America's new subprime shanty-towns
In this chilling BBC clip, a newsteam ventures to one of LA's new shantytowns made up of people who've lost their homes in the subprime meltdown and now live in tents, improvised shacks or RVs on abandoned land. It's the contemporary Hooverville, and, as the Subliterate Cinephile notes, I wonder why I found out about this from the BBC and not US media.
Link
(via The Subliterate Cinephile
Not Hooverville.
Bushton. Roveston. Greenspan Heights.
Chimpyville.
well done America!
We look forward to a cultural renaissance and blossoming of gritty new art and writings in the grand tradition of the Dust Bowl and the Gangster Years!
The film alone will be magnificent! Too bad about all the blighted lives, misery and suffering. Ahhh, well, whaddya gonna do?
I'm sorry but for most of them, there is something more than just getting their house repo'd that is making it that hard for themselves. Getting your house repo'd doesn't preclude you from doing what the rest of us do: rent.
I think we need to get away from feeling sorry for people because they were greedy and/or stupid and get into a house they would inevitably be unable to afford.
I feel badly for them that they are homeless, as I do for all homeless people. But to blame their homelessness on having their home repossessed? I just don't buy that.
You didn't hear about it from the US media, because the whole country is in serious denial. Get ready to wallpaper your tenements with dollars folks!
All very well and good for you if there are just a few poor people. What will you do and say when they grossly outnumber you?
America was conned - who will pay?
Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.
There's still plenty of time for that. Now where did I put that length of rope?
Leading Economic Writer: Financial Meltdown A "Gigantic Fraud"
Says Americans "duped" by "serpent-tongued" elite
Steve Watson
Infowars.net
Monday, March 17, 2008
Propel This! - Submit to Propeller.com
A leading economic journalist has described the current financial crisis as a "gigantic fraud", the fallout of a deliberate and preconceived profit agenda to enslave the middle classes in a debt bubble.
The economics editor of the London Guardian, Larry Elliott, has hit out at the global financial elite in a refreshing piece that marks a rare shift away from the establishment hackery we are used to from the corporate media.
In an article titled America was conned - who will pay? Elliot writes:
Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.
[...]
Of course, a "new New Deal" will be born of exactly the kind of state of emergency where we'll really see the fascism kick into high gear. Each successive day is looking more and more like Alex Jones will be vindicated.
HA HA, beat ya.
Getting your house repo'd doesn't preclude you from doing what the rest of us do: rent.
Try renting with a low FICO and a foreclosure on your record. Landlords do check, you know. Most people who get foreclosed spend every last dime trying to prevent it. That leaves them with no first /last/deposit. It's not that simple.
However, America wasn't conned. America bought houses that they couldn't afford. Then America pulled non-existent equity out of those houses so that they could buy Hummers. America was greedy.
it's not NICE to beat the elderly..... and treacherous
Charlie (#4), I agree with you. The loans that these mortgage companies were offering should NEVER have been allowed in the first place. All of these foreclosures are happening due to those horrible, misleading variable interests loans. These "home owners" took a HUGE gamble accepting these loans when the ceiling was apparent.
I too feel badly for the loss of their homes but WTF were they thinking to accept these HORRIBLE loans in the first place!?! I too have sympathy but I also admit that my sympathy is limited.
If you are offered a home loan where your first year (or more) of payments goes toward the interest and nothing toward the principal - gambling on a hypothetical increase in property value - then you cannot afford to buy a home.
It is really sad that this is happening. Yet again, I am ashamed and embarrassed for my country.
Can I patent the phrase "compassionate but unsympathetic"?
Already taken by Bush, Antinous.
Who are we scapegoating again? Is this like blaming the USA economy circling the drain on "building too many houses"?
It takes two to tango. The people in this documentary may have been short sighted and over-hopeful about their prospects, but they were also victims of con jobs.
All those shabby, exploitive loans should never have been offered in the first place. The buyers were convinced they could handle an obligation that any reputable banker would know they weren't ready for. Faked employment and financial condition records, high-pressure salesmen, badly explained terms and conditions . . . it's a swindle.
The strip-mining developers, bankers, and mortgage hucksters deserve to be on the street as much as these people.
It's really perverse the way that people keep blaming the mark for falling for the con. I don't understand that attitude. Sure... the con artist depends on the gullibility and greed of his target but it isn't that hard to work out who bears the moral responsibility here.
