Our Subprime Economy

The corporate press has been filled with stories about the subprime mortgage mess, mostly speculation about how it will affect what are referred to as "the markets". It is understood that "the markets" will have to make some "adjustments" to the disaster.

Apparently this means large bonuses to the financial wizards who came up with the subprime mortgage idea and more government bailouts similar to the one recently engineered by Ben S. Bernanke. Despite being derided by commentators and pundits as Wall Street socialism and welfare for the money losing classes, it was applauded by the free market fundamentalists who got us into the mess in the first place.

Business Week even put Bernanke on the cover looking like Lenin in an old Soviet agitprop poster. Move over Ayn Rand, Business Bolshevism will put red ink stained Wall Street back into the black. 

I call all of this the Bob Dylan theory of economics from his song Love Minus Zero/No Limit.

"In the dime stores and bus stations,
People talk of situations,
Read books, repeat quotations,
Draw conclusions on the wall.
Some speak of the future,
My love she speaks softly,
She knows there’s no success like failure
And that failure’s no success at all."

Yes, for the the titans of high finance there’s no success like failure. But for the rest of us, failure’s no success at all.

It’s an an economic Katrina  ravaging all of working class America. Entire neighborhoods are at risk as banks foreclose subprime mortgages, people are thrown out into the street and boarded up homes sink into disrepair. Hardest hit are communities of color and female homeowners. It’s rapidly becomg a form of ethnic and gender cleansing.

The corporate press has been doing a lot of finger wagging in the direction of the working class. How dare these irresponsible individuals take out loans that they might not be able to pay back. Didn’t they read the fine print? Haven’t they heard of financial planning? Didn’t they check it out with a top rated corporate lawfirm like Wachtell, Lipton, Rosen & Katz  or with the prestigious Price Waterhouse accountants?

What’s the matter with these people anyway?

Of course, the corporate press never asks why so many working class people can’t afford decent housing while MacMansions and pricey condos sprout up like toadstools after a spring rain. I guess it never occurred to them that if you don’t pay workers enough money to buy products in the marketplace, that might have economic consequences.

Even that old anti-union anti-semitic skinflint Henry Ford knew that, which is why he paid his workers above "market" rate even though they had no union at that time. You can’t sell Model T’s unless people can afford to buy them.

By the way, he was trashed by the rest of his corporate contemporaries for doing this. Such shortighted thinking help lead to the 1929 stock market crash and the Great Depression.

As Woody Guthrie used to sing back in those bad old days, "Some will rob you with a six gun…and some with a fountain pen."

But the even the bad old days weren’t all bad. When faced with foreclosures, Depression Era farmers would attend foreclosure sales and with stony expressions, shotguns and pitchforks, dare anyone to bid more than a penny. In Depression Era cities, the Unemployed Councils would gather up the neighbors and block evictions with their bodies and their their anger.

All of this protest scared our political class so much that after World War II, young veterans coming home from the worst war in humanity’s long bloody history could secure low cost government subsidized home loans that helped fuel the long economic boom of the 1950’s.

Hell, I lived in one of those government subsidized working class subdivisions until my teen years.

But because of Jim Crow, people of color were not able to take advantage of these loans as easily as white folks.

Part of our hidden history as a nation is how much this racial disparity led to white working class people having more family wealth to pass down to their children.

Right now my partner Estelle and I live in a rather ordinary 19th century frame two-flat "worth" hundreds of thousands of dollars in today’s still inflated housing market. We were able to buy this when it was still affordable thanks to parental help from a generation who was able to take full advantage of those low cost veterans’ loans.

The racial disparity this represents means that today’s housing crisis will hit hardest on people of color whose history is much different.

The AFL-CIO has called for a moratorium on subprime mortage foreclosures and had this to say in front of the U.S. House Financial Services Committee:

"Some say, let working people suffer; markets left alone will get it right in the end. Yet somehow there is always help for the well-connected—cheap money for the banks, severance packages for their failed executives, billions in bonuses for the investment bankers who structured the mortgage deals. Workers, single women who are heads of households, people of color, the retired, are just collateral damage. But not this time—this time we must act to help the people who really need the help—the alternative is genuine economic crisis."

All of this makes me question the economic literacy of the well compensated citizens of Wall Street and their friends in Washington. Didn’t they see where their casino-style investments, their toothless "regulatory" agencies and their tight fisted low wage policy would lead?

Then again, maybe they did. People equipped with golden parachutes always land on their feet.

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