President Bush recently signed into law H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act, to address the foreclosure crisis that is sweeping the country.
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The new legislation comes as foreclosure figures reach new highs. According to a July 28 Associated Press story, “The number of households facing the foreclosure process more than doubled in the second quarter compared to a year ago.” The article explains that foreclosures now total 739,714 homes across the country, a 121 percent increase from 2007.
Nevada, California, Arizona and Florida are hardest hit. One in 43 homes in Nevada received a foreclosure notice in the second quarter of 2008. In Stockton, Calif., the rate is 1 in 25—seven times the national average.
The impact on working-class and poor people has been devastating. A report by First Focus, an advocacy group for families and children, estimates 2 million children will be affected by home losses due to foreclosures. More than 300 school districts have reported an increase in homeless children following the outbreak of the foreclosure crisis. In Cleveland, Ohio, there has been a 30 percent increase in the number of homeless students from the previous year.
The new law includes language suggesting it will help 400,000 homeowners who are in the process of losing their homes through foreclosure. The Center for Community Change and the National Low Income Housing Coalition hailed the Act’s creation of a housing trust fund benefitting households earning less than 50 percent of the area median. Families at or below 30 percent of the median will get 75 percent of the funds.
Realtors, lenders celebrate bailout legislation
However, the Democratic and Republican parties made sure that the bankers and mortgage lenders got the lion’s share of the benefits. To the extent that the new legislation helps at-risk homeowners, it is a secondary consequence. Foreclosures were of no concern to the government as long as working people were the only ones suffering; only when crisis emerged for banks and mortgage brokers did politicians take notice.
According to the big-business media, the bill will make available close to $4 billion to local governments to purchase and rehabilitate “distressed” homes. Wall Street and the ruling class are desperate to stop the decline in home values that has a general negative effect on the construction industry and spending for consumer goods, especially in those areas most affected by the foreclosure crisis.
Their concern is not for the people in those communities, but for the lenders that are facing major losses or even bankruptcy as the resale value of the foreclosed homes has dropped below the value of the portfolio of loans outstanding—a problem aggravated by rising defaults on auto loans and credit card debt.
The bill gives the U.S. Treasury much greater powers in overseeing Fannie Mae and Freddie Mac, two leading lenders and guarantors of housing loans. In another nod to the interests of big capital, the bill temporarily increases the amount the U.S. Treasury can lend to these financial behemoths. Treasury Secretary Henry M. Paulson has stated that “[the increase in lending is] crucial to bolstering confidence in the companies and stabilizing housing finance markets.” (Los Angeles Times, July 27)
In its effort to “stabilize the housing finance markets,” the federal government will issue $11 billion in tax-exempt bonds. The funds raised will go to shore up bad loans, among other aims.
The bonds are yet another giveaway to the banks and the other financial institutions that brought about the foreclosure crisis in the first place. The bonds are sold with a guaranteed tax-exempt interest rate that will be paid out of the government treasury, which is funded primarily by taxing individual wage earners—the working class. The issuing of bonds and the guaranteed profits from the interest paid, albeit profits much less than Wall Street would like, are guaranteed profits nonetheless in uncertain times.
It is worth noting there are no calls for “Big Government” to stay out of the boardrooms of corporate America by any of the capitalist politicians who have made a career out of attacking Washington for meddling in the affairs of business. The U.S. Congress and the president are acting on behalf of the needs of the capitalist class during this time of financial crisis. As Karl Marx explained in “The Communist Manifesto,” the government is “managing the common affairs of the whole [capitalist class].”
If there are any lingering doubts over whom the new law is meant to help, it should suffice to note that the California Association of Realtors promptly stated it “applauds President Bush’s decision to sign H.R. 3221 into law.” MarketWatch, a well-known online financial news website, ran the headline “Housing stimulus bill a big win for construction industry.”
No profits, no homes
This crisis exposes the supremacy of private property under U.S. capitalism and the maximization of profits as its driving force. People are not leaving their homes because they do not need places to live. There is not a lack of housing to explain why thousands of people are homeless. But if they cannot make a profit selling a home, they will let it sit idle even as people go homeless.
In Minneapolis, Minn., homeless activists report occupancy in homeless shelters throughout Minneapolis is up 30 percent from last year due to foreclosure. As rental properties are being foreclosed, tenants are being evicted.
The result is a rise in rents as the vacancy rate for rental units drops. There are only 58 four-bedroom apartments for rent in the entire Minneapolis area—and all are taken.
A local politician is quoted in the media stating, “Banks aren’t selling foreclosed homes because they’re waiting until the market hits rock bottom. Then they can declare their losses to Wall Street, which makes the stock more attractive to investors.
The crisis in the housing market and the accompanying misery visited upon workers, their families and their communities is the result of an irrational system that puts the greed of lenders and landlords ahead of human needs.
If the government were primarily concerned with the impact the housing crisis is having on the working class, it could use eminent domain, a right of the government to seize private property in the interest of the public good, to stop all home foreclosures. That would put an immediate end to the human suffering the real estate speculators have created in their drive for profits.
The La Riva/Puryear presidential campaign demands a moratorium on foreclosures and evictions—something that neither Obama nor McCain would ever get behind. Banks and mortgage lenders should bear the consequences of their reckless speculation and predatory lending. Housing must be a right for all working people!
To find out more about the La Riva/Puryear presidential campaign, click here. To find out more about other PSL candidates running in local and national elections, click here.
