is not encouraging any thing but crooked business. Romney’s sympathy seems lie with the “frightened“ banking industry and not with the consumer and the voters. (We don't want to scare those poor bankers with those heavy regulations and multi-page documents, now do we?)

Repealing regulations is something that the Republicans have cheered since Reagan. It’s one of the only things that Romney seems definite about. So it is no wonder that the Koch Brothers- long time fighters of profit-stifling regulations- have thrown their support behind Mitt. Like raising taxes on the job creators, the deregulation rant ties into the the meme that deregulation is a job killer. 
The New York Times threw some icy cold water on that argument in an article last year:
“Dodd-Frank is adding safety margins to the banking system,” said Douglas J. Elliott, an economic studies fellow at the Brookings Institution. “That may mean somewhat fewer jobs in normal years, in exchange for the benefit of avoiding something like what we just went through in the financial crisis, which was an immense job killer.”
One astute blogger from Nevada noted that Romney was short on specifics when it came to why he dislike this financial regulatory reform legislation. (It seemed to have a lot to do with how many pages there were.)
It seems that Governor Romney’s position is clear, but not so clear:
“In July, Romney was unable to name specific parts of the bill that he liked or disliked. When asked, he said only, “It’s 2,000 pages. I’m sure there’s something in there that’s good…I’d be happy to take a look at it perhaps line by line at some point and lay out the provisions that I think are unfortunate.’’
Today, he was more specific. Romney said he believes it does make sense to regulate derivatives. He said it also makes sense to have different capital requirements if someone is holding a home mortgage compared to someone holding high-risk securities.Some features have to be addressed,” he said.”
“Some features have to be addressed?” What features? Which of the eleven parts of the Dodd Frank Act would Governor repeal? Which would he modify? Which would he retain? …
“… he said, the 2,000 pages of the bill are “overwhelming” for community banks and the fact that pages of rules must still be written creates too much uncertainty.” [BostonGlobe]
Perhaps we got a 2,000 page bill because the financial sector created a $7.1 TRILLION crash? Perhaps we got a 2,000 page bill because on September 29, 2008 the stock market plunged 788 points on the news that the House had failed to pass TARP legislation? [CNN] Thus wiping out $1.2 Trillion in market value in one day. Maybe we got a 2,000 page bill because three years after the crash the American middle class had lost 23% of their accumulated wealth? [Atlantic]
As the blogger points out, many of the provisions in the 2000-page document don’t apply to those poor confused community banks so they needn’t have worried themselves so.
If anybody needed any further proof that Romney, as president, would stand back and watch as another foreclosure crisis occurs, you can find it in this rather hackneyed quote:
"If you start having government starting to tax people so they can give money to people who need help in their homes, you'll just bring the market down, down, and down, and you'll never see an end to it."
There it is in a nutshell. You don't even have to put on your glasses to read between those lines. Don't look to government to bail you out. This is your mess. People do not matter. Markets and industries matter. Banks matter. 

One Interesting Point on Gambling

Admittedly it does take a lot of nerve to come to Nevada and campaign against gambling but that’s what Romney appears to have done. In one local newspaper, there’s this for the local news cast quoted above:
Romney also said he doesn't support legalizing online gaming. He's says he's against it because of the social costs and people's addictive gambling habits.
It’s a very eye-opening remark but like most things that Romney has said, it isn’t what it appears to be. Why? Because Romney’s objections to legalizing online gambling can easily be used for ALL gambling, whether online or not. 
The social costs and the addictive nature of gambling is certainly not restricted to the Internet. His reasons are solely on moral grounds and while that might be play well, in the Bible belt, in Nevada such moralizing could be another deciding factor in the November.
It is clear that the economy of Nevada draws a great deal from its gaming industry, regardless of the social costs. At the same time, Romney made those statements, Nevada Gaming Control Board officials announced that Nevada gambling revenues increased 5.7 percent in February to $932 million, a figure greeted by analysts as "solid progress." State gaming tax collections were up 69 percent in February. 

