Friday, January 30, 2015

Supreme Court Moves to Undo Civil Rights Law ... Again

Go To Original

The U.S. Supreme Court has once again taken it upon itself to reconsider a landmark civil rights law. Under the Fair Housing Act of 1968 and subsequent legal precedents, individuals or institutions can be sued for racial segregation in housing even if they cannot prove that the segregation was intentional. But conservatives have long argued that segregation ought to be legal as long as it is not deliberate. Now, the court, under Chief Justice John Roberts, also seems to want to see it that way.

The case in question was brought by a nonprofit organization in Texas called the Inclusive Communities Project, which found that state-funded vouchers for affordable housing were being issued almost exclusively in black neighborhoods, ensuring that white suburbs were spared the presence of low-income residents. So ICP sued the Texas Department of Housing and Community Affairs saying it was a violation of the Fair Housing Act. Enter the Supreme Court.

It is clear that some justices feel that a reconsideration of the historic law is in order. Two earlier housing cases that the court wanted to take on were settled by lower courts. The Texas case is the third one in three years in which the court has expressed interest. In January, the court heard oral arguments, and while Justice Antonin Scalia, a stalwart conservative, appeared to ask some tough questions last week of the attorney representing Texas, the final ruling is still up in the air. A 5-4 vote in favor of Texas could end up devastating a law that has been in place for more than 40 years.

It should not surprise us that some justices want to end fair housing. In 2013, the Supreme Court eviscerated a key provision of the 1965 Voting Rights Act, allowing states to change their voting requirements without having to consult with the federal government. That ruling undermined a protection that had been hard-won by the civil rights movement. Immediately after the 2013 ruling, a number of states jumped at the chance to create obstacles to voting, particularly for poor people of color. The documented impact of the ruling on the November 2014 elections was found to be significant.

Housing discrimination has historically formed the basis of racial segregation in the United States, and sharp disparities still exist along color lines. The language of the Fair Housing Act is simple. It “prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status ... and disability.” What the Supreme Court is considering is whether that language can be used to sue on the basis of “disparate impact,” rather than actual intent. In other words, if the result of an institution’s actions appears racist, that does not mean it is racist. The U.S. has an ugly history of making such fallacious distinctions. In the 1960s, Southern states often administered complicated and confusing “literacy tests” to African-Americans who wanted to register to vote. The tests were designed for failure and enabled Southern officials to claim they were following the letter of the law because as long as blacks passed the test they were allowed to register. It didn’t matter if almost no one could pass the tests. It didn’t matter if there was a racist outcome as long as there was no proof of racist intention. But how does one prove a racist intention?

John A. Powell is a professor of law, African American studies, and ethnic studies, the Robert D. Haas Chancellor’s Chair in Equity and Inclusion, and the director of the Haas Institute for a Fair and Inclusive Society at UC Berkeley. His latest book is titled “Racing to Justice: Transforming Our Concepts of Self and Other to Build an Inclusive Society.” He also sits on the board of directors of the Inclusive Communities Project. In an interview Tuesday on “Uprising,” he told me that for the court “to suggest that a body of law that has been in place since the 1960s under fair housing is inappropriate, is really saying, ‘Let’s go back; let’s return to the good old days where we allow discrimination. ...We allow a society that’s highly regulated by race, as long as we can’t prove intent.’ ”

Powell cited the example of climate change: “How many people say, ‘I’m getting up today and I’m going to deliberately try to warm the planet?’ Whether we are trying to make the climate change ... is almost irrelevant. The question is, are we?”

Incidentally, under the current law, if an institution being sued under the Fair Housing Act can prove there is a good reason for disparate impact, it is not held accountable. For example, if a bank is shown to be offering higher cost loans to African-Americans and claims that such a pattern exists because African-Americans have lower credit scores, the existing law protects the bank (even if it shouldn’t). In fact the Fair Housing Act, as it is written, does not go far enough, given the ongoing racial segregation in housing nationwide. And still the Supreme Court is considering gutting this modest protection.

According to Powell, the current configuration of the U.S. Supreme Court seems to espouse an agenda to “curtail civil rights and expand corporate rights.” In fact, there seems to be a strong pattern of expanding the definition of what corporations are entitled to, including treating them as persons, which, as Powell pointed out, is not in the Constitution. At the same time, the court has been narrowing the definition of civil rights. “The court is on a very disturbing trend,” Powell said, “to try to turn back the clock to the early 1950s.”

