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Laura Gottesdiener: Wall Street’s Rental Empire

7:37 am in Uncategorized by Tom Engelhardt

This article originally appeared at TomDispatch.com. To receive TomDispatch in your inbox three times a week, click here.

Note for TomDispatch Readers: Our next piece will be posted on Sunday evening, December 1st. Happy Thanksgiving! Tom

Foreclosed home

Wall Street is up to the same old tricks in the housing market.

“One shitty deal.” “Shitty deal.” “Shitty.” The date was April 27, 2010, and Senator Carl Levin (D-Mich.) was pissed as he launched into a rant with those pungent quotes in it. As part of a Senate subcommittee investigation into the causes of the financial meltdown, Levin was grilling Goldman Sachs CEO Lloyd Blankfein and several other current and former Goldman higher-ups about their roles in that crisis and in particular the exotic, opaque investment deals they had created and peddled.

What had Levin steaming mad were internal emails revealing that, on the cusp of the financial crisis, Goldman staffers knew that they were selling crummy investments. Levin’s tirade was inspired by an email in which a Goldman staffer describes a product he’s selling as “one shitty deal.” That, of course, did not stop Goldman from selling such products. Not only that, but the firm’s traders later bet against those deals to make even more money! Contempt, thy name is Goldman.

At the heart of that April 2010 hearing, and at the heart of the financial crisis itself, were countless “shitty deals” in the form of so-called mortgage-backed securities. Remember those? It’s been a few years, so here’s a quick refresher. Wall Street firms like Goldman cooked up an idea to bundle together thousands of home mortgages — loans made to people from Fresno to Lubbock to Kalamazoo to Baltimore — and sell them to investors. Goldman profited off their sale and, as long as those homeowners made their mortgage payments, investors enjoyed a constant income stream.

But as we now know, many of those home loans were filled with tricks and trap-doors and, in some cases, were made to people who simply couldn’t afford them. First gradually, and later in cascades, millions of people stopped paying their mortgages, which meant that those mortgage-backed securities went sour. The losses were historic, plunging the U.S. economy into what we now call the Great Recession.

Five years later, the fallout from that mortgage-fueled meltdown and the bailing out of many of the financial institutions that profited from them is far from over. However belatedly, the feds continue to investigate the nation’s biggest banks for having sold shoddy mortgage-backed securities. On November 15th, JP Morgan Chase, one of the nation’s largest banks, agreed to a $4.5 billion settlement with 21 institutional investors who claimed they were wrongly sold bad mortgage-backed securities. Days later, the Justice Department announced a $13 billion settlement with JP Morgan — “the largest settlement with a single entity in American history” — for wrongdoing related to the packaging, marketing, and selling of those securities.

But as Laura Gottesdiener writes today, you can’t keep a bailed-out industry down. Wall Street and its masters of the universe are at it again. They’ve devised a new way to profit off the housing market — and this time it has nothing to do with risky mortgages. Now, Wall Street is securitizing something else: your rent check. Andy Kroll

The Empire Strikes Back 
How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again 
By Laura Gottesdiener

You can hardly turn on the television or open a newspaper without hearing about the nation’s impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.

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Steve Fraser, Another Day Older and Deeper in Debt

7:28 am in Uncategorized by Tom Engelhardt

This article originally appeared at TomDispatch.com. To receive TomDispatch in your inbox three times a week, click here.

Strike Debt Protester

A #StrikeDebt Protest on September 17, 2012. Does debt make the whole world a prison owned by the 1%?

Over the past five years, I’ve spent more hours than I wish to count talking to homeowners within the blast zone of the great housing meltdown of the late 2000s. I’m thinking about the ones who lost their homes to foreclosure, or offloaded them quick and dirty in a short sale, or battled a lender or loan servicer or crooked attorney in court. Most of the people I interviewed had this in common: after the market bottomed out, they owed more on their mortgages than their houses were worth. It’s called being “underwater.” By November 2011, 14.6 million borrowers were underwater on their mortgages, the total amount of negative equity in America pegged at $1.15 trillion. A year later, as the housing market plodded along on the path to recovery, there were still 14 million Americans underwater.

