We Are Out of Money, California Edition

Here's an L.A. Times op-ed by David Crane, an advisor to California Gov. Arnold Schwarzenegger:

The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That's the finding from a study released Monday by Stanford University's public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

To put that number in perspective, it's almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.

Why should Californians care? Because this year's unfunded pension liability is next year's budget cut to important programs. For a glimpse of California's budgetary future, look no further than the $5.5 billion diverted this year from higher education, transit, parks and other programs in order to pay just a tiny bit toward current unfunded pension and healthcare promises. That figure is set to triple within 10 years and -- absent reform -- to continue to grow, crowding out funding for many programs vital to the overwhelming majority of Californians.

How did we get here? The answer is simple: For decades -- and without voter consent -- state leaders have been issuing billions of dollars of debt in the form of unfunded pension and healthcare promises, then gaming accounting rules in order to understate the size of those promises. […]

Instead of a government of the people, by the people and for the people, we have become a government of its employees, by its employees and for its employees.

That Stanford study is here [pdf]. And yes, we have been telling you so.

The Reason Foundation, which is the 501(c)(3) nonprofit (donate today!) that pays for Reason-branded journalism, also produces some boffo nuts-and-bolts public policy research and recommendations. Last week the Foundation released a roadmap for "The Next California Budget" (press release here, pdf study here), along with a plan (release here, study here) on how to save a ton of money on the union-mangled sinkhole that is the state's corrections system. There are concrete ways out of this politician-created mess, but it's going to take a category of public servant whose first response to fiscal crisis is *not* "Let's close the parks!"

Comments

[Name Withheld]

My company is taking a writedown do to the passage of ObamaCare. The result? Forced layoffs.

Thank you federal government.

[They were culling the heard]

If you were needed, they would have kept you.

[Name Withheld]

They did. My concern is for the ones they didn't keep.

I just think it's wrong that the solution to thirty million unisured Americans is massive layoffs all across America.

[wylie]

Sure, they'll be unemployed but at least they'll have healthcareinsurance.

[ATL]

Well you will have waiting list really, but don't worry they will get to after their pay raise!

[R C Dean]

If you were needed, they would have kept you.

Meh. Business isn't about need, its about financial benefit.

ObamaCare changes the cost structure of a business. Employees that previously provided a marginal benefit now show a marginal cost. Ergo, they're gone.

[They were culling the heard]

Do you own a business?

[cynical]

Do you own a dictionary?

[ATL]

Do you own a thesarus? Mine's broken. 😉

[Punmeister]

Aren't Thesaurus' extinct?

[Parker]

What's another word for Thesaurus?

[JoeG]

Synonymicon! (ok, I made that up - but isn't it awesome?)

Some actual synonyms for thesaurus are:
"wordbook", or "wordfinder".

[TMLutas]

Lifeboat economics is always ugly. Nobody likes it. Employees are rightfully mad at the circumstances that forced the company into that situation, to wit, the passage of Obamacare.

The first casualty of lifeboat economics is any sort of expansion, new product development, or service improvement that might have been in the pipeline. The people that were needed for those functions but not essential for the company to avoid bankruptcy get laid off. Your dismissal of these people is not just unfeeling and cruel but is an apologia for those politicians like President Obama that have derailed those growth plans.

[truth be told]

"Your dismissal of these people is not just unfeeling and cruel but is an apologia for those politicians like President Obama that have derailed those growth plans." The reality is job losses occur during market crashes, gasoline shortages, and general economic slowdowns. Businesses take advantage of these situations to get rid of the dead weight. It is not related to whomever is in power, nor as a result of avoiding bankruptcy. It is a known practice and I am neither cruel, nor unfeeling. Reality is a cruel mistress.

[missing link]

truth be told, maybe not unfeeling but perhaps retarded then?

"it is not related to who is in power" - nonsense by extension it sure as hell is the policies of those in power. There is not a single business person in Obama's inner circle. That speaks spades as to why this recession will drag-on and why companies continue to let works go.

[You're]

missing the link alright. My post does not concern politics. It is about business strategy/just cause for firing. Obama does not have his dick in this at all.

[?]

To put that number in perspective, it's almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.

Yeah, that's a vivid mental picture.

How 'bout "That's a decent half-hour in the back room at Chilli Willie's in Lubbock for every man, woman, and child on Earth."

