Millions of Americans have had their homes foreclosed in the past few years. Many had adjustable rate mortgages they didnât understand, sold them by slick salespeople for companies like Countrywide Financial. When these mortgages reset to unaffordable levels, and they couldnât refinance, they lost their homes.
Others who had less fraudulent mortgages are losing their homes anyway because of the economic downturn. After the 2008 crash, their income dropped--for example real estate brokers couldnât sell any houses for a while-- and they missed a mortgage payment or two. They attempted to get in touch with their bank to make an arrangement to catch up, but found themselves in foreclosure instead.
In the 1940âs fantasy world of Its a Wonderful Life, you go down to the bank and talk to George Bailey, whom youâve known all your life. George cuts you a break and is willing to wait a month or two for you to get on your feet, because heâs a compassionate man but also because its good business--he wants to keep you in your house and keep doing business with you the rest of your life.
In our real world, though, you will discover that there is nobody on the other end of the phone at Bank of America, HSBC, or Citi who has the authority to do anything for you. The bank is a huge automaton moving to foreclose you after you missed two payments, even though you are now offering to catch up. Your mortgage has been assigned and sliced and diced, to support mortgage backed securities, and finding out the real identity of the entity suing you in foreclosure turns out to be impossible sometimes. The court requires a conference for the purpose of giving the bank a chance to offer you a mortgage modification, but the banks ignore this requirement without consequences, making a fool of the court: they send inexperienced, desperate attorneys who charge by the conference (themselves victims of late capitalism, see below) who like the employee you got in the telephone have no authority to make a deal. A new lawyer comes to each conference, and none even knows what was said at the last conference. The court then has a choice, to haul in the CEO of Bank of America and sentence him to contempt, or to carry on as if the system is working to protect you. It does the latter.
Or perhaps you are new to the work world, staggering under $120,000 in debt to obtain a two year dental technician degree, or $700,000 for college and medical school. I saw an interview with one young woman who calculated that if she had no children, took no time off, never lost her job, she might pay off her loans by the time she was 57. Student loans can never be discharged in bankruptcy.
You came to New York City because it offered hope or upward mobility in your chosen career of arts, entertainment, business or law, or you grew up here and want to stay. All you can afford is $800 a month for rent on your salary, so you have no choice but to pile up in a two bedroom apartment with five other people, all of them paying $800 also. Thatâs because there are no $800 apartments. New York is a city in which $20,000 and $30,000 salaries are still entry level pay to break in to the career you want, but apartments are $3000 a month. Thereâs no safety net and as you look into the future, you know youâre probably not going to make it here.
If you grew up in the Bronx and you donât have a college degree, or maybe even if you do, only minimum wage jobs will be available, and in that case youâre earning $15,000 a year in the city of the $3,000 apartment.
You probably didnât have health insurance before the Affordable Health Act required it. Your whole life was a gamble you wouldnât get hurt or sick. If you are hospitalized, you could run up a $20,000 medical bill in four days and there is no way to pay that on a $30,000 salary. Even with insurance, of you have a 25% deductible, four days in the hospital will still cost you $5,000, and you can't pay even that much on a $30,000 salary. Nothing in the Act prevents the second situation from happening to you--you can still be flattened by deductiibles, exemptions and out of network costs. For example, if you go in for a procedure like a colonoscopy which is covered by your plan, you may still find out later the anesthesiologist wasnât, and get a bill for $2000.
Maybe you thought you were one of the lucky because you got in to law school and secured loans to pay for it, at St. Johnâs or Cardozo. But by the time you graduated you discovered that you had been sold another crock, that there are no law jobs out there and almost nobody in your graduating class is employed anywhere as a lawyer. You hear about lawsuits people are bringing against law schools claiming that the whole things is a scam, like mortgages, student loans, and health insurance, just one more way to play you and take your money without delivering the benefit you were promised.
Or maybe you are older and starting to think about retirement. You could be the widower of a cop who was killed in the line of duty and that doesnât matter any more; if you live in a city that was hammered by the downturn (declining real estate taxes, vacant houses, increasing crime, flight of population) everyone is eying your pension and it probably will be cut to a level you canât live on, if it hasnât been already. Or you are a few years younger, and joined the work world after retirement pensions were eliminated from most industries and 401(k) plans were substituted. But your 401(k) lost 50% of its value when the economy slid, and even before that, you hadnât been able to put away enough for your retirement, even with Social Securityâ¦.maybe you are still paying those student loans from thirty years ago.
