The economic crisis and war

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While the world's attention has been focused on the global economic crisis, the United States has continued to prosecute its neo-colonial war in Iraq and has expanded its military violence in Afghanistan and the adjoining border regions of Pakistan.

Early Thursday morning, a US drone fired four missiles into a religious school, or madrassa, in a tribal area of Pakistan's North Waziristan, killing 11 people, according to Agence France-Presse. It was the latest in a series of US strikes into Pakistan, including at least one commando raid by Special Forces ground troops, launched since the beginning of September. That the US has embarked on a deliberate policy of spreading its war of occupation in Afghanistan into Pakistan was underscored by last month's revelation that President Bush signed a secret order in July authorizing the use of American ground troops in Pakistan.

In Afghanistan itself, the US and its NATO allies have stepped up their attacks on military and civilian targets in an attempt to stem a widening war of resistance against foreign occupation. An overnight airstrike by US-led coalition forces in Khost Province in eastern Afghanistan killed nine Afghan soldiers, in an apparent "friendly fire" incident. The civilian toll from US air strikes has risen sharply in recent months, including an attack on an alleged Taliban compound last August that killed more than 90 civilians, a majority of them women and children.

Human Rights Watch reports that American and NATO air strikes have killed some 500 Afghan civilians over the past five years, very likely a serious underestimation of the actual toll. As the New York Times reported on Thursday, "The latest air strike came as fighting in Afghanistan reached its highest level since late 2001," i.e., in the first months of the US invasion.

The deteriorating US military and political situation in Afghanistan has become a focus of the presidential election, with Democratic front-runner Barack Obama taking the lead in pledging a major escalation of the US intervention. In a campaign speech in Virginia on Wednesday, Obama said he would order a surge of US troops, perhaps 15,000 or more, as soon as he gained the White House. "It's time to heed the call ... for more troops," he declared. "That's why I'd send at least two or three additional brigades to Afghanistan."

Obama has brushed off as a "rhetorical flourish" statements made at a Seattle fundraising event by his running mate, Senator Joseph Biden, that within six months of Obama's inauguration, the new president would respond to a major foreign policy crisis by taking "incredibly tough" and unpopular decisions. Biden cited five possible flashpoints—the Middle East, Afghanistan, Pakistan, North Korea and Russia.

That Biden's chilling remarks were no mere "rhetorical flourish" is substantiated by a lengthy article published in Thursday's New York Times by the newspaper's White House correspondent, David E. Sanger. Discussing the foreign policy positions advanced by Obama and his Republican opponent, Senator John McCain, Sanger points to key areas where Obama has articulated an even more aggressive posture than McCain.

On Iran, for example, the McCain campaign has suggested that it would be willing to accept a deal that allowed Iran to produce uranium on its territory, while the Obama campaign told the newspaper that an Obama White House "would not allow Iran to produce uranium on Iranian soil, the same hard-line view enunciated by the Bush administration."

Sanger notes that Obama has declared that "we will never take military options off the table" and that he would not give the United Nations "veto power" over a decision to hit Iranian nuclear facilities. Sanger goes on to say that US intelligence officials claim the "threshold" for a possible military strike—the point where Iran produces sufficient nuclear material to build a weapon—"may be crossed fairly early in the next presidential term."

Obama has also suggested that the US should impose a blockade on Iranian imports of gasoline and refined petroleum products. Noting that the Bush administration has stopped short of proposing such a move, he writes, "A blockade, however, could constitute an act of war..."

On Pakistan, Sanger writes, "it is Mr. Obama who has been far more willing than Mr. McCain to threaten sending in American troops."

Obama, no less than McCain, speaks as a representative of the American ruling class, which will determine the foreign and military policy of the United States in accordance with what it perceives to be its global economic and strategic interests.

The economic crisis, global in scope but centered in the decline of the world economic position of American imperialism, will inevitably drive that policy in an even more aggressive and belligerent direction, regardless of which capitalist party occupies the White House. The economic crisis injects into world affairs an ever-greater element of tension and conflict between rival imperialist and capitalist nations.

