End the Fed rally last April. Photo: Chris Steller, MnIndy

Minnesota’s End the Fed group has something to celebrate Sunday as they march on the Federal Reserve Bank of Minneapolis: U.S. Rep. Ron Paul’s effort to audit the Fed passed in the House Financial Services Committee last Thursday.

Six of Minnesota’s members of Congress are among 313 co-sponsors to Paul’s bill: Republicans Michele Bachmann, John Kline and Erik Paulsen, and Democrats Jim Oberstar, Collin Peterson and Tim Walz.

Bachmann and Paulsen serve on the House Financial Services Committee and voted in favor of the amendment Thursday, which passed 43-26. Democrat Keith Ellison is also on the committee; he voted no.

Organizer Melissa Hill said she expects “a couple hundred” people to turn out for the local End the Fed group’s fourth rally at the Minneapolis Federal Reserve Bank in the last year.

For the first time they will gather elsewhere — at 11:30 a.m. at Loring Park on the other side of downtown — before marching (on sidewalks) to a 12:30 p.m. rally the Fed building on the Mississippi riverfront.

Hill says the Minnesota group tries to be nonpartisan and is not affiliated with the conservative Tea Party movement. “We lean a little more toward the left” than other End the Fed groups nationally, she said.

For Hill, the march comes on the heels of losing her race as a “Civil Disobedience” candidate to incumbent DFLer Diane Hofstede in Minneapolis’ city council election. And she is still the target of criminal proceedings in Pittsburgh, where she is appealing a charge of  disorderly conduct arising from the recent G20 economic summit there.

Ending the Federal Reserve (a move for which Paul also has a bill pending) would, Hill says, mean getting control of the nation’s money supply again  – “in our control instead of behind shadowy doors.”

A more politically progressive protest kicked off the string of demonstrations at the Minneapolis Fed in late September 2009, when groups (including ACORN) protested federal bailouts for Wall Street financial firms without similar aid for homeowners threatened with foreclosure on Main Street (video).

Donald McFarland, who spoke at that rally, told MnIndy those groups had no affiliation with the End the Fed protests.

A few weeks earlier, during the 2008 Republican National Convention, Ron Paul himself made an appearance at the Minneapolis Fed’s plaza at the culmination of a Green Bay-to-Minneapolis “Walk for Freedom” — which some people call the beginning of the national End the Fed movement, Hill says.

The Ritz-Carlton Bachelor Gulch hotel in Beaver Creek, Colo., site of a $113,753 Xcel board of directors retreat

DENVER — With St. Paul–based Xcel Energy on pace to disconnect power to some 70,000 Coloradans this year for nonpayment, energy activists there are openly questioning why ratepayers should pick up the tab for lavish executive board-member dinners, hotel and spa retreats and luxury box tickets to professional sports games. But those who want the Colorado Public Utilities Commission to establish a firm policy cracking down on such excesses likely won’t get their wish anytime soon, according to a commission spokesman.

The PUC is set to begin final deliberations on Xcel’s latest rate-increase request — its second in the last year — on Dec. 3, but PUC spokesman Terry Bote said the commissioners will probably only consider the merits the of the $136 million rate hike and not delve into rule changes for travel and entertainment expenses.

“The commission can’t set a rule by deliberation in a rate case, so if they were going to make a rule, they would have to go into a rule-making proceeding to do that,” Bote told the Colorado Independent. “If they choose to, they can put language in the order that says, ‘We don’t expect these types of expenses to be included in future rate cases,’ but that’s not binding, obviously.”

The issue first came up during testimony in the nearly $180 million rate case in Denver earlier this month (Xcel has since reduced that amount in a settlement with consumer groups by nearly $44 million). Clean energy and consumer advocates pointed out Minnesota Attorney General Lori Swanson had a serious problem with excessive Xcel travel and entertainment charges last summer.

Some of those charges included a $113,753 Xcel board of directors retreat at the ultra-luxury Ritz-Carlton Bachelor Gulch hotel near Beaver Creek in Colorado’s Eagle County — of which Xcel tried to pass $36,149 on to Minnesota ratepayers, according to testimony by the state AG’s office. Other items included first-class airline tickets and luxury hotel stays for top Xcel executives during conferences in Europe.

