Using Technology to Deepen Democracy, Using Democracy to Ensure Technology Benefits Us All

Friday, January 18, 2008

Faces at the Bottom of the Shell Game

[via Democracy Now!]

According to a Report just issued by United for a Fair Economy, the ongoing subprime mortgage crisis will cause people of color in particular to lose more than a hundred billion dollars. This would constitute the greatest loss of wealth for African Americans in modern U.S. history. People of color in general stand to lose twice as much wealth over the course of the crisis as compared to whites.

One of the authors of the Report, Dedrick Muhammad, Senior Organizer and Research Associate at the Institute for Policy Studies, was interviewed yesterday on Democracy Now! to talk about the crisis and its devastating and disproportionate impact on people of color. I want to highlight a few points Muhammad made, and encourage everybody to read the whole transcript or listen to the whole segment available at the other side of the link to Democracy Now!

Muhammad begins his case by framing the subprime mortgage crisis in connection with the ongoing catastrophic failure of neoliberal governance and crony capitalist "reconstruction" that we summarize now with the single word: "Katrina."

This way of framing his case seems to me pretty devastating:
[J]ust as Katrina a few years ago revealed the great wealth divide and how racialized this wealth divide is in this country, we’re going to see the subprime crisis do similar things.

As African Americans, Latino Americans, in particular, we’re trying to become homeowners, which is the number one source of wealth for most Americans. We see private companies taking advantage of African Americans and Latinos, putting them into loans that they could not afford, which will, in fact, actually take away the little wealth that African Americans and Latinos have been able to develop over these last thirty, forty years.

There are structural and historical reasons that account for the disproportionate abuse of people of color by these reckless lending practices, and so this isn't a claim attributing the abuse to explicit racist attitudes on the part of lenders (although such attitudes are no doubt often a part of the story, given that this is the interminably racist US of A).
[W]hat’s clear is that subprime industry was focusing on the weak in our society and was trying to take advantage of people who -- most people do not have the opportunity to read through the long complicated forms that happen when you refinance or when you’re taking out a home loan. And so, because of historic racism in this country, African Americans have only about a tenth of the wealth of white Americans. And again, homeownership is a primary means of wealth development. And so, African Americans are trying to, for the first time, really become majority homeowners, and the subprime industry took advantage of that situation. So whether they had in their minds they’re going to take advantage of African Americans or not, the problem is that they were taking advantage of American citizens, and this disproportionately is impacting African Americans and Latinos, but it’s also going to impact millions of working-class and middle-class white Americans, as well.

Muhammad then goes on to point out, that it is not only the direct and disproportionate loss of wealth that will target people of color in particular in this crisis. As the consequences of the crisis reverberate into our social institutions more generally, it will be the most vulnerable members of our society who are sure to bear the brunt of the costs to come as well.
[C]ities -- and we’re going to see that states -- around the country are going to realize what a dramatic effect it’s going to have on their areas, as well, because with the decrease in home value that is part of this subprime crisis, the subprime crisis is going to lead to mass foreclosures in many areas -- Baltimore, D.C., in Michigan, as well, Nevada…. Las Vegas is one of the highest foreclosure rates. It’s bringing down the prices of homes substantially. And what that means is that property taxes are going down, so now cities and states are going to have less revenue to provide services to the people of those areas….

How did we get into this mess? How does it actually play out on the ground?

Muhammad sketches out a story that reminds me eerily of the now familiar stories of the vast loans the World Bank notoriously peddled to friendly incumbent interests in the governments of so many so-called "underdeveloped" (for this term, one should always substitute the term: "overexploited") nations for techno-hyped infrastructure projects, overurbanization, unsustainable industrial agriculture projects, and so on. These ill-conceived enterprises always ended up making a few mostly already rich people incomparably richer, while at one and the same time disrupting and dismantling traditional (and often sustainable) local lifeways and social support systems. As we all know by now, when the glorious future benefits of these idiotically overambitious projects failed to materialize, the inevitable aftermath of debt, corruption, scandal and so on would justify hideous "restructurings" of the debt, demanding "market discipline" and "austerity regimes" imposed on the vulnerable victims of these policies, dismantlement and "privatization" (put more plainly: looting) of infrastructure and social support, and so on.
[M]ortgage lenders [will] take out loans from a, let’s say, a Latino American family who made a good income but had very little wealth, and would steer them into a high-cost loan and for a property that they really could not afford. And now, oftentimes in the past, mortgage lenders wouldn’t sign on to something like this, because they would be concerned about getting their money back.

But the deal they worked out with Wall Street is that they could sell this debt to Wall Street, and then Wall Street could sell it again and again and again, and you have a whole bunch of different people at different layers making money off of bad loans. So it really became to a point where mortgage lenders didn’t even care if they were going to actually get the money back from the individual they lent it to, because they knew they were making their money off of the loans being sold over and over again in Wall Street, which is why now you’re seeing major financial institutions across the country shaking from this subprime crisis, because debt had to be paid back at some point. And even though many wealthy people have made much money off of this, at some point this debt had to be collected. And so, now we’re seeing major financial institutions suffering the consequences. But who’s going to suffer the worst consequences are those who are going to have their homes foreclosed, who are going to have their credit destroyed, and have already weakened financial communities in a much worse situation.

