Our Most Powerful Weapon Against Wall Street? The Rise of Reverse Eminent Domain
Photo Credit: Shutterstock.com/BlueSkyImage
December 15, 2013
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Wall Street tore the heart out of our economy. It profited
wildly by puffing up the housing bubble. It profited wildly again when
the federal government provided more than $10 trillion worth of bailout
money and loans. And right now, 95 percent of the economic growth
of our so called recovery is going to the top 1 percent -- the very
bankers, traders and mortgage moguls who wrecked the economy in the
first place. Meanwhile, Wall Street's reckless gambling caused more than
8 million workers to lose their jobs in a matter of months.
Today -- five long years after the collapse -- we face a
sustained unemployment rate higher than anytime since the Great
Depression. In addition, housing values have plummeted. For many, the
value of their homes has fallen by half. Even with the recent uptick in
housing prices, 10.8 million homeowners are still underwater
-- meaning that their homes are worth less than their mortgages. The
total amount of negative equity stands at $805 billion as of October,
2013.
Being underwater is a big, big problem brought to us by
Wall Street's predatory profiteering. If you're under water and need to
move, you'll still owe the bank after you sell your home (called a short
sale). Or you could just walk away from your home and let the bank
foreclose, which means you'll lose whatever equity you had and see your
credit rating crash. Further, if you're underwater it probably means
that you're living in a neighborhood with many foreclosures, which often
leads to safety concerns and further downward pressure on the value of
your home as well as raising the costs of local policing and sanitation
services. And of course, if you lose your job, you are in great danger
of losing your home as well.
Predatory Lending: Minorities are the hardest hit
The problem is particularly acute in areas with high
numbers of minority residents where the negative equity rate is likely
to be twice as high as white neighborhoods. For example, according to
the Woodstock Institute,
"In highly African American communities in the Chicago six county
region, 40.5 percent of borrowers are underwater, while another 5.4
percent are nearly underwater. Similarly, 40.3 percent of properties are
underwater in predominantly Latino communities and 5.3 percent are
nearly underwater. In contrast, only 16.7 percent of properties in
predominantly white communities are underwater, with another 4.4 percent
nearly underwater."
This is not an accident.
Wall Street banks, brokers and mortgage companies targeted
minority neighborhoods for high profit sub-prime loans. Using every
sales trick in the book, they loaded up new homeowners with loans that
were costly to the borrower but extremely lucrative to the mortgage
companies and then to the Wall Street financial engineers. This is
called predatory lending
and all our governmental watchdogs knew it was happening at least since
the 1990s. The tragedy is that many of these borrowers actually wanted,
and qualified for, conventional mortgages that were far safer and
affordable, but which earn the mortgage company less profit.
In a fair and just economy, those who wrecked the economy
would be paying for damage done. Their ill-gotten gains would go to
making whole the victims of the housing collapse and the loss of jobs.
But that's not our world. Justice only comes when we're willing to take
action, and that's precisely what several local communities are doing.
If these towns are successful, Wall Street will finally face a modicum
of real justice.
How Communities are Fighting Back using "Reverse" Eminent Domain
Richmond, California is facing the full brunt of the
housing collapse. The average value of its homes has declined by 50
percent. Foreclosures and vacant houses blot its neighborhoods. The
costs of policing and collecting garbage from vacant homes has
increased. It was time to take action.
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