That testimony prompted Xcel, which provides power to 5 million customers in eight states, including Colorado, to trim $3.9 million in travel and entertainment expenses from its $132 million rate case in Minnesota last summer. Regulators ultimately allowed for an overall $91 million increase in that state.

The Minnesota rate case caught the attention of Colorado energy activists who tried earlier this month to introduce the Minnesota AG’s testimony into the Colorado rate-case docket. The Colorado PUC rejected that move but did request more information from Xcel on whether similar charges were being included the Colorado rate case. Xcel introduced an exhibit on the final day of testimony detailing more than $120,000 in expenses.

The tab included dinner bills in excess of $10,000 and board retreats at luxury spas in Boulder for more than $40,000. Xcel immediately offered to remove those expenses from its rate-increase request.

“The commission has never disallowed these sorts of expenditures in the past and the company finds that these occasional expenses are a reasonable cost of business, but offered to remove the costs from its historic test year during the hearings,” a company spokesman said. “The company will offer to remove the same amount from its forecasted test year, meaning that customers in Colorado will not be paying for these types of expenses.”

However, attorney Dennis Kelly, an “intervener” in the rate case on behalf of a grassroots Arapahoe County group called the ArapaHOPE Community Team, said his organization and others fought hard to get the Minnesota case into the record because they want the Colorado PUC to establish a firm policy on exorbitant travel and entertainment expenses.

“One of the reasons we really wanted to get this into the docket is because I don’t think that these costs had ever really been reviewed by the Colorado Public Utilities Commission, and I don’t think they really have set guidelines on any of this,” Kelly said.

Now activists in Minnesota are calling out Xcel for its annual $5.8 million corporate aviation budget, according the Minneapolis Star Tribune. The company maintains two eight-passenger Learjets — which cost about $1,200 an hour to fly – mostly for company executives to travel between Minneapolis and Denver, its two largest markets.

David O. Williams writes for the Colorado Independent, sister site to the Minnesota Independent.

lllustration: George Peters

WASHINGTON — Mortgage giant Fannie Mae’s recent announcement that it will give homeowners facing foreclosure the chance to stay in their properties as renters for as long as a year is the latest aggressive move by the government to help troubled borrowers and tenants avoid being evicted. But as past efforts to stem the foreclosure crisis have already shown, even well-intentioned programs haven’t managed to reach significant numbers of people in peril – meaning any new approach faces a tough road ahead.

Consider, for example, a new federal law approved in May that protects renters from foreclosure evictions by giving them the right to stay in their residences after foreclosure for 90 days or for the duration of of their leases. Despite the new law, some tenants aren’t getting notice of their rights and are simply moving out, housing advocates said.

The problem has been particularly widespread surrounding a provision in the law, called the Helping Families Save their Homes Act, that allows for borrowers with Section 8 affordable housing vouchers the option to also stay in their residences when their landlord is in foreclosure. Some tenants who call their state or local housing authorities in Massachusetts and Connecticut after a foreclosure eviction notice are mistakenly told they have to move, noted Judith Liben, a senior housing attorney with the Massachusetts Law Reform Institute, a nonprofit legal services advocacy group. Better training of housing authority staff would help fix the situation, she said.

“Even with well-intentioned policies, there’s a disconnect between a good idea put into law, and what really happens on the street,” Liben said. “We see that disconnect on the ground, all the time.”

Despite anti-foreclosure initiatives by the government and lenders, the housing crisis has continued to worsen. Foreclosure notices totaled a record high of nearly 938,000 in just the third quarter of this year, according to RealtyTrac, an online foreclosure database. The Center for Responsible Lending predicts a total of 9 million foreclosures by 2012. Vacant and abandoned foreclosed properties are adding to neighborhood blight problems. Renters increasingly have become caught as innocent bystanders, evicted often without notice when their landlord faces foreclosure.

The new federal protections are supposed to address that. But in some cases, tenants in foreclosed homes either can’t reach real estate agents in charge of selling the properties to let them know they want to continue renting, or they get incorrect information from agents and think their only option is to move out immediately, said Shelley White, litigation director at New Haven Legal Assistance in Connecticut. In some instances, law firms send misleading letters that imply a financial incentive to move, known as cash for keys, is a renters’ only option, she said.

“We’re definitely seeing a lot of problems with tenants that just get notes from Realtors that say the bank has foreclosed on your property, and it’s time to get out,” Wright said.