[Ken Shultz]

"The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported."

Having to work to pay for $500 billion worth of somebody else's union benefits shouldn't bother you.

...if you're an idiot who thinks California's problems have something to do with immigration.

[Lonewacker]

Did I hear a whistle?

[Paul]

Pshaw, California's solution is immigration. If California's private sector work force shrinks any further, the Ponzi scheme will collapse. The only solution is to start trucking in people. Against their will if we have to.

[Episiarch]

If you get the feds to bail you out, and therefore force me to help pay for your shit, Californians, I will forgo my libertarian principles of non-initiation of violence. It's war at that point.

[x,y]

No need to forgo your principles. Everyone down the line is responsible. California politicians and bureaucrats who voted for unsustainable programs and federal p&bs; who implementing and enforced various tax and borrowing regimes. All have agressed against you (if that's even the right way to say it), and you're well within your right to finally say "no."

[x,y]

For f*** sake, preview. "federal p&bs; who implemented and ..."

[x,y]

OK, triple post. At least I know the semicolon wasn't intentional. Must be some html code I don't know.

[Hazel Meade]

The Feds will bail everyone out indirectly.

Currency Devaluation.

You know it's inevitable.

[sage]

There's another possibility: the VAT. One of Obama's budget people spoke of it recently.

Just think: even greater shares of our wealth being taken to increase the wealth of the entitlement class. War? Ugly will be an understatement.

[Gilbert Martin]

Yeah Paul Volkcer has been mouthing about that.

The mindset of these guys is just amazing. The problem is massive spending and the existence of entitlement programs that are structurally unsustainable (not to mention immoral and unconstitutional).

So the solution is always to do nothing about that and just keep on raising taxes.

[Public Sector]

And yet one more possibility. Come to the dark side... Libertarians... I AM YOUR FATHER!

[BrianPat]

I prefer to maintain my dignity thank you 😉

Excluding Police and Firemen ! They deserve great pay and benefits since they put their lives on the line for our sake every day.

I would exempt teachers, but considering the sad shape of public schools and the demands teacher unions make(RI) I have no respect anymore for teachers, it's not a respected profession anymore, mostly just a place for people who can't make it in the real work force to hang out together !

[Squid]

With due respect to firemen, they're getting paid a professional wage for what's really semi-skilled labor. They sit around a fire hall for 24 hours at a time, cooking in their commercial-grade kitchens and watching movies or sports on plasma big-screens. Sometimes, they go fight fires.

The 20 days a month that they're not at the fire hall, they're off fishing or earning extra income. Then they retire at age 50 with a lavish pension, and spend even more time fishing or making extra income.

Where I grew up, firemen were volunteers, and the fire hall was barely a step up from a church fellowship hall. They were regular members of the community who banded together for the common good. They were a hell of a lot closer to Tocqueville's experience than today's big-city union firefighters could ever be.

I appreciate the bravery and sense of sacrifice of today's professional firefighters, but it doesn't mean I'll overlook the shameless extortion their collective bargaining units engage in.

[Logic 101]

Wouldn't the problem be the union, as opposed to the men running into the burning buildings that you run out of?

[TMLutas]

Sorry, nobody should be exempt from review and cuts of the least important/least efficient parts of the job. In Gary Indiana they have separate maintenance divisions that fix police cars and fire trucks. Since there isn't enough work to go around, all the maintenance divisions (including the general fleet maintenance division and the sanitation maintenance division) have low utilization. You could consolidate all of them into one vehicle fix it force, save money, and incidentally cut the fire and police budget.

Would you really shed a tear over this sort of police and fire cuts?

[rondawg]

No exemption for police and fire - there are too many of them and their benefits are not equal to the private sector. Why should I have to be responsible to pay for a Highway Patrolman at over $100K per year and then he gets to retire at 55 at full salary and benefits (the disability scam). No - I won't put up for that and will move after I made my California money to a red state with low taxes. Screw the lazy police and fireman - it's not like they actually enforce the law anyways (e.g. immigration laws).

[Vance]

Police are #13 on the list of jobs that have the highest risk of death or severe injury. Firemen are #17.
They are being grossly overpaid based on a myth.

[PapayaSF]

I wouldn't be surprised if they already get paid more in salaries and benefits than whoever is #1-12 on that list.

[rondawg]

Total BS - highest risk of death - really how many die in a year? Compared to truck drivers so we should pay them for life? Horse pucky.

