Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
Bank Job: Make Rogue Corporations Pay for Foreclosure Crisis
BOSTON--"We know how to prevent foreclosures," Federal Reserve Bank senior economist Paul Willen told The New York Times. "We just need to be prepared to spend the money." Willen "sees two possible solutions: Require banks to modify loans, basically imposing the cost on them; or pay banks to modify loans, imposing the cost on taxpayers."
Millions of American families have lost their homes to foreclosure since the global economy crashed in 2008. At this writing 4.4 million more households are in severe default on their mortgages--and that doesn't count the millions of renters who are getting evicted.
A few distressed homeowners are professional "flippers" who took out short-term adjustable-rate mortgages on dozens of houses at a time. When the housing bubble burst, their dream of easy profits using borrowed cash to turn a quick profit blew up too.
But that's a rare story. The overwhelming majority are people who got into trouble through no fault of their own. Most lost their job or suffered a medical catastrophe. They're victims of the usual boom-and-bust cycle of corporate capitalism.
Laissez-faire conservatives argue that that things will sort themselves out and that society will wind up stronger as the result of "creative destruction." But the scale of the post-2008 Depression is too big to sit on our hands. One out of four Americans face current or imminent joblessness. Poverty and homelessness are about to skyrocket.
Most frightening, there is no hope of economic improvement. Obama hasn't enacted a jobs program. There's no new technology waiting in the wings to spur economic growth, as the Internet did during the 1990s. The cavalry won't be foreign investment--the rest of the world is struggling too.
The social, political--and yes, economic--consequences of creating a new vast permanent underclass are terrifying to contemplate. Theft and random violence will rise. As we're seeing with the Tea Party, right-wing demagogues will gain power. People do bad things and listen to bad people when they're afraid. The U.S. could easily end up looking like Russia.
In 2009 the Obama Administration announced a new program, Make Home Affordable, to assist distressed homeowners. But--unsurprisingly, since it was voluntary and therefore toothless--MHA has been a bust. Fewer than 500,000 households have received modifications to their mortgages. As I can personally attest, banks like Citibank, Chase and Bank of America intentionally "lost" paperwork they requested so they could evict their customers and seize their homes as quickly as possible--frequently using fraudulent documents bearing forged signatures. FDIC chairperson Sheila Bair said: "We...know that in too many instances, servicers have not made meaningful efforts to restructure loans for borrowers who have documented that they are in economic distress."
That's for sure. When I lost my half my income in 2009, Chase Home Finance advised me that getting laid off had not adversely affected my financial status.
Millions of mortgages are going to need reduced interest rates and lower principal to reflect the new reality of the housing Markey. So who's going to pay?
It would be unfair to dun the taxpayers for the cost of loan modifications. First and foremost, many people rent. Why should people who can't afford the American Dream subsidize it for others?
Besides, the taxpayers already paid. The 2008 TARP bailout should have gone to the unemployed and homeowners facing foreclosure; when they paid their mortgages this would have wiped those "toxic assets" off the banks' books. Trickle-up economics works; trickle-down doesn't.
At bare minimum, banks that can't find the note to prove they own a home in foreclosure, and those who used fraudulent "robo-signers" to sign court documents, ought to lose their mortgages outright. In a tidy bit of justice, this would be fair punishment while allowing hundreds of thousands, possibly millions, of people to stay in their homes.
Next an investigation should be conducted of general bank malfeasance during the go-go '90s and '00s. Any bank that charged exorbitant interest rates on credit cards, ravaged debit card users with insane ATM fees, and failed to notify borrowers of the terms of their adjustable mortgages, should similarly face the only sanction they might remember the next time they're tempted to behave indecently: all their mortgages and credit card debt lines ought to be wiped clean.
- Posted in
30 Comments so far
Show AllYup, I'm gonna write my congress critter Virginia Foxx to "demand" she make this happen, then I am going to wait around for hell to freeze over before it does...
