Review: Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream by Aaron Glantz

 There have been lots of books written about the collapse of the housing market in 2008.  I have read several of them, but this would be the first of them that discusses the catastrophe in the context of what government could or should have done differently. What did happen was that the feds bailed out the banks rather than bailing out the homeowners.  Now you could argue that those who capitalized on the willingness of the banks to refinance anything and everything driving up the value of houses so they could be refinanced and treated like ATMs properly bore the brunt of the devastation. Glantz makes a case for a different agenda.

 

During the foreclosure epidemic of the depression, FDR created the Home Owners Loan Corporation, which bought millions of distressed mortgages and modified them. If that didn't work and foreclosure became necessary, it sold the foreclosed homes to individuals, taking care of them while they were on the market, and so the program almost paid for itself.  That, coupled with the creation of the FHA and FHA, ushered in an unprecedented era of prosperity and homeownership. Government stepped in rather than stepping aside. Glantz suggests Reagan stepped aside, during the savings-and-loan crisis in 1986 when those institutions liberated by the elimination of most regulations ran amok and using their client's money made risky bets.  The administration then permitted the vultures to swoop in and pick up the assets at fire-sale prices, losing billions in the process but enriching the vultures.  The Obama and Bush administrations did the same in 2008 spending almost a trillion on Wall Street bailouts. Investors were attracted  to the collapsed housing market by auctioning off delinquent mortgages at low prices and with loss-share agreements that essentially guaranteed that the investors wouldn’t lose money. These policies not only provided firms with financial incentives to pursue foreclosures but also enabled an enormous and permanent transfer of wealth from homeowners to private equity firms.

 

Glantz has several examples of people who were conned into making risky investments like reverse mortgages without understanding the consequences for their heirs or estate. Fees and high interest rates doomed those saddled with trying to unravel themselves from the mountain of debt they had accumulated. Glantz shows, it happened over and over in similar ways across the country, systematically turning middle-class homeownership into corporate profits, facilitated at every stage by the federal government. And people wonder why Trump became so popular.

The math is frankly staggering as venture capitalists and billionaires moved in to collect the spoils, enriching themselves even further as the expense of us, the taxpayers.  Whether all this could occur is because of the cozy relationship the Democrats and Republicans had with the rich eastern establishment tycoons, the Larry Summers, Mnuchins (and where did he wind up?) et al. seems self-evident to me.

 

The California attorney general’s office delivered a robust report against  bank practices, "detailing widespread misconduct, which included backdating false documents, performing foreclosure actions without legal authority, and violating proper foreclosure notification practices. But the attorney general at the time, Kamala Harris, did nothing."

 

The whole process, supported by the government, became fodder for the rich.  Prices of millions of starter homes had fallen to half their 2006 peak. Private equity firms snapped them up. The biggest buyer was Blackstone, the nation’s largest private equity firm, which funded a subsidiary called Invitation Homes whose representatives traveled with cases full of cashier’s checks to auctions around the country, spending as much as $100 million per week. After a merger with Waypoint, they now own more than 80,000 houses. No longer were these homes a way for the middle class to accrue savings—now they were lucrative investments for the very rich.

"The Obama administration facilitated the transfer of wealth from homeowners to private equity firms in two ways. A house that goes to foreclosure auction but doesn’t sell is repossessed by the bank that holds its mortgage, becoming what is bewilderingly referred to as a real estate owned home, or REO. By August 2011, the federal government owned 248,000 repossessed and unsold properties, nearly a third of the nation’s REOs. In 2012 the HUD launched the Real Estate Owned-to-Rental pilot program, encouraging investors to buy bundles of the government-owned REOs if they agreed to maintain them as rental units. The pilot put 2,500 homes in Chicago, Riverside, Los Angeles, Atlanta, Las Vegas, Phoenix, and various cities in Florida up for auction in batches. Meg Burns, senior associate director of housing and regulatory policy for the Federal Housing and Finance Authority, said the program was intended to “gauge investor appetite” for single-family housing and to “stimulate” the housing market by “attracting large, well-capitalized investors.” Treasury Secretary Timothy Geithner, meanwhile, argued that creating new options for selling foreclosed properties would “expand access to affordable rental housing”; this turned out to be gravely mistaken."

