Saturday, November 6, 2010

Flourishing on Foreclosures (Polemic) by Edwin L. Young, PhD

Flourishing on Foreclosures: One of the Many Benefits to Corporations of the Mortgage and Finance Boondoggle
By Edwin L. Young, PhD

When corporations lay off workers, many have to have their homes foreclosed. Corporations blame having to reduce their labor force on the bad economy. Fewer workers equal less labor costs. Corporations use the saved money to buy cheap foreclosed homes. Incidentally, CNBC has reported many times the majority of US Corporations are just sitting on mountains of cash. They offer their retained employees a huge reduction in salary; some as much as $20,000 a year. This decrease is offset by giving them a chance to move into a nicer but far cheaper foreclosed home which the corporation had just bought for pennies on the dollar. Thus, the economic downturn, the foreclosures, the RIF, and reduced salaries, all taken together, is resulting in both huge financial savings and gains to those corporations who are already overflowing with cash.

Remember corporations hire the finance whiz kids from the elite universities to figure out how to stealthily orchestrate such economic misfortunes for those outside the corporate inner circle. Corporate heads are singing a phrase from that old cowboy song “its their misfortune and none of my own.” Their exploitative stratagems are reaping outlandish corporate fortunes and ginormous bonuses to those on the top rung of the corporate ladder and particularly to the conniving captains of multinational investment corporations.

All through the Bush administration , he was touting the “Ownership Society” and encouraging people to buy homes. This media blitz was accelerated just as the Tax Cuts went into effect. To facilitate their countrywide swindle, TV was awash with announcements about the benefits of Home Equity Loans and Second Mortgages. All the while, there was a rash of corporate outsourcing of jobs. Corporations began to lay off employees and switch to part time workers with no benefits. The war in Iraq was draining the economy. As this scenario approached the end of the Bush second term, the whole economy was beginning to come crashing down like humpty dumpty with no king’s horse’s or kings men to save it.

As employment began dropping, Bush propped up employment figures with a massive increase in government jobs. This coupled with the switch to part-time workers kept the percent of unemployed near the usual five percent levels. Nevertheless, the debt to credit companies was skyrocketing. The debt to income ratio first surged, and therefore maintained the GDP, until personal credit balances with their high interest rates topped out. Then, the consumers and homeowners saw they were headed for their economic doom. Conveniently, this occurred after the middle of the Bush’s second term, namely in the year 2007. This put an end to what Greenspan, head of the Federal Reserve, dubbed “irrational exuberance” in both consumerism and the stock market. Next, the stock market nose-dived.

By 2008, pension funds, upon which workers and their families depended, began to be wiped out due to the stock market crash from around 14,000 to 7,000 on the Dow Jones Averages. Masses of people were losing their savings and cashing in retirement accounts such as IRAs just to keep from being evicted from their homes. The fact that gasoline reached $149 was hurting the middle and lower classes to the point that SUV and gas guzzling pickups were filling the used car lots and sold at far below their Bluebook value.

On the corporate end of things, at the same time that Mercedes, Porsche, and Ferrari were having their best years ever, Ford and Chevrolet were going bankrupt. Sales for Mid-level retail stores like JC Penny, Sears, and Dillard’s plummeted while the sales soared for the high-class retail stores like Tiffany and Niemen-Marcus. Not surprisingly, sales were also soaring for the lower-class discount stores for the likes of Wal-Mart and the Dollar Store. Whole Foods was weathering the storm and discount grocery stores were raking it in.

Those who were sucked in to making otherwise unwarranted real estate investment in upscale homes and those were buying upgraded and highly expensive second homes found themselves with declining income and swimming in the murky waters of massive debt. By the end of 2008, they were having to foreclose. Even as they were foreclosing, the sharks of the big investment institutions that are hidden in those murky waters were swimming in for the kill. Moreover, the cycle in the economic warfare, which they had initiated, with Bush’s assist, was on a rapid upswing and corporate conmen began reaping the benefits of the spoils of war.

It was not just the tax cuts primarily benefiting the rich, the reduction in labor costs, the “ownership society” media blitz to defraud the financially na├»ve, nor the scarfing up of the cheap foreclosures that were benefitting the wealthy and big corporations. No, rather, as the stock market was nose-diving, corporations were focused on their own stocks. They were selling their own corporations’ stocks high and buying back low. This whole conspiracy of the robber barons was wiping out unsuspecting small investors and unsophisticated pension fund managers.

However, as corporations were buying back their own stocks, they were causing a sea change in American Capitalism. Now there would be fewer stockholders and less dividends to pay out. Most importantly, there would be fewer stockholders who could potentially vote against outsourcing. It was like the Bush administration, the big Wall Street Investment Bankers, and the major corporate heads had planned the perfect murder. Only in this case, the victim was the US economy, the US populace.

This was a crisis of mammoth proportions for everyone. Everyone of course but themselves! They were gorging and flourishing on forecloses and acquisitions of cheap bankrupt corporations who lay victimized by legislation enacted in the early Bush administration that exempted otherwise heinous criminal business dealings from prosecution.

That is what free enterprise and our democracy is all about!

Here’s to manure in the celebratory punch bowl of the entrepreneur!

Author bio:

Edwin is a 76 year old, retired, psychotherapist/institution reformer. His greatest satisfaction came from reforming many juvenile correctional institutions, a maximum security prison, a West Texas mental hospital, and the huge Job Corps in San Marcos, Texas. All in all there were thirteen institutions that he successfully reformed. In the last year of his PhD program, Edwin was one of the two PhD graduate students to be awarded the annual University Research Institute grant. His dissertation committee said his was the longest, best, and most complex in the history of the department. Since retiring, Edwin spends his time writing. His site is: The Natural Systems Institute.

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