Food for Thought
Now that the excitement, tears, and post-election euphoria of the presidential election has receded, the headlines have returned to the country’s very serious economic woes, and the news gets worse by the day. It is becoming more evident that the “top-down” bailout of Wall Street pushed by the Bush Administration is not working at the current funding level and the lame duck and his banking-insider treasury secretary will soon be asking for more. Already, AIG—whose executives continue to enjoy lavish getaways, now at the public’s expense—got yet another nearly $40 billion in the past few days. The corporate capitalists that control our government who constantly whine about “socialism” for ordinary citizens every time a new program like universal health care is proposed, have no compunctions about seeing that the rich get it in a sleight-of-hand inversion of the Robin Hood method.
Outside of a banking system on death’s door, the Detroit car industry stands on the precipice of bankruptcy. The gas-guzzling cars they have been making for the past decade are no longer in demand and even used ones aren’t selling. It seems that a $25 billion public bailout is imminent. (There was a report this week that predicts the share prices of the major US car manufacturers may sink to ZERO in the next year.)
The mortgage crisis gets worse as more and more homeowners sink into negative equity and struggle to make interest-only payments. Mounting foreclosures have brought more relief to the shady, greedy investment banking cabal largely responsible for the mess, but none for the embattled home (non)owners. Consumer spending is way down from even last year’s not-so-great figures and nearly all retail chains and mom-and-pops are struggling, and many are going out of business. Unemployment is increasing by leaps and bounds every month, and some economic experts are saying the true unemployment rate is near 15 percent. Most employed people I know are wondering if they will even have a job in a few months, and those that are unemployed often find themselves in competition with hundreds of others for a job—if they haven’t already given up.
The situation here in Silicon Valley and the surrounding greater Bay Area is entirely in line with these national trends. I have lately noticed that there are rarely more than a few shoppers about in Valley Fair, Oakridge, or the new mall on Coleman near downtown, day or night. Even Santana Row seems quiet. Mervyns is liquidating, Ann Taylor, Linens ‘n Things and several others are in bankruptcy, and a few other giant chain retailers like Best Buy and Circuit City are hanging on by their fingernails. Many of my friends in the Bay Area book publishing industry are experiencing significant drops in sales and are very concerned. The very bad Christmas retail sales projections are likely to make matters worse and perhaps hasten the end of other main street stores.
An article in the New York Times this week reveals the sad state of the mortgage crisis in the surrounding area, where many Silicon Valley workers live. Mountain House and other locations around Tracy and Stockton are experiencing a full scale emergency, with the majority of properties purchased in the past five years worth a fraction of what the “owners” owe on their mortgages. In parts of San Jose, the number of “underwater” homeowners who bought in the past five years is 50-60 percent or more. In Santa Clara County, 15 percent of all homes are similarly underwater.
There is a new plan in Washington to send a lifeline to distressed homeowners that allows modification of their mortgages to make their payments “more affordable.” I wonder what that means exactly, especially if there is no negotiation to re-establish a realistic value for the homes under the current circumstances. This seems to be to be a case of too little too late. If we are going to effectively bail out the system driven to the brink by the corrupt mortgage practices and real estate price fixing of the past decade, we should be remedying the matter from the bottom up, not the other way around as we are now, and resetting values based on the market. Otherwise, these distressed home owners may as well just walk away from their mortgages.
Many experts say these are the worst economic circumstances faced by a new president since FDR took office in 1933. With the situation rapidly deteriorating, it is conceivable that we may yet reach the 25 percent level of employment of that Great Depression year and experience a similar collapse of the banking system. Will we soon be singing our own version of that era’s biggest hit, “Brother Can You Spare a Dime?”
I don’t know what the solution is, but we got into this mess by way of 25 years of deregulation that allowed the corporations to usurp power vested in the people by the Constitution. We have taken the first step as a people to remedy that with the election of new, dynamic leadership. Once the president-elect’s economic team is in place and working to solve the potentially catastrophic problems we face in the coming months, the new Congress needs to roll up their sleeves and get to work re-imposing control over the US financial sector, exercising their Constitutional duties of oversight to ensure that the financial system runs on behalf of the citizens, not corporations and their corrupt lobbyists. Whether the new administration and Congress has what it takes remains to be seen. They can’t do any worse then what we have had the past eight years. However, we are going to need much more—an unprecedented effort from the best minds alive and an extraordinary level of cooperation from the American people. The survival of our democracy and way of life may very well depend upon it.