Another way in which the Obama administration facilitated the rise of the single-family rental industry is when the government took on $5 trillion worth of bad FHA-insured mortgages when it assumed ownership of Fannie Mae and Freddie Mac in 2008, then auctioned that debt off through the Distressed Asset Stabilization Program (DASP) with almost no safeguards.

The big different between FDR's actions and those of Reagan thru Obama, is FDR used the power of government to help people. The others used the power to, perhaps unwittingly because that's where the advice was coming from, the rich bankers who had the most to gain from governmental support. Glantz quotes Woodrow Wilson in 1911: “The great monopoly in this country is the money monopoly. So long as that exists, our old variety and freedom and individual energy of development are out of the question. A great industrial nation is controlled by its system of credit.”  It's not hard to look at Wilson's time and the wealth inequities and then at the rise of Father Coughlin (Tucker Carlson) and Huey Long (the only politician who worried FDR.)  Huey Long was competent; the only thing that saved us from Trump's authoritarian desires was his incompetence. Of course, the jury's still out.

As Thomas Barrack, one of those enriched through governmental policies put it, “Anytime the government is intervening in our business, if you buy, you will be successful.” Overdue and panicked government intervention is the vulture investor’s best friend.

 

 

 

 

Review: Whitaker Chambers by Sam Tannenhaus

Where else can you find elements of a spy story, good guys against bad guys, weird characters, and cognitive dissonance all rolled into one?  The Hiss/Chambers case riveted the nation, laid the groundwork for Nixon's rise, and epitomized national phobia.

 Chambers, who died comparatively young at age 60, certainly made a mark. Considered by many to be an uncouth individual (with notoriously bad teeth - a key component at the Hiss trial), Chambers like many others during the depression feared Capitalism was moribund and unable to address the inequities that had been exposed so they were tempted by Communism which appeared to have solved some of those problems. Almost all became disenchanted especially following the pact Stalin made with Hitler and revelations of his ruthlessness. Post WW II anti-Communist fervor became the rage and HUAC (the House on Un-American Activities, itself spectacularly un-American in its behavior) became a mechanism for politicians to loudly trumpet their pseudo-Americanism.

 

Many of those had actively spied for the Russians including Hiss and Chambers.  Chambers, who had been early in his disenchantment moved with his family dozens of times in a no-to-unrealistic paranoiac fear of the NKVD's possible revenge.

 

Chambers had a fascinating background. His family life was a mess, but he managed to get into Columbia where he first considered himself a conservative and where his literary career began.  He was considered a talented writer (indeed, Witness, his autobiography is considered by many to be a masterpiece.)  Following a trip to Germany where he witnessed wretched poverty, he joined the Communist Party and left college. Soon disenchanted, he left the Communist Party, and eventually became editor of Time Magazine and a favorite of William Buckley. Jacques Barzun and Meyer  Shapiro said that had he not gotten mixed up with the CP he might have gone on to be one of the great poets of the 20th century, he was so talented. Once tarred by the Hiss brush, however, his life was virtually ruined.

 

No need to go into the details of the trials here, other than to report that both men became larger-than-life symbols: Hiss representing the New Deal and Chambers the rising anti-communist political movement.  Each was used rather abysmally by his respective disciples to each's detriment. Chamber target was modernism, not just Communism, and his weapon was the scatter shot which hit all sorts of groups including liberals, socialists, and humanists, as well as Communists, all of which he blamed for societal ills. Chambers became more and more religious and mystical. He became an Episcopalian, then a Quaker from whom he was quickly estranged.  He also considered Hiss to be one of his best friends and only wanted him dismissed from his post, certainly not jailed. He was a man of ideas but of inconsistent ideology, refusing to be labeled or identified with any group. He didn't last long writing for The National Review after alienating many of its readers by defending the right of Hiss and Robeson to get US passports.