Even more so than in the previous decade, the United States will seek, under conditions of financial turmoil and economic slump, to offset its economic decline by military means. It is necessary to learn the lessons of history. The last great world economic crisis—the Depression of the 1930s—set off escalating military conflicts that culminated in the holocaust of World War II.

The 2008 elections, unfolding under conditions of deepening recession and escalating military violence, demonstrate the immense dangers posed by political illusions in Obama and the Democratic Party. Once again, the enormous anti-war sentiment of the American people has been preempted by being channeled behind the Democratic wing of American imperialism.

Should Obama win the election, as appears increasingly likely, the struggle against militarism and war will be waged against his administration.

Could the US election be stolen?

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With John McCain and Barack Obama already swapping accusations of widespread voter fraud, experts warn that a bitter and protracted fight could ensue if the race to the White House is decided by a narrow margin.

The legal battle over election rules has already made it all the way to the Supreme Court as Republicans fight to block potentially false registrations from being validated and Democrats struggle to prevent voter disenfranchisement.

Compounding the problem is the decentralized US electoral system, which hands often partisan local officials the power to make rules and maintain the voter registration rolls.

"I'm hoping it's not close," said Richard L. Hasen, a professor who specializes in election law at Loyola Law School in Los Angeles.

"I am certain there will be problems on election day."

An estimated nine million new voters have registered for the hotly contested November 4 election, and the Obama campaign says Democratic registrations are outpacing Republican ones by four to one.

The McCain campaign contends that an untold number of those registration forms are false and warns that illegally cast ballots could alter the results of the election and undermine the public's faith in democracy.

Republicans have launched a slew of lawsuits aimed at preventing false ballots from being cast, the most high-profile an attempt to challenge as many as 200,000 of more than 600,000 new registrations submitted in the battleground state of Ohio that was blocked by a Supreme Court ruling Friday.

They point to investigations into whether liberal-leaning community organization ACORN deliberately submitted false voter registrations as proof of "rampant" and widespread fraud which McCain said could be "destroying the fabric of democracy."

But the Obama campaign said this was just a "smokescreen" to divert attention from Republican "plotting" to suppress legitimate votes and to "sow confusion and harass voters and complicate the process for millions of Americans."

Voters whose registrations have been challenged or those who find their names have been removed from the rolls are often required to cast provisional ballots, which are not immediately counted in some jurisdictions and are often rejected due to technicalities.

Meanwhile, a 2007 study by the New York University School of Law concluded that "it is more likely that an individual will be struck by lightning than that he will impersonate another voter at the polls."

"For these problems to be really decisive they have to be within the margin of litigation, which is typically a few thousand votes," Hasen said in a recent interview.

The 2000 election took weeks to resolve as Democrat Al Gore fought Republican George W. Bush all the way to the Supreme Court after Bush won the state of Florida, and thus the election, with a margin of a few hundred votes.

Four years later, Democrat John Kerry conceded defeat despite allegations of widespread voter suppression in Ohio, which handed Bush his second term with a margin of nearly 119,000 votes.

In the meantime, electoral litigation has become part of the standard play book.

The number of lawsuits filed over elections has more than doubled from an average of 94 in the four years prior to the 2000 election to an average of 230 in the six years following, Hasen found in a study published in the Stanford Law Review.

Misinformation has also been used to discourage voters from showing up on election day.

Students in Virginia, Colorado and South Carolina were wrongfully told by voting officials that they could lose their scholarships and their parents would no longer be able to claim them on their income taxes if they registered to vote in their college towns.

The Michigan Department of Civil Rights launched an advertising campaign this week to combat misleading rumors - some started by local officials in mailings to voters - that people would be denied the right to vote if they lost their home to foreclosure, have a criminal record or do not have photo identification.

Such tactics are not new, said Laughlin McDonald, the director of the American Civil Liberties Union's voting rights project.

