It might seem astonishing that right in the middle of the run-up to the second biggest bank bail-out in the history of capitalism (another round of ‘quantitative easing’ worth around 500 billion, dubbed QE2 by traders and analysts), that Bank of America (BofA) would have the temerity to begin proceedings on 102,000 home foreclosure suits, reactivating a process that had been voluntarily suspended in 23 state courts for the past several weeks.
On the other hand, from their perspective: why not? The bank probably feels pretty confident that with Obama in the White House and the Republicans at the door of Congress they’ll be able to capitalize on the latest round of Fed intervention no less than the last time- the ‘Geithner plan’ of 2009.
Doubtless they’ll soon have some heat to deflect, as the details of the initiated foreclosures proceedings come out. Unfortunately though, it will take a strong political shift in order for the bankers behind the shenanigans to be held to account. This fact alone demonstrates that the ‘bottom line’ in the whole unfolding drama is still class and race war, as this renewed attack on the foreclosed-upon will undoubtedly consist disproportionately of the poorest and most marginalized American homeowners who, once lured into the now defunct housing frenzy.
The recent controversy has again brought to light the extent to which the entire home-ownership-debt-complex is controlled by the big banks. BofA ‘services’ $14 million home loans supposedly worth $2.1 trillion. The quasi-public Fannie Mae and Freddie Mac own half of these. Thus, BofA’s move is sure to embolden other lenders to get tough on foreclosed homeowners. Whether this means a huge wave of foreclosures remains to be seen.
According to yesterday’s New York Times, if other lenders start the same process, 2 million homeowners would be at risk of losing their homes; the number of people living in these homes is doubtless close to triple this. Highlighting the class and race violence of the scheme is the fact that the entire process of declaring a home to be a legitimate case for foreclosure proceedings has now been called in to question.
According to the Times, ‘GMAC Mortgage…helped prompt the controversy [over the foreclosure process] when one its executives testified that he had signed 10,000 [sic] documents in a month, is also proceeding with foreclosures.’ At this rate it would clearly be impossible to determine whether or not a homeowner behind on mortgage payments was in fact ‘in foreclosure’, a category which is qualitatively distinct from being behind in payment in that it entail the imminent possibility of the asset being repossessed.
The reams of documents supporting such claims obviously represent peoples’ lives, but with predictable nonchalance Bank of America has shrugged off any charges of wrongdoing. Meanwhile, even mainstream analysts have marveled at the level of the bank’s hubris in the matter, and all 50 state attorneys general have joined in an ‘investigation’ of the process. The New York Fed and big private investment firms Blackrock and Pimco have even gone so far as to suggest that Bank of America should be forced to buy back some portion of the loans they originated. But this is obviously a result of the fact that these entities hold billions worth of BofA originated bonds and derivatives, and thus need to jump into the fray to ensure that they don’t lose out in case their bonds actually become worthless. As they say, if I owe you $100, it’s my problem; if I owe you a million, it’s yours.
For the mega banks, the wager which Bank of America has laid down is that they can make a quick grab at the properties without suffering too much from a write-down in the value of those ‘assets’. Correlated to this is the belief that they can do this without too much concern that they will ultimately lose the faith of their bondholders and raters who could sue them in court if their bonds were to dramatically lose value as a result. If they can pull this off, they’ll be able to miraculously transmogrify worthless loans into concrete assets- at the expense of the people who live in these homes, who will no doubt be kicked out, and theoretically, the taxpayers who underwrite all of the quantitative easing.
This is the point at which the Fed and the big private equity firms will ultimately hang fire. The stock markets were shaky yesterday as a result of the move, but equities are inherently riskier than bonds, and the sense of panic is as yet not general. Despite the posturing, the imminent prospect of 500 billion worth of ‘QE2’ will probably keep the Fed, the corporate banks, and the private equity firms from going after each other as long as there are embattled homeowners to dispossess. After all, who needs the American consumer if the Federal Reserve is willing to spend trillions to prop up paper assets that the ‘free market’ would obviously liquidate. Why else would BofA have stayed their foreclosures in the first place, if not to try to redeem some value from loans sold to buyers for totally over valued homes?
Now that the banks can rely upon another round of quantitative easing, the scrutiny over the quality of their loans and, most importantly, the value of the underlying assets, might temporarily recede as they attempt to foreclose on millions of people who will be put out of their homes. This development should only help sharpen the focus for Left political activists, journalists, and theorists. The contributions of Mike Whitney and Michael Hudson to this site have already thoroughly demolished the notion that the attempts made by the Obama administration to mitigate the effects of the crisis for average Americans have been sincere. Furthermore, the so-called recovery is evidently no more than a Fed-Wall Street project to re-inflate the paper-claims on wealth that once served as the dynamo of the US economy. With every step the real nature of the supposed ‘financial crisis’ becomes clearer: it is a development that must be understood as the result of an unfolding struggle between the poor and the embattled middle-class, on the one hand, and the elite and super-rich on the other. The Obama administration has failed on many accounts, but they can be credited for making this crystal clear.
PATRICK MADDEN can be reached at: firstname.lastname@example.org