April 5, 2007

Subprime Scandal: Don't Blame the Victims

It's so predictable. Soon you'll be hearing politicians and corporate media pundits repeat the following over and over:

"We feel bad that people are loosing their homes to foreclosure, but they should have known better than to take on more debt than they could afford."

Many of the people who are loosing their homes will go along with this half-truth and drop their heads in guilty shame. They won't realize that they are victims of the The cancer stage of capitalism.[1]

Wealth has been consolidating into the hands of fewer people and corporations over the past few decades starting with policies of the Regan administration. It continued through policies of the Clinton (DLC) Administration, including support of corporate globalization and the 1996 Telecommunications Act. Then, the dot-com bubble burst and corporate corruption, symbolized by Enron, resulted in capital flight from Wall Street. This forced investment wealth to find a new home, and much of it fled to real estate; not just buying property, but investing in mortgage backed securities. Now, not only are subprime mortgage holders feeling pain, but pensions, university endowments, insurance companies and some of the largest commercial banks that are over-invested in the real estate bubble are soon to feel the pain (40 mortgage companies have recently filed for bankruptcy).

Corporate-sponsored Congressional deregulation of the financial and real estate industries allowed the real estate and associated finance industrial complex to run amok (get corrupt). Not only did money run to real estate, but money was created from thin air in the form of people taking out loans literally on top of loans on top of artificial equity, which fueled more speculation until this iterative cycle inflated an artificial real estate bubble of historic proportions. This led to artificially high real estate prices; how many of us have heard friends say, "I couldn't even afford to buy the house I live in. Glad I bought it when I did." Predatory lenders continued to lull people into signing mortgage loans for these over-priced homes. Profit-driven lenders convinced people that these exotic mortgages were the norm, and the only way anyone could afford to buy a home these days, suggesting that "every one's in the same boat."

So, is it really fair to blame people caught in default for over-priced homes, and simply look the other way from Congress, Bush's regulatory agencies, Wall Street, get-rich-quick scammers and the corporate media that has watched this travesty unfold without saying anything? Is the media really that clueless, or are they just part of the keep-quiet inside crowd?

One more prediction; it's certain that several members of Congress on both sides of the isle are implicated in this mess, just like the Savings and Loan tripple-scandal of the 1980s. The first scandal was the corporate-sponsored Congressional deregulation of the Regan era. The second scandal was the corporate corrupt exploitation of the deregulated markets. The third scandal was that Congress hid their blame buy bailing out the irresponsible industries with government bonds. That resulted in tax payers not only paying for the binge of the S & L scammers, but paying interest on the government bonds to.... those who are wealthy enough to buy the bonds... including those who profited from the S & L scams.

Will the public ever learn? We need to put some people in jail, regardless of their political affiliation.


1. This is a reference to John McMurtry's book, The Cancer Stage of Capitalism. The US economy has evolved to a stage in which few tangible products are created. Instead, accumulated capital is moved around in speculative activities that are disconnected from the real economy. This can result in many dislocations, such as commodity prices being driven up by hedge funds, hitting small farmers with prices that don't make "economic" sense and threatening their existence.

No comments: