Did Racism Help Cause the Mortgage Crisis? Part One

I am honored to present the work of Ralph Brauer.  For some time I have marveled as I read his research and reflected upon his work.  Today, this author of note shares with readers at BeThink.  I welcome Ralph Brauer.  May I invite you to peruse his prose.  Please ponder; then share your thoughts.

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

There is an elephant in the room no one wants to mention when you bring up the housing crisis.  It is the same elephant that has occupied the room since the very beginning of this nation.  Yes, it was there that hot Philadelphia summer when they drafted the Constitution.  Maybe that is what Ben Franklin is gazing at as he sits in the center of the famous painting of the signing of the Constitution by Howard Chandler Christy that hangs today in the House of Representatives east stairway.  Certainly the elephant had haunted Franklin much of his life causing him to call it “a constant butchery of the human species” in an anonymous letter written in 1772.  That elephant that haunted Franklin and continues to haunt us today is racism.

The economic crisis we face today has produced countless essays analyzing its origins and proposing all manner of cures, but almost no one has dared to mention the elephant in the room.  As I researched this topic I found only one person who seemed to be on to it: John Kimble, who wrote an excellent op ed piece in the New Orleans Times Picayune in October that should be required reading for everyone.  One sentence gets to the heart of the matter:

What few today remember is that one of the government’s central goals in undertaking mortgage market reform was to segregate American cities by race.

That such a piece should come from New Orleans does not surprise me; that few have sought to connect what to me seem rather obvious dots is more of a mystery to me.  But that is the power of that elephant in the room.

Perhaps now with an African American President we will finally have more open discussion of the elephant in the room and that discussion should begin by acknowledging that the elephant played a significant role in causing the mortgage crisis which in turn has toppled financial giants as if they were a row of dominoes.  To understand why we need to go back to the years immediately after the Second World War when the housing boom began.

The Creation of the Suburb

The discussion of the role of racism in America should begin by confronting the most important social, cultural and political reality of the past half century: the American suburb is largely a creation of racist loan policies that came from none other than the federal government.  The suburban migration stands as one of the largest freely-undertaken, government-subsidized mass social movements in history.  It accomplished by democratic means what dictators over the ages have tried to accomplish by force: alter the physical, economic, and social environment to create a unique culture.  As Kenneth Jackson writes in Crabgrass Frontier, his history of the American suburb:

Suburbanization was not an historical inevitability created by geography, technology, and culture, but rather the product of government policies.  (p. 293)

Through a variety of government subsidies, the creation of the suburbs allowed people of modest means to attain what real estate ads have christened the American dream.  The immensity of this achievement is only beginning to dawn on us, for it constituted the kind of land and social reform that governments everywhere still try to accomplish.  Kenneth Jackson notes:

Single family housing starts in this country rose from 114,000 in 1944 to 937,000 in 1946, 1,183,000 in 1948, and 1,692,000 in 1950.  (p. 233)

The federal government financed this growth through the Federal Housing Administration, an agency created during the New Deal to help spur the growth of home construction.  During the postwar housing boom Jackson points out:

The main beneficiary of the $119 billion in FHA mortgage insurance issued in the first four decades of FHA operation was suburbia.

Drawing the Color Line

A half century before the creation of suburban America, W.E.B. DuBois had written in the very first sentence of The Souls of Black Folk the immortal and prescient words:

HEREIN lie buried many things which if read with patience may show the strange meaning of being black here at the dawning of the Twentieth Century.  This meaning is not without interest to you, Gentle Reader; for the problem of the Twentieth Century is the problem of the color-line.

Little could DuBois have predicted that the color line would become a red line drawn around the American suburb by none other than the FHA.  The name redlining actually dates back to the 1930s when the FHA first began using color codes to designate areas where they should not invest.  Red areas were off-limits.  Jackson states:

FHA also helped to turn the building industry against the minority and inner-city housing market, and its policies supported the income and racial segregation of suburbia.

Even as the suburbs mushroomed across the American landscape, a few were asking questions.  In 1955 Columbia Professor Charles Abrams charged:

From its inception, the FHA set itself up as protector of the all white neighborhood.  It sent its agents into the field to keep Negroes and other minorities from buying houses in white neighborhoods.  (Jackson, pp. 213-214)

In what has become the classic source on FHA discrimination, The Politics of Exclusion, Michael Danielson quotes an FHA underwriting manual:

If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes.  A change in social or racial occupancy generally leads to instability and reduction in values.(p. 203)

FHA policies also required appraisers to determine the probability of people of color moving into a neighborhood and even forced homeowners to agree not to sell their property to someone of another race.  According to one commentator,

“[T]he most basic sentiment underlying the FHA’s concern was its fear that property values would decline if a rigid black and white segregation was not maintained.

With the rise of the Civil Rights movement in the 1960s, the FHA began to make some attempt to right these wrongs, but with the election of Richard Nixon in 1968, the so-called “Southern Strategy” soon put a stop these efforts.  Chris Bonastia documented Nixon’s dismantling of FHA’s residential integration efforts in his paper, “Hedging His Bets: Why Nixon Killed HUD’s Desegregation Efforts.” Nixon’s refusal to back HUD’s reform efforts would have an impact on American society that ranks right up there with the decision by President Rutherford B. Hayes to abandon the South to the segregationists, essentially ending Reconstruction.

Yet to see one man and one decision as a historical lynch pin is to take an outmoded view of history, for the truth is that by 1968 the die had already been cast and DuBois’ color line had been drawn like a moat around the suburbs designed to keep people of color from entering. It would have taken considerable political will–and perhaps even federal law enforcement–to desegregate the suburbs by then.  Dr. Martin Luther King, jr.’s infamous march into the Chicago suburb of Cicero, where he was met with bricks and catcalls, showed the depth of that moat. There is a moment in the video of that march when you hear what sounds like a shot and King turns suddenly as if wondering where the shot came from.

This does not excuse Nixon’s actions, which at best were misguided and at worst cowardly and racist. While historians debate how much Richard Nixon personally bought into the Thurmond catechism, his elevation of Thurmond aide Harry Dent to the White House staff after the election sent a clear signal of his alliance with Thurmond. Dent was the one who sat outside the Senate chamber with a pail in case Thurmond needed a quick bathroom break during his record-setting filibuster. Nixon himself put it bluntly:

I am not going to campaign for the black vote at the risk of alienating the suburban vote.

For the federal government to go further than the law, to force integration in the suburbs, I think is unrealistic. I think it will be counter-productive and not in the interest of better race relations. [quoted in Charles M. Lamb, Housing Segregation in Suburban America Since 1960, p. 4, p. 9]

Still, as Lamb would point out in a footnote, two decades later a University of California study found that 44% of white Americans favored encouraging African Americans to move to the suburbs.

The Creation of the Subprime Market

Yet the FHA did not just discriminate against people of color who sought to live in the suburbs, it also made  it more difficult for them to obtain loans, period, by refusing to insure loans in areas with high concentrations of people of color.  The systemic impact of this is still reverberating through America’s inner cities.  Without FHA insurance, no reputable bank would issue a home loan to someone living on the other side of the “color line.” This in turn had a host of social and cultural impacts, from resource-poor schools to lack of jobs because businesses would not build where the FHA would not write loans.

You don’t need to be a systems modeler to see how each of these came to feed on each other. In the last decade scholars have begun to refer to this as “structural racism,” by which they mean a convergence of forces and policies that conspires to sustain the color line. Just imagine one systemic loop: you cannot get a good job because you live in a neighborhood with substandard housing and were educated in a substandard school and so you cannot qualify for a loan for better housing which in turn further reinforces the substandard housing. Structural racism is also not a bad metaphor, either, for it suggests the immense weight of these multiple factors that presses down on people living inside those red lines drawn by the FHA.

Where legitimate businesses and institutions are prevented from entering, illegitimate ones will grow. Since regular banks would not lend to people of color in inner city neighborhoods and FHA policies kept them from lending to the few people of color who could afford suburban housing, there obviously was a need for someone to supply these loans and so we have the growth of the so-called subprime market, only back in those days they were known as loan sharks and other unprintable words and had reputation to rival check cashing operations, greedy landlords and take and bake furniture renters. Anyone who has grown up in the inner city can tell stories not only about price-gouging home loans, but high-priced loans for everything from cars to buying furniture or clothes on credit.

What Is Subprime Lending

Subprime lending is a mixture of old-fashioned altruism and blatant thievery with an American twist. Some entered into the business of making loans to people of color because they genuinely believed people deserved an equal opportunity, others saw a chance to make a quick buck. The reality of the situation was that without FHA insurance even the most well-meaning lenders still had to charge more than they would have for a white suburban home-buyer.

A 2003 study for the Lawyers Committee on Civil Rights Under Law reported:

While red-lining has served to exclude poor and minority residents from the benefits of mainstream mortgage lending, purveyors of predatory lending (or so-called “reverse red-lining”) practices have targeted many of the same poor and minority households that traditional lending institutions have ignored or excluded.

In testimony before the House Committee on Banking and Financial Services in 2000 Bill Brennan of the Atlanta Legal Aid Society outlined how subprime lending works for lenders:

Here is what these companies do, the predators. They overcharge on interest and points, they charge egregiously high annual interest and prepaid finance charges, points, which are not justified by the risk involved, because these loans are collateralized by valuable real estate.

Since they usually only lend at 70 to 80 percent loan-to-value ratios, they have a 20 to 30 percent cushion to protect them if they have to foreclose. They usually always buy at the foreclosure sale and pay off the debt and sell the house for a profit.

As for those taking out the loans, Gary Gensler, Undersecretary for Domestic Finance at the treasury Department, told the same Committee:

Borrowers in these markets often have limited access to mainstream financial services. This leads to two things, as the Senator said earlier. Some borrowers who really would qualify for prime loans-we estimate anywhere between 15 and 35 percent of the subprime market could qualify for prime and cannot get that prime loan. Second, the rate and term competition is limited. Subprime lenders don’t tend to compete as much on price.

Beyond preying on vulnerable populations, beyond the limited access to mainstream financial services, is that abusive practices tend to be coupled with high-pressure sales tactics, whether by a mortgage broker, a home improvement contractor, sometimes a lender themselves in the local community.

Perhaps the most extensive and longest longitudinal study of predatory lending practices has been the Woodstock Institute’s periodic reports on Chicago.  It’s 1999 report “Two Steps Back” was among the earliest to blow the whistle on predatory lending.  They found:

Documented cases of abuse include fees exceeding 10 percent of the loan amount, payments structured so that they do not even cover interest (resulting in increasing principle balances), and flipping a loan numerous times in a couple of years.

At the same time, lending to lower-income and minority communities is often viewed as an isolated line of business, in which the focus is on the short term transaction and associated fees. Lenders active in such communities tend to be mortgage and finance companies subject to much less regulation than banks and thrifts. The increased scale of the subprime industry itself has resulted in a larger number of abuses. Moreover, there has not been a proportionate increase in regulation or regulatory resources devoted to this new industry.

As usual, graphs and tables tell the story in black and white:





The date on the graph may be a little difficult to see. It is 1998. On the first table, the percentage of subprime loans going to African American communities is 53%. Only 9% went to predominantly white communities. The Woodstock study went on to deal with the obvious question: is it race or income that is the strongest determinant of who receives a subprime loan? They found it was the former:

Thus, whether a neighborhood is predominantly African-American explains the greatest amount of variation in subprime lending,

The Final Results

In 1997 Bill Brennan could tell the New York Times:

We have financial apartheid in our country. We have low-income, often minority borrowers,  who are charged unconscionably high interest rates, either directly or indirectly through the cover of added charges.

Three years later Census data would confirm Brennan’s charge. The Lawyers Committee on Civil Rights Under Law found:

The typical white person lives in a neighborhood that is overwhelmingly white, with a few minorities (80.2% white, 6.7% African American, 7.9% Hispanic American, and 3.9% Asian American), the typical African American lives in a neighborhood that is mostly black (51.4% black, 33.0% white, 11.4% Hispanic American, and 3.3% Asian American). By comparison, the typical Hispanic American lives in a neighborhood that is more evenly Hispanic American and white (45.5% Hispanic, 36.5% white, 10.8% black, and 5.9% Asian American); and the typical Asian American lives in a neighborhood that is mostly white (17.9% Asian American, 54% white, 9.2%  black, and 17.4% Hispanic American).

In a study released this year by United for a Fair Economy, the authors note:

According to federal data, people of color are more than three times more likely to have subprime loans: high-cost loans account for 55% of loans to Blacks, but only 17% of loans to Whites.

This is a decade after the Woodstock study identified a similar pattern in Chicago.

Reflections

This history makes you wonder what kind of country we might have become had racism not pervaded the home mortgage market. The United for a Fair Economy study puts it eloquently:

While the housing crisis has affected all sectors of society, it has disproportionately affected communities and individuals of color. For them, the dream that Martin Luther King, Jr. once spoke of has been foreclosed.

Now the injustices white America heaped on black America for half a century have come home to roost. The sobering thought to ponder is that what you have read so far is merely the very tip of a rather large iceberg, for there are literally dozens and dozens of books and countless articles on racism and housing. If you enter “racism” and “housing” in Google you will find over four million entries. Yet despite over half a century of studies, reports and papers about discriminatory lending, little was done about it.

The most damning piece of evidence in this entire story is not that racism fostered predatory loans, but that like organized crime going from petty bootleggers and drug dealers to big time operators, the practice of predatory loan sharking expanded and went mainstream– moving from being the providence of small-time shady operators to mainstream banks. Essentially, loan-sharking cast off its sleazy past and the bigger it became the more people looked the other way.