You read in the newspaper that the middle class is eroding away, that there are essentially only two classes left in this country, the super-rich and everyone else. The super-rich add a few to their numbers each year, and everyone else is sliding downhill. Maybe you noticed that nobody (except a couple of Times op ed columnists writing in dense language) is talking about the causes. As far as anybody says, the mortgage crisis, the economic downturn, the erosion of the middle class, are just an Act of God, a shapeless, random misfortune for which nobody is at fault, like the weather. Except that may now be a bad metaphor, because there is a world wide scientific consensus that human activities are causing extreme weather. Hmmm, the same people denying global climate change are also denying responsibility for the recession and the decline of the middle class...
Everyone knows the saying, âthe most beautiful trick the devil ever played, was to persuade you that he does not exist,â but most of us think its from the movie The Usual Suspects. The writers were quoting Charles Baudelaire, âLe Joueur Genereuxâ, from Petits Poemes en Prose (1864). I think the truth lies in a much different narrative, that we are experiencing the incidents and accidents of late capitalism. Whatever capitalism was before-- I think the trope that early capitalism consisted mainly of small, people oriented owners is no more authentic than George Bailey --today its a succession of bubbles, one after another. We are in the final years of the mortgage bubble aftermath, and Internet Bubble #2 is already in preparation. The increasingly greedy and decreasingly regulated Wall Street folk were told, or figured out at some point, that government would not interfere if they started selling crappy and fraudulent products to the middle class. And they did, and we have been seeing the results for thirty years already, accelerating now.
Letâs pull the mortgage strand as a case study. A mortgage is, for most people, the only way to own a home. Nobody except a thin veneer of humans at the very top of the heap has ever been able to afford to pay cash for a home in America. Back when houses were $20,000, what my parents paid for a three bedroom house in Flatbush, Brooklyn in 1959, that would likely have been a yearâs salary even for middle class people making very comfortable money at the time. Everyone bought a house on a deal on which they had thirty years to pay--thatâs what a mortgage is.
When the survivors came back from World War II, there was a lot of thinking about what kind of America we wanted to have after the war and the end of the Depression. The answer was homes, education, children; the Veteransâ Administration and other government agencies helped that entire generation with mortgages and tuition, and they went and had the Baby Boom as a result. Another way of phrasing what happened, the decision government made, was: we want to make sure that everyone who came back is invited to remain in the middle class if already there, is able to join if not, to stay there securely and to raise another generation of children who will also be middle class.
That plan has changed radically. Rousseau noted two hundred and fifty years ago that there cannot be national security if individuals are not safe, yet somehow our environment has adapted to allow predators to chase us through the grasslands in which we live. Government no longer protects us against our fellow citizens, putatively our equals in a democracy, who want to sell us adjustable rate mortgages we canât afford, bundle those mortgages into securities, sell those securities to clients--and then, on top of all that, issue derivatives to insure themselves against losses on those securities. In a society formerly officially based on the understanding we are all ends not means, the Wall Street players are now allowed to treat us as tools or marks, and use us to achieve wealth in a way that leaves us much poorer or even destitute of anything. It is now apparently acceptable for millions of Americans to lose their homes as part of a disreputable financial gamble by the banks and brokerages.
That post-World War II invitation to join the middle class is being withdrawn. For the last groups invited to the party, the African Americans and Latinos who worked hard, qualified for mortgages and were proud to own the roofs over their familyâs heads, it now seems it was never a serious invitation anyway, just a barefaced fraud, to sell them mortgages they would never be able to afford when the rates reset. Instead of George Bailey, eagerly and ethically building a stable community of people who would be customers forever, eager young Countrywide salespeople were just trying to write as many mortgages as possible for two selfish purposes: to make their commissions and create the building blocks for the securities created by their higher-ups. They didnât care about the quality of the products, or their impact on us the customers, or that the consequences would inflict gross suffering on millions of families, and actual homelessness for some.
