Two American Families

The title above is that of a Frontline documentary by the irrepressible Bill Moyers that aired last night, July 9, 2013. Needless to say, it’s a marvelous piece of work—one that Moyers and his colleague Kathleen Hughes started all the way back in 1991 when the unraveling of America’s industrial base was going into high gear. It follows two Milwaukee families—one white, one black, both with several children, and houses of their own—as they move from fairly secure lower-middle class existence to near poverty after the closing of factories and then several more economic shocks culminating in the financial meltdown of 2008. In both cases, the male of the house started with a job in the manufacturing sector that once made Milwaukee a prosperous industrial city. The comparison with any number of cities in both the Midwest and the Northeast and even the South is quite obvious. Like Detroit, like Bridgeport CT where I grew up, the busy factories in these towns supported countless families in the period after World War II, providing jobs with good benefits and wages that allowed a single, usually male worker to support his family, pay a mortgage, send his children to school and college, and save for retirement. Since then, under Ronald Reagan and the conservative assault on government, unions, and the social safety net created by Democrats like Franklin D. Roosevelt and Lyndon Johnson, those jobs have withered away. Corporations have been allowed to take their factories to countries like China or Bangladesh or Mexico where labor costs are a fraction of American costs. The result has been an American landscape littered with boarded-up factories, and increasingly since 2008, boarded-up houses whose one-time occupants can no longer afford the mortgages or the upkeep of neighborhoods going to seed.

Moyers takes each family in turn and shows its relative peace and prosperity in 1991. These families are not wealthy, by any means, but both live in tidy neighborhoods and both have men who work in apparently secure factory jobs. The white guy, Tony Neumann, works as a machinist in the Briggs & Stratton factory making what turns out to be the princely sum of $18 per hour, plus benefits. His wife Terry can be a stay-at-home mom, taking care of their two, then three children. On the strength of the Briggs & Stratton job, they buy a house, with a mortgage of $820 a month, and a plastic backyard pool. The African American Stanleys appear similarly prosperous at first, with Claude working a good job at the A.O. Smith factory. They have five children and Claude doubles as a preacher, then a pastor at his own tiny church. This faith sustains him and his family through very hard times, and also gives the Stanleys what appears to be a bit more of a social connection than the Neumanns—though the Neumanns are also religious, being devout Catholics.

But even before the 1990s, things begin to go sour for both families. Both men lose their good factory jobs when their factories depart for cheaper climes. Though this is a major blow, both remain positive and apply for what will be lesser jobs, hoping that something will replace the lost income. It turns out to be a vain hope: one of the points made by the documentary is that good factory jobs are leaving Milwaukee and elsewhere in the United States forever. Tony goes out right away and applies for jobs at places like Wal-Mart, Sam’s, McDonald’s and other ‘big box’ horrors, all offering less than $6 per hour. It is a huge comedown from the $18 he was making, but he keeps doing it, keeps trying to retrain himself for something a little better. Each time he finds a promising job, however, that too falls through when the factory or business closes. Knowing that the wolf is at the door (the wolf being the bank that keeps demanding the now-in-arrears mortgage payment), Kathy tries at first to sell skin-care products, something she can do from home. She ends up losing money on the venture and gives it up. She is forced to go to food banks to keep her family fed. The scene is much the same for the Stanleys. Having lost his good job, Claude takes a job waterproofing basements for less than $7/hour, not even half what he was making. It is an exhausting, grimy job but he does it with energy and eventually becomes foreman for a little more money. But with five kids to support, the Stanleys have the same trouble making the mortgage payments as the Neumanns. So Jackie, who had also worked at Briggs, finds a job selling real estate—she had been studying it even while working at Briggs when she saw the handwriting on the wall. Unable to sell in other areas of the city because of her color, she still sells a house every now and then and manages to keep her family barely above water. But then Claude contracts a lung disease and ends up in the hospital for several weeks, with a bill of over $30,000. Buoyed by faith, they manage to keep going, with the sons starting their own lawn-care service, and Claude working on a garbage truck. And on the strength of their combined drive, they even manage to send their eldest son, Keith, to Alabama State College where he somehow—borrowing on credit cards and every other means—manages to graduate. This sets them a bit apart, for at the end of the film, we see Keith having managed to find a good job working with a city councilman, owning his own house, and even supporting one of his sister’s sons. But having seen the struggle his parents went and still go through, he has refrained from marriage, fearing he might not be able to afford children of his own.