Like you, I have lost any and all faith in calling and/or writing my elected officials. Most of our elected officials voted for the original bailout -- despite phone calls coming into their offices, 100-1 against the bailouts. At that same time, I attended some protests/rallies here in NYC -- against the bailouts. People were angry then, and they remain angry.
I agree with Cassandra that Glass-Steagall needs to be reinstated, among any number of other reforms that need to be put into place. However, I can't see any of this taking place -- anytime soon. If anyone is "hopeful," I'd be happy to be introduced to any reasoning that might "change" and/or ease my mind!
Note that it was mostly Congressional Democrats, and only a few Republicans who voted for TARP when a supermajority of their constituents were calling them and telling them not to vote for it.
Now the Democrats want us to support them on November 2 ?
We keep on talking here and everywhere, while the Administration and Senators keeping mum’s about foreclosures. Seriously, we are done talking. Anyone knows if there is Class Action Lawsuit against OneWest Bank, please give us the links here. We are from CA. Thanks
"Laissez-faire conservatives argue that things will sort themselves out and that society will wind up stronger as the result of "creative destruction.""
Of course they would - none of them are suffering from the housing catastrophe they engineered and then sat and watched.
With over half of our Congress and over half of our Supreme Court being millionaires, why in the world should the average citizen's plight be of any concern to them???
Their riches are still intact and growing - this is what an oligarchy is all about!!! Democracy -- HA!!!!!!!!!!
The argument back is "What laissez-faire?". If we had not bailed them out they would have failed. We probably would have had to do something for pension funds and individuals but the ratings agencies should have been sued to death and assets used to at least partly compensate those they suckered. Then we would have reinstituted Glass-Steagall.
The collapse of Goldman, Citi-Corp etc plus the ratings agencies, would have been the creative destruction they seek and there would have been lots of small investment banks/brokerage houses stepping in to pick up the slack which would have been the stronger system that grew in their place.
They have to be met on their turf and use their arguments to show how silly (and deceptive and greedy)they are.
It is ironic that the strongest defenders of laisezz-faire (the bankers) demand government support when their activities backfire.
Actually, the bankers already know their puppets that they had helped put into office in elections past. As it is, "investigating" the banks becomes pointless after government bails them out despite strong public opposition along with giving policies that range from toothless to down right regressive as the "solution". Letting the banks fail and skipping the "investigations" would be a double savings.
P.S.: I wished that strong public support asking that banks be allowed to fail would still hold but unfortunately, that appears to have peaked in 2008 itself while the habit of blaming the home owners more than the banks hasn't changed much.
sheepherder: That's my point. The ridiculousness of these slime bags pretending they are free market stars is beyond silly but nobody seems to call them on it in free market terms. They ought to be laughed at and scorned for believing that what they do has anything to do with free markets or laissez-faire.
Oh yeah--no one also wants to point out that they actually use FDIC-insured money for their scams.
Keep a close eye on Wall Street. Current insider sell to buy ratio of top firms 3177-1
http://www.activistpost.com/2010/10/baby-boomers-get-out-of-stock-market.html
AESOPS: Can you tell me what "sell to buy ratio of top firms" means? I don't understand investor parlance at all. Maybe the article link will explain it.
Few minutes later: Okay. I read the article. Now I understand. What can we trust in these days?
This is one reason Walll Street is drooling over the prospect of Privatizing Social Security.
Now think about it. The "Insiders" know a Crash going to come or that some firm faces collapse. When they SELL all their shares someone has to buy them so that they can profit. Generally the buyers are big Pension funds or Mutual funds from Banks...
That well can run dry in time...
So with Privatized Social Security there will be a pool of trillions of dollars. Insiders PUMP share prices way up by issuing "statements" about the health of the Company that is simply not true...they then DUMP the shares. The Wall Street Insiders use that pool of Social Security money to buy those shares at a premium.
