The Foreclosure Mess: Another Crisis of State Capitalism

Article by David D’Amato.

Updating on “the foreclosure mess” that continues “to speed struggling homeowners” out onto the streets, Yahoo News’ Zachary Roth notes the “potentially fraudulent” procedures banks have employed in “their rush to foreclosure and eviction.” The documents that originally created these mortgages were buried under the infamous “toxic” derivatives swallowed up by Fannie and Freddie (at the expense of the taxpayer).

Unable to obtain the appropriate signatures, a necessary step in processing forecloses, banks resorted to hiring firms whose cubicle-bound drones signed mortgage instruments by the hundreds per hour, giving the green light to SWAT teams removing people from their homes. With all of this big bank rapacity and deceit, it would be easy to regard the foreclosure crisis as a clear manifestation of the defects inherent in “free enterprise,” as a case of free markets gone awry.

To inculpate genuine free markets, however, is to ignore the intervening causes of the fiasco, glossing over the extensive and noteworthy interventions of the state at every stage of the housing market. The housing policies of the state’s power elite were geared not to creating an “ownership society,” but rather to furthering the abuses of the current rentier society, where the state’s favored companies enjoy every advantage counter to free market alternatives.

In the upside-down world of the statist economy, pushing working people into homes on scanty down payments and with mortgage installments stretching into infinite is apparently something to regarded as government altruism. Pointing out the hypocrisy inherent in the state’s promotion of “low-down-payment purchases,” former Freddie Mac economist Arnold Kling reminds of “all the people who did not default, but who still owe more on their mortgages than their houses are worth.”

So the banks are having a field day fraudulently foreclosing on properties in default, and at the same time they’re happy to keep collecting on risky loans they made gambling with the taxpayers’ money. “Housing advocates who pose as friends of the middle class,” Kling went on to note, “are instead perhaps its worst enemies.”

Beyond the TARP bailouts to Wall Street banks now busying themselves uprooting American families, the state has meddled on behalf of the corporate ruling class in a number of other, less obvious ways. Zoning laws, by arbitrarily obstructing perfectly safe and viable housing options, act to unnaturally limit the opportunities for, and therefore the supply of, affordable housing, filtering the population into state-subsidized housing options.

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