That is until it suddenly threatens to take down the entire American economy. Now like the figures in that painting of Constitution Hall, fingers are pointing and people are staring.

If racism played a big role in creating the mortgage crisis, the solution to our current problems will prove tougher to deal with than what the so-called experts have been telling us. We could be witnessing the fourth American revolution. The first was the war for independence, the second the Civil War, the third the Great Depression and now the present crisis which combines the themes of the previous two–race and economics.

The next essay in this series focuses on how we got here and why, for only by understanding that journey can we see a way out of the current morass. What is clear so far is that this crisis is not merely the fault of a few misguided CEOs, but rather the culmination of decades of discrimination in which all of us are culpable.

Now the time has come to stop pretending there is no elephant in the room and deal with it.

Resources

For a good bibliography on the subject click here.

Crossposts: The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left

Did Racism Help Cause the Mortgage Crisis? The Rise of Sandy Weill and Citigroup



Photo: United for a Fair Economy The State of the Dream

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

Sandy Weill’s story tells how racially-biased predatory lending lies at the center of the economic crisis.  A third-generation American, Weill grew up on the streets of Brooklyn where for some the road to success was a place whose name came from a structure built to protect the city from Indians, pirates and other invaders and whose die was cast when a small group of men met in secret under a buttonwood tree: Wall Street.

Like the hero of a Horatio Alger tale, Weill began his climb to success not in the proverbial mail room but as a $35 a week clerk, eventually clawing his way to become second-in-command at American Express. But Weill had an itch for more so he cashed in his chips and set about looking for his own business. In 1986 he settled on a Baltimore loan company named Commercial Credit that specialized in predatory lending.

The tale of how Weill would use Commercial to build the financial empire that became Citigroup is the story of the financial crisis and at the heart of that story is racial discrimination and predatory lending. In short, predatory lending made Citi into one of the nation’s largest financial institutions and now is responsible for its downfall.

The Beginnings of Citi

If Weill did any due diligence at all, he knew quite well he was buying a company whose entire existence was predicated on ripping off people of color. Commercial already had a shady reputation when Weill moved in on it. In 1973 the FTC had issued an order demanding Commercial cease using deceptive and hardball tactics to entrap those in search of a loan. In his article “Banking on Misery Citigroup, Wall Street, and the Fleecing of the South,” Michael Hudson  relates that Weill’s assistant, Alison Falls, was appalled at the idea of buying Commercial:

Hey guys, this is the loan-sharking business. “Consumer finance” is just a nice way to describe it.

After Weill bought the company did he seek to curb these practices? Quite the contrary, Commercial became even more aggressive. After all, Weill’s whole business plan was predicated on using Commercial to launch a larger company and in order to do that he had to get as much as he could out of Commercial, which meant squeezing clients even more.

Some of Weill’s former employees tell stories of being pressured into steering clients into dubious deals. Hudson quotes Sherry Roller vanden Aardweg, who worked for Commercial in Louisiana from 1988 to 1995. She agrees there was “a tremendous amount of pressure” to sell insurance: That insurance was issued by another Weill acquisition American Health & Life.

We kept adding insurance that we could offer. It just kept growing. It was beginning to get a little bit ridiculous.

Frank Smith, who worked for Weill in Mississippi, put a perspective on ripoffs such as “closed folder closings” in which documents adding to the cost of the mortgage were kept from the client:

They need the money or by God they wouldn’t be at the finance company. They’d be at a bank.

Weill used the money milked from Commercial’s clients to acquire insurance and finance company Primerica. In 1990 he acquired Barclay’s Bank. Meanwhile the stories told by African Americans victimized by Weill certainly sound like loan sharking. Two Mississippi clients of Commercial signed on for Annual Percentage Rates (APR) of 40.92 and 44.14. Another client paid $1,439 for insurance on a $4,500 loan.

Ripoffs like this attracted the attention of attorneys and law enforcement officials, especially in the South, where Commercial had a large presence. Hudson reports:

In 1999, the company agreed to pay as much as $2 million to settle a lawsuit accusing Commercial and American Health Life of overcharging tens of thousands of Alabamans on insurance.

Jackson, Miss., attorney Chris Coffer says he obtained confidential settlements for about 800 clients with claims against Commercial Credit or its successor, CitiFinancial.

How much money African Americans probably overpaid Commercial can be glimpsed from one study by the Community Reinvestment Association of North Carolina. Testifying before a 2006 hearing of the Federal Reserve in Atlanta, CRA-NC Community Organizer Richard Brown cited the findings of the study, Paying More and Getting Less: An Analysis of 2004 Mortgage Lending in North Carolina:

Our key finding is that disproportionately, by a ratio of more than 4 to 1, African Americans pay more interest on home loans than whites do in North Carolina.

Cultural Impacts

Like some modern plantation, subprime lending was built on the enslavement of African Americans, only instead of being field hands or sharecroppers their lives were indentured to loan sharks. Like the infamous overseers who ruled plantation life with the crack of a whip, the loan sharks ruled the lives of African Americans with whips woven together with words the way real whips are woven from strips of leather. While these words might not have inflicted the physical wounds overseers specialized in, the mental scars inflicted by the words woven into loan sharking mortgages were socially and psychologically devastating.

Like slavery, loan sharking helped to turn the African American family into a hot-button issue whose implications are still the subject of volatile debates within and outside the community. Yet while the particular sociological and cultural impacts of loan sharking may be the subject of some debate, there is agreement about the big picture: the impact rippled through families and communities like a rogue wave bringing misery and destruction. In the inner city and some rural communities, especially in the South, African American families faced two equally devastating choices when it came to housing: deal with the loan sharks or deal with the slum lords.

Loan sharking also rippled through American culture. Call it apartheid or something else, whatever label you assign to it the forced separation of whites and people of color is the number one issue of post World War II America. As surely as South Africa carved out “homelands” for its black citizens, so FHA and others carved out the equivalent through redlining.

In the South African Americans and whites lived together but interacted through the elaborate codes and rituals of Jim Crow, but in the North the races were physically separated so a white suburbanite could grow up without having much association with people of color. As a result, while white Southerners saw African Americans as inferior, white Northerners saw them as abstractions.

The 90s Boom in Subprime Loans

Meanwhile Sandy Weill continued building Citi through mergers and acquisitions. In 1993 came the controversial merger with Travelers followed four years later by Citi’s acquisition of Salomon Brothers. At the same Weill was building Citi, the mortgage market was undergoing some dramatic changes. Researchers began identifying a huge spike in the number of subprime loans. Loan sharking had come from back streets and low budget store fronts to the center of America’s financial empire: Wall Street.

A graph from the Woodstock Institute tells the Story:

This graph raises two obvious questions: what was fueling the growth and who was providing those new subprime mortgages? The first is still the subject of some debate among economists and others.  For example, some have tied it to an increase in interest rates. In its explanation accompanying the graph Woodstock states:

Despite increasing rates in 1994, 1995, and 1997, however, subprime lenders continued to increase their refinance volumes. This suggests that subprime refinancings are not driven by homeowners refinancing to save money during times of declining rates and that subprime lenders are aggressively marketing loans regardless of the rate environment.

In part, the growth of predatory activity stems directly from the development of an increasingly specialized and segmented mortgage market, especially for refinance and home equity loans.

What was in it for others is the same thing that was in it for Sandy Weill–profits. Forbes reported that in the boom of the 90s, subprime companies enjoyed returns up to  six times greater than those of the best-run banks.

United for a Fair Economy put it more bluntly:

The subprime lending crisis has occurred because a financial product intended for limited use by a limited number of people has been parlayed into another ill-fated bubble by some mortgage lenders lacking in integrity, foresight, and any vestige of civic concern.

What made this possible was the packaging and trading of loans, which goes under the fancy name of securitization.  A Federal Deposit Insurance Company report describes how this process works:

Thirty years ago, if you got a mortgage from a bank, it was very likely that the bank would keep the loan on its balance sheet until the loan was repaid. That is no longer true. Today, the party that you deal with in order to get the loan (the originator) is highly likely to sell the loan to a third party. The third party can be Ginnie Mae, a government agency; Fannie Mae or Freddie Mac, which are government sponsored entities (GSEs); or a private sector financial institution. The third party often then packages your mortgage with others and sells the payment rights to investors. This may not be the final stop for your mortgage. Some of the investors may use their payment rights to your mortgage to back other securities they issue. This can continue for additional steps.

As usual a graph tells the story of the growth of these new investment vehicles.

The FDIC goes on to explain how various pooling tactics package subprime loans, taking you into a thicket of acronyms like (MBSs), collateralized debt obligations (CDOs), and structured investment vehicles (SIVs)–all essentially are ways of spreading the risk of pooled mortgages. Notice that the initial upswing in MBS begins in the late 1980s. That was due to the tax reform act of 1986.

Ginnie Mae (Government National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) had been involved with MBS before the 1986 bill, but the Reagan Administration’s gift to the home mortgage industry introduced another acronym into the mix: REMIC–Real Estate Mortgage Investment Conduit, which is yet another tool for pooling and packaging mortgages. None other than Freddie Mac described the importance of the 1986 bill:

The REMIC law was passed as part of the Tax Reform Act of 1986 and marked the beginning of the growth of the CMO [Collateralized Mortgage Obligation] market.

Once financial institutions began to catch on to this and entered the thicket of securitization in a big way, there was no turning back. The American economy would never be the same.  Put the two graphs above together and you have the story: the initial growth of the subprime market was enabled by the growth in MBS. There remained only one regulatory hurdle in place, one that had been there since the Great Depression.

The Repeal of Glass-Steagall

Had Carter Glass been alive in the 1990s it is doubtful any of this would have happened, but by the time he put his name on the Glass-Steagall Act during the Depression, Carter Glass was an old man. He had actually been a delegate to the 1896 Democratic National Convention when William Jennings Bryan gave his “Cross of Gold” speech and most of his political life he had a Bryan streak in him that included a distaste for banks. When he left Woodrow Wilson’s cabinet at the end of Wilson’s term he was already warning of the dangers of uncontrolled banking, particularly banks getting involved in the stock market and other financial dealings.

Carter Glass would not have liked Citi or Sandy Weill. Weill, in turn, had little use for what Glass had created, seeing it as an obstacle that stood in the way of his fulfilling his vision of the kind of “full-service” banking Carter Glass had feared.

The Glass-Steagall Act was designed to keep banks out of the securities business because Carter Glass and New Deal officials including President Franklin Roosevelt believed that one of the causes of the Depression was that banks had strayed too far from their original functions during the 1920s.  According to a paper by Jill M. Hendrickson:

in 1932, 36 percent of national bank profits came from their investment affiliates (Wall Street Journal 1933, p. 1).

Glass-Steagall built a wall between banking and other financial services and the ink on the paper was barely dry when the bankers and their allies in the Republican Party began howling.  Over the next half century there were numerous attempts to weaken or scuttle Glass-Steagall, but in the midst of the securitization boom the cries to tear down the wall of Glass-Steagall grew louder.  In 1990, the Fed, under former J.P. Morgan director Alan Greenspan, permitted guess who–J.P. Morgan–to become the first bank allowed to underwrite securities.

It would be none other than Sandy Weill who would put in motion the forces that ended Glass-Steagall when he essentially gave the federal government the equivalent of an upraised finger by proposing the most audacious financial merger in American history: he would merge one of the largest insurance companies (Travelers), one of the largest investment banks (Salomon Smith Barney), and the largest commercial banks (Citibank) in America. The problem was the merger was illegal in terms of Glass-Steagall.

Weill convinced Greenspan, Robert Rubin, and President Bill Clinton to sign off on a merger that was illegal at the time, with the expectation that Congress would repeal Glass-Steagall. That would happen with a big push from Sandy Weill. First, he spent over $200 million in lobbying fees to convince Congress to go along with his merger. It still ranks as the largest single amount spent by one firm on one bill over the shortest period of time in American history.

When the conference committee charged with reconciling the House and Senate versions of the repeal bill seemed stalemated, it was Sandy Weill who applied the final push needed to get the bill passed. Here is the now oft-quoted Frontline report of what happened:

On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill’s effect on the Community Reinvestment Act, which sets rules for lending to poor communities. Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

The Aftermath

With Glass-Steagall out of the way, Sandy Weill had his merger and the American financial industry now had a green light to enlarge on subprime lending. Some followed Weill’s model of consolidating loan and insurance companies as he had done with American Health & Life and Travelers, taking loan sharking to a level those who had engaged in it back when it was done in storefronts with peeling paint could have never imagined.

More money than any organized crime syndicate could have dreamed of flowed into the coffers of the subprime lenders. What had been an activity aimed mainly at people of color now became linked to complex financial instruments such as tranches and derivatives, that to an uninitiated mind resembled nothing so much as the old shell game. Where’s the mortgage? Under this fund? No. guess again. Inner city and suburb which had been separated by redlining became linked by acronyms–MBS, CDOs, CMOs. But as we shall see in the next essay, ripping off people of color would continue.

Postscript: The Revelations of Language

Some reading this essay might object to my linking loan sharking and subprime mortgages, but Sandy Weill from the streets of Brooklyn would get it. Subprime is perhaps one of the most misleading euphemisms ever devised, because it means exactly the opposite of what the term implies. The Investopedia offers a succinct definition:

A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans.

