Background on the Foreclosure Crisis In Nevada County
By the Foreclosure Defense Group of Occupy Nevada County
The Foreclosure Defense Group of Occupy Nevada County is made up of community members concerned about the high rate of foreclosures in our community. We are learning how to search county records for fraudulent assignments, and our research has revealed many improprieties by banks and loan servicers. We have witnessed many foreclosure auctions held on the steps of the Nevada City Courthouse, and have demonstrated against the seizure of homes by the very banks that caused the foreclosure crisis in the first place. We started a Foreclosure and Eviction Support and Empowerment Group, which meets Wednesdays at the Nevada City United Methodist Church. Community members who are going through foreclosure are now searching us out and we are trying to support them.
According to Realty Trac, over 5,000 homes in Nevada County have been foreclosed since 2008. There are currently 877 Nevada County homes listed for foreclosure.
In addition to the tragedy of personal loss, the foreclosure crisis has devastated Nevada County as a whole. Foreclosures provoke further decline in home prices, resulting in dramatic decreases in property tax revenue and drastic cuts to county jobs and services. Foreclosed homes cause neighborhood blight, crime, and public safety issues.
Estimated costs of the foreclosure crisis to Nevada County, including loss in home values, property tax loss, costs to local government, along with the methods of calculating these costs, can be found at the following website: http://dig.abclocal.go.com/kgo/PDF/Home-Wreckers-Report.pdf
Over the last two years incontrovertible evidence has emerged around the country that the loan servicers of the five largest banks have filed and recorded millions of fraudulent documents to illegally foreclose on homeowners. In February, 2012, San Francisco County Recorder Phil Ting announced that an audit of foreclosure documents in his office revealed that 99% of the sampled foreclosures had “suspicious activities” and 84% had “at least one clear violation of the law.” Most of these foreclosures contained more than one class of violation and some had up to six. In almost all cases these violations were related to chain of assignment issues, largely resulting from mortgage securitization, and the inability of foreclosure servicing agencies to demonstrate legal standing to foreclose.
In Nevada County the percentage of foreclosures has been much higher than in San Francisco County (5000 foreclosures in much-smaller Nevada County compared to 12,000 in San Francisco County). A thorough audit by the Nevada County Clerk-Recorder’s office would almost certainly reveal a similar proportion of suspicious activities and violations of law.
One problem for California counties, including Nevada County, is that banks are using the MERS (Mortgage Electronic Registry System) to transfer and assign mortgages. MERS is like a opaque “black box” that allows banks to obscure the chain of title on individual properties and avoid County recording fees. This has deprived the Nevada County Clerk Recorder’s Office of needed funds and has resulted in a significant reduction of staff. The system makes it very difficult for homeowners (and others) to track the various assignments and to uncover who is the legitimate owner of the loan (to whom they should be making payments). Audits of the MERS system have revealed widespread fraud. While banks require home buyers to be transparent, fill out mounds of paperwork, and pay recording fees, MERS enables the banks themselves to avoid doing so.
In short, there is little or no oversight of the foreclosure process, particularly in non-judicial foreclosure states like California. Our counties and homeowners are suffering the consequences.
There needs to be a state-wide and nation-wide solution to this problem. California Attorney General Kamala Harris is calling for a “Homeowner Bill of Rights,” comprised of a series of bills designed to protect homeowners from abusive mortgage practices and to help devastated communities recover from the foreclosure crisis. Among the other provisions in Harris’ bills are requirements that lenders prove to homeowners that they have a right to foreclose on a property before doing so1. The legislation she supports is currently stalled in committee due to heavy lobbying by banking interests2.
Our group has formed an Eviction Response Team, to support foreclosed families or tenants of foreclosed homes on an emergency basis if their rights are not being observed or if they are being harassed. (Yes, it happens here.)
We have formed a Fraud Investigation Team, to explore the extent of fraudulent assignments and other mortgage-related documents in the County Clerk-Recorder’s office.
We have also been exploring the legality of the foreclosure auctions taking place on the steps of the County Courthouse. Their courthouse location implies that they are lawful and sanctioned by the County. These auctioneers will not even give their names. According to the California Secretary of State, some of the foreclosing companies they represent are not licensed to do business in the State of California.
“Let Us Have Our Day In Court” (Local Rally at Wells Fargo Bank)
Press Release from Foreclosure Defense Group of Occupy Nevada County
“Let Us Have Our Day In Court”
Rally at Wells Fargo Bank
Wednesday, May 9, 4 pm
The Foreclosure Defense Group of Occupy Nevada County will hold a rally at Wells Fargo Bank on Wednesday, May 9, to support a local family in their struggle to resist eviction until their federal case against Wells Fargo and US Bank for unlawful foreclosure is resolved.
Billi Vogan and Lee Traupel invested $100,000 to buy their Penn Valley home in 2004. They paid their conventional mortgage for 6 years, but in 2010 their income was reduced and they applied for a loan modification. Thus began a long and convoluted process that resulted in their home being foreclosed last November. The couple currently has a case pending in Federal Court against US Bank and Wells Fargo charging that this was an unlawful foreclosure. Wells Fargo lawyers sought to have the case dismissed, but the federal judge declined to dismiss and found ten of the causes against Wells Fargo to be valid.
In spite of this precedent-setting case, the couple is facing an Unlawful Detainer hearing before a local judge on May 14, after which they and their son could be evicted. Earth Justice Ministries, a local nonprofit, is working with the Occupy group to organize an Interfaith prayer vigil in front of the courthouse at 2 pm. on that day.
The Foreclosure Defense Group is calling on Wells Fargo to negotiate directly with Billi and Lee. They are asking Wells Fargo and US Bank to postpone their eviction and allow them to pay rent at fair-market-value until the federal case is decided. An online petition supporting the family can be signed here:
A video interview with Billi Vogan explaining their situation is below.
The rally will be held at the Wells Fargo branch at 707 Sutton Way on Wednesday, May 9, at 4 p.m. There will be signs, visual displays, speeches, and songs related to the foreclosure crisis. For more information, contact noforeclosures@earth-justice.org or call 265-5976.
Background information is attached. “Our Story” is by Billi Vogan. “Background on NC Foreclosures” is by Foreclosure Defense Group of Occupy Nevada County. This Press Release is also attached.
For more information:
Billi Vogan: 432-8764
Peter Galbraith [petergalb@gmail.com] 288-3600 (Foreclosure Defense Group)
Sharon Delgado [revsher@earth-justice.org] 265-5976
Billi Vogan and Lee Traupel’s Story
Penn Valley, California
We bought our home in 2004, saved for years and had $100,000 to invest in our first home. We got a conventional loan with Wells Fargo (WF) and never missed a payment for 6 years. In 2010 my husband’s consulting business slowed so much that we knew we needed to try and reduce our mortgage payments if possible. By this time we couldn’t qualify for a refinance and had heard that banks were modifying home loans for people in our situation.