And it isn't like these people fell victim to one unscrupulous salesman. Everybody was telling them this was ok. Hell, Greenspan kept loan rates at %1 in order to feed the bubble. The government and the media said all was good and right in the world. Come on in, the water's fine!
building too many houses
I live in a city where maybe 5% of the housing is new and empty. The condo complex next to me was built about four years ago and has sold roughly five out of fifty units. Yet, building continues unabated. The developers have to keep building to keep the money flowing from the lenders. Home construction in the US has become a pyramid scheme.
I don't know who can be blamed for the fact that where there is hammer there is anvil.
Can you blame the hammer? Can you blame the anvil?
This however, is teh awesome!
Chicken Game
“‘I refinanced a couple of years ago and pulled out $100,000 and put in a fabulous pool,’ he said. ‘Now I’ve got this fabulous pool and fabulous house, but it’s not worth anything. Why shouldn’t I be building equity over the next four to five years instead of playing catch-up?’”
“The man said he has not made a mortgage payment for five months.”
“‘I’m playing the bank game,’ he said. ‘I’m playing chicken with them. I already got them to agree to put (the unpaid) payments on the tail end of the loan. What I’m really pushing them to do is to (adjust my mortgage) for the current market value and write off the rest. I’d love (to have it) lopped down to a $450,000 basis rather than $710,000.’”
“If the bank won’t negotiate, he’ll walk away, the man said.”
Sure... the con artist depends on the gullibility and greed of his target but it isn't that hard to work out who bears the moral responsibility here.
You obviously haven't worked in the real estate industry. The moral responsibility belongs squarely with the homebuyers. You know, those people who stared out the window looking bored while I tried to explain the purchase contract to them. The ones that wanted a 110% loan so that they could buy an RV as part of their home purchase. The ones with the 500 FICO score and a foreclosure.
How about my friend who got foreclosed so that he could buy his wife a boob job, then declared bankruptcy to get out of his towering Amex bill. Despite skipping out on a myriad of debts (thus raising my credit card rates), he's still making extravagant, unnecessary purchases using handy-dandy PayPal one-time credit cards. You're infantilizing the American public. Not without reason, mind you, but that's why we're in this mess. A complete unwillingness to take responsibility for one's choices.
Seriously. There is far more going on with THESE people than the current mortgage trouble. If they could just recently afford ANY mortgage, why can't they afford rent?
Also, every time I hear about somebody's "ever increasing mortgage payment" I wonder, why do so many people have adjustable rate mortgages? Why did so many people get into interest-only mortgages in the last few years? Sure, there have been abuses in the finance industry, but people need to take some responsibility for themselves, and READ THE EFFING CONTRACT! Avoid the balloon payments, and take the fixed rate. Just take the fixed rate, already!
Actually, this has been covered several times in the L.A. TImes, but rather than focus on how the people ended up there, it focused on the City of Ontario's (where the camp is located) efforts to evict all of the camp residents.
Greed is obviously not the problem, since if they were greedy they would not have taken action that was going to put them out of business.
What we are seeing is the inevitable product of government meddling in the housing industry.
Banks made the high risk loans precisely because our government encourages them to, by bailing them out if they fail, by keeping interest rates artificially low, by enabling artificial entities such as Freddie Mac and Fannie Mae, etc. etc.
Banks should not be lending to high-risk customers in the first place, they should insist on making the most profit possible by making loans to people with good credit so they get their money back. However, if they do that then they are tagged as discriminatory against the poor.
We can expect to see such crises repeated again and again until our government stops coddling the unsuccessful and steps out of the picture.
The proper solution is get the government entirely out of manipulating the home loan markets, which would get banks back to making sensible loans to customers who can actually pay, and let all parties suffer the consequences of any bad decisions rather than unjustly shifting responsibility to the rest of the public and prolonging the misery.
And if you wish to found a private charity to help those who lost homes, you are free to do so.
"A complete unwillingness to take responsibility for one's choices."
The Bush America, top to bottom.
The causal problem, however, is the game theory perspective of the lending institutions, in which the central banking system biases them in favor of malinvestment in extremely risky loans, because the lending institutions will not absorb the costs of failure. They win whether mortgagers default or not.
You obviously haven't worked in the real estate industry. The moral responsibility belongs squarely with the homebuyers. You know, those people who stared out the window looking bored while I tried to explain the purchase contract to them. The ones that wanted a 110% loan so that they could buy an RV as part of their home purchase. The ones with the 500 FICO score and a foreclosure.
