U.S. Economic Growth Weakest in Over 4 Years
S.& P. Index Climbs Past the Record It Set 7 Years Ago
The issue of oxymoronic economic reports are not new to the Bush administration. I clearly remember the "booming" economy under Bill Clinton that was making "all boats float." That is until you turned to the "national" or "societal" section and saw that food banks across the country were being swamped with the increases in those needing emergency food supplies. I guess that all boats were floating if one had the good fortune to own a boat.
Then hit the so-called "recession" which was a depression for most of the nation. Month after month, the Bush administration issued (and the corporate media repeated) that the economy was getting better and better. The branding of that improvement was the "jobless recovery." How in the world one can have a recovery for the people when it is "jobless," was one of those sound bites that constantly set my teeth on edge. Those who were "recovering" (though they were actually speeding away from the bulk of the population) were that top 1% and the corporations they own and control.
The two articles at the top of this essay point to a continuation of the same schizophrenia that has become so common. The economy is down, economic growth is now, inflation is up, debt is up, and the stock markets (and the corporate holdings that they trade) are doing "fabulously" - thank you very much.
There was the introduction of all kinds of "creative" financing options. These included, interest only mortgages and a plethora of adjustable rate options. You see, while interests rates may have gone down, housing prices were sky rocketing. In order to get at many first time buyers, even a fixed rate of 5.5% was not enough to bring over valued housing prices within range. So enter the 2.2% adjustable rate mortgage with buyers going in at the max they could afford.
Then the interests rates went up. Those with creative mortgage deals, and those in the extortionary "subprime" market were in way over their head. Even those who were in middle class who were using their (refinanced) homes as leverage for improvements and other debt found themselves on the edge of a crumbling cliff.
So what's up with the (seemingly) shady "subprime" lenders? Well, apparently, standing behind them is Wall Street. The whole back room financing linking "respectable" Wall Street financiers, with the somewhat questionable Johnny on the Spot mortgage loan sharks has been very profitable for both partners. Not so profitable however when the market crashes and the Wall Street intermediaries evaporate. Now the pressure is on the "stop foreclosures" which is really less of a concern than protecting Wall Street from the sudden risk exposure.
So the effort is on to prop up lenders, but what about the folks who are losing their homes (and all the front money they put into them)? Well that's all she wrote for many of them who in trying to save themselves from foreclosure are trying to sell their homes. Unfortunately for them, the market has essentially dried up and they can't sell, or must sell below what they paid for their home - leaving them out from under the loan (if they are lucky) but still owning the lenders tens of thousands of dollars. For a growing number, the only solution is to walk away - and that is what foreclosure rates indicate.
Like the "jobless recovery," the economy can soar for Wall Street while it crashes for the people. However, the housing "crash," or bursting of the "housing bubble," could send shocks all the way back up through those fancy shoes to the Wall Street pockets -except, that most of the profits are likely sitting in sheltered off shore accounts. But the profit line looks slim and it is an excellent opportunity to press for tax payer assistance to "save" the "industry."
David Cho. Washington Post, 4/10/07. Housing Boom Tied To Sham Mortgages
Martin Crutsinger. AP. 5/25/07. Existing Home Sales Fall in April
Vikas Bajaj. NY Times. 5/08/07. East Coast Money Lent Out West
Mark Trumbull. Christian Science Monitor. 4/26/07. Lenders act to limit US foreclosures