As to the Neumanns, their trajectory is much more severe. Beaten down by constant worry, Tony and Kathy finally split into divorce. By this time, their children are grown but each one seems headed for the same fate, struggling with the low-wage jobs that now dominate Milwaukee’s economy—if it can be called that. Kathy is finally unable to pay her mortgage, and despite her pleas with the bank for a modification, lands in foreclosure. The most agonizing moment is when she returns to the house that once rang with the noise of her family, now owned by an Asian couple who purchased it in foreclosure for around $40,000. Some of her last words are poignant, even tragic, acknowledging that she doesn’t think she’ll ever get back to where she was, even though she has undergone training and become an aide in a nursing facility, working the overnight shift. Salary, $11.50 an hour, plus benefits. She lives in the house of a friend, having crashed with relatives on and off since the foreclosure, the only dream she has left that of being able to buy a place in a trailer park. When asked by Moyers if she thought she’d ever be secure, she said she doubted it, given the way the economy was going. What then? asked Moyers. Just keep going, she said:

“We’ll just work until we collapse and keel over and die.”

Two American Families packs a powerful punch—at least for those who can imagine the same thing happening to them. Because that is its radical message: the American Dream—at least as it has always been touted to average Americans, that with hard work, anyone can succeed—is dead. Has been dead for quite some time. For as the financiers and banksters and CEOs and hucksters consume (or perhaps one should say “steal”) an ever greater portion of the national wealth, average Americans like the Neumanns and the Stanleys are left with the indigestible crumbs of low-wage slavery. Through no fault of their own—rather through the greed of corporatists and militarists and their precious globalization—the jobs they could once count on have disappeared. Gone for good. Without the means to a good college education, without the communal power needed to counter the satanic power of capital, they are condemned to lives of anguish, poverty, humiliation, and self-blame. And unless something drastic is done, and quickly, more and more Americans, even those who manage to borrow and work their way through college with ever mounting debts, are sure to join them.

Lawrence DiStasi

Bailout

Niel Barofsky’s recent book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street (Free Press: 2012), is a sobering, even infuriating account by an insider who was chosen as the special Inspector General charged with overseeing the TARP program. His office was called SIGTARP, and he got an indication of how important the Treasury Department considered his oversight when he was shown his new office—a tiny hole in a basement of the Treasury building with no windows and a musty odor (in Washington, a big office with a view of iconic buildings is a sign of status). Still, Barofsky, who had trained as a prosecutor with the FBI’s renowned New York Office, brought some of his comrades with him and set out to oversee TARP. What he found shocked him, eventually forcing him to resign in frustration. It should shock every American; for what he learned, indicated by his subtitle, was that the Treasury Department, headed first by Hank Paulson, and then, under Obama, by the narcissistic former head of the New York Fed, Tim Geithner, so favored banks over homeowners that every program was shaped to help big banks, while letting homeowners, waiting for the promised modifications of their loans, basically “twist in the wind.”

            Barofsky begins his tale by showing us how the banks encouraged those subprime loans we’ve all heard about. They used the euphemistically termed “yield spread premium” as a way of offering a bonus for brokers who could “convince a borrower who qualified for a prime loan to take a more expensive, higher-interest-rate subprime loan.” That is, they paid brokers more money to steer borrowers into more expensive loans, even though they knew the borrowers had less chance of paying them. That’s because banks earned double on the subprimes: they’d get higher interest rates to begin with, and then be able to resell the mortgages for higher profits in those infamous loan packages that brought down the system. This was predatory lending in spades. But the rating agencies routinely gave these risky loans AAA ratings, and the Federal Reserve just looked the other way. When the loans and the derivatives based on them went bad, panic ensued. 