As for loan sharking, a definitive definition is a little more difficult to come by. Investopedia says it is anyone who charges above the legal interest rate (which is set by some states). Several others add that it also involves an implied or real threat to injure the person who doesn’t pay off.  As if to throw a ringer into that definition there are dozens of references to “legal loan sharking.” Perhaps the broadest definition is at Wiktionary:

Someone who lends money at exorbitant rates of interest.

These definitional niceties represent not merely semantic nit-picking, but in fact provide a vital piece to understanding the cultural shifts that have accompanied the economic crisis. One of the unspoken theses in this series of essays is that by clothing loan sharking in the more respectable term of subprime, it suddenly made it not seem so bad to lend money to people–especially people of color–at higher rates. It is reminiscent of the semantic games segregationists used to play with strategies like the “literacy law.” CNN even named “subprime” the word of the year. Can you see them doing that for loan sharking?

In a fascinating article, Ben Zimmer explains how subprime came to have its present meaning, noting that the earliest use of the term was in industry to describe something below grade while in the 1970s banks used it to refer to loans below the market rate.

Something happened to the word in the 1990s, however. Now it was the borrowers themselves who were being classified as “less than prime” based on their shaky credit histories. [My underline]

Zimmer is on to something when he says the term was applied to people, because as we have seen, a high percentage of subprime loans were aimed at people of color.  So the phrase about borrowers being “less than prime” has more meaning than Zimmer perhaps realized when he wrote that sentence.

At the same time that subprime underwent a shift in meaning it is quite clear that so, too, did loan sharking. The earlier references clearly have a criminal tinge to them. In old crime movies “loan sharking” was always thrown in with other nasty activities gangsters perpetrated on the innocent and not so innocent. Yet the recent references seem to take the gangster and the “enforcer” out of the term, so loan sharks just charge higher rates without threatening to break your legs or worse.

This linguistic convergence of loan sharking and subprime reflects an economic and social convergence, for it seems to date from about the time Sandy Weill first bought Commercial. So as Weill took what his own assistant termed a loan sharking operation to the pinnacle of corporate success, the financial industry adopted the euphemism of subprime just as it was getting into this type of lending.

In truth it is the financial industry itself which has helped to blur the distinction between conventional lending at a higher rate and the hardball, card-sharp techniques of the loan shark. That in turn has given rise to a new term “predatory lending” which has largely replaced loan sharking in our vocabulary, creating a living for economists and others who write papers dissecting the differences between the two as if they mattered to those who have to pay exorbitant rates.

As we plunge deeper into the financial crisis, two things are clear: it takes a pretty good lawyer to decipher the standard mortgage agreement and an even better wordsmith to explain if an agreement charging more than the standard interest rate is an innocent subprime mortgage or predatory lending. For me I will continue to use loan sharking with its connotations of shady activity until the financial industry cleans up its act.

Zimmer ends his article by observing:

Here’s hoping that in the not-too-distant future we can look back on the current usage of subprime as a quaint artifact of the late 20th and early 21st centuries.

Twenty years ago the mainstream financial industry would have nothing to do with subprime lending.  Now they are using language much like the defenses of the original loan sharks to defend it, talking about how they are performing a service for people who cannot get loans any other way.

In the next essay we will look at the consequences of the Glass-Steagall repeal, the fall of Sandy Weill and Citigroup, and the growth of so-called subprime lending. Then you can make up your own mind about whether to call it loan sharking or continue to use that other euphemism.

Crossposts:  The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left

Did Racism Help Cause the Mortgage Crisis? Part One

I am honored to present the work of Ralph Brauer.  For some time I have marveled as I read his research and reflected upon his work.  Today, this author of note shares with readers at BeThink.  I welcome Ralph Brauer.  May I invite you to peruse his prose.  Please ponder; then share your thoughts.

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

There is an elephant in the room no one wants to mention when you bring up the housing crisis.  It is the same elephant that has occupied the room since the very beginning of this nation.  Yes, it was there that hot Philadelphia summer when they drafted the Constitution.  Maybe that is what Ben Franklin is gazing at as he sits in the center of the famous painting of the signing of the Constitution by Howard Chandler Christy that hangs today in the House of Representatives east stairway.  Certainly the elephant had haunted Franklin much of his life causing him to call it “a constant butchery of the human species” in an anonymous letter written in 1772.  That elephant that haunted Franklin and continues to haunt us today is racism.

The economic crisis we face today has produced countless essays analyzing its origins and proposing all manner of cures, but almost no one has dared to mention the elephant in the room.  As I researched this topic I found only one person who seemed to be on to it: John Kimble, who wrote an excellent op ed piece in the New Orleans Times Picayune in October that should be required reading for everyone.  One sentence gets to the heart of the matter:

What few today remember is that one of the government’s central goals in undertaking mortgage market reform was to segregate American cities by race.

That such a piece should come from New Orleans does not surprise me; that few have sought to connect what to me seem rather obvious dots is more of a mystery to me.  But that is the power of that elephant in the room.

Perhaps now with an African American President we will finally have more open discussion of the elephant in the room and that discussion should begin by acknowledging that the elephant played a significant role in causing the mortgage crisis which in turn has toppled financial giants as if they were a row of dominoes.  To understand why we need to go back to the years immediately after the Second World War when the housing boom began.

The Creation of the Suburb

The discussion of the role of racism in America should begin by confronting the most important social, cultural and political reality of the past half century: the American suburb is largely a creation of racist loan policies that came from none other than the federal government.  The suburban migration stands as one of the largest freely-undertaken, government-subsidized mass social movements in history.  It accomplished by democratic means what dictators over the ages have tried to accomplish by force: alter the physical, economic, and social environment to create a unique culture.  As Kenneth Jackson writes in Crabgrass Frontier, his history of the American suburb:

Suburbanization was not an historical inevitability created by geography, technology, and culture, but rather the product of government policies.  (p. 293)

Through a variety of government subsidies, the creation of the suburbs allowed people of modest means to attain what real estate ads have christened the American dream.  The immensity of this achievement is only beginning to dawn on us, for it constituted the kind of land and social reform that governments everywhere still try to accomplish.  Kenneth Jackson notes:

Single family housing starts in this country rose from 114,000 in 1944 to 937,000 in 1946, 1,183,000 in 1948, and 1,692,000 in 1950.  (p. 233)

The federal government financed this growth through the Federal Housing Administration, an agency created during the New Deal to help spur the growth of home construction.  During the postwar housing boom Jackson points out:

The main beneficiary of the $119 billion in FHA mortgage insurance issued in the first four decades of FHA operation was suburbia.

Drawing the Color Line

A half century before the creation of suburban America, W.E.B. DuBois had written in the very first sentence of The Souls of Black Folk the immortal and prescient words:

HEREIN lie buried many things which if read with patience may show the strange meaning of being black here at the dawning of the Twentieth Century.  This meaning is not without interest to you, Gentle Reader; for the problem of the Twentieth Century is the problem of the color-line.

Little could DuBois have predicted that the color line would become a red line drawn around the American suburb by none other than the FHA.  The name redlining actually dates back to the 1930s when the FHA first began using color codes to designate areas where they should not invest.  Red areas were off-limits.  Jackson states:

FHA also helped to turn the building industry against the minority and inner-city housing market, and its policies supported the income and racial segregation of suburbia.

Even as the suburbs mushroomed across the American landscape, a few were asking questions.  In 1955 Columbia Professor Charles Abrams charged:

From its inception, the FHA set itself up as protector of the all white neighborhood.  It sent its agents into the field to keep Negroes and other minorities from buying houses in white neighborhoods.  (Jackson, pp. 213-214)

In what has become the classic source on FHA discrimination, The Politics of Exclusion, Michael Danielson quotes an FHA underwriting manual:

If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes.  A change in social or racial occupancy generally leads to instability and reduction in values.(p. 203)

FHA policies also required appraisers to determine the probability of people of color moving into a neighborhood and even forced homeowners to agree not to sell their property to someone of another race.  According to one commentator,

“[T]he most basic sentiment underlying the FHA’s concern was its fear that property values would decline if a rigid black and white segregation was not maintained.

With the rise of the Civil Rights movement in the 1960s, the FHA began to make some attempt to right these wrongs, but with the election of Richard Nixon in 1968, the so-called “Southern Strategy” soon put a stop these efforts.  Chris Bonastia documented Nixon’s dismantling of FHA’s residential integration efforts in his paper, “Hedging His Bets: Why Nixon Killed HUD’s Desegregation Efforts.” Nixon’s refusal to back HUD’s reform efforts would have an impact on American society that ranks right up there with the decision by President Rutherford B. Hayes to abandon the South to the segregationists, essentially ending Reconstruction.

Yet to see one man and one decision as a historical lynch pin is to take an outmoded view of history, for the truth is that by 1968 the die had already been cast and DuBois’ color line had been drawn like a moat around the suburbs designed to keep people of color from entering. It would have taken considerable political will–and perhaps even federal law enforcement–to desegregate the suburbs by then.  Dr. Martin Luther King, jr.’s infamous march into the Chicago suburb of Cicero, where he was met with bricks and catcalls, showed the depth of that moat. There is a moment in the video of that march when you hear what sounds like a shot and King turns suddenly as if wondering where the shot came from.

This does not excuse Nixon’s actions, which at best were misguided and at worst cowardly and racist. While historians debate how much Richard Nixon personally bought into the Thurmond catechism, his elevation of Thurmond aide Harry Dent to the White House staff after the election sent a clear signal of his alliance with Thurmond. Dent was the one who sat outside the Senate chamber with a pail in case Thurmond needed a quick bathroom break during his record-setting filibuster. Nixon himself put it bluntly:

I am not going to campaign for the black vote at the risk of alienating the suburban vote.

For the federal government to go further than the law, to force integration in the suburbs, I think is unrealistic. I think it will be counter-productive and not in the interest of better race relations. [quoted in Charles M. Lamb, Housing Segregation in Suburban America Since 1960, p. 4, p. 9]

Still, as Lamb would point out in a footnote, two decades later a University of California study found that 44% of white Americans favored encouraging African Americans to move to the suburbs.

The Creation of the Subprime Market

Yet the FHA did not just discriminate against people of color who sought to live in the suburbs, it also made  it more difficult for them to obtain loans, period, by refusing to insure loans in areas with high concentrations of people of color.  The systemic impact of this is still reverberating through America’s inner cities.  Without FHA insurance, no reputable bank would issue a home loan to someone living on the other side of the “color line.” This in turn had a host of social and cultural impacts, from resource-poor schools to lack of jobs because businesses would not build where the FHA would not write loans.

You don’t need to be a systems modeler to see how each of these came to feed on each other. In the last decade scholars have begun to refer to this as “structural racism,” by which they mean a convergence of forces and policies that conspires to sustain the color line. Just imagine one systemic loop: you cannot get a good job because you live in a neighborhood with substandard housing and were educated in a substandard school and so you cannot qualify for a loan for better housing which in turn further reinforces the substandard housing. Structural racism is also not a bad metaphor, either, for it suggests the immense weight of these multiple factors that presses down on people living inside those red lines drawn by the FHA.

Where legitimate businesses and institutions are prevented from entering, illegitimate ones will grow. Since regular banks would not lend to people of color in inner city neighborhoods and FHA policies kept them from lending to the few people of color who could afford suburban housing, there obviously was a need for someone to supply these loans and so we have the growth of the so-called subprime market, only back in those days they were known as loan sharks and other unprintable words and had reputation to rival check cashing operations, greedy landlords and take and bake furniture renters. Anyone who has grown up in the inner city can tell stories not only about price-gouging home loans, but high-priced loans for everything from cars to buying furniture or clothes on credit.

What Is Subprime Lending

Subprime lending is a mixture of old-fashioned altruism and blatant thievery with an American twist. Some entered into the business of making loans to people of color because they genuinely believed people deserved an equal opportunity, others saw a chance to make a quick buck. The reality of the situation was that without FHA insurance even the most well-meaning lenders still had to charge more than they would have for a white suburban home-buyer.

A 2003 study for the Lawyers Committee on Civil Rights Under Law reported:

While red-lining has served to exclude poor and minority residents from the benefits of mainstream mortgage lending, purveyors of predatory lending (or so-called “reverse red-lining”) practices have targeted many of the same poor and minority households that traditional lending institutions have ignored or excluded.

In testimony before the House Committee on Banking and Financial Services in 2000 Bill Brennan of the Atlanta Legal Aid Society outlined how subprime lending works for lenders:

Here is what these companies do, the predators. They overcharge on interest and points, they charge egregiously high annual interest and prepaid finance charges, points, which are not justified by the risk involved, because these loans are collateralized by valuable real estate.

Since they usually only lend at 70 to 80 percent loan-to-value ratios, they have a 20 to 30 percent cushion to protect them if they have to foreclose. They usually always buy at the foreclosure sale and pay off the debt and sell the house for a profit.

As for those taking out the loans, Gary Gensler, Undersecretary for Domestic Finance at the treasury Department, told the same Committee:

Borrowers in these markets often have limited access to mainstream financial services. This leads to two things, as the Senator said earlier. Some borrowers who really would qualify for prime loans-we estimate anywhere between 15 and 35 percent of the subprime market could qualify for prime and cannot get that prime loan. Second, the rate and term competition is limited. Subprime lenders don’t tend to compete as much on price.

Beyond preying on vulnerable populations, beyond the limited access to mainstream financial services, is that abusive practices tend to be coupled with high-pressure sales tactics, whether by a mortgage broker, a home improvement contractor, sometimes a lender themselves in the local community.

