Blaming the Poor

I posted the following article on the Guardian's Comments is Free site yesterday. It says things that I think need to be said, about the moral crassness of the commentators who have taken to blaming poor people for the financial collapse we're undergoing. With the permission of the Guardian, I'm republishing it today on the Huffington Post. If you've already read it, please forgive me. If you haven't, I hope it will be of interest.

**

A funny thing has happened on the way to the forum. As the institutions of super-capitalism continue to implode, a number of conservative commentators have started to lay blame for the mess on poor people.

Now that might seem strange given that poor people control approximately no major financial institutions; and it might seem unfair in light of the unprecedented redistribution of wealth away from the working and middle classes and toward the wealthy these past several years. According to the Urban Institute, these days sixty percent of low-income families still don't own homes - despite years of the hard sell designed to get them to buy; more than a third of them don't own cars, which in many instances means they can't get jobs since they have no way of getting to work; and nine out of ten of them have no retirement savings. By contrast, Forbes recently estimated that America's 499 billionaires (a number that has doubled in the past eight years) control $1.4 trillion in assets -- or at least did until the catastrophic market failures of the past month.

It might even seem bizarre given the fact that millions of desperate men and women signed onto utterly manipulative, usurious, "creative" mortgages during the sub-prime gold-rush years, and, as a result, ended up losing what little capital they had accumulated over lifetimes of hard work as well as losing the roofs over their heads. To stretch a point, one could even view such a suggestion as offensive, since so many banks got into trouble by "bundling" mortgage securities that only preserved their value and generated profits so long as enough poor people signed on for the ride and agreed to be screwed.

But, apparently, that's because you and I, dear readers, don't understand the intense psychological pull poor people have on rich folks, a pull that can, apparently, make the world's hardest, meanest, and most ruthless CEOs - highly educated men and women who've spent years honing the fine arts of profit-making -- part with good money on a whim and hand it over to a bunch of irresponsible, check-bouncing lay-abouts. Fox News's Neil Cavuto went so far as to explicitly link banks' lending to minority customers - a move they only reluctantly agreed to after decades of redlining minority neighborhoods and effectively removing most African-Americans from the home-ownership society -- with the current financial collapse. Thursday night, on Larry King, a conservative spokeswoman accused the community organizing group ACORN of "pressuring" banks to give mortgage loans to people with no jobs. Obama is supported by ACORN. QED: the whole bloody mess is Obama's fault.

Let's forget for a minute about the attempt to blame the collapsing global financial edifice on a man who in one breath the Republicans accuse of having no government experience and in the next try to position as being single-handedly responsible for the creation of trillions of dollars in dubious loans. Let's look at the deeper notion that manipulative poor people are responsible for all of our current pocket-ache.

Earlier this year, researchers from Demos, the think tank of which I am a fellow, published a book on America's escalating personal debt crisis, titled Up to Our Eyeballs. Among the findings: starting four or five years back, mortgage brokers were being paid by sub-prime lenders to trawl low-income and minority neighborhoods looking for marks whom they could hang high-interest rate loans on. The brokers were paid "yield spread premiums" for getting borrowers to accept higher interest rate loans than the baseline rate the company would have been prepared to lend them money at. The loans were front-loaded with high fees and adorned with such small-print items as pre-payment penalties. Between 1994 and 2005, the authors found, "subprime home loans increased from $35 billion to $665 billion."

Many of these loans were given to people who in fact would have qualified for regular mortgages had they only known where to look and how to go about applying; had they gotten those regular mortgages they might not have faced personal ruin when their variable rates kicked in in 2007 and 2008. But then, again, had they got those mortgages a whole lot of sub-prime middle-men wouldn't have gotten their profits.

That unqualified borrowers were given huge loans is, at this point, a given. That these borrowers, en masse, are to blame for the resultant crisis makes no sense. Sure, some people took out huge mortgages they had no intention of paying off simply because they were selfish. But that's not the story experienced by most of the low-income borrowers.

Let's get real here. People borrowed because they were presented with offers they couldn't refuse. They were told that home ownership was the path to prosperity, and, like everyone else, they wanted their chance to realize their dreams. When they held back from buying property, they found the decks stacked against them: the same people who urged deregulation of the mortgage industry also lobbied for an end to rent controls and curtailments of government-funded public housing.