            Then came TARP. As most of us remember, Hank Paulson went to Congress and rang the alarm about the imminent collapse of the entire financial system if the people’s representatives didn’t approve the massive bailout. Even so, many in Congress were reluctant, but went along because the Treasury Department sweetened the bank bailout with the assurance that, since it would control the troubled mortgage loans that were toxic, Treasury could give relief to homeowners by modifying the terms of those loans. And this would allegedly stabilize the housing market.

            Trouble was, it didn’t work that way. Paulson instituted the CPP (Capital Purchase Program), and what it did was to use TARP funds to “inject capital directly into the banks by buying preferred shares of stock from them,” allegedly to help stimulate lending. It immediately put $125 billion of taxpayer money into nine of the largest banks, but without removing the toxic assets, or purchasing or modifying mortgages at all. The focus of CPP, and of all other government programs, would be the banks; there would be no lending, no credit flowing, no help to homeowners being foreclosed on. Some in Congress, like Georgia Democrat David Scott, cried foul:

            “We have been lied to…bamboozled; they came to us to ask for money for one thing, then used it for another. They said we would have oversight, and no oversight is in place. We have given these banks $290 billion for the sole purpose of so-called buying these toxics. They change it, and all of a sudden now they [the banks] are not lending it but using it for acquisitions, using it for salaries. These are lies.” (p. 27)

            There were other programs with other acronyms (TALF, HAMP), and they were all, according to Barofsky, dedicated to the same thing: easing the pain for banks, bailing them out, and letting defrauded homeowners fend for themselves. The amounts of money either given or lent or guaranteed by the government (U.S. taxpayers) was staggering. TALF, for instance, the Term Asset-backed Securities Loan Facility, was created by the Federal Reserve to spur consumer credit lending. The NY Fed lent up to $1 trillion to the banks, with “asset-backed securities” as collateral, in effect, betting a trillion dollars of taxpayer money with the only requirement being that “all eligible bonds [the collateral] earn a AAA rating by two credit-rating agencies.” Barofsky, outraged, called William Dudley, head of the NY Fed; the exchange is worth quoting in full:

            “That’s fucking crazy, right?” I asked

            “You are correct. That is fucking crazy.”

            “Bill” I said, “Let me get this straight. We’re going to put $200 billion of taxpayer money on the line to buy asset-backed securities that are similar to those that got us into this whole mess in the first place, and we’re going to rely only on the credit-rating agencies and investor due diligence, nothing else?” I asked.

            Dudley replied, “Right.”

            I exploded. “Really? Really?” My voice rose. “Isn’t that exactly the same formula that caused this financial crisis? Exactly? What makes you possibly think that now, after all of this, the rating agencies are suddenly going to get it right?”

            Dudley paused, understandably annoyed at my tone. “Well, the rating agencies performed pretty well in these asset classes,” he continued, “and we’re confident they won’t risk being embarrassed again.”

            It was my turn to pause. “You don’t think that the credit-rating agencies will embarrass themselves again?” I challenged.

            “Correct,” Dudley confirmed.

Barofsky comments: “These guys were going to risk hundreds of billions of dollars of taxpayer money on the integrity of the exact same rating agencies that had sold their souls for a few basis points of profit.”

