So why do they keep saying that Main Street shares any of the blame in the mess the country's economy is in? Well, that's actually somewhat of a rhetorical question. I know the reasons that they're giving:
- Main Street didn't "save for a rainy day."
- Main Street lived off of credit cards instead of "within their means."
- Main Street took out loans "they knew" they couldn't afford.
But every one of those reasons completely ignores why Main Street did or didn't do some or all of those things.
Now, I am the first to acknowledge that there are people out there who are — and probably always will be — irresponsible money managers with their own personal finances. My own sister is one of them. If she has five dollars, she will spend ten. If she has ten dollars, she will spend twenty. She thinks she has "paid for" something if she has charged it to a credit card. To be blunt, she's an idiot. And there are idiots everywhere.
Were there some people who "knew" they couldn't afford the homes they were buying? I'm sure there must have been. But those people do not represent the vast majority of people who were convinced by mortgage lenders that they could afford the ridiculous loans that they were often forced into if they wanted to buy a home.
No, no one held guns to anyone's heads and made them take out loans in the first place. But there is a very good reason that so many people rushed out to be homeowners in the 2000s, and why almost all of them ended up with absurd loans that ultimately led to them being in over their heads. (More on this later.)
There are also some very good reasons why people aren't saving the way they used to. And why people are living on credit instead of income, aka "within their means."
"The ability of American households to maintain a standard of living, as measured by the real purchasing power of their income," has plummeted to 1964 levels or below*.
What this chart shows, is "the ability of American households to maintain a standard of living, as measured by the real purchasing power of their income."
- The decline in real purchasing power of domestic America means that as time passes, a greater fraction of income has to be spent on the essentials of living. For America as a whole this has already happened; for individual households the situation is much worse, with real purchasing power substantially below what it used to be in 1964.
- Initially during such a trend of declining purchasing power, there is a cushion that enables households to reduce discretionary spending in order to afford the food and energy and transport needed to survive in reasonable comfort. As the situation gets worse, less funds are available for discretionary spending. Finally, households have to decide which of their normal expenses they can leave out of the budget in order to be able to pay for the essentials of living.
So while Wall Street — the 1% — has seen their share of the national income increase 385% over the past 30+ years, Main Street has had to — literally — borrow money to survive.
Even if the above concept applies to all Americans, the 1% are the only ones left with any cushion, allowing them to continue to enjoy luxury items like $39,000 backpacks (if you're one of the 1% and want one, sorry, they're SOLD OUT), while thousands of the 99% have had to cut so many of their essentials that they now find themselves living in tent "communities."
How do the 1% expect the majority of the other 99% to keep our heads above water under such economic conditions?
When people have to decide between paying the rent and paying the electric bill, there's no money to save.
When people have to skip meals so their children can eat, there's no money to save.
When people who had nest eggs prior to the economy collapsing, no longer do, by no fault of their own, their ability to pay their mortgages greatly diminishes.
When a self-employed, single mother cannot afford health insurance, there is nothing left to save.
In 2003 my husband and I started looking for a home to buy. We were willing to take our time and find the right home at the right price that we could afford to retire in; perhaps even using it as an investment for our retirement. We spent nearly 2 years looking, all the while continuing to save for as much of a down-payment as possible.
By early 2004 we started seeing bidding wars on properties, with upwards of a dozen bids being placed on a single home! It was getting crazy. We could see over the horizon that if we didn't buy something sooner, rather than later, we might not ever be able to afford a home of our own. And the fact that after 11 years in the same apartment, we had a new landlord who had allowed the property to deteriorate to the point where we had raccoons living under the building, slugs coming up through the baseboards from the crawl space, rats infesting the entire unit (one chewed through a towel we had stuffed under the bedroom door, jumped into bed with us and started running up my leg before I kicked it to the ceiling), overflowing garbage dumpsters, etc., played another role in our determination to stop renting and buy something of our own in the immediate term.
I had been in my job for 4 years. My husband had recently started a new job with a Fortune 500 company (within the top 200, actually). We had zero debt. Both of our vehicles were paid off. We pay for everything with our credit cards to earn points and pay them off in full every month. We had (and have) tens of thousands of dollars in "available credit," and our credit scores at the time were between 720 and 740.