And for those who still held back, who risked ever-rising rents and an ever-greater economic disempowerment, they were bombarded with pre-approval notices regarding mortgage applications from banks and finance companies who thought they could make a few quick bucks. They were repeatedly told, by financial specialists who ought to have known better, that buying, and then refinancing, their homes was a painless way to cushion their lifestyles. After all, the shills said, property values would inevitably keep soaring. And they were misled by brokers who didn't tell them what sub-prime loans really entailed.

So I'll say it again: yes, many people made bad bets, didn't read the small print, didn't understand what they were getting into. But these are poor people, most of whom don't have the benefit of years of specialized higher education. When the times were good, conservatives were gleeful at the moneys liberated by lending to them at inflated rates of interest. How truly shameful that now the chips are down they're asking the poor to shoulder the moral responsibility for the country's fiscal collapse. It's as stupid a notion as Marie Antoinette telling Paris's starving masses to eat cake when they could no longer afford their daily bread.

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Comments

[vote08now]

THANKS SO MUCH FOR THIS ARTICLE
While the well to do were eating caviar and drinking
the finest of wines they never thought that one time
the hole they were digging for others would be one for
themselves someday soon. It came soon enough. When you
are offered this opportunity and have heard from mostly
everyone the benefits of what owning your own home could
do for you in the longrun, of course you are going to go for
it. Karma is a mutha.

[marc04]

Thanks for the article. I vented on Daily Kos in my diary about this very thing, ever since I first heard the talking point. Now this is becoming a main talking point in conservative circles. I guess that it's okay to dump on poor people and blame them because they usually don't vote and so no one has to pander to them. But news flash to the conservative geniuses making this point: Poor people do vote and their vote counts too!

I am saddened by these charges and even more sad that John McCain and his surrogates are using this whole Fannie/Freddie selling houses to people who could not afford them (poor people) talking point. These are the same people who could not afford houses then and cannot afford them now. Mostly middle class people who lived beyond their means bought these houses, needless to say, there are a lot of middle class people with sup-prime credit scores but if the politicians are scared to mention this because they might lose some votes.

Well these people who forced this government doesn't work and let the markets run free ideology on society should be suffering just as much as the rest of us...but they're not and they never will. They will always find a way to blame the lower classes and make us pay the losses while they vacation at the spa.

[zenaby56]

Thank you for htis article!!!

I also want to bring into the discussion those who have wealth and took advantage of the sub-prime lending to increase their wealth. This has been a great tool for them. We hear a lot about people who couldn't afford their loans, yes, they are losing immensely. I think the creation of sub-prime financial instruments had a humongous benefit for those who could afford these kinds of loans. While I am not very versed in economics, I do have to wonder how one could have been created for a benefit for those who have much at a consequence to those who had little.

[skantea]

I'm a reasonable person, smart about somethings and not so smart about others, and It seems to me that a first time homebuyer (something I've not yet had the pleasure of being) is very quickly thrust into a blizzard of paperwork all of which they get little time to digest.
Now, me with my crazy life, where sometimes priorities are based on situational ethics, can easily see myself being swindled by a predatory lender(Until now of course).
Lender: "Just sign here and here, now you have three days to figure out what this all REALLY means, or you can sit back, trust ME and dream about your beautiful new life."
I know a lot of hard working, smart, honest people who would look around them, see other people doing it, and assume that it must be okay.
I don't understand how that makes me greedy.
But I CAN easily see how it makes the LenderBanks greedy.
BTW being poor is extremely stressful, and not something people WANT to be, so of course we gamble on the future.
Calling us ignorant isn't fair or appropriate, it's more like putting too much faith in people who claim to know more about "The Rules" than you do.
And as a poor person if you don't have faith, then you really got nothin'.

[francoise]

Skantea,

Being poor has nothing to do with being ignorant or lacking intelligence.

It has a lot to do with being honest and being unlucky.

Some guys are manipulative sharks who don't feel guilty abusing other ones' trust.

