As an artist interested in ideology and how culture is formed and manipulated, the mortgage crisis is an ideal laboratory. Over the last week the "foreclosure crisis" has moved to the top of the national discourse as people begin to realize what is happening....or do they? The issue has been framed in the media as a problem with "paperwork". As is typical, the need to distill complex issues to sound bytes that engage public sentiment for short durations trumps a close analysis of the situation. The financial industry is perfectly happy with this framing, and considering that their advertising dollars pay the network meal-ticket, everyone is happy with this simplification. Politicians, preparing for the upcoming elections are happy, they appear to "support the little guy" while simultaneously diverting the real issue in a way that protects their campaign fund-raising....once again, thank you financial industry.
In an article called Obama Calls the Question on Geithner, Robert Kuttner begins to spell it out. Despite the wishful mantra that the "recession is over", the economic collapse is not complete. We've masked the problem and attempted to protect the financial industry by offloading the costs of their greed and ineptitude onto the middle class (not once via TARP, but now, again, via the land-grab that is the foreclosure crisis). The conservative right, in keeping with their modus to simplify everything to a form that supports their world-view, continues to blame the crisis on "people who bought more than they could afford" and are similarly happy with a scenario that makes the middle class pay. Kuttner gets it right that,
"Most of the underwater homeowners, now almost one in three, are not speculators or people who took out sub-prime loans. They are simply ordinary Americans whose houses are suddenly worth less than the mortgages on them, because of the general collapse in housing prices."
The reality is that the financial industry caused this collapse by cannibalizing itself and our country in order to maximize profits. In Foreclosure Fraud for Dummies, 1: The Chains and the Stakes, Mike Konczai does a good job of illustrating what has happened. Giving the industry the benefit-of-the-doubt, one might say that they engaged in faulty paperwork because they are soooo overwhelmed with foreclosures (this is the message they are portraying via the media). One thing we should have learned, recently, is NOT to give industry that benefit! The reality is that in their rush to securitize mortgages (ie, make additional money with them, over and above the traditional form of profiting from loans through interest), the financial industry ignored law and separated mortgage notes and deeds of trust from the underlying loans. In other words, while gorging at the trough, it was inconvenient (re less profitable) for them to do what the law required, and maintain the original loan documents. Now we are left with a situation where who knows who owes what to whom. Compounding the issue, the securities in which they wrapped these mortgages are now practically worthless because the "cat is out of the bag". Nevertheless, they are intent on retrieving as much of this "investment" as possible by sticking it to homeowners who now own mortgages that are irreparably damaged. No wonder the banks won't work with people to renegotiate their loans or short-sale properties.
So this is a war between the haves and have-nots. Institutions rely on social control mechanisms to enforce their power. One such mechanism is the ethic of debt. We are taught that if we borrow money we should do whatever is possible to pay it back, even if it is to our own personal detriment. Unfortunately, in the US, that ethic is not applied evenly to institutions and individuals. John Courson, CEO of Mortgage Bankers Association chides families for walking away from their homes, while his enterprise does exactly the same thing, defaulting on their new $80 million dollar building in Washington D.C. As this 60 Minutes piece points out, given the current circumstances with banks holding borrowers hostage, it may be smarter to dump it before you are driven to bankruptcy: The Case For Walking Away From Your Mortgage - 60 Minutes
The bottom line is that we have a serious problem, and the cause of that problem isn't the people at the bottom. As we've seen over and over, the problem is at the top, the logical result of deregulated capitalism, and it's high time they pay the price for their actions.