The sub-prime scam

Submitted by AWL on 16 October, 2008 - 5:54 Author: Rosalind Robson

Still trying to get your head round “sub-prime”, “structured finance” and “deleveraging”? You could have done worse than Robert Peston’s guide to how the Super Rich Fucked up all Our Lives. Here the basic mechanics of the financial crash were told quite well.

Peston was following up his book Who Runs Britain? How the Super Rich are Changing our Lives [review: www.workersliberty.org/node/10214]. But he brought us right up to date with how the system which produced a proliferation of junk (and not so junk) financial goods eventually seized up.

Peston spent a long time examining the chain which led from sub-prime mortgages to the crash and he told us a little, but only a little, about the human story. That is a story worth thinking about some more.

Unscrupulous mortgage brokers in America,sold huge numbers of mortgages to working-class people who really could not afford to take out huge loans, or did not know that their interest rates and repayments would go up rapidly once the initial “teaser” repayment period was over.

Really those brokers were nothing better than loan sharks hanging out in working-class neighbourhoods, feeding on people’s poverty and need to put a roof over their heads.

The huge rise in mortgage selling was backed by US politicians. They like Thatcher, and all bourgeois ideologues really, wanted a “property owning democracy”.

Of course many thousands defaulted when the “teaser” period was over and the payments went up. They went back to living in rented accommodation once more. Or were left homeless. In Britain, if you are “lucky” the state will put you and your family in a bed and breakfast if you can’t afford private rents. You won’t get a council house because defaulting on a mortgage is classified as making yourself intentionally homeless.

If you’re not lucky, you will be living in America, and ending up in shelter, your family split up, your life ruined forever.

Meanwhile the super rich are still having a great deal of difficulty spending their money, turning to personal shoppers to fufil their material “dreams”. One such dream merchant told how a client wanted a fighter plane in the front garden, another, a week living with tribe in a remote party of Africa — to get in touch with their spiritual self or some such garbage.

Obscene? You bet. It’s enough to make you want to be a socialist.

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