When we spoke with WF loan consultants they said that as long as we were current with our mortgage there is no way we would be considered for a loan mod. So, feeling like we were jumping off a cliff, we decided to default on our loan. We gathered the many documents WF requested and faxed in our app. for a loan mod. Six months later, we were still faxing, sending hundreds of docs and being told that, “We don’t understand why you are being denied a loan mod., your numbers should make you qualified.”
Around this time we heard about a WF loan modification workshop in Sacramento. Being publicized as an opportunity to meet face to face with loan specialists, we jumped on the chance and made an appt. We had all of our documents to substantiate our income and our explanation of hardship, thus allowing us to prove we should be able to get the loan mod we needed. After about 10 minutes the loan specialist said, “I have some bad news, your loan is an MBS, and these “investors” don’t participate in loan modifications, I’m sorry, there is not much we can do.” Why weren’t we told this at the beginning of our application process? Perhaps we would have never gotten so far behind in our payments had we known a loan mod was out of the question for us.
Because of our situation, I immediately knew what it meant to have an MBS loan. The Massachusetts Supreme Court had ruled in favor of a homeowner in January of 2011, US Bank National Trustee v. Ibanez, that the securitization of the loan that took place made it impossible to know who actually had clear title to the house in question. At that point I did more research and discovered our loan was the exact same as the parties for the Massachusetts now famous case, US Bank National and Wells Fargo. At this point we realized that our mortgage had been turned into a stock and it was unclear to us who we were actually supposed to be making mortgage payments to. There is a reason for laws regarding the transfer of title to protect homeowners. The banks in their rush to make money completely trampled the proper procedures for our real estate laws. Time to hire an attorney.
We found an attorney in LA, Deborah Gutierrez, of Proper Law, that specializes in such cases and is very passionate about the wrong doing that these banks have done, not just to homeowners, but their practices have greatly contributed to our whole financial meltdown. There are so many issues that have been discovered about the unscrupulous practices of banks to cover up their misdeeds. Robo signers, anyone? Robo signers are individuals that have no qualifications or correct documentation to sign what they attest to be signing. The reason for this is the banks don’t have the proper paperwork to foreclose, so they illegally falsify documents in order to foreclose on people. Our state is a non-judicial state, so the only way to defend your self from wrongful foreclosure is to file a case with the state or federal courts. We filed a lawsuit in March of 2011 in our Superior Court here in Nevada County and also asked for a Temporary Restraining Order to postpone the sale of our house, but the Nevada County Court allowed the foreclosure to go through without reviewing our lawsuit. US Bank National bought our home on the courthouse steps in July of 2011. Our attorney decided we had reason to file our suit in Federal Court, so we decided to file our lawsuit there in August of 2011.
We are now in Federal Court. Our case was heard in November of 2011 and the Federal Court judge ruled that there was cause to move the case forward, he did not dismiss our case as the WF and US Bank National attorneys assumed he would do. The legal council for WF and US Bank were quite surprised. Part of what our case is about is that there are laws and regulations governed by the NY Stock Exchange. Banks did not abide by those laws that govern these investments as stated in the Pooling and Servicing agreements that these MBS are in. I am told by Deborah Gutierrez that our case has made it into cases all over the country, so we are setting precedent in this case.
We are now facing an eviction hearing very soon here in our Superior Court. My husband and I are trying to defend ourselves, as our funds are exhausted and our attorney is only working on our Federal Case. It is very challenging to represent oneself in court without an attorney, and the banks are well aware of this. Most people in these financially challenging times don’t have money to hire an attorney. I am told these cases are “rubber stamped” and judges don’t usually rule in favor of the defendants. I am convinced that WF and Us Bank illegally foreclosed on our home because they did not follow the law when it came to assigning the deeds, as per their pooling and servicing agreement, and making sure the chain of title was correctly recorded among other illegal practices. What really is aggravating about all this is the way the banks want to make sure we have all our paperwork in perfect order during the loan mod process. In court we were recently fined to pay US Bank attorney fees regarding the eviction case, because we mistakenly did not send the attorneys all the documents they wanted for our upcoming hearing.
The other part of this that is distressing is that these issues are complex and I don’t think the courts understand that many of these cases are about much more than deadbeat home owners who don’t make their payments. There are many cases throughout our country in which homeowners are having success, but it is an uphill battle.
I would not recommend this battle to anyone, but I will never regret standing up for what I think is right. We feel that we will be forced out of our home shortly, but I know we will be ok. I have learned so much along the way and when I really think about our situation I would still rather be us than them.
Further Resources:
- “Background on Foreclosure Crisis in Nevada County“
- “Judge Rules Wells Fargo Engages in “Reprehensible,” Systemic Accounting Abuses on Mortgages, Hits with $3.1 Million Punitive Damages for One Loan“
- “Monique White May Win Back Foreclosed Home With Occupy’s Help”
- “Look Who’s Pushing Homeowners Off the Foreclosure Cliff”
Esquire Magazine: Writer wanted to help convert class war into generational war. No skills required; pays top dollar
Reprinted with permission from the Center for Economic and Policy Research (March 30, 2012)
By Dean Baker
This could well have been the want-ad Esquire used to attract a writer for its story titled, “War Against Youth.” This lengthy piece is the best compendium of warped logic and misplaced facts on this topic since the Peter Peterson financed film, IOUSA.
The whole story is given away in the first paragraph:
“In 1984, American breadwinners who were sixty-five and over made ten times as much as those under thirty-five. The year Obama took office, older Americans made almost forty-seven times as much as the younger generation.”
That sounds really awful. Thankfully it is not true, as readers could find by looking at the chart that accompanies the article. This is a ratio of wealth not income.
This is a huge difference. Wealth adds up a household’s total assets. This means the value of their home, their 401(k) and other savings, their checking account and car. The calculation the n subtracts liabilities: mortgage debt, car loans, credit card debt, and student loans. This is very different from income, which for most people means their wages and for older people their Social Security.
If the writer, the editor, the fact checker or anyone at Esquire had a clue, they would have caught this mistaken first paragraph and killed the piece. As their chart shows, the median net worth for households over age 65 was $170,494. That merits repeating a couple more times. The median net worth for households over age 65 was $170,494. The median net worth for households over age 65 was $170,494.
Again, net worth refers to total assets minus liabilities. This means that if we add up the home equity of the typical household over age 65, their 401(k) and all other savings, the value of their car and any other possessions they might have, it comes to just over $170,000. This is a bit more than the price of the median home.
In other words, if the typical household over age 65 took all of their wealth, they would have enough money to pay off their mortgage. After that they would be entirely dependent for their living expenses on their Social Security benefit, which averages a bit more than $1,200 a month.