The Shares collapse. The Wall Street Insiders ensure it the pool of Money from Social Security that takes the losses. The Insiders pocket billions in profits. They buy the Shares up cheap again...The Brokers controlling Social Security funds willingly selling those shares cheap...repeat over and over again.
Wall Street and the Stock Market is a SCAM. They need a new pool of Investment Capital to continue to work their scam. Its sitting there in the form of Social security.
There has been a persistent "rumor" that Soros funds wikileaks through one of his foundations......
Here is WSJ article about The US solicitor General bolcks Fed appeal to the supreme court.
http://blogs.wsj.com/economics/2010/10/27/banks-us-solicitor-general-blocked-fed-appeal-to-supreme-court/
The jobs losses will be permanent. Pay attention to paragraph 2 and 3.
http://www.counterpunch.org/roberts10282010.html
aesops dog: I agree with you -- people should read articles written by Paul Craig Roberts. He gets it -- the job losses are permanent!
Chris Hedges, too, makes the same point in his articles, talks and in his books as well.
and couple that w/ a rising population where you need 2 to 3 million new jobs a year created just to keep pace w/ population growth you have permanent unemployment from here on out....
so supply up and demand down = lower wages!
look for an attack on the federal min wage when the brownshirts take control of congress
okay, while i agree that all the banks involved in the mortgage crisis deserve to be prosecuted and either cover their own losses or be allowed to fail, and while i agree that largely unregulated banks charge a long list of essentially fraudulent fees to their customers, I DON'T agree that, as the author states, "The overwhelming majority (of foreclosed on homeowners) are people who got into trouble through no fault of their own."
as your mother used to say, "it takes two to tango." like it or not (and i don't), we live in a capitalist economy and home ownership is not a god-given right. and asset prices sometimes go down. and if we purchase an asset with little or no money down at an inflated price and then borrow against it to buy a jet ski -- and THEN the asset price goes down, we're in deep doo-doo.
the "great recession" was the result of the collapse of a fraud perpetrated by banks not on, but WITH, the consuming public.
certainly, it's an outrage that working and middle class taxpayers should have to pay a penny to salvage a bankrupt bank -- much less pay a multi-million dollar banker bonus; but it's also hugely unfair for working and middle class taxpayers who exercised restraint and prudence -- who rented, who went without jet skis, who remained observant of the commonly-known fact that prices can also go down, who didn't succumb to a culture that at every level was saying, "Oh come on, everyone's doing it" -- it's hugely unfair that those people and their children and their children's children should be faced with the choice of watching their less considerate compatriots fall into poverty, or significantly lowering their own already-modest standard of living further to bail them out.
should we, as a society, have a safety net to cover every man, woman and child from the unforseeable vicissitudes of life in an unpredictable world? absolutely. should we have a safety net that covers folks who moved into a house with no money down and no chance of being able to make the payments on it, then borrowed against it, spent the borrowed money and then watched as the value of the house VERY PREDICTABLY collapsed -- contributing to the undermining of a debt-laden economy, and in many cases costing those very "homeowners" their jobs? maybe, but boy that's a tough one to swallow. and railing against the (very real) exploitative policies of banks doesn't make it any less tough. and pretending that this was a rare occurrence and that most of those facing foreclosure are innocent victims (reasonable evidence indicates that many are, but many more are not) won't change the reality.
my point here is that progressives who made bad choices shouldn't just assume that progressives who made good choices see this as just another issue of social or economic injustice. it's much more complicated than that and the author of this piece-- and many of my much-loved friends -- need to acknowledge that.
there's no good choice in the neo-nazi capitalist system. get it? guess not.
I agree that this a complicated matter. However, people need to move away from blaming the victims and focus on taking on the perpetrators who put us here in the first place. The best thing to do is to focus on what conditions people into making bad decisions before making a judgment as to which victims are innocent vs guilty.
