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Forum Post: The Banksters Are Now Setting Up the Crash of 2016

Posted 8 years ago on Dec. 2, 2013, 5:59 p.m. EST by LeoYo (5909)
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The Banksters Are Now Setting Up the Crash of 2016

Monday, 02 December 2013 15:05 By The Daily Take, The Thom Hartmann Program | Op-Ed


As the great Yogi Berra once said, "it's déjà vu all over again." Right now, millions of Americans are still struggling to recover from the 2008 financial collapse. That collapse was fueled by the housing crisis, when Wall Street banksters were running around betting on risky mortgage-backed securities that they could sell to investors and make billions from. They were able to do that because the Graham-Leach-Bliley Act and the Commodities Futures Modernization Act had blown up rational banking regulations, and, as a result, we saw things like the so-called mortgage "liar loans". Banksters were able to turn billions of dollars in risky mortgages into trillions of dollars in derivatives. And then everything went to hell.

Fast forward to today, and because of Dodd-Frank there are no more "liar loans." Banksters can't run the same scam as they did during the housing crisis. So, they've found a new way to come up with real-estate-backed securities that can be turned into derivatives, worth billions in profits. How? They've become landlords. As Marilyn Volan points out over at TomDispatch, in the past year and a half, banksters in Wall Street hedge funds, big banks and private equity firms have purchased hundreds of thousands of mostly-foreclosed houses across the country. Among the firms and big banks buying up America's real estate is the Blackstone Group, the largest private equity firm in the world. The Blackstone Group alone has bought nearly 40,000 houses across America, spending $7.5 billion in the process. Blackstone, for example, bought 1,400 homes in Atlanta in one day, and owns nearly 2,000 houses in the Charlotte, North Carolina metro area.

So why are Blackstone and other Wall Street firms buying up foreclosed homes all across the country? It's simple. By renting these homes back to Americans, and securitizing America's home-rental market, they can bundle up rental payments the same way they used to bundle mortgage payments, and sell them to investors.

Sounds awfully familiar, doesn't it?

Blackstone alone has partnered with several of America's largest banks, to bundle the rental payments of over 3,000 homes. And they're just getting started. Last month, Blackstone released the first -ever rated bond completely backed by securitized rental payments, and, sure enough, investors rushed to get in on the action. When this latest get-rich-quick scheme by Wall Street blows up, the big banks and financial institutions will be just fine, like they were in the aftermath of 2008. Because they leverage these things so much, they have very little skin in the game. Instead, you and I will again face the consequences of their actions. Thousands of Americans will again find themselves on the streets, looking for a place to call home, and our economy will be shattered. We could see a housing and financial collapse that makes the Great Recession look mild.

This is something I talk about in my new book, "The Crash of 2016." The basic premise of my book is that conservative lawmakers overreacted to the progressive changes in America that took place in the 1960s and 70s. That overreaction, which included massive deregulation and tax cuts, opened the door for predators – particularly predatory banksters – to step in and wreak havoc on our economy. And, as we see with Wall Street's new efforts to turn rental homes into cash-cows, that door hasn't been closed.

The predators are again up to their old tricks. Nothing has changed. Elizabeth Warren was right when she said that the system is rigged. And if we don't unrig the system quickly, we're going to see another disaster very, very soon.

This piece was reprinted by Truthout with permission or license.



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[-] 4 points by elf3 (4203) 8 years ago

Thanks for this article LeoYo - I've been pointing this out for a while (in depth view of this see Real Estate for Ransom on You Tube)

The gov also allowed investors to buy up Fannie Mae home Path homes in bulk ensuring that even inexpensive and actually rather shoddy housing can't be bought by the average wage earner without being undersold by the big buyers (Reminder 50 percent of Americans earn less than $26,000 per year per the Social Security Administration).

Corporate Housing = Rent Forever = forced mark-ups (Cause just like your job if you don't like it... "go get a cardboard box" and if you don't like goods from China "don't buy anything".

Housing was the American Dream - it has been stolen and combined with trade with China - this new "everything is a market" mentality has killed our jobs, our self reliance our country and our democracy.

A doctor and a nurse could once share the same zip code - now a doctor can't even share the same zip code as a landlord unless he's also a landlord. The new way to screw generations of young people who will rent and pay inflated rents forever while living on meager wages that simply can't keep up with the inflated rates and inflated cost of resources such as energy, communications, and food. - Let alone thousand percent mark-ups on cheap Chinese crap made with slave and child-labor under the thumb of Communistic regime.