The chumps who lent these dupes money are just as guilty. And should suffer just as much. They're in the business to asses risk. When the climate changes assuming that even high risk loans could be acceptable, they lose, too. And it's all their fault.
Poor decision making, both by buyers, and by their lenders, are a formula for bad times. Everyone was reckless and the chickens are coming home to roost.
Looks like the rest of us will be paying for this mess in one way or another. In the mean time, the (nonexistent) free market gets the blame.
I wonder, given that BB readers are all over the place, if everybody quite gets the Southern California lifestyle. Riverside County, where I live, has one of the highest foreclosure rates in the country. 20 year olds who work behind the counter at Del Taco drive Escalades, Navigators, BMWs. People drive cars that cost three times their annual pay! This is considered normal here. That way of thinking goes a long way toward explaining why we have such a high foreclosure rate.
It doesn't help matters any that these banks and investment companies based all of their loan packages, etc on the silly assumption that home prices would continue to rise exponentially. When they stopped rising, the house of cards collapsed.
The chumps who lent these dupes money are just as guilty.
Most of them are unemployed now with little hope of employment. The real estate boom created thousands of new, inexperienced, not-too-bright real estate agents and lenders looking to get rich quick. They didn't, but they did manage to help destroy the economy.
You know Antinous, I can't even imagine thinking the way the people you describe think. Seriously, that's way outside of my experience.
On the other hand
"We can expect to see such crises repeated again and again until our government stops coddling the unsuccessful and steps out of the picture."
I don't see social Darwinism as a solution either. Oh yay, socialism for the rich and capitalism for the poor. What a wonderful world that would be. Shanty towns in every metro and ragamuffin children selling their bodies on the street. Just so we can feel superior.
One boy,
Boy for sale.
Come take a peep.
Have you ever seen as
Nice
A boy
For sale.
Five years ago there were three occupations here: realtor, waiter, whore. Now there's just waiter and whore.
I live in Canada. Canadian media with its European counterparts covered the tent cities in California many times over the last few months! While American
Now the USA not only became Police state but it seems that news are being censored now!
But does it explain the actions of those extending the credit?
It's the same mindset all the way up. Your realtor encourages you to buy what you can't afford because that's how she gets paid. Your lender fudges your documents to get you the loan because that's how he gets paid. The underwriters play along with the sham because, without loans, they don't have jobs. And at the very top, the ultra rich sit spider-like, waiting for the capital to return to them. Does it ever change?
And at the very top, the ultra rich sit spider-like, waiting for the capital to return to them. Does it ever change?
no
Sky. Is. Falling.
The video clip is a little misleading. From what I understand, this is one particular tent city in Ontario, CA (not exactly LA; part of the Inland Empire) and not one of thousands (yet).
I first heard about it in this article with a somewhat deceptively uplifting headline in the LA Times "Ontario Opens Arms to Homeless" (2.3.08).
Then, a little over a month later, this one: "Tent City Evicting Homeless who are not from Ontario"(3.14.08), as mentioned by Sambaoo in a previous comment.
Though the BBC video isn't too specific, the accompanying BBC article is a little more clear. The video gives the impression that most of the people living in Tent City are homeless because of the "sub-prime meltdown." Referring to the man in the video :
"There are thousands like him across California- people whose inability to finance their mortgages has cost them their homes; many thousands more across the US.
But in Tent City, at least, he is in a minority - few are here as a direct result of the housing crash."
Obviously, this is still completely terrible and f***ed up, just not quite in the way that the brief video implies. Even the headline of the BBC article has a far different tone than that of the video:
"Tent city highlights US homes crisis"
vs. the way more alarming (and plural)
"Tent cities spring up in LA."
Not that too many people read the rapidly shrinking LA Times anymore, but they did report it before the BBC.
Guys, if you think that is bad, you should look at the dollar versus practically any other foreign currency.
I’m no expert on things, but I do like buying some vintage Japanese toys off of Yahoo! Japan auctions. And holy crap! Just in the past week the Yen exchange rate from the dollar went from 103 Yen to $1 on (3/10) to 97 Yen to the $1 today (3/17).
Something really, really scary and really big is happening out there folks.
I didn't realize it had gotten this bad. Does anyone know if this is happening outside of California also?
