Monday, June 20, 2011

America Hoodwinked

In 2005, a part of my American dream was realized. I bought a house in Brownstone Brooklyn, New York City. I was an unlikely beneficiary of the "Subprime Lending" scam that was orchestrated on a massive scale by the banks in this country. The scheme that was meant to help Americans own their homes, brought the whole global financial system to its knees. For those who are still unfamiliar with the term "Subprime Lending", it basically means giving mortgages to people who may not have the financial strength to make the payments on the loan. These mortgages are also characterized by low down payments, higher interest rates and less favorable terms in order to compensate for higher credit risk. Many of these loans were handed to people with adjustable interest rates or ARMs. An ARM is where the interest rate would be low and locked for a short term, affording lower monthly payments towards interest only and not principal. After the initial period the interest rate would adjust to an exorbitant and prohibitive amount. And there in lay the devil that submerged homeowners across the country when the value in their homes vanished. Some were swept away and others are still clinging onto their roofs.

The essence of unbridled capitalism and free market is to make a profit most often by selling goods or services. In the real estate and financial industry, profit is made solely by the arbitrary business of speculation, manipulation, hedging and betting. Money is made and lost by exchanging assets that are valued by factors beyond an average persons understanding or control. These two industries brought the country and the world to a grinding halt by virtue of one important but essential nature that drives the business, greed.

Most banks do not lend to self employed people such as myself, as they see us as high risk vagrants, unless you can show you are making a large amount of money. In 2005 when we decided to buy a house, I struggled to get a loan. Most banks found me to be ineligible by a slight margin. Then finally a mortgage company called Countrywide Home Loans, which was the largest company of its kind at the time, came to my rescue. Just with a few phone calls and some faxed documents they decided to take the risk of putting me on their portfolio. My "Jumbo Loan" (a loan amount over $500,000) was approved and a few days later, after some unnerving discrepancies in the loan documents at the closing, I had my own home. By the time I completed the whole process, I had lost all joy of acquiring my very own domain. I had had a nervous breakdown.

The financial tsunami that was gathering steam right under my nose, with me on its back, crested in 2009. Major Wall Street firms such as Bear Sterns and Lehman Brothers collapsed. My mortgage company went belly up and was bought by Bank of America. The fraudulent mortgage loans had infected the market, threatening credit and destroying the confidence in the American system. Soon the American government headed by George Bush realized the severity of the problem and found themselves in a tight spot. Their philosophy of deregulation and allowing greed to thrive in the name of false prosperity had reached its logical conclusion. And so they appeared in front of the American public presenting a grave situation calling up visions of the Great Depression. An intoxicated populace that felt their "way of life" was under threat, felt even more nervous. To safeguard freedom and the American way of life the banks had to be injected with tax payer money, other wise there would be "Bread Lines" outside grocery stores within weeks. This was the story that was sold, and like always the "narrative of fear" worked.

Billions of dollars were funneled into Goldman Sachs, Citi Bank, AIG, Bank of America and their friends. The very people who had created this precarious situation had now been told to accept cash or perish. All to calm the market and send a signal that this would ease credit to businesses to resume growing and the economy would regain steam. There was no guarantee that the banks would lend the people's money back to the public, none was expected of them. It was just a charade to regain confidence.

It was quickly realized that the rescue package delivered by Treasury Secretary Hank Paulson and his friends Ben Bernenke and Tim Geithner (present Treasury Secretary) to the banks did not materialize into tangible benefits for the public at large. All they did was bolster the banks so that they would be flush with funds to restart Wall Street. And that they did with great success in the process managing to give themselves record bonuses while the rest of the nation was still struggling to surface from the slump. A reinvigorated Wall Street gave the government machinery good cause to proclaim that they had stalled a financial meltdown, that would otherwise have been catastrophic.

As the new President took charge, there was hope there would be drastic change, almost a reversal, but big slogans amounted to nothing. Ex-bankers continued the line of succession in the key financial posts. Most violators were let go with a slap on the wrist. Political bickering led to more spending and less tax cuts for the wealthy. President Obama enacted the "Stimulus Plan" to spur job growth and enacted the "Foreclosure Rescue Plan" which would help homeowners who were struggling to stay in their houses. The banks were requested to modify the terms of their mortgage loans. Most often a modification would mean lowering the interest rate and waiving all penalties for non-payment. All banks were required to assist applicants, but the standards by which they approved the modifications were arbitrary and lacked federal oversight.

Having voted President Obama into office I thought this was a fine program. Finally change he had promised was actually reaching the citizens in need. Socialism was not just for the capitalist banks, it was also for the people, hurrah. So I applied for a "Loan Modification" with Bank of America. My house was not in foreclosure and I had not defaulted on my payments, but I was struggling and I could use some breathing room to better my financial situation. The Obama program was publicized to help individuals like me as well. My interest rate was not low by any means, and I was hoping to lower it to make my mortgage payment affordable. I submitted my documentation to Bank of America as a self-employed person. My application was accepted. I was delighted.

After months of calling for a clear answer on the status of my application, I received a notice stating they needed additional information. That information was promptly sent. There was no response. After almost a year and a half I was told my application was turned down, because they determined I could afford my home. So I said, if I can afford my house let me at least refinance my loan to a lower interest rate. I was told my income did not qualify for a refinance as the guidelines had changed and the regulatory agencies had become unusually strict in overseeing standards for loan approvals. My outstanding mortgage amount was too big, and my income did not qualify. The agencies that were deregulated by Ronald Reagan, Bill Clinton and the soothsayer of global finance Alan Greenspan seemed to have woken up just in time to inspect my case. At least this is what I think I was told by Bank of America.

Today America carries a national debt of almost 14 trillion dollars, which breaks down to $45,000 per individual citizen. Greece's debt breaks down to about $44,000 per individual. The Congress is yet again raising the debt ceiling to function. Banks and other private enterprises are flush with funds and even bailed out firms such as GE are posting a profit. Wall Street is in a respectable place, but the middle class is rapidly shrinking. Unemployment is high, salaries are low and tax cuts have never been this low in fifty years.

While America was hoodwinked by the banks and their comrades in the government, it is the average person who has had to bear the brunt. Government has proven ineffectual again, squandering people's treasure in corrupt ways using wars and entitlements as an excuse. Democrats cannot bring themselves to consider serious spending reform, Republicans reject higher taxes for the wealthy, and right wing Tea party people would rather see the nation burn than compromise. While America calls out corruption around the world it fails to deal with the corruption that is eating away at its core. A nation that takes pride in its system of justice and demands honor of its public servants, has very few honorable men and women left who really care about the plight of the nation.

As a middle class tax paying citizen, my power is very limited. My American dream of one vote, one voice is a ruse. And time after time I am reminded that very little changes where true power lies. Even now we are told America is the wealthiest nation in the world, we have the largest military and yet more people become poorer everyday in every which way. In a nation born out of the worst excesses of racism and prejudice it becomes more and more unclear where and at what level discrimination takes place. Bias can never be articulated in a nation that is so weary about being sued, that it takes sophisticated steps to safeguard itself. By denying me the ability to refinance my loan, Bank of America can discriminate based on the fact that I am self-employed. But I can never prove it. Same as while America is Hoodwinked no one can prove it, one can only stand by watch and hope for hope. It is what it is.