The difficulties in outreach to tenants comes as the government continues expanding options and assistance to borrowers and renters dealing with foreclosure. In addition to the new federal law, the Treasury Department plans soon to rollout its plan encouraging more short sales by offering financial incentives to lenders and borrowers. In a short sale, a homeowner sells his home for less than the amount owed on the mortgage, and lenders forgive the remaining loan balance.

Both Fannie and Freddie Mac earlier this year began allowing qualified tenants in foreclosed homes under their control to sign month-to-month leases. Freddie Mac also started offering former owners of foreclosed homes the month-to-month lease option. Last week, Fannie announced its new policy, which significantly expands on the idea, allowing some owners who didn’t qualify for a loan modification and can’t afford their mortgage  the option of staying on in their homes. The owner would voluntarily turn over the property to Fannie in a “deed for lease” transaction, instead of going through a lengthy foreclosure process. The former owners in exchange would be given the option to rent back their homes for at least a year. Unlike in a short sale, their credit is unlikely to take a hit because of the transaction. And even investors may be eligible, meaning they would turn over their properties to Fannie, but their tenants would have the option to remain.

“This is huge,” said Dean Baker, co-director of the Center for Economic and Policy Research, who proposed a similar own to rent idea when the financial crisis first hit two years ago.

Baker would prefer that Fannie’s new policy extend the the rent-back period even further, to five or 10 years. But, overall, Baker said Fannie’s program addresses the problem of growing numbers of vacant properties, and represents a shift to promoting rental policies as a foreclosure solution. “You’re guaranteed a year, and that gives you some stability and a chance to plan ahead,” he said.

He and others also described Fannie’s new program as a big step forward over some efforts currently in place to help renters in foreclosed homes.

Fannie Mae, for example, already gives renters in foreclosed homes the option to continue renting on a month-to-month basis, or to accept a cash for keys offer. According to Fannie’s data, the financial help has been a far more popular option. Since January, it has tallied 3,500 cash for keys agreements, and 300 signed leases. Fannie Mae spokesperson Amy Bonitatibus said the program was set up to offer both choices to renters. It is open to all tenants of Fannie Mae-owned properties, but she had no information on specifically how many tenants had been approached with offers.

The small number of leases signed isn’t really surprising, said Danilo Pelletiere, research director for the National Low Income Housing Coalition. The options to renters were offered post-foreclosure, by which time some tenants may have decided to make other living arrangements. Cash for keys can be a more attractive option than a month to month lease. The new federal tenant protection law also overlapped with Fannie’s program, so some tenants may not have felt a need to sign leases, he said.

Pelletiere and other advocates said they have much higher expectations for Fannie’s new approach for former owners. A deed for lease transaction can happen far more quickly than a foreclosure, and having a longer-term lease will be more attractive to many people. Fannie also has hired a national property management company to handle the new program, while its existing rental initiative for tenants uses local real estate agents and property managers.

“Because of the way it’s designed, it should do a much better job,” Pelletiere said. “That makes it much more likely that we’ll see a national response. It provides a way for Fannie to be proactive and to get to the property earlier. And it costs less than getting someone out of a home and foreclosing on them.”

Alan Mallach, a senior fellow at the National Housing Institute and the Brookings Institution, agreed. “What’s interesting will be to look at how many people this new policy affects,” Mallach said. “I think it will be significant.”

Pelletiere said he also found some encouragement in early results from Freddie Mac’s program earlier this year to rent back properties to former owners of foreclosed homes on a month by month basis. According to Freddie Mac’s figures, almost 12,000 units entered its portfolio of foreclosed homes between April and October. In 70 percent of cases, a borrower is working on a mortgage loan modification, leasing the home back, or accepting cash for keys. In another 27 percent of cases, the property was vacant by the time Freddie Mac took it over. In three to four percent of cases, an owner or renter faced eviction. Of those occupants who signed leases, two-thirds were owner occupants and one-third were tenants. Spokesman Brad German said he had no further breakdown of the numbers.

The long-held belief has been that owners would decline to become renters again, so having more owners than renters sign rental leases is an encouraging sign for Fannie’s new program, Pelletiere said.

