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The ‘American Dream’ Is Dead

by Dave Ransom  |  Issue: February / March 2011
Photo: Daymon J. Hartley
DETROIT: People in Detroit fight against evictions. | Protesters at the General Motors Renaissance Center last year. The protest was organized by the People's Summit Tent City.

As housing prices plummet, the financial oligarchy is forcing millions from their homes

Housing prices have plummeted since the economic crisis began. Workingclass homeowners have lost a massive $9 trillion in the decline. That’s almost twothirds of the equity they had built up over years of making mortgage payments.

People at all levels of wealth have suffered these losses. But it is no secret that the hardest hit have been the poorest, immigrants among them.

Now come the warning signs of a second leg down in housing prices. Analysts predict another 10-20 percent drop. That would push prices down to about half of what houses were worth before the crisis hit, wiping out even more hard-earned equity.

Meanwhile, the five biggest U.S. banks are squabbling with the hedge funds, the investment pools of the very rich. They are fighting over which of them will be forced to take the much smaller, $1-trillion loss at their end of the housing crash. Odds are that they will transfer even that to working-class taxpayers.

The $9 trillion in losses don’t begin to describe the confusion, anxiety, and suffering of working-class homeowners. Nearly six million families are behind on their mortgage payments or being foreclosed on by the banks.

That’s more than 10 percent of all the families who have mortgages, a number that will rise as housing values decline. Everyone else wonders if a lost job or a medical emergency – or a deportation – will make them next.

One family in four who are paying on their mortgages are now “underwater” – their mortgages are higher than the house is worth. Like peons on a great estate, they are paying the banks interest on a debt that will probably never go away.

And like those all-powerful landowners, the banks are making the rule up as they go. The first and foremost is that they will stay rich and powerful, whatever it takes.

The financial oligarchs are making this a “bipartisan” effort. To the disappointment of many people, President Obama has joined in this. Together, they are pulling the core of the Democratic and Republican parties together to oversee the step-by-step destruction of the American Dream.

A good part of that dream has been the promise of government-supported home ownership. Now Obama’s bipartisan commission on the economy has called for ending the homeowner tax write-off. And the White House is maneuvering to gut the agencies that kept mortgage rates low, Fannie Mae and Freddy Mac.

At the same time, the big five banks are debating how much of a downpayment home owners should make when buying a house – should it be 20 percent or 30 percent. These banks control more than half of U.S. mortgages. Before the economic crisis, they required little or no downpayment.

Working-class homeowners in the U.S. are not taking this lying down. Some are mailing in the keys to their houses and walking away from their mortgages. Others are squatting in their homes without making any more mortgage payments. Still others are opening and living in houses that the banks have left empty. But these actions are not coordinated and united.

Before Christmas, lawyers representing homeowners exposed illegal methods the banks used when they foreclosed on working-class families. People’s outrage was so great that members of Congress called for a national moratorium on foreclosures. Now those voices have gone silent.

Here’s the whole picture. Working-class home equity has been destroyed. The banks are forcing millions from their homes. Efforts to change this in Washington are just talk. Together Wall Street and Washington are abandoning the programs that have supported working-class home ownership.

The old regime’s version of the American Dream is dead. A struggle to define the new regime and a new American Dream has just begun. And that struggle is between the oligarchs and the people, between the capitalists and the working class. That, at least, has not changed.

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