If you need an additional case study of the phenomenon, look into the Glass-Steagal act. Adopted after the Depression to prevent banks from ever again trading in risky securities, it was repealed by a Republican congress in the 1990âs, in legislation signed, not vetoed, by Bill Clinton, who refuses to this day to see any connection to the events less than ten years later, when banks which bet largely on risky mortgage-backed securities were in danger of failure and had to be bailed out under TARP. Republicans are still fighting like wildcats to prevent any regulation of derivatives, and banks are again beginning to issue mortgage-related securities and derivatives. Dodd-Frank will reintroduce some levels of protection--and the conservatives are doing everything they can to roll back anything in the law which would prevent the same thing from happening again.
You must judge for yourself if the devil exists. I believe that anyone with common sense can clearly see whatâs happening here. Wall Street was set free to prey on people like you and me, is doing so heartily, and politicians who rely on campaign contributions from Wall Street types have effectively ended any attempt by government to protect us against depredation. Each new case will filter up to a Supreme Court which has two members, Justices Scalia and Thomas, who openly travel to and participate in Koch Brothers conferences-- the billionaires who are pouring millions of their own dollars into opposing any protection of any nature for the middle class. The Koch Brothers donât want unions, limits on campaign contributions, environmental regulation, a government role in health insurance, any kind of social safety net for the middle class.
In the history of the world, a declining middle class has always been a symptom of a fatal disease for any nation, from Sparta onwards. The goal of a democracy always must drive towards an expanding middle class; nations are most stable when almost everyone is included. It is hard to imagine what kind of democracy you can have when the opposite condition pertains, when the middle class is fracturing, shrinking, when inequality is becoming greater. What could the other liberties possibly mean in such a context? Freedom of speech in our world seems to mean âthe right to complain, as you circle the drainâ.
Which finally gets us to the question suggested by the title of this essay: why arenât you angry? Millions of Americans who took mortgages through 2008 were played by Wall Street as thoroughly as if they had been the victims of an old timey short con, asked to deposit a forged $5,000 check while wiring $1,000 immediately to a foreigner. Yet the vast majority of these victims are now going gently into that good night, passively and hopelessly giving up their homes, their wealth, their shot at the middle class without pushing back, without complaint. If a few hundred thousand of those millions chained themselves to the doors of their homes when the foreclosure was being served, or moved their furniture and families into the ATM vestibules at the bank which loaned them the money, or drowned the auctioneer out at the foreclosure auction by loudly singing, government might have a better idea that the middle class cannot and will not be sacrificed to Wall Street for profits. It is astonishing to me, completely unexpected and unprecedented, that we are experiencing our own financial destruction with such complacency.
I think the Official Narrative has something to do with it. If the economy crashing is just One of Those Things That Randomly Happens, like a lightning storm, instead of being caused by an artificially induced mortgage bubble based on sheer greed, then there is nothing anybody can do about it. This is the Wizard of Oz explanation: pay no attention to the man behind the curtain. If that doesnât succeed in baffling and silencing you, the second line of defense is, its your own damn fault. Why did you take a mortgage you couldnât afford? Similarly, the guy who bought your car via a forged money order for twice its value sent from another country, and persuaded you via some convincing story to wire him back the âexcessâ, should walk scot free and you take all the blame for believing him. Nobody else is to blame, for thatâs just the way capitalism works, and by the way, we need to give the billionaires a little license and latitude, so they can create the jobs you donât have or which donât pay enough for your to rent an apartment!
Push a Libertarian hard enough, and you eventually get to the real explanation: the world is unequal, some people who have more than you will use that leverage to acquire even more at your expense, so suck it up, its just the way the world operates. But that isnât really an argument, just a brutal lack of one; in fact, its a proclamation that arguments are unnecessary and useless, like a parent answering âBecause Iâm the daddy!â
If power wonât actually preserve the peace by protecting you, it will as its second line of defense leave you in a state of helpless, passive shame and suffering, feeling whatever happened is an act of an impartial or malign universe, and anyway was really somehow your fault, and thereâs nothing to be done about it. But if you understand that shame is rage turned inwards, and turn it outwards instead, whatever else happens, youâve just recaptured your own status as an independent, proud, opinionated individual, the supposed bastion and enabler of a democracy, someone who has a right to demand the respect even of the Koch Brothers. What you accomplish from there is up to you, but you will have taken the most important first step towards countering the nonsense, and freeing yourself from that expectation you will be a passive mark, a mere pawn in someone elseâs game instead of a player in your own. There are times for shame, but this is not one; you didnât do anything wrong; you are being played; its a time for rage.