The Foreclosure Mess: Another Crisis of State Capitalism

Updating on “the foreclosure mess” that continues “to speed struggling homeowners” out onto the streets, Yahoo News’ Zachary Roth notes the “potentially fraudulent” procedures banks have employed in “their rush to foreclosure and eviction.” The documents that originally created these mortgages were buried under the infamous “toxic” derivatives swallowed up by Fannie and Freddie (at the expense of the taxpayer).

Unable to obtain the appropriate signatures, a necessary step in processing forecloses, banks resorted to hiring firms whose cubicle-bound drones signed mortgage instruments by the hundreds per hour, giving the green light to SWAT teams removing people from their homes. With all of this big bank rapacity and deceit, it would be easy to regard the foreclosure crisis as a clear manifestation of the defects inherent in “free enterprise,” as a case of free markets gone awry.

To inculpate genuine free markets, however, is to ignore the intervening causes of the fiasco, glossing over the extensive and noteworthy interventions of the state at every stage of the housing market. The housing policies of the state’s power elite were geared not to creating an “ownership society,” but rather to furthering the abuses of the current rentier society, where the state’s favored companies enjoy every advantage counter to free market alternatives.

In the upside-down world of the statist economy, pushing working people into homes on scanty down payments and with mortgage installments stretching into infinite is apparently something to regarded as government altruism. Pointing out the hypocrisy inherent in the state’s promotion of “low-down-payment purchases,” former Freddie Mac economist Arnold Kling reminds of “all the people who did not default, but who still owe more on their mortgages than their houses are worth.”

So the banks are having a field day fraudulently foreclosing on properties in default, and at the same time they’re happy to keep collecting on risky loans they made gambling with the taxpayers’ money. “Housing advocates who pose as friends of the middle class,” Kling went on to note, “are instead perhaps its worst enemies.”

Beyond the TARP bailouts to Wall Street banks now busying themselves uprooting American families, the state has meddled on behalf of the corporate ruling class in a number of other, less obvious ways. Zoning laws, by arbitrarily obstructing perfectly safe and viable housing options, act to unnaturally limit the opportunities for, and therefore the supply of, affordable housing, filtering the population into state-subsidized housing options.

Selling well-connected firms huge swaths of land for pennies on the dollar, the state enables developers to cover the landscape with suburban neighborhoods, the infrastructure costs to be passed onto (as usual) the masses. As if walling in the land for Big Business weren’t enough to exaggerate the costs of housing, building codes prevent people from taking advantage of inexpensive possibilities that the state reckons they need to be protected from.

“Consumer protection” is, as always, just a slick front for empowering corporate giants to cartelize and to pull consumers into their orbit, precluding the kinds of alternatives that actually would alleviate the troubles of working class life. Ordinary, working people, the “marks” in the state’s corrupt game of three-card Monte, have paid dearly due to the gambles of subprime lending.

Where everything the banks lost was recouped through bailouts and the Fed’s consumption of bad debt with play money, the common man gets to watch his home — probably the only real wealth he had — become another corporate welfare payment. There’s nothing remotely “free market” about the scenario that has played out over the last few years in the housing market; it is another in a long list of instances where the state creates hazard-ridden imbalances adapted to channeling society’s wealth toward the power elite.

Market anarchism calls for an end to statism, for the reemergence of voluntary, cooperative society, not to give a free hand to corporate power, but to allow real market competition to limit it. Only through its ability to use the coercive mechanisms of the state can Wall Street wreak the kind of havoc it has. When we remove the impediments of the state, today handicapping the working class and stacking the odds for elites, society’s productive will finally be true stakeholders.