Panic
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By Gegner
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March 6th, 2007
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That’s right good citizen, you’re not supposed to panic. Stay calm, all is well.
It is the media’s job to soothe your jangled nerves so when you read stories such as this one
Mortgage Crisis Spirals, and Casualties Mount
There’s nothing to worry about. This story is, after all, just another case of a few ‘bad apples’…
This gentleman sets the scene for us:
“You just lost touch with reality after a while because that’s just how people were living,” said Mr. Elsayed, 42, who spent nine years at New Century before leaving to start his own mortgage firm in 2005. “We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”
Seems people were chomping at the bit to shower people like Mr. Elsayed with money…not cheap money but ‘no questions asked money’…money they were desperate to get so they could keep the wolves from their door a little while longer.
While there’s no official recognition of this it’s not hard to imagine what drove throngs of people into the arms of lenders that offered (temporary) salvation from a looming mountain of debt with no income verification, no employment verification and no questions asked.
Many years of stagnant wages while real inflation ran around 8%, small wonder these people were ‘drowning’.
Of course, altruism had nothing to do with this:
Large companies that bought subprime lenders during the boom, like H&R Block and HSBC, are now scrambling to sell them or scale back their exposure. Many investors are also likely to suffer: Wall Street firms made billions in fees, commissions and trading revenue from packaging and selling subprime mortgages to them as bonds.
Think about it good citizen. The mortgage industry is how the infamous ‘they’ kept the GDP numbers in the black while the nation produced nothing!
Of course, most of the 500,000 people who work in the mortgage industry did not cash in so grandly. The wealth was concentrated among executives, loan officers and brokers, because the greatest rewards were meted out in the form of commissions, bonuses and stock awards.
“In the hot times, it was not unusual to see a broker make a million bucks,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “You can carry that up further to people who ran the companies. The whole business revolves around personal compensation.”
The hot times are clearly over.
Industry officials say they are seeing an exodus of executives and salespeople as companies fold, cut jobs and push out early leaders.
Strange how this keeps going around in circles. How will these half a million people pay their mortgages? How about the estimated three-quarters of a million people who will no longer be able to find work in the construction trades?
In the last two years many skeptics began warning that the red-hot housing market and adjustable-rate loans would blend into a toxic brew. Last year, subprime loans totaled $600 billion, or about 20 percent of all mortgages, up from $120 billion and 5 percent in 2001, according to Inside Mortgage Finance. More than half of subprime loans have adjustable rates.
Think about this good citizen. 20% of all mortgages yet the home ownership figures have only shifted a tiny bit…that means a good percentage of these loans are re-fi’s. What’s the primary reason why homeowners re-fi…to consolidate debt.
Let’s shift mental gears here for a moment as we take a look not so much at healthcare but what constitutes ‘middle class’:
Without Health Benefits, a Good Life Turns Fragile
Once upon a time good citizen, before it became an ‘industry’, healthcare was part of the cost of doing business.
In yet another instance that makes us wonder who writes this drivel, we have a reporter who asks us to be ‘surprised’ by the obvious:
But the surprise is that the uninsured are not necessarily the poor, the unemployed and the undocumented. Solidly middle-class people like Ms. Readling are one of the fastest growing subgroups.
Lower class, middle class, upper class…sometimes the problem with labels is that they’re too vague.
Sometimes the problem with labels is the need to use them at all.
Especially when it comes to our fellow humans.
While the government does not have an official definition of “middle class,” one commonly used point of reference is the median household income, which was $46,326 in 2005.
Commonly used? How about reality. If you aren’t making $80K you aren’t making it. Between living expenses, insurance, retirement and other financial obligations, a measly $46K ‘household’ income qualifies as ‘poor’…but there’s no ‘official’ measure of what constitutes ‘middle class’ and there’s a good reason for that.
It lets everyone think they’re in the middle…oddly, it seems the only ones who don’t think they’re middle class are the rich.
What am I saying? It’s articles such as this one, which play upon people’s perceptions of what constitutes ‘normal’. Here we have ‘poor’ being equated with normal…and thus, the middle.
I’ll add a sadder statistic to make my case. Do you know where $46K falls in the income distribution chart? $46K is near the seventy percent mark for men (meaning 70 percent earn LESS while 30% earn more) and it’s somewhere in the ninetieth percentile for women…so much for being in the middle, huh?
One last tidbit before we return to the other side of the debt picture:
Katherine Swartz, a professor of health policy and economics at Harvard, said the soaring cost of health care was a major reason for the increase in the number of uninsured. She said it also reflected long-term changes in the economy, like the decline in manufacturing jobs and the growth in the share of workers in service industries and small businesses, which are less likely to provide health benefits.
Moreover, Ms. Swartz said, “Companies have become more aggressive in hiring people as temporary or contract workers with no fringe benefits.”
Are these the current ‘hard realities’ of the business world, is this what it takes to be ‘competitive? Many seem to think so but what I find remarkable is that these are the same circumstances described in Marx’s ‘Capital’…which was published 150 years ago!