To take another comparison, the lifetime accumulation of wealth of the typical household over age 65 would be approximately equal to what the CEO of Goldman Sachs earns in two days. A top hedge fund manager, who makes $3-4 billion a year, can pocket this much money in ten minutes. Yet, Esquire tells us that it is the high living retirees getting by on their $1,200 a month Social Security checks who are responsible for the questionable future facing the young.
Even this comparison of net worth is misleading. It shows that the net worth of households over age 65 increased from $120,000 in 1983 to $170,000 in 2009. However these numbers do not include pension wealth. A household over age 65 in 1983 was far more likely to be receiving money from a defined benefit pension than a household today. The loss of pension wealth would offset much of this modest gain in wealth over the last quarter century.
Also, using the ratio of the wealth of households over age 65 to the wealth of households under age 35 is just a foolish exercise. Households under age 35 never had much wealth. Their 1983 median wealth of $11,500 was not going to carry them far in life. The fact that it fell to $3,660 is not of great consequence compared to their career opportunities.
This would be like saying that homeless people are in trouble because the median amount amount of money they had in their pockets fell from $1.20 to 60 cents. Just as the main factor that will determine the well-being of homeless people is not the amount of change in their pocket, the main factor that will determine the well-being of the young is not their wealth.
A 25-year-old Harvard MBA with $150,000 in student loan debt will do just fine. The relevant issue for young people is their career prospects. These will not be very good if the 1 percent continue to get most of the gains from economic growth.
But the first paragraph is just the beginning. This piece is a true cornucopia of bad logic and misinformation. It tells readers that:
“The biggest boondoggle of all is Social Security. The management of entitlement programs, already weighted heavily in favor of the older population, has a very specific terminal point that coincides neatly with the Boomers’ deaths. The 2011 report by the Social Security trustees estimates that, under its current administration, the fund will run out in 2036, so there’s just enough to get the oldest Boomers to age ninety.”
Social Security is projected to first face a shortfall in 2036, according to the Trustees projections (2038 according to the Congressional Budget Office), but it does not “run out in 2036,” even in the absurdly unlikely event that Congress never does anything to address the shortfall. (The share of beneficiaries in the voting population will be about 50 percent larger in 2036 than it is today. Any bets that Congress won’t pay full scheduled benefits?)
There will still be plenty of tax revenue being paid in 2037. This will be sufficient to pay about 80 percent of scheduled benefits. With benefits projected to be close to 40 percent higher (after adjusting for increases in the cost of living) in 2037, the payable benefit in 2037 would still be higher than what the typical retiree gets today.
Perhaps even more importantly, today’s beneficiaries paid for their benefits. The return on their payroll taxes is reasonable (@1-3 percent, after adjusting for inflation), but hardly excessive. This is why it is absurd that Esquire tells us that:
“According to a 2009 Brookings Institution study, ‘The United States spends 2.4 times as much on the elderly as on children, measured on a per capita basis, with the ratio rising to 7 to 1 if looking just at the federal budget.’”
Yes, using the Brookings Institution methodology the United States spends about 1000 times as much on billionaires as on children, measured on a per capita basis.
Figure it out yet? Billionaires own government bonds. The government pays them interest on these bonds. A billionaire like investment banker Peter Peterson might well get tens of millions of dollars a year in interest on these bonds. It’s true that Peter Peterson paid for these bonds, but the Brookings Institution and Esquire says this does not matter.
The next golden nugget of ignorance comes in the very next paragraph:
“But the government’s future ability to pay is decreasing rapidly precisely because the Boomers splurged so heavily during the Bush and Clinton years. Public debt per person in the United States currently stands at $33,777. George W. Bush inherited a public-debt-to-GDP ratio of 32.5 percent and brought it up to 54.1 percent during a period of economic growth.”
If the measure of splurging is the public debt, then Esquire is on the wrong planet here. The gross debt of the federal government was equal to 64.1 percent of GDP at the end of 1992. It had fallen to 57.3 percent of GDP by the end of 2000. How could they get something so simple so wrong?
Of course the debt is not a measure of intergenerational equity. At some point everyone alive today will be dead. The bonds that they hold will end up in the hands of the next generation. This means that the debt will be paid from some members of younger generations to other members of younger generations. There can be an issue of intra-generational equity, for example if Bill Gates’ children and grandchildren own all the debt, but there is no issue of inter-generational equity here.
What matters for inter-generational equity is the overall state of the economy and the physical and natural infrastructure that we hand down to future generations. By the first measure, we are doing quite well. Productivity is increasing at the rate of close to 2.5 percent annually. This means that after 30 years, the average worker will be producing more than twice as much in an hour of work as they do today. If this gain is relatively evenly shared (i.e. the distribution of income gets no worse), then the typical worker in 2041 will enjoy a standard of living that is close to twice as high as what workers today enjoy.
It’s true that if we ignore global warming then this may not be the case. Similarly, if the U.S. manages to antagonize the rest of the world with its foreign policy, people here may not be able to enjoy the fruits of productivity growth. But this will have nothing to do with the Social Security and Medicare benefits received by baby boomers.
There is way too much other nonsense to address in this post, but one item is too delicious to pass up. There is a box with the heading:
“How to disenfranchise a generation.”
The box then discusses the measures proposed by Republicans in many states to impose more restrictions on voting, most importantly requiring a government issued photo ID card to vote. Incredibly, Esquire tells readers that this rule is aimed at young people, as though they expect these measures to keep the children of Wall Street traders and Fortune 500 CEOs from having a vote.
In fact, these laws are quite obviously targeted at minorities of any age. The Republicans are not trying to keep their kids from voting. There are trying to keep the kids of African Americans and Hispanics from voting, as well as parents and grandparents. Does Esquire really not know this?
This article is a shameful effort to transform the realities of class war, where the wealthy have been rigging the rules to secure themselves most of the gains from economic growth, into a generational issue. The combination of ignorance and dishonesty in this piece is truly extraordinary.
Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNN, CNBC, and National Public Radio. He writes a weekly column for the Guardian Unlimited (UK), the Huffington Post, TruthOut, and his blog, Beat the Press, features commentary on economic reporting. His analyses have appeared in many major publications, including the Atlantic Monthly, the Washington Post, the London Financial Times, and the New York Daily News. He received his Ph.D in economics from the University of Michigan.
Images from the Great Depression: Seems Like Just Yesterday
Reprinted from Common Dreams (March 25, 2012) by permission of author.