Still, he and others noted the government wouldn’t be prompted to move toward a more aggressive rental policy if a greater number of loan modifications were successful. A recent report by the Congressional Oversight Panel for the government’s taxpayer-funded bailout program criticized the progress being made under the administration’s Making Home Affordable program, saying that in a best case scenario it would prevent fewer than half of expected foreclosures.

As foreclosure notices pile up, troubled tenants and borrowers don’t always understand they might be eligible for help, or they don’t know who to contact to apply for programs, or they just give up and leave upon a foreclosure – even in cases where they have new federal laws and programs intended to avoid evictions. To Liben, the Massachusetts housing attorney, one constant of the housing crisis has been that some people “get lost in the shuffle.” She’s waiting to see if that will finally change.

The center, which has existed in one form or another since 1977, has been planning a new children’s area at its centerpiece museum and has a fundraiser and holiday program on the calendar for December. The center also houses a 7,000-volume library and research center and hosts events throughout the year.

In January, the museum was scheduled to open an exhibit of photographs from Walden Woods in Massachusetts, a project involving the Walden Woods Project. That’s a cultural nonprofit (dedicated to preserving the place that Henry David Thoreau made famous) founded and supported by musician Don Henley.

Now would be a good time for a famous son or daughter of the Iron Range to do the same for the former Ironworld.

“It’s usurping the power of the legislature… Right now he’s actually writing laws,” he said. “I don’t know where’s he getting this authority, and nobody’s really taking him on.”

“Right now any governor — whether the governor is Tom Rukavina or Tim Pawlenty — can basically sign every spending bill and then decide to unallot,” he said.

Rukavina agrees that Pawlenty’s motives in unallotment have been more about his national political ambitions than in looking after Minnesota’s future.

“I think he’s being very insincere in his claim that he loves this state and loves the people of this state,” he said. “Because what he’s doing to them isn’t, from where I come from, any sign of love.”

On Monday, the House Rules Committee voted to file a brief in support of a suit against the governor’s unallotment of some $2.7 million from the state budget.

Watch it:

See answers by DFL gubernatorial candidates R.T. Rybak and Paul Thissen to Stellmacher’s ongoing candidate series on the biggest threats to Minnesota.

Photo: Graham Moomaw, Washington Independent

In headlining Thursday’s “House call” protest against health-care reform, U.S. Rep. Michele Bachmann was going rogue on her own party’s leaders, who had hoped to focus the day’s attention on their own 12-hour, online health-care “town hall.”

David Weigel, of the Washington Independent (a Minnesota Independent sister site) writes:

This isn’t a surprising turn of events. In the run-up to the Sept. 12 march on Washington, Rep. John Boehner (R-Ohio) and Rep. Eric Cantor (R-Va.) were surprise guests at a Sept. 10 rally outside the Capitol. That event was actually identical to this one–protesters fanned out after the rally to talk to their members of Congress. But the crowd at that rally was smaller and more controlled, with most protesters holding FreedomWorks signs that had been passed out. The crowd at this rally was far less on-message. By the end of the day, the images that made it out of the rally were of protesters waving signs comparing health care reform to the Holocaust, and the video that made it out of the protest was heavy on Bachmann — one of the people Rep. Roy Blunt (R-Mo.) seemed to be referring to in a cryptic October comment about how to deal with a “problem member” who keeps making news.

In 2003, Pawlenty submitted a proposed general fund budget of $28.1 billion — or $2.8 billion more than the revenues received during the previous biennium. Two years later the governor offered up a $29.8 billion budgetary blueprint, roughly $1 billion more than the state took in during the previous budget cycle.

The pattern continued in Pawlenty’s second term. In 2007, he proposed a $34.4 billion general fund allotment, $2.2 billion more than the state’s cash inflow during the previous biennium. Finally in January of this year, the governor submitted a $33.6 billion budget, $1.4 billion more than revenues during the prior two-year cycle.

In total, Pawlenty’s budget proposals for the eight-year span would have exceeded revenues by $7.4 billion. In other words, when Pawlenty actually had the opportunity to adhere to the strict fiscal stringency that he’s now advocating he chose not to do so.

Pawlenty unveiled the proposal at a state Capitol press conference Thursday morning.