The hubris of this court is astonishing. The Fair Housing Act was passed in 1968 by Congress and signed into law by President Lyndon B. Johnson. It was then expanded in 1988 under Republican President Ronald Reagan to include discrimination against people based on disability or familial status. The law has been used hundreds of times to undermine discrimination in housing. Why, then, should the court take it up? Liberal Justice Stephen Breyer asked the same question during the Fair Housing Act case last week: “Why should this court suddenly come in and reverse an important law which seems to have worked out in a way that is helpful to many people, [and] has not produced disaster?”

The judiciary is supposed to interpret law, not make it. Lawmaking is the job of Congress and the president. And yet, as the 2010 ruling in Citizens United v. FEC showed, the court can do away with laws put into place by democratically elected lawmakers simply because it wants to. In the Citizens United case—which is a classic example of the expansion of corporate rights that Powell referred to—the Supreme Court chose to intervene even though it was not asked to, just as it is doing in the case over fair housing.

If fair housing is decimated, the repercussions on other aspects of American society could be widely felt. For example, the already racially segregated public school system is likely to become even more divided. Kids go to school where they live, and if housing discrimination runs rampant, so will educational apartheid.

The maxim that conservatives often employ to celebrate war veterans—“they died for our freedoms”—literally holds true for the civil rights movement. Scores of Americans, black and white, struggled, risked their lives and died so we could have a set of laws that protect us from the worst aspects of institutional racism. The Supreme Court, in taking up the Fair Housing Act of 1968, is once again denigrating the memory of the civil rights movement and thumbing its nose at the brave warriors who fought with blood and tears for racial equality.