[-] 3 points by LeoYo (5909) 8 years ago

What the Media Isn't Telling You About Detroit's Bankruptcy

Wednesday, 04 December 2013 16:01 By The Daily Take, The Thom Hartmann Program | Op-Ed


By now you've probably heard the news: Michigan Governor Rick Snyder is now free to rob Detroit workers of their hard-earned pensions. On Tuesday morning, Judge Steven Rhodes ruled that because federal law trumps state law, Michigan's constitutional protections for public employee pensions don't apply in federal court.

It's pretty much official now: Detroit is going bankrupt.

The death of a great American city is one of the biggest - if not the biggest - news story of the week. But the mainstream media has yet to tell the real story behind the Motor City's decline. Bankruptcy law is a complicated topic, so it'd be one thing if the major networks avoided all the nitty-gritty details of the past few months' legal battles. But they haven't. In fact, that's all the mainstream media has focused on. They've made it seem like Detroit's troubles magically began back in July when the city's Emergency Manager Kevyn Orr first filed bankruptcy papers. And while those legal battles are interesting in their own right, they're really only part of a much bigger story: the destruction of Detroit by America's bankster-billionaire class.

The media isn't telling that story. And it needs to be heard. At one point in time, Detroit was ground-zero for the American dream. The Motor City really was the Motor City. It was the fifth biggest metropolitan area in the country and its economy was booming as a result of the success of the big three automakers: Ford, General Motors, and Chrysler. The car industry's unionized workforce took home good middle-class salaries, in turn bolstering the city's tax revenues. But over the past 30-plus years Detroit has been hit hard by the three-headed monster of the new American fire economy: free trade, union-busting, and bankster-run Ponzi schemes. From the Washington administration to the Reagan Revolution of the 1980s, our trade system was based around a system of protectionist tariffs that encouraged doing business in American and discouraged doing business abroad. But towards the end of the 20th century, both Republican and Democratic lawmakers began to embrace a new form of free-market extremism: free trade. Free trade opened up the economy to foreign competition and outsourced jobs once done by American workers to workers overseas. Detroit was hit especially hard as foreign car companies like Toyota took advantage of lax trade policies to sell their products to American consumers. This decimated Detroit's industrial core. The Motor City's manufacturing workforce stood at 200,000 in 1950. Today, it's 20,000.

But any possibility that those foreign companies would help provide new jobs to Detroit's now unemployed autoworkers was stopped dead in its tracks by right-to-work-for-less states in the South using their anti-worker laws to attract foreign manufacturers like Volkswagen and Toyota. And with its jobs gone and poverty rampant, Detroit, like so many other deindustrializing cities across America, then became the target for banksters looking to make a quick buck with rip-off mortgage schemes. As a result, the financial crisis hit the Motor City especially hard.

But to make matters worse, after evicting thousands of Detroiters from their homes, the big banks didn't bother going through with the normal foreclosure process. Instead, they left the houses abandoned in an attempt to avoid paying taxes on them. Their scheme worked: Detroit's army of abandoned houses costs the city millions every year in unpaid taxes.

The Motor City, once ground zero for the American dream, is now ground zero for the worst policies of the post-Reagan economy. Its industrial heart has been shredded in the name of free trade. Its workforce has been decimated by glorified union-busting schemes. And in the final insult to injury, its impoverished population has been ripped off by predator banksters.

Of course, you can't expect the media to focus on that, right? With so much money to be made, it's far easier to focus on the short term and blame greedy retirees, who, by the way, have been doing their part to fund pension plans while the state government has avoided living up to its end of the bargain. But if we really want to save the rest of the country from devastation, we need to take a good hard look at the lesson of Detroit. Because if we continue on the path we've been on for the past 30 years, Detroit's decline won't be just a sad story, it will be America's story.

This article was first published on Truthout and any reprint or reproduction on any other website must acknowledge Truthout as the original site of publication.

[-] 3 points by LeoYo (5909) 8 years ago

Pension Theft: Class War Goes to the Next Stage

Wednesday, 04 December 2013 14:30 By Dean Baker, Truthout | Opinion


In the past two days we've seen a federal judge rule that Detroit can go bankrupt, putting its workers' pensions in jeopardy, and we have seen Illinois' Legislature vote for substantial cuts in its retirees' pensions. Undoubtedly these two actions are just the tip of the iceberg. We have opened up a new sport for America's elite: pension theft.

The specifics of the situations are very different, but the outcome is the same. Public employees who spent decades working for the government are not going to get the pensions that were part of their pay package. In both cases we have governments claiming poverty, and therefore the workers are just out of luck.

