[lbo-talk] EU opens Northern Rock investigation

[Sean Andrews]

On Thu, Apr 3, 2008 at 12:47 PM, Doug Henwood <dhenwood at panix.com> wrote:
>
>>  Well I said this not all that long ago:
>
>  <http://www.leftbusinessobserver.com/Turmoil2.html>
>
>  Since the expenditure of public funds is probably inevitable, it
>  would be very nice, if the public actually got something in return—
>  though the precedents for this are not encouraging. At the very
>  least, the financial system badly needs to be re-regulated to prevent
>  the sort of wild speculative adventures that have become routine in
>  recent decades. Though Wall Street types will complain that that will
>  hurt them, or assert that regulation is impossible, these claims
>  should be studiously ignored. This whole boom–bust–bailout cycle has
>  gotten very wasteful and very dangerous. It would have been nice if
>  the dot.com and Enron debacles had led to some sort of re-regulation,
>  but they didn't. This time around, the hangover is even worse than
>  the last go-round. What might the next one look like without some
>  sort of re-regulation? Some people in Washington are starting to talk
>  about this, but without serious popular pressure, the measures are
>  likely to be very mild stuff indeed.

Actually, I think this next part is what I was looking for:

"But it would also be nice to see some new institutions emerge out of
the wreckage of the subprime adventure. Failed small banks and
mortgage brokers could be turned into community development,
nonporfit, and cooperative institutions. As was suggested in LBO #116,
instead of foreclosing upon people who are behind on their mortgages,
some public entity could acquire their houses and transform them into
limited equity cooperatives. In such an arrangement, people can own
their dwellings, but only sell them back to the co-op at a price
reflecting improvements plus inflation but without any speculative
gain. Occupants would continue to pay a mortgage, but a much smaller
one, with the government picking up some of the writeoff, and banks
absorbing some as well."

So what would be involved in creating these new institutions?  I think
that we would need something like the squatters mentioned here a few
weeks ago to really get something like this passed (i.e. some
hardcore, civil disobedience and threat to the order from below).  The
problem would seem to be that there isn't necessarily a constituent
group that can protest or work this out (i.e. there is no "us" to get
"them" to do it.)   It is just an atomized wave of disaster that most
people are just hoping misses them.

As someone with a mortgage to pay that is likely going to be higher
than my home value very soon, I can say that as long as I stay put I'm
probably fine.  But since I will likely need to move to get a job,
that will be a problem (and looking at the figures you have at the
bottom of that piece, a problem that won't be going anywhere anytime
soon). In other words, we can likely continue to pay our mortgage, but
could be stuck living in the same place (i.e. not able to move for
employment, etc.) barring the acceptance of some personal financial
punishment.  My department at GMU just had to abandon a search for a
tenure line position after the first choice candidate came back with a
similar story: she can't accept because she didn't think she could get
out from under the house she owns in order to move.  This is just one
problem, easily dismissed as a sort of bad luck. The goal, it would
seem, is to make it recognizable as part of a larger problem to which
we need to demand solutions.

s