"Yet for some reason investment banks such as Bear Stearns (and soon Lehman Brothers) are insulated from the consequences of their reckless lending by the central banking system with bail-out money creation from the Federal Reserve. How odd. "
Oh they are not insulated from their actions
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.WZcjaU572w
The entire system is undergoing collapse. There were a few people who did well out of this mess, but trust me. I work in the business and the pain is being liberally spread top to bottom. From PIMCO and CALPERS to those living in the shanty towns.
" (Jimmy) Cayne (Ex Pres of Bear Stearns) still owns 5 percent of Bear's stock, the value of which fell under the JPMorgan buyout to $11.7 million from $333 million four days ago. Last month, Cayne paid $27.5 million for two adjacent 14th-floor condominiums at New York's Plaza Hotel overlooking Central Park, according to city property records."
Looks like he might be joining them in tent city.
However to blame wall street or the home buyer misses the point. When the ride started wall street couldn't get off. The biggest shareholders in pubco's and hedge funds and the like are pension funds/mutual funds. The massed contributions of Teachers, policemen, Firefighters, gaffers, construction workers etc.
However these pension funds don't have enough money to meet their retirement requirements (the tech collapse dented their growth). Hence they push whomever they hold shares in for extreme market beating growth. Driven by low interest rates and fueled by consumer greed housing was too big for wall street not invest in and take risks in. And of course the inevitable happened.
Fundamentally the booms and busts of the last 30 years are driven by these funds trying to meet their obligations of a massive retiring population which is supported by a much smaller generational cohort.
When your parents see how their retirement is dented. THEN you'll see riots in the streets.
Poor people are poor people -
And they don't understand
A man's got to make whatever he wants-
And take it with his own hands.
Poor people stay poor people -
And they never get to see
Someone's got to win in the human race-
If it isn't you, then it has to be me.
So smile while you're makin' it-
Laugh while you're takin' it-
Even though you're fakin' it-
Nobody's gonna know.
Nobody's gonna know.
It's no use mumbling.
It's no use grumbling.
Life just isn't fair-
There's no easy days
There's no easy ways
Just get out there and do it!
And sing and they'll sing your song-
Laugh while you're getting on-
Smile and they'll string along-
And nobody's gonna know.
Nobody's gonna know.
Nobody's gonna know.
And nobody's gonna know.
"Something really, really scary and really big is happening out there folks."
Oh it's not scary. It's normal. When the perception is that the supply of money exceeds the demand, the value will drop.
The US government stopped telling everyone how much it was printing, so we all decided there was a bad reason why they did this.
If it wants to restore confidence in the dollar, the first step is to tell us how many of them there are in the first place. Until that time, you'd be best to have some precious metals tucked away in a corner.
fear not
We all want justice but you got to have the money to buy it
You'd have to be a fool to close your eyes and deny it
There's a lot of poor people who are walking the streets of my town
Too blind to see that justice is used to do them right down
All life from beginning to end
You pay your monthly installments
Next to health is wealth
And only wealth will buy you justice
There'll always be a fool who insists on taking his chances
And that is the man who believes in true love romances
He will trust and rely on the goodness in human nature
Now a judge will tell you that's a pathetic creature
All life from beginning to end
You pay your monthly installments
Next to health is wealth
And only wealth will buy you justice
Money, justice
Money and justice
Money, justice
When there's a bluebird singing by your window pane
And the sun shines bright all day through
Don't forget boy
Look over your shoulder
'Cause there's always someone coming after you (la la la la)
When everything in life seems just as it should be
At last success seems just around the door
Don't forget boy
Look over your shoulder
'Cause things don't stay the same forever more (la la la la)
Hope springs eternal in a young man's breast
And he dreams of a better life ahead
Without that dream you are nothing, nothing, nothing
You have to find out for yourself that dream is dead (la la la la)
Dead (la la la la) repeat to fade
They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?
Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Why don't you remember, I'm your pal? Buddy, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Say, don't you remember, I'm your pal? Buddy, can you spare a dime?
I maintain that there could not be predatory lending without willing prey. Conned or not, at some point you have to sign a contract, and you have every opportunity to know what you're getting into.
I bought my modest home a few years back, and I read every bit of the contract. The loan officer, builder, and title company were all surprised that I was actually reading it as I was signing the mountain of paperwork. Why would you not read it? Why would you walk into a commitment like that uneducated? three years ago there were historically low interest rates, yet so many people signed on to variable rate deals.
