Wednesday, September 7, 2011

Bailing out Criminals While Indebting Citizens

Yes, my headline captures exactly what is happening.

Today The Wall Street Journal reports that "Older Americans Held Hostage by Mortgages" page A1.

The article discusses how older Americans have lost savings and become indebted by their inflated mortgages. The article examines how these mortgages essentially trap and victimize citizens.

Americans are not to blame for sinking their savings into their mortgages.

They were persuaded and exhorted by financial "experts" to pursue this course and realtors, mortgage lenders, and appraisers were all in on the game of legitimizing inflated housing prices so that everyone could get their bonuses, except the citizen left holding the bag.

Yet, the criminals received US government bailout funds while the citizens received nothing.

Prins and Ugrin calculated in 2010 that the value of the U.S. bailout to financial firms and government insurers of the financial system (e.g., FDIC) totaled $10.4 trillion dollars.

In contrast, the American public received no bailout and no debt-reduction programs. Stimulus spending was very limited in comparison to bailout spending and much of the stimulus was poorly targetted ($862 billion provided in U.S. stimulus).

The transfer of private financial industry losses to government balance sheets has coincided with public sector structural adjustment and austerity in economically advanced western nations, illustrating the operations of what Naomi Klein (2007) has described as “disaster capitalism.”

For example, the New York Times reports: Families Feel Sharp Edge of State Budget Cuts
By MONICA DAVEY September 6, 2011 http://www.nytimes.com/2011/09/07/us/07states.html?_r=1&nl=todaysheadlines&emc=tha23

LANSING, Mich.Stretched beyond their limits and searching for new corners of their budgets to find spending cuts, states are now trimming benefits for residents who are in grim financial shape themselves.
Some states, including Florida and Missouri, have decided to shrink the duration of state unemployment benefits paid to laid-off workers, while others, including Arizona and California, are creating new restrictions on cash aid for low-income residents.
Here in Michigan, more than 11,000 families received letters last week notifying them that in October they will lose the cash assistance they have been provided for years. Next year, people who lose their jobs here will receive fewer weeks of state unemployment benefits, and those making little enough to qualify for the state’s earned income tax credit will see a far smaller benefit from it....
MAJIA HERE: The reduction in government spending in the U.S. on health care, education, and social services will traumatize a populace that has reportedly lost, on average, 20 percent of its household wealth from 2007 to 2009 (Pew Research Center, 2010).

Additionally, over one half (55 percent) of Americans’ wages were affected in the forms of job layoffs, wage and hour cut backs, and unpaid furloughs. Thirty-two percent of Americans reported unemployment during the recession.

The loss of household wealth, wages, and benefits is ongoing and points to the growing impoverishment of the nation at the same time that the federal government is proposing widespread cuts in social spending, particularly in the area of health (but not military spending or financial bailouts) (McKinnon, 2010).

Americans need to demand that banks write down inflated mortgages and that spending on social programs that benefit the welfare of the population and stimulate small businesses be prioritized over federal spending directed at the criminal elements responsible for the crisis.
references

Klein, N. (2007). The shock doctrine: The rise of disaster capitalism. New York: Metropolitan Books.
McKinnon, J. D. (2010, July 1). Deficit panel stresses spending cuts. The Wall Street Journal, p. A6.
Pew Research Center. (2010, June 30). The great recession at 30 months. Pew Research Center [on-line]. Available: http://pewresearch.org/pubs/1643/recession-reactions-at-30-months-extensive-job-loss-new-frugality-lower-expectations
Prins, N., & Ugrin, K. (2010, May 5). Bailout tally report [on-line]. Available: http://www.nomiprins.com/storage/reports/bailouttally012010.pdf

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