The disappearing black middle class

[Gunner]

Source: Chicago Sun Times

The disappearing black middle class
BY JESSE WASHINGTON July 10, 2011 12:24AM
Reprints

Princeton Professor Cornel West (center) eagerly shakes the hand of President Barack Obama in June 2010. Today, West calls Obama “a black mascot of Wall Street oligarchs.” | Pablo Martinez Monsivais~AP
Updated: July 10, 2011 2:19AM

Millions of Americans endured financial calamities in the recession. But for many in the black community, job loss has knocked them out of the middle class and back into poverty. And some experts warn of a historic reversal of hard-won economic gains that took black people decades to achieve.

“History is going to say the black middle class was decimated” over the past few years, said Maya Wiley, director of the Center for Social Inclusion. “But we’re not done writing history.”

Adds Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy: “The recession is not over for black folks.”

In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median net worth for black households had fallen 83 percent to $2,170, according to the institute.

Austin described the wealth gap this way: “In 2009, for every dollar of wealth the average white household had, black households only had two cents.”

Austin thinks more black people than ever before could fall out of the middle class because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs. Those are jobs that are being eliminated because of massive budget shortfalls.

Since the end of the recession, which lasted from 2007 to 2009, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor. Last April, black male unemployment hit the highest rate since the government began keeping track in 1972. Only 56.9 percent of black men over 20 were working, compared with 68.1 percent of white men.

Even college-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.

Nearly 8 percent of African Americans who bought homes from 2005 to 2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.

Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.

“I thought Barack Obama could have provided some way out. But he lacks backbone,” Princeton Professor Cornel West told truthdig.com recently.

West said Obama sold out the poor to become “a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. . . . I don’t think in good conscience I could tell anybody to vote for Obama.”

Wiley said Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and prevent foreclosure because of job loss. But she would like Obama to aggressively counter the suggestion that first black president would be showing favoritism if he specifically helped black people.

“It’s the right thing to do for the nation,” she said. “Black people are a huge segment of the population, they’re especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover.”

AP

 

[nittie]

This is a nightmare. It's un-fucking believeable how much we have lost in less than one decade. The Black middle class has to take responsibility for this though we cannot blame it on anyone else. We should have known that the gains of the 60's where ours only if we continued the fight which we didn't do. We let Diddy, Ice Cube, Snoop and a few other Negro minstrels sell us on a lifestyle we knew wasn't real or worth pursuing. Now we are stuck with it, trapped in it and those jobs we used to move up are in India or China. It's like we are in the 2nd Reconstruction headed for another Jim Crow era and there's no plan to avoid it.

 

[Gunner]

This is a nightmare. It's un-fucking believeable how much we have lost in less than one decade. The Black middle class has to take responsibility for this though we cannot blame it on anyone else. We should have known that the gains of the 60's where ours only if we continued the fight which we didn't do. We let Diddy, Ice Cube, Snoop and a few other Negro minstrels sell us on a lifestyle we knew wasn't real or worth pursuing. Now we are stuck with it, trapped in it and those jobs we used to move up are in India or China. It's like we are in the 2nd Reconstruction headed for another Jim Crow era and there's no plan to avoid it.

No better way to put it.

 

[muckraker10021]

The entire middle & working class Americans, regardless of race, got destroyed by the rapacious banksters three-card-monty , let’s fuck-up the world economy, musical chairs death dance.

If you don’t want to do the reading to find out what happened, then watch the movie “Inside Job”, get the DVD or I’m sure the links to watch it are posted somewhere here on BGOL.

Diddy, Ice Cube, Snoop et al. have as little do with the financial predicament of the Black middle class as Charlie Sheen, Owen Wilson, or Toby Keith have to do with the collapse of the white middle class. As you investigate one finds out that the banksters made an alliance with Black big-pimping, mega-church, prosperity preaching pastors to steer their parishioners into shitty sub-prime mortgages. I wonder how much money the pimp pastors made from the banksters on this deal?

Unlike the whites the banksters targeted Blacks for subprime shitty mortgages. They referred to Black people as “mud people”. .

Even if you had a 750 credit score, if you were Black the banksters told their representatives to sell you a subprime piece-of-shit mortgage. Has our feckless first Black US attorney General Eric Holder filed suits against the banksters for this illegal “steering”?? Hell No! Eric has lost his testicles years ago. Eric said we were a nation of cowards two years ago. Eric needs to look in the mirror to see what a true coward looks like.

Meanwhile the “steering” and “mud people” part of the mortgage meltdown never made television news. Since 90% of Americans get their news ONLY from television, they never heard about it.

The banksters blamed Fannie and Freddie and the CRA (Community Reinvestment Act) for the mortgage debacle. They Lied!! Read{ 1 } and { 2 }

The reality is that even before the real estate pump & dump bubble started, Black households had a minuscule amount of the wealth white households enjoyed. It is only logical that the housing bubble collapse would cause more financial devastation and havoc in Black households; especially factoring in the illegal racist “steering” that was a wide spread practice employed by the banksters. As the movie ‘Inside Job’ asks – why aren’t any of these guys in jail??