Unfortunately, it's a jungle where we live. The fittest aren't the smartest or the most educated ones, they are the ones who can handle best the ability to convince others to trust them with their hard and honestly earned money.

[libby5564]

Be for real...if you make 20,000. a year you cannot afford a 150,000. home...even Forest Gump knbows that...

[UnknownSoldier]

The difference between British Imperalism and American Imperialism is that the Brits would travel to where the jobs were going, be it in India, Africa, China, or Ireland. America sent jobs overseas and told the American people to stay behind and get retraining.

[nezumi]

In times of crisis, scapegoats are readily sought. And usually you find them among your own, not among those of the upper echelons. Those appear to be too far away and out of reach.

So now, one person with moderate savings blames another. If this advances to throatcutting, all the better for the top 1%. They hate the poor (and the middle class, by the way) and want them dead. So much better, if they decimate each other.

[Kache]

To paraphrase the great T.S. Elliot, "This is the way capitaism ends, not with a bang but a whimper".

Fo 8 years all of our GDP increases contained the footnote that housing accounted for more than half of GDP growth. That was an illusion. Today's housing prices have wiped out those 8 year figures. Our problems are far deeper than just the immediate credit crisis. Our economy has not grown in 8 years. If your personal wealth is measured in your home value or stock value, you are worse off today than you were 8 years ago. Solving the technical credit problems will not bring back that lost wealth.

In spite of Glasnost and Perestroika the Soviet economy suffered a lost decade too. In the end, their system fell into complete chaos for lack of confidence.

[nezumi]

Was it not rather e.e.cummings (pity this busy monster, manunkind, not...)?

But you are correct: the economy has not grown in any real sense in the last years. A rise in (basically unproductive) asset prices as well as doctored inflation figures might have made it only difficult to perceive.

This, however, is not the end of capitalism. (You wish!)

[AC500]

Have people forgotten how Bush pushed the "ownership society"? Where under his administration everyone would get a chance to own a home?

[Buddy McCue]

I haven't forgotten. Here's Bush in his own words, from his 2002 speech at George Washington University:

"Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a homeownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future. We've got to work to knock down the barriers that have created a homeownership gap.

I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families."

[Poboy]

Here is your proof and the blueprint for the current housing and credit crisis.

http://www.hud.gov/news/releasedocs/blueprint.pdf

[dutt]

The next scapegoat will be all the ordinary people who gambled away their retirements in risky 401k's.

[sharri]

Finally, some sense being spoken in this issue. Story out today says private sector loans, NOT Freddie and Fannie, created this mess. Why the MSM allows things to be reported as fact that are actually political garbage is shameful. Fannie and Freddie are clearing houses that buy up previously approved loans and sell them to investors. They are not lending agencies. Placing the blame on them is political cover.
Blaming those who bought homes using creative financing created by the lenders, is like blaming your parents for having you even though they weren't wealthy. These lenders and mortgage brokers flooded the market with incentives that even enticed the most savvy of borrowers to take the bait. They promised rising property values and lowering interest rates were a "SLAM DUNK". By the time the balloons came due you would be sitting pretty. You'd have plenty of equity from rising property value that the lack of down payment money would be insignificant and lower interest rates would be a wash in monthly payment. The average home buyer is not the expert, the lender is.

[funkalicious]

The leverage at Freddie and Fannie were out of control 65 to 1 why do you think the government took them over? They hold lots of toxic assets. Freddie and Fannie were the tipping point and the font of the derivatives. Poor lending standards lowering the down payments to 3% means Fannie and Freddie have become sub prime lenders.

They are not the sole problem by any means but they don't get a pass either. We don't really know how bad their book is and we are speculating if they had been forced into receivership and taken before a judge the American people would be reassured one way or the other. We would have justice.

But the opaque manner in which these entities operate and the huge amounts of tribute 170 million in lobbyist money payed out to our lawmakers leads reasonable people to question their solvency and operating practices.

[SEQUOIABISON]

From my perspective, it is not the lack of regulations that is ruining our economy it is the lack of Jobs.

When the government actually gives tax breaks to corporations for shipping important manufacturing jobs overseas this should be considered a criminal traitorous offense.