How come in other countries the fireman or volunteers or they don't have firemen at all?

Police and firemen are grossly overpaid with unrestricted overtime at will. Who do you think you are kidding? Firemen don't even have a full time job (unlike the police). The real argument you should be making is that no one want to do the police job (unless you a closet facist or control freak), therefore we need these people.

Another thing - look at the education of policemen compared to the general public - are they really entitled to that type of pay, benefit and such?

[Draco]

Devalue the currency, and you simply get unions demanding cost of living adjustments. And if you have the political will to resist that, you should have the political will to impose the necessary cuts in the first place.

[Logic 101]

Unions were supposed to exist to get workers a fair share of profits. Since the public sector supposedly has no profits, isn't the phrase public employee union an oxymoron??

[Draco]

The American taxpayers (and the state and city taxpayers) have essentially been indentured to act as a permanent "serf" class, working to support the comfortable retirements and health benefits of the over-class: the teachers and government bureaucrats. Oh, and the serfs don't have defined benefit retirement plans -- their own futures are at risk as the market rises and falls. But the over-class is secure, riding on the backs of the taxpayers.

I'm with Episiarch. This cannot stand.

[Ron L]

"There are concrete ways out of this politician-created mess, but it's going to take a category of public servant whose first response to fiscal crisis is *not* "Let's close the parks!""

This presumes there are public servants actually care about something other than their own immediate welfare.
I'm sure there are one or two, but this is the libertarian fantasy analogous to the left's hope for the New Soviet Man.

[R C Dean]

My prediction is that politicians will do what they always do - kick the can down the road.

In this case, it means rolling up all those liabilities (likely including private union pensions if the Dems hold the House) to the federal government, as it will be the last to collapse financially.

While this will postpone the financial collapse, it will also make it worse when it comes.

Nothing enrages me more than the knowledge that I will be working and paying ever-higher taxes so government employees my age can enjoy their comfortable retirements and double-dipping deals. I suspect I am not alone.

[sage]

If the revolution gets violent, my guess is that many of those folks will be deprived of their belongings. Even in a police state not all pube-sec leeches can be protected all the time.

[Public Sector]

We don't want you to just resign yourself to your fate, we want you to embrace it... to love it... to beg for it.

[Michael Ejercito]

If the revolution gets violent, my guess is that many of those folks will be deprived of their belongings.

Not before journalists are.

Journalists are traitors to America.

[Citizen Nothing]

Bring it on.

[cynical]

Journalists are being deprived of their jobs for failing hard at them. Until the feds actually convert them to true public servants through a bailout, that should be sufficient punishment.

[iowahawk]

1. Finally fed up, productive businesses in California will speed up their exodus to Oregon, Nevada, Arizona and Texas.

2. With each exodus, surviving California business face an ever-increasing concentration of tax burden, intensifying the incentive to abandon the state.

3. Some employees of these companies will choose to relocate, bringing with them demands for the California-level government idiocy to which they are accustomed (see, e.g., Austin TX).

4. The employees that do not choose to relocated will remain in California, unemployed, using their new found spare time to demand expanded state welfare benefits, social services, and government jobs.

5. This will further increase the political power of California's parasite class, who will insure the election of more insane spenders to Sacramento.

6. Finally dug into too deep a financial hole, the state will demand a bailout from the federal government, who will cheerfully comply.

7. This will quickly open the door to further bailouts of other financially profligate states (Illinois, New York, Wisconsin, et al.).

8. Residents of financially solvent states who get the bill will begin demanding equally idiotic spending by their own legislatures to avoid being suckered again.

We are truly, truly fucked.

[George B]

I disagree that steps 6, 7, 8, and bend over are inevitable. I think we can replace enough politicians to slow down the madness by 2011 and start reversing it by 2013. If not, my home state of Texas will probably refuse to start an income tax to fund expanded medicaid coverage. If the huge unfunded mandate of ObamaCare doesn't get rolled back, it's secession time. Unsustainable spending will eventually stop one way or another and not everyone plans to ride the ship of state all the way to the crash.

[John Galt]

Secession has been tried before. It ended badly.

OTOH...Texas can separate into 5 States....but there isn't anything in the agreement detailing when they ahve to re-apply for admission tot he Union. Perhaps we can make El Paso the rump "Texas" while the rest of us get around to re-joining the Union in, say, 500 years.

