Patricia Nell Warren

One in Seven -- A Scary New Year's Prediction

Filed By Patricia Nell Warren | December 13, 2008 4:00 PM | comments

Filed in: Living, Politics
Tags: Elizabeth Warren, government bailout, home foreclosures, LGBT debtors, LGBT homeowners

Merry Christmas from our government, everybody. The other day, in an interview with MSNBC's Rachel Maddow, Harvard economics expert Elizabeth Warren dropped a little holiday bomb. Warren is chairman of the Congressional panel set up to oversee TARP, the spending of that $700 billion bailout. "In the next year," Warren said, "one in every seven American homeowners will be in foreclosure."

One in seven. That's up from the one in 10 that is already reported. I wondered if Warren's comment would make headlines next day. But it got buried by the breaking scandal in Illinois. Ho, ho, ho.

Think about it. First of all, roughly one in every 10 foreclosures might be a gay, lesbian, bisexual or transgendered home. Think of the impact on our own world -- our activism, fundraising, community businesses, media, health services, events, and anything else you can name.

If Warren is right, then having a roof over your head might shortly be more important to many of us than the right to marry. Our LGBT world has few services of our own to cover the widening gap.

Actually the TARP chairman's prediction is not new. Warren has been making it for almost a year. She has been studying debt and bankruptcy in the American family for a long time. Her research uncovered the interesting fact that Americans aren't going under because they were greedy. They're going under because the fixed costs of everything that most of us face, especially a family, simply exceed the earning capacity of a couple, even if they're both working. Indeed, Warren found that the surest indicator that a family might go bankrupt was having a child.

But Warren was commenting from deep in the academic woodwork, so nobody paid any attention to her. Indeed, she made herself unpopular in some Wall Street circles for saying it. Now it looks like she might be so right that it hurts to say it.

One in seven means a boarded-up home on every block in America.

Everything I'm reading about the federal programs that were launched to supposedly help a lot of homeowners salvage their mortgage problems, like FHA Secure, tells me that these programs are helping only a small number of people so far. Among other things, the exploding needs of our population are hitting a processing bottleneck. One halfway honest lady working for a prominent lender told me off the record that their FHA Secure office is buried in paperwork, getting 20,000 requests for help every week.

One in seven. Think how many more Americans will be experiencing homelessness. The National Coalition for the Homeless says that right now, around 3.5 million Americans experience homelessness in a given year. So think where this number will go in the next year. With one in ten, we can estimate 350,000 gay, lesbian, bi and transgendered people will be out there on the mean streets.

Though the federal government has launched programs to get some homeless people with special needs into stable housing, most of our cities don't know what to do with the homeless people they have already. Many cities have actually passed laws that are hostile to the homeless.

Think of the added pressures on our already inadequate services for the poor -- everything from soup kitchens to hospital emergency rooms. Think of the soaring crime rate -- violent acts committed against homeless people, and by desperate hopeless people (theft, etc).

Just a few things to think about. And there will be more.

So Merry Christmas, everybody. And a Happy New Year that hopefully includes a secured home for everyone who needs one. President-elect Obama and his incoming administration have their work cut out for them.

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This makes me so mad. It wasn't something we didn't see coming or couldn't have prevented. It was something that was avoided by people in power because of their ideology and greed. And now the rest of us are stuck holding the bill.

I sure hope things turn around soon, but it doesn't look like they're going to.

things will not turn around soon. we must give Obama some time in office.

and there is only so much he can do.

throwing money at the auto companies or the banks is an enormous mistake. the leadership must change in these institutions or we will be right back where we started.

and a bunch of executives will be richer.

it was all foreseeable. you can go back to 2001-2002 and see the interest rate cuts creating this mess.

Because banks were reckless in their lending standards, they gave loans to any bum who came along for houses they couldn't afford. Suddenly feeling rich, those people pulled money out of their houses as if they were ATMs and spent it, often on depreciating items like televisions or cars. When the rate adjustment at a higher rate happens on thier loans, they go into foreclosure. Greedy Wall Street (Merrill/Lynch's O'Neal, Bear Stearns) packaged these loans into what is called Derivatives and sold them to foriegn banks. Derivatives may be the single largest threat to the world's financail system. Derivatives make up the world's largest financial market. They now exceed half a quadrillion dollars and are now about ten times the global gross domestic product. We have only seen the beginning of the global economy sinking. President elect Obama inherited a sinking Titanic. Riots due to unempoloyment are already happening in Greece, Spain and France. It will be worldwide chaos.