Under his plan, the state’s general fund budget would be limited to the amount of revenue collected in the previous two-year cycle. The two-term Republican governor argued that such a stringent cap on spending is necessary because legislators have proven unable to contain spending. Since 1960, he pointed out, general fund budgets have increased by an average of 21 percent every two years.

“That is an amazing, startling, frightening number,” Pawlenty said. “It is unsustainable going forward.”

Such an amendment would need to be passed by the legislature and then approved by voters. Pawlenty wants the proposal to be on the ballot next year.

But it is unlikely to get a favorable reception from Democrats, who control both legislative bodies with substantial majorities. Pawlenty acknowledged that.

“I suspect they won’t like it,” he said of his DFL counterparts. “Anything that limits spending growth they won’t like.”

Democratic leaders insisted that they will give the proposal serious consideration. “I’m intrigued at learning more about it,” said Tom Bakk, chair of the Senate Taxes Committee and a candidate to take over Pawlenty’s job in 2011. “This will require some very thoughtful consideration.”

But Democrats also pointed out that Pawlenty has never proposed a budget that would have fit within the fiscal strictures he hopes to set for future administrations. In the current biennium, for instance, Pawlenty initially proposed a $34.4 billion general fund budget — more than $2 billion over revenue collections for the prior two years. In addition, the state is currently facing a $5–7 billion budget deficit.

“We’ve got a $5–7 billion iceberg in front of us and I think it would have been better if he would have proposed something of this significance earlier in his term,” said Senate Majority Leader Larry Pogemiller. “But let’s give it some thought now, on his way out the door.”

Indeed, Pawlenty is not running for re-election next year and is clearly eyeing a 2012 presidential bid. Burnishing his credentials as a fiscal conservative could help with that cause — even if it does nothing to solve Minnesota’s budget problems.

Many conservative commentators, from the Wall Street Journal editorial board to Americans for Tax Reform, hailed Pawlenty in June for unilaterally slashing $2.7 billion from Minnesota’s budget over Democratic protests.

The DFL party was quick to characterize Pawlenty’s proposed amendment as another ploy to bolster his political ambitions.

“If a budget cap is such a good idea, why did Gov. Pawlenty wait until he was nearly out the door before proposing it?” asked Brian Melendez, chairman of the DFL party, in a press release. “The answer is simple: so that he wouldn’t actually have to govern under it, because he has no plans to follow through with what is really just a political stunt aimed at boosting his national notoriety.”

According to the AP, this year’s 115 bank failures represent the most closures since 1992 (for comparison, 25 banks failed last year and three in 2007), but it’s well short of the tally in 1989, when, in the thick of the savings-and-loan crisis, 534 were shut down.

The shuttered banks — California National Bank in Los Angeles; Bank USA, NA, in Phoenix; San Diego National Bank; Pacific National Bank in San Francisco; Park National Bank in Chicago; Community Bank of Lemont in Illinois; and the Texas banks North Houston Bank, Madisonville State Bank, and Citizens National Bank in Teague, — were reopened on Saturday under the US Bank name.

According to the FDIC’s summary, five Minnesota banks failed this year, including Riverview Community Bank in Otsego and Mainstreet Bank in Forest Lake.

Treasury Secretary Timothy Geithner. Photo: WDCpix

WASHINGTON — Appearing before a House panel on Thursday, Treasury Secretary Tim Geithner made his best pitch for legislation granting the White House broad new powers to seize Wall Street firms when their collapse might torpedo others in the industry.

It didn’t go so well.

A number of Democrats on the House Financial Services Committee unfurled a laundry list of charges against the proposal, including the prominent concern that the bill would empower the president — and future presidents –with unlimited bailout authority to prop up “too-big-to-fail” institutions at the expense of taxpayers.

“Mr. Secretary, I’m not a man that fears this administration or you,” Rep. Paul Kanjorski (D-Pa.) told Geithner. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.”

Rep. Brad Sherman (D-Calif.) echoed those concerns, arguing that the bill represents “the most unprecedented transfer of power to the executive branch to make decisions about both spending and taxes in history — all without congressional approval.”

The tone of the comments could foreshadow a tough road ahead, not only for the White House, but for Financial Services Chairman Barney Frank (D-Mass.), who introduced legislation this week that grants the Treasury’s request to broaden the president’s “resolution authority.” The bill is one of the final pieces of the finance-reform puzzle that Frank has been putting together all year. But by conceding most of the administration’s requests, the Massachusetts Democrat — who asked no questions of Geithner Thursday — has riled others on his panel, who want to see more taxpayer protections in the bill.