Our economy is not collapsing because some people lied on their credit application or because banks gave loans to marginally credit worthy clients.

We are falling apart at the seams because all the high paying manufacturing Jobs are gone, corporations only interested in the temporary Bottom Line instead of the long term stability of America and the American workforce, have put millions of people out of work by giving these once reliable secure Jobs to foreign countries that can be exploited for slave wages.

Obama/Biden

[musselmanm]

Union Yes! Even minimum wage workers should have their own union.
How much would it put the US out if the minimum wage earners went on strike?
They may even have enough members to get health coverage for all of them.

[dadw5boys]

If you over value enough homes by 30 % and take that 30 % out of the Economy by Fraud this is what you get. An Economy in crisis.

Call up the Country Wide CEO who bailed out with Millions and all those who took huge million dollar bounes for buyiong and selling over valued loans.

The Community Reinvestment Act was meant to keep neighborhoods from getting run down and falling to squalor and crime. Homes in the Desert and wealthy Subdivision did not even qualify for the program. That is why they went around Fannie and Freddie to sell them to Investment Banks. The Investment Banks did not bother to check and see if the loans were made legally.

Fannie and Freddie would have denied the loans.

Con men set out to defraud the U.S. Economy and have been successful because they appealed to everyones greed! If Bush has left Greenspan alone the high interest rates would have prevented most of this. Republican knew that deregulation would open up the market to abuses and it would drive the Economy into 4% and 5% growth rates expanding the economy but it would all fall apart in the short run. There never was a long term plan.

Greenspan warned you in a statement before Congress and other places. He said " These artifically low interest rates can not be sustained very long without doing grave hram to the Economy ". What part of "GRAVE HARM" did you not understand ?

[ImmanuelGoldstein]

This all springs from the poisoned fruit of one deadly tree. The myth that residential housing actually creates new wealth simply by sitting there. Until this myth is exploded and driven from out tax codes, we will be subject to these useless housing boom/busts forever. We need to get back to the idea that houses are about comfort and securtiy not a bottomless biggy bank.

[schatsie]

But you must understand, this bubble was the only thing that kept the BUSH economy from tanking then... Think about it, no new jobs except the military, blackwater and Walmart, loosing family jobs with pensions and benefits, etc....giving the rich a trillion dollar tax break and starting the War and letting Katrina happen...

So, the only place Main Street had to continue to spend was the Equity Bubble, and now Bushes chickens have come home to roost... We need the WHISTLEBLOWERS to get into this mess and develop a sound solution...instead of another Wall Street BAILOUT, JUST LIKE THE SAVINGS AND LOANS MESS 20 years ago....

[phoebie]

Well done. I recall having conversations with young homeowners five or so years ago. They were all in the process of having their mortgages redone with companies that encouraged them to build additions on to their homes and tack on their high interest credit card debt (most likely from buying furniture, appliance and electronics to fill the home they could not otherwise afford). Luring them with interest only or superfically low payments with a ballon payment later,the homeowners were sure they could refinance years down the road. Or the best one I heard was one mortgagebroker who tried to tempt the borrowers into another $10,000 in order for the mortgage broker to invest those funds in the stock market for the broker to control for them.

[Gidster]

I refinanced to pay the out of pocket expenses for my wife's illness. $64k in medical expenses. It was either refinance my home or file bankruptcy. So I refinanced, when the bubble burst, my payments went up over a grand a month!

I knew what I was getting into, I thought. I was sure I could absorb another $3-$500 in payments, but $1085 a month on top of my current $865 payment was more than I could afford.

60% of my monthly salary was now going to my house payment alone. That leaves very little for food, gas, or even a telephone!

[francoise]

These poor people who got scammed into subprime mortgages, are doing their own jobs : they might be in Afghanistan or Iraq; they might be teachers in difficult schools; they might be sweeping floors and frying chicken. Whatever. They are doing honestly and properly the work that they are paid to do.

These bankers and brokers, what does their work consist in ? It seems to me that they have the knowledge, through education, of how loans and mortgages work.

It's quite obvious where the responsability lies.

[wolfgangmo]

Pitchfork and torches are called for. We know the criminals. Perhaps someone need to go and get them.