By Paul Buchheit
In March of 1936 U.S. photographer Dorothea Lange, on her way to San Francisco after searching the countryside for Depression-era photos, passed a sign saying “Pea Picker’s Camp” in Nipomo, California. Thinking little of it, she drove on. But a few miles down the road she changed her mind and turned back. Her first encounter in the camp was with a widowed 32-year-old Oklahoma mother of seven who had driven to California looking for work. Now, after a storm had wiped out the crop, and after she had sold the tires from her car to buy food, she sat under a makeshift tent with her children, unprepared for the days ahead of them. She looked a lot older than 32.
Days later a San Francisco News article reported: “Ragged, Hungry, Broke, Harvest Workers Live in Squalor.” Shocked Californians immediately began sending food, and the family of “migrant mother” Florence Thompson found refuge in a government shelter.
Millions of Americans today are like the woman in that 76-year-old black and white photo: desperate and determined but dignified individuals who want a job rather than a handout. But the present keeps fading into the past. The National Poverty Center recently reported that extreme poverty in America has doubled since the 1990s. 1.5 million people live on less than two dollars a day. Many more Americans — up to half the population — are considered “low income” by the Census Bureau.
Just like in the Depression years, people are losing their homes, or they’re losing the wealth that was in their homes. Foreclosures now account for almost a quarter of all residential sales. American families owe $700 billion more than their homes are worth.
Just like in the Depression years, people are without work, or they can’t find decent jobs. Unemployment figures don’t show the millions of underemployed and the millions who have stopped looking for work. Incredibly, wages over the last decade have increased more slowly than during the ten years of the Great Depression.
Other comparisons between then and now are equally striking. Inequality has returned to the modern-day high set in 1928. The middle class is rapidly losing its consuming power. Congress is making the same mistake that led to the “Roosevelt Recession” of 1937, focusing on budget-cutting rather than job growth.
Conservatives insist that the poor can’t become dependent on government. That’s fine, if they have job opportunities. Education is said to be the key. But state education cuts for 2012 are $12.7 billion, federal education cuts of 8% are anticipated beginning in 2013, and the total amount of student loans has reached $1 trillion.
The rational solutions include ending the Bush tax cuts, implementing the Buffett Rule, and imposing a small financial transaction tax.
Then wage a war, as we did in the 1940s, but this time against oil, by building wind turbines and solar panels and a smart grid for alternative energy transmission. That would create millions of jobs, and take us far away from a time we’d like to forget.
And it would put America back in the hands of middle-class workers instead of financial executives whose only goal is to get rich. It might even create a new class of folk hero. For a while in the 1930s “Pretty Boy” Floyd was a hero for taking money from the bankers responsible for foreclosures. He’d still be popular if he were around today.
Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.
True Unemployment Rate at Depression Level (19.9%) and Rising
This article by Daniel Amerman (rated as a “must read” by Yves Smith in her Naked Capitalism blog today) examines in excruciating detail the government’s manipulation of unemployment statistics to make the rate look lower than it actually is, to make it appear to be falling when it is actually rising:
When we look at broad measures of jobs and population, then the beginning of 2012 was one of the worst months in US history, with a total of 2.3 million people losing jobs or leaving the workforce in a single month. Yet, the official unemployment rate showed a decline from 8.5% to 8.3% in January – and was such cheering news that it set off a stock rally.
How can there be such a stark contrast between the cheerful surface and an underlying reality that is getting worse?
The true unemployment picture is hidden by essentially splitting jobless Americans up and putting them inside one of three different “boxes”: the official unemployment box, the full unemployment box, and the most obscure box, the workforce participation rate box.
… a detailed look at the government’s own data base shows that about 9 million people without jobs have been removed from the labor force simply by the government defining them as not being in the labor force anymore. Indeed – effectively all of the decreases in unemployment rate percentages since 2009 have come not from new jobs, but through reducing the workforce participation rate so that millions of jobless people are removed from the labor force by definition.
When we pierce through this statistical smoke and mirrors and factor back in those 9 million jobless whom the government has defined out of existence, then the true unemployment rate is 19.9% and rising, and not 8.3% and falling.
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Public Sector Banks: From Black Sheep to Global Leaders
By Ellen Brown (Reprinted from Centre for Research on Globalization with permission of the author)
Once the black sheep of high finance, government owned banks can reassure depositors about the safety of their savings and can help maintain a focus on productive investment in a world in which effective financial regulation remains more of an aspiration than a reality. Centre for Economic Policy Research, VoxEU.org.
Public sector banking is a concept that is relatively unknown in the United States. Only one state—North Dakota—owns its own bank. North Dakota is also the only state to escape the credit crisis of 2008, sporting a budget surplus every year since; but skeptics write this off to coincidence or other factors. The common perception is that government bureaucrats are bad businessmen. To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield.
When we remove our myopic U.S. blinders, it turns out that globally, not only are publicly-owned banks quite common but that countries with strong public banking sectors generally have strong, stable economies. According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40 percent.[i] The BRIC countries—Brazil, Russia, India, and China—contain nearly three billion of the world’s seven billion people, or 40% of the global population. The BRICs all make heavy use of public sector banks, which compose about 75% of the banks in India, 69% or more in China, 45% in Brazil, and 60% in Russia.
The BRICs have been the main locus of world economic growth in the last decade. China Daily reports, “Between 2000 and 2010, BRIC’s GDP grew by an incredible 92.7 percent, compared to a global GDP growth of just 32 percent, with industrialized economies having a very modest 15.5 percent.”
All the leading banks in the BRIC half of the globe are state-owned. In fact the largest banks globally are state-owned, including:
- The two largest banks by market capitalization (ICBC and China Construction Bank)
- The largest bank by deposits (Japan Post Bank)
- The largest bank by assets (Royal Bank of Scotland, now nationalized)
- The world’s largest development bank (BNDES in Brazil).
A May 2010 article in The Economist noted that the strong and stable publicly-owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the rest of the world in the last few years. According to Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil:
Government banks provided counter cyclical credit and policy options to counter the effects of the recent financial crisis, while realizing competitive advantage over private and foreign banks. Greater client confidence and official deposits reinforced liability base and lending capacity. The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.
Surprising Findings
In a 2010 research paper summarized on VoxEU.org, economists Svetlana Andrianova, et al., wrote that the post-2008 nationalization of a number of very large banks, including the Royal Bank of Scotland, “offers an opportune moment to reduce the political power of bankers and to carry out much needed financial reforms.” But “there are concerns that governments may be unable to run nationalised banks efficiently.”
Not to worry, say the authors:
Follow-on research we have carried out (Andrianova et al, 2009) . . . shows that government ownership of banks has, if anything, been robustly associated with higher long run growth rates.
Using data from a large number of countries for 1995-2007, we find that, other things equal, countries with high degrees of government ownership of banking have grown faster than countries with little government ownership of banks. We show that this finding is robust to a battery of econometric tests.