            When he gets to the new Treasury Secretary, Tim Geithner, Barofsky has even more trouble controlling his contempt. Geithner apparently did everything he could to stymie and sabotage the oversight function that Barofsky had sworn to implement. The Treasury Secretary’s concern was always to protect and bail out the banks, period. If this hurt homeowners losing all of their wealth, in many cases because of fraudulent loan practices by the very banks Geithner was protecting, so be it. So it was with HAMP, the Home Affordable Modification  Program, created in 2009 under Obama. Its four purposes were to 1) protect home values, college funds, retirement accounts, and life savings; 2) preserve home ownership; 3) promote jobs and growth; 4) protect taxpayer interest. But as Barofsky describes Geithner’s comments about it in a key meeting, the Treasury Secretary saw it as a way to help banks rather than homeowners: “This program will help foam the runway for them (i.e. the banks).” In other words, HAMP’s main purpose, for Geithner, was to keep an imminent tide of foreclosures from hitting the banks all at the same time. By stringing homeowners along with the illusion of relief, foreclosures would be spread out over more time, thus giving banks a chance to absorb the losses “while other parts of the bailouts juiced the bank profits.” In short, “HAMP was not separate from the bank bailouts; it was an essential part of them.” And if those who received, or never received home modifications eventually went under, as many would, that was fine; the banks would survive and thrive, as their huge bonuses shortly after the bailouts proved.

            Barofsky’s team eventually estimated what the real cost of the government bailout was, or could have been if all the pledges of all the government programs had been actually committed. The number is shocking, even to a public inured to the shenanigans and sleight of hand engaged in by government officials. Though the dollar amount outstanding at the time Barofsky’s team did their audit was “only” $3 trillion, the total amount that the government had to commit, if money markets and banks had failed, was—$23.7 trillion. That’s Trillion, with a T—more money than most nations can even conceive—and its purpose was to bail out the banks. The amount that Treasury spent to help homeowners, on the other hand, was $3 billion—paltry, even compared to the $50 billion originally allocated to HAMP.

            Now, of course, the banksters and Wall Street are riding high again, with more profits than ever, while millions of Americans still struggle without jobs and 3.5 million have lost their homes for a total loss of $7 trillion in housing wealth. As to the poor, the poverty rate has also increased from 12.5% to 15.1%  since 2007. Nor have mortgage servicers—the ones who encouraged all those subprime loans in the first place, as well as the ones who pretended to be helping homeowners under the HAMP program—been held responsible.

            Barofsky’s book is a must-read for anyone who wants to understand how banks thrive and bought-out governments facilitate their financial theft. An added benefit is that it’s written with clarity and verve, making it quite comprehensible for the average reader. Though he is precisely the type of government official the nation needs, Barofsky’s investigations and positions and refusal to play the DC game, pretty much short-circuited his government career. Rather than cash in on his government job, he’s now teaching law in New York, and writing books like this one. For that, we all owe him. 

Lawrence DiStasi

Occupy Everywhere

Police nationwide having moved in, at this point (Police on Dec. 7 finally attacked and destroyed the Occupation in downtown San Francisco), the Occupiers in public spaces of dozens and dozens of American cities have been forced to leave. But is this the end, as many have feared?

Not quite. In what some have called the next logical and brilliant move, the Occupiers have shifted their locus (not their focus) to the core of the crisis: bank foreclosures of homes. As Stephen Lerner, an organizer with SEIU, says: “…we’ve occupied public space — now we need to occupy private space that’s been stolen by banks.” Sean Barry of VOCAL-NY adds: “One of our messages is that there’s more empty homes that banks are sitting on than there are homeless families.”

Still, some might think, ‘oh, foreclosures; that’s old hat, a story that’s over.’ But it isn’t. According to many insiders, the banks have yet to foreclose on the majority of homes in the U.S., perhaps as many as 4 million more. More than that, the AP reports in its story on foreclosure occupations that “Nearly a quarter of all U.S. homeowners with mortgages are now underwater, representing nearly 11 million homes” (CT Post, December 6). That’s 11 million homes, folks, 1 out of 4. Talk about the Great Depression. Which is what, by the way, Rachel Maddow did on a recent MSNBC show (well worth watching). As an introduction to her sympathetic segment on the Occupy Foreclosures movement, she showed news reports and movie clips of exactly the same kind of resistance during the early 1930s when millions of Americans were losing their homes and farms. Huge crowds would show up and resist not just passively or peacefully, but by first putting the furniture that had been removed by authorities back into the homes, and then by throwing rocks and utensils and farm implements at police arriving to enforce the evictions. These people were pissed off and they were serious.

