Thursday, April 30, 2009
The consequences of this defeat are significant. In the big, macroeconomic picture, it eliminates an incentive for financial institutions to write off losses on mortgages issued during the bubble, and replace them with new ones based upon current market values, thus keeping more people in their homes, out of bankruptcy court, and capable of contributing to a stabilization of demand. Instead, many of the people currently underwater in their homes will be sub-proletarianized. Furthermore, it permits these institutions to persist in attempts in bankruptcy court to collect the entirety of the amount due on the mortgage as secured, to the detriment of other unsecured creditors, who will have to wait for payment, if there is any, until the note holders capitulate to reality. As a result, the credit crunch will remain with us longer than necessary.
But, wait, you say, perhaps it is a good thing. Won't this push us towards a more collective response to the global recession? Doesn't keeping people in their homes merely perpetuate the privatization of social life? Do we really want people to regain their access to credit, and, thus, continue to perpetuate a capitalist system of production, distribution and consumption? Well, no. But the notion that we persuade people that a collective, non-hierarchical alternative is superior by throwing them out on the street and tearing up their credit cards doesn't strike me as plausible. Many socialists and anarchists have historically sought to build support for their vision of society by assisting people in their day to day struggles, and that is an apt strategy here. And, there is always the peril that desperate people will embrace right wing extremism instead of left radicalism.
Meanwhile, one has to wonder why other sectors of the economy outside finance weren't actively lobbying for the passage of this bill. Measures that redirect funds from finance capitalists to the manufacture of goods and the provision of services, as this measure would have indirectly done, would most definitely be in their interest. But they have been immobilized in the face of the power displayed by Wall Street as financial institutions dictate policy for their exclusive benefit. As Michael Hudson said last November: A kleptocratic class has taken over the economy to replace industrial capitalism. Hence, the US is now a country defined by those who aspire to be a Suharto, not a Ford, Edison, Gates or Jobs.