Expanding on this theme in their research paper, the authors write:
While many countries in continental Europe, including Germany and France, have had a fair amount of experience with government-owned banks, the UK and the USA have found themselves in unfamiliar territory. It is therefore perhaps not surprising that there is deeply ingrained hostility in these countries towards the notion that governments can run banks effectively. . . . Hostility towards government-owned banks reflects the hypothesis . . . that these banks are established by politicians who use them to shore up their power by instructing them to lend to political supporters and government-owned enterprises. In return, politicians receive votes and other favours. This hypothesis also postulates that politically motivated banks make bad lending decisions, resulting in non-performing loans, financial fragility and slower growth.
But that is not what the data of these researchers showed:
[W]e have found that . . . countries with government-owned banks have, on average, grown faster than countries with no or little government ownership of banks. . . . This is, of course, a surprising result, especially in light of the widespread belief—typically supported by anecdotal evidence—that ‘… bureaucrats are generally bad bankers’ . . . .
What accounts for their surprising findings? The authors provide a novel explanation:
We suggest that politicians may actually prefer banks not to be in the public sector. . . . Conditions of weak corporate governance in banks provide fertile ground for quick enrichment for both bankers and politicians – at the expense ultimately of the taxpayer. In such circumstances politicians can offer bankers a system of weak regulation in exchange for party political contributions, positions on the boards of banks or lucrative consultancies. Activities that are more likely to provide both sides with quick returns are the more speculative ones, especially if they are sufficiently opaque as not to be well understood by the shareholders such as complex derivatives trading.
Government owned banks, on the other hand, have less freedom to engage in speculative strategies that result in quick enrichment for bank insiders and politicians. Moreover, politicians tend to be held accountable for wrongdoings or bad management in the public sector but are typically only indirectly blamed, if at all, for the misdemeanours of private banks. It is the shareholders who are expected to prevent these but lack of transparency and weak governance stops them from doing so in practice. On the other hand, when it comes to banks that are in the public sector, democratic accountability of politicians is more likely to discourage them from engaging in speculation. In such banks, top managers are more likely to be compelled to focus on the more mundane job of financing real businesses and economic growth.
The BRICs as a Global Power
Focusing on the financing of real businesses and economic growth seems to be the secret of the BRICs, which are leading the world in economic development today. But the BRIC phenomenon is more than just a growth trend identified by an economist. It is now an international organization, an alliance of countries representing the common interests and goals of its members. The first BRIC meeting, held in 2008, was called a triumph for former Russian President Vladimir Putin’s policy of promoting multilateral arrangements that would challenge the United States’ concept of a unipolar world.
The BRIC countries had their first official summit and became a formal organization in Yekaterinburg, Russia, in 2009. They met in Brazil in 2010 and in China in 2011, and they will meet in India in 2012. In 2010, at China’s invitation, South Africa joined the group, making it “BRICS” and adding a strategic presence on the African continent.
The BRICS seek more voice in the United Nations, the IMF, and the World Bank. They are even discussing their own multicultural bank to fund projects within their own nations, in direct competition with the IMF. They oppose the dollar as global reserve currency. After the Yekaterinburg summit, theycalled for a new global reserve currency, one that was diversified, stable and predictable; and they have the clout to get it. According to Liam Halligan, writing in The U.K. Telegraph:
The BRICs account for . . . around three-quarters of total currency reserves. They have few serious fiscal issues and all are net external creditors.
Western financial interests have long fought to maintain the dollar as global reserve currency, but they are losing that battle, despite economic and military coercion. Russia, China and India are now nuclear powers. The BRICS will have to be negotiated with, and the first step to forming a working relationship is to understand how their economies work.
Written for the Public Banking in America Conference April 27-28th, Philadelphia.
Ellen Brown is an attorney and president of the Public Banking Institute,http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com
America’s Credit and Housing Crisis: New State Bank Bills
By Ellen Brown (Reprinted from the Centre for Research on Globalization with the permission of the author)
Seventeen states have now introduced bills for state-owned banks, and others are in the works. Hawaii’s innovative state bank bill addresses the foreclosure mess. County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties. Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.
The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a major disappointment before it has even been signed, sealed and court approved. Critics maintain that the bankers responsible for the housing crisis and the jobs crisis will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.
We may not be able to beat the banks, but we don’t have to play their game. We can take our marbles and go home. The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues. States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies. The states receive a modest interest, and Wall Street lends the money back at much higher interest.
Rhode Island is a case in point. In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hencewrote in ecoRI News on January 26th:
According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.
Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .
Hence asks:
Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?
Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”
2012 Additions to the Public Bank Movement
Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system). With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states. For states and text of bills, see here.
Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank. The most recent,California’s new bill, was introduced on Friday, February 24th.
All of these bills point to the Bank of North Dakota as their model. Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:
One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.
Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.
Publicly-owned Banks and the Housing Crisis
A novel approach is taken in the new Hawaii bill: it proposes a program to deal with the housing crisis and the widespread problem of breaks in the chain of title due to robo-signing, faulty assignments, and MERS. (For more on this problem, see here.) According to a February 10th report on the bill from the Hawaii House Committees on Economic Revitalization and Business & Housing:
The purpose of this measure is to establish the bank of the State of Hawaii in order to develop a program to acquire residential property in situations where the mortgagor is an owner-occupant who has defaulted on a mortgage or been denied a mortgage loan modification and the mortgagee is a securitized trust that cannot adequately demonstrate that it is a holder in due course.
The bill provides that in cases of foreclosure in which the mortgagee cannot prove its right to foreclose or to collect on the mortgage, foreclosure shall be stayed and the bank of the State of Hawaii may offer to buy the property from the owner-occupant for a sum not exceeding 75% of the principal balance due on the mortgage loan. The bank of the State of Hawaii can then rent or sell the property back to the owner-occupant at a fair price on reasonable terms.
Arizona Senate Bill 1451, which just passed the Senate Banking Committee 6 to 0, would do something similar for homeowners who are current on their payments but whose mortgages are underwater (exceeding the property’s current fair market value). Martin Andelman calls the bill a “revolutionary approach to revitalizing the state’s increasingly water-logged housing market, which has left over 500,000 of Arizona’s homeowners in a hopelessly immobile state.”
The bill would establish an Arizona Housing Finance Reform Authority to refinance the mortgages of Arizona homeowners who owe more than their homes are currently worth. The existing mortgage would be replaced with a new mortgage from AHFRA in an amount up to 125% of the home’s current fair market value. The existing lender would get paid 101% of the home’s fair market value, and would get a non-interest-bearing note called a “loss recapture certificate” covering a portion of any underwater amounts, to be paid over time. The capital to refinance the mortgages would come from floating revenue bonds, and payment on the bonds would come solely from monies paid by the homeowner-borrowers. An Arizona Home Insurance Fund would create a cash reserve of up to 20 percent of the bond and would be used to insure against losses. The bill would thus cost the state nothing.
