The Housing Crisis and a Fight-Back Program

Moratorium Now! Coalition members occupy the City Council auditorium demanding the imposition of a state of economic emergency in Detroit.
Originally uploaded by Pan-African News Wire File Photos

The housing crisis and a fight-back program

By Jerry Goldberg
Published Nov 20, 2008 10:30 PM
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Editor's Note: The following is the text of an address delivered before the national conference on "The New Situation in the U.S. and the World" conference held on November 15-16, 2008 in New York city.
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The current economic crisis has been building for years. At its root is the massive elimination of decent-paying jobs and lowering of wages in the U.S. and worldwide, a phenomenon explained and analyzed so well in the party’s newest book, “Low-Wage Capitalism.”

The capitalist class was able to delay the inevitable economic collapse in significant part through the creation of the housing and home refinancing boom and its offshoots, racist subprime predatory lending and exotic adjustable-rate, pay-option, interest-only and negative amortization mortgages. People were sucked into putting their homes up as collateral for loans based on artificial appraisals that vastly overstated their value.

The financial interests made huge profits off these loans with their high interest rates and exorbitant fees. However, the lure of quick profits overcame any rational analysis of what was going on, so every single financial institution became involved in the mortgage boom, buying trillions of dollars of mortgage securities with no regard to the long-term prospects. It was classic overproduction as described by Marx, but within the financial sector.

In the years 2004-2006, U.S. homeowners pulled about $840 billion each year out of residential real estate, home equity lines of credit and refinanced mortgages. These so-called home equity withdrawals financed hundreds of billions a year in personal consumption from 2004-2006.

Today the whole deck of cards has collapsed. The mortgage refinancing boom turned into its opposite. Each company now faces billions of dollars in losses and the government is scrambling to bail them out with its trillion-dollar giveaway financed by the taxpayers. Even if the capitalists stabilize the financial markets on some level, and this is highly doubtful, how are they going to replace the hundreds of billions of dollars a year that were funneled into the capitalist economy through home refinancing?

Home equity loans are a thing of the past, as housing values have declined rapidly across the U.S. In fact, families are forced to divert more and more of their incomes to mortgage payments that have doubled and tripled as they reset upward at the same time that home values are in serious decline.

With foreclosures now affecting about one in nine households, there is no sign of a rebound. The home refinancing lever the capitalists used to stave off an economic downtown has now turned into its opposite, from the last stimulus into a serious depressant. It seems clear that the prospect for the coming period is a profound and long-lasting economic downturn.

Will the government be able to stave off or at least significantly ameliorate the effects of this collapse? It is interesting to note that even in the depression of the 1930s, the New Deal only modestly eased the vast unemployment and suffering of the masses. It was really the spending for World War II that brought the capitalist economy back. For example, the author of “Labor’s Giant Step” points out that during the New Deal, spending for the unemployed ran only about $1 to $1.5 billion a year, while the total yearly cost of government was a little more than $7 billion. In contrast, during the war the Roosevelt administration spent $79 billion in 1943, $95 billion in 1944 and more than $100 billion in 1945. That is not to say that significant reforms were not won, including Social Security and unemployment insurance, but it was the war, not the New Deal, that revived the capitalist economy.

Even the liberal bourgeois economist Paul Krugman of the New York Times has criticized the New Deal for being too conservative, and has called for public spending in the neighborhood of $600 billion on jobs and services to avert a severe downturn in the economy.

In contrast, the Democrats seem to be proposing a $150-billion stimulus plan. We already have a bloated war budget that has become a permanent feature of imperialism and long ago became a depressant on the economy. With the Democrats’ continued support for the $700-billion Pentagon budget and the trillion-dollar bailout to the banks, it’s hard to picture where more funds to meet people’s needs will be coming from.

Comrades, what is the role of a revolutionary party like ours as we enter a period characterized by a profound economic downturn that has all the indications of being severe and long-lasting? It is to marshal every one of our resources, and especially our revolutionary perspective and experience, to mobilize the workers and oppressed to fight back.

Our ideological view, to overthrow capitalism and replace it with a socialist system, puts us in a unique position to intervene in the period to come. We are not about saving capitalism, like the Democratic Party, which mouths support for the workers and then gives $700 billion to bail out the banks in a bill that did not have one item in it to stop foreclosures or protect working people in any way.

We reject the view of the UAW leadership who, after agreeing to 50-percent wage concessions in the last contract, have been silent in the face of layoffs and plant closings that violate that contract and now run to Congress with the executives of the auto companies to beg for a bailout for the corporations.

The issue isn’t whether GM, Ford and Chrysler will survive, especially if they continue to dismantle the auto industry. It’s the workers’ property rights to their jobs and pensions and benefits that matter. It’s the workers and the communities they live in that should be given money by Congress to keep the plants running, and producing cars and transportation that people need, under workers’ control.

We are not social democrats trying to cut deals with the banks to ease the foreclosure epidemic. Our program is that everyone has a right to housing. There must be a moratorium on foreclosures and evictions to keep people in their homes and stop the destruction of our communities by the racist, predatory banks. People should be making reasonable payments based on their ability to pay, not on fraudulent and usurious loans by the financial robbers. The billions being given to the mortgage companies to bail out their failing loans should be used instead to train youth as plumbers and electricians and carpenters, in a city like Detroit, to repair the 18 percent of homes that are vacant due to foreclosures and to turn these houses over to the homeless.

When a hospital or health clinic threatens a shutdown, we are for the community occupying the facility and keeping it open alongside doctors and nurses committed to serving the people. That’s what the Young Lords did in the 1960s. That’s how universal health care will start becoming a reality—not through some incoherent plan that recognizes rights for insurance companies that are nothing but parasites.

We know where the funds are for a public works program. Just take the $700 billion from the bailout to the banks, and dismantle the Pentagon for another $700 billion. The problem with Iraq wasn’t that it was the wrong war. Every imperialist war is the wrong war because capitalism and imperialism are the wrong system.

It is precisely because we are communists dedicated to the overthrow of the capitalist system that we are in a unique position to craft the kind of programmatic demands to meet this crisis and challenge the fundamental capitalist property rights at the core of this system.

It was one year ago, at last year’s party conference, that we first raised the idea of a campaign for a moratorium on foreclosures. I am proud to say that over the past year, based on advancing that program and sticking with it, we were able to build a mass organization and coalition in Detroit that has gained recognition as the leading force in fighting the foreclosure epidemic and the entire economic crisis in our hard-hit city.
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