Secretaries of Labor are often unstoppable cheerleaders for the job market, seeing blue skies ahead. Former US Representative, now cabinet secretary Hilda Solis has learned from two years on the job during tough economic times: No blue sky forecasts unless they are absolutely guaranteed. Here's what she sounds like now: "I don't think that right now the Federal Government or the Congress is in a position to say that we're somehow going to be able to address all that. We're all going to have to come to the table, all make hard decisions, and tighten our belt."
Who can blame her? When the stimulus money for state and local governments ran out, public workers started to get laid off. Corporations are sitting on one of the largest mountains of cash in history. Earnings are strong but not encouraging new hires. On this week's edition of Destination Casa Blanca, wide-eyed optimism was in very short supply.
We spent most of the program talking about banks, lenders, and Latinos. The numbers are not encouraging: Latino unemployment is significantly higher than the national rate. Home losses have long since moved from being driven by people with second-rate subprime mortgages to being driven by families with plummeting incomes.
Enter the government of the United States. First the Bush administration, then the newly-arrived Obama administration rolled out programs designed to keep people in their homes. They've been slow, and didn't do much to slow the onslaught of foreclosures. When the repeated efforts didn't accomplish much, it was always back to the drawing board to avoid the mistakes of this program in the next one.
But work outs, short sales, new amortization schedules and all that stuff was never going to address the fundamental problems of the housing market. In any marketplace, involving any buyers and sellers, and any commodity, cheaper money and new buyers is going to mean rising prices. In America we had home prices that were growing faster than the number of households, faster than incomes, faster than was ever justified by changes in the housing stock. The last entrants to a marketplace often pay more for their house, and have a smaller chance of making much money when they sell it.
Oh, but those housing prices, jumping year after year, convinced millions that if they didn't jump on the train it was going to leave the station without them. Those new owners included many people who couldn't really afford to buy their house, people who just barely squeezed through the front door with the deed in their hands.
The just-barely-qualified fell into several camps. Some were one bad month away from missing home payments, or one major mechanical failure -- home heating, hot water -- away from losing it all. Others had "liar loans," made after verbal assurances of sufficient income and savings, often when both sides of the transaction -- lender and borrower -- were in on the lie. Still others would have qualified for a conventional loan but got snookered by unscrupulous mortgage brokers who loaded them up with fees and mortgage rate booby traps.
Too many Latino buyers got the worst of all these worlds. They were late entrants to the market, after much of the appreciation had already happened. They were disproportionately first-time buyers, so they couldn't sell high somewhere else to capture the funds to buy in an inflated market. Underbanked, living in neighborhoods abandoned by the conventional banking industry, they were prey for the worst bottom-feeders in the financial services industry.
Latinos were also terribly exposed on the other end of the market... providing a lot of the labor that was overbuilding housing in marketplaces across the Sun Belt, feeding a marketplace fueled by cheap money. When the game was up, their unemployment rate climbed faster and farther than that of other Americans.
From everything we've been told on Destination Casa Blanca, it's going to take a long time to whittle down the mountain of unsold homes. Hundreds of thousands of families who were cheated by mortgage brokers are going to stay cheated, lose their homes, and start all over again. Millions of jobs gone after the recession are going to stay gone, and millions of people who go back to work are going to do it for reduced wages.
During the 90s, black and Latino workers were the last to benefit from tightening labor markets, last hired, and last given raises. The good times that stretched for so many from the mid-90s to the later years of this century's first decade was muffled for minority families. Yes, they benefited, just not as much. Then, when the gains of the long boom evaporated, many were left with less than they had before.
It's going to be a long trip back. For the country as a whole, but especially for those Americans who have shared so little in the country's bounty for so long, and still have a strongly optimistic view of the American Dream and their place in it. Their touching faith in the future is smashed at our own risk.
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