Monday, August 11, 2008

Mortgage crisis, Fannie May, U.S. Government, American Dream

Some of the blame for the mortgage crisis can be put on the U.S. government's emphasis in post-war years on non-socialistic measures to promote a higher quality of living. John Kenneth Galbraith, liberal economist and general gadfly, sad in one of his later books, and I unfortunately can't remember which one it was, that the public financing companies Freddie Mac and Fannie May were designed with the point in mind of letting regular Americans get some sort of equity in society, some sort of tangible piece of property that they could use to get loans and generally afford more stuff. By promoting individual home ownership and the idea of using homes as collateral in loans a kind of stakeholdership would become accessible to people that theoretically wouldn't be accessible if people had apartments, etc... The truth is that this was a great way to avoid giving people a well defined stake in society as defined by political institutions, i.e. through social rights, like the right to housing and the right to have a wage that would allow the acquisition of some of the nice things in life. These rights were transferred to individualistic means, and private and semi-private hands, even when it made no sense.

You can find some of the GI Bill houses out there today, for example in corners of Royal Oak Michigan that otherwise are pretty well gentrified. They're basically one room houses with some strips of lawn on the sides and back right next to each other, giving the owner a sense of having a home and a yard, but at a cost of ultimate inefficiency in construction. Instead of little tiny houses next to one another, money could have been saved on constructing apartments that may have been able to be bigger than the houses because of the lesser cost. People have ideas of publicly constructed housing as being this terrible, terrible, thing in the United States because housing projects in the U.S. were built with the idea in mind of discouraging people from wanting to live there, so that poor people wouldn't sponge off the U.S. government, which no doubt sucked if you were poor and needed the housing to get a roof over your head. This decision to promote individual ownership lead also to the growth of poorly planned, extraordinarily wasteful, suburbs where energy, materials used in housing construction, and natural resources is squandered to give people a sense of self-proprietorship. But it's the suburbs that are now fueling the housing loan crisis.

The American dream of owning a house in the suburbs with a white picket fence and a nice green lawn that you could use to finance loans, endorsed by the federal government, has turned into an unsustainable credit binge, as a way of life that promised utopia while dismissing the notion of a good society achieved through pressing the government to recognize socially possessed rights to housing and decent wages for everyone that now crumbles into the ground.

You can't avoid some sort of socialization of society if you want to establish any sort of a decent life for people. If you leave it up to private hands and expect capitalism to ensure it through market mechanisms alone you're going to end up with something like the crisis that we're experiencing right now.

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