A lot of those mortgages (especially the "liars' loans") were not made by banks, but by independent mortgage brokers. These guys filled out the papers, sold the mortgages "upward" in the system, collected their fees and went on to issue more mortgages. When Indiana required them to pass a basic test showing they understood the laws involved, most of the firms folded and left the state.
These guys are not mentioned in any of the articles I have read about the mortgage mess. They should be first in line if anyone is held responsible.
Between the mortgage brokers and the banks, neither of them are trustworthy.
http://www.thetruthaboutmortgage.com/mortgage-brokers-vs-banks/
sorry but I'm not buying that! 1st off most people lost their homes because they LOST THEIR JOBS!
and the others lost theirs because when their ARM ran out the banks called the loans due instead of rolling the loans over as was promised when people took those loans.... then people needed to plop down 10's of thousands of money at a time when people are tight - even if they have jobs....
and the banks have received in credits and loans of over 25 trillion - (stiglitz and krugman) - while the ENTIRE RESIDENTIAL MORTGAGE MARKET is around 11 to 12 trillion.....
so the gov and the FED have given out more than enough money to PAY OFF EVERY SINGLE MORTGAGE IN AMERICA 2 times over... not just the ones in default.....
and average americans have the right to expect the FED and others running the US economy not to actively work at bankrupting them and then calling it their fault....
BRING BACK THE GUILLOTINE!
MTDON: Alas, the numbers (legal bank heist) are as nebulous as those configured as collateral damage in the twin wars of empire. We've heard everything from $700 billion to several trillion, in terms of "aid" to failing banks. I don't know if it's 25 trillion; or how many trillion went down another rabbit hole like similar amounts that allegedly went missing on their way to Iraq.
The entire American enterprise is so wrought with guilt, graft, and corruption as to make any attempt at accurate numbers its own impossible feat. And that makes remedies harder to find, no less define.
I do agree with your recipe... post facto.
desperate people,
with no vested interest in the success of the system that sucks the blood of the working majority to the last drop,
have no reason to make the "good choices" that the parasitic system allows.
the parasites can continue to under-estimate the working people's intelligence at their own peril.
i agree, the system is rigged, it sucks, it's run by an elite kleptocracy. and when the victims of that system make their "choices," they needn't consider those running the system; what i'm suggesting, though, is that when the consequence of their behavior further victimizes their fellow victims, they ought to acknowledge that and address it.
the world is a complicated place and while it's tempting to let our anger simplify it for us, it's not always right. i'm not saying, "lose the anger;" i'm saying use it wisely and fairly.
many many people have been foreclosed on and lost their homes when their ARM loans are not renewed and the people are forced to refi.....
But w/ prices down - the 20% down (on a 80/20 loan)has been lost so the people are forced to either pony up another $30,000 to $50,000 to refi....
An easy way to prevent this would be to simply make the banks refi the loans at the current market rate w/out requiring a new appraisal -
even if they only offered this to people that are not in arrears it would still stop many many foreclosures.....
but the demonrats can't even do that for the people....
Screw the dem's - they deserve everything they get this fall......
Either government makes the banks pay or we all make the switch to credit unions and try our luck out. The latter might be more likely until we can get a government that listens.
My suggestion: Nationwide mortgage boycott.
This is a part of my post from above made yesterday 10-28 @ 10:11 am... (minor typos corrected).
Here is a WSJ article "The US Solicitor General Blocks Fed Appeal to the Supreme Court". (mispellings etc. corrected)
http://blogs.wsj.com/economics/2010/10/27/banks-us-solicitor-general-blocked-fed-appeal-to-supreme-cou...
IMPORTANT UPDATE!
http://dailybail.com/home/update-banking-group-asks-us-supreme-court-to-hear-federal-r.html
WOW, this one is an eye opener concerning Citi......
http://cryptome.org/0002/citigroup-dmca/citigroup-dmca2.htm
There is another link listed in the top section of the above listed link you really need to see.