The Hidden Death of the Ownership Society

15 comments

Posted on 6th February 2013 by Administrator in Economy |Politics |Social Issues

Charles Hugh Smith and I are on the exact same page. He just sent me his latest article for your enjoyment.

The Hidden Death of the Ownership Society   (February 6, 2013)

The foundation of the neofeudal economy is this: the right of ownership still exists in name, but the actual ownership of political and financial power is concentrated in the hands of a few.

The core of American liberty is widespread private ownership of property.The Founding Fathers were quite clear on the necessity of protecting private ownership from encroachment by a covertly created monarchical Empire or a financial Aristocracy.

Private ownership protected liberty and the distribution of wealth by enabling widespread ownership of “the means of production” (land, tools, intellectual property, enterprises) and home ownership.

Thus the correlation between prosperity, widespread ownership of small businesses and homes and a relatively modest disparity of private wealth. When ownership of property becomes concentrated into a rentier class (i.e. a financial Aristocracy) that is protected by a Monocrat Central State, income disparity shoots up and prosperity is concentrated in the hands of the political and financial Elites.

In other words, the Founding Fathers understood that financial servitude precluded political liberty.Liberty in a neofeudal economy was ultimately liberty in name only.

Why Inequality Matters: The Housing Crisis, The Justice System & Capitalism.

While outright slavery was outlawed, the chains of serfdom were (and are) entirely legal. If you doubt this, please try erasing your student loans in bankruptcy court.

There are a number of complex dynamics in play in the Death of the Ownership Society.I will try to cover them as simply and directly as possible.

1. If a homeowner’s real-world equity is effectively zero, then what do they actually own?They own a mortgage, i.e. a promise to pay a debt. As long as they are current on payments, this acts more as a claim on future ownership, i.e. full ownership when the mortgage is paid off, or a long-term lease.

If their equity is 10% of the mortgage, there is no way to extract this equity short of selling the home, and the transactions fees will consume most of the 10%.

What the lender owns is A) a claim on the underlying property and B) the homeowner’s income stream, much of which flows to the lender via mortgage payments.

Is this arrangement “widespread ownership” or is it cloaked neofeudalism?In credit bubbles, homeowners appear to benefit as their ownership claim is leveraged by the lender’s capital into astounding profits. But alas, credit bubbles never last, and when they pop then the extra debt taken on to play the speculative leverage game remains to be paid.

2. If the mortgage is sliced and diced into tranches and securitized, i.e. bundled into pools of mortgages sold to investors, what happens to the notion of ownership?

Longtime correspondent Jim S. provides the answer: securitization creates a new class of “non-property” that is fraudulent and thus criminal.Jim explains:

The original crime at the front of the securitization process is creating “non-property.” The loss of the legal paper trail of title transfers, note transfers, country property transfer registrations in the rapid performance of mortgage securitizations is further sidestepped by focusing attention on the foreclosure procedural irregularities at the end of the process. The creation of “non-property” at the front of the process necessarily creates the additional requirement of additional fraud at the end of the process: foreclosures.By extending the forgiveness of what should be prosecuted as fraud (what has been deemed mere malfeasance deserving of a picayune civil fine), the Status Quo hid the original crimes of rapid securitization that destroyed the legal status of property. The biggest crime in American History is about to end the process of “sweeping” the original crime under the rug. The crime is the destruction of the legal standing of property, fully at public expense, and its ultimate accumulation in the Executive Branch for “redistributive” disposition, again at the full expense of the public. Dodd/Frank only has extended the efficiency of the complicated process of theft, and further solidified the nature of its very permanence.

The focus on the disappearance of mortgage titles is at the foreclosure end, and not at the front end of the securitization process where the titles disappeared on a system wide basis. Robo-signing is a fraudulent result of the original crime, not recognized or treated as a crime, but as a civil offense worthy of a paltry fine.

The robo-signing settlement will further solidify mortgage securities formation in the future, with civil penalties for malfeasance reduced to a minimized cost of continuing the process.

Though the the Consumer Financial Protection Bureau (CFPB) has been sold as a consumer protection agency, it is fundamentally a rogue agency operated within the Federal Reserve.

The CFPB is mentioned as having undefined scope and extensiveness of powers, immune from real Presidential or Congressional oversight, having essentially full, autonomous power within the Federal Reserve to do what it wants, when it wants, in the full comfort and safety of the Federal Reserve itself. The CFPB can buy, borrow on and take security positions in failing and failed banks. What a deal.

This harks back to a pre-crisis specialty: get rid of supposedly outdated regulation, but create no new limits or powers to keep things from blowing up.