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How The Bubble Destroyed The Middle Class
Commentary: Sluggish growth is no mystery: No one has any money

by Rex Nutting

July 8, 2011

http://www.marketwatch.com/story/how-the-bubble-destroyed-the-middle-class-2011-07-08?pagenumber=1

WASHINGTON (MarketWatch) — A lot of people say they are deeply puzzled by the slow recovery in the U.S. economy. They look at the 9+% unemployment rate and the mediocre growth in national output, and they scratch their heads and wonder: Where is the boom that inevitably follows a deep bust, such as we experienced in 2008 and 2009?

But there is no mystery. What other result would you expect from the financial ruin of the once-great American middle class?

And make no mistake, the middle class has been ruined: Its wealth has been decimated, its income isn’t even keeping pace with inflation, and its faith in the American economy has been shattered. Once, the middle class grew richer each year, grew more comfortable, enjoyed a higher living standard. It was real progress in material terms.

But that progress has been halted and even reversed. In some respects, the middle class has made no progress in a generation, or two.

This isn’t just a sad story about a few losers. The prosperity of the middle class has been the chief engine of growth in the economy for a century or more. But now our mass market is no longer growing. How could it? The middle class doesn’t have any money.

There are a hundred different ways of looking at the economy, and a million different statistics. But if you wanted to focus on just one number that explains why the economy can’t really recover, this is the one: $7.38 trillion. <div align="right"><!-- MSTableType="layout" --><img src="http://i.min.us/idY85q.PNG" align="right">
</div>
That’s the amount of wealth that’s been lost from the bursting of housing bubble, according to the Federal Reserve’s comprehensive Flow of Funds report. It’s how much homeowners lost when housing prices plunged 30% nationwide. The loss for these homeowners was much greater than 30%, however, because they were heavily leveraged.

Leverage is an amazing thing: When prices go up, the borrower gets all the gains. And when prices go down, the borrower takes all the losses. Some families lost everything when the bubble collapsed, others lost very little. But, on average, American homeowners lost 55% of the wealth in their home.

Most middle-class families didn’t have much wealth to begin with — about $100,000. For the 22 million families right in the middle of the income distribution (those making between $39,000 and $62,000 before taxes), about 90% of their assets was in the house. Now half of their wealth is gone and it will never come back as long as they live.

Of course, rich folk lost lots of wealth during the panic as well. Their wealth is mostly in paper not bricks -– stocks, bonds, mutual funds, life insurance. The market value of those assets fell further than home prices did during the crash, but they’ve mostly recovered their value now. The S&P 500 (SNC:SPX) lost 56% of its value when it crashed, but it’s doubled since then. Stocks are down about 13% from peak.

The rich recovered; the rest of us didn’t.

If losing half your meager life savings weren’t bad enough, the middle class has also been falling behind in terms of income for decades. Families in the middle make most of their money the old-fashioned way: Working their fingers to the bone for 40 years for wages and a modest pension.

Their wages have been flat after adjusting for inflation. In the late 1960s, the 20% of families right in the middle were earning almost their full share of the pie: they had 17.5% of total income. Their share has been falling steadily ever since. Now, that 20% is earning just 14.6% of all income. Meanwhile, the top 5% captured a growing share, going from 17% in the late 1960s to 22% today. <div align="left"><!-- MSTableType="layout" -->
<img src="http://i.min.us/iecXrM.PNG" align="left"></div>

The housing bubble was the last chance most middle-class families saw for grasping the brass ring. Working hard didn’t pay off. Investing in the stock market was a sucker’s bet. But the housing bubble allowed middle-class families to dream again and more importantly to keep spending as if they were getting a big fat raise every year.

I don’t think we’ve quite grasped how much the bubble distorted the economy in the Oughts, and how much it continues to distort it today. We’re still paying the bills from that binge.

During the last expansion from 2003 to 2007, according to an analysis by Fed economists, American homeowners took $2.3 trillion in equity out of their homes through cash-out refinancing and home-equity loans, and they spent about $1.3 trillion of it on cars, boats, vacations, flat-screen televisions and shoes for the kids.

All that spending circulated through the economy, creating millions of jobs here and in China, where they make those TVs and shoes.

During that period, the economy grew at an annual average rate of 2.7%, which is about typical for our economy. But growth would have been closer to 2% if we hadn’t had a housing bubble; if we hadn’t had the extra consumption financed by the bubble and if we hadn’t built millions of surplus homes. That’s a huge difference. At 2.7%, the economy can create a significant number of jobs. But 2% is stagnation, not even keeping pace with population growth and productivity improvements.