 

He wrote, "counterrevolution and conservatism have little in common. In the struggle against Communism the conservative is all but helpless. For that struggle cannot be fought, or much less won or even understood, except in terms of total sacrifice. And the conservative is suspicious of sacrifice; he writes first to conserve, above all what he is and what he has. You can’t fight against revolutions so." But just what a counter-revolutionist stood for, except as the opposite of revolutionist, he never said.

Ironically, had Hiss simply fessed up to having been a member and having passed documents (mostly on European economic policy) that probably would have been the end if it, but he made the fatal mistake of suing Chambers.  That brought to light the famous pumpkin and typewriter that were Hiss's downfall.

 

The left according to Arthur Schlesinger, in a review of Witness, led a whispering and vilification campaign of Chambers that continued for decades, much of it homophobic even though Chambers was certainly not homosexual, and that this campaign was no less horrible than that orchestrated by HUAC.

 

The unanswered question we are left with is why out society requires a constant enemy. In the fifties and sixties it was the bugaboo of the Red Scare; today it's Islamic Facism. Is threat required as a glue for society? Just walk into any airport and realize you have become the sheep required to suffer indignities and silliness all in the name of the illusion of safety. Chambers and Hiss both served as useful stereotypes and straw men when each was far more interesting and complicated. The Communism each man was briefly enamored with never existed either; it was a chimera that Chambers recognized as such long before Hiss.

 

For a terrific series on the Hiss/Chambers case watch the 38 part series done by John Beresford on Youtube.  It's very good. (A Pumpkin Patch, A Typewriter, And Richard Nixon  .)  On another note regarding government secrets -- the Chambers/Hiss thing was all about secrets, after all -- Thomas Powers wrote a review of Secrecy: An American Experience by Daniel Moynihan, which discusses, at length how secrecy is used within the government to hide things they don't want the rest of government to dins out about. This often puts decision-makers in awkward positions, e.g. Kennedy was never told of the CIA's own report on how the Bay of Pigs wouldn't work, and Truman was never informed of the VENONA decryptions. Moynihan writes:

 

All the bitter divisions of the McCarthy years, the exaggerated Republican charges of “twenty years of treason” and the Democratic countercharges of witch-hunting, might have been avoided, Moynihan suggests, with who knows what profound consequences. There might have been no fight to the death over who lost China, no lingering nightmares at the outset of the Kennedy administration that hands-off realism in the Caribbean and Southeast Asia would inexorably summon up new howling mobs demanding to know: Who lost Cuba? Who lost Vietnam?

 

I.e., there would have been no Hills/Chambers controversy, either. In the end, the secret documents Hiss passed along and the dotty actions Chambers was required to do undercover before he broke with the party, had no impact or consequence to anything. Looking back, it was like watching a children's game. I wonder how much of that has changed.

 

For an examination of why did otherwise reasonable men, at the highest levels of our political culture, succumb to these extreme suspicions see Ellen  Schrecker’s book, Many are the Crimes.  Her answer to this question is that the excesses of the cold war originated in “a sense of panic” that dated back to the Russian Revolution of 1917. That panic manifested itself in the fifties and continues today. The press failed during Hiss/Chambers.. To quote one reviewer, "Hysteria and paranoia aren't the exclusive preserve of ambitious politicians and the voters they seek to steer through the latest minefield of awful threats.  Hysteria and paranoia aren't the exclusive preserve of ambitious politicians and the voters they seek to steer through the latest minefield of awful threats. The press made another muck of it here, too. The press couldn't cope with nuance or indecision."  Watching the news today, you realize things haven't changed.

 

 

 

 

  

Review: God Knows His Name: The True Story of John Doe No. 24 by David Bakke

 I read this book many years ago but it has stuck with me and recently I was listening to some Mary Chapin Carpenter who wrote a song based on this unfortunate man's tombstone inscription, so I went back and looked up my review that I wrote for Goodreads many years ago. It's really a book well worth reading and thinking about. 