You might find it interesting to read the article that the link on Warren's name takes you too. The results of her years of study are interesting, and go against the stereotype that has been thrown at us by the media.

More typically, homeowners who re-fi'ed did so not for frivolous reasons, but to cover some basic fixed cost, such as college education or major medical bills, or perhaps to raise additional capital for a small business. All too often, the sub-prime mortgage was all they could get. People were willing to use part of the equity in their homes to cover these costs.

I suspect that the lending industry has created this "blame the victim" notion about sub-prime mortgages in order to deflect some blame away from their own greed.

The media are to blame for poor coverage. If it were more widely known that half of all personal bankruptcy is due to medical debt, and that a very large percentage of medical debt is now placed on credit cards, which by recent law are exempt from bankruptcy negotiations, I suspect that more voters would be more aggressive about demanding single payer health care rather than lower taxes. Taking out a subprime mortgage to pay medical debt may indeed look like a more viable alternative than charging medical care on a card with 22% interest, or whatever it is now.

Medical debt is also at the center of the financial crisis of the Big Three automakers. The primarily German and Japanese foreign owned auto factories in the US pay for medical plans that are cheaper for them but awful for workers in those plants. GM, Ford and Chrysler pay for better plans.

All this underscores the need for socialized medicine, the repeal of Biden's pro-bank, anti-consumer bankruptcy law and for a federal constitutional amendment for wages, stipends, and retirement income equal to $25.00 an hour adjusted for inflation.

Don Sherfick Don Sherfick | December 13, 2008 5:29 PM

Not that it's any less comforting to those involved, but the quote says one in seven U.S. homeowners. I'm wondering if thats the case of if it is one in seven homeowners with mortgages. If the latter, one would have to know the number of homes in the U.S. that had some kind of mortgage balance as opposed to being paid off free and clear.

No, a foreclosure can affect a family that does not own their home. If a tenant rents a home, the landlord is foreclosed upon, and the tenant is on a month to month agreement, they could find themselves evicted upon a foreclosure, despite not owning the home.

It's pretty clear that she meant homeowners with mortgages -- since people who own their homes free and clear wouldn't be looking at foreclosure.

Elizabeth Warren writes: "I can't say strongly enough how decent and hardworking these people are," she says. "The cost of being middle class has shot out of the reach of the median family. For millions of families, the situation is getting desperate."
I didn't mean to imply that all loans were made "to any bum that came off the streets". Of course, most were hard working citizens, it's just that anyone who applied could get a loan through Washington Mutual or Wachovia as long as they had a house picked out to mortgage. The usual credit check was waived.
Bank of America and Wells Fargo were smarter and didn't fall for the sub prime mortgage scams packaged by the Wall Street brokers. There were no regulations by the Security Exchange Commission, and the Bush government is to blame for that.

Robert Ganshorn Robert Ganshorn | December 14, 2008 10:09 AM

What rings on this thread for me is the need for universal health care. If one is "homeless" the need for health care services is even greater. Health care would remove a major expense American business is expected to provide making us more competitive on the world market. Health care would allow people who are strapped by high insurance premiums to keep their houses. health care would insure that they did not lose a house because of lack of coverage.

All insurance companies do is pool risk (when they are not investing in derivatives). The American public at large would make, at last, the ultimate pool of risk that would provide sensible cost to everyone through taxation. For the wealth our country generates why do we have the infant mortality rate we have? Americans are being told their health care is soooo wonderful in quality. It is not wonderful now, and I fear it will get worse.

Always thought provoking Patricia.

My worry is about becoming one of the seven. Blogging doesn't pay much and with the downturn in the economy, our advertising revenue has dried up quickly. Jerame's job isn't the most secure, so we're cutting costs left and right to save up some dollars just in case. On Monday we're having our home phone disconnected since we both have cell phones now. We've started clipping coupons from the mail. And we've started paying extra on the mortgage to try and get it down as quickly as possible.

Further in her interview, Warren indicate that the government wasn't going to do much of anything more about the problem. Well, the government will HAVE to do something about the problem. Let's hope that Obama and the new Congress do something significant after taking office.

The FHA Secure program doesn't apply to jumbo loans...which would mean many homes in middle-class neighborhoods. Some lenders are going through the motions of helping homeowners re-fi to a lower payment, but they're still looking at credit ratings...and whose credit rating is any good after they miss mortgage payments? It seems like the lending industry is just stuck in old habits and doesn't have the courage or the smarts to do the right thing.