Perhaps the most extensive and longest longitudinal study of predatory lending practices has been the Woodstock Institute’s periodic reports on Chicago.  It’s 1999 report “Two Steps Back” was among the earliest to blow the whistle on predatory lending.  They found:

Documented cases of abuse include fees exceeding 10 percent of the loan amount, payments structured so that they do not even cover interest (resulting in increasing principle balances), and flipping a loan numerous times in a couple of years.

At the same time, lending to lower-income and minority communities is often viewed as an isolated line of business, in which the focus is on the short term transaction and associated fees. Lenders active in such communities tend to be mortgage and finance companies subject to much less regulation than banks and thrifts. The increased scale of the subprime industry itself has resulted in a larger number of abuses. Moreover, there has not been a proportionate increase in regulation or regulatory resources devoted to this new industry.

As usual, graphs and tables tell the story in black and white:





The date on the graph may be a little difficult to see. It is 1998. On the first table, the percentage of subprime loans going to African American communities is 53%. Only 9% went to predominantly white communities. The Woodstock study went on to deal with the obvious question: is it race or income that is the strongest determinant of who receives a subprime loan? They found it was the former:

Thus, whether a neighborhood is predominantly African-American explains the greatest amount of variation in subprime lending,

The Final Results

In 1997 Bill Brennan could tell the New York Times:

We have financial apartheid in our country. We have low-income, often minority borrowers,  who are charged unconscionably high interest rates, either directly or indirectly through the cover of added charges.

Three years later Census data would confirm Brennan’s charge. The Lawyers Committee on Civil Rights Under Law found:

The typical white person lives in a neighborhood that is overwhelmingly white, with a few minorities (80.2% white, 6.7% African American, 7.9% Hispanic American, and 3.9% Asian American), the typical African American lives in a neighborhood that is mostly black (51.4% black, 33.0% white, 11.4% Hispanic American, and 3.3% Asian American). By comparison, the typical Hispanic American lives in a neighborhood that is more evenly Hispanic American and white (45.5% Hispanic, 36.5% white, 10.8% black, and 5.9% Asian American); and the typical Asian American lives in a neighborhood that is mostly white (17.9% Asian American, 54% white, 9.2%  black, and 17.4% Hispanic American).

In a study released this year by United for a Fair Economy, the authors note:

According to federal data, people of color are more than three times more likely to have subprime loans: high-cost loans account for 55% of loans to Blacks, but only 17% of loans to Whites.

This is a decade after the Woodstock study identified a similar pattern in Chicago.

Reflections

This history makes you wonder what kind of country we might have become had racism not pervaded the home mortgage market. The United for a Fair Economy study puts it eloquently:

While the housing crisis has affected all sectors of society, it has disproportionately affected communities and individuals of color. For them, the dream that Martin Luther King, Jr. once spoke of has been foreclosed.

Now the injustices white America heaped on black America for half a century have come home to roost. The sobering thought to ponder is that what you have read so far is merely the very tip of a rather large iceberg, for there are literally dozens and dozens of books and countless articles on racism and housing. If you enter “racism” and “housing” in Google you will find over four million entries. Yet despite over half a century of studies, reports and papers about discriminatory lending, little was done about it.

The most damning piece of evidence in this entire story is not that racism fostered predatory loans, but that like organized crime going from petty bootleggers and drug dealers to big time operators, the practice of predatory loan sharking expanded and went mainstream– moving from being the providence of small-time shady operators to mainstream banks. Essentially, loan-sharking cast off its sleazy past and the bigger it became the more people looked the other way.

That is until it suddenly threatens to take down the entire American economy. Now like the figures in that painting of Constitution Hall, fingers are pointing and people are staring.

If racism played a big role in creating the mortgage crisis, the solution to our current problems will prove tougher to deal with than what the so-called experts have been telling us. We could be witnessing the fourth American revolution. The first was the war for independence, the second the Civil War, the third the Great Depression and now the present crisis which combines the themes of the previous two–race and economics.

The next essay in this series focuses on how we got here and why, for only by understanding that journey can we see a way out of the current morass. What is clear so far is that this crisis is not merely the fault of a few misguided CEOs, but rather the culmination of decades of discrimination in which all of us are culpable.

Now the time has come to stop pretending there is no elephant in the room and deal with it.

Resources

For a good bibliography on the subject click here.

Crossposts: The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left

Digging a Record Deficit




To view the original art, please travel to Digging a Record Deficit’

copyright © 2008.  Andrew Wahl.  Off The Wahl Perspective.

Earlier this week, The White House announced it’s expecting the 2009 budget deficit to hit a record $482 billion. Worse still, this total doesn’t factor in an additional $80 billion in expected war costs (despite a mandate from Congress that they be included). All told, then, the deficit will top a half trillion dollars. That’s TRILLION. In one year. Thanks largely to a president from the party that touts fiscal restraint, and who inherited a budget SURPLUS. Consider it a parting gift from “The Digger” [Archive No. 0829] (see toon above).

Before signing off, Several Bits of Off the Wahl Perspective News . . .

– One of my editorial cartoons has been selected by toonpool.com for its ongoing “Underground Exhibition” in Europe. On Aug. 3, “Checking the Gauge” [Archive No. 0617] will be broadcast 40 times a day on 4,000 video screens in Berlin’s subways, and should be seen by approximately 1.5 million passengers.

– Three of my toons can be found in new books chronicling the recent primaries. “Marathon Coverage” [Archive No. 0801] is included in “The Race for the 2008 Democratic Nomination,” while “Mitt on Change” [Archive No. 0802] and “Fresh Face of the GOP” [Archive No. 0804] made the cut for “The Race for the 2008 Republican Nomination.” I won’t be selling copies in the OtWP Store, but, if you’re interested, you can use the links below and I’ll get a kickback from Amazon.

Buy “The Race for the 2008 Democratic Nomination”:

  • “The Race for the 2008 Democratic Nomination”
  • Buy “The Race for the 2008 Republican Nomination”:

  • “The Race for the 2008 Republican Nomination”
  • – Finally, the time has come for a summer break. I plan to take the next three weeks off for family travel, backburner cartoon projects and just to generally recharge my battery. Expect my next toon Aug. 27, just in time to comment on the Democratic convention.

    Till then,

    Andrew

    toon@offthewahl.com

    Issue Number One; Economic Insecurity Breeds Bigotry, Bias and Bitterness



    Fear Itself

    copyright © 2008 Betsy L. Angert

    He was a beautiful bouncing baby boy.  He was born to two parents that love him dearly.  Even before his birth, indeed, prior to conception, this little fellow was the apple of his parent’s eyes.  His biological beginning was carefully calculated.  As the seeds of life developed into a bright-eyed baby, the people he now knows as Mom and Dad thought of little else but Maxwell.  The soon to be proud Papa and Momma anxiously anticipated the day they could hold this bundle of joy.  Each of his parents was eager to meet and greet the small, sweet face of the guy that they would call Max.  Maximum value, supreme significance, marvelously magnificent, all this was and would be their son.  After Max was delivered and during any political season, such as this, Mom and Dad feel certain Max is issue number one.

    The guardians look over their angel.  They plan for his future, and they are apprehensive, just as their parents and grandparents were before them.  For generations the realities of daily life have shaped parental priorities.  First and foremost, families want to survive, to feel safe and secure.  Yet, much that accounts for stability is beyond the control of a parent or any single person.  Moms and Dads agonize, as do all individuals.  Economic, educational, environmental concerns have an effect on caregivers and all citizens.  Military engagements also affect households, even if only one lives within the domicile.  Mothers, fathers, and babies, boys or girls learn to fear.

    Ultimately, in the course of a life, each individual will ask, how does any matter affect me, my family, and friends of mine?  Countless citizens sense we have loss the sense that within a society, each individual works for the commonweal.  The words of Thomas Paine On the Origin and Design of Government in General are principles from the past.  In America today, the common folk feel they can no longer trust the government.  In recent years, people profess too many promises were broken; lies were told.  Intelligence was not wise.  Still, Americans sense there is an enemy.

    In the minds of most Americans, the foe exists outside self.  Few have fully internalized the truth of the words uttered by Franklin Delano Roosevelt, “The only thing we have to fear is fear itself.”  As people do, citizens in this country trust themselves.  People know their faith will guide them.  The Almighty will not disappoint them.  Proud of their personal strength and all they survived throughout the course of their lives, the American public, no matter their economic station believes their family will be fine.  All Americans trust in their ability to fight the opposition.  Residents in the United States are not afraid to take up arms if they need to protect themselves from evil forces.

    Nevertheless, Americans are “bitter.”  People in the cities, the suburbs, and in the countryside, resent the precarious position their leaders have placed them in.  In the “Land of the free and home of the brave” the public is “looking for strong leadership from Washington.”  Individuals and communities recognize they cannot go it alone.  Sadly, those previously entrusted with Executive privileges have not served the common folk within the United States well.  Citizens have expressed their ample concern for quite a while and no one seems to hear the cries.  While some of the Presidential aspirants wish to believe Americans are not indignant . . .

    Poll: 80% of Americans Dissatisfied

    By Associate Press.

    Time Magazine

    April 4, 2008

    (New York) – More than 80 percent of Americans believe the country is headed in the wrong direction, the highest such number since the early 1990s, according to a new survey.

    The CBS News-New York Times poll released Thursday showed 81 percent of respondents said they believed “things have pretty seriously gotten off on the wrong track.”  That was up from 69 percent a year ago, and 35 percent in early 2002.

    The survey comes as housing turmoil has rocked Wall Street amid an economic downturn.  The economy has surpassed the war in Iraq as the dominating issue of the U.S. presidential race, and there is now nearly a national consensus that the United States faces significant problems, the poll found.

    A majority of Democrats and Republicans, men and women, residents of cities and rural areas, college graduates and those who finished only high school say the United States is headed in the wrong direction, according to the survey, which was published on The New York Times’ Web site.

    Seventy-eight percent of respondents said the country was worse off than five years ago; just 4 percent said it was doing better . . .

    The poll also found that Americans blame government officials for the housing crisis more than banks or homebuyers and other borrowers. Forty percent of respondents said regulators were mostly to blame, while 28 percent named lenders and 14 percent named borrowers.

    Americans favored help for people but not for financial institutions in assessing possible responses to the mortgage crisis.  A clear majority said they did not want the government to lend a hand to banks, even if the measures would help limit the depth of a recession.

    Intellectually astute, each individual understands to his or her core, a country must work well as a whole.  If we act independently of others, with little regard for those who reside in our nation, we all will realize a reason to feel insecure.  No family can survive alone. Maxwell’s parents can plan and work to provide, but if the country suffers from a crisis, be it fiscal, a protracted feud, the cost of food, or fuel, the family will also find themselves in situation critical.

    In a society, we are our neighbors’ keeper, for what affects those in adjacent abodes will influence us.  If one person is poor, so too is his brother.

    The tenet is true in the abstract; it is also viable concretely.  We need only consider what occurs when one domicile on the block is in disrepair or foreclosure flourishes in an enclave.  Property values for all homes in the area plummet.  A family functions best as a unit.  A nation fares well when we are one.

    Our most conservative estimates indicate that each conventional foreclosure within an eighth of a mile (essentially a city block) of a single-family home results in a 0.9 percent decline in value.  Cumulatively, this means that, for the entire city of Chicago, the 3,750 foreclosures in 1997 and 1998 are estimated to reduce nearby property values by more than $598 million, for an average cumulative single-family property value effect of $159,000 per foreclosure. This does not include effects on the values of condominiums, larger multifamily rental properties, and commercial buildings.

    Less conservative estimates suggest that each conventional foreclosure within an eighth of a mile of a property results in a 1.136 percent decline in that property’s value and that each foreclosure from one-eighth to one-quarter mile away results in a 0.325 percent decline in value.  This less conservative finding corresponds to a city-wide loss in single-family property values of just over $1.39 billion. This corresponds to an average cumulative property value effect of more than $371,000 per foreclosure

    In 2008, this consideration consumes millions of persons who thought they were safe and secure.  As the subprime debacle ripples through every community, people realize their very survival is at risk.  Everyone, even some of the elite now experience a profound sense of insecurity.  Again, people ask who or what might they trust.  The average American has faith only in what is familiar.  Max, Mom, and Dad, families turn to what is tried and true.  Whatever has protected them in the past, they hope, will save them from what is an uncertain future.

    Certainly, people have no confidence in government.  Many are frustrated.  They resent those who placed them in such a precarious situation.  Mothers, fathers, sons such as Max, and daughters are reminded, without regulations only the few profit.  Dreams die.  Witness the subprime debacle.

    Mortgage companies and banks, such as Wells Fargo, have twisted the average prime mortgage loan into something much more incapable of paying by the recipient, but profitable to the company. Subprime loans, as “adjustable rate mortgages,” are packed with deceiving modifications that have low “teaser” rates that expand in interest exponentially after an initial low pay period.  Families that have received Subprime loans have bit into a bitter center of the sugar-coated American dream.

    Citizens in this once prosperous country wonder whether they will ever again be able to trust that they can aspire to greater heights.  Homes are no longer worth what they were at the time of purchase.  Payments on adjusted rate mortgages [ARM] are exorbitant and balloon expenditures are now due.  Americans feel pinched.  Businesses are also affected by a slowed economy and bad investments.  Bankruptcy is an option, although brutal.  As the cost of fuel and food rises, financial fears become more real.  Existence takes a toll.  As Americans assess the circumstances within their home region, they realize there is reason to hold on tightly to what they know and love.  