Thank you, Jim, for the clear explanation.

It is clear that Securitization Is Illegal.

3. Economist John Maynard Keynes’ concept of a “comprehensive socialisation of investment” has been reduced by the Neo-Keynesian cargo cult to a cartoonish campaign of the Central State to borrow trillions of dollars to prop up its most corrupt and inefficient crony-capitalist cartels and the rentier-class–the financial Aristocracy.Here is Keynes:

I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the means of securing an approximation to full employment. But beyond this no obvious case is made out for a system of State-Socialism which would embrace most of the economic life of the community.

In this context, we can understand the original purpose of the Federal Housing Administration (FHA) and the other housing-mortgage agencies of Fannie Mae and Freddie Mac as a “somewhat comprehensive socialisation of investment” in housing: a Federal agency underwrote and guaranteed mortgages to individual households to enable widespread ownership of homes. It was not conceived as a “system of State-Socialism,” that is, a means for the State to acquire ownership of the nation’s housing stock.

Not coincidentally, the rental housing market was dominated by individual investors (Mom and Pop proprietors) in the era before mortgage securitization and the concentration of power in “too big to fail” investment and commercial banks.

Institutional ownership of rental housing was concentrated in the 50+ unit housing sector, less than 1% of the nation’s 15 million rental properties. In the 5- to 49-unit sector, individual owners still owned three-fourths of all properties.

The ownership of rental properties was widely dispersed among individual investors.

4. Now we find the Federal mortgage agencies are colluding with private capital to transfer ownership of the Federally guaranteed/owned portion of the nation’s housing stock to concentrations of private capital, i.e. the financial Aristocracy.

The details of this wholesale transfer of what amounts to public property to the financial Aristocracy are chilling: in effect, private capital puts a few bucks down and Fannie Mae loans them the rest at zero interest. It also gives them roughly 30% of the rental income for managing the properties, and after the dust of robo-signing has settled, the properties will be transferred to the financial Aristocracy.

What happened to the agency’s mission to broaden home ownership? It has been subverted to serve the interests of concentrated private capital.

Michael Olenick: How Fannie Enriches Private Equity Investors at Taxpayer and Homeowner Expense(Naked Capitalism, highly recommended)

Fannie Mae Begins Marketing Foreclosed Homes as Rentals

Structured Sales Transactions(i.e. the bundling and transfer of Fannie Mae owned properties to private capital)

Thanks to the collusion of the Federal Reserve and the Federal mortgage agencies, private capital is gorging on vast blocks of homes:

Blackstone to buy $1 billion worth of Tampa Bay homes for rentals

It’s About Time – JP Morgan To Enter The Housing Slumlord Trade

5. There are effectively two sets of laws in the U.S.: one for the Central State/financial Aristocracy and one for the serfs. From Why Inequality Matters: The Housing Crisis, The Justice System & Capitalism:

One of the central characteristics of highly unequal societies is that two sets of laws develop: One set for the rich and powerful and one set for everyone else.The more unequal societies become, the more easily they accept the unacceptable, and with each unrebuked violation, the powerful actors at the top of the society gain an ever greater sense of entitlement and an ever greater sense that the laws that govern everyone else don’t apply to them. As a result, their behavior becomes increasingly egregious.Yale’s Robert Dahl, one of the preeminent political scientists of our era, wrote in 2006 in On Political Equality (Yale University Press) of the risks of rising economic inequality, which is inevitably accompanied by political power which also concentrates at the top of the society:

“The unequal accumulation of political resources points to an ominous possibility: political inequalities may be ratcheted up, so to speak, to a level from which they cannot be ratcheted down. The cumulative advantages in power, influence, and authority of the more privileged strata may become so great that .. a majority of ordinary citizens…are simply unable…to overcome the forces of inequality arrayed against them.”

In other words, neofeudal serfdom.

The new road to serfdom runs not through Marxist ownership by the State but the transfer of the nation’s assets and wealth by the State to concentrated private capital.

6. The next iteration of this transfer is now clear: blocks of rental homes will be bundled and securitized by Wall Street and sold to investors worldwide.Haven’t we seen this before? Only now it’s all OK because the creation of “non-property” rentier income streams is now legal, and the Federal government and the Federal Reserve have begun to transfer publicly owned or guaranteed properties to their pals in private capital on a wholesale basis.

From It’s About Time – JP Morgan To Enter The Housing Slumlord Trade:

“It’s hard to find a private-equity firm on the planet that doesn’t have a strategy in this space,” Gary Beasley, chief executive officer at Waypoint Homes, said last week at the American Securitization Forum’s annual conference in Las Vegas. The Oakland, California-based company has bought homes in California, Arizona, Illinois and Georgia.