Now that the bubble has burst, homeowners are putting money INTO their homes, not taking it out. The impulse to pay down the mortgage and the credit card is reducing the amount of money we’re spending on other things. Since 2007, instead of taking $2 trillion out of their house, homeowners have put $1.3 trillion into them.

You think that might be having an impact on consumer spending?

Even with trillions in debt being paid off or written off, very little progress has been made in deleveraging. The debt-to-disposable income ratio has slipped from 130% at the height of the bubble to 115%, but that’s still far more than the 90% recorded in 2000 or the 80% of 1989 or the 60% of 1976. No one knows how far it needs to fall before American families are comfortable with how much they owe.
<div align="right"><!-- MSTableType="layout" --><img src="http://i.min.us/idYYeO.PNG" align="right"></div>

The slow growth in the economy is no mystery: Most families don’t have any extra money to spend. It will take a long time for the middle class to rebuild its wealth, especially if we don’t find some work.

The crazy thing is that our leaders aren’t even talking about this crisis. With the upper classes prospering and global markets booming, they don’t need the U.S. middle class any more. The market is up, profits are soaring, and the corporate jet is fueled and ready for takeoff.

And if the middle class can’t buy bread? Let them eat cake.



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[RepostKing]

No better way to put it.

cosign

 

[Greed]

Black middle class economically vulnerable

Black middle class economically vulnerable
Downturn has wiped out gains of last 30 years, Urban League says

October 07, 2012|By Dawn Turner Trice, Chicago Tribune reporter

Generations of Valerie Magee's family, from her grandparents to her children, have deepened their roots in the black middle class, finding a pathway to prosperity through college education and the support of family members.

But as Magee, 56, watches college tuition skyrocket and wealth and incomes plummet, she worries that college might be moving beyond her young grandchildren's grasp.

So Magee, a divorced nurse administrator, recently sold her pricey south suburban Matteson home, hoping that will free her up financially to better assist her children if they need help with a future mortgage payment or tuition.

"Every generation wants the next to move up at least one more rung on the ladder, not backward — never backward," she said. "My daughter and son-in-law are doing OK for now, but who knows what will happen tomorrow?"

For months, the presidential candidates have been trying to court the middle class, extending offers of tax cuts, lower gas prices and better schools. The message: America does well when the middle class does well. The corollary: We feel your pain.

But much less attention has been given to the black middle class, which since the recession and slow recovery has suffered massive decreases in wealth and high rates of home foreclosures. Blacks overall are experiencing a 13.4 percent unemployment rate, according to figures released Friday, much higher than the national rate of 7.8 percent.

The Pew Charitable Trusts' Economic Mobility Project recently released a report projecting that 68 percent of African-Americans reared in the middle of the wealth ladder will not do as well as the previous generation.

In August, the National Urban League's State of Black America 2012 report found that nearly all the economic gains that the black middle class made during the last 30 years have been wiped out by the economic downturn.

"This is a very dire situation," said Valerie Rawlston Wilson, an economist with the National Urban League Policy Institute. "Even for blacks who have college degrees, we've seen a doubling of their unemployment (rate) between 2007 and 2010."

Roxie King, 63, who lost her job as a cardio echo ultrasound technician in 2010, has been fighting to keep her Chicago home.

"You're robbing Peter to pay Paul and you're trying to keep the lights on and it's a real struggle," King said. "You go through whatever little nest egg you had, and all you have left is frustration."

That nest egg is central to the discussion about the middle class. It's often key to how well a family rebounds after a financial catastrophe, or whether a kid makes it to college.

From 2005 to 2009, the average black household's wealth fell by more than half, to $5,677, while white household wealth fell 16 percent to $113,149, according to the Pew Research Center. In 2009, 24 percent of black households had no major assets other than a vehicle, compared with 6 percent of their white counterparts.

"For every $20 whites have in wealth, blacks have just $1," said Paul Taylor, director of Pew's Social and Demographic Trends project. "And in many cases, households get a boost because they inherit wealth from parents and grandparents. Blacks for most of history haven't been able to accumulate that type of wealth."

Mary Pattillo, a Northwestern University professor and expert on the black middle class, said this segment of the population is so fragile because it's disproportionately lower middle class.

"It includes workers, such as the administrative assistant and the lower-level salesperson, who make about $30,000 a year and whose job doesn't require a college degree," Pattillo said.

"When you're one paycheck away from not being able to pay the mortgage or college tuition, it's hard to accumulate wealth."

Saving money for the future is especially difficult for blacks living paycheck to paycheck. The median annual household income for blacks declined by 11.1 percent (from $36,567 to $32,498) from June 2009 to June 2012, according to an analysis of Census Bureau data by Sentier Research. The decline for whites was 5.2 percent and for Hispanics 4.1 percent. Both groups started with higher incomes than blacks.

"A generation of wealth and assets are evaporating, and the presidential candidates aren't making a peep about it," said Keeanga-Yamahtta Taylor, 40, a doctoral candidate in African-American studies at Northwestern. "We're talking about historic changes in manufacturing, and these are systemic changes in the economy and in the midst of this, people are being left behind."