    Perchance G-d and country are all citizens can believe in, and maybe there is no longer reason to believe either of these will save them.  Certainly, Administrations in the recent past and present have not protected us well.  After all, our Presidents, Congress, and the Federal Reserve were responsible for the Demise of Glass-Steagall Act.  This law once regulated banks and limited the conflicts of interest created when commercial depositories were permitted to underwrite stocks or bonds.  Without such oversight, Americans lost their security.  Survival no longer seems possible.  The American Dream is a nightmare.

    The Next Slum?

    By Christopher B. Leinberger

    Atlantic Monthly

    March 2008

    Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses, they front have gone vacant. Signs of physical and social disorder are spreading.

    At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in.  In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville.  I never imagined in my wildest dreams that stuff like this would happen.”

    In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the houses are nicer than those at Windy Ridge-many once sold for well over $500,000-but the phenomenon is the same.  At the height of the boom, 10,000 new homes were built there in just four years. Now many are empty; renters of dubious character occupy others.  Graffiti, broken windows, and other markers of decay have multiplied.  Susan McDonald, president of the local residents’ association and an executive at a local bank, told the Associated Press, “There’s been gang activity.  Things have really been changing, the last few years.”

    In the first half of last year, residential burglaries rose by 35 percent and robberies by 58 percent in suburban Lee County, Florida, where one in four houses stands empty. Charlotte’s crime rates have stayed flat overall in recent years-but from 2003 to 2006, in the 10 suburbs of the city that have experienced the highest foreclosure rates, crime rose 33 percent. Civic organizations in some suburbs have begun to mow the lawns around empty houses to keep up the appearance of stability. Police departments are mapping foreclosures in an effort to identify emerging criminal hot spots.

    The decline of places like Windy Ridge and Franklin Reserve is usually attributed to the subprime-mortgage crisis, with its wave of foreclosures.  And the crisis has indeed catalyzed or intensified social problems in many communities. But the story of vacant suburban homes and declining suburban neighborhoods did not begin with the crisis, and will not end with it. A structural change is under way in the housing market-a major shift in the way many Americans want to live and work.  It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes.  And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

    Perchance, more weighty than the influence of a social degradation on a community is the impression such dire circumstances leave on a little lad such as Maxwell. Young Max will learn, just as his parents had.  Likely, he too will come to believe that he can only depend on himself.  An older and wiser Max will not fully grasp how extraordinary he is, or perhaps he will know all to well that no matter how glorious he is, someone might jeopardize his stability.  No matter how well he lives his life, another force, power, person, or authority might cause his dreams to go awry.  

    Maxwell sees how hard life is for his parents.  He comes to understand that he too will always and forever, need to prove his worth.  How else might he hold onto his job, his home, his money, or his sense of self?  For Maxwell, as for us, anyone, innocent as they may be, might seem a threat.  His Mom and Dad, fearful that they might lose their livelihood, health care benefits, the family home, and their ability to provide, let alone survive, teach their young son trepidation.

    Mom and Dad look around the neighborhood and they see society is shifting.  People of other races, colors, and creeds are destined to overtake the white majority.  This can be nothing but trouble, or so they think.  Maxwell trusts this sentiment to be true.  The parents wonder; might immigration and  Free Trade deprive them of their life style?  In the United States, Anglo Americans react more to what they muse might be so.  However, ample evidence affirms the contrary.  A 2006 study, by the Pew Hispanic Center avows, the sudden rise in the foreign-born population does not negatively effect the employment of native-born workers.

    Growth in the Foreign-Born Workforce and Employment of the Native Born

    By Rakesh Kochhar, Associate Director for Research

    Pew Hispanic Center

    August 10, 2006

    Rapid increases in the foreign-born population at the state level are not associated with negative effects on the employment of native-born workers, according to a study by the Pew Hispanic Center that examines data during the boom years of the 1990s and the downturn and recovery since 2000.

    An analysis of the relationship between growth in the foreign-born population and the employment outcomes of native-born workers revealed wide variations across the 50 states and the District of Columbia. No consistent pattern emerges to show that native-born workers suffered or benefited from increased numbers of foreign-born workers . . .

    The size of the foreign-born workforce is also unrelated to the employment prospects for native-born workers.  The relative youth and low levels of education among foreign workers also appear to have no bearing on the employment outcomes of native-born workers of similar schooling and age.

    Nevertheless, people continue to fear what is less than familiar.  Maxwell’s mother and father often speak of the immigrants.  The words voiced are unkind.  Assessments often are unrealistic.  In this country, on this globe, our apprehensions, our insecurity, the fear that we might not survive divides us.  Self-surety is issue number one.  

    When individuals do not feel as though all is fine, when distressed, emotional reactions may be exaggerated. Many persons prefer to deny that they feel distraught.  The press, the powerful, and persons who wish to be more prominent understand this.  Each is expert in the art of persuasion.  Tell us that we are doing well, that we are strong, that they will help bring certainty, security, and safety to our lives, and to our country, and we will croon along with them.

    Anxious Americans, at home and abroad, such as the parents of young Maxwell attack.  Anyone can be considered the enemy.  Bankers, big business, bureaucrats, billionaire oil magnates, migrants, and of course, mutineers of Middle Eastern descent.  Our fellow citizens are easily terrorized, if not by the persons who they think might destroy the neighborhood, or take their job, the people who crashed a plane into the Twin Towers must be a target.  Since September 11, 2001, Maxwell parents have thought it wise to protect United States shores.

    Some Americans say we must stay the course in Iraq and Afghanistan.  These persons may fear terrorists from the Persian Gulf.  There is great consternation when people do not think they are physically safe.  

    Citizens feel a greater concern when they discover the reasons we went to war are invalid.  Again, the people in this country recognize the adversary is the American Administration.  Lie by lie, the Iraq War Timeline reveals greater reason for antipathy.

    Those who cite security and survival as the primary concern proclaim, “It is the economy.”  They say, this is the number one issue Americans must address.  Too many persons, today, cannot even live paycheck to paycheck.  Disposable income, discretionary spending, savings to fall back on are luxuries of the past.  People dream of the cushion they hope to create.  Yet, in the back of their minds, they fear.  Again,  foreclosures are in the forefront in people’s minds.  Many are mired in debt.  In February 2008, another sixty percent (60%) of Americans concluded they could no longer pay the mortgage.  Mortgage Woes Boost Credit Card Debt. Balances on charge cards cannot be reconciled.

    Plastic Card Tricks

    The New York Times

    March 29, 2008

    Americans are struggling with a very rocky economy while they are also holding almost $1 trillion in credit card debt. In most cases, those cards provide a little flexibility with the monthly bills. But an increasing number of people are defaulting because of the “tricks and traps” – soaring interest rates and hidden fees – in the credit card business.

    Before more Americans get in so deep that they cannot dig out, Washington needs to change the way these companies do business to ensure that consumers are treated fairly.

    The stories about deceptive practices are harrowing. At a recent news briefing in Washington, a Chicago man told about what happened when he charged a $12,000 home repair bill in 2000 on a card with an introductory interest rate of 4.25 percent. Despite his steady, on-time payments, the rate is now nearly 25 percent. And despite paying at least $15,360, he said that he had only paid off about $800 of his original debt.

    Once more Americans are confronted with what causes great bitterness.  No one, not Congress, the companies that lend citizens cash, the corporate tycoons, or candidates can imagine why Americans might be bitter. None of these entities care enough to help the average Joe, Jane, Maxwell, or his parents.

    Why might inhabitants in this Northern continent be cynical, or feel a need to cling to religion, weapons, or hostility.  Perhaps, these sanctuaries feel  more tangible.  Faith, as an arsenal, and anger too, are at least more affordable than other options.

    Petroleum prices are also an issue of import.  Citizens cry, I now work for fuel.  Only four short month ago, oil hit $100 a barrel for the first time ever.  The rate charged for petroleum continues to climb.  Now the expense exceeds what was once unimaginable. The cost of crude is the cause.  The effect is, Mommy and Daddy do not drive much anymore.  Each trip is evaluated.  Carpools are common considerations.  Vacations are not thought vital.  Parents who had hoped to show Max the seashore this summer cannot keep the promise they made to themselves and their progeny.  Plans did not prove to be predictions.

    In 2008, the inconceivable is classified as inevitable.  Scientists share a stingy assessment.  The environment is no longer stable.  Nor are our lives on the planet Earth.  We, worldwide, have passed the point of no return.  Globally, groups and individuals pooh-pooh this determination.  For them, immediate concerns take precedence over the future.  

    The question we all inevitably ask, even if not expressed aloud, is, “Will I continue to exist?”  If so, “Will my family and I be comfortable?”  The answers shade our sense of what is right or wrong.  Maxwell hears his Mom and Dad speak of free trade.  This is another hazard that haunts them.

    The link between economic integration and worker insecurity is also an essential element of explanations for patterns of public opposition to policies aimed at further liberalization of international trade, immigration, and foreign direct investment (FDI) in advanced economies. Economic insecurity may contribute to the backlash against globalization in at least two ways.  First is a direct effect in which individuals that perceive globalization to be contributing to their own economic insecurity are much more likely to develop policy attitudes against economic integration.

    Second, if globalization limits the capacities of governments to provide social insurance, or is perceived to do so, then individuals may worry further about globalization and this effect is likely to be magnified if labor-market risks are heightened by global integration.

    It seems every issue intimidates us.  Each challenges the security we crave.  All beckon us and cause us to question whether we, Maxwell, or his parents will survive.  Our serious fears force us to believe we must separate ourselves from others, from our brothers and sisters.  In an earlier speech, echoing the words of Franklin Roosevelt, the eloquent Barack Obama spoke of this situation and how our own anxiety harms us.[ The Presidential hopeful offered solutions.

    [W]e need to come together to solve a set of monumental problems – two wars, a terrorist threat, a falling economy, a chronic health care crisis and potentially devastating climate change; problems that are neither black or white or Latino or Asian, but rather problems that confront us all . . .

    Understanding this reality requires a reminder of how we arrived at this point. As William Faulkner once wrote, “The past isn’t dead and buried. In fact, it isn’t even past.”  We do not need to recite here the history of racial [or economic] injustice in this country. But we do need to remind ourselves that so many of the disparities that exist in the [any] community today can be directly traced to inequalities passed on from an earlier generation that suffered  . . .

    Legalized discrimination . . . That history helps explain the wealth and income gap  . . . and the concentrated pockets of poverty that persists in so many of today’s urban and rural communities.

    A lack of economic opportunity  . . . and the shame and frustration that came from not being able to provide for one’s family, contributed to the erosion of [all] families – a problem that welfare policies for many years may have worsened. And the lack of basic services in so many urban [and now with “no new taxes” suburban] neighborhoods – parks for kids to play in, police walking the beat, regular garbage pick-up and building code enforcement – all helped create a cycle of violence, blight and neglect that continue to haunt us.

    Potential President Obama understands and hopes to help all American realize that we are one.  While this vocalization was meant to focus on the more obvious rift between the races, the Senator from Illinois, the community organizer, attempted to advance awareness for what troubles Americans as a whole.

    In fact, a similar anger exists within [all] segments of the  . . . community. Most working- and middle-class white Americans don’t feel that they have been particularly privileged by their race. Their experience is the immigrant experience – as far as they’re concerned, no one’s handed them anything, they’ve built it from scratch.  They’ve worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor.  They are anxious about their futures, and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game, in which your dreams come at my expense . . ..

    Americans, no matter the color or circumstances might contemplate that anger is “often proved counterproductive” as are resentments.  These attitudes distract attention and widen any divide.  If Americans are to find a path to understanding, we must accept that our insecurity, our fears need not distract us.  We will survive if we work as one.

    This time we want to talk about the crumbling schools that are stealing the future of [any child] black children and white children and Asian children and Hispanic children and Native American children. This time we want to reject the cynicism that tells us that these kids can’t learn; that those kids who don’t look like us are somebody else’s problem.  The children of America are not those kids, they are our kids, and we will not let them fall behind in a 21st century economy . . ..

    This time we want to talk about how the lines in the Emergency Room are filled with whites and blacks and Hispanics [poor and those the government classifies as affluent] who do not have health care; who don’t have the power on their own to overcome the special interests in Washington, but who can take them on if we do it together.

    This time we want to talk about the shuttered mills that once provided a decent life for men and women of every race, and the homes for sale that once belonged to Americans from every religion, every region, every walk of life.  This time we want to talk about the fact that the real problem is not that someone who doesn’t look like you might take your job; it’s that the corporation you work for will ship it overseas for nothing more than a profit.

    This time we want to talk about the men and women of every color and creed who serve together, and fight together, and bleed together under the same proud flag.  We want to talk about how to bring them home from a war that never should’ve been authorized and never should’ve been waged, and we want to talk about how we’ll show our patriotism by caring for them, and their families, and giving them the benefits they have earned.

    Today, we must be honest with ourselves.  We can admit that we are incensed, irritated, infuriated, and irate.  These feelings do not immobilize us.  Nor do we necessarily need to fight, and be combative.  It is time we teach Maxwell and also Maxine, distress can inspire us to dream the of impossible and make it our truth.  We, Americans can rise above our bitterness and build bridges to a fine future if we unite.