On October 11, 1946, a black boy of indeterminate age was found wandering the streets of Jacksonville, Illinois. When police discovered he was deaf, mute, and suspected to be retarded, he was sent to the Lincoln State School and Colony, a state facility that bore little resemblance to its name. Had he been permitted to stay at the School for the Deaf, his life would have been completely different, but that school was not permitted to take retarded people.

The Lincoln School was a self-contained city having a farm with price-winning cattle and a dairy processing plant. It generated its own power and returned thousands of dollars to the state treasury, thanks to the free labor provided by the residents (really inmates). These people varied from the very severely retarded to those of borderline intelligence. The place was vastly overcrowded, and the pecking order among residents was often established violently.

John Doe, as he was called since they were unable to identify him at all, was given an I.Q. test, but much like any test, if you don't understand the value or importance of the test, there will be little incentive to do well, even assuming you can understand what is expected of you. A special test was used that had been designed for the deaf, but the examiner had difficulty conveying the purpose and instructions for the various tests that were disguised as games or puzzles. John's deafness and inexperience were a huge impediment, and, not surprisingly, he scored very low on the test. This result was to haunt him for years to come. After several unsuccessful escape attempts, John gradually adapted to his surroundings. He had no known relatives so there was no one to claim him nor to send him packages or money that might help alleviate his situation.

By the mid-sixties, thanks in part to JFK's commitment to improving conditions and education for the mentally retarded and an Illinois commission, facilities and conditions were improving at the Lincoln School. John Doe had now been there close to two decades.

Unfortunately, it was also the time of Chlorpromazine that the psychiatric profession had discovered could turn unruly or violent patients into virtually catatonic, but untroublesome, individuals. It soon became the drug of choice for nearly everyone in an institution. Despite regular doses, John was becoming one of the best students in the ASL class that had been started for the deaf residents. He became a trustee and was placed in charge of several other patients, helping them to dress and to get ready for the day.

By 1973 the side effects of the drugs began to manifest themselves and John was inflicted with diabetes and glaucoma. In 1975, the Lincoln School was converted into a state prison, and John was sent to the Jacksonville Developmental Center. He was now totally blind, but thanks to a few dedicated individuals, his talents were recognized and he was sent to the Helen Keller School. This provided him with the skills he needed to subsequently live in a series of group homes.

He died a few years later, but to this day no one has still been able to track down his identity. God may know his name; it's a shame He didn't give a shit.

P.S. Mary Chapin Carpenter wrote a song that included the words from his tombstone.  Here are the lyrics:

Lyrics

I was standing on this sidewalk
In 1945 in Jacksonville, Illinois
When asked what my name was there came no reply
They said I was a deaf and sightless, half-wit boy

But Lewis was my name though I could not say it
I was born and raised in New Orleans
My spirit was wild, so I let the river take it
On a barge and a prayer upstream

They searched for a mother and they searched for a father
And they searched till they searched no more
The doctors put to rest their scientific test
And they named me John Doe No. 24

And they all shook their heads in pity
For a world so silent and dark
Well, there's no doubt that life's a mystery
But so too is the human heart

And it was my heart's own perfume
When the crape jasmine bloomed on St. Charles Avenue
Though I couldn't hear the bells of the streetcars coming
By toeing the track I knew

And if I were an old man returning
With my satchel and pork-pie hat
I'd hit every jazz joint on Bourbon
And I'd hit every one on Basin after that

The years kept passing as they passed me around
From one state ward to another
Like I was an orphaned shoe from the lost and found
Always missing the other

They gave me a harp last Christmas
And all the nurses took a dance
Lately I've been growing listless
Been dreaming again of the past

I'm wandering down to the banks of the Great Big Muddy
Where the shotgun houses stand
I am seven years old and I feel my daddy
Reach out for my hand
While I drew breath no one missed me
So they won't on the day that I cease
Put a sprig of crape jasmine with me
To remind me of New Orleans

I was standing on this sidewalk
In 1945 in Jacksonville, Illinois

Source: LyricFind

Songwriters: Mary Carpenter

John Doe No. 24 lyrics © Sentric Music