The foundation of the neofeudal economy is this: the right of ownership still exists in name, but the actual ownership of political and financial power is concentrated in the hands of a few. “Ownership” of a heavily mortgaged home is a simulacrum of ownership when the “owner’s” income is diverted to a rentier financial Aristocracy.

 

RIP: Our Expansionist Central State (23 Minutes, 25 Slides) CHS with Gordon T. Long:

 

Things are falling apart–that is obvious. But why are they falling apart?The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:go to print edition 1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com

To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

 

15 Comments
  1. AWD says:

    That was the whole point of the housing bubble. Get people to buy homes, then take them away from them. The kleptocracy weren’t happy just getting debt payments (mortgages), they wanted to property itself, and now they have it don’t they?

    I don’t own my house, the city and county do. If I fail to make a property tax payment, they seize my property and auction it off. I cannot simply pay off my house and just live in it, I must pay property taxes or else lose my house. How the fuck is that fair and American and what the founding fathers had in mind?

    6th February 2013 at 2:18 pm

  2. KaD says:

    I agree. Even if your home is paid off your are STILL going to have to make property tax payments, otherwise the home will be taken from you. So, in reality, there is no possible way to ever REALLY own your home in its entirety. Ownership is a mirage.

    6th February 2013 at 2:22 pm

  3. Pirate Jo says:

    AWD, you have to pay property taxes because other people have kids, and if you didn’t pay for their educations, who would?

    WON’T SOMEBODY PLEASE JUST THINK OF THE CHIIIIILLLLLLDREEENNNNNNN??????

    6th February 2013 at 2:28 pm

  4. Mary Malone says:

    The cronies have beaten homeowners down with the moral hazard club. What this article says is true – title has been clouded on 66 million mortgages – and it cannot be fixed.

    While people are demonstrating and protesting new gun laws, the cronies are stealing millions of homes digitally.

    It’s almost over. People will realize they have lost their property rights when it’s too late.

    6th February 2013 at 2:38 pm

  5. ThePessimisticChemist says:

    The entire housing process is one big fucking joke. Every time you turn around is one more mooch with a federally mandated service that you HAVE to fucking pay, unless you happen to have enough cash on hand to buy the home outright.

    Nauseating.

    6th February 2013 at 3:16 pm

  6. michaelj007 says:

    I’ve been hip to the GSEs and their potential use as a STEAMROLLER to flatten the pavement for the new 100 lane Serfdom Expressway. What this article turned me onto is the notion that securitization and obfuscation of clear title was most likely intentionally constructed as a catalytic converter turning private property into “public”- as only the the losses are shared- property. Very sleazy shit. I HIGHLY doubt the ignorant masses will catch on…. especially since our glorious leaders appear to be poised to grant participation rights to the new batch of fresh immigrants. I can’t wait to see Housing Bubble Version 2.0!

    6th February 2013 at 5:11 pm

  7. Leobeer says:

    I saw this in the comments section of tfmetalsreport.com .

    As a Realtor for the past 28 years I thought I’d seen or heard it all… Until now.
    I was showing homes in Pontiac, MI one afternoon recently and showed up at a home at the 4:00 pm time my appointment was scheduled for. After I woke up the homeowner, she let us in and then proceeded to tell my buyers and I that she has already entered into a contract to sell the home on a short-sale. (A short-sale is a sale where the banks accepts less money than is owed on the home). After some chit-chat, she proceeded to tell us that she and her sister (who also lived in the area) were buying each other’s homes via the short-sale process. I mentioned to her that I thought relatives could not be involved in those transactions. She smiled and said “We have two different last names so no one knows the difference”.
    She went on to tell us that each of them owed over 100K on their homes and were in the process of buying each other’s homes for about 10-15K cash. To top it off, they were each receiving $3,000.00 in government provided relocation assistance at the closing.

    My buyers and I were amazed that she was outright admitting to fraud and yet, she continued. She began to tell us that the best part of her scheme was that because they currently were not working that they (both) are now receiving Section 8 Vouchers. I said I thought those were for renters and she said “That’s the best part; me and my sister are going to be renting each other’s homes so we don’t even have to move, and Obama is going to give us each $800.00 a month to pay the rent!” She then picked up a picture she had framed of Obama and did a little happy dance around her living room and while she kissed the picture she was singing “Thank you Obama…. thank you Obama.”