    It is not elitist to speak truth.  It is ignorance and obfuscation to deny how we feel and what we fear.  We cannot change what we do not acknowledge.  Elusion will not bring bliss.  We may be insecure; we may question whether we can survive.  Indeed, if we act as we have in the past, if we focus on our faith and antipathy, there will be no reason to hope.  Americans, divisions have distracted us for too long.  To negate our natural response is to restrict our growth.  This time citizens of the United States, let us come together.  Bitterness can become sweet.

    Sources of insecurity.  Resources for survival . . .

    Capitalism; Competitive Markets Cut To The Core; Inequity Is Inevitable


    American propaganda – Capitalism (1948)

    copyright © 2007 Betsy L. Angert

    Decades ago, Americans watched a televised spoof of current events, the Rowan and Martin Laugh-In Show.  A cast of characters sang “What is the news across the nation?”  Then they assessed the antics of politicians and celebrities alike.  Serious situations were satirized; silliness was glorified.  Americans were given an opportunity to reflect and see how sadly corrupt and irrational our competitive Capitalist system is.  Exuberance envelops us.  Avoidance advances.  Americans consume, compete, and settle into complacency.

    This week, as we again set aside time to honor laborers in America, this reality seemed ever-present.  Labor’s failure is perhaps industrialism at its best.  Free enterprise follows the market or perchance it creates a product for America to buy.

    In recent weeks, the American public was again able to purchase the absurdity that passes for news.  The current craze streaming through the airwaves is Senator Larry Craig was arrested in an airport bathroom.  Although he plead guilty after being accused of a crime, Idaho Senator Craig, stated, I did nothing ‘inappropriate’ in [an] airport bathroom.  What the Senator did do, regardless of whether he solicited sex from a male officer or not, is provide Americans with another welcome distraction.  That is glorious; that is entertainment!  In a free-enterprise marketplace economy, we demand diversions.  The truth of our status is too painful to bear,

    The weighty news daunts and haunts us.  There are moments that we wish to share what is thought significant to Americans as a whole.  However, these are few and far between.  U.S. Workers Are Most Productive.  As we read this banner headline, we exclaim, ‘Hooray!’  America is still Number One!!!  Citizens are reassured.  The public need not look any further.  Nor is there a need for the mainstream media to dwell.  Citizens of this country are secure in their knowledge.  This nation is great.  The numbers support our sense of self, or at least this calculation does. 

    However, sadly, days later, we learn,  4-Year Growth in Jobs Ends; Dow Off 200. This pronouncement did not appear as prominently; nor did it receive the attention Larry Craig’s resignation did.  Few wanted to discuss the devastation in the job market or the blow to the economy.

    Not only did the report show that there was no job growth last month, but it also found that the job market was significantly weaker in June and July than the government first reported.  Revisions to earlier jobs reports showed that 81,000 fewer jobs were created than initially estimated.

    This bulletin is not novel.  Buried in the back pages a thorough reader often finds words that might destroy the illusion.  Opinion: Pay heed to needs of the American worker.  However, statements such this are far less titillating.  Sex sells.  Super star sensationalism stimulates.  A member of Congress in crisis is a celebrated chronicle.  Accounts of Labor Day festivities, those filled with fun and folly can help to affirm America is on solid ground.  Any information that attests to the good of Capitalism is treasured.

    However, if we care to probe deeply, beyond the hype, we might question the system that leave its citizens steeped in debt, despair, and economic depression. 

    Just prior to Labor Day, John Sweeney, President of the AFL-CIO, [American Federation of Labor and Congress of Industrial Organizations] published an editorial that appeared in no more than one or two periodicals.  Sweeney spoke of the plight of the American employee, the drudge.  He discussed circumstances that are yours and mine.  We, the laborers, the common folk that sustain this country, and make the United States great may wish to understand.

    ‘What’s wrong with America?”  That’s the question Steve Skvara, a disabled, retired steelworker, asked seven Democratic presidential candidates several weeks ago at the AFL-CIO Presidential Forum in Chicago.  Skvara struggles to afford health care for himself and his wife after the company he worked for declared bankruptcy and abandoned its commitment to those who gave the best years of their lives to their employer. 

    As we approach Labor Day, many of America’s workers are echoing Skvara’s question.

    Corporate greed and nearly seven years of wrong-headed Bush administration economic policies have fed a growing gap between the haves and have-nots.  Americans are less secure about their jobs, retirement, health care, and standard of living.

    The issue that Skvara so poignantly raised – health care – is on the mind of nearly every American. 

    Our system is broken; it’s left 47 million without insurance coverage and millions more with inadequate or unaffordable care.  Rising health costs are crippling families and making it harder for responsible businesses to compete. A recent study by the New York City Department of Health found that one of every six adults in New York has no health insurance, though nearly two-thirds of those without coverage have jobs.

    Americans now work longer hours than workers in any other developed country, and as a result, we generate a whopping $13 trillion in income every year.  Yet, at the richest moment in our nation’s history, the wealthiest 1 percent claims more than 20 percent of the nation’s income.  As a result, workers have seen their slice of the economic pie shrink to a sliver.

    Yet, those with an empty stomachs are grateful for the smallest serving.  In America, we are trained to believe there is a limited supply.  Resources are scarce.  There is only enough for a few.  Some will have, others must work diligently to acquire a pittance.  Citizens are reminded there is reason to hope.  The news is filled with success stories.  The masses are asked to suspend disbelief.  They too must dream. 

    In truth, opportunities are not equal.  This reality may seem obvious if you are among a minority, or born poor.  Nevertheless, even those that struggle to do well in America, aspire to greatness.  After all, this is the land of the free market, free enterprise, freedom, and opportunity.

    Citizens and immigrants alike believe as their great grandparents, grandmothers and grandfathers did.  We trust in the words of Mom and Dad.  America is the land of opportunity.  People have faith that in America anyone can make good.  Perhaps, early in our nation’s history some did.  Narratives are nuanced.  Nonetheless, today there seems less reason to dream.

    [T]he Pew Charitable Trust published the first of its studies on economic mobility.  The nonpartisan project is taking input from top economists and researchers across the political spectrum in an effort to measure American mobility – the ability of a person to move up or down the income ladder.

    The study finds that economic mobility in America is “less than has long been presumed.” It says economic mobility is actually declining for men in their 30s, who are doing worse (as a whole) than their father’s generation when measured by incomes: “This suggests that the up escalator that has historically ensured that each generation would do better than the last may not be working that well.”

    The study also says that, based on other research, “about half of the advantages of having a parent with a high income are passed onto the next generation,” which means “one of the biggest predictors of an American child’s future economic success – the identity and characteristics of his or her parents – is predetermined and outside that child’s control.” In other words, the existing rich are just getting richer and the middle class tends to stay middle class.

    Our countrymen complain; yet, customarily, we accept, ‘Life is not fair.’  In the spirit of an entrepreneur, Americans believe.  After all, in this great nation our Constitution confirms, “All men are created equal.” 

    Nevertheless, Economists theorize.  Researchers reassure us, the reality that the ‘rich get much richer’ is a new phenomenon.  It is only in recent years that the Middle Class struggles to sustain a comfortable life style.  Always in the past, the poorest among us had a chance at success.  In America, the streets are paved in gold.  Anyone can make it here. 

    An individual merely needs to maintain that competitive edge.  A word to the wise and those that want more, keep your chin up and nose to the grindstone.  Pay your dues.  Good comes to those that work hard for a living and wait.  Americans accept these standards.  Conventional wisdom serves to secure the workforce as is.  We understand, We must keep hope alive if the USA is to remain Number One. 

    The public is encouraged to think the best of the current situation, regardless of reality.  Rarely is the populace exposed to fiscal facts.  The news is just too disturbing.  Besides, in a market economy, actual statistics are dry.  Data does not sell.  Nor do formulas and figures entertain a society groomed to crave comedy, short stories, drama, and special effects.  No one wants to know the myth is a manipulation, necessary to maintain inequality.

    Recent studies suggest that there is less economic mobility in the United States than has long been presumed.  The last thirty years has seen a considerable drop-off in median household income growth compared to earlier generations.  And, by some measurements, we are actually a less mobile society than many other nations, including Canada, France, Germany, and most Scandinavian countries. This challenges the notion of America as the land of opportunity. 

    Despite these potentially troubling findings, the current national economic debate remains focused too narrowly on the issue of inequality, leaving aside the more important core question of whether the foundation of opportunity, economic mobility, remains intact.  As Federal Reserve chairman, Ben Bernanke recently noted: Although we Americans strive to provide equality of economic opportunity, we do not guarantee equality of economic outcomes, nor should we. Indeed, without the possibility of unequal outcomes tied to differences in effort and skill, the economic incentive for productive behavior would be eliminated, and our market-based economy – which encourages productive activity primarily through the promise of financial reward – would function far less effectively.

    Elected officials grasp, inequity is exceptionally good for the economy.  Indeed, it is essential.  Noted Liberal Senator, Barney Frank finds no fault with disparity.  The Congressional Finance Chair merely struggles when the difference between the rich and poor is extreme.  In a News Hour interview, on a day set aside to honor labor, no less, the Progressive Massachusetts representative concedes.

    Inequality is a good thing. You don’t have a capitalist system without it.  But we are in a position now in which inequality is excessive.

    One might ask, in a system that promotes scarcity among the poor, and advances policies that allow the affluent to become more so, how can we expect any outcome other than what we witness today.  Yet, Americans do not inquire why or how an economic system that requires inequality is adopted in a nation whose Constitution states, all men women, and children are of comparable worth. 

    Instead, common-folk suffer in silence.  Individuals stress.  People in this great country, the land of  opportunity, blame themselves for not being better, or at least for not being the best they could be.  Our countrymen are convinced the sky is the limit.  They watch others on their televisions and think, someday. 

    Actors and actresses on the silver screen are larger than life.  Surely, the audience thinks that could be me.  Industrialists are featured in periodicals.  We see them in commercials.  Businessman and businesswoman write books.  These Capitalist share their secrets.  People are captivated by the promise that they too could become rich.  Competitive drive is all we need.

    The media, just as free enterprise Economists, remind us of this in each moment.  Residents of this country are persuaded to cling to stories of celebrity, self-made millionaires, and corporate genius.  The thought is, if he or she made it, so too can I.  As much as Americans enjoy success stories, we much prefer tales of woe.  Thus, for weeks now, we have been guided to the toilet.  The Larry Craig story lives large.  The Senator’s sexual preference has been discussed with greater vigor than all other matters since it was first exposed.  Howard Kurtz of Cable News Network’s Reliable Sources offers his hypothesis for why this might be.  He states.

    Celebrity scandals have become embedded in the media’s DNA.  Every couple of days, it seems, somebody somewhere who’s been mentioned in “People” or “US” or on “Access Hollywood” gets into some kind of trouble and we all start buzzing about it.

    Now comes “Entertainment Weekly” with a cover story on the 25 biggest celeb scandals of the past 25 years.

    Again, we might question why do Americans focus on the failures of the famous.  Perhaps, other indulgences, such as sex, drugs, and drink have not significantly dulled the pain.  Try as they might, people in this prolific territory, never seem able to compete with the images they have of themselves.  Middle Americans do not often live up to their expectations.  People become impatient with themselves and with all those around them.

    Residents in this wealthy nation want, they need.  We cannot wait.  After all, in movies, on television resolution and riches comes within minutes.  Granted, people in the United States are greedy.  As well they should be.  Capitalism demands such an attitude.  Immediate gratification is cultivated by corporate America.  Once more, Journalist Howard Kurtz assesses this truth in his meta on the media.  As Kurtz and his guest correspondents, digest the dynamic of media coverage as it pertains to hurricane Katrina, they accept what many of us perceive.  During the tempest, there was much drama.  Now two years after the storm, the interest in the circumstances and the people affected has died.  The audience is flippant.  They are a product of a competitive free-market society.

    Kurtz:  [O]bviously, John Dickerson, it lacks the drama of the hurricane itself, when you have people clinging to roofs and water rushing in. And, you know, anybody who goes there — I went there about eight months after the storm — is just struck by the continuing miles and miles of devastation and abandoned houses and all that. And you come back and you want to sort of tell the world about it. But in the world in which we live, it’s got to compete with Michael Vick pleading guilty to dogfighting and Larry Craig and everything else.

    Dickerson: That’s right.  And what was interesting is, after Katrina, there were a lot of people — you know, even Condi Rice said we need to have a national conversation about race. And what everybody said was, you know, we had forgotten about this story of America’s forgotten people and the poor before Katrina, so let’s all think about it now. But now we’ve seen that that conversation, even after this devastating tragedy, has, in fact, shrunken away.

    For the masses, much fades from memory, even when we marinate in what is.  Distractions are often a welcome break.  The misery
      of another can be the source of great entertainment, particularly when, in a nation of lopsided wealth personal fulfillment does not seem possible in the near future.

    A year ago, also on the Labor Day weekend, another report surfaced.  Only the affirmative aspect of this study was considered suitable for distribution.  The Public Says American Work Life Is Worsening, But Most Workers Remain Satisfied with Their Jobs.  The qualifier is important to note.  People may rant, ‘We must make a change.’  However, humans adapt easily.  Mankind is comfortable when our essential needs are met.  People gravitate towards the familiar.  If we feel safe and secure in our knowledge, ‘life is fine,’ we will likely do little to alter what is.

