The excesses of the sub-prime mortgage lending industry are inevitably pointing to a huge bailout by the taxpayers, and potential collapse of housing prices overall. Due to the wide popularity of home equity loans, a housing price collapse will subject many millions of homeowners to the reality of mortgage loans well in excess of the value of their homes, making it impossible to fully pay off the loan upon sale of the property.
The rise of the World Trade Organization and extensive multilateral trade and tariff agreements created since the 1980s have been accompanied by domestic economic policies that make the control of inflation a higher priority than planning and developing a full employment economy. Accordingly, millions of well-paying jobs have been outsourced offshore. Deregulated financial markets of the ‘80s resulted in rampant fraud, and the collapse of the savings and loan industry required a massive bailout by the American taxpayer. The recent subprime mortgage meltdown once again highlights the worst failings of economic policies now in vogue in much of the world.
The lending industry depends upon available capital to finance its loans, and the mortgage industry has been particularly creative in packaging high-risk/high-return investment vehicles to be sold on Wall Street. Unfortunately, when things go sour, investment shifts from venture capital to vulture capital, and our financial system begins to feed instead on the economic carrion of a distressed citizenry.
Foreclosed homes are quickly devoured by vulture capitalists eager to trade for profit on the misfortune of others. Thus it is that one middle-aged man seriously suffering from complications of Parkinson’s disease, who owed only $20,000 on a home equity line but was current with the same lender on his first mortgage, lost track of making his equity line payments and suddenly became homeless. His house, sold out from under him in foreclosure, was only returned to his possession when the story hit the front page of the San Francisco Chronicle and became a public relations nightmare for the vulture capitalists who had bought his home out of foreclosure. He is one of the lucky few.
While touting high-minded philosophy about the power and economic freedom of the individual, limiting the power of government and promoting unregulated markets, our governmental policy makers, having enjoyed the largesse of Wall Street’s huge campaign contributors, continually allow the investment community to evade the sorry results of its own excesses. Corporate bigwigs, like the CEOs at Merrill Lynch and Citicorp who presided over failed investment strategies, lose their jobs but nonetheless retain hundreds of millions in salary, stock, and retirement entitlements. The average Jill or Joe, conversely, are left to fend for themselves in an era of sharply decreased pension benefits, unavailability of affordable health insurance and virtually no job security.
The world’s wealth is held in fewer hands today than ever before in modern history. In America, the social safety net created between 1930 and 1975 has largely been dismantled, while income inequality substantially exceeds that of the 19th century period of the “robber barons.” Ironically, while the shocking economic facts are widely available online and global communication reaches billions of people, the ordinary citizen is far too preoccupied with the daily struggle to make ends meet and trying not to become dinner for the vultures.