Birth Pangs Of The Coming Great Depression

Go To Original
The signs of the times are everywhere – all you have to do is open up your eyes and look at them.  When a pregnant woman first goes into labor, the birth pangs are usually fairly moderate and are not that close together.  But as the time for delivery approaches, they become much more frequent and much more intense.  Economically, what we are experiencing right now are birth pangs of the coming Great Depression.  As we get closer to the crisis that is looming on the horizon, they will become even more powerful.  This week, we learned that the Baltic Dry Index has fallen to the lowest level that we have seenin 29 years.  The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis.  In addition, “Dr. Copper” and other industrial commodities continue to plunge.  This almost always happens before we enter an economic downturn.  Meanwhile, as I mentioned the other day, orders for durable goods are declining.  This is also a traditional indicator that a recession is approaching.  The warning signs are there – we just have to be open to what they are telling us.
And of course there are so many more parallels between past economic downturns and what is happening right now.
For example, volatility has returned to the markets in a big way.  On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points.
This is precisely how markets behave just before they crash.  When markets are calm, they tend to go up.  When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.
At the same time, almost every major global currency is imploding.  For much more on this, see the amazing charts in this article.
In particular, I am greatly concerned about the collapse of the euro.  The Swiss would not have decoupled their currency from the euro if it was healthy.  And political events in Greece are certainly not going to help things either.  Economic conditions across Europe just continue to get worse, and the future of the eurozone itself is very much in doubt at this point.  And if the eurozone does break up, a European economic depression is almost virtually assured – at least in the short term.
And I haven’t even mentioned the oil crash yet.
There is only one other time in all of history when the price of oil collapsed by more than 60 dollars, and that was just prior to the horrific financial crisis of 2008.
Since the last financial crisis, the oil industry has been a huge source for job growth in this country.  The following is an excerpt from a recent CNN article
The oil sector has added over a half million jobs — many of them high paying — since the recession ended in June 2009. That’s 13% of all US job growth over that period.
Now energy companies and related sectors are laying off thousands. Expect that trend to continue, bears say.
But losing good jobs is just the tip of the iceberg of this oil crisis.
At this point, the price of oil has already dropped to a catastrophically low level.  The longer it stays at this level, the more damage that it is going to do.  If the price of oil stays at this level for all of 2015, we are going to have a complete and total financial nightmare on our hands
For the first time in 18 years, oil exporters are pulling liquidity out of world markets rather than putting money in. The world is now fast approaching a world reserve currency shift. If we see 8 to 12 months at these oil prices; U.S. shale industry will be wiped out. The effect on junk bonds will cascade to the rest of the stock market and U.S. economy.
…and this time there will be nothing left to catch the falling knife before it hits the American economy right in the heart. Not the FED nor the U.S. government can stop what’s coming. Liquidity will freeze up, our credit will be downgraded, the stock market will start to collapse, and then we can expect the FED to come in and hyper-inflate the dollar. This will cause the world to finish abandoning the world reserve currency in the last rungs of trade. This will be the end of the petrodollar.
Something that I have not discussed so far this year is the looming crisis in emerging market debt.
As economic problems spread around the world, a number of “emerging markets” are in danger of having their debt downgraded.  And many investment funds have rules that prohibit them from holding any debt that is not “investment grade”.  Therefore, we could potentially see some of these giant funds dumping massive amounts of emerging market debt if downgrades happen.
This is a really big deal.  As a Business Insider article recently detailed, we could be talking about hundreds of billions of dollars…
Russia this week became the first of the major economies to lose its investment grade status from Standard & Poor’s, falling out off the top ratings category for credits deemed to have a low risk of default for the first time in a decade.
If Moody’s and Fitch follow, conservative investors barred from owning junk securities must sell their holdings. JPMorgan estimates this means they may ditch $6 billion in Russian government rouble and dollar debt.
Russia may have company. Almost $260 billion worth of sovereign and corporate bonds – nearly a tenth of outstanding emerging market (EM) debt – is in danger of being relegated to junk, according to David Spegel, head of emerging debt at BNP Paribas, who calls such credits “falling angels”.
And no article of this nature would be complete without mentioning derivatives.
I could not possibly overemphasize the danger that the 700 trillion dollar derivatives bubble poses to the global financial system.
As we enter the coming Great Depression, derivatives are going to play a starring role.  Wall Street has been pumped full of funny money by global central banks, and our financial markets have been transformed into the greatest casino in the history of the world.  When this house of cards comes crashing down, and it will, it is going to be a financial disaster unlike anything that the planet has ever seen.
And yes, global central banks are very much responsible for setting the stage for what we are about to experience.
I really like the way that David Stockman put it the other day…
The global financial system is literally booby-trapped with accidents waiting to happen owing to six consecutive years of massive money printing by nearly every central bank in the world.
Over that span, the collective balance sheet of the major central banks has soared by nearly $11 trillion, meaning that honest price discovery has been virtually destroyed. This massive “bid” for existing financial assets based on credit confected from thin air drove long-term bond yields to rock bottom levels not seen in 600 years since the Black Plague; and pinned money market costs at zero—-for 73 months running.
What is the consequence of this drastic financial repression along the entire yield curve? The answer is bond prices which keep rising regardless of credit risk, inflation or taxes; and rampant carry trade speculation that can’t get out of its own way because  central banks have made the financial gamblers’ cost of goods—the “funding” cost of their trades—-essentially zero.
Of course I am not the only one warning that a new Great Depression is coming.  For instance, just consider what British hedge fund manager Crispin Odey is saying…
British hedge fund manager Crispin Odey thinks we’ve entered an economic downturn that is “likely to be remembered in a hundred years,” and central banks won’t be able to stop it.
In his Odey Asset Management investor letter dated Dec. 31, Odey writes that the shorting opportunity “looks as great as it was in 07/09.”
“My point is that we used all our monetary firepower to avoid the first downturn in 2007-09,” he writes, “so we are really at a dangerous point to try to counter the effects of a slowing China, falling commodities and EM incomes, and the ultimate First World Effects. This is the heart of the message. If economic activity far from picks up, but falters, then there will be a painful round of debt default.”
Even though most average citizens are completely oblivious to what is happening, many among the elite are heeding the warning signs and are feverishly getting prepared.  As Robert Johnson told a stunned audience at the World Economic Forum the other day, they are “buying airstrips and farms in places like New Zealand“.  They can see the horrifying storm forming on the horizon and they are preparing to get out while the getting is good.
It can be very frustrating to write about economics, because things in the financial world can take an extended period of time to play out.  Sadly, most people these days have extremely short attention spans.  We live in a world of iPhones, iPads, YouTube videos, Facebook updates and 48 hour news cycles.  People no longer are accustomed to thinking in long-term time frames, and if something does not happen right away we tend to get bored with it.
But the economic world is not like a game of “Angry Birds”.  Rather, it is very much like a game of chess.
And unfortunately for us, checkmate is right around the corner.