Taylor said that although both of her parents had doctorates, they divorced when she was young, and her family's grip on the middle class was sometimes tenuous.

"I grew up with a single black woman who had two kids," she said. "At various points, we had a middle-class existence. But my family struggled during the economic recession of the 1980s and my mother had to file for bankruptcy and we had to sell our house.

"I didn't grow up under harsh conditions, but it also wasn't a life of privilege."

Historically, many blacks have made it into the middle class via public-sector and union jobs. But since 2008, the public sector has shed about 600,000 positions.

The 2009 recovery is the first in nearly 40 years that has not been accompanied by an expansion in the public sector. "In every recovery since the 1970s---in 1975, 1982, 1991 and 2001---we've seen the government sector grow," said Adriana Kugler, chief economist for the U.S. Labor Department. "The reason there hasn't been growth is, unlike the federal government, city and state budgets can't operate on deficits."

But the other reason is the property tax base of many local governments is being whittled away by the home foreclosure crisis.

After the housing bubble burst in 2006, everyone was affected, but blacks were hit particularly hard. About one-quarter of blacks have lost their homes or are seriously delinquent and at risk of losing them, according to the North Carolina-based Center for Responsible Lending.

The center also found that African-American borrowers with good credit scores received subprime, predatory loans associated with high foreclosure rates three times as often as white borrowers with comparable credit scores.

Earlier this year, the Woodstock Institute, a Chicago-based nonprofit research group focused on fair lending issues, found that although 25 percent of homes in the Chicago area were underwater, about 40 percent of homes in predominantly black neighborhoods were.

The average equity for mortgaged properties in communities that are more than 90 percent white is about $108,000. In communities that are 80 percent or more black, the average is $6,800.

Spencer Cowan, Woodstock's vice president, said the institute didn't break the research down by income range.

"But the disparity is so great that it would almost be impossible for even a black middle-class neighborhood to have significantly more equity, so that the wealth disparity wouldn't be on that order or magnitude," said Cowan.

Home values and equity are a huge deal because homes accounts for about 60 percent of black wealth.

"For whites at the upper-income levels, their home is a component of their wealth, but they may have a 401(k) and other assets," Cowan said. "But for most black middle-class folk and those at the lower rungs, it's all about their homes."

Dr. James Thompson, 54, is an allergist and asthma specialist who grew up in the Jackson Park Highlands neighborhood, an upper-income enclave surrounded by neighborhoods of more modest means. He said black middle-class residents have historically lived not far from poorer residents.

"Our parents taught us that if you were able to elevate yourself, you recognized the fact that you didn't make it alone and others made sacrifices," said Thompson, whose wife is a nurse and two children are recent college graduates. "You have to reach back."

He said he's an outlier among physicians around the country in that he supports the 2010 Affordable Care Act. He said that an illness shouldn't devastate a family's finances, and that health care reform can help stabilize the black middle class.

"I think it comes down to whether you believe (affordable health care) is a right or a privilege," he said. "If you believe it's a right, we have to make sacrifices. If you believe it's a privilege, you're probably against the policy."

Duane Jackson, 35, is the son-in-law of Valerie Magee. He's a car salesman, and his wife, Randi, 31, is a compensation benefits specialist. They have three children, ages 7, 5 and 4, who attend private school. He said being middle class has as much to do with a person's aspirations as his income.

"We're working on saving up for a home," said Jackson, who lives in suburban Park Forest. "We're fortunate that my parents have started a money market fund for each of the grandkids for college, or there wouldn't be anything just yet."

Like his wife, Jackson grew up middle class. He said he doesn't want his children to be saddled with college debt because it hurts their upward mobility.

"They're supposed to start off with a clean slate," he said. "We want for our kids what our parents wanted for us — something better."

http://articles.chicagotribune.com/...k-middle-class-black-households-national-rate

 

[GhostofMarcus]

We must have a lot of dumb blacks out there because everyone knows fixed is better then adjustable or sub-prime mortgages. I have bought three houses before.

 

[Cruise]

We must have a lot of dumb blacks out there because everyone knows fixed is better then adjustable or sub-prime mortgages. I have bought three houses before.

How about this...

are you dumb to believe mortgages are necessary at all?

Mortgage lending is just a huge scam on the public.

 

[SPECTRE1]

African Americans are being setup as economic slaves.

1. Targeted High Interest Loans.
2. Limited Access to Capital and ability to 'own' the means of production. Intentional sabotage of black enterprises to cause bankruptcy.
3. Poor representation of AA in management of companies.
4. Psychological Operation, brainwashing blacks into accepting a subservient, limited role in society through the media.
5. Wage fixing and collusion.
6. Surveillance
7. Elimination or Poor Social Safety Net
8. Poor Funding of Schools

 

[GhostofMarcus]

How about this...

are you dumb to believe mortgages are necessary at all?