Obviously the gaming industry didn’t pick up on the full implications of that remark. There’s a very good reason why he doesn’t seem to have made any distinction between the moral hazards of gambling but only mentioning online gambling. He wants to have it both ways. 
 One of his failings is constantly trying to appear strong and attempting to please everybody. In this particular case, it cannot be done. 

Let me explain. Romney’s position on gambling fits into his Mormon background and is, if anything is, unlikely to change. (That's saying a lot when it comes to Mitt Romney.) 
According to the tenet of the faith of The Church of Jesus Christ of Latter-day Saints gambling, games of chance, and lotteries are condemned as moral evils and admonishes its members not to participate in them in any form.

Gambling is based on the morally wrong philosophy of getting something for nothing, of taking money without giving fair value in exchange. Not only is gambling morally wrong, the Mormon devout claim, but it is also bad economics for customers. Additionally, according to author Charles D Tate, Jr. and the Encyclopedia of Mormonism:
The lavish gambling centers around the world stand as ample evidence that the chances of winning are weighted heavily in favor of the establishment and against the bettor... There can be no question about the moral ramifications of gambling, including government-sponsored lotteries.
Therefore an interesting dynamic appears. The Guardian tells us that the Mormons played a large part in Romney’s victory in Nevada during the Republican caucuses.
Romney's vote was magnified by the large Mormon population in Nevada who turned out in large numbers to support their co-religionist. A survey of caucus-goers showed about 25% were Mormons.
Romney's support was magnified by the large Mormon population in Nevada who turned out in large numbers to support their co-religionist. A survey of caucus-goers showed about 25% were Mormons.
Whether he recognizes it or not, Romney finds himself trapped between the powerful  gaming industry and all the revenue that industry generates for the state against the Mormon support for its own candidate.   

Conclusion

According to recent poll conducted by Rasmussen, President Obama now has a 52 to 44 percent lead over Mitt Romney. While that’s a pretty strong advantage, very much depends on how the economy fares between now and election day. On that front, at least, there has been gradual improvement in recent months.
While it’s often risky to put too much faith in poll results, for what it’s worth, other polls are even more positive for Obama. Six months ago and for most of last year, Obama’s approval rating was unhappy news. 
Now, however, there’s been a steady improvement in the numbers. Public Policy Polling reports:
Over the last 5 months Obama's approval numbers have recovered, Romney's favorability numbers have taken a strong turn in the wrong direction, and Obama's opened up an 8 point lead in the state at 51-43.
Obama's 44/53 approval rating in the state has now flipped to positive territory at 50/46. Most notably what was a 42/53 breakdown with independents is now 55/40. He's seen smaller improvements with Democrats (from a 78% approval rating to 82%) and with Republicans (from a 6% approval to 12%).
Romney's net favorability meanwhile has dropped by 14 points to -13 with 38% of voters seeing him positively to 51% with a negative opinion. Part of his strength in Nevada had been an unusual number of Democrats seeing him favorably, but that crossover appeal has dropped from 27% to 18%. With independents his favorability is 36/54.
If the Nevada voting patterns from 2008 repeat themselves, Obama should be able to count on backing from women voters, Hispanic voters and voters under the age of 44. In the last presidential election, Obama drew unusually strong support in the state with those voters:
  • 59% of ballots cast by Nevada women
  • 62% of ballots cast by Nevada voters under age 44
  • 76% of ballots cast by Hispanic voters in Nevada

The problem is this is not 2008 and the president wasted too much of his credibility attempting to negotiate with Congress that was unwillingly to compromise and hell-bent on making him a one-term president. Therefore, Obama will need to convince those groups that changing horses in mid-stream will undermine the work in progress. (And if George W. Bush could do it, then surely there's no reason to be hopeless.) 

In each of those categories, Romney’s support is particularly weak. With the drafts of controversial laws regarding immigration and a variety of women’s issues, Republicans in the state legislatures have certainly not been much help to Romney on the national stage. The take-no-prisoners attitude among Republican leaders may play right into Obama’s hands by November.
All in all, the news from Nevada looks pretty positive for the president but politics is a fickle game and how the end results will turn out can never be 100% certain.
_________________

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