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Dispatches From the Front
By David Glenn Cox
Yesterday was a beautiful day. The sun was shining, the trees are in bloom. My son and I were going to pick up a car that he found in a neighborhood he was familiar with from his high school days. The neighborhood showed all the signs of decline and the lawns were littered with the signs of modern times. Real estate signs and for rent signs abounded, as well as the empty properties.
As we drove through these desolate desperate streets I reflected on my own situation; that as tenuous and precarious as it is, it could still be so much worse. My son said, “They had a foreclosure eviction yesterday about a block from where I found this car. My friend Jeremy knew them. She's a widow woman and has a daughter who had borrowed money against the house. They put them out yesterday and a lot of their stuff went missing, two handguns and their laptop computers.”
I had seen foreclosures before, but this one looked like a combat zone or a natural disaster. When I was a kid the house behind the house across the street was hit by a tornado. The roof was torn off the house and their belongings scattered to the four winds. That’s what this looked like, like a scene from hurricane Katrina. A woman, maybe 60, with a daughter around 40 were rummaging through hundreds of boxes unceremoniously loaded and dumped three feet from the doors of the property, the house, the garage and the storage building around back.
As we passed my son said, “Don’t look,” but I felt a physical pain and an emotional trauma because I was watching something that shouldn’t be happening. It shouldn’t be happening to men and especially not to women, but this is America. This is what happens to people in America and someday it will be your turn and your belongings will be out in the yard. You will lose your job, most likely through no fault of your own. Or you will get sick and not be able to pay your bills. Then the bankers and the creditors will strip you bare and leave your carcass on the roadside.
I try to express myself and sometimes it comes across as pessimism and I understand that, but from where I sit here in the trenches I can’t find much to be optimistic about. I find myself in a unique situation here because I read Robert Reich the other day and with all of his education and his high profile jobs I realized that he doesn’t know shit about what’s going on here. This is a middle class, blue-collar crisis and they can’t teach it at Harvard and you can’t learn it in a boardroom; you have to live it. You have to roll around in it. You have to watch someone else drive off with your car and watch someone changing the locks on your house to begin to understand.
Then, like me, you’ll find that your optimism will fit in your coin purse. That politicians' promises will fit in a thimble. So you begin to watch and ever so slowly you begin to understand because you see this society now as an outsider. This world no longer includes you. You have no reason to go to the mall or to the movies, and for fun you talk to stray cats at your door. I’ve met so many stray cats, people like myself who have lost everything. They spit at Obama’s platitudes and cuss Republican ineptitude and intransigency.
They know instinctively like I know that there are winners and losers here, that for every old woman put out of her house some banker is smiling and calculating his profit. FDR saved over a million homes from foreclosure in a year. Obama’s rescued a hundred and fifty thousand in 14 months but it’s pretty obvious that if you leave the banks in charge they’ll find a way to profit from it. Misery and injustice don’t show up in an accounting ledger.
The Federal Deposit Insurance Corporation (FDIC) has begun to sell off forty billion dollars in bad assets for twenty-two cents on the dollar. These assets, taken from failed institutions, are in many cases bundled mortgage loans that the Wall Street sharpies can pick up for a song. At twenty-two cents on the dollar a two hundred thousand dollar house costs forty-four thousand dollars. Kind of hard to lose on a deal like that, isn’t it?
The same companies that bought the troubled assets after Reagan tanked the savings and loan industry are circling the tank again with their fins proudly showing. Little old ladies in mortgage trouble? “Hit the bricks, bitch!” Bankers with cash, “Right this way, gentlemen.” This time the federal government is doing it a bit differently from the Reagan era. Rather than throwing chum to the sharks, this time there is a hook; the government must be allowed to wet its beak. The FDIC will hold on to fifty percent of some portfolios and is demanding a share of the profits up to seventy percent.
Starwood Capital Group Chief Executive Officer Barry Sternlicht told potential investors in February it’s "very hard to lose money on the deals."
“'They are doing a much better job this time around," said John Bovenzi, the FDIC’s chief operating officer until last year, who also helped unwind the S&L crisis. "They have learned a lot, and they aren’t making the same mistakes."
Oh, God, yes, they learned a bunch. Instead of just doling out the property like Monopoly deeds for pennies on the dollar, this time the government wants a cut of the profits. But it gets even better!
“Loan sales planned or completed in 2010 are on pace to reach at least $10 billion in book value by mid-year, matching the total for all of 2009. The FDIC arranged at least $860 million in interest-free financing this year to support deals, according to statements from the buyers. A new sale of FDIC- owned loans with a book value of $1.97 billion is scheduled for June.”
Free financing! Millions of struggling Americans begging mortgage holders to reduce principle or interest by one or two percent and the FDIC is selling mortgages for twenty-two cents on the dollar with zero interest!
“The financing helps pricing,” FDIC Chairman Sheila Bair said in a March 19 interview. The packages include hundreds of loans where borrowers aren’t making payments. Some “may be so distressed that a healthy bank just does not want to deal with them,” Bair said.
Not everyone agrees. University of Louisiana Professor of Finance Linus Wilson argues that FDIC’s zero-percent financing artificially inflates prices by as much as 20 percent and leaves the agency’s insurance fund vulnerable to losses.
For the bankers and investors, these are can’t-miss, sweet deals at great rates; for the middle class and people in trouble, you get nothing! You’d think a deal like this would be too good to pass up. Well, you’re wrong because it gets better. "The government is entitled to a share of the profits." The private investors said this, and these are their words so I think it is fully appropriate that they get full credit for them. The government is entitled to a share of the profits from the private investors that they “squeeze” from delinquent homeowners. If, however, the struggling delinquent can’t be squeezed, then the FDIC will consider writing down the cost of the banker's investment!
Struggling homeowners must deal with the banks while the federal government works with the banks, as well as partners with them, no less. I’d say considering the circumstances I’m still an optimist. The same banks that tanked the economy get to borrow the money back from the Federal Reserve for a quarter of a percent. While you, and notice that I don’t include myself because I’m no longer a taxpayer, will pay out three and a half percent interest to give the bankers their money at a quarter percent.
Considering it’s the largest transfer of wealth in American history from the middle class to the investor class, I’d say I’m still a sport! I think more than anything else what I want for you to understand is that this isn’t about me. There are only two kinds of people here, those that are wet and those who are going to get wet. I’m wet, I’m soaked to the bone, but they can only get you once. They’ll take everything you’ve got and steal from you in the process. They’ll leave behind only your memories and dreams of former days.
Dreams of when you had a job and a house and a car and a future. I haven’t lost my sense of humor though. I can still laugh at tea-partiers and the people who pay attention to them and worry about them. A dozen bikers and myself could send the whole bunch scurrying for their Suburbans and minivans. But remember this, when the paper rolls up the far edges join in the middle, and the next version of coffee klatches or tea parties won’t carry funny signs, but bricks. Especially when they discover that the people who’ve robbed them were rewarded and subsidized for it by their own government.
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