And so, "free enterprise" conjures up the usual fraudulent pyramid scheme, organized by the usual gang of cronies, preying, as usual, on the most vulnerable people in society, utterly failing to live up to their promises, as usual, but not before many of the authors of the failure (disdainfully ignoring all the while, as usual, the usual voices of sanity and reasonableness and caution and oversight) become obscenely rich -- some of them only for a time, but, oh, what a time they have! -- while the vulnerable victims of the failure are left to pay and pay and pay for what amounts to "legitimized" fraud.

We've got to end the rule of incumbency -- of what FDR called in an era not unlike our own, the Economic Royalists -- the incumbent interests of the corporate-militarist neoliberal/neoconservative world order. All this will take is a basic income guarantee, universal healthcare and life-long education paid for by a progressive taxation of income (including investment income) and real estate.

I dread the comments to come from smug champions of "capitalism." They've got their walls of irrefutable pie-charts and arid abstractions to hide from the world with. As usual, they will decry the "socialism" of this recitation of plain facts.

Look at the newspapers, people, the financial headlines amount to a pile of skulls at this point! We need to demolish the institutions of fraud and build the institutions of fairness. I don't give a damn if you want to call that urgent effort socialism, social democracy, welfare statism, participatory economy, localism, mutual aid, natural capitalism, whatever.

Facilitate more democracy, more equity, more diversity and free people will collaborate peer-to-peer to solve shared problems and provide one another the support, pleasure, and provocation we need. Until we democratize the world, peer-to-peer, incumbent interests will continue to play their Great Games of theft, deceit, and control. Until then, never forget and never stop fighting for the faces at the bottom of the shell game.


Anonymous said...

Prior to the wave of subprime lending, the main complaint about disadvantaged minorities and mortgages was redlining: African-Americans with bad credit or who could be statistically predicted to default more often were not being offered unprofitable loans.

Were those critics wrong? What's the optimal level of access to credit for poor people who are likely to default?

Dale Carrico said...

Surely it is something of a false alternative to ask: Who is more right? The ones who thought (and think) it's fine that historically and structurally disadvantaged people are fucked over? Or the ones who think we should fuck over the fucked over a bit more?

If one wants to propose home ownership as a pathway to historical redress and an equitable stakeholder position in a diverse society, then propose a regulated and subsidized program to do just that.

Don't throw vulnerable people into the threshing machine of white racist patriarchal capitalism and claim that the revictimization of its victims is for their own good.

Eric said...

And once again we see the calls beginning to come out from the Great Free Market Capitalists for the government (read: non-rich taxpayers) to bail them out. What is that I hear in the distance? RTC! RTC!

Defend that shit you pro-crony capitalist whores.

If you want a bailout, use your much vaunted economic genius to bail yourselves out...or, even better, to not get into these messes in the first place. It isn't as though this crisis was unforeseeable.

Eric said...

forgot to add: they claim to be deserving of their wealth because they are great risk takers all the while riding golden parachutes for failure and securing welfare from the state for themselves. Some risk.

Go die in a fire.

peco said...

How can you take their influence away? If they have enough supporters, they could keep delaying things (the end of the Iraq war, for example). I don't see why they would lose supporters. "Bipartisanship" prevents especially harsh criticism from working.

Progressive ideas generally win (eventually), but conservatives can slow them down and completely stop some (deregulation).

It is very hard to fight a group that has more power.

Dale Carrico said...

p2p formations facilitate people-powered politics, environmental crises are shaking up otherwise complacent people from their trust in incumbent interests.

This is the opening.

Institute basic income, universal healthcare, lifelong education, and create a framework for more democratic global governance (to replace non-democratic corporate-militarist global governance that exists now) step by step wherever the opportunities present themselves.

As long as green consciousness keeps the killers defensive and p2p consciousness keeps deepening democracy the momentum is with progress and against incumbency.

Can you believe people castigate me for negativity on this blog? I'm a freakin' Mouseketeer.

peco said...

The environment isn't the public's biggest concern.

For global warming, a large part of the public will be satisfied by fake fixes, so not too many supporters will leave. For everything else, conservatives could actually fix the problem without hurting them too much.

If p2p formations become more powerful, conservatives can use them too. Just substitute the Village for liberals.

Dale Carrico said...

I disagree with you on both counts. Technofixes and greenwashing need mass-mediation to sell them and p2p is already pushing back against those mechanisms. Also, p2p doesn't work for conservatives at all in my view. Bottom-up open-access formations go against the grain of the top-down discipline/control organizational structures that define incumbent politics -- not to mention the practical matter that the more p2p conservatives try to be the more the reality of the prevalence of batshit crazy racist misogynist theocratic paranoid gun-nuts in conservatism is exposed to the world, very much to their cost.

I'm eager to hear more comments on topic, btw: the conspicuously racialized face of the subprime mortgage crisis.

peco said...

Okay, I agree that corporations will be forced to protect the environment.

Conservative views seem crazy to a lot of people, but so do progressive views. They are both equally crazy to moderates/most people/a lot of people.

On topic:

All this will take is a basic income guarantee, universal healthcare and life-long education paid for by a progressive taxation of income (including investment income) and real estate.

In all countries or only some? It would have to be in "overexploited" countries too in order to work. (Even if it were only in "overexploited" countries, it would still work.)

I dread the comments to come from smug champions of "capitalism." They've got their walls of irrefutable pie-charts and arid abstractions to hide from the world with. As usual, they will decry the "socialism" of this recitation of plain facts.

Is there a relatively objective way to measure "success" other than money? (This isn't a rhetorical question.) said...

Someone needs to say something about this! IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! see it with YOUR OWN EYES!