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Economy Anyone?
By Rowan Wolf (about the author) Page 1 of 2 page(s)
For OpEdNews: Rowan Wolf - Writer
Remember the so-called "sub-prime" mortgage crisis, with the efforts to portray it as lenders giving mortgages to folks who had "bad" credit? This was spun (briefly before even this disappeared) as "those folks got what was coming to them." However, the issue was (and is) less about borrowers with "bad" credit than those who had not built a credit history. It was also about rich folks trying to cash in on a peaking housing market, and developers doing the same (emphasis mine):
Similar to other banks, most of Umpqua's credit problems have come in the residential sector. About 75 percent of the loans now lumped in the troubled category as "nonperforming assets" are loans to residential developers, said Ron Farnsworth, Umpqua's senior vice president for finance.
Who is really getting slammed by the mortgage debacle?
Women - who were 40% of the borrowers in Baltimore, half of them "sub-prime."
Racial minorities who after struggling to get into the housing market (and hence wealth building) have lost more ground than they gained - an estimated $163 to $278 billion by the time the crisis is over. There is almost a 40% difference in the mortgage losses between whites and racial minorities - a clear signal of ongoing institutionalized racism.
More than 2 million subprime borrowers face higher mortgage costs and the possible loss of their homes if they cannot meet the payments. Studies have found that blacks and Hispanics were likely to be charged higher interest rates on subprime loans than whites with similar credit ratings. (Predatory Lenders Still Seen Targeting Minorities)
Renters whose landlords took the bait on the "easy" and "creative" credit terms. And yes, those renters are more likely to be women and racial minorities. Renters are facing skyrocketing rents and evictions as landlords try to recoup their losses. It is estimated that 20-45% (depending on the area of the country) of the mortgage foreclosures are on rental properties. Further, many of those losing their homes are also losing both deposits and a month's rent. Not surprisingly, more than a few are going from apartment dwellers to homeless.
The China Daily reported that the world stock exchanges lost $5.2 trillion in January in fallout from the U.S. mortgage collapse, and the early estimates of mortgage losses are $400 billion - which seems on the low side to me.
But, to speak of these "losses" is duplicitous at least. That $400 billion is in somebody's pocket, as is the $5.2 trillion in losses (it is called profit-taking). I don't have the resources to determine where that money went, but it is pretty clear where the bailout money is going.
According to a report in the Feb. 18, 2008 Financial Times, banks borrowed $50 billion from the Federal Reserve in January. They did this through an instrument initiated in December 2007 to improve liquidity in the market called a Term Auction Facility (TAF). This offers lenders below prime rate, short term loans. Other central reserves in Europe have similarly pumped money into the market.
While purportedly aimed at staving off a credit crisis, the Financial Times states that analysts are nervous about the lending scheme:"The TAF . . . allows the banks to borrow money against all sort of dodgy collateral," says Christopher Wood, analyst at CLSA. "The banks are increasingly giving the Fed the garbage collateral nobody else wants to take . . . [this] suggests a perilous condition for America's banking system."
Indeed! Here we have a situation where the U.S. government deregulated banking, setting up a Ponzi scheme for both the credit and mortgage markets, which accelerated a housing bubble which has burst at the same time as the risky loans (not risky borrowers) hit their margins. Then, those engaged in the fleecing of borrowers (particularly borrowers faced by systemic predatory and discriminatory lending practices) are "bailed out" with our tax dollars, so that they can continue to fleece the people.
Not to leave the well-heeled behind, the economic "stimulus" plan signed by Bush has a little present for those in the high-priced home market. Namely, the limit on government backed home loans have jumped from $400,000 to $729,750 and jumbo loan rates are dropped 1%.
The change in loan limits, which allows the federal housing agencies Fannie Mae and Freddie Mac to purchase or guarantee the mortgages, is intended to encourage lenders to write more mortgages because they can easily sell them to the agencies.
Yes indeed. Sell those attractive "jumbo loans" to the same folks who created the sub-prime crisis.
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