    Years ago, I lived in a roach infested studio apartment.  I slept on a Murphy, pullout bed.  The springs poked through the thin mattress.  The stove in my minuscule kitchenette had two small burners.  The furniture was used, dirty, and dilapidated.  Nonetheless, I was content.  Settling seemed more sane than venturing into the unknown.  To others my state of affairs seemed sad.  For me, all was good enough.

    It is good to know, people adapt.  They make due.  This fact benefits those averse to accepting less than the best.  In a Capitalist culture, the affluent must be certain there are those willing and able to serve.  The underclass, if gratified with crumbs will continue to work for the wealthy.  Thus, the rich can get richer and the economy survives.  The elite among us thrive.  The poor ultimately perish at an early age.  No matter.  Reproduction will help sustain the imbalance necessary for Capitalism to flourish.  There will be a continual supply of underprivileged to meet the demands of the corporate class.

    However, the health of the working class is in rapid decline.  Few are able to prevent illness.  Health insurance is frequently not provided by employers.  Government programs are restrictive.  In a Capitalist country, programs that might prevent illness are labeled, “Socialist” and therefore unacceptable.  Let people fend for themselves.  “Pull your self up by your boot straps,” even if the price of foot-ware is beyond your reach.

    Poverty Rate Up 3rd Year In a Row
    More Also Lack Health Coverage
    By Ceci Connolly and Griff Witte
    Washington Post
    Friday, August 27, 2004; Page A01

    The number of Americans living in poverty or lacking health insurance rose for the third straight year in 2003, the Census Bureau announced yesterday, reflecting a job market that failed to match otherwise strong economic growth.

    Overall, the median household income remained stagnant at $43,318, while the national poverty rate rose to 12.5 percent — 35.9 million people — last year, from 12.1 percent in 2002. Hit hardest were women, who for the first time since 1999 saw their earnings decline, and children. By the end of 2003, 12.9 million children lived in poverty.

    As expected, the number of people without health insurance grew last year, to 45 million — an increase to 15.6 percent from 15.2 percent. White adults, primarily in the South, accounted for most of the increase. The proportion of people receiving health insurance through an employer fell to 60.4 percent, the lowest level in a decade, from 61.3 percent.

    The census report provided hard numbers to anecdotal evidence that the recent recovery has missed certain regions and segments of the population. An additional 1.3 million Americans fell below the poverty line in 2003, as incomes dipped for the poorest 20 percent of the population. An additional 1.4 million became newly uninsured.

    “This recovery has failed to reach those in the bottom half,” said Jared Bernstein, a senior economist with the Economic Policy Institute.

    As the years pass, we realize red flags remain ignored.  The poor are not the only persons affected.Study: More Middle Class Uninsured.  an income once thought opulent now is substandard.

    Middle-Class Americans Join Ranks of Uninsured in 2006 as Private Coverage Shrinks

    Number of Uninsured Swells 2.2 Million to 47 Million

    15,000 Doctors: “Single Payer National Health Insurance is the Only Solution”

    Chicago – The U.S. Census Bureau released data today showing that the number of uninsured Americans jumped by 2.2 million in 2006 to 47.0 million people, with nearly all the increase (2.03 million) concentrated among middle-class Americans earning over $50,000 per year, according to an analysis by Physicians for a National Health Program (PNHP). Strikingly, 1.4 million of the newly uninsured were in families making over $75,000 per year. An additional 600,000 were in families earning $50,000 to $75,000 per year. (The median household income in 2006 was $48,200).

    “Middle income Americans are now experiencing the human suffering that comes with being uninsured. It makes any illness a potential economic and social catastrophe,” said Dr. Steffie Woolhandler, co-founder of Physicians for a National Health Program and Associate Professor of Medicine at Harvard Medical School.

    When Americans have health insurance, the coverage is often inadequate.  Half-truths flourish in a Capitalist culture.  It is imperative we maintain the myth.  However,  we need only look at our own lives to realize the vibrancy of the “Middle Class” is not what we are led to believe. 

    Granted, more Americans may have color televisions.  Cellular telephones are abundant.  Much in the way of supposed material wealth fills our homes, or more honestly, the house the bank owns and we live in.  Nonetheless, most of what we possess is not fully ours.  We made the down payment on our wares and we continue to pay the bills.  Our purchases ensure the economy will remain healthy.

    In America, credit card debt is up.  Homeownership is down.  The miracle of a home ownership with a ‘no money down’ mortgage was merely a mirage.  Ultimately, as might have been expected the bubble burst.  Bankers did as the public does.  They borrowed from Peter to pay Paul.  Our pal Paul had investments on paper.  His worth was inflated.  Industrialists are able to create great illusions.  Print more money; it is the magic cure.

    For years, Americans believed as businesses invited them to do.  All this can be yours.  A signature is all that is required.  Brokers said, ‘You too can buy a beautiful home.”  Your good name is enough to secure a loan.  Today,  Mortgages in foreclosure at record high.  The sub-prime fiasco is as much is in a Capitalist society, a front for failures.

    We, as Americans fail to save dollars or cents, sense [sic.]  We have no time or knowledge of how to do other than what we have done, keep up with the Jones’s.  It is a competitive world out there.  Only the strong survive.  Strength is measured in dollars.  Yet, all that glitters is not gold.

    In a world where inequity is thought excellence, there is much to consider.  Americans may speak about a need to change.  However, when asked to do so, we proclaim.  I do not want to give up the creature comforts that destroy the environment. 

    Rarely, do we consider that if we work together to better the Earth for all it inhabitants equally, the quality of life will improve for everyone.  We dare not contemplate industry and government together can create jobs that nurture nature.  This topic is taboo.  Government and industry, must remain separate.  In truth, they never were in the United States.  Capitalism spreads freedom, free enterprise, even as democracy, the free and equal right of every person to participate in a system of government, falters.  Thus, we have it income inequity increases.  The rich get richer.  The masses sink further into oblivion.

    Capitalism thrives for citizens of this great nation comply.  They accept familiar and comfortable circumstances.  It is far easier to do as we have done for centuries.  People in this Capitalistic culture continue to claim this “civilized’ lifestyle is unsurpassed.  Certainly, no country is as great as ours. 

    Americans compete in a desire to feel complete.  We shop until we drop.  We drown our sorrows.  Those in this, the wealthiest country on the planet, dive into drug-induced stupors.  The general public hopes to find happiness. However, they must know, in a culture that breeds inequity, they are powerless. 

    An educated community exercises their right to free speech.  Speaking out pacifies anxious Americans ; still frustration lingers.  Ultimately, even the scholarly escape in various forms of entertainment.  Men and women in this glorious nation gossip, indulge in rumors,  and temporarily absorb themselves in reports to release the pressure.  Capitalism and the active marketplace appease the masses and sustain the classes.

    Thank goodness, Americans excel at avoidance and diversions are everywhere.  If it were not for a Conservative Idaho Senator and his circumstances, Amid sex scandal, Senator Larry Craig resigns we might have to question the quality of a competitive market economy.  So, embrace the fury.  It is your duty as a Capitalist.

    Capitalism, Inequity, and Deplete Resources . . .

  • 11 Arrested in New Jersey Corruption Inquiry, By David W. Chen.  The New York Times. September 7, 2007
  • pdf 11 Arrested in New Jersey Corruption Inquiry, By David W. Chen.  The New York Times. September 7, 2007
  • Quarterly Foreclosure Rate Again Sets Record, Defaults May Hurt Home Prices, Overall Economy. By David S. Hilzenrath and Dina ElBoghdady.  Washington Post. Friday, September 7, 2007; Page D01
  • pdf Quarterly Foreclosure Rate Again Sets Record, Defaults May Hurt Home Prices, Overall Economy. By David S. Hilzenrath and Dina ElBoghdady.  Washington Post. Friday, September 7, 2007; Page D01
  • Labor’s failure. By James Carroll.  The Boston Globe. September 3, 2007
  • Craig Arrested, Pleads Guilty Following Incident in Airport Restroom By John McArdle. Roll Call. Monday, Aug. 27, 2007; 4:48 pm
  • Craig: I did nothing ‘inappropriate’ in airport bathroom.  Cable News Network. August 28, 2007
  • 4-Year Growth in Jobs Ends; Dow Off 200. By Jeremy M. Peters.  The New York Times. September 7, 2007
  • pdf 4-Year Growth in Jobs Ends; Dow Off 200. By Jeremy M. Peters.  The New York Times. September 7, 2007
  • Opinion: Pay heed to needs of the American worker, By John Sweeney.  NewsDay. August 31, 2007
  • pdf Opinion: Pay heed to needs of the American worker, By John Sweeney.  NewsDay. August 31, 2007
  • Public Says American Work Life Is Worsening,  But Most Workers Remain Satisfied with Their Jobs.  By Paul Taylor, Cary Funk, Peyton Craighill.  Pew Research Center.  September 2006
  • The New Rich: Self-Made or Family-Made? By Robert Frank.  Wall Street Journal.  May 29, 2007
  • Reliable Sources.  Cable News Network.  September 2, 2007
  • Middle-Class Americans Join Ranks of Uninsured in 2006 as Private Coverage Shrinks, By Steffie Woolhandler, MD, Quentin Young, MD, Don McCanne, MD. Physicians For a National Health Program. August 28, 2007
  • pdf Middle-Class Americans Join Ranks of Uninsured in 2006 as Private Coverage Shrinks, By Steffie Woolhandler, MD, Quentin Young, MD, Don McCanne, MD. Physicians For a National Health Program. August 28, 2007
  • Mortgages in foreclosure at record high.  By Patrick Rucker. Reuter. September 6, 2007
  • Amid sex scandal, Senator Larry Craig resigns.  Cable News Network. September 2, 2007
  • Report: U.S. Workers Are Most Productive.  Associated Press.  The New York Times.  September 2, 2007
  • pdf Report: U.S. Workers Are Most Productive.  Associated Press.  The New York Times. September 2, 2007
  • Taming your office ego.  Market Place Morning. September 3, 2007
  • Oh, Everyone Knows That (Except You), By Amy Goodnough.  The New York Times. September 2, 2007
  • pdf Oh, Everyone Knows That (Except You), By Amy Goodnough.  The New York Times. September 2, 2007
  • Watts Revisited. Forty Years Later, Dreams Deferred ©

    “Forty years later, the schools in this part of town are among the lowest achieving anywhere in the city.
    Forty years later, the unemployment rate is the highest of anywhere in the city.”
    Mayor Antonio Villaraigosa

    August 11, 2005 was the anniversary of the infamous Watts riots.  There were celebrations, an acknowledgment that time had passed.  Yet, for most living in this area, time has stood still.  There was little or nothing to celebrate.  Life in the neighborhood is virtually the same. For those living in this Los Angeles community, some forty years have gone by and little has changed.

    The Watts area, a section of South Central Los Angeles, is still symbolic of life in the “slums” of America.  Poverty leads to greater poverty.

    Conditions today are as they were in August 1965, horrendous.  Then, more than half the residents were unemployed.  One quarter of the households were receiving welfare.  In 2005, Mayor Antonio Villaraigosa suggests circumstances are similar.

    Forty years ago, landlords were absent. Property-owners were typically white, well off, and would not want to be seen in such a slum.  Most residents lived in squalor.  Rat and roach invested homes were the “norm.”  Leaking roofs, cracked walls, and poor plumbing were common.  Buildings were not maintained. The idea of repairs, restoration, and renovation were whimsy.  These did not happen.

    Public transportation was not available in this part of town.  Residents were required to walk more than a mile merely to find employment, go to their jobs, or to purchase goods.  Shopkeepers, businessmen, and bankers took advantage of this.  Prices were higher and quality much lower in poverty stricken neighborhoods.  Interest rates were also adjusted; these did not favor a struggling clientele.

    Racial discrimination was rampant.  The police were suspicious of all Black citizens.  Surveillance was strong; law enforcement was always watching and waiting for African-Americans to do wrong. Police brutality was acceptable and occurred frequently.

    For local residents life was a struggle.  Surviving was barely possible; thriving was fantasy.  The Black population could not gain access to capital. Beginning a business venture was next to impossible. Improving one’s station in life was not even a dream.

    People in Watts felt as though they had no control over their own destiny. Resources were limited.  Negro’s were not represented in city government. African-American citizens had no power.  Though the right to vote was finally awarded to Black citizens in 1965, there was no reason to believe that things would different.

    In 2005, there are slight differences; however, life still looks grim!  Look for your self.  Read and reflect upon the following statistics. These numbers come from the Los Angeles Youth Opportunity Movement.

    UNEMPLOYMENT
    • In Watts, 22 percent are unemployed.  In other areas of Los Angeles the percentage is less than 7.
    • Employed residents typically work in low-skilled and low paying positions. In other areas of the city the numbers differ.  Most are gainfully employed in areas that require greater education, expertise, and pay a better wage.
    • 32 percent in the Watts residents work in production, transportation, or material moving occupations. In the city of Los Angeles only 15 percent work in similar circumstances.
    • Service occupations support much of Watts.  Rarely are residents found in professional and specialized stations.

    EDUCATION
    Educational attainment in Watts is lower on average than it is in any other area of Los Angeles. Upward motion and motivation are nil.  In some respects, numbers are declining.
    • The percentage of adults earning at least a Bachelor of Arts degree increased by only one percentage point from 1990 to 2000.
    • As of the 2000 census, 3 percent of adults in Watts have earned a BA degree; in the City of Los Angeles, 26percent of had achieved this feat.
    • 64percent of adults in this community do not have a high school diploma.
    • Nearly 40% of the adults in Watts have less than a 9th grade education.