Critics of the Arizona bill maintain that it shifts losses from collapsed property values onto banks and investors, violating the law of contracts; and critics of the Hawaii bill maintain that the state bank could wind up having paid more than market value for a slew of underwater homes. An option that would avoid both of these objections is one suggested by Michael Sauvante of the Commonwealth Group, discussed earlier here: the state or county could exercise its right of eminent domain on blighted, foreclosed and abandoned properties. It could offer to pay fair market value to anyone who could prove title (something that with today’s defective title records normally can’t be done), then dispose of the property through a publicly-owned land bank as equity and fairness dictates. If a bank or trust could prove title, the claimant would get fair market value, which would be no less than it would have gotten at an auction; and if it could not prove title, it legally would have no claim to the property. Investors who could prove actual monetary damages would still have an unsecured claim in equity against the mortgagors for any sums owed.
Rhode Island Next?
As the housing crisis lingers on with little sign of relief from the Feds, innovative state and local solutions like these are gaining adherents in other states; and one of them is Rhode Island, which is in serious need of relief. According to The Pew Center on the States, “The country’s smallest state . . . was one of the first states to fall into the recession because of the housing crisis and may be one of the last to emerge.”
Rhode Islanders are proud of having been first in a number of more positive achievements, including being the first of the 13 original colonies to declare independence from British rule. A state bank presentation was made to the president of the Rhode Island Senate and other key leaders earlier this month that was reportedly well received. Proponents have ambitions of making Rhode Island the first state in this century to move its money out of Wall Street into its own state bank, one owned and operated by the people for the people.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com
Matt Taibbi: “Banks Sold Oregano as High Grade Weed”
In this 5-minute video, journalist Matt Taibbi talks to Occupy Wall Street and explains how the mortgage-backed security scam works.
Our Co-Owned Future
From health care to jobs to community development, why the future will be cooperative.
By Gar Alperovitz (Originally published in Yes! Magazine, March 2, 2012)
This is the second post in a series of three. Click here to read the first.
The explosive force of Occupy Wall Street—and more than a thousand other local efforts—offers hope that a movement committed to long-term change might one day achieve a fundamental transformation of the American political-economic system. Quietly, a different kind of progressive change is emerging, one that involves a transformation in institutional structures and power, a process one could call “evolutionary reconstruction.”
The first post in this series reviewed emerging possibilities for change in the financial sector both nationally, and state-by-state. This part takes up health care possibilities, along with the democratization of ownership now quietly going on in communities throughout the nation.
That a long era of social and economic austerity and failing reform might paradoxically open the way to more populist or radical institutional change—including various forms of public ownership—is also suggested by emerging developments in health care. Here the next stage of change is already under way. At first, it is likely to be harmful. Republican efforts to cut back the mostly unrealized benefits of the Affordable Care Act, passed in 2010, provide one example of this. The first stages, however, are not likely to be the last. Polls show overwhelming distrust of and deep hostility toward insurance companies. We can also expect public outrage to be fueled by stories like that of fifty-nine-year-old James Verone who attempted to rob a bank in Gastonia, North Carolina last year—but only, he made clear, for one dollar. The reason: unemployed and without health insurance, Verone simply saw no way other than going to jail to get health care for a growth on his chest, foot difficulties, and back problems.
Cost pressures are building in ways that will also continue to undermine corporations facing global competitors, forcing them to seek new solutions. A report from the federal Centers for Medicare and Medicaid Services (“National Health Expenditure Projections, 2009–2019”) projects health care costs to rise from the 2010 level of 17.5 percent of GDP to 19.6 percent in 2019. It has long been clear that the central question is to what extent, and at what pace, underlying cost pressures ultimately force development of some form of single-payer system—the only serious way to deal with the underlying problem.
A new national solution is ultimately likely to come either in response to a burst of pain-driven public outrage or, more slowly, through a state-by-state build-up to a national system. Massachusetts, of course, already has a near universal plan, with 99.8 percent of children covered and 98.1 percent of adults. In Hawaii, health coverage (provided mostly by nonprofit insurers) reaches 91.8 percent of adults in large part because of a 1970s law mandating low cost insurance for anyone working twenty hours or more a week. In Vermont, Governor Peter Shumlin signed legislation in May 2011 creating “Green Mountain Care,” a broad effort that would ultimately allow state residents to move into a publicly funded insurance pool—in essence a form of single-payer insurance. Universal coverage, dependent on a federal waiver, would begin in 2017 and possibly as early as 2014. In Connecticut, legislation approved in June 2011 created a “SustiNet” Health Care Cabinet directed to produce a business plan for a nonprofit public health insurance program by 2012, with the goal of offering such a plan beginning in 2014. In California, there is a good chance a universal “Medicare for all” bill may be on the governor’s desk for signature by mid-2012. (Similar legislation passed by both the House and the Senate was vetoed by then-Governor Schwarzenegger in 2006 and 2008.) In all, nearly twenty states will soon consider bills to create one or another form of universal health care.
One can also observe a developing institutional dynamic in the central neighborhoods of some of the nation’s larger cities, places that have consistently suffered high levels of unemployment and underemployment, with poverty commonly above 25 percent. In such neighborhoods, democratizing development has also gone forward, again paradoxically, precisely because traditional policies—in this case involving large expenditures for jobs, housing, and other necessities—have been politically impossible. “Social enterprises” that undertake businesses in order to support specific social missions now increasingly make up what is sometimes called “a fourth sector,” different from the government, business, and nonprofit sectors.
Roughly 4,500 not-for-profit community development corporations are largely devoted to housing development. There are now also more than eleven thousand businesses owned in whole or part by their employees; five million more individuals are involved in these enterprises than are members of private-sector unions. Another 130 million Americans are members of various urban, agricultural, and credit union cooperatives. In many cities, important new “land trust” developments are underway using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing.
The various institutional efforts have also begun to develop innovative strategies that suggest broader possibilities for change. Consider the Evergreen Cooperatives in Cleveland, Ohio, an integrated group of worker-owned companies, supported in part by the purchasing power of large hospitals and universities. The cooperatives include a solar installation company, an industrial scale (and ecologically advanced) laundry, and soon a greenhouse capable of producing more than five million heads of lettuce a year. The Cleveland effort, which is partly modeled on the nearly 100,000 person Mondragón cooperatives in the Basque region of Spain, is on track to create new businesses, year by year, as time goes on. However, its goal is not simply worker ownership, but the democratization of wealth and community-building in the low-income Greater University Circle area of what was once a thriving industrial city. Linked by a nonprofit corporation and a revolving fund, the companies cannot be sold outside the network; they also return 10 percent of profits to help develop additional worker-owned firms in the area. (Full disclosure: The Democracy Collaborative, which I co-founded, has played an important role in helping develop the Cleveland effort. See www.Community-Wealth.org for further information on this and many other local and state efforts.)
