--- On Wed, 2/4/09, raghu
> > Charles, > I think it is necessary to make a distinction here that is > very > important: a certain kind of consumerist over-consumption > is entirely > consistent with and can co-exist with under-consumption in > the same > society (maybe even the same family?). > > Suppose a homeless person takes out a no-doc mortgage on a > small 2 > room apartment so that he can put a roof over his head; or > an > unemployed person taking out a home equity loan to pay for > medical > bills because of no health insurance. I don't think > David would > characterize these as over-consumption; indeed these are > examples of > *under-consumption*, where people are unable to obtain > basic > necessities of life. > > On the other hand, suppose a middle income family takes out > a > home-equity loan to buy a large flat-screen plasma TV, or > uses a > credit card to pay for an SUV. That *is* overconsumption. > > Which type of consumption was predominant during the recent > housing > bubble is an empirical question. The media likes to portray > the > stereo-type of people taking home equity loans to buy > expensive > consumer goods, but is that accurate? Or is it just more PR > like the > infamous welfare queen driving a Cadillac? > -raghu. ^^^^ CB: I'm not sure, but it very well may be. Also it has been said that many of the people who got foreclosed on with "subprime" (better named _predatory_) loans already had mortgages and were swindled into refinancing into sub-prime/predatory loans, with ballon payments, ARMs ,etc. and other tricks( see below *) I think the issue you raise is important, however, in terms of the overproduction/underconsumption Marxist "ping-pong" discussions, and David's question, I think the literal bottomline is that some corporations don't get paid , whether for necessary or luxury goods, and therefore a large chunk of their profits, are not realized; and thereby there is a diminishing impact on their rates of profit. By the way, raghu, have you heard that comedian Jon Stewart has been putting forth our idea for the feds to pay mortgage debtors to pay their mortgages to the banks, instead of paying the banks ? - win-win. ^^^^^^^ * Sen. Charles Schumer (D-N.Y.) charged that: According to the chief national bank examiner for the Office of Comptroller of the Currency, only 11 percent of subprime loans went to first-time buyers last year. The vast majorities were refinancing that caused borrowers to owe more on their homes under the guise that they were saving money. Too many of these borrowers were talked into refinancing their homes to gain additional cash for things like medical bills. Lewis, quoting Eisman in the Portfolio.com article, revealed what went on in a case very close to home: Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.” Nor was bad credit the primary factor for distributing the loans, a myth conveniently circulated and repeated to this day. Schumer again rebutted the notion, quoting none other than the Wall Street Journal: Based on the Journal’s analysis of borrowers’ credit scores, 55 percent of subprime borrowers had credit scores worthy of a prime, conventional mortgage in 2005. By the end of last year, that percentage rose to over 61 percent according to their study. While some will have damaged their credit in the interim, it’s clear that many subprime borrowers have the financial foundation for sustainable homeownership, but may have been tricked into unaffordable loans by unscrupulous brokers. Thus, working-class Black and Latino families, over half if not 60 percent of whom were eligible for conventional loans, burdened by several years of stagnant and falling wages during a jobless recovery were led by mortgage companies in clear and blatant cases of predatory racially inspired lending. The racial overtones are evident in this swindle are evident. But what made the loans predatory? The United For a Fair Economy study provides the following criteria: One factor is their marketing and sales to inappropriate customers. Another is pre-payment penalties. Seventy percent of subprime loans had such penalties. A third element was Adjustable Rate Mortgages (ARMS), which often carried unexplained ballooning interest rates that increase payments by as much as one-third. A majority of subprimes were ARMS. Yet another condition was the exclusion of tax and insurance costs when estimating the monthly payment for a potential home-buyer. And finally the encouragement of ordinary borrowers to take interest-only loans, where in the initial year or two only the interest is paid on, after which the principal rates kick in raising the cost dramatically. The End of Neo-Liberalism and Bush's Last Scam: How Racism Sparked the Financial Crisis By Joe Sims http://www.politicalaffairs.net/article/view/8033/1/359/ ^^^^^ In Soviet Russia, the television watches YOU! ^^^^^ In the United States, _1984_ has been reversed: they control you by getting you to watch Big Brother, i.e. television - CB 2000 _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