Finance companies foolishly offering bad loans to consumers who foolishly accept them. It takes two.
Flags high, ranks closed,
The S.A. marches with silent solid steps.
Comrades shot by the red front and reaction
march in spirit with us in our ranks.
The street free for the brown battalions,
The street free for the Storm Troopers.
Millions, full of hope, look up at the swastika;
The day breaks for freedom and for bread.
For the last time the call will now be blown;
For the struggle now we all stand ready.
Soon will fly Hitler-flags over every street;
Slavery will last only a short time longer.
Flags high, ranks closed,
The S.A. marches with silent solid steps.
Comrades shot by the red front and reaction
march in spirit with us in our ranks.
think I'm kidding?
Thank you for the copy of Mises. It's very interesting to read a text from the time America was on the Gold Standard.
However. Interest rates are cut/raised after the fact. What gets the balls rolling are the( estimated) 20 trillion dollars held in pension funds moving in one direction. And believe me. It like a herd of buffalo.
http://en.wikipedia.org/wiki/Pension_fund
Well...
Like me they'll pay an analyst a small fortune for a detailed prediction of where the market is going and what asset class will outperform, and what is the correct amount of risk to take on given the rules of the fund etc.
Then they'll get a phone call saying so and so made 30% in three months investing in a hedge fund that specializes in a yen backed carry trades, or credit default swaps or any of the many other exotic financial concoctions of which sub-prime mortagages were part of.
And their common sense will go right out the window.
Of course it helps that as far as the US is concerned San Francisco, New York and Boston
are where the money is managed and there really only is a few thousand people who make the calls.
Very easy to get in herd mentality when surrounded by people saying the same things every day.
To put this in perspective, the entire capitalization of all the companies the NYSE is 18.9 trillion dollars. China's economy is 1.27 trillion dollars.
Essentially when these funds move into a market in a large way they cannot get out except very gradually. Unless they want to collapse the system and then everyone loses everything. Hence when they get caught, like now there is little choice for them but to sit it out and gradually move into other assets, like Gold, Oil, Wheat, Copper etc.
And Finally
"``Glass-Steagall protected bankers against themselves,'' Eveillard said. ``Bankers are sheep. They don't mind going over the cliff if everyone else goes over the cliff.''"
http://www.bloomberg.com/apps/news?pid=20601109&sid=aDSFgf3DHR_A&refer=home
Great discussion... but not alot of light be shed on the issue.
- First, whoever said Bear Stearns is insulated from their actions, they lost 98% of their value and lost the company over the course of 12 months. That is not insulation, so your argument fails.
- Second, to the person who said that you can't rent in the Inland Empire with a low FICO score...LOL.. people are begging for renters in that area right now. If you thought you could afford a house, you can definitely afford to pay rent.
- Third, no matter what government program is installed, people who don't pay their mortgage will have to leave one way or the other. Why should I pay for someone else's mortgage? We have government programs to assist people to buy homes that entail having to learn how to actually buy a house wisely. I suggest folks use them.
Are we allowed to say that these people didn't read the contract, and we should still help them? Or does our compassion only exist for people as smart as we'd like to be or smarter?
How about :The Bush regime encouraged the financial system to rip off people by not requiring adequate explanation or disclosure of risk in an easy-to-understand form of these complex financial instruments (or by even permitting these Instruments to arise) - the politicians abandoned the people it was their only duty to protect by Regulation and Law - which are the only tools that the politicians have.And note the Banks are all Creations of the Law, allowed to exist because they are to serve the public interest not the interests of their shareholders or most especially their Managers.
Oh yeah let the Banks "self-regulate" - Fed rates 1%(or less) for Banks (of all kinds, it appears) and 5% (or more) for the most rock-solid borrowers. Tell me, if the Markets Rule how a borrow-happy US Govt borrowing trillions for war doesn't push up interest rates? keeping War cheap by regulating interest rates for Gov. borrowing? Good money after bad?
The Boomers will have no health care insurance and their "pensions" (Based on Stock returns?) will be inflated away. This is the "Opportunity Cost" of the present situation.
And it is the Governments fault for failing to regulate and rule (and yes govern) the greedy money-men . The function of the Law is to protect the Weak and Ignorant against the depredations of the Clever and Powerful. What good is it otherwise? Otherwise, the Law becomes only the handmaid of Tyranny and Despotism.
