[Ed.: We decided to repost Gregg Robinson’s very recent article on San Diego’s foreclosure crisis, due to several factors, including the interest shown in it immediately, plus we posted 4 articles after his, burying Robinson’s very timely piece. So, here it is again. If you’ve read it, go to the articles below it.]
THE RETURN OF TOM JOAD
“Nominal house prices in the aggregate have rarely fallen and certainly not by very much,” Alan Greenspan, 2005
Just as San Diego led the nation into the housing bubble, it is also leading our country into the foreclosure crisis. In communities like Chula Vista, Oceanside, Spring Valley, Barrio Logan and Golden Hills thousands of working class home owners are facing foreclosure and eviction from their homes. Roughly half the homes sold in our community in the last few months have been the result of foreclosure or some other form of financial distress. Unfortunately, this situation will only grow worse in the next year as tens of thousands of sub-prime loans adjust to market rates.
Many residents facing foreclosure are simply giving up. Convinced that there are no options open to them, they are abandoning their homes. Other vulnerable home owners are being scammed by rip-off artists posing as foreclosure counselors who cheat them out of their equity and their homes.
This crisis can be expected to have ripple effects. As working and middle class families lose their homes to foreclosure, they will join thousands of other low and moderate income San Diegans in the rental market. This will result in an escalation in rental costs that will worsen housing affordability. Homes that are abandoned will also bring down the price of the entire housing market, decreasing both the tax base and funding for city and county services. Ironically, these abandoned homes will also drive up the cost of these same government services as abandoned homes necessitate greater police and fire department protection due to vandalism and other illegal activities.
We hear from some in the financial community that any kind of protection for these hard pressed homeowners is counter productive. They argue that there is a “moral hazard” created when government protects consumers from their own foolish decisions. These consumers, they claim, will only go on to future acts of economic irresponsibility if they are not “disciplined by the market.” This advice, however, is hypocritical. Remember that a few months ago in the midst of the housing bubble these same experts were hyping teaser rates, no down payment mortgages, and liar’s loans as the “beauty of financial innovation.” Remember as well that when the Savings and Loan industry went belly up in the 1980’s or when hedge fund operators got into trouble in the late 1990’s similar experts told us we needed to bail them out in order to protect financial stability in our country. The doctrine for the rich has been “too big to fail,” while the policy for the middle class is “too small to notice.”
This is the greatest crisis in the home market since the great depression, and the solutions to it should reflect this fact. The key is to use the power of government to bring this economic meltdown under control. There are a number of variants on this theme. Some have suggested that we revive the “Home Owners Loan Corporation” that was created during the Depression. This government agency would buy up distressed mortgages at drastic discounts, and then offer favorable terms to home owners. Another suggestion is to simply pass legislation that forces mortgage holders to rent these homes back to their occupants at reasonable rates. Home owners in trouble would have to give up title to their property, but in return they would be guaranteed reasonable rents for as long as they chose to live on the property. Finally, others have called on the government to pass legislation that would force lenders to restructure loans into a form that is more affordable by borrowers. What all these share is an increased role for government..
While any of these government based solutions would solve the home mortgage crisis, they have an even more important advantage. These actions would reinvigorate the sense that government is the solution to major social problems. The last thirty years has been dominated by neo-liberal economic orthodoxy. The claim that government is the source of, and the market is the solution to, every problem has been a lie drummed into Americans. Bringing the state back in to solve the mortgage crisis returns government to a central role in progressive reform which, in turn, sets the stage for future reforms in healthcare, the environment, education, etc. This would put Reaganism and neo-liberalism into reverse. Once we have re-established the progressive role of government, a host of insoluble social problems are open to attack. It would remove the ideological blinders that have put so many progressive reforms out of reach.
Unfortunately, these government solutions to the mortgage crisis will probably have to wait for a new administration in Washington. In the mean time, we need short term solutions at the state and local level that keep people in their homes until an Obama or Clinton administration is able to solve this mess.
These short term solutions would involve local governments calling for moratoriums on foreclosures. State governments, city councils, and local boards of supervisors could declare moratoriums and then order local officials to refuse to enforce any action having to do with foreclosures. If local judges refused to order and local sheriffs refuse to enforce foreclosure and eviction orders, then the hemorrhage of working class families from their homes would be staunched. At a minimum, the housing market for foreclosures would be thrown into a chaos that would take months to sort out. That is what we want. We must play for time while national politicians come up with long term solutions.
Finally, where local governments refuse to get involved, community activists must take action. If our financial overlords have given us the 1930’s in our mortgage market, we must return the favor by giving them “Tom Joad” in the streets. Sit-ins at foreclosure hearings, “eviction parties” where demonstrators refuse to let families be removed from their homes, and pickets of banks and real estate offices that specialize in foreclosures should be the order of the day.
This is more than 1930’s nostalgia, it is the kind of politics necessitated by decades of greed and indifference. We must face this situation with both the creativity and commitment that existed during the Depression. We must have the courage to push this issue into the headlines and into the lap of government as our grandparents did nearly three quarters of a century ago. We are struggling not merely to save the homes of millions of Americans, but to create a home for the next wave of progressive politics. To paraphrase FDR, “the only thing the left has to fear is fear itself.” Now is the time to put fear aside and act.