Agreement reached to raise the debt ceiling

Republican and Democratic leaders have agreed on a plan to raise the debt ceiling.

The announcement arrives after months of intense closed-door negotiations, and just two days before the deadline set by the Treasury Department.

The agreement would slow the growth of government spending over the next decade by $2-$3 trillion and allow enough borrowing to put off another vote to raise the ceiling to 2013. About $1 trillion will be cut immediately, and the details of the remaining spending reductions will be handled by a bipartisan committee of 12 lawmakers from both chambers, who will recommend cuts for Congress to vote on. To appease the GOP's conservative wing, the deal would also require a vote in both chambers on an amendment to the Constitution requiring the federal government to balance its budget each year.

Jobless Claims Dropped Last Week

Lets go all in, if we can get in

Economists say that by early 2006, we (the American Middle Class) started losing big. Here we thought we were on a roll. We got suckered into thinking we had the game beat and borrowed to the max. Where'd we get the money? Well, about 90% of our life savings was in our homes, so from 2003 to 2007, we took $2.3 trillion out through refinancing and equity loans and spent about $1.3 trillion of it just on stuff.

How's the game going now? Well, in terms of income, we've been falling behind for decades. So far we're told we've taken losses to the tune of 55% of the value of our homes. How much is that? In this game, the Federal Reserve keeps the books and they say $7.38 trillion of our wealth is now gone. Most of us didn't have much wealth to begin with — on average about $100,000. Now it's a much lower number, and we're debating whether it can still be called "wealth" at all?

Most of the middle class still want to play, but an unusually large number of us have been kicked out of the game altogether. The "unemployed" now amounts to over 9% of the total labor force. That's the number the government tells us anyway. There are also quite a few though that have given up and quit trying.  When they do that, the government won't even consider counting them in the stats. If you're not a player, or you've quit trying to be a player, it appears you become nobody.

In the movie "Wallstreet," Gordon Gecko said "It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another." For a long time now, that transfer of money has gone to the perception of the already rich and their stand-in corporations.

With the upper classes prospering and global markets booming, they don't need the U.S. middle class to play any more. If we do get in the game for another hand, what say we go all in. Heck, it's too late to play it close to the vest if we've already lost our shirt.

Obama helps a few more out-of-work homeowners

On Aug. 1, the FHA will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months. That will allow qualified homeowners to go without making a monthly payment for 12 months before the foreclosure process begins.

The extended grace period only applies to FHA-backed loans, which are usually given to low- and middle-income borrowers and represent about 14 percent of all active mortgages and roughly 25 percent of new mortgages.

Last year, roughly 17,000 homeowners received a government-supported delay on their mortgage payments. About 3,500 borrowers with FHA-insured loans fall behind on their mortgages each month due to unemployment. Another 10,000 unemployed homeowners have taken advantage of a three-month delay in mortgage payments in the past year.

Administration officials hoped private lenders and government-controlled mortgage companies Fannie Mae and Freddie Mac would adopt a similar policy.

Fannie and Freddie signaled they would not.

The Great Recession lingers on Main Street

Economists say the recession ended two years ago, but if this is a recovery, its been the weakest and most lopsided of any since the 1930s.

Corporate profits are up by almost 50% since the recession "ended" in June 2009. Compare that to the first two years after the recessions of 1991 and 2001, profits rose 11 percent and 28 percent, respectively. Where do those profits go? Surprise, the wealthiest 10 percent of Americans own more than 80 percent of outstanding stock.

The typical CEO of a major company earned $9 million last year, up approximately 25% from 2009.

On the other side, new jobs pay less than the ones that vanished in the recession. The average worker's hourly wages, after accounting for inflation, were 1.6 percent lower in May than a year earlier. Despite cutting what they owe the past three years, the average household's debts equal 119 percent of annual after-tax income. At the same point after the 1981-82 recession, debts were at 66 percent; after the 1990-91 recession, 85 percent; and after the 2001 recession, 114 percent.

The working class continues to set records. Social programs accounted for a record 18 percent of personal income in the last three months of 2010. Almost 45 million Americans are on food stamps, another record.

Is it much of a surprise that a majority think the recession continues? Some 29 percent of that majority will go even further -- they say it feels more like a depression.

Emergency Homeowners Loan Program

HUD and the nonprofit housing advocacy group NeighborWorks America started a program last week offering loans that don't actually need to be repaid, if applicants meet certain requirements.

 The loans available to around 30,000 applicants, are interest-free. Payments go directly to the lender for a portion of the borrower's monthly mortgage, including missed payments or past due charges. And when the assistance period -- which runs for up to two years -- ends, 20% of the loan is forgiven with each passing year. In other words, for qualified borrowers who stay in their home for at least five years after the assistance period and who don't fall behind on their mortgage again, this money doesn't have to be paid back.

If they sell their home before the entire loan is forgiven, they'll be on the hook for the remaining amount. The same holds true if they fall behind on their mortgage payments again: they'll need to repay the remaining balance of the loan when they sell or refinance their home. Separately, borrowers aren't required to have equity in their home to receive this money.

While the limit each person will get is up to $50,000, loans will average about $35,000 per person, according to NeighborWorks America.

To be eligible, homeowners must have lost income and be at risk of foreclosure due to involuntary job loss, underemployment or a medical or other economic condition; details on the application process are available online through NeighborWorks America.

Applications will be taken through July 22nd.

Banks finally getting the picture?

Approximately 23% of homeowners with a mortgage are underwater. Another 2.4 million homeowners are teetering on the brink, with less than 5% equity in their home. If home prices drop further over the next year many of those owners could end up with negative equity.

Now --- Half of homeowners who owe 50% or more on their home than it's worth and default do so strictly because of negative equity, according to a Federal Reserve Board study.

So --- Both GMAC Mortgage and Wells Fargo have started either reducing some mortgage balances, deferring payments or offering subsidized refinancing in areas with large declines in home values -- like Miami and Las Vegas.