Mortgage lending is just a huge scam on the public.

I would say the worth of the houses is the scam. Please explain how a mortgage is not necessary unless you have cash.

 

[Cruise]

I would say the worth of the houses is the scam. Please explain how a mortgage is not necessary unless you have cash.

What is a mortgage? You go to a bank or finance company to get a "loan" to "buy" a house and you pay the bank or finance company for 15 or 30 years.

It is insanity.

What value does the bank or finance company add? None.

They are not "lending" anything.
They do not "own" the property.
You are merely exchanging paper promises.

Without the mortgage, property prices would drop dramatically, making the banks unnecessary.

 

[Greed]

We must have a lot of dumb blacks out there because everyone knows fixed is better then adjustable or sub-prime mortgages. I have bought three houses before.

That absolute wasn't true then and isn't true now. For the mass majority of people, a fixed rate is suitable, but there are specialized cases where a person or business could benefit from an adjustable rate. The issue is whether to create a mortgage to be sold-off in a relatively short time, or have the mortgage perform, over the long-term, in a historical manner.

Of course, the problem was people treated the mortgage as an end in itself.

 

[Greed]

How about this...

are you dumb to believe mortgages are necessary at all?

Mortgage lending is just a huge scam on the public.

What is a mortgage? You go to a bank or finance company to get a "loan" to "buy" a house and you pay the bank or finance company for 15 or 30 years.

It is insanity.

What value does the bank or finance company add? None.

They are not "lending" anything.
They do not "own" the property.
You are merely exchanging paper promises.

Without the mortgage, property prices would drop dramatically, making the banks unnecessary.

That's not fair. Just like all financial innovation, a mortgage was born from a market inefficiency. Relative to the risk involved, banks are willing to give a long-term loan with the home as collateral. Relative to another set of risk involved, consumers would be willing to take out a long-term loan for a home and use that home as collateral. As a result there is a lot of value to be created.

But just like all financial innovation, it was made to work a certain way. Mortgages basically only offset the risk it was initially designed to offset. Once the mortgage broker and the homebuyer changed their priorities and goals, then the mortgage product became inadequate. It's like when credit default swaps and other financial derivatives were causing issues. Derivatives were designed with hedging purposes in mind and work great for the set of risk it was designed to offset, but then people used them just to speculate, which is fine, but it creates a new set of risk that needs to be offset. Those extra set of risk weren't offset properly. Mortgages were no different.

No matter how the use is changed, a mortgage is still a useful tool to match people and banks together under the right circumstances.

 

[Greed]

African Americans are being setup as economic slaves.

1. Targeted High Interest Loans.
2. Limited Access to Capital and ability to 'own' the means of production. Intentional sabotage of black enterprises to cause bankruptcy.
3. Poor representation of AA in management of companies.
4. Psychological Operation, brainwashing blacks into accepting a subservient, limited role in society through the media.
5. Wage fixing and collusion.
6. Surveillance
7. Elimination or Poor Social Safety Net
8. Poor Funding of Schools

Let me just say, that you remind me of a young thoughtone.

Try to work into your logic that black people have choice. If someone wants to make them worse off, but they have the ability to make a conscious choice to work against it, then what action should black people take.

And if that person has the ability to offset the negative influence, then is that person still a victim?

 

[GhostofMarcus]

That absolute wasn't true then and isn't true now. For the mass majority of people, a fixed rate is suitable, but there are specialized cases where a person or business could benefit from an adjustable rate. The issue is whether to create a mortgage to be sold-off in a relatively short time, or have the mortgage perform, over the long-term, in a historical manner.

Of course, the problem was people treated the mortgage as an end in itself.

That the problem, you get something you can't afford and go for the low payments in the beginning with the adjustable mortgage but forgets that the thing balloons in the end. Fixed, you know all the way. My fixed mortgages have not been sold.

I see what you are getting at that the bank makes the money up but the hold system is build on that. Money is just paper.

 

[Diamels]

We let Diddy, Ice Cube, Snoop and a few other Negro minstrels sell us on a lifestyle we knew wasn't real or worth pursuing.

I can understand the others, but why Ice Cube?

 

[Cruise]

That's not fair. Just like all financial innovation, a mortgage was born from a market inefficiency. Relative to the risk involved, banks are willing to give a long-term loan with the home as collateral. Relative to another set of risk involved, consumers would be willing to take out a long-term loan for a home and use that home as collateral. As a result there is a lot of value to be created.

But just like all financial innovation, it was made to work a certain way. Mortgages basically only offset the risk it was initially designed to offset. Once the mortgage broker and the homebuyer changed their priorities and goals, then the mortgage product became inadequate. It's like when credit default swaps and other financial derivatives were causing issues. Derivatives were designed with hedging purposes in mind and work great for the set of risk it was designed to offset, but then people used them just to speculate, which is fine, but it creates a new set of risk that needs to be offset. Those extra set of risk weren't offset properly. Mortgages were no different.