Last night I watched the FDR special on the History Channel. For any Bilerico reader who wants to understand more about that era, it's worth watching. Today we can fault FDR for some things, but the man did plunge in to provide direct and meaningful economic help to individual Americans, and families, during the Depression. When he died, and massive crowds turned out for his funeral, many people carried placards that said things like "FDR saved my home." That's the kind of leadership we need

It took two years from the crash of 1929 until the Depression was officially recognized in 1931. We could be in the unhappy position of beating their record.

Every indicator points towards the economy bottoming out. 1.9 million people were fired since December of last year and the “official’ (and always underestimated) unemployment figures could pass 10% early next year. Unemployment hit 6.7% in November but if you account for ‘discouraged workers’ and part timers it’s about 13%. Unemployment reached 23% in 1932 and didn’t drop under 10% for almost ten very long years and then only in the aftermath of Pearl Harbor.

Wages are going down and benefits being eliminated as cutbacks in government social spending increase. Credit card debt, foreclosures and auto repos are soaring. Housing starts are at a record low. The Big Three automakers are teetering, the stock markets are whipsawing but still trending down and lost about 40% of their worth this year. The infrastructure is crumbing.
Yet hundreds of billions are being used annually to murder Iraqis. The national debt will double this year reaching about $17 trillion dollars, all of which will go to restoring and increasing the wealth of the retarded uberrich who wrecked the economy.

The first of the Democrats great austerity measures – deep cuts in auto workers wages and benefits is a condition for loans for the big Three. The loss of wages and benfits will escalate the downward economic spiral. The main thing to keep in mind is that recessions over time are self correcting and that depressions are not. World War Two ended the Depression, not the Democrats make work projects.

Which explains why Obama has no intention of ending the oil wars.

Yes, and unfortunately there is one big difference between the U.S. economy in 1941, when we entered World War II, and the economy vis a vis the Iraqi war today.

In 1941 the U.S. had a lot of heav-industry plants and equipment that could be re-tooled to turn out ships, planes tanks, trucks and ammo. Much of our population could also be put to work in that wartime industry.

Today our heavy industry is mostly sitting abandoned in the Rust Belt, about to be joined by the last of our auto manufacturing...while we have outsourced most of our industry to other countries. Even the electronics components of much of our military hardware is mostly made in other countries now.

So I doubt that any war-related recovery the U.S. might make during the Obama administration will be as rapid or complete as the one we made in the early 1940s.

That's true, the war base of the economy isn't a huge stimulant and it's stimulative effects are more than cancelled out by it hyper-inflationary effects.

Nevertheless all the cabinet appointments, especially of Clinton and Gates indicate they'll keep the war going.

The inflation caused by LBJs war against South East Asians smoldered through the economy until well into Reagan’s second term. The end of that inflation and the end of payments to bail out the rich who lost money in the Carter-Reagan S&L crises created the budget gains of Clinton's administration and eased inflation.

Bush squandered all those budget gains murdering muslims and wasting the lives of GIs from Palestine to Pakistan.

John R. Selig | December 14, 2008 5:25 PM

Not only are Americans being faced with foreclosures, but they are faced with not having enough food to eat.

An article in "The Washington Post" on November 26th reported that , "The number of Americans on food stamps is poised to exceed 30 million!"

The same article goes on to add, "Breaking the symbolically important 30 million mark comes on the heels of government data showing that 11.9 million people went hungry in the United States at some point last year. That included nearly 700,000 children, up more than 50 percent from the year before."

Robert Ganshorn Robert Ganshorn | December 16, 2008 7:05 AM

John, I am already seeing hunger in the streets here in Thailand. Not a little hunger either. The States gets a mild cold and Asians get a coma.

Happy Days are NOT here again.

When bipartisanship becomes gang rape…

Yesterdays web edition of The Washington Post says that "at the last minute, the Bush administration insisted on a one-sentence change" to part of the bill to recoup the losses of the managers of the banks who wrecked the economy.

The changes, effectively kept out of the debate when Congressional leaders ordered incoming fax and phone service to publicly known numbers temporarily blocked, allowed the White House and the Democrat Congressional leadership to pass provisions that "effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives… Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives."

On Friday, Sept 26th the Republicans voted against the bailout and over the weekend and ensuing week both Bush and Obama were on the phone twisting the arms of their respective congressional delegations to vote for it. It passed the Senate on Monday and the house on Friday Oct. 3rd with the under the radar changes intact. Bush signed it within hours.