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Live Chat: Robert Scheer on Foreclosures

Posted on Oct 15, 2010

(Page 3)

Truthdig: It is. OK, the next question, from Jason: Is the American dream a myth, and did that myth help cause the current problem? I just turned 30 and do not have a house, yet most of my friends do or are planning to buy very soon. I used to feel left out and envious, now I feel like I never want to have such a burden as a mortgage and be a slave to it. And by extension a slave to my job and a corporation in order to earn money to make my mortgage payments.

RS: Well, the fact is, you know, you want to own a house because there are a lot of breaks to people who own houses. You get a deduction on your interest rate, you know; hopefully, when there’s inflation, you’re protected somewhat. There were rational reasons why people wanted to be stakeholders, and it’s built into the … I wouldn’t say the myth; it’s built into a basic idea of American democracy of a large, ever-larger middle class of stakeholders, rather than the extremes of rich and poor which have characterized other societies. And the whole dream of the founders, going back to the Founders, was to have, you know, basically what they had in mind was an agrarian democracy with basically stakeholders in a large middle class…[OMISSION]…would create stability in the society. Now that’s eroded dramatically, and we have very sharp class differences now that have exacerbated over the last 20 years. We have 44 million people in this country now living officially under the poverty line. That’s official government statistics; 44 million people are poor! A big chunk of our population, people who are called middle class, are now really suffering. And so the question of homeownership … you’re right in the sense that homeownership was part of a dream. A dream of a large American middle class of stakeholders, people who had something, you know. They could say, “OK, I’ve got my home. I’ve got this piece of land. I’ve got something to pass on to my children. I’ve got a place where I can live when I’m retired and, you know, leave it.” That has been destroyed. It’s been destroyed. Now, in terms of the question that was asked—“does it make sense to opt out of that?”—yes. It does. Because right now it’s a very risky business to get into, housing. They have in fact destroyed the housing market, and right now the reason we have a moratorium with some of the leading banks on foreclosures is we’ve got all these houses … this is an absolute disaster. Just tracing the actual ownership of tens of millions of houses has become a major problem. … [OMISSION] And the reason I bring up this Tom Donilon, who was the chief counsel at Fannie Mae when they concocted this thing, and his wife is chief of staff to the vice president, Joe Biden—you know, I wonder, what are these people thinking? This is the guy that Obama just praised, his “probing intellect.” Why doesn’t Obama go probe this guy’s probing intellect and ask him today—just imagine, Barack Obama could say “Hey Tom, I just made you head of my National Security Council. I’ve trusted now the nation’s security and future to you, Tom. ’Cause you’re so bright, you have such a probing intellect, you have a remarkable work ethic. So what happened between 1999 and 2005 when you were the counsel of Fannie Mae, and you concocted this crazy system of the MERS, the Mortgage Electronic Registration Systems, that is now destroying the housing market? What were you thinking? What did you think would work? How do we fix it?” You know? You would think one reporter would ask the president that, you know? “Have you asked your good buddy Tom, now, the guy who helped you in the debates, your close friend—have you asked him why he created this monstrosity of a mortgage registration system so we don’t even know who owns these houses now?” And the people are not asking that. And if you can detect some rage in my voice—I feel very angry about this. I don’t get it. I really don’t get it. I voted for Obama, I contributed money to his campaign, and I wonder how in the world—how in the world did you turn to somebody who was as close as anyone to the creation of this monstrosity of securitized mortgages? And all the mess that was created when he [Donilon] was at Fannie Mae and made an enormous amount of money off the run-up of Fannie Mae stock and everything. And you turn to this guy to be your closest confidant and protect this country in terms of national security in the world? I think it’s a major, major scandal and it’s very, very depressing in terms of an assessment of who Obama is and where he gets his information.

Truthdig: Oh, yes, exactly. We have time for one more question. And the question comes from BJW ... how are new mortgages being treated differently now?...

RS: This is the same question, and they’re not being treated differently, and that’s the whole problem. That Obama, for all of his talk about financial regulation and changing the system—they didn’t change the system. The banks are in charge, they do what they want to do, they’re not held accountable, and the mess continues. That’s the sad truth here. And, you know, this president … I can’t tell you. This is so disillusioning.  So disillusioning. That this guy has been a craven tool of Wall Street. I’m sorry. That’s just the reality. And how in the world this candidate of change, who was supposed to be a community organizer, who was supposed to be feeling the pain of people out there, you know, ended up being the typical best-and-the-brightest, a lead educated snob who ends up being really indifferent to the suffering out there, and then leaves it to the Sarah Palins of this world to represent the fear and anger of people out there, and we don’t have a serious progressive alternative. That’s a very sorry state of affairs.


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Truthdig: OK, great. Thank you, Bob.

RS: Thank you. Bye.

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By Craig2, October 18, 2010 at 8:46 pm Link to this comment
(Unregistered commenter)

The Bankers have abused the mortgage market over and over again. Take it away from them. Buy the distressed mortgages at a discount. Say, 30-40%. Then write new mortgages at new property values with the “home owners” at 4-4.5% for thirty years. Use Social Security Treasury Bonds to facilitate these purchases. Invest Americans Social Security funds in Americans mortgages and Social Security will be secure far into the future. Might even pay for some National Health Care with the proceeds.