No matter how the use is changed, a mortgage is still a useful tool to match people and banks together under the right circumstances.

Just to be clear, mortgages operate on the same principle as the Federal Reserve Note, it is not backed by anything other than the FULL FAITH AND CREDIT IN THE BORROWER.

That right there is why mortgages will never be stable and will always lead to housing booms and busts... doesn't matter if it is fixed or variable.

The same problems happened during the Great Depression. Loads of people took out variable rate loans because bond buyers would not buy fixed-rate debt. And, mortgages were usually renegotiated every year. When interest rates fell into the floor and people wanted to renegotiate, the banks refused, for fear of destroying their balance sheets, and so foreclosures ran rampant.

The Federal government stepped in and... guess what? They bailed out the banks. Didn't stop the Great Depression which lasted until the end of World War 2.

We are in the same boat today and I don't think the end of a World War is going to save us this time around.

 

[QueEx]

Just to be clear, mortgages operate on the same principle as the Federal Reserve Note, it is not backed by anything other than the FULL FAITH AND CREDIT IN THE BORROWER.

That is just absolutely wrong!

A mortgage is not a note nor is it a negotiable instrument.

A mortgage is a lien to collateralize a loan -- to secure repayment of the note. If the note is not repaid according to its tenor, the holder of the mortgage has the right to foreclose the mortgage and sell the property to someone else (or purchase it himself) to payoff the defaulted loan/note.

That right there is why mortgages will never be stable and will always lead to housing booms and busts... doesn't matter if it is fixed or variable.

Wrong a again. I don't think you know jackshit about mortgages.

 

[Greed]

I wouldn't equate a Federal Reserve Note and a mortgage. When the government strips the value from the note you have no recourse. A creditor can at least sue the borrower and/or take possession of the home. It doesn't completely make up for the loss, but it's more than you can get from the Fed.

Of course, if the government stops saving the banks we can stop going through the same shit over and over.

 

[Cruise]

That is just absolutely wrong!

A mortgage is not a note nor is it a negotiable instrument.

A mortgage is a lien to collateralize a loan -- to secure repayment of the note. If the note is not repaid according to its tenor, the holder of the mortgage has the right to foreclose the mortgage and sell the property to someone else (or purchase it himself) to payoff the defaulted loan/note.





Wrong a again. I don't think you know jackshit about mortgages.

Okay, everybody, all together now,

WHAT EXACTLY IS BEING "LENT" IN THIS "TRANSACTION"?

 

[QueEx]

Okay, everybody, all together now,

WHAT EXACTLY IS BEING "LENT" IN THIS "TRANSACTION"?

Lending for Dummies:

Cruise wants to purchase a home.
Seller wants to sell a home @100K.
Cruise does not have 100K to give to Seller.
Cruise goes to GreedBank, applies for and is approved for a loan in the amount of 90K (GreedBank wants cruise to have a stake in the transaction, i.e., pay 10% down).

THE CLOSING:

• GreedBank cuts a check payable to order of Seller for 90K -- (90K is being LENT; and 90K is being borrowed)

• Cruise brings 10K to the closing, made payable to Seller.

• Seller receives 100K.

• Deed - Seller executes a deed to Cruise transferring title of the property to cruise.

• Promissory Note - Cruise signs a promissory note - promising to pay (repay) the sum of 90K + interest to GreedBank.

• Mortgage - Cruise executes a mortgage in favor of GreedBank. Through the mortgage, title to the property (in some states legal title; in other states equitable title) is transferred to GreedBank; the mortgage provides that if Cruise should fail to pay the Promissory Note according to its tenor (or otherwise fail to live up to the conditions in the mortgage, i.e., to maintain insurance on the property, permit no waste of the property; keep the home in good repair, etc.) then GreedBank can protect its interest by foreclosing on the lien and selling the property at public outcry to recoup all or as much as then possible of the 90K that GreedBank paid to Seller in behalf of Cruise.

Basically, thats the sequence and consequence of events in many, if not most, states. Of course, some states differ as to whether legal or equitable title is conveyed to lender through the mortgage -- but that is a distinction of no real import here.

`

 

[Cruise]

Lending for Dummies:

Cruise wants to purchase a home.
Seller wants to sell a home @100K.
Cruise does not have 100K to give to Seller.
Cruise goes to GreedBank, applies for and is approved for a loan in the amount of 90K (GreedBank wants cruise to have a stake in the transaction, i.e., pay 10% down).

THE CLOSING:

• GreedBank cuts a check payable to order of Seller for 90K -- (90K is being LENT; and 90K is being borrowed)

• Cruise brings 10K to the closing, made payable to Seller.

• Seller receives 100K.

• Deed - Seller executes a deed to Cruise transferring title of the property to cruise.

• Promissory Note - Cruise signs a promissory note - promising to pay (repay) the sum of 90K + interest to GreedBank.