[cynical]

"Secession has been tried before. It ended badly."

But there won't be a major social evil to rally the rubes around, unless you think pension plans for overpaid bureaucrats is going to sell like abolition.

There's also the question of whether the states that secede will be capable of taking control of any nukes on their territory. This ain't the 19th century anymore.

[rondawg]

Secession ended badly because of slavery. If a state tried to union now I can almost guarantee there would not be a war over it.

[Jeffersonian]

That pretty much the scenario, in a nutshell.

[DADIODADDY]

I don't mind getting fucked, if there's dinner & a movie...

[I bet]

you don't mind skipping the dinner & a movie.;-)

[kinnath]

It is time to expell CA from the Union. There is no other way to protect the rest of us.

[Paul]

to continue to grow, crowding out funding for many programs vital to the overwhelming majority of Californians.

Interesting language you use here, Matt. As the public sector grows ever larger, eventually, an overwhelming majority of Californians will consider their pension the single "vital" program.

You do see that's where all Western Governments are going.

We're not going to go socialist because of some sinister plan within the Obama administration, we're going to go socialist because in the end, it'll be the only game in town.

[Corrections Dept.]

Interesting language you use here, Matt Mr. Crane.

[INVA$ION USA]

And the INVA$ION continues... http://www.BorderInvasionPics.com

[Andy Freeman]

Note that CA's retired public employees tend to leave the state, so they don't pay CA income tax on their pensions.

[Taxed to Death in CA]

I would love to see Reason publish a story on CA pensioners leaving upon retirement. It's only going to get worse, and this growing trend needs more media coverage.

[Kyle Beckley]

Attorney General Candidate John Eastman is proposing a lawsuit to block the back pensions. He has brought suit in Orange County to do the same. By doing so, he seems to be the only candidate for California office who has recognized the problem and proposed a partial solution.

[M. Report]

When I hired on at Hughes Aircraft,
the salary structure was defined as:
Those who do the work get the pay.

The States which are working will not
bankrupt themselves paying for those
that are not; when the shears go from
wool to flesh, even sheep will kick,
and the citizens of the working states
are a pack, not a herd.

[noahp]

Richter 9.0 schadenfreude when CA defaults followed by Richter 10.0 anger when Obama bails them out with the TARP slush fund.

[Mike H.]

Can we call this Pearl Harbor II?

[Fen]

"For decades -- and without voter consent -- state leaders have been issuing billions of dollars of debt in the form of unfunded pension and healthcare promises, then gaming accounting rules in order to understate the size of those promises"

RICO the lot of them.

[Vance]

There are solutions, but none will be put into effect even as the economy collapses (see: Greece). The state will keep on keeping on until the bank accounts are empty and they all stand around slack-jawed.
Good joke about the parks. Whenever they whine about a budget crisis, they always threaten to cut things like parks, police, firemen, and teachers (as if you could fire a single teacher in CA). They never talk about cutting multi-million-dollar programs to study the sex life of sea lions or demographic studies of depression in GLBT children or defunding the Department of French Medieval Literature at the state colleges. Remember when the Repubs "shut down" the federal government years ago? The first thing they Dems did was close the national parks (it was labor day weekend). When that didn't work they said they couldn't afford the postage to mail out SSI checks.
How to solve the CA pension crisis:
1. Declare bankruptcy and renegotiate.
2. Inform the recipients that they have been the victim of a Bernie Madoff-like Ponzi scheme and they are sh*t out of luck. Take it up with the people that sold it to you--the unions. Like Madoff's victims, don't expect much money back.

[Fred Z]

What's with all the quacking? Surely you knew this was necessarily your fate?

Unfettered democracy cannot stand. The plebs learn they can vote for bread and circuses and they would be mad not to, so they do.

The republic doomed itself when it allowed the vote to those who pay no taxes or who receive government money in greater amount than they pay taxes.

[Jobless in Georgetown]

So simple, so true, so depressing.

[Dan H.]

The next stage of this mess has already started - California is experiencing a huge brain drain as the best and brightest pick up and move elsewhere. This will make it even harder to balance the state's books. And if they try to solve their fiscal crisis by raising taxes, the brain drain will accelerate.

If Obama bails out California and puts another 500 billion liability on the backs of Americans along with all the other new liabilities, the brain drain will simply go nationwide.