Another innovative enterprise is Market Creek Plaza in San Diego. There a comprehensive, community-owned project links individual and collective wealth-building through a $23.5-million commercial and cultural complex anchored by a shopping center. The complex has developed a range of social and economic projects that have resulted in the employment of more than 1,700 people. Its multicultural emphasis on the arts has helped create several venues for common activity among the local Asian, Hispanic, and black communities.
Significantly, these collectively owned businesses are commonly supported by unusual local alliances, including not only progressives, labor unions, and nonprofit and religious leaders but also, in many cases, the backing of local businesses and bankers. The efforts have also attracted surprising political support. In Indiana, for example, Republican State Treasurer Richard Mourdock has established a state-linked deposit program to provide state financing support for employee ownership. At this writing, Ohio Democratic Senator Sherrod Brown has plans to introduce model legislation to support the development of an initial group of Evergreen-style efforts in diverse parts of the country. Environmental concernsare also involved; many of the enterprises are “green” by design, increasingly so as time goes on. Cleveland’s Evergreen laundry, which uses less than a third the amount of water used by comparable commercial firms, is one of the most ecologically advanced in the Midwest. In Washington state, Coastal Community Action (CCA) operates a portfolio of housing, food, health, and employment programs for low-income residents that uses development and ownership of a fourteen million dollar wind turbine to generate income to support its social service programs.
Gar Alperovitz is the Lionel R. Bauman Professor of Political-Economy at the University of Maryland and co-founder of the Democracy Collaborative. He is author, most recently, ofAmerica Beyond Capitalism: Reclaiming Our Wealth, Our Liberty and Our Democracy and, with Lew Daly, of Unjust Deserts: How the Rich Are Taking Our Common Inheritance. He is working on a new book on systemic institutional change. This article is adapted from a piece in Dissent Magazine. Interested?
- The Old Economy’s Not Coming Back. So What’s Next?
We can’t go back, and we really don’t want to. We’re witnessing the birth of something better: a new economy where livelihoods that are just, sustainable, and meaningful will be available to all. - 2012: The Year of the Cooperative
How an old business model is finding new relevance all over the world. - Time Banking: An Idea Whose Time Has Come?
Why let the availability of money determine the range of the possible? Time banks are taking off, in ways you never expected.
This work is licensed under a Creative Commons License
Ayn Rand Worshippers Should Face Facts: Blue States Are the Providers, Red State Are the Parasites
By Sara Robinson (Reprinted from Alternet, February 29, 2012)
There’s only one way to demonstrate who America’s producers and parasites really are. It’s time to go Galt.
Last week, the New York Times published a widely discussed article updating an argument that progressive bloggers noticed a very long time ago. It’s now well-understood that blue states generally export money to the federal government; and red states generally import it.
TPM published a great map showing exactly how this redistribution works:
Progressives believe in the redistribution of wealth, so we’re not usually too upset by this state of affairs. That’s what it means to be one country. E pluribus unum, and all that. We’re happy to help, because we think we’ve got a stake in making sure kids in rural Alabama get educations and seniors in Arizona get healthcare. What’s good for them is good for all of us. We also like to think they’d help us out if our positions were reversed. It’s an investment in making America stronger, and we feel fine about that.
But maybe it’s time to admit that we’re being played for chumps, and that there are people in the rest of the country who are taking way too much advantage of our good nature. After all: it’s now a stone fact that the blue states and cities are the country’s real wealth creators. That’s why we pay more taxes, and are able to send that money to the red states in the first place. We’re working our butts off, being economically productive, going to college, raising good kids, supporting reality-based schools, keeping our marriages together, tending to our busy and diverse cities, and generally Playing By The Rules. And the fates have smiled on us in rough proportion to the degree that we’ve invested in our own common good.
So we’ve got every right to get good and angry about the fact that, by and large, the people who are getting our money are so damned ungrateful — not to mention so ridiculously eager to spend it on stuff we don’t approve of. We didn’t ship them our hard-earned tax dollars to see them squandered on worse-than-useless abstinence-only education, textbooks that teach creationism, crisis-pregnancy misinformation centers, subsidies for GMO crops and oil companies, and so on. And we sure as hell didn’t expect to be rewarded for our productivity and generosity with a rising tide of spittle-flecked insanity about how we’re just a bunch of immoral, godless, drug-soaked, sex-crazed, evil America-hating traitors who can’t wait to hand the country over to the Islamists and the Communists.
Ironically, the conservative movement’s favorite philosopher had some very insightful things to say about this exact situation. Ayn Rand’s novels divided the world into two groups. On one hand, she lionized “producers” — noble, intelligent Übermenschen whose faith in their own ideas and willingness to take risks to achieve their dreams drives everything else in society. And she called out the evil of “parasites,” the dull, unimaginative masses who attach themselves to producers and drain away their resources and thwart their dreams.
Conservatives love this story. They’re eager to claim the gleaming mantle of the producers, insisting loudly that their tax money is going to support people (mostly in blue states and cities, it’s darkly implied) who won’t or can’t work as hard as they do. If you want to arouse their class and race resentments, there are few narratives that can get them rolling like this producers-versus-parasites tale.
But the NYT story and that map up there prove beyond arguing that the conservative interpretation of events is 100 percent, 180-degrees, flat-out wrong. America’s real producer class is overwhelmingly concentrated in the blue cities and states — the regions full of smart, talented people who’ve harnessed technology and intellect to money, and made these regions the best, most forward-looking places in the country to live.
And the real parasites are centered in red states (the only exceptions being states with huge resource reserves, like Alaska and Texas) — the unimaginative, exhausted places that have clung to a fading past, rejected science, substituted superstition for sense, and refused to invest in their own futures. It’s not unfair to say that those regions are simply feasting off the sweat of our ennobling labor, and expecting us to continue supporting them as they go about their wealth-destroying ways.
And we producers have had enough.
Progressives Go Galt!
If you’re a conservative who thinks Ayn Rand called it true with this producers/parasites thing, then by all means: let’s go there. All the way there — and then some. But fair warning is in order: you may not like where we end up.
By way of a modest proposal, I hereby declare the birth of a new Progressive Objectivism — a frankly producerist personal-responsibility crusade aimed at getting these whiny red leeches off our collective blue hide. If they think they can get by without us, let’s not stand in their way. What these people need from us, at minimum, is some tough talk — the kind of stern, grown-up verbal whoop-ass the conservatives wouldn’t hesitate for a moment to unload on us if the roles were reversed.