• Mortgage - Cruise executes a mortgage in favor of GreedBank. Through the mortgage, title to the property (in some states legal title; in other states equitable title) is transferred to GreedBank; the mortgage provides that if Cruise should fail to pay the Promissory Note according to its tenor (or otherwise fail to live up to the conditions in the mortgage, i.e., to maintain insurance on the property, permit no waste of the property; keep the home in good repair, etc.) then GreedBank can protect its interest by foreclosing on the lien and selling the property at public outcry to recoup all or as much as then possible of the 90K that GreedBank paid to Seller in behalf of Cruise.

Basically, thats the sequence and consequence of events in many, if not most, states. Of course, some states differ as to whether legal or equitable title is conveyed to lender through the mortgage -- but that is a distinction of no real import here.

`

So, in your example, 90K is being lent?

All that other stuff you typed is just there to confuse the public. It is just a lot of double-talk (or legalese which is the same thing).

Okay, how exactly is ... according to your example ... GreedBank lending the 90K?

When you answer that question, you will be 1 step closer to exposing the scam of it all.

 

[QueEx]

Bruh, I sincerely don't mind explaining -- but I also know when I'm just arguing with a fool. And I also know that if I continue, I'll be the damn fool.

 

[Cruise]

It's funny how people, when an uncomfortable truth is involved, refuse to answer the question, resort to personal attacks, or try to change the subject.

I asked a simple question. Why not just answer it?

 

[Upgrade Dave]

Bruh, I sincerely don't mind explaining -- but I also know when I'm just arguing with a fool. And I also know that if I continue, I'll be the damn fool.

Never too old to learn, huh Q.

 

[Cruise]

^^^^^^^^^^^^^^^^

You obviously have spent no time in court.

Man, it would be funny if you pulled that in front of a jury.

"Your Honor, I refuse to answer the question because I think it's stupid."

Now, everyone in the courtroom, including the jury, is thinking, what is this guy hiding?

 

[QueEx]

Never too old to learn, huh Q.

you know . . .

 

[QueEx]

^^^^^^^^^^^^^^^^

You obviously have spent no time in court.

Man, it would be funny if you pulled that in front of a jury.

"Your Honor, I refuse to answer the question because I think it's stupid."

Now, everyone in the courtroom, including the jury, is thinking, what is this guy hiding?

Yeah bro, you're too much for me. You're a lawyer; and they tell me that lawyers never ask questions that they don't already know the answer. Since you asked the question Mr. Lawyer, school us: educate us with your infinite wisdom !

 

[Greed]

So, in your example, 90K is being lent?

All that other stuff you typed is just there to confuse the public. It is just a lot of double-talk (or legalese which is the same thing).

Okay, how exactly is ... according to your example ... GreedBank lending the 90K?

When you answer that question, you will be 1 step closer to exposing the scam of it all.

Why isn't the answer simple like they are lending their depositor's money out, which is the banking model?

 

[Cruise]

Why isn't the answer simple like they are lending their depositor's money out, which is the banking model?

That is NOT American-style banking.

and that's the scam.

---

American-style banking requires absolutely ZERO DEPOSITS to make loans. The reason banks accept deposits is so the public (including their competition) will have faith and confidence in the bank.

American-style banking is always a cartel. It is a confidence scheme.

American-style banks produce nothing and they add almost no value to the economy.

And, the whole world is now using American-style banking as their model. Which is why the whole world is fucked.

There was a time, when banks actually lent out from their deposits. That was back in the early 19th century and earlier. That ended around the 1840s.

Banks, ever since, have never made loans. All they do is just take a check, write a number on it, and give it to you as a LOAN. But, nothing is being lent. All that happened is the bank gave you a piece of paper that someone took in exchange for something of value.

The bank gave nothing in value for the "LOAN" but you are now obligated to pay the bank for 15 or 30 years. That is debt slavery. It is a total fraud.

But, in the crooked, corrupt American-system, that is called modern banking.

Sometimes, it just seems like people are no better than animals to willingly go along with such stupidity.

 

[Greed]

By your own logic there is still something being lent and it's the taxpayer dollar when the government insures/bails out a bad bank, with or without conditions.

You're right that it's a corrupt system and the banks generally add no value to the process (I qualified it), but their is value there. There is a difference between economics and finance. Finance is measured with a material ruler. Economics includes non-material gauges, but it's hard to quantitatively measure non-material goods. You can qualitatively measure it though.

In a literal sense, happiness is an economic value. Happiness from having your own home can lead to multiple externalities like greater productivity and more children (future taxpayers). Both are considered good things.

I wrote more on the intangible aspects of economic value in this thread:
Does the study of economics shape your political views?

 

[tp2001]

This is an interesting thread...like the back-and-forth discussion

Cruise, I feel what you're saying here...it's the concept of lending that's screwed up in a sense but something tells me that I've seen this explanation before in a video series on YouTube...

