In this “Bust Bowl,” It’s Every Person for Themselves

During the 1930s, drought and dust storms combined to devastate farms in the heartland of the United States, already decimated by the Great Depression. One quarter of the population of the “Dust Bowl” lost their farms and ranches when the banks foreclosed on them. Millions left the Great Plains for California or elsewhere.

Today, the entire nation is trapped in a “Bust Bowl,” laid low from coast to coast by the collapse of an economy based largely on finance and speculation. The “official” unemployment rate, which has been above 9.5% for the last fourteen months, understates the true devastation wrought by the Wall Street debacle. Vast numbers of our citizens have descended into poverty: 42 million Americans – one in seven – are considered poor.  Just an hour or two outside LA, 15 to 20% of residents in towns like Bakersfield and Riverside are below the poverty line.

Back in the Thirties, farmers joined together to protect each other against foreclosures: trying to block authorities from seizing the farms, moving furniture back into the homes of the evicted, and refusing to bid on properties that were foreclosed. But there’s little sympathy for our neighbors evident these days.

To the contrary, speculation has ingrained itself so deeply in the American psyche that people view foreclosures as an opportunity to snatch up a home at distressed prices. And now that some banks are pulling homes off the market because they can’t prove they hold the mortgages, as my colleague Martin Berg has described, would-be purchasers are unhappy. The New York Times quoted a Florida mother who was supposed to move into a foreclosed “three bedroom steal” when Fannie Mae took the house off the market. “Now I’m sharing a room with my son,” she complained. “What the hell is up with that?”

It’s hard to feel sorry for someone who is trying to reap some kind of a windfall from someone else’s tragedy.

I know, everyone’s just trying to get by. The Times noted that one man who had lost his own home to foreclosure after falling behind on his payments had made a successful bid on another foreclosed home – his “dream house” – only to have the deal frozen by the bank.

But is the solution to beggar thy neighbor?

Consider the debt collector profiled in the New Yorker this week. A former drug dealer who did some time, “Jimmy” now runs a small operation in Buffalo, New York. He buys bad debts from businesses like banks and credit card companies for a few cents on the dollar, and then does what he can to collect from the people who owe the money. Anything he can get, he keeps. With so many Americans out of work and deeply in debt, the collection business is booming these days. Buffalo’s home to quite a few such firms these days, because, as Jimmy explains, “Buffalo is broke!” Jimmy’s got five kids and he’s trying to make a living and meet the payroll for his staff, whose job is to nag and cajole people into paying something on what they owe. Plus he’s up against some bigger firms that are willing to break the law in order to collect. But it’s not a pretty picture, especially because it soon becomes clear that Jimmy’s company is in trouble, and he may soon find himself among the debtors of Buffalo.

The average American is not going to be able to leverage himself out of this economic nightmare.

In the Thirties, the federal government ultimately came to the rescue: prodded by Roosevelt, Congress authorized the courts to reduce a farm mortgage to its diminished market value, and to suspend a farm foreclosure for three years. (A conservative US Supreme Court initially struck the law down as an improper intrusion of the government in the banking business, but it was later upheld.) Farmers were also allowed to borrow money through the federal government to pay off their old mortgages. This was the New Deal.

This time around, Wall Street firms have been given access to trillions of dollars of federal money at rates approaching zero interest, but with no requirement that they lend this taxpayer money back to taxpayers at all, much less at fair interest rates. Thus the banks, credit card companies and investment firms are back in business and in fact, most are rolling in dough. The rest of us have to pay exorbitant interest to borrow our money, if it is offered at all. And at the behest of Wall Street, the US Senate rejected a proposal to allow federal bankruptcy courts to modify mortgages so people could stay in their homes. A few days ago, the Obama administration rejected a nationwide moratorium on foreclosures. "While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse," according to the Federal Housing Administration.

I'd call this a "Raw Deal."

"Apology Accepted, Captain Needa"

It’s not about “sorry” anymore.

Even before the Wall Street titans were sworn in last week, it appeared as if the goal of the Financial Crisis Inquiry Commission’s chair, Californian Phil Angelides, was to wring an apology from the men whose companies led the nation into an economic abyss. Whereas most Americans, let me venture, would like to wring their necks.

About twenty-five years ago, I wrote about “inseki jishoku,” the Japanese tradition of accepting responsibility for one’s actions and resigning one’s position as penitence. “These social balancing mechanisms are powerfully ingrained within the Japanese culture. In business activity, they create by necessity a ‘state of intimacy’ among management and employees,” William Ouchi, a management expert, told me at the time. I suggested that there would be less corporate crime in this country if American CEOs embraced a similar approach. 

That never happened.

So what would be the point of a symbolic apology from the titans of the Money Industry – assuming they would be willing to offer one (they tried hard not to, in the event)?

No amount of apology is going to salve the grievous wound in the American psyche as the banks’ profits and bonuses break records.

Like most Americans, I am having a hard time getting my head around how these companies can claim to be earning a “profit” and their executives billions of dollars in extra compensation after American taxpayers were forced to pitch in trillions of dollars to keep the companies afloat.

The truth is that they were able to get away with it because no one in Washington ever imposed any kind of quid pro quo for the bailout.

No cap on the exorbitant interest rates we now pay to borrow our own money from the credit card companies, for example.

No relief for people trying to keep up with their mortgages and pay the rest of the bills.

If symbolism is what this is all about, I say we’ve moved beyond the “apology” stage. How about sending some of these people to jail for twenty years? Or is it "legal" to destroy an economy and cost Americans their life savings and jobs? I had hoped the Angelides investigation would be the beginning of an intensive investigation that, like the Watergate hearings, would lead to holding people criminally accountable for their actions. Not so far, at least.

As I watched the politicians and the leaders of Goldman Sachs, Chase and Bank of America sashay around an apology at the witness table, it reminded me of a scene from the Empire Strikes Back. Han Solo and the Millenium Falcon have just managed to elude Darth Vader’s entire fleet of starships. Informed that Vader wants an update on the search, Captain Needa replies, “I shall assume full responsibility for losing them, and apologize to Lord Vader.”  Vader, using the Force, strangles him. “Apology accepted, Captain Needa.”