The obvious winner here is Canada. When Canada had the big, intrusive government and the U.S. had the smaller government with lower taxes, Canada lost a lot of its people capital to the U.S. as the most successful moved South where the opportunities were greater and the taxes lower. That flow stopped when Canada fixed its budgetary problems and lowered its debt and deficit. Now the U.S. is going the way of Canada in the 1960's, and you're going to pay the price for it.

The economics seem clear enough - if as an American your children are born with $100,000 in liabilities already assigned to them, and your taxes are increasing annually to cover your ever-increasing shortfall in Medicare and Medicaid, it will become very enticing to move across the border and shed all the liability on your family. Canada now has a smaller government than the U.S. and lower taxes. Businesses aren't regulated as heavily, and we have no inheritance tax. Federal business tax will be lowered to 12.5% by 2012. Our pension system is fully funded, our deficit is small and our debt much smaller than yours. The actions of U.S. politicians (and the inaction of Canadian politicians perpetually mired in minority governments that can't do much) has caused this shift in statism from Canada to the U.S.

There will be a lot of Americans looking carefully at Canada in the next decade if this goes on.

[Seerak]

Many will consider it, but not a lot will go. In case you have forgotten, as recently demonstrated, Canada's grip on freedom of speech is a tad more slippery than it is down here.

Good luck trying to use a firearm in self-defense up there.

As for medical care, Canadians are coming *here* when they need the high end. What do you think is going to happen to health care up there when Obamacare wrecks what's left of private medical industry down here?

Even the states' rights idiots should pause, as Canada is much more centralized at the basic level. You don't hear about "provincial rights" up there, for a reason.

Canada only looks better because it isn't moving as fast as the US right now. It sure as hell hasn't reversed direction or anything like that.

[rondawg]

Hello - how can you go to Canada and evade the eye of the IRS. Do you know the hoops you have to go through not to pay taxes to the IRS? You have to denouce your citizenship, be a citizen of another country (probably takes 10 years) and then get a waiver from the IRS. GOOD LUCK WITH THAT.

[daniel]

simple solution.
California goes bankrupt; this means all of its contractual obligations cannot be enforced and can be renegotiated. Renegotiation reduces all government salaries and pensions by a factor of 2.
California now solvent.
end of crisis.

[Matt]

The consensus on this website seems to be that govt. employees are the cause of problems. Now that business has busted the unions, and downsized their employees' benefits and pay, supersized their top management's pay, and outsourced everything they can, govt. employees are the only non-management employees with decent pay and benefits.
Now they have to be reduced to the same low level in the interest of fairness?

[John Galt]

I like the way you think. Definitely.

[To Hayek With You]

Yes, they do have to be reduced because they get their money by using the government's monopoly on force to steal for their benefit. The rest of us who actually produce things that people want and are willing to pay for aren't going to support the government workers who do nothing but gum up the gears of commerce forever. Government employees are like the barnacles that cling to the bottom of a boat... get enough of them and eventually they all have to be scraped off before you can make any forward progress.

[Vance]

I'll assume you're not joking.
The answer is "yes." I'd like to give my wife a million dollars for her birthday. But I don't have a million dollars, no matter how much she wants it and that I promised it to her. So she'll get what I can afford.
It's kind of simple, really. (And I might add that businesses don't exist for the purpose of providing people with jobs.)

[TheOldMan]

We could sweeten the pot by reducing or increasing payments
based on recidivism rates. On the other hand, we could just disenfranchise
anyone who belongs to a public sector union as a condition of employment.

[Milo]

Great Post! and, even better comments.
I received this from a friend even older and more tired than me. The author is unknown. It seems to ask the right questions.

"The danger to America is not Barack Obama but a citizenry capable of
entrusting a man like him with the presidency. It will be easier to limit
and undo the follies of an Obama presidency than to restore the necessary
common sense and good judgment to an electorate willing to have such a man
for their president.

The problem is much deeper and far more serious than Mr. Obama, who is a
mere symptom of what ails us. Blaming the prince of fools should not blind
anyone to the vast confederacy of fools who made him their prince.

The republic can survive a Barack Obama. It is less likely to survive a
multitude of fools such as those who made him their president."

Depresses me all to hell.

[Michael Ejercito]

The problem is much deeper and far more serious than Mr. Obama, who is a
mere symptom of what ails us. Blaming the prince of fools should not blind
anyone to the vast confederacy of fools who made him their prince.