    So here is the bottom line… Both of these scammers got at least $80,000.00 in debt forgiven, $3,000.00 in cash for relocation (when in fact they did not relocate) and to boot, you and I will now be paying (through our taxes) $1,600.00 in rent for each them each and every month…. perhaps forever!

    Is it any wonder why so many people have decided that all they have to do is VOTE and they will be taken care of for life at the expense of the taxpayers? I would not be at all surprised if they are receiving food stamps and whatever other programs are available for anyone who is willing to lie to get assistance.

    These women went from working and paying about $900.00 each in mortgage payments to staying home and getting paid $800.00 each per month to live in the same home they had been living in and all they had to do was lie on a few papers. This craziness has to stop! I’m sure this kind of fraud is going on each and every day all across the country and no one wants to touch the subject of entitlements because they might OFFEND someone or lose a vote or two.

    By the way… she had an almost new SUV in the driveway, three flat screen TV’s and a very nice computer set up in her living room which was furnished entirely with nice leather furniture.

    It’s the NEW ‘AMERICAN WAY’….

    6th February 2013 at 7:55 pm

  8. marissa says:

    I’ve all but quit owning stuff.

    Ownership of just about anything is an open invitation for the government to steal your money in order to retain the ‘ownership’–property taxes, vehicle license and registration–fuck em. I don’t need them poking their noses into my life and I don’t need stuff which allows them to hold me hostage. I quit playing their game ten years ago.

    I ride the bus, live in a rented apartment, type on a $180 second hand computer, and watch a $20 second hand TV. My apartment is furnished from the thrift store. I don’t have a cell phone.

    Take it all government, the whole lot isn’t worth a thousand bucks and all of it is junk anyway. And then go to hell.

    6th February 2013 at 9:15 pm

  9. michaelj007 says:

    Leobeer- there’s NO WAY those folks are going to come up with $10K-$15K cash plus closing costs. FAKE! Even so…. you can buy a house in plenty of Detroit neighborhoods for $10k to $15k cash with NO tomfoolery involved.

    6th February 2013 at 9:30 pm

  10. Eddie says:

    Leobeer

    Sounds like an urban myth. But, damn, something like that could really happen in this crazy-ass world we live in. I’m tempted to say bullshit, but you never know.

    6th February 2013 at 10:58 pm

  11. Makati1 says:

    Pirate Jo, let the parents pay for educating their offspring. It’s not my responsibility. If they cannot pay, the kid/s stay home. No problem. That’s what’s coming anyway. If you have kids in grade school, they will probably never graduate. The governments are going broke. The tax base is disappearing. The banks don’t pay property taxes. So schools are going to close. Are you prepared?

    6th February 2013 at 11:45 pm

  12. flash says:

    AWD says:I don’t own my house, the city and county do. If I fail to make a property tax payment, they seize my property and auction it off. I cannot simply pay off my house and just live in it, I must pay property taxes or else lose my house. How the fuck is that fair and American and what the founding fathers had in mind?

    Dishearteningly true. Even though you’ve worked hard your entire life to pay off the mortgage on your your home ,you cannot be secure in your home from loss of income or saving just because you own outright. .If you loose your savings and source or income ,then your are at the mercy of an unmerciful state, who will toss you out of your home for back taxes with all the fanfare of tossing a losing lottery ticket into the trash

    And, it’s onto the street you go to fend for yourself the best you can with nary a peep of protest on your behalf. from your neighboring sheep. That is the inherent wickedness of the sytem of property tax .

    If you can’t pay your state tribute your property rights are legally declared void .The joke is a one of the disillusionment you ever possessed any property rights, played on you by yourself.

    Every homeowner knows the property tax system is archaic and wrong , but still the tributes from servant to master continue unabated with no hope for reform.

    7th February 2013 at 9:26 am

  13. flash says:

    Leobeer , the scam you mentioned is still pennies compared to the trillions the bankster class ass-raped America for.
    I say , more power to ‘em. At least they’re not on the street like so many other victims of bankster fraud.

    7th February 2013 at 9:29 am

  14. Anonymous says:

    The only thing you can ever truly own is an “asset” the depreciates in value over time and requires periodic maintenance $$. IE: your home. You own the structure which requires maintenance but not the land itself.

    7th February 2013 at 11:03 am

  15. Pirate Jo says:

    I completely agree, Makati.

    God forbid people take responsibility for the offspring they chose to bring into the world. People are generally horrified at the idea of providing for the education of their own kids, because they look at how much it costs. But there is no reason for it to cost that much, and education through 5th grade is pretty much just glorified daycare anyway.

    7th February 2013 at 12:34 pm

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