Obama’s Plan for Home Owners
– No help for African, Latino and poor communities
Barack Obama’s recent plan to bail out 9 Million Home Owners falls far short of coming anywhere near the current need.
So who are these 9 million who will be helped? The claims made by the current administration that relief is on the way obscures the reality that few of those most in need will find any relief from the Obama Plan.
In particular few in the African community, which has been the target of more subprime loans than any other community, will benefit from these programs.
A careful look at the plan reveals who benefits and who will not. It also reveals how the Obama plan protects the interests of the banks at the direct expense of great suffering and loss of income in the black community.
Far from ending the predatory practices which have ravaged African communities in the U.S. the Obama plan continues to support additional profits earned through criminal activity by predatory lenders.
The Obama Plan: Who Will Qualify?
The details of this plan can be found on the website “www.makinghomeaffordable.gov.” Here we find a deceptively simple and user friendly website complete with a tool to allow people to check if they are eligible for either of the two programs which make up the Obama recovery plan.
The first plan is not relevant to most people in crisis. It is a plan to allow homeowners to refinance their homes at excellent rates. In this case the value of the mortgage must be the same or LESS than the current value of the home. It is clear that this will only serve those in a limited number of well to do and mostly white communities where real estate prices have not plummeted. In addition, those who are deliquent on payments or have been 30 days late more than once in the last 12 months do not qualify.
So in reality this option will not apply to subprime borrowers and will leave out the vast majority of those in the African community.
The second plan seems at first to be a real option. According to the website this plan is intended to help only 3-4 million homeowners – a significantly smaller portion of the program than the refinance option.
This plan involves modifications to a mortgage which may lower interest and principle and change the terms of the mortgage so that payments do not exceed 31% of the applicants income. This sort of relief would indeed make it possible for many to stay in their homes.
A closer look at how the plan works reveals, however, that this is deceptive. First, this plan is not administered through the government but through the lenders. The government offers no direct relief to homeowners. Instead, it gives additional money to banks as “incentives” for them to make modifications.
This means the lenders control the process. They determine which modification agreements would be most profitable to the bank given the government assistance they would receive for making the mortgage.
Again, a house that is already underwater and whose value has dropped significantly and whose owner has a low income is an unlikely candidate for a loan modification under the program. It simply would be less profitable for the banks. As the white middle class begins to feel the squeeze of the mortgage crisis there will be a limited number of these who might benefit from the program.
Most significantly this plan fails to address the more than 16 million estimated homeowners whose loan balances are more than 5% higher than the value of their homes. This alone eliminates most Africa and Latino and other poor homeowners.
An Alternative Plan
What plan would work to alleviate the current forclosure crisis? The 13 trillion dollars of tax payer’s money that the government has given to the Wall Street bankers is far more than it would take for the government to pay off ALL “bad” mortgages for private homeowners.
Imagine the boost to the economy when people’s money no longer went to mortgage payments! And this would eliminate all the “bad” mortgages plaging the banks books. It would inject lots of money into the economy and create prosperity and economic development in many previously devastated African communities. So why not?
It is simple. The banks make their unreasonably high profits based on interest paid over a very long time. The higher the interest and the longer the payment period, the greater the profit made. Paying off people’s mortgages would serve to stabilize the economy and serve the welfare of the vast majority of people in the US. It would help reverse the harm done by subprime lenders who have leeched unreasonable profits to serve their lavish lifestyles at the expense of African and poor communities.
What this sensible alternative would not do is serve the needs of those who are determined to continue to reap huge profits from oppressed and working people
At first glance it is not exactly clear that this alternative plan would be a serious challenge to the capitalist system. After all, once the toxic mortgages were off the books of the banks they could in theory go on lending money to new homebuyers and continue to make profits. Yet this fails to consider the absolute dependence of capitalism – which was built on the enslavement of African people and the genocide of the Indigenous people – on the continuing exploitation of oppressed communities in the United States.
A recent event in Massachusets brings to light the inherent link between Obama’s so called plan to “eliminate foreclosure and help struggling homeowners”, the need of the contemporary capitalist system to continue to extract of weath from African and oppressed communities, and the current Economic Crisis.
Sub Prime Loans, Goldman Sachs and Contemporary Capitalism
Bloomberg Press reported today (May 11, 2009) that “ Goldman Sachs Group , Inc agreed to pay about 60 million dollars to settle a Massachusets investigation into the packaging of mortgage securities at the root of the collapse of the US housing market.
Massachusetts has led the country in forcing potential African home buyers who qualified for standard fixed interest rate or “prime” loans into the far more profitable subprime loans. Subprime loans start out with a low teaser rate but then increase to outrageously high interest rates. In the words of the Attorney General of Massachusetts , Martha Coakley, they were “destined to fail”.
In fact, according to the article on the website Bloomberg.com, through bundling up these subprime mortgages and investing them into hedge funds, Goldman Sachs actually bet on the decline of the value of homes to which it offered these loans and thereby made great profits from the plummeting home values at the expense of the homeowners.
It is unclear how many of the thousands of homeowners who suffered from this criminal activity will benefit from Goldman Sachs’ settlement. It appears, however, that at the very most SOME of these homeowners whose loans are serviced by Goldman Sachs’ Litton Serving LP will have their loans reduced by about 25 -30 percent.
There is no agreement to make reparations for the losses of the thousand who lost their homes and wealth due to Goldman’s practices over the last several years. The Massachusets Attorney General made it clear that she had no intention at this time to examine earlier loans made under these parasitic terms. So while the exact terms of the agreement have not yet been disclosed to the public we know that the Goldman Sachs settlement is likely only to help homeowners who are among the most well off.
We also know that 60 million dollars does not come close to making up for the wealth lost in the African and Latino communities of the state due to these parasitic practices.
According to Bloomberg reporters Kathleen M Howley and Christine Harper, 60 million dollars is “about one and a third day’s revenue for Goldman Sachs’ fixed-income, currencies and commodities division in 2007 when it made a record 16.2 billion dollars. Sixty million dollars is also less than the incomes received by Goldman’s top three executives in 2007.
At the present time Goldman Sachs is also being investigated for similar activity in the Cleveland Area. The Massachusetts agreement sets a precedent. We have no reason to expect any significant reparations to black and oppressed communities in the Cleveland area, where last year more than 77,000 homes, mostly in African communities, were in foreclosure.
Without criminal charges, admission of wrong doing or any legislation against such practices, Goldman Sachs and other predatory lenders will simply continue to pillage African and oppressed communities with impunity.
This case is another example of the revolving door between the US Treasury, The Federal Reserve and Goldman Sachs’ executives. This is the same Goldman Sachs that received the bulk of tax payers’ bailout funds. This is the same Goldman Sachs whose previous CEO, Hank Paulson, developed and guided the bailout funds under President Bush, and the same Goldman Sachs for whom Obama’s current Secretary of the Treasury Timothy Geithner was employed as a paid lobbyist!
The Obama administration has enlisted a mob of criminals and gamblers to lead the current recovery efforts. They do not wish to gamble with their own money. Despite the current economic crisis these parasitic bankers continue to make billions of dollars by exploiting the African people in the U.S. and oppressed peoples around the world.
The Obama administration and those put forward to resolve this current economic crisis of imperialism cannot solve the problems they created and benefit from. The only solution for African people is the reunification and liberation of Africa and African people around the world and the end to this parasitic system built at the expense of African and oppressed peoples.
Build the African Socialist International!