Blogging Away Debt
Consumers are asking others to help them develop self-control because so many companies are not showing any restraint. The Federal Reserve estimates that credit card companies sent out more than six billion direct-mail solicitations in 2005. Last year the average American household was $21,000 in debt, about a third of that on credit cards.
Again we stray from the ‘Headline’ to look at what lies beneath. How the world has changed due to credit cards. We all know credit cards are landmines waiting to go off in our pockets but we all have them…because there are many things you can’t do without one.
Try renting a hotel room or a car without a credit card. Then there is the all-important ‘credit rating’…if you don’t have one you can’t get a loan!
Now lets flip this rock over and look beneath it. Economists say wages have been ‘stagnant’ for the past five years…when it’s been more like forty, about the same time that credit cards first appeared.
Wages may be stagnant but prices haven’t. This is how the major corporations continue to earn ‘record’ profits, quarter after quarter.
Um, I haven’t noticed a ‘tin foil hat’ requirement like they have over at the big blog but you can put one on if you feel the need because I’m going to point to something that should be pretty obvious.
Where does business get it’s ‘capital’…the cash kind? From banks, right? Well where do credit cards come from? Yep, same place. Now, banks don’t issue credit cards because they’re nice…because if they were nice they wouldn’t try to trap you into paying huge sums in penalties and interest.
Credit cards are another ‘income stream’ for banks.
Banks want you to use your cards.
Just saying…isn’t it a strange coincidence that wages went stagnant about the same time credit cards turned up on the scene?
Anyway, these days it’s not uncommon to see people whip out their cards in the grocery store. When the cashier asks “cash or credit?” nine times out of ten you hear “Credit.”
Everyone knows how useless credit card ‘reward’ programs are…they aren’t worth the grief and aggravation you suffer to take advantage of them.
Then there’s the well-publicized fact that people are spending more than they make…up to 120% of their income.
Now, the credit card companies are aware of the situation they’ve put you in…and this is what they did about it:
In response to the explosion in consumer debt, Congress passed a law in 2005 making it more difficult for individuals to declare bankruptcy. But legislators did nothing to curb the blizzard of pre-approved cards that fall through the mail slots. Often the most profitable customers are the least responsible ones. At a Senate Banking Committee hearing in January, Chairman Christopher Dodd cited a study estimating that credit-card penalty fees had risen to $17.1 billion in 2006 from $1.7 billion in 1996.
And there it is good citizen…all from the mainstream media and all in the same day. Sure, I took it all out of context but whose story is more credible?
Still have doubts? Click here and check out the ‘Alert’ dated 3/4/07 for a peek at what’s happening with the M3...and try not to panic
Thanks for letting me inside your head,
Gegner
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He said "Marx"!
The last link was interesting, but the "alert" is only available to subscribers. Maybe you could post up the "money quote." Good post.
Good summation of how the credit industry was able to wallpaper over stagnant wages and necessity price inflation.
This industry is soaking the shrinking middle class and poor through jacked up fees and universal defaults, which can quadruple an original account credit limit. Believe me I have been there.
Not only that, but access to personal credit data and the error rate of the credit bureaus is scandalous. The big brotherism of the private sector has exceeded that of the government thanks to this industry. Try to get an erroneous credit report changed! Its just as hard if not harder as getting an error by the IRS or some other government agency changed.
This parasitic industry has only been able to come about and increase due to wages not keeping up with prices - a house of cards technique of propping up the economy. Sooner or later Wiley Coyote (the consumer) will quit running on thin air and will plunge to the valley below. I have a feeling this will happen sooner than later.
What is now happening is the credit card industry is getting its tentacles into the health care industry by offering dedicated credit for health expenses. It never ends.
Why don't you consider posting this on Kos? I think it would get a good reception there.
Ironically, I'm a 'refugee' from Kos, a victim of the 'quarantine' syndrome (that the front pagers call a 'glitch'.)
It seems posts that ask questions mainstream politicians might find embarassing are returned to your 'draft' folder in a 'locked' state...followed by a two day posting 'suspension'.
This happened to me twice...I figured the third time would get me banned so I posted a GBCW.
One of the front pagers e-mailed me to say I was being silly and insisted that tech support would straighten me out.
So I humored them and sent an e-mail explaining what happened to my posts to tech support.
The silence, to date, has been deafening.
Not all my posts were quarantined, a phenomenon that makes the 'glitch' explanation somewhat doubtful.
The two diaries that were contained what may well fit the description of being 'politically embarrasing' content...subjects 'the powers that be' would perfer not to see the light of day much less public debate.
I think you'll agree that my pointing out here in this piece the 'coincidence' between stagnant wages and the birth of the credit card industry would be branded as being solidly in 'tin foil hat' territory over on Kos.
Thank heavens for CG!
Speaking of which, SGS is a subscription service and I'm not a subscriber so I don't have any more detail to offer than what he posts for general consumption...which is somewhat alaming in itself.
If you click on the archives and then read the month to month entries an even more frightening picture starts to emerge.
It's almost as if market fundamentalism and cheap labor conservativa policies are a vast failure leading inexorably toward impoverishment.
But that can't be. They promised us deregulation and privatization would make us all "owners". I don't get it.
