[Fwd: Obama ’s housing plan and the American ruling class]

[Charles Cornell]

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Subject: Obama’s housing plan and the American ruling class
Date: Fri, 20 Feb 2009 23:54:18 -0800 (PST)
From: "Lone Wolf" <phoenixx6 at gmail.com>
Organization: http://groups.google.com
Newsgroups: alt.politics.socialism.trotsky

Obama’s housing plan and the American ruling class
21 February 2009

US President Barack Obama's Homeowner Affordability and Stability Plan
(HASP), announced Wednesday, will do little to alleviate the enormous
financial pressures on working class families caused by plummeting
home prices.

It does not reduce the outstanding debt, or principal, that homeowners
owe the banks, which for millions of Americans now surpasses the value
of their homes. Even in its modest stated aims—to reduce monthly
mortgage loan payments for a portion of embattled homeowners—HASP will
in most cases depend on the voluntary participation of private banks.
It does nothing for the hundreds of thousands of renters thrown out
onto the streets by evictions and foreclosures against their
landlords.

While complete details of the plan for loan modifications from private
banks will not be released until next month, it is already clear that
there will be innumerable hurdles designed to make it very difficult
for homeowners to qualify. Anyone who is deemed able to "afford" their
present rates will not qualify. If a mortgage company decides that
refinancing a loan will cost them more than sending the house into
foreclosure, moreover, they will be free to deny refinancing.

The haphazard and ineffectual character of Obama's proposal for the
housing crisis, like his stimulus bill, does not arise from mere
technical deficiencies. Rather, it is conditioned by the demands of
the financial elite that Obama represents, which will brook no limit—
no matter how mild—to its power and prerogatives.

Thus, HASP—which the Obama administration crafted in close
consultation with the banks—is loaded with measures designed to win
the support of financiers and investors. For the financial elite, the
bill sets aside the lion's share of a $75 billion appropriation. The
banks will not be required to write down the values of vastly
overpriced loans, much less relinquish control over the securities
built up through the home lending industry.

The proposal on housing, moreover, is part of an overall plan being
developed by the Obama administration to funnel trillions of dollars
into the hands and accounts of the financial institutions and
investors who precipitated the crisis.

The New York Times on Friday ran a front-page analysis of the Term
Asset-Backed Securities Loan Facility, or TALF, which is set to hand
over more than $1 trillion in low-cost loans to major hedge funds and
other holders of debt-based securities. Securities investors in the
credit card and auto loan markets, among others, will be able to
borrow against as much as 95 percent of the face value of their
overpriced securities, and would be liable for as little as 5 percent
of any losses.

Commenting on the program, the Times noted that the administration
would be "effectively subsidizing the profits of big private
investment firms in the bond markets." TALF is part of the massive
bank bailout proposal outlined by Treasury Secretary Timothy Geithner
earlier this month.

Wall Street's varying reactions to HASP and TALF are revealing. In
spite of the fact that HASP, like TALF, is tailored to appease the
finance industry, it has been met with hostility from sections of the
elite who view the program as a "bailout" for "irresponsible"
homeowners. Of course, Wall Street offers no such protestation when it
comes to the ongoing bailout of irresponsible and incompetent banking
executives and investors to the tune of trillions.

A moment on CNBC, which has since been widely broadcast in the
American media, graphically captured the perspective of the financial
elite. An animatedly angry correspondent, Rick Santelli, denounced
Obama's tepid mortgage reform from the floor of the Chicago Board of
Trade. Speaking on behalf of the traders, Santelli yelled, "We really
[don't] want to subsidize the losers' mortgages... and reward people
that should carry the water instead of drink the water." Santelli
continued, "This is America! How many of you people want to pay for
your neighbor's mortgage that has an extra bathroom and can't pay
their bills?" As he spoke, the traders cheered him on and interjected
insults toward those facing foreclosure. America, indeed.

As it has been picked up in the media, the incident has been presented
as an example of widespread popular opposition to the aiding
homeowners. The ranting of the cable news commentator on a channel
that functions as a mouthpiece for Wall Street, was the lead news item
on NBC that evening. Santelli himself declared that the stock traders
represented a "cross section of America." This places reality on its
head. While the media sought to smother or downplay the enormous
popular hatred for the bank bailouts, it is seeking to manufacture
public opposition to aid for homeowners.