The time has come for blue America to go Galt. Our farewell rant — long and epic, as Rand’s turgid writing style would have required — might sound a bit like this:
First off, dear Red Staters: If your town’s economy depends on a nearby dam, canal, harbor, airport, military base, interstate highway, national park or monument, or prison, just STFU. Because you are, in every way possible, a parasite, living off something the rest of us paid to build.
Second: If you are a homeowner who takes a mortgage interest deduction — which is how the rest of us subsidize your house, and with it your status in the middle-class — we don’t want to hear another word from you about how you made it all on your own. And that goes for those of you who got your education via the GI Bill, or took out an SBA loan, or went to well-funded public schools back when such things existed. You are what you are because we believed in you, and invested in you. And we’re deeply insulted that you refuse to even acknowledge that fact.
Third: Don’t come crawling to us to support those kids you couldn’t afford to have, but refused to allow contraception or abortions or actual fact-based sex education to prevent. It’s just that simple. Our blue-state babies are better off in every way that matters because we plan our families. A failure to plan on your part does not create an obligation on ours. Your policies force women to have kids, even when they’re patently not ready to have them. Now (as you’re so fond of telling women who find themselves unhappily pregnant), you get to live with the consequences of those choices.
Fourth: Don’t ask us to pay to educate your kids if you’re not willing to have us teach them what we know about the world. We believe in free, comprehensive, rigorous and reality-based public education because it’s done more than any other government service to make us rich, powerful and successful; and we want the same for you.
We realize some of you aren’t too keen on public schools. It’s great that you want to take on more personal responsibility for educating your own kids. Just be warned: if you don’t teach them real science and real history — including evolution, climate change and the actual contents of the US Constitution — we’re probably not going to hire them. So we hope you’re also ready to take responsibility for that, too, which will probably mean supporting your grown kids in your basement until you die.
Fifth: Between federal water reclamation projects and farm subsidies, we are paying you zillions of dollars to grow stuff we’d actually rather not eat. Don’t look now, but those of us in blue cities and states are moving away from your petrochemical-saturated GMO-bred CAFO-grown industrial “food” products as fast as we possibly can. There aren’t enough organic and community-supported farms to feed all of us yet — but we have taken responsibility for this, and are working hard on the problem. You can either get on this train, or holler at it while it flattens you. What you cannot do is yell at us because we don’t want to eat what you choose to grow.
Notice, too, that the only reason we’re having to subsidize you in the first place is that the all-holy free market does not bless you with profits on this crap. In your own book, that makes you a capital-L Loser. In ours, we’ll settle for “parasite.”
Sixth: We are so over your bigotry. Again: we know from our own long experience that including women, gays and minorities makes us not only culturally richer; it also makes us more economically productive as well. And the recent economic meltdown has shown us that monocultures run exclusively by rich white men tend to stagnate into breeding pools for all kinds of social and financial parasites, who then come forward to prey on those least able to resist — like you.
Diversity isn’t just an idealistic fetish for us: we do it because we think it makes us richer on every front that matters. If “parasite” is just another word for “people who willfully make bad choices that keep them poor and ignorant,” then your prejudices by definition make you parasites. And we are not, therefore, obliged to deal with you.
And finally: If you want to pretend global warming isn’t happening, you do not get to come whining to us when you get hit with droughts or floods. We’re not going to send FEMA to bail you out. We’re not going to build canals to give you our water. We’re not going to fund your levees. If you’re so sure God will provide, go ask him to keep your reservoirs full and your cities dry. Because we resign.
But will we come back?
Yep. It all sounds really ugly. But that’s the point of going Galt: it’s a big fat tantrum designed to prove just how important you are in the grand scheme of things. (The tactic is also not unfamiliar to any mother who’s gone on a protracted housekeeping strike to gain appreciation from an uncooperative family.) If others have to suffer hardship to learn the lesson — well, that’ll teach ‘em. The emotionally satisfying goal is to get the parasites to come back, begging on their knees for your vital help and resources. They know now, in a way they didn’t before, that they cannot survive without you.
So: if that fantasy moment were to come, what would it take to convince us Progressive Objectivists to emerge once again from our cool blue producerist enclave, and take responsibility for the chastened masses once again? We have just five simple demands:
1. Stop taking more money from the federal government pot than you put into it. If you believe in paying your own freight, then do it. If you can’t, that’s fine — we’ll go back to helping you out — but you have to let go of that producerist superiority crap, because you’re simply not entitled to it.
2. Admit that we were right. Admit that nobody in America ever makes it on their own, and that we are all in this together, and that there’s such a thing as the common wealth and the common good. Admit that regulation is necessary to keep the unprincipled strong from preying on the weak. Admit that there has never in history ever been any such thing as a free market: markets are created by governments, and need to be overseen by them. And finally: admit that your conservative leaders got us into this economic mess, and don’t know squat about how to get us out of it.
3. Join the reality-based world. Accept that America’s prosperity utterly depends on how well-educated its kids are, especially on topics like science and history. Accept that evolution happened, and that climate change is happening now. Embrace nuance. Learn something about how to assess evidence and think rationally, without a pre-determined conclusion. Remember that God only helps those who’ve gained the real-world skills to help themselves.
4. Admit that we love our country every bit as much as you do — and that, given our much greater success at creating strong families, productive 21st-century industries and excellent places to live, we might actually know more that you do about how to make it work better in the future.
5. Last but by no means least: Knock off the hate-mongering, threats and name-calling. Your heroine, Ms. Rand, predicted rightly that parasites invariably despise the producers they feed on; you should be embarrassed that your own behavior bears her out so clearly. And, just once, say thank you to us for all the contributions we’ve made (or, at least, tried to make) toward your well-being. We don’t ask for much, but a little gratitude now and then wouldn’t hurt.
Five easy steps. Do this, and we’ll come back and work with you as co-creators of an America we all can love. Until then, though, you can pay your own bills. We’ve decided we have better things to invest that money in — upgraded schools, single-payer healthcare, expanded college systems, mass transit, sustainable technology investments, and forward-looking research to launch new industries that will make us richer yet. And you’ll have a choice, too: you’ll either learn what it takes to produce like we do, or you’ll get to find out what real poverty feels like.
Would that we had the guts to go Galt. We probably don’t; it’s just not in our natures to tell people who are hurting to go to hell, or leverage our economic might to get the political upper-hand. But there’s nothing stopping us from pointing out, loudly and often, exactly who is really who in this producers-versus-parasites relationship. We didn’t draw that ridiculous battle line — but maybe it’s time for us to accept their terms of engagement, stake our rightful claim as the country’s actual producer class, and show them just how tall and proud we are to stand on our far more fertile ground.
Sara Robinson is a trained social futurist and the editor of AlterNet’s Vision page. Follow her on Twitter, or subscribe to AlterNet’s Vision newsletter for weekly updates.
