You Can't Go Home Again: Foreclosing the American Dream
By Bob Simpson at Sep 23, 2008
First of all, it's not the fault of "the market". Blaming the market for the estimated 1.7 million foreclosures this year means that no one is responsible and everyone is off the hook. But market fluctuations are not the weather, nor are they "Acts of God", to use the favorite expression of the insurance industry. Markets are constructed by real human beings. Markets have rules written by real human beings. Markets have referees and judges who are real human beings. Markets have participants who are real human beings.
Forget about the "invisible hand of the marketplace" so beloved by ivory tower econ professors and overpaid media pundits. There is no invisible hand of the marketplace. Real human hands shape the marketplace and they have left plenty of fingerprints behind. Those estimated 1.7 million foreclosures mean a lot of fingerprints.
Although there have been a few celebrity foreclosure stories like Jose Canseco, Ed McMahon, and Vin Baker, as well as reports of woes among the overextended nouveau riche, the vast majority of foreclosures involve everyday working class Americans and their families.
According to some finger wagging Americans, the main problem comes down to foolish choices made by the home buyers. If only those blue-collar yokels hadn't been so picky about a place to live, the banks wouldn't have had anyone to prey on. Then we wouldn't be staring into the Abyss of another Great Depression while the Abyss smirks back and says, "I told you so".
So was it working class ignorance and financial irresponsibility that created this disaster? Are we supposed to feel scorn for their bad choices? Or pity them for their economic ignorance?
Well I have a personal message for the self-righteous finger wagging crowd. It wasn't working class America who re-wrote the rules of the mortage game and fired the referees who used to enforce those rules. That brilliant scheme came from smartest Wall Street guys in the room armed with their MBA's and number crunching computers. They unleashed the economic Ebola virus of the subprime mortgage and all of its deadly exotic cousins that are currently attacking the immune system of our nation's economy.
Their enablers were the Republican and Democratic politicians who made it all legal in exchange for "campaign contributions". We used to call them bribes, but you don't dare say that word in today's "politically correct" society. The corporate owned mass media then lied about the shining wonders of "deregulation" and the "free market" and shoved aside any discussion of more sane alternatives. Did I say "lied"? That's another term we're not allowed to use in "polite" company. Ok, the media "misspoke". My bad.
The mass media also failed to inform us that the national policy of the USA has been to keep working class wages artificially low by unionbusting, outsourcing and by exploiting working class racial and gender divisions.
But people still have to pay for food, shelter and other necessities, so they borrow money if their wages come up short. If a subprime mortage is the only way to afford a house, well shock and surprise, they'll take the risk. Some people actually qualified for safer mortgages but were conned by fast talking flimflam artists in the deregulated banking industry. When big developers turn apartments into yuppie condos and public housing into bulldozed rubble, a subprime mortage can look like the only option. With pensions drying up and 401K's going down the toilet, a house in a rising real estate market becomes a working class family's sole investment for their economic future. Sure it's a gamble, but what are your choices?
And it's not only wages that were deliberately starved by national policy, it was what we call "fringe benefits". You know like health insurance, sick leave, child care, retirement, disability, unemployment insurance and the like. In a lot of countries these aren't called fringe benefits. They are thought of as necessities of civilized life, like air, food and water. But for much of working class America these are luxuries as out of reach as a corporate Lear Jet. In many cases, people took out dangerous second mortgages on their existing homes to pay for healthcare, take care of an aging parent or send their kids to college. Then if they lost their jobs, the bottom fell out.
In working class America the lack of these fringe benefit "luxuries" can be devastating.
For example there's Philadelphia, a city hit hard by foreclosures. Marciela Perez of became ill with cancer and lacking health insurance, stopped making her mortgage payments. Senator John McCain who has 7 houses contracted cancer and he lost none of his homes. Senator McCain also gets excellent health coverage from his government job on Capitol Hill.
One of Marciela's neighbors was Mike O'Mara. Mike ran up too much debt, lost his truck driving job and couldn't pay his mortgage. Trucking used to be a prestigious high paying blue collar job with good benefits and job security. After all, somebody has to deliver all that of that stuff we use. But the trucking industry was "deregulated" as part of our national policy of keeping wages and benefits artificially low. Deregulation meant that the nation's truckers saw their wages and working conditions rapidly deteriorate.
Deregulation... made it easier for nonunion workers to get jobs in the trucking industry. This new competition has sharply eroded the strength of the drivers' union, the International Brotherhood of Teamsters. Before deregulation ICC-regulated truckers paid unionized workers about 50 percent more than comparable workers in other industries. Although unionized drivers still are paid a premium, by 1985 unionized workers were only 28 percent of the trucking work force, down from around 60 percent in the late seventies. — Trucking Deregulation by Thomas Gale Moore
It wasn't only the workers in the trucking industry that were devastated by deregulation, trucking is only the poster child for what was happening all across our economy. Mix that in with outsourcing and de-industrialization, then take a sip of that Kool-Aid.
On top of that unemployment insurance has been dramatically slashed in the name of "market discipline" so that it is hard to get and doesn't cover even basic expenses anymore. Lose your job and you can lose everything.
When U.S. Senators and Wall Street CEO's lose their jobs, no one kicks them out of their homes, even when they are the ones whose national economic policy has been to impoverish working class America to the point where our entire economy is now at risk. In other words, work hard and get your ass kicked. Screw up big time and get rewarded for it.
Working class America's biggest mistake wasn't signing on the dotted line of those subprime mortgages. Working class America's biggest mistake was not putting the kibosh on this madness before it was too late.
Now the nation is in the middle of a bailout plan written by the very people who got us into this mess. Working class America will be expected to pick up the tab. Exactly how we are going to do that is a mystery to me given that we are already in hock up to our eyeballs and behind on our bills as it is.
I've got a better idea and I'm not the only one who who is thinking these thoughts. Let's seize the assets of those who created this disaster. I don't mean just the bad debts and worthless paper of their exotic financial shenanigans.When we screw up and lose our jobs, many of us lose our homes at one of those heartbreaking sheriff's sales. These have become the government equivalent of the charity resale shop: a Goodwill Store with the houses provided by the dispossessed.
Let's make sure that all of the assets of these bail-outed companies become public property to be disposed of as we democratically see fit. And let's not stop there. Why not seize some of the value of the mansions, furs, limos, Lear jets, private zoos and yachts of the actual perps who carried out these economic offenses. Think of it as victim compensation. We can do it of that quite legally through taxation and through criminal and civil proceedings--whatever is appropriate. They sure show no mercy to us when we can't pay our bills.
Since most of don't really know much about bigtime economics, we're going to have to hire a whole new batch of economists who will work for Us instead of Them. We've got a lot of hard thinking ahead and a lot of tough decisions to make. If you need some ideas to kickstart your brain, read what Bernie Sanders the socialist U.S. Senator from Vermont has to say,"
The people who can best afford to pay and the people who have benefited most from Bush's economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.
Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:
a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;
b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and
c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies' stock goes up.
You can read more from Bernie Sanders HERE
The choice is pretty stark right now. Its either socialism for the rich or socialism for the rest of us.
So choose wisely folks...