So, it seems, are today’s occupiers. The AP report cited above claims that homes in more than 25 cities were involved in Tuesday’s protests. And more are on the way. Said one of the Seattle organizers: “It's pretty clear that the fight is against the banks, and the Occupy movement is about occupying spaces. So occupying a space that should belong to homeowners but belongs to the banks seems like the logical next step for the Occupy movement.” In response, Seattle police spokesman Sean Whitcomb insisted that occupying private property represented the same violation—trespassing—that occupying public space did. The police response, and the penalties, would be the same. But the occupiers are unfazed. In Atlanta, protesters disrupted a home auction of foreclosed properties with whistles and sirens. Several individual home foreclosures have already been stopped, and the evictees given more time to try to work out a deal with the banks. One woman in Cleveland expressed gratitude to the occupiers, who came and camped out in tents in her backyard, frightening off officials who were supposed to come and evict her. She was still in her home on December 6 (see Maddow video). Moreover, the Occupiers have joined forces with groups that have been active for several years (Take Back the Land, Viva Urbana) in defending homes against evictions—supplying fresh and enthusiastic troops for the earlier efforts. The movement also derives encouragement and tactics from movements in other countries like Spain, where the 15M movement has stopped hundreds of evictions and occupied vacant buildings.

That this movement has moral authority can be seen by what NY Times columnist Nicholas Kristof wrote in a recent interview with a Chase banker named Theckston:

He (Theckston) says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less-savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up. (Kristof cited by Sarah Seltzer, Alternet, Dec. 5)

We’ve all heard accusations about this type of cruel and intentional fraud before, but to hear an admission of it of from one of the bankers involved is stunning.

This—the moral authority they have, both currently and historically—is why the Occupy movement has the powers-that-be scrambling for ways to de-legitimize it. I mentioned in my last blog the rumor about a public relations firm being hired by bankers. More recently, Republican talking-points guru, Frank Luntz, expressed his concern about it to the Republican Governors Association meeting in Orlando: “I’m so scared of this anti-Wall Street effort. I’m frightened to death,” he said, and offered 10 tips on what specific language to use to counter it. First and foremost, “Don’t say ‘capitalism.’ Use ‘economic freedom’ or ‘free market’ instead.” Now this is really interesting: even the Republicans are admitting that the American public now thinks ‘capitalism’ is immoral! And if Republicans are seen as “defenders of ‘Wall Street’,” says Luntz, “we’ve got a problem.” (Yahoo News, Dec. 1)

Karl Marx must be smiling. Imagine, the Republican Party, that bastion of mindless boosterism, is running away from capitalism as a concept. Moreover, Luntz also advises Repubs not to say government ‘taxes the rich;’ instead say government ‘takes from the rich,’ because Americans respond favorably to ‘taxing the rich.’ By God, I sure hope the clueless, pusillanimous Democrats have read this. Because Luntz urges other verbal subterfuge as well, and all reflect two things: the Republicans are vulnerable and scared (as well they should be, their policies having brought this nation to the brink of disaster), and at the other end, have thoroughly absorbed the lessons of the TV age about framing a message properly, while Democrats have not. Now, finally, there’s a golden opportunity to hang the Republicans with the real message and practice they and their financial masters have been promoting for years: advancing the cause of the 1% at the expense of the 99%.

So far, the only element in the nation that has understood this, and been willing to act on it, are the Occupiers. We can only hope that the American people in ever greater numbers will begin to get it as well, and that the hapless talking heads they elect to public office will follow. The only question is, how much of everywhere has to be occupied and how many of the rest of us have to be jailed before the worm turns?

Lawrence DiStasi