Before getting to the specifics of these cases, it is worth dealing with a couple of points. First, there has been a huge media campaign to trumpet the generosity of public-sector pensions. The Washington Post once ran a major front-page article on public pensions in which its poster child was a former official in a small California city who was getting a pension of more than $500,000 a year. Of course this sounds horrible, and it is. The official had been the city manager and had assigned himself several other top jobs, all of which came with generous pensions. He also was under indictment. This is not close to the typical pension in California or anywhere else. In the case of Detroit, the typical pension is a bit more than $18,000 a year. In Illinois it's around $33,000 a year. It's important to note that most Illinois workers do not get Social Security, so this is their whole retirement income.

The other item generally missing from the coverage is that these pensions are part of workers' pay. Controlling for education and experience, public-sector pay is somewhat lower than the pay of private-sector workers. The more generous pension and health care benefits that most public-sector workers enjoy are offsetting lower wages. The pensions are not gifts bestowed by the government on workers; they are part of workers' pay. When the city of Detroit or state of Illinois cut workers' pensions, they are in effect saying that they are not going to pay workers for the work they did.

Turning to the specifics, there is no doubt that Detroit is in bad financial shape. Part of this can be attributed to mismanagement and corruption. However, by far the biggest factor is the decline in the auto industry, which was the driving force of the city's economy. This decline has far more to do with national economic policy than any decisions made by the city government. It also didn't help matters that the state of Michigan made it very easy to escape the problems of the city by stepping over the city line into the suburbs, which many of its middle-class residents did.

Detroit workers might be forgiven if they thought they could count on getting the pensions for which they worked. After all, the Michigan Constitution prohibits the state from cutting pensions. And the city of Detroit is a creation of the state of Michigan, which might have led them to believe that the Michigan Constitution also applied to Detroit. However, a federal judge just ruled otherwise. Now Detroit's workers face the prospect of a bankruptcy judge taking large chunks out of their pensions.

The story of Illinois pensions should be at least as infuriating. Unlike Detroit, the economy in Illinois is reasonably healthy. News reports often tout its unfunded liability of $100 billion without pointing out that this is an obligation that needs to be met over the next 30 years. During this period, Illinois' economy will exceed $18 trillion in output, putting the liability at roughly 0.6 percent of the state's future income. That is hardly trivial, but neither is it an unbearable burden.

The disturbing aspect about the Illinois situation is that the underfunding of the pension was a deliberate choice. For years the governor and Legislature approved budgets that did not make the required contribution to the pensions. (The city of Chicago, under Mayor Richard M. Daley, did the same thing.) This was a deliberate shafting of workers in which most of the state's leading political figures acquiesced.

Among those who deserve special vilification in this story are the bond-rating agencies (yes, the folks who rated all those subprime mortgage-backed securities as Aaa). During the years of the stock bubble in the 1990s, they analyzed pension funds using the assumption that the bubble would persist indefinitely. This meant that state and local governments had to make little or no contribution to their pensions. Unfortunately, it was a habit that stuck. Even after the bubble burst, they continued to contribute little or nothing to their pensions. So now Illinois, Chicago and several other state and local governments have badly under-funded pensions. It would seem that they would have an obligation to raise the revenue needed to pay workers, after all this money they are owed.

But in 21st century America, contracts and the rule of law apparently don't mean anything, at least not if the people at the other end are ordinary workers. So, rather than inconvenience all those rich folks at the Chicago Board of Trade or other highly successful businesses with a larger tax bill, the plan is to stiff the firefighters, the schoolteachers, and the people who collected garbage for 30 years. It may turn out to be the case that the rich and powerful can just rewrite the rules as they go along. But at least the people should know that theft is now in style when it's their property at stake.

Copyright, Truthout.

[-] 1 points by DebtNEUTRALITYpetition (647) 8 years ago

The consumer financial protection bureau is doing their part by not allowing main street any recourse when they default on a credit card debt no matter what the reason for the default.

The upcoming debt collection rules overhaul will be lauded in the media as a great step for consumers, conservatives will express outrage, yet that too will all be for show because main street cannot even call time out when a default occurs, or what I call debt neutrality.

[-] 1 points by Copiosis (19) 8 years ago

I attended Thom's presentation here in Portland two weeks ago. While some of the information provided was illuminating, a lot of it was alarmist and very little time was spent on alternatives/solutions to this problem. I find that irresponsible a it leaves people in a state of apathy resulting from feeling powerless.

Instead Thom and others like him should take an inventory of the systems out there being innovated to replace capitalism and recommend ways sot support them with actions that are immediate, medium term and long terms. Giving people something to do - even a small thing - gives them a sense of empowerment. We've had enough of people cataloguing the problem. Time to start offering solutions.