We found the perfect little house (800sf, so no McMansion by any stretch) and contacted what was supposed to be a reputable broker (he had handled my boss's refinance the year before). We filled out reams and reams of paperwork; provided 3 years of bank statements and tax returns, several months of paycheck stubs, credit card statements and investment account statements. Credit checks were run, reports provided, appraisals made.
And to our great excitement, we were told that we qualified for a loan! Our down-payment was deemed sufficient. Our credit-worthiness excellent. The only "snag" at the time was that because my husband didn't have 2 years with his current employer, he would have to apply using "stated income." Uhm, okay. "Does that affect the interest rate or any other pertinent factor in the loan?" we asked. "No," we were told. All's good! We were quoted an interest rate based on a standard (conforming) First and a Second mortgage with a slightly higher rate, and no points.
We made our offer, wrote an impassioned letter to the sellers as to why they should choose us over any other interested buyers, had our offer accepted, and handed over $20,000 in earnest money.
When we were one day away from closing our "reputable" mortgage broker "regretfully" informed us that he'd been unable to secure the loan he had originally quoted us. All he could find? An interest only First, a variable Second, and oh, he "had" to take a full point. Had to.
Of course we could have walked away and lost $20,000 — that was always an option. But for us (and I presume most normal people) that really wasn't a viable option, so through gritted teeth we accepted those terms, vowing to refinance as soon as possible (which we did, after 2 years, being one of the lucky few who got in before the door closed, and got ripped off again by another unscrupulous mortgage broker, but I'll spare you that story).
Our "reputable" broker then faxed over a "Good Faith Estimate of Closing Costs," and we went into escrow with a check in hand ready to close.
Not so fast.
The escrow agent handed us the closing documents, and much to our shock and horror, the actual closing costs were double what our "reputable" mortgage broker had told us to expect. We showed the escrow agent the GFE. "Where are all the title fees?" "This fee is way off! All of them are." "How could anyone in this business send you into closing with a document this wrong?!"
We spent the next 5 hours calling everyone charging a fee and begging them to reduce it for us. Everyone was sympathetic and agreeable. Except for our "reputable" mortgage broker. He was incredulous. "What do you want me to do about it?!" he demanded. "Give up your point" (which was fully half of the difference between the actual costs and his sloppy estimate), we said. It's not as if he wasn't already making a boatload of commission off of the loan anyway. Nope. No way. Wouldn't budge. Not a penny.
So throughout this ordeal, we were lied to, we were misled, and we were ripped off.
How is getting into a crappy loan our fault again?
By the way, this is what our house looks like today, after extensive "curb appeal" improvements:
We've been in our house for going on 7 years now. A year and a half ago I was let go from my job and replaced with someone willing to work part time for less money than I was. And over that period of unemployment we never made so much as a single payment late on anything.
I was recently fortunate enough to land a dream job that lets me do what I was doing for pleasure before, and I get to work from home! No, I'm not a prostitute, even though some of the struggling have had to resort to that. I'm the Copy Editor for one of my favorite online sources for news; Business Insider.
But I'm doing this job as an "independent contractor." And while I do get many benefits from that status, the one major drawback is that we can no longer qualify for a loan to refinance our mortgage. Because of the backlash against "stated income" loans, no one who is self-employed can get mortgages these days. So in spite of the fact that my husband now has 7 years at his employer, I can prove my income with canceled "paychecks," we've never been so much as one second late with a mortgage payment, and our credit scores are now 775 and 840, we're stuck with a loan that adjusts every year now.
And a mortgage that exceeds the value of our home.
More, if you take into consideration that we put $100,000 in improvements in it, hoping we could at least keep up in value with our mortgage. Most people wouldn't begin to have that kind of luxury and we count our blessings every day.
So much for retirement.
And we're keenly aware of the fact that at any time the whole thing could still come crashing down around us. It has come crashing down around a significant portion of Middle America. And in spite of most of us doing everything "right," we can barely tread water, let alone get ahead. In fact, on the whole, the American Middle Class is shrinking. Quickly. With no hope of ever clawing their way out or up.
So if, as I contend, Main Street really shouldn't be blamed for the gross negligence that led to the collapse of our economy; should the banks? Should the 1%?