In all, a grotesque subsidization of the least-productive paper shufflers (traders) by the people who earn their bread by the sweat of their brow, mediated facilitated and encouraged by this god-awful Disaster of a Leadership Class.
"The Bush regime encouraged the financial system to rip off people by not requiring adequate explanation"
Please show me where the disclosure requirements for home mortgages were less under Bush than under Clinton.
Second, mortgages don't need explanation and they are not complex. You borrow money and pay it off over thirty years. You can either have a fixed payment or a floating payment. That is all you really need to know.
To the buyers: get a mortgage you can afford.
To the lenders: make sure the borrower can afford it.
To the investment banks: accurately price the risk of mortgage back securities.
To all three groups: you made this bed, lie in it.
Oh, the world is so unfair. Rest assured, while the Fed will let the average Joe sink, because he made a bad investiment, that same Fed will come out and help the Fat Cat bankers. We need to really deal with the entire issue of people being greedy. What's the answer, socialism?
I'm a bit confused about how the economy works...
People are losing their homes because the economy is in bad shape. To save the economy, money will be pumped into banks and/or the stock market etc.
So, to help the poor, money must be given to the rich?
I think it would be a better idea to give money to the people who've lost their homes and other poor people. They would probably inject all that money straight into the economy (by buying food and renting a place)...
Is the system this fucked up or what is my major misunderstanding here?
You know what, look at them. Look at those people who went about looking like easy victims for financial sharks, just look at them with their disgustingly low FICO scores. How dare they think they can just walk around tempting sharks like that and get away with it, bite free?
They were asking for it.
That's to say, they were using some sort of shaped sounds and saying they wanted a place to live, might have been English I don't know, but I'm not quite sure what they were saying.
Not my fault they couldn't see i was out to ride them, not my fault they were pumped full of messages telling them that these loans were going to make all their dreams come true. Not my fault they couldn't and can't make out the difference between reality and fantasy, even if their major media, trusted community organisations and government organisations all tell them to put their trust in a bearded man in the sky who sees and guides all that they do and will help them get everything they ever wanted so long as they just believe...
Not my fault. I had to rape 'em. If not me, then someone had to.
They were asking for it.
@ #66 The system is that screwed up, sadly enough.
However, having our govt to pump $ into the economy by bailing out banks will only serve to lengthen our recession, devalue the dollar and create inflation like we have never seen before. It might not be the great depression, but it will be darn close.
Remember 2000-2001 stock market crash as a result of the dot-com boom? That "recession" was short lived, do you know why? Because businesses were allowed to fail (w/o being bailed out) then new opportunities were formed, which rejuvinated the US economy...which is how capitalism is supposed to work. (lots more where that came from on Jcyreus dot Com)
If we heard about this story in the U.S. media, then Greg Palast would be a household name, too. (www.gregpalast.com)
The number of pure fallacies in this discussion is remarkable.
Take this one for instance, "People are losing their homes because the economy is in bad shape." That is not true. People are losing their homes because they took out a mortgage they could not afford and will never be able to afford. That is why foreclosures are up. Not because of a bad economy. If you don't know what they problem is, how can you possibly offer a solution.
As for the government helping the "fat cat bankers", tell that to the owners of Bear Stearns LL...
There is a huge difference between "bailing someone out" (which the government has specifically not done) and providing liquidity to the system. It is the liquidity that will allow mortgages to be rewritten and refinanced. ll f y b-hng about helping out small borrowers should be in favor of more liquidity. Bt thn gn, f y dn't vn knw th vry bscs f wht th prblm s, hw cld y pssbly dntfy pssbl sltn vn whn t s bng crrd bfr yr vry ys.
Hey, what time is it? Isn't American Idol on?
The people who took out the failing mortgages were conned to some extent... but to a far larger extent, they were absolute idiots and irresponsible.
The real-estate and mortgage industry convinced consumers to buy bigger... and would qualify them for HUGE loans based on rising housing costs.
The dialogue was something like this:
Realtor: Why move in 5 years when your family grows? Buy bigger now. We can finance it.
Bank: Take a X year loan, and we'll do it at the variable rate, so you SAVE money
Bank (to self): SAVE money until the interest rate rises... then we make a killing!