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By plenum, October 18, 2010 at 1:23 pm Link to this comment

Great article, and “doublestandard”‘s historical perspective was a good contribution.

Folks, we’re fucked.  The only sanity based in honesty that remains is from those who are now 10,15,20 years late to learn of the theft and, then as now, too weak to do anything about it. Those who have lost or losing there homes think they can resort to the courts and Congress to serve some semblance of justice, but those 50 or so State’s Attorneys - who are they really working for: Justice, their ‘constituents’ the Citizens and ex-homeowners, or are their constituents really Bankers?  I don’t know, but I don’t have my hopes up much.  Sure, the news sounds like hope but who doesn’t think they DON’T have 2nd, or 3rd agendas? Armed rebellion is the only thing that will convince the institutional thieves to stop, or change… and I even admit that THAT doesn’t work well (except in FRANCE, of all places.)

Sorry about the pessimism, but that’s what the thinking has been for the last year ++ here.

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By SteveL, October 17, 2010 at 8:22 pm Link to this comment

Come on the banks are going to whine, the stock market will go down and the
government will roll over and give the banks what they want.

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By doublestandards/glasshouses, October 16, 2010 at 12:55 pm Link to this comment
(Unregistered commenter)

Interesting that Grant refused the bankers request.  Aparently presidents back then couldn’t be pressured by the business community.  Nor were they dependent on corporations for campaign cash.

Grant refused their request and the economy eventually recovered.  I wonder if congress would have passed the emergency measures back in September
2008 if they had known a little more US history.

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By doublestandards/glasshouses, October 16, 2010 at 12:46 pm Link to this comment
(Unregistered commenter)

Capitalism has been one disaster after another in this country.  “The American Dream” has been interrupted by many a nightmare.  Here is an excerpt from AMERICAN COLOSSUS, The Triumph of Capitalism 1865-1900 by W H Brands, 2010:

  Morgan, Rockerfeller, and Carnagie were too busy
  making money to worry about the political recon-
  struction of the Union and the moral and constitu-
  tional issues it raised.  But they couldn’t ignore
  an event that, in its own way, marked the end of
  the Civil War.
  Jay Cooke was a Union stalwart no less valuable
  to the Northern cause than Ulysses Grant or William
  Sherman, but like Morgan, Rockerfeller, and  
  Carnagie, he confined his fighting to the
  economic front.  At a time when bonds were some-
  thing only rich folks bought, Cooke sent small
  armies of agents across the Northern countryside
  selling Union war bonds to farmers and mechanics,
  lawyers and merchants, wives and widows, and
  aunts and orphans.  In all he sold more than $1
  billion of bonds, and it was largely because of
  this that the greenbacks of the Union government
  printed during the war didn’t depreciate the way
  Confederate currency did.  Cooke grew rich in the
  bargain, earning around $1 million, but those who
  thought seriously about the subject accounted his
  services cheap at that price (which amounted to a
  commission of one-tenth of 1 percent).
  After the war Cooke devoted that same promotional
  zeal to underwriting railroads.  He hawked $100
  million in bonds for the Northern Pacific, a pro-
  spective second transcontinental, particularly
  targeting European investors whose knowledge of
  American geography was acquired chiefly from
  Cooke’s agents…
  The campaign to unload the bonds might have
  succeeded had peace not broken out in Europe un-
  expectedly.  The Franco-Prussian War ended sooner
  than anyone but Bismark anticipated, causing
  world grain prices to plunge and, with them, the
  prospects of a new railroad to the wheat fields
  of the northern Plains.  Then a second scandal
  regarding the finances of the Union Pacific
  surfaced, prompting a federal investigation and
  blackening the bonds of all railroads.  Not even
  the irrepressible Cooke could overcome this
  double blow and his Northern Pacific issue went
  begging.  So far had he extended himself on the
  road that the failure sealed his business fate.
  In September 1873, in the anniversary week of
  Jay Gould’s Black Friday, Cooke announced that he
  couldn’t meet his obligations and would have to
  close his doors.
  The news staggered Wall Street.  “Dread seemed to
  take possession of the multitude,” the New York
  Tribune reported.  Cooke had been a pillar of
  the financial community; if he could fall, anyone
  could.  A correspondent of the Nation observed,
  “Great crowds of men rushed to and fro trying to
  get rid of their property, almost begging people
  to take it from them at any price.”  Banks
  trembled and collapsed; brokers issued frantic
  margin calls before going under themselves…
  The governors of the stock exchange shut the system
  down, causing the panic to spread to Boston,
  Philadelphia, and even Chicago.  President Grant
  traveled to New York, where the bankers and brokers
  pleaded with him to bolster the banking system
  by an infusion of federal cash.  Grant demurred on
  constitutional grounds but agreed to an emergency
  buyback of government bonds…
  The panic revealed the rickety nature of corporate
  America…  The failure of the financial system,
  starting with Cooke and Company, caused huge
  sections of the capitalist structure to collapse.
  Thousands of firms - railroads, manufacturers,
  merchant houses, commodity traders, law and
  accounting offices - went under, leaving the
  survivors to count their blessings…

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