Such comments are part of an attempt to place the blame for the
economic crisis on the supposedly profligate American consumer. This
sentiment was in fact echoed by Obama himself, who spoke in his
inaugural address of the "collective failure to make hard choices."

The crisis in the American housing market in fact represents the
intersection of powerful objective processes that have been ripening
for more than 30 years.

One has been the long-term erosion in the living standards of the
working class. Since the 1970s, social inequality has increased and
wages have stagnated, in spite of increased worker productivity. To
counteract their declining social position, workers were compelled to
seek out individualistic "coping mechanisms." They have labored for
more hours at more jobs, wives and mothers have entered the workforce
by the millions, and, most important, workers have increasingly relied
upon credit to support consumer spending, tuition payments, cars, and
even major health procedures.

This latter tendency, the turn toward credit debt, was promoted by
American capitalism as a critical component in the financialization of
the economy, a process set into motion by the historic decline of
American capitalism in the latter half of the twentieth century. In
the 1970s, American industry was weakened by powerful rivals in Japan
and Germany, relentless downward pressures on the rate of profit, and
a combative working class.

Financialization was the bourgeosie's response to these crises. A
landmark in this development came in 1981, when Federal Reserve Chief
Paul Volcker—currently a top economic advisor to Obama—introduced
interest rate "shock therapy" to the economy. By laying waste to basic
industry and creating mass unemployment, Volcker aimed to break the
resistance of the working class. But the American bourgeoisie had also
learned that enormous fortunes could be made through the transfer of
social wealth from industry and the working class into various forms
of financial speculation, including the manipulation of debt.

These interconnected processes came to a head in the collapse of the
US housing market. In order to maintain themselves and their families,
workers were compelled to build up ever greater levels of debt. The
bubble in the housing market became the final means by which many
workers offset declining living standards, leveraging their homes
against rapidly rising values in order to make ends meet.

American banks, investors, real estate firms, mortgage companies and
politicians relentlessly promoted this through sub-prime and other
adjustable rate mortgages. The resulting loans were then sold,
bundled, and resold, drawing the entire world financial system atop a
profoundly unstable system. The process fueled a massive bubble in
home prices.

New layers of billionaires and multi-millionaires were created on the
basis of speculation in mortgage securities, stocks, and various forms
of derivatives. The American capitalist class as a whole was enriched
beyond comprehension. In the process, a modern aristocracy
consolidated its control over every aspect of official political,
cultural and economic life.

The immediate cause of the economic crisis was the bursting of the
bubble in the housing market, as growing numbers of impoverished
workers could no longer afford their home loans. After the collapse of
the housing market bubble, the exotic securities instruments built up
on the basis of the housing market turned out to be scarcely worth the
paper upon which they were printed. This spread through the entire
financial system. It soon became clear that the incalculably large
quantities of paper value built up in the stock market, the hedge
funds, mortgage financing concerns, and the banks, represented claims
on precious little of value.

The American financial aristocracy, however, will not politely
acknowledge its culpability and allow for the amelioration of the
conditions of the working masses the world over. With the breakdown of
the mechanisms by which it defrauded the working class of vast social
wealth, the capitalist class is ruthlessly utilizing its control over
the state to seize for itself new resources at home and abroad.

Barack Obama, who was elected by appealing to a popular rejection of
the Bush administration's economic and military policies, is the new
political frontman for the financial aristocracy. His mortgage plan
aims to lend the appearance of "change," but his overriding concern is
the defense of finance capital.

The resolution of the housing crisis, like the larger economic crisis
of which it is part and parcel, is not simply a technical matter. It
is a class question. The working class must articulate and fight for
its own program.

The massive resources accumulated by the ruling class through fraud
and swindling must be recovered and placed under the democratic
control of the working class. These resources should be deployed to
meet pressing social needs, including the basic need for housing.
Immediate relief must be provided to homeowners, including a massive
reduction in home and other forms of debt owed by working people.

This can only be done on the basis of an independent and revolutionary
political movement of the working class fighting for socialist
policies, including the nationalization of the banks and large
corporations under the democratic control of working people, in
opposition to the ruling class, the Democratic and Republican parties,
and the capitalist system that they defend.

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