Excellent article. It could be better tho.
"This parasitic industry has only been able to come about and increase due to wages not keeping up with prices"
This particular point is fairly brilliant as an observation and the centerpiece of the column, but it is still too subtle in the way it is presented to grab you.
And generally you had a bevy of strong points that were not presented with enough full frontal nudity to make a neck jerking impression.
"What is now happening is the credit card industry is getting its tentacles into the health care industry by offering dedicated credit for health expenses. It never ends."
This is among the most brazen acts of craven excess I have ever seen. It is immoral and disgusting. We have to shove this one back up the orifice from which it fell.
The main issue is the usury of a debt based economy transforming our wealth and life's work into the conditions of slavery. This is so different from a capitalist economy and so much more parasitic than merely selling our lives by the unit.
see below...dunno what this is doing here...
I am, in fact, softselling here...but that's my style.
I use the 'voice of reason' approach but there's nothing stopping you from taking what you've found here and making it your own.
I agree that this issue needs more exposure and I for one would like to see more diaries/blog posts on this topic in my travels.
Well honestly I never considered that the banking industry manufactured a need for credit until a few years ago. But now it is becoming fairly easy to see that as the financial bohemoths attempt to get a foot hold in China's economy and criticize the lack of consumer credit as a shortcoming in the Chinese financial superstructure. And then the medical credit IC mentioned is equally in your face.
The idea that the CCI is intentionally predatory is easy to see, but the fact that they may have manufactured a need for their services is a new idea to me.
I would like to see the idea developed. I admit I am not yet able to see all the dots.
What is easiest of all to see is that the banking industry manufactured an economic system that served themselves. And it is based on credit and debt.
Funny,
Wonder what you discussed that pissed of the PTB (powers that be) at Kos and what they define as "tinfoil hattery"
I have had discussions of how stagnant wages aided and abetted the credit industry in my diaries at Kos, and I have touched on some concepts that might be borderline tinfoil hattery to mainstream Democratic/political thought, yet my diaries have made it through every time (although they don't attract the comments unlike some quite ordinary stuff there). Also some quite inflammatory diaries get on and get recs such as NYCEves on the disgusting state of the US healthcare system insurance conspiracies.
In fact I have only posted a half a dozen diaries on Kos, and have had two of them rescued. CG is also getting some following over there as well and his diaries get rescued frequently. Still curious as to who you pissed off over there.
You might want to go over to an alternative, such as Mary Scott O'Connors My Left Wing, to post your musings.
Again, thank you for stimulating the discussion. Sorry about the censorship at Kos.
I honestly don't know the answer to that but I have my suspicions that it's someone other than the site's moderators.
I used to post daily. While I only made the rec list once, I had a bit of a following...how many only the site administrators knew because only they could see who reads what.
I did notice one thing. Certain expressions of mine or issues/viewpoints I raised seemed to 'echo' (appear in other diaries) which led me to think my readership was wider than the number of comments to my posts would indicate.
But there's no way to prove it (could very well be coincidence) and I would be the first to admit it.
That said, the very idea of 'quarantine' rankles and I refuse to wear a muzzle.
Please shift mental gears here as I respond to LC's comment.
I'd like to say it's the 'advantage of my years' that allows me to 'see' the changes in our society over the past fifty years but fifty isn't 'that' old.
I hesitate to mention this because it comes off as 'pompous' but 'genius' is misunderstood. People think geniuses 'know' things but that isn't the case at all, they can 'see' things others fail to recognize.
Big difference between knowing and seeing.
While I have tested out at the lower end of 'genius' it hasn't done me a lick of good.
So what I offer here are my own 'insights', the way I see things.
That's why I don't use outrage, because these 'observations' are personal and subject to attack.
This is why I prefer to hold up the pieces of the puzzle as I see them and let the reader draw their own conclusions.
In the end it's all about the questions we ask...or, in my case, questions that aren't 'obvious' to others.
I figured you would eppreciate this Gegner. It sickens me.
http://www.marketwatch.com/news/story/paulson-china-should-open-banks/story.aspx?guid=%7B564FD004-E731-495E-A7E7-73DA45C258E4%7D
That Paulson is a real piece of work. My take on this is he's trying to wrestle control of China's banking system away from the government so they will have a 'safe haven'(new customer base) when the USD collapses.
The 'idea' is to open up China's consumer markets by implimenting [easy] consumer credit so the Chinese end up like us, slaves to the damn bank.
The US market is shot (meaning leveraged to the hilt) thus is he after the Chinese to act quickly so they can 'take up the slack' (by buying more of what they produce themselves.)
Sadly, Paulson's right...the US consumer can't hold on much longer. If the assholes are to save themselves they must open up new markets.
Let's hope China's ruling elite take their sweet time.
That was my take Gegner.
1/5th of the world economy/population yet to be subjigated to debt.
Paulson just can't resist wanting more.
China is way hip, but they do suffer from immature market infrastructure and regulations. I hope they never cave in.
But the timing, a mere 6 days after China's stock market precipitated a worldwide market collapse....not an accidental message to the Chinese.