Subprime: It's the Way We Live Now

So the headlines tell us to prepare for the worst. Whole neighborhoods blighted because of shuttered and foreclosed properties. Up to 20 percent of homeowners in some areas finding themselves on the street, with all of the humiliation and anger such a fate entails. Punctilious and qualified borrowers in heavily-impacted neighborhoods losing the equity they patiently built up over decades. A big potential hit to equities markets on account of portfolios laden with dubious "mortgage derivative" holdings. Massive job losses throughout the entire real estate sector, which had fueled much recent job growth in this country. Tax receipts tanking in the many places where city and county budgets were premised on steadily rising property values.

In the major media it's all being pitched to us as kind of a business cycle thing--the result of too much irrational exuberance, akin to the dotcom bubble of seven years ago.
"These things happen," seems to be the mantra. That, and an implied moral judgment of the saps and suckers who should have known better--who should have read the fine print, who should known that the mortgage deals on offer were too good to be true.

Almost nowhere have I seen anyone going after the shameless avarice of the usurers involved: the community of sharks who are pleased to describe themselves as the "financial services industry." Nor have I seen very much commentary pointing to the indispensable enablers of the greedheads: the conservative politicians, policymakers, and pundits who never miss an opportunity to entrust the public's welfare to the tender mercies of avaricious privateers.

These conservatives (a howling misnomer, but let it pass) have a lot to answer for. Thanks to their ideology, playing itself out in public policies adopted over the past 30 years, nearly all financial markets in the U.S. have been effectively deregulated. Thanks to their handiwork, anything really does go now when it comes to confiscatory interest rates, blatantly false and deceptive marketing of financial products, dishonest reporting to public agencies, and bribes and kickbacks offered to people who are supposed to provide neutral financial advice to prospective borrowers.

Empowering the predators while disarming their prey does in fact have a predictable result, and today we see that result in full inglorious flower.

The current wave of mortgage defaults and foreclosures tells only a small part of the story. The same predatory interests are responsible for ramming through the new bankruptcy legislation that now basically eliminates the bankruptcy option for middle class borrowers regardless of circumstances. Theses same interests are responsible for the growing plague of "payday loans" and "debt consolidation" products that target people of color in particular with interest rates of 50 percent and more. How interesting that the "Support Our Troops!" conservatives--Limbaugh and O'Reilly and that whole lot--have had nothing to say about the huge numbers of active-duty servicemen and women who have been horribly victimized by payday loan operators conveniently arrayed around major military bases in every part of the country.

According to free market ideology, you see, it's all good. In their view the world is divided between sharks and chum. If you aren't smart enough to be a shark, that's your "choice"--and good luck to you. Encouraging the sharks feed at will is what makes capitalism dynamic, don't you know.

It's dynamic, all right. At this very moment the folks who feasted handsomely through the real estate boom years by pushing junk loans are moving their money elsewhere, secure in the knowledge that they were able to take all their profits on the front end. That's right: almost none of the dealmakers have been left holding the bag on today's mortgage defaults. They made sure of that. It's all gain and no pain for the rentier class these days. They must chuckle to remember that there was actually a time in this country when lenders and not just borrowers were expected to bear some risk.

Now to the coda. As the big media continue to update us on the extent of the housing carnage (without, of course, troubling to assign blame), expect the developing story on student lending to remain an unconnected dot. Allow me to connect it here and now. Again, we see the same cast of characters at work: big-time usurers and their ideological enablers.

Recall, if you will, how the Republicans insisted it would be more "efficient" to cut direct government lending and invite the private sector into the student loan business. And then think about how incredibly much profit there was for the private sector to drool over in eyeing this particular hen house, what with college costs soaring and thus with far more students thus having to borrow heavily in order to have any shot at a college education.

So are we really "shocked, shocked!" in Claude Rains fashion to discover that these lenders paid off financial aid officers, including officers at some of the nation's most prestigious universities, to steer loan business their way?

Like sheep to the slaughter they are led.

Thus it has always been, you say, and I agree. What has changed, in this wretched land of subprime ethics, is that now we blame the sheep. The slaughterers emerge with their virtue intact. We even celebrate them. After all, they are keeping things dynamic.