Frank’s proposal would create an oversight commission to monitor and regulate Wall Street’s investment houses and other non-bank institutions to ensure that they’re on solid footing. Federal regulators could, for example, force companies to increase capital reserves or decrease the amount of debt they’re holding, if the scenario was deemed a threat to topple the firm.

The bill would also empower the White House to swoop in and dismantle failing Wall Street institutions in order to minimize the impact on the finance system as a whole — a strategy modeled on the authority of the Federal Deposit Insurance Corporation to intervene when commercial banks are threatening to fall.

To protect taxpayers, Frank’s bill aims to have failed-company shareholders and creditors cover the cost of the government help. If more money is needed, taxpayers would initially pick up the tab, to be reimbursed later by an after-the-fact tax levied against other large Wall Street institutions that would presumably benefit from the stabilizing effects of the government intervention.

Supporters maintain that the proposal does not empower bailouts at all, but would simply allow the government to control the deaths of failed companies so they don’t drag down the financial system with them — a kind-of controlled euthanasia designed to protect consumers from the hubris of the finance industry.

“If we do have to step in, it will be very painful for those companies” Frank told MSNBC Thursday. “They will be put out of business. The CEOs will be fired. Shareholders will be wiped out. We are not going to have a situation where people can expect to be bailed out and live happily ever after.”

Geithner, for his part, denied that the proposal authorizes the White House to tap federal coffers at all. Asked by Rep. Maxine Waters (D-Calif.) if the bill grants “the authority to spend the taxpayers’ money to bail them out if you deem that to be a good way of handling that situation,” the Treasury secretary answered with one word: “No.”

Yet the House bill empowers the administration to make loans, buy assets, and invest in failing institutions if regulators determine those steps are required to prevent “serious adverse effects on financial stability or economic conditions in the United States.” To do so, of course, the White House would use taxpayer funds. And no monetary limits are specified.
And while the bill aims to recover the taxpayer dollars within 60 months of the bailout, Sherman notes that the White House would also have the authority to extend that deadline indefinitely.

“It could be 60 years,” he said.

That these bailout protections are limited only to those institutions whose failure is deemed a system-wide threat is another source of criticism on Capitol Hill. Many lawmakers and finance experts contend that that stipulation creates an unfair advantage for big firms over their smaller competitors. For example, they could access capital at lower rates if lenders know they have access to some level of federal lifeline. That dynamic, critics argue, would act to promote “too-big-to-fail” institutions, rather than reining them in.

“Why should the American people have to sit out there and see us creating mammoth organizations that nobody says we have the authority to control or limit, but we have the authority to help them when they get into trouble?” asked Kanjorski.

There are still other concerns. For example, some lawmakers are attacking the proposed bailout tax on large institutions, arguing that it should be collected beforehand as a type of insurance fund, rather than imposed after a competitor went under.

“No more TARP. No more bailouts,” said Rep. Luis Gutierrez (D-Ill.). “Let them [the companies] create the fund, the systemic risk fund, that will guarantee that the American taxpayer will no longer have to be involved should they cause such a crisis ever again.”

Geithner responded that such a system would encourage even more risky behavior from the largest companies. “If you create a fund in advance, there’s a risk you’re going to create more moral hazard,” Geithner siad. “People will live the expectation where the government will come in and protect them. We don’t want to create that expectation. That’s why we think it’s better to do it after the fact.”

Meanwhile, conservatives and representatives in the finance industry are blasting the notion that solvent companies should be forced to pay to bail out the mistakes of competitors. “Should Ford bear the costs of compensating the taxpayer for what happened to G.M. and Chrysler?” asked Rep. Jeb Hensarling (R-Texas.).

Gutierrez pointed out yet another concern: Placing such broad new powers in the hands of Treasury leaders – who often arrive directly to the job from previous positions of power on Wall Street – creates the impression of the fox guarding the hen house.

“How do we know the next secretary of the Treasury won’t be the former CEO of Goldman Sachs as they have been in the past?” he asked. “They seem to be interwoven, and that’s what the American public sees.

“They see the interconnectedness in terms of their power, their influence and always to their benefit.”