The economic grenades are going off. Just pick up today’s newspapers. The subprime lending crisis is metastasizing; foreclosures on homes purchased with subprime mortgages are expected to reach two million by the end of next year; the unemployment rate is soaring; oil has hit $100 a barrel; the credit crunch is causing an unprecedented liquidity squeeze; and consumer spending is dipping sharply; and the Fed Chief, citing recession fears, is signaling that the Fed will cut interest rates soon, perhaps by a large amount.
While we hear and read more about the impact of the credit crisis for Wall Street’s big boys, don’t lose sight of the impact on Main Street.The financial pain and stress is rippling fast thoughout the economy and country. A friend just back from Detroit says that one of the local papers, a couple of weeks ago, ran a 120-page thick supplement filled with notices of foreclosed homes for sale.
On January 6, as Max Fraser reports in our latest issue, Rainbow/PUSH Coalition’s Wall Street Project Economic Summit focused on the subprime mortage implosion and its impact on the economy. The crisis, warned Reverend Jesse Jackson speaking before a battery of local politicians, housing activists and civil rights leaders, “is sinking America’s economic ship like the Titanic.” Black homeowners have been hit especially hard–largely because predatory lenders have been steering them toward subprime loans for years at more than twice the rate of white homeowners. “It’s the single largest economic issue of our time,” said Jackson, “a crime committed on Wall Street, made possible by the complicity of the US government.” Watch for House Judiciary Committee Hearings and investigations into Wall Street and subprime scams. And on January 22, Rainbow/PUSH and the Urban League will lead a march on the Department of Housing and Urban Development in Washington to bring attention to the foreclosure crisis and try to force President Bush to address the crisis in his State of the Union speech.
As for Congressional attempts to grapple with the foreclosure crisis–at the end of last year, Congressman Barney Frank tried to push through legislation that extends moderate regulation to the subprime market. But he faces a tough fight because money still rules in DC. Just as the the hedge fund and private equity cowboys have lubricated the lobbying troughs and candidates’ war chests to avoid paying taxes at the same rate as a waitress or policeman, the mortgage industry is pouring in bucks to stave off even modest regulation of its often predatory practices.
But if we reward the mortgage industry’s lobbying, they will keep using the same kinds of deceptive practices to make a quick buck, no matter what the costs to home buyers and communities. They know they can always lobby Washington to get them off the hook if things go badly-as they have. Just remember that while predatory lenders were driving low-income families to financial ruin, 10 of the country’s biggest mortgage lenders were spending more than $185 million lobbying DC to let them get away with it.