The answer is both yes and, to some degree, no. Yes, in that it was the banks and the underwriters who knowingly (and there can be no denial that they knew, unlike many new homeowners who were duped) wrote toxic loans; and the ratings agencies who lied to everyone about those loans; and the speculators; and the market manipulators who peddled, promoted and bought and sold the bad loans that set the stage for the economy to plunge us into a near Depression.
- Edited to add: Actually, that's putting it far too nicely. For a real taste of the anger many of the 99% are feeling, here's how blogger Keith Balmer describes it in his post, We Are the 99 Percent:
- "These Wall Street criminals took millions of people’s pensions, 401ks, company stock options, and subprime mortgages, bundled them up into securities, derivatives, CDOs, and credit default swaps, and sold this junk to people who didn’t know that what they were buying was junk. And if that wasn’t evil enough, these same banks bet against the junk they sold. In other words, they were hoping the economy crashed.
- "And when it did, BOOM! They got paid, again.
- "Then they put a gun to the head of Congress. And they told them, 'this is a stickup. Nobody move! Now give us 700 billion dollars or the middle class gets it!'
- "Not only did they get 700 billion in TARP money, but they also received a 1.2 trillion dollar loan (with a zero percent interest rate) from the Federal Reserve. Then they took our money, and instead of investing it back into the economy (like they promised), they paid themselves bonuses, jacked up the interest rates on our credit cards, started engaging in shady foreclosures, and bought a bunch of yachts."
So I ask again, how are we, the 99%, to blame for this?
But we also have to look at the role government played in this mess.
In some ways, the government not only provided the means by which these deceptive and manipulative practices could be carried out, they actually legislated the higher level of risk that many lending institutions took on, and for that portion of the disaster, the banks are off the hook.
And neither party is blameless in this.
After 12 attempts in Congress over 25 years, and hundreds of millions of dollars in lobbying on behalf of the banking industry, President Clinton signed the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 into law, which repealed the protections contained in the Depression era Glass-Steagall Banking Act of 1933. But while that was the cherry on top, it was only one aspect of poor governance that brought about this crisis.
Requirements by HUD that at least 55% of all Fannie Mae and Freddie Mac loans be given to borrowers at or below the median income level, and George W. Bush's push to see 5.5 million new minority homeowners in America with schemes such as the American Dream Down Payment Assistance Act, which allows Section 8 vouchers to be used both for down payments and monthly mortgage payments, contributed enormously to the problem. And even though President Obama and the Democratic Congress he had during the first two years of his term, were more productive than any other President and Congress since WWII, nothing was done in the way of serious reforms that would make any real difference in the way banks do business. Nor has any tax reform that would make tax payments in this country more equitable been implemented.
We keep hearing the 1% whine about how they pay the lion's share of the taxes, implying or even stating outright that that means the 99% should sit down and shut up. And Republicans have convinced their constituency that even talking about increasing tax rates on any portion of any type of the income of the 1% is tantamount to "class warfare."
You only need remember one thing to show how absurd this lie is:
If the 99% could actually work their way up to being anywhere remotely near the 1%, we'd gladly pay more taxes, too! We can't pay taxes on income we don't have. And the 1% won't pay it to us. They won't allow us to share equitably in the fruits of our labor.
Again, the 1% have seen a 385% increase in their share of the national income; the 99%, Zero.
- "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." ~ Abraham Lincoln
Then there's Americans for Tax Reform's Grover Norquist and his "no tax increases ever" pledge that nearly every Republican member of Congress in both the House and Senate has signed, preventing any means for our government to raise enough money to fund even its basic activities without borrowing. I don't recall anyone ever electing Grover Norquist to any public office. Yet there he is, literally controlling it with his personal puppet strings.
And not only are banking and other lobbyists "paying" our politicians to craft legislation in their clients' favor, the politically motivated non-profit American Legislative Exchange Council (ALEC) has been handed the keys to the kingdom, writing as many as 150-200 bills that become law every single year across this nation. I don't remember electing ALEC to anything, either.
And in the meantime, workers' rights and protections are being systematically stripped in favor of the business owners who are reaping the highest profits ever recorded in history. Profits. Not revenue. Profits.