The realtors work on a % commission, so they're always trying to inch prices up. I was once shown a rental in NYC that was just way overpriced, so I walked out. When the landlord asked me outside, I said "1500? I've seen 4 nicer places on this block for 1100 from another agent this week. you want too much." She replied "1500? I was asking 1050" - and just looked at the real estate agent who tried to weasel out of it, then said "I thought i could get you more for it".
The banks were all hoping to turn 5% interest rates into 11% rates through the variable rate scheme... they approved everyone for the low-end of the cash, but never thought through the "wait... what if people can't pay on the high end?!?"
My point is this: a lot of consumers were convinced into buying bigger than they could afford by the industry that got tanked. They're both responsible.
Cory,
There is a reason you haven't heard about this from the American media: they can't verify the story.
Let me just say right off that I am not denying that there is a mortgage crisis here in the U.S.; there is however, a great deal of difference between valid journalism and something created for its' own sake. Who made that video? What are their credentials? Who is the editor -- the gatekeeper for truth and accuracy?
Case in point: I live in Cleveland, Ohio, where the mortgage crisis is hitting just about as hard as anywhere else. We have a 15% mortgage foreclosure rate here (or something like that -- it's huge).
Recently, a French journalist arrived to do a story on the crisis in Cleveland, and he went to a house just inside the city (error #1: he reported he was in Shaker Heights, a suburb), where a dog stood in a window. He claimed, in his story, that the prior owner was so bad off that they left the dog behind.
The truth behind the dog is that the home was purchased from someone who had been transferred out of Cleveland to another city. The new owner, a developer/remodeler, left his dog there to guard the house, as thieves steal copper pipe and other metals to sell as scrap -- for a high price.
The facts are archived at www.cleveland.com, the main web site for the Cleveland Plain Dealer -- who detailed the Frenchman's poor journalism in a front-page story.
The French journalist never bothered to investigate the story, never bothered to check the facts, and just reported what he figured would be "award-winning" journalism. No checks, no balances. Absolutely nothing to prove validity -- and you are expected to believe every word.
Just because it's on the Internet doesn't automatically mean it's true, especially if it comes out of the U.S.
Guys- this WAS first reported in the US media. See Samba00 (#26) and my (#42) previous comments.
Here's the thing. We all know Three Card Monty is a scam. Yet people still play it. Is it because they're stupid? Maybe. The fact of the matter is that we don't live alone. We live in a society, and people in that society are of all kinds and types.
The fact of the matter is that Americans are typically not finance-savvy. That's just the society we live in. It's a fact.
So stop trying to say that we should kill off the majority of our society because they're not as educated or savvy as they should be. If you do that, the society will collapse, taking you with it.
I live near the tip of the iceberg--Detroit. I suggest that everyone stops paying banks anything! Have a credit card with a ballance? Let the Feds pay it for you. Have a loan of any kind? Let the Feds pay it. This country is in serious need of a good ol'fashioned depression. And you know what's going to save us? All the money controlled by the top 1% of the population. Let the f-cking ultra-wealthy help, since it's because of them that we are here. Rich bankers, fund managers, CEOs...GREEDY, greedy, greedy SOBs. And then let's take George Bush and throw him into prison for the rest of his life. Or longer.
My wife asks me why we don't have a car, when other people who make "less than we do" have cars; I shall have her read this article - and the comment, especially about kids in Cali driving BMWs - and the record profits of ExxonMobil and the lavish lifestyles of the oil-owning people of Brunei, Saudi Arabia, the Sudan, the UAE ...
My co-workers wondered why I have never and never intend to invest in the IRA we have; I am forbidden by law and like my job too much to explain it to them.
My parents wanted to know why I didn't buy a house, when the rates were so low.
Only in modern America can living the lifestyle of an ascetic be rebellion.
#76:
Uhm, have you not been paying attention?
The Federal Government is funded by us, down here, in the lower-to-middle-class. George Bush's administration gave the ultra-wealthy many, many tax breaks.
The rich are rich because they figured out ways to not have to give up money that came into their hands.
Having the federal government 'bail out' this problem is like bailing from one boat into another.
P.S.: Encouraging people to not pay the debts that they are /legally required/ to pay is Incitement - in and of itself a crime. I'm not a lawyer, so don't take my word for it, ask your own lawyer.