 

[Cruise]

The basic problem with the current American thinking, is that it changes the basic meaning of words to the point that no 2 people can agree on a definition.

For instance,

unemployment
racism
loan/lend/borrow
money
conservative/liberal
authority/sovereignty
law/rights
terrorism

and on and on.

Americans have placed ignorance and stupidity on a pedestal to be worshipped. And, it seems, the more "educated" you are in the United States, the stupider you look to the rest of the world.

Okay, that's my preface.

===============

When someone says I am going to lend something, they assume it is mine to lend, namely that I own it and can give it to whomever I wish.

Now, the way banking works in most of the world today, suppose me, just a non-white guy on BGOL decides he wants to make loans. I am broke, have no assets, no cash, absolutely nothing of value whatsoever. The only thing I have is a checkbook.

Let's say BGOL member 1 comes to me, and asks me for a loan of $10000. Now, the way American-style banking works, if I get a state charter to open a bank (which is a license to steal, essentially), I can write a check for $10000, as a loan, to the BGOL member. I don't need any deposits, any assets, absolutely nothing.

Now, the question becomes, if I don't have $10000, how can I write a check for a loan of $10000? The reason is because all anyone is going to do with my check is just take it to another bank to deposit it. Nothing of value has actually changed hands. There is a small chance it might be cashed, but whether it is or not, I still wrote a good check. Why? Because the BGOL member promised to pay back the $10000 and their credit is good. So, my $10,000 check is not covered by my credit, it is covered by the credit of the borrower.

It is possible, the bank where the check is deposited might come to me, and demand $10000 in cash. So, what I do, is go to another bank and ask for $10000 in cash (using the BGOL member's promise to pay as security) as a loan, and give the cash to the bank that demanded it from me.

All of it is a game of musical chairs, passing the buck, and stealing from Paul to pay Peter. No value is added. No service is delivered. Nothing is created. It is nothing but promises and paper.

Of course, this is the way it was done back before computers. Today, it is faster than that. Everything is computerized, and insolvent banks can immediately be restored (by other banks) or bailed-out (by the government).

You may think American-style banks don't do this. But, it is impossible for them not to do this. That is why Chase, Bank of America, Citibank, and Wells Fargo needed bailouts. They wrote trillions of dollars in loans that none of the banks could cover because the economy went into the toilet. The economy did not crash directly because of these idiots, but they certainly made a bad situation exponentially worse.

I find it amazing when people try to justify this crooked, corrupt system as if there is anything legitimate about it. The government, schools, TV/media, politicians, and certainly not the banks will tell you the truth. They want you to believe the lies and fraud so they can control you through lies and debt.

It's just a different form of slavery... one that is nearly impossible to escape.

 

[BKF]

Bruh, I sincerely don't mind explaining -- but I also know when I'm just arguing with a fool. And I also know that if I continue, I'll be the damn fool.

 

[Greed]

The basic problem with the current American thinking, is that it changes the basic meaning of words to the point that no 2 people can agree on a definition.

I would describe that as a characteristic of politics. The rest of the world has to care about reality since we can't subsidize our bad ideas with money taken at the muzzle of a gun. That's why it's dangerous for regular people to value politics foremost in their life. They don't have a way to save themselves from their own stupidity like politicians.

When someone says...

Your post seems to assume that the goal of banking is to make one loan.

The gist of your post assumes you can get a bank charter without showing you can meet the capital reserves requirements, someone would come to you for a loan without knowing whether or not you're shady, and some other bank will help you when the loan needs to be covered by you.

By your own example, you're a non-white going to get a bank charter. You're not getting it if you're broke. The laws of this country apply to most people, but the problem is that they don't apply to politically connected people. With a few exceptions, politically connected people are usually rich people. Your own example stresses that you aren't rich. It's not a reasonable premise that you are getting a bank charter while being broke.

I also don't agree with your assumption that anyone would go to you with no history behind the bank. When I advocate freedom for people, I'm using a base assumption that people aren't morons. This is independent of your bank's lending criteria. Only a desperate person would go to you in the example you created. A desperate person will quickly use that check or promise, which would expose a flaw in your scenario. Double-entry accounting is a fundamental basis of capitalism. There is no way a person would cash that at a bank and that bank wouldn't expose your financial position immediately. Bank-to-bank transactions are usually cleared in 24 hours. They are not going to cover the loan before they have the Fed hit your bank's account. Also, if we're talking about a home loan, the banks are basically dealing directly with each other.

The third implausible aspect of your example is, even if your example is accurate up to this point, no bank will cover for you. Banks are generally horrible to one another. Why would bailouts or the Federal Reserve exist as the lender of last resort if banks were willing to create these endless accounting loops of loans. The real JP Morgan became a legend because he would bully banks into helping each other because they wanted to see each other fail.

Overall, banking is valuable, but it just isn't valuable when its done by traditional banks who can get bailed out for being stupid which isn't what the average bank gets away with doing.