      This number is 5 percent higher than in years past. Some speculate that this is a reflection of an increase in the immigrant population.

    POPULATION
    • Currently, more than 30 percent of the population is foreign-born.
    • Ten years ago, only 7.5 percent of Watts’ residents were immigrants.
    • 76 percent of immigrants now living in Watts arrived in this country within the past 20 years.
    • The population is no longer predominantly Black.
    • In 1990, the community was 58 percent Black and 43 percent Latino.
    • By 2000, 61 percent of the population was Latino, and 38 percent was Black.

    INCOME AND POVERTY
    • The median household income was $19,600 in 2000.
    • In the city of Los Angeles median household incomes were twice as high.
    • Per capita income in South Central Watts was $6,800 in 2000
    • In the city as a whole, inhabitants earned $20,700.
    • 46 percent of the persons living in Watts reluctantly embraced poverty.
    • Less than 23 percent in the city of Los Angeles, live in poverty.
    • 59 percent of children under 18 live in impoverished circumstances in South Central, Watts.
    •  In Los Angeles proper, the number of children under 18 living in poverty is 31 percent.
    • 24 percent of area households or half of the Watts’ citizenry received public assistance in 2000.

    HOUSING
    Housing in Watts is more affordable than it is in the city as a whole.
    • The average median rent is just $491 per month, 27 percent less than median rent in the city.
    • Buildings in the area are about the same age as those in the rest of the city, averaging about 42 years old.
    • By HUD definition, homes and apartments are severely overcrowded.
    • 28 percent live in what homes classified as severely overcrowded, 56 percent higher than the city’s rate.
    • The vacancy rate is very high.  This contrast is considered classic in area with slum and blight conditions.
    • Watts is a renter’s community; 64 percent of households rent their residence.
    • Residents of Watts tend to stay.  Upward mobility is not the standard.
    Homeownership rates are low, the population lacks wealth and assets.

    In 1965, circumstances such as these caused great frustration.  Riots were the result.  Is another rebellion possible?  Absolutely.

    Forty years ago, there was a glimmer of hope.  Former President Lyndon Baines Johnson promoted and proposed laws that that would advance the American Dream.  He spoke of creating a “Great Society,” ending poverty, promoting equality, improving education, rejuvenating cities, and protecting the environment. Programs were initiated. However, hope died as the Dream was left behind, as was Watts was left behind.

    Now four decades later, we are asked to believe again.  Novice Mayor Antonio Villaraigosa proposes change.  He presents his dream.  He calls it the South Los Angeles Investment Initiatives project.  He says, “These initiatives will not transform Watts overnight, but what they demonstrate is a commitment to every part of the city, a commitment to a part of the city, Watts, where a dream has been deferred.”

    Can we trust, or will this dream be as the American Dream was, delayed, distilled, and ultimately destroyed. We cannot know with certainty; however, we can hope, again.  We can decide to make a difference.  We can choose to allow this dream to thrive.

    You might enjoy reading references directly, rather than through links.  Please venture forth.
    Los Angeles Youth Opportunity Movement
    Los Angeles Times, A truth buried in the ruins of Watts, by Kay S. Hymowitz
    Los Angeles Times, Renewed Focus on Watts’ Lessons, by Patrick McGreevy and Jessica Gresko
    The Washington Post, Burned, Baby, Burned. Watts and the Tragedy of Black America, by John McWhorter

    Societal Bubbles Bursting, Job Security, Debt, Health Care, Pensions ©

    Each day we hear talk; we are experiencing a housing bubble and it will have to burst.  There are those that say rising prices is the history of housing.  The cost of housing steadily increases and has for the last fifty years.  As the growing population grows so too does the cost of homeownership.  Demand is high, supply attempts to follow. Wall Street Journal, David Wessel writes, The Fed Starts to Show Concern At Signs of a Bubble in Housing

    With the advent of low and no interest home mortgages, the possibility of acquiring a house increases.  Please reflect upon, Los Angeles Times, by David Streitfeld, They’re In – but Not Home Free.

    With this boost, the likelihood of bankruptcy is also amplified. Bankruptcy filings are up 370% in the last 20 years.  The effects of a global economy also contribute to the possibility of insolvency.  Fewer Americans are employed in stable positions.  Job security is a misnomer Careers that last for a lifetime increasingly are disappearing.

    Fewer people pursue profession callings, they find it difficult to follow their passion. People often take jobs for practical reasons. Employment contracts are temporary, if they exist at all.  Most Americans will find themselves out of work for a time and that period is longer than it was in the past.  An article published in the Chicago Tribune, after this treatise was posted, advances understanding.  Please consider, White-collar Jobless Blues, by Barbara Rose.

    During that time, and even during better times, bills can mount.  Consumers buy on credit.  They hope to keep collectors at bay, and yet, the creditors come.  The stress that societal conditions create affects health.  Costly illnesses are the cause for almost half of all personal bankruptcies.

    Many Americans discover that their health is not as they desire.  Close to half of United States citizens are “using” prescribed drugs.  It is said, medications are over prescribed.  Doctors fear lawsuits if they do not attend to patient needs or requests.  Numerous patients are demanding drugs.  Television and radio commercials tell them to.

    Drug companies play to people’s doubts, profoundly.  Consumers come to believe that if they need to urinate during the night, then, they need to take a pill.  If they want to have great physical “intimacy” a tablet is required.  To sleep well, a person must swallow a pill or two.  Prevention is not proposed; medication is.

    In 2005, life is a bubble.  We live in a world where all is exaggerated, extravagant, and easily broken.  People drift, they float and they fear stability is fleeting.  It is.  Please read, If America Is Richer, Why Are Its Families So Much Less Secure?, Los Angeles Times.

    There was a time when Americans focused on creating “A Great Society;” our President spoke of it.  In 1964, Lyndon Baynes Johnson proclaimed, “The Great Society rests on abundance and liberty for all. It is a place where the city of man serves not only the needs of the body and the demands of commerce, but the desire for beauty and the hunger for community.  It is a place where men are more concerned with the quality of their goals than the quantity of their goods.”

    In 1964, hope and fulfillment were building.  The citizens of the United Sates were working towards a shared vision.  However, all that has changed.  America changed; its leadership changed.  The principles of the Great Society perished and our present social order grows dim.  There is not only speculation of the housing bubble bursting; there are other truths that we accept confidently.  Many of these are false and they will fade.  Exploding myths are everywhere.

    In 2005, life is not great for civilization as a whole.  There are those that flourish; however, they represent only 10 percent of the population.  “Working Americans are on a financial tightrope,” said Yale University political scientist Jacob S. Hacker, author of soon to be published,  The Great Risk Shift.  “Business and government used to see it as their duty to provide safety nets against the worst economic threats we face.  But more and more, they’re yanking them away.”

    We as a society have become [more] separate and unequal.  Instead of being a “United” States of America, we are divided.  It is now every man, woman, and child for him or herself.  People are struggling to survive, trying to sustain a reasonable life style.  Debt is the nation’s downfall.  Health costs are escalating.  Health insurance has long been elusive for many American citizens.  Pensions are a promise not kept.  Bankruptcies are on the rise.  There are reasons for this.

    University of Pennsylvania economist Peter Cappelli discusses some of these.  He says, “For almost a century, business and government worked in tandem to expand the economic protections afforded working Americans through social insurance programs and career employment.  In the last 25 years, we’ve stripped most of these away.  For a growing number of people, the result is unmistakable: “You’re on your own.”

    In the following passages, statistics are shared.  These are offered in hopes of furthering the understanding for ideas such as these.  A bubble does not exist in isolation; it too is connected to all other causes and effects.

    For every action, there is an equal and opposing reaction.
    Sir Isaac Newton [Physicist]

    No man is an island, entire of itself…any man’s death diminishes me,
    Because I am involved in mankind;
    And therefore never send to know for whom the bell tolls;
    It tolls for thee.

    John Donne [17th century English poet.]

    Job Security
    Job security in 2005 is an oxymoron; those days are gone.  Employers are feeding a fertile market and not their employees. Business owners are anxious, they might lose profit shares; investors are fickle. Therefore, with the support of administrations that favor industry, companies have happily broken the loyalty bond that once existed between corporations and their employees.
    • In the 1980s 56% of major corporations surveyed stressed, “employees who are loyal to the company and further its business goals deserve an assurance of continued employment.”  [Conference Board, research business group]
    • Ten years later, by 1990, only 6% believed that loyal employees were important to business goals.
    In this climate of corporate power, people are increasingly downsized from their jobs.
    • Middle-aged men, in 1978, could expect to be with the same employer for 11 years.  [Bureau of Labor Statistics]
    • Today, 2005, middle-aged men cannot expect to be with the same employer beyond 7.5 years, f few last that long.
    • The average length of unemployment is 50 percent longer than it was in 1970.

    The economic damage created by lay-offs is greater than ever before. Princeton University economist Henry S. Farber recently found that college graduates were taking a far bigger hit. Few are asked to return to their original jobs. Most are forced to take positions that pay less, though these placements may ask as much or more of their workers. Often people must be re-trained; they must abandon their original fields.

    Debt
    Among the effects of unemployment and job insecurity is the lack of savings, the inability to put monies aside, and the expansion of personal debt. The Federal Reserve reports that in the last decade, the percent of income households devoted to debt is steadily increasing.

    • More than 10% of households have monthly debts greater than their incomes.
    • In 2001, 42% of households had less than $1,000 total on hand. This number accounts for the combined dollars available in checking and savings accounts, CDs, mutual funds, stocks, and bonds.
    • 25% of low-income households have credit card debt.
    • 48% of zero-net-worth households do have debt, and these owe almost twice as much as the average American.
    • More than half of all adults have incomes that vary, significantly, from month to month.
    • Most workers with varying monthly incomes are dependent on overtime, tips, commissions, or self-employment.
    • More than 7 million Americans already have second jobs, according to the Bureau of Labor Statistics.  Nearly three out of every 10 people who hold more than one job say they do so to meet household expenses or pay off debt.  [Chatzky, J., Money, Weapons of Mass Debt Destruction. page 57.  September.  2004]
    • American adults that are not working due to unemployment are few and far between. Those not working, due to chronic or temporary illness, or injury is greater than the number of unemployed.

    Health Insurance
    • In1987, employers provided health coverage for 70% of the nation’s working-age population.  [Employee Benefit Research Institute in Washington.]
    • Only 63% of employers provided any health benefits in 2004.
    • 18 million people who once expected to receive coverage must now make their own arrangements.
    • When employers do continue coverage, increasingly, they force more of the costs onto employees.
    • Since 2000, employers have steadily raised the premiums charged to their workers.
    • An average worker must pay 50%, or about $1,000 a family.  [Kaiser Family Foundation and the Health Research and Educational Trust]

    Pensions
    • Twenty-five years ago, almost 40% of the nation’s private full-time workforce was covered by traditional employer?”based pensions
    • In 2005, 20% of workers are covered by employed based pensions.
    • Pensions are defined as contribution plans such as 401ks.
    • Employers now contribute only some funds to pension plans, typically about half what they once did.
    • Employees alone bear the burden of ensuring that they have enough money to retire on.

    The Bankruptcy Trend
    • According to the American Bankruptcy Institute (ABI), in the fiscal years 2002 – 2003, personal bankruptcy filings rose 7.8%.
    • In 2003, 1,625,813 households filed for bankruptcy. This is twice the number of those filing for personal bankruptcy protection in 1993.

    The number continues to escalate.  US consumer debt is at an all time high!  There are those that want us to believe that the reason for the rise is that people are spending frivolously.  They are flaunting their wares and there is no need for such behavior.

    Credit card companies take no responsibility for the debt of individuals; nor do health care professionals.  Insurance companies claim no fault and mortgage brokers deny a contribution.  Businesses take no blame and government garners none.  Each of these states, culpability is that of the individual.  However, statistics do not bare this out.

    Income fluctuations and job insecurity increase the likelihood of debt.  For families and individuals, the greater the debt, the greater the chance of getting caught in an irreconcilable crisis.  Layoffs, divorce, illness, and injury all add to the weight of economic instability.

    Economic weight is as physical weight; Americans have long been preoccupied with both.  In a recent poll conducted by the Cambridge Consumer Credit Index, the tide has turned.  Currently, more than one quarter of the population consider the weight of their body of less concern then getting out of debt.  When making New Year’s resolutions, 28 percent of American citizen resolved to pay down debt.

    “This is the first time in the history of the Cambridge Consumer Credit Index that more Americans say that reducing debt is a higher priority than losing weight or exercising more.  These results provide ample testimony to the increasing heavy burden that debt is perceived to be by American consumers who continued to take on billions of dollars in additional credit in 2003.  The large increase in a desire for more secure employment also shows that, despite many signs of economic growth, many Americans still do not feel secure in their jobs,” stated Jordan Goodman of the Index.

    Goodman words and study secure the truth of what is. Americans need not fear bubbles will burst; they are already disintegrating.  Housing is only one aspect of what has, does, and will affect Americans.  Sadly, the idea or reality of “A Great Society” is no longer. American civilization is not great, it is not working well; it is not growing greater.  As a whole, we are weaker; the dreams of Lyndon Banes Johnson died a slow, substantive, and a silent death.

    Mark Thoma, Economist’s View, offers graphic realities.  Please view this bubbles as they burst.Graphs Gathered from Blogs (June 2005)

    Please read and reflect upon this commentary, Why The Employment Situation Sucks by bonddad, Daily Kos.