Wow, that's a misleading headline . . . this story describes one tent city in one California community, where the overwhelming majority of the population are homeless for reasons unrelated to the sub-prime mortgage issue. I'd say the reason Cory hasn't seen "this" story in the US media is because "this" story as he's defining it doesn't actually exist.
@ RRSafety
The problem is inflation. Creating more inflation to stave the withdrawal symptoms is not a solution. "Creating liquidity" is creating inflation! Having the Federal Reserve give JP Morgan a "discount window loan" and forcing them to buy Bear Stearns at $2/share with that money is a bail-out. Bear Stearns should fail like any other insolvent business would have to; anything else is corporate welfare.Furthermore, there is a big difference between the fact that investors know Bear Stearns should fail which is what their collapsed stock price indicates, and the market action of actually going insolvent. Stock price is really only tangential to the cashflow of a business. Stock price has as much to do with the solvency of a business as a fuel gauge has to do with gasoline providing fuel for your car.
There seems to be a lot of talk about how the people who are losing their homes are to blame, that they made a bad financial decision and should have read the contract with a lawyer, etc.
I was thinking about another common cause of recession - people getting laid off and fired, and how you can make the same kind of hard-line personal responsibility argument:
"Look, those people got those jobs knowing they could be fired at any time - they should've read their employment contract more closely. If they were smart they would've gone to night school and studied to become tenured professors! They made a gamble to stake their livelihood on a risky factory job, and now they have to take responsibility for it."
It's interesting how the same argument seems absurd when taken out of the context of loans and debt. I think this is because we have a deep cultural ethos linking debt to a sense of personal responsibility - if you can't or won't pay back what you owe, you're worthless and a social failure...much more so than if you just lose your job.
"if you can't or won't pay back what you owe, you're worthless and a social failure..."
only if it's under a million
Wow. I just watched John Carpenter's "They Live" and my friends and I were making fun of the "Hooverville" that Roddy Piper et al. were living in -- though it did remind me of areas in Echo Park and East LA. These people better find themselves some SUNGLASSES, fast!
@#4 posted by Charlie Wade , March 17, 2008 9:32 PM
People conned into a sub-prime mortgage, often when they were not told of other options or if they were presented with distorted facts could hardly be called "greedy and/or stupid". Don't lose sight of where the real greed lies in all of this: the bankers and the credit corporations that since the Reagan deregulation orgy have had carte-blanche.
Silly BBers... The whole reason that there's a "Chicken or the Egg" debate about *some* things is *because* that debate is purely academic (ie, merely philosophical). In THIS case, we know which came first: the lending industry saw an opportunity for profit via the gross misleading and manipulation of a gullible/greedy/desperate/whatever public. The reason that the con artist is at fault in a scam is just as much a causal reason as it is a matter of intent. Here we have both: causal and intent. They set up an "operation" with malicious intent. After that, it doesn't MATTER *why* people bought into it. It doesn't matter if the people bought into it because they were greedy or stupid. Regardless of pragmatics and legality, both the malicious intent and the premeditation leave the lending industry squarely at fault.
Ethics classes should be mandatory...
Others have said similar, but I wanted to chime in...
I'm kinda disappointed at some of the "tough shit" posts here. These people didn't necessarily KNOW the trouble they were getting into. Believe me- new home salesmen in particular a few years ago should have the same reputation as a lot of car salesman. You could walk into any development anywhere with terrible credit and dubious income and they would put you into any home you wanted. Builder's buy-down incentives and variable-rate mortgages with no-money-down made it relatively easy. They all sold people on the "American Dream" of home ownership. Was this a mistake? Of course- but it's more the fault of the banks and builders that did it than the people who were enticed by it.
It's important to keep in-mind too- everyone expected housing prices to continue to go up (even though real estate has been artificially high in many parts of the country for years) and at least hoped that interest rates would stay low. The majority of people don't "expect" that the economy is going to tank. They also have a reasonable expectation that their wages will increase as time goes on, which also didn't happen for most.
There are a lot of people in really bad situations right now- and just callously blaming them for it is wrong. The blame lies with the banks and other corporations who were responsible for allowing the situation to happen to begin with, and with the government for their complete lack of any real economic plan (short of bailing out said banks and corporations, and their multi-millionaire board members).
And- just TRY renting somewhere with bad credit. It doesn't happen. You can live in a cash-only run-down motel, but you are probably safer and better off on the street or in a tent on a vacant lot. You can't even get into a trailer park without good credit anymore.