One more time: the 1% have enjoyed a 385% increase in their share of the national income; the 99%, Zero.
There is simply no excuse for 1% of this country's citizens to marginalize the other 99%. There is no excuse for taxing labor at a higher rate than we tax passive activity income. None.
This is not the America any of our Founding Fathers established or envisioned. It's an affront to their long-fought and hard-won efforts at Independence and the establishment of the United States. And it's long past time that The People do something to wrest control back from the Lobbyists, Big Industry, Bankers and Hucksters.
We are not fighting because we're envious of those with better means. We are not fighting because we're lazy and want government handouts. We're not fighting because we're on "the fringe" or "want sex and drugs" (What?!) as some in the 1% allege.
We are fighting for the very reasons Thomas Jefferson laid out in his letter to John Taylor on May 28, 1816. To wit:
- "The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens. ...
- "If, then, the control of the people over the organs of their government be the measure of its republicanism... it must be agreed that our governments have much less of republicanism than ought to have been expected; in other words, that the people have less regular control over their agents, than their rights and their interests require.
- "And this I ascribe, not to any want of republican dispositions in those who formed these constitutions, but to a submission of true principle... to speculators on government, whose fears of the people have been inspired by the populace of their own great cities, and were unjustly entertained against the independent, the happy, and therefore orderly citizens of the United States. ...
- "[B]elieving, as I do, that the mass of the citizens is the safest depository of their own rights, and especially, that the evils flowing from the duperies of the people, are less injurious than those from the egoism of their agents, I am a friend to that composition of government which has in it the most of this ingredient. And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
"[T]he evils flowing from the duperies of the people" in this case, by my estimation, are minimal, if existent at all. And whatever those may be, they are most certainly "less injurious than those from the egoism of [our] agents (elected representatives in government)."
"[T]he mass of the citizens is the safest depository of their own rights," and today we have less "regular control over" our agents than our rights and our interests require, so it is therefore incumbent upon We, The People, to hold our elected representatives responsible once and for all.
And that is what the Occupy Wall Street movement intends to do. We are going to wrest control of our rights and interest from the Big Boys who have decimated them for their own greedy ends. And we are going to take down any politician who continues to pander to and be bought by them.
On Saturday, October 15th, Occupy Wall Street protesters assembled in New York City and voted on a Plan of Action to elect an Executive Committee and convene a National General Assembly. The Agenda is posted here: The Steps to Non-Violent Revolution and the Convening of a National General Assembly.
This could literally change the face of America.
I hope those in the 1% — the CEOs, the Bankers, et al— will "get it" soon so they can be ready for what's about to come.
REFERENCES AND ADDITIONAL RECOMMENDED READING
▶ Who to Blame for the Financial Crisis ~ By Mortimer B. Zuckerman at U.S. News & World Report
▶ The 2011 State of the US Economy ~ By Daan Joubert at CommUnity of Minds
▶ AMERICA TODAY: Heartbreaking Pictures From New Jersey's Homeless 'Tent City' ~ By Robert Johnson at Business Insider
▶ Mr. Weill Goes To Washington — The Long Demise of Glass-Steagall ~ By Frontline at PBS
▶ We Are The 99%
▶ President Hosts Conference on Minority Homeownership ~ George W. Bush at George Washington University
▶ Corporate Profits Were the Highest on Record Last Quarter ~ By Catherine Rampell at The New York Times
▶ WALL STREET FIRES BACK: Protesters Are Just A Lazy Disgruntled Fringe Group ~ By Henry Blodget, CEO and Editor-in-Chief (and my boss) at Business Insider
▶ Here Are Occupy Wall Street's Plans For A National Convention That Could Change The Face Of America ~ By Linette Lopez at Business Insider
▶ The Works of Thomas Jefferson in Twelve Volumes. Federal Edition ~ Collected and Edited by Paul Leicester Ford. United States Library of Congress
▶ We Are the 99 Percent ~ By Keith Balmer of The Badass Liberal
▶ Occupy Wall Street
▶ The99PercentDeclaration ~ By We, The People
"How wonderful it is that nobody need wait a single moment before starting to improve the world." ~ Anne Frank