That included, until recently, my parents. The house I grew up in, the only one my parents have ever owned and in which they still live, is a modest, two-story Cape Cod with a generous lawn on a boring street where rows and rows of apple trees once grew. Boring in the best ways: quiet, free of crime, pleasant neighbors, the ideal place for a restless kid to burn through summer days carving blacktop on a skateboard or juggling a soccer ball. As a reporter, I’ve visited neighborhoods in California and Florida and Nevada, not unlike the one where I grew up, ravaged by the housing crisis — homes abandoned, windows smashed, empty living rooms tagged with graffiti. But thanks to some private version of magical thinking, I never imagined that the meltdown could reach my childhood corner of suburban Michigan. Why would it? What did my old neighborhood have to do with no-doc subprime loans, BBB-rated mortgage-backed securities, or collateralized debt obligations?

The crisis came anyway. Last December, as we hopscotched around town buying last-minute Christmas presents, my mother told me how, for years, they’d been underwater on the house they’d owned for nearly as long as I’ve been alive. Five thousand dollars underwater, then $10,000, then $20,000… The local housing market sagged along with the nation’s, and there was nothing they could do about it. This angered me more than anything I can remember: first, you’re a “homeowner”; then, it turns out that you’re over your head in debt by no fault of your own; and, in many cases, the most you can do is hunker down and wait until the market rebounds.

By last Christmas, when I visited, the market’s gradual rebound and a refinance deal 18 months in the making had lifted my parents’ house out of the debt morass. Selling it, as my folks soon hope to do, will prove a challenge, but at least they stand on dry land. That’s more than can be said, as TomDispatch regular Steve Fraser writes, for millions more Americans staggered by student loans, home loans, credit card debts, and so many other forms of indebtedness.

In his latest excavation of crucial parts of this country’s history that no one ever taught you in school, Fraser, author of Wall Street: America’s Dream Palace, explores debt and insurrection as the most American of traditions. This essay will appear in print in the next issue of an invigorating new magazine, Jacobin, recently touted in the New York Times. (To subscribe to it, click here.) Special thanks go to its editor, Bhaskar Sunkara, for letting TomDispatch post it now. Andy Kroll

The Politics of Debt in America 
From Debtor’s Prison to Debtor Nation
By Steve Fraser

[This essay will appear in the next issue of Jacobin.  It is posted at TomDispatch.com with the kind permission of that magazine.]

Shakespeare’s Polonius offered this classic advice to his son: “neither a borrower nor a lender be.”  Many of our nation’s Founding Fathers emphatically saw it otherwise.  They often lived by the maxim: always a borrower, never a lender be.  As tobacco and rice planters, slave traders, and merchants, as well as land and currency speculators, they depended upon long lines of credit to finance their livelihoods and splendid ways of life.  So, too, in those days, did shopkeepers, tradesmen, artisans, and farmers, as well as casual laborers and sailors.  Without debt, the seedlings of a commercial economy could never have grown to maturity.

Ben Franklin, however, was wary on the subject. “Rather go to bed supperless than rise in debt” was his warning, and even now his cautionary words carry great moral weight.  We worry about debt, yet we can’t live without it.

Debt remains, as it long has been, the Dr. Jekyll and Mr. Hyde of capitalism.  For a small minority, it’s a blessing; for others a curse.  For some the moral burden of carrying debt is a heavy one, and no one lets them forget it.  For privileged others, debt bears no moral baggage at all, presents itself as an opportunity to prosper, and if things go wrong can be dumped without a qualm.

Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy.  Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures.

Think of this upstairs-downstairs class calculus as the politics of debt.  British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

After months of an impending “debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private.  Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt — mortgages gone bad, student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living. 

The world economy almost came apart in 2007-2008, and still may do so under the whale-sized carcass of debt left behind by financial plunderers who found in debt the leverage to get ever richer.  Most of them still live in their mansions and McMansions, while other debtors live outdoors, or in cars or shelters, or doubled-up with relatives and friends — or even in debtor’s prison. Believe it or not, a version of debtor’s prison, that relic of early American commercial barbarism, is back.

In 2013, you can’t actually be jailed for not paying your bills, but ingenious corporations, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway.  With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a trend in the making.

Will Americans tolerate this, or might there emerge a politics of resistance to debt, as has happened more than once in a past that shouldn’t be forgotten?

The World of Debtor’s Prisons

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Barbara Ehrenreich: Looting the Lives of the Poor

6:42 am in Uncategorized by Tom Engelhardt

This article originally appeared at TomDispatch. To receive TomDispatch in your inbox three times a week, click here.