Our fifth columnist media hid the truth.

Remember that at least one media outlet was willing to use forged documents on a hit piece against the President of the United States.

[Jobless in Georgetown]

I agree. The media did not vet BO a fifth as much as they did Sarah Palin. Anyone who had no interest in right-leaning blogs or who didn't watch cable news channels had no way of knowing what a flip-flopping, unexperienced shell of a man he was/is.

[Thomas Casey]

Precisely. In anything like normal times, Obama would be the village wierdo and pitied/ignored. In my small town we have a drug-addled "artist" who has walked around here in a daze for fifteen years that I know of. If he has ever done an honest days' work no one has ever seen it... Bread and circuses anyone?

DeToqueville was all too prescient.

[M. Report]

Leaders, followers, and fools 🙂
The proportions of each in the
population will determine the
outcome; Look around, and if
you do not like what you see,
go somewhere else, soon.

[SukieTawdry]

California's public sector unions came into being with a stroke of the executive pen (Jerry Brown's). Can't they go out the same way?

[three chord sloth]

Well, don't get too pessimistic. There is some room for hope. If my state, NJ, can elect a guy like Chris Christy then anything is possible.

He is actually doing what he promised. He is cutting spending and not raising taxes, he is going after civil service unions and their golden pensions and bennies, and he is actually making headway.

I had a conversation recently with a state-level politically connected friend that opened my eyes. He said his boss, a north Jersey Dem is actually relieved that these changes are happening. He was tired of being "owned" by the government unions, and was tired of watching as friends and family were forced from the state by taxes as soon as they retired.

If he is any indication, more people than you might think have figured it out... the current system is unsustainable, and they just need political cover (a designated "bad guy") to pin the blame on as they go along with many of the needed fixes.

[motionview]

You'll know someone is doing what needs to be done when there are massive public employee strikes. And then the question will be, does the state break the unions or do the unions break the state(more)?

[TerribleTom]

Great comments people. No sense reiterating what you've all already discussed. Here's a perspective that people seldom talk about...redistribution of wealth on a national level. The Fed decided long ago that the strength of the country can be defined by it's weakest state. We all know there are states out there that would be in poor shape if it had to financially stand on their own. In steps cash cow states who contribute Fed Income Tax to be redistributed to piss poor states to prop them up and give them the same standard of living as everyone else. Does that not make you sick?! However, would we be happy as a nation to see a state like Kentucky be living in a 3rd world status while Illinois lived in utter opulence with the money generated by Chicago? I think we'd be just as outraged. So where's the common ground? Is there common ground? Should our states stand on their own feet, or die under it's own weight? Or do we have an obligation to every state in the union to keep it afloat? Step in California. A state that should be able to stand on it's own AND generate wealth to be redistributed amongst the other states. What do we do when a cash cow state is bankrupt? Do we go to the other cash cow states and bleed them for CA's financial sins or let them implode as a lesson? Tough questions, but something to think about. We're capitalists living in a government run macro scale socialist system. The Fed is operating as a socialist power redistributing the wealth of not only citizens but the states it's been entrusted to protect. The Fed was supposed to protect capitalism, not bleed it. And before you anti-capitalists charge in keep this in mind...the % of free market capitalists that are corrupt is NOWHERE near the % of politicians that are corrupt in this country. So to say we're safer with the Fed controlling capitalism is completely moronic.

[oke e doke]

as johnny cash used to sing

WE'RE BUSTED

[jmb27]

Predatory Lending is a major contributor to the economic turmoil we are currently experiencing.

Here is an example of what I am talking about:
Scott Veerkamp / Predatory Lending (Franklin Township School Board Member.)

Please review this information from U.S. Senator Jeff Merkley regarding deceptive lending practices:
"Steering payments were made to brokers who enticed unsuspecting homeowners into deceptive and expensive mortgages. These secret bonus payments, often called Yield Spread Premiums, turned home mortgages into a SCAM."

The Center for Responsible Lending says YSP "steals equity from struggling families."
1. Scott collected nearly $10,000 on two separate mortgages using YSP and junk fees. 2. This is an average of $5,000 per loan. 3. The median value of the properties was $135,000. 4. Clearly, this type of lending represents a major ripoff for consumers.

http://merkley.senate.gov/news.....925F046B6F

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