Gordon Gekko, the infamously cutthroat capitalist and lead character in Oliver Stone’s Wall Street, captured the heady years of the 1980s with a single, indelible line: Greed is good. Today, it is Edward Conard, a friend and former colleague of Mitt Romney’s at the private equity firm Bain Capital, who has offered a new mantra for the 1%, a cri de coeur for the Gekkos of the twenty-first century: Inequality is good.

Barbara Ehrenreich - photo by David Shankbone

Barbara Ehrenreich - Photo by David Shankbone

In his new book Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong, Conard argues that gaping income inequality is an indication of a healthy economy, not a sick one. The more unequal we are, Conard told the New York Times Magazine, the better off we all will be. Why? Because economies grow and thrive when smart people devise solutions to our thorniest problems by inventing or perfecting goods and services. Conard singled out a group of twentysomethings sitting at a Manhattan coffee shop one afternoon, deriding them as lazy “art-history majors.” Those people should be out creating businesses and taking risks, he insisted, because that’s how societies prosper. And the way to encourage that risk-taking is the promise of obscene wealth for those who succeed (and, implicitly, dismal poverty for those who don’t).

How obscene should that wealth be? In 2008, the top 1% commanded 21% of all income in America. Conard says our society would improve if only that figure were doubled.

Needless to say, there is no shortage of Conard critics. The more respectful ones ask: Teachers do not fit Conard’s entrepreneurial ideal — are they no use to society? What about judges? Government regulators? Others dismiss Conard as an out-of-touch millionaire living in a fantasy land. For instance, Conard claims that wages for American workers have climbed in recent decades; in fact, as liberal economist Dean Baker notes, wages have barely kept pace with inflation. “We’ll leave it to his shrink,” Baker quipped, “to determine whether the problem is that Conard is deluded or dishonest.”

It’s not hard to imagine how members of the working poor would react to Conard’s message. Here he is urging them to take the leap and design more efficient soda cans or search engines, when, as TomDispatch regular Barbara Ehrenreich makes strikingly clear, the working poor who dare share food with the down-and-out or kick up their feet on a subway seat can land in a debtor’s hell created for them by state and local governments and law enforcement agencies. Unlike Conard, Ehrenreich, the author of the bestselling Nickel and Dimed: On (Not) Getting By in America, had an actual urge to help those in trouble. She’s just launching the Economic Hardship Reporting Project, which will “will pay laid-off and/or underemployed journalists who are themselves caught in the maw of economic hardship to produce compelling stories.” (To catch Timothy MacBain’s latest Tomcast audio interview in which Ehrenreich discusses how the poor get soaked and her latest project to fund investigative journalism on poverty, click here or download it to your iPod here.) Andy Kroll

Preying on the Poor
How Government and Corporations Use the Poor as Piggy Banks

By Barbara Ehrenreich

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Occupy Earth, by Chip Ward

6:36 am in Uncategorized by Tom Engelhardt

OCCUPY SPACESHIP EARTH! (Image: alycesantoro, flickr

OCCUPY SPACESHIP EARTH! (Image: alycesantoro, flickr

This story originally appeared at TomDispatch.com.

To receive TomDispatch in your inbox three times a week, click here.

If your child has asthma and it’s getting worse, then news about the White House’s recent retreat on ozone (that is, smog) standards for the air over your city wasn’t exactly cause for cheering. Thank our environmental president for that, but mainly of course the Republicans, who have been out to kneecap the Environmental Protection Agency since the 2010 election results came in.  We may be heading for an anything-blows environmental future, even though it couldn’t be more logical to assume that whatever is allowed into the air will sooner or later end up in us.

With a helping hand from that invaluable website Environmental Health News, here’s a little ladleful of examples from the chemical soup that could be not just your air, soil, or water, but you.  It’s only a few days’ worth of news reports on what’s in our environment and so, for better or mostly worse, in us: In Dallas-Ft. Worth, there’s lead in the blood of children, thanks to leaded gasoline, banned decades ago, but still in the soil.  In New York’s Hudson River, “one of the largest toxic cleanups in U.S. history” (for PCBs in river sediments) is ongoing.  Researchers now suspect that those chemicals, already linked to low birth weight, thyroid disease, and learning, memory, and immune system disorders,” are also associated with to high blood pressure.  Then there’s mercury, that “potent neurotoxin that is especially dangerous to the developing brains of fetuses and children.” If allowed, it will enter the environment via a proposed open-pit gold and copper mine to be built in Alaska near “one of the world’s premier salmon fisheries.” Read the rest of this entry →