Despite strict constitutional and legal protections for the right to vote, "the history of the country has been one of flagrant vote denial," McDonald told AFP.

Many of tactics once used to keep blacks from voting in the south - poll taxes, literacy tests, violence and intimidation - have been eliminated.

But some have been adapted, including the practice of purging voting rolls of people likely to vote for the other party by challenging them en masse.

"There's more (attempts at voter suppression) that's been going on in the lead-up to this election than any I can remember," McDonald told AFP.

"The fact remains the people who have the power to make the rules are all too often willing to do so in ways that serve their partisan interests."

How the Banksters Made a Complete Killing off the Bailout

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By Pam Martens

In 1897, when 8-year old Virginia O’Hanlon posed her Santa Claus query to the New York Sun, she received a heart-warming editorial response reassuring her that "He exists as certainly as love and generosity and devotion exist."

Today, we hand our 8 year olds a $13 trillion national debt while our Congress hands Wall Street banksters the national purse without so much as a hearing to determine the cause of the debt collapse. Worse still, the money is doled out to the very same individuals who leveraged their institutions to casino status.

Americans are correctly outraged at the spectacle of U.S. crony capitalism crashing stock and bond markets around the globe while simultaneously watching the poster boys of crony capitalism on Monday, October 13, 2008 march up the granite steps of the United States Treasury building in their Armani shoes and heist a fresh $125 Billion of taxpayer dough in broad daylight.

The U.S. Treasury Secretary, Henry Paulson’s, $700 billion bailout plan to buy up distressed mortgage assets has spun off its own $250 billion subsidiary plan (skipping that pesky detail called taxation with representation) to inject $125 billion in equity capital into 9 of the biggest commercial and investment banks in the country. Another $125 billion may possibly go to smaller regional banks and thrifts, assuming they will sign on to the deal.

And what will taxpayers get for their investment in these financial firms whose stock prices are getting hammered as the public recoils in revulsion at what they have done to our financial system? The taxpayers, who were not invited to send their own legal representative to the negotiating table, will receive a paltry 5% dividend, exactly half of what Warren Buffett received for his recent investment in General Electric, a company that actually makes something real, like jet engines and light bulbs.

Now we learn from the U.S. Treasury web site that it has hired the law firm of Simpson, Thacher & Bartlett to represent our taxpayer interests going forward at a cost to us of $300,000 for six months work. But we’re not allowed to know their hourly wages; that information has been blacked out on the Treasury’s contract. Curiously, the Treasury has named in its contract the specific lawyers it wants to work for us. Two of those are Lee A. Meyerson and David Eisenberg. Mr. Meyerson has been a central player in facilitating the bank consolidations that have led to the present train wreck, including building JPMorgan Chase from the body parts of Chemical Bank, Chase Manhattan and Bank One.

Mr. Eisenberg has played a central role in the proliferation of the credit derivatives blowing up on the books of the Frankenbanks created by Mr. Meyerson. Here’s what the Simpson, Thacher & Bartlett web site says about its relationships and Mr. Eisenberg’s work:

"The Firm’s practice benefits from established relationships with all of the major investment banks. Mr. Eisenberg is responsible for creating the asset-backed practice at the firm and has represented clients involved in the structuring of the first asset-backed commercial paper program, the first public offering of credit card-backed securities by a bank and the first offering of asset-backed securities supported by dealer floor plan loansMr. Eisenberg represents JPMorgan Chase Bank, as issuer, in its ongoing program of public offerings of its credit card receivables backed notes. In addition Mr. Eisenberg represented JPMorgan Chase Bank in connection with the issuance of notes backed by commercial loans and in connection with its offerings of Leveraged Notes for Credit Exposure, a credit derivative product. Mr. Eisenberg has also represented underwriters, issuers and sponsors of modeled index catastrophe bonds. Mr. Eisenberg has represented sellers and buyers of credit protection in connection with synthetic securitizations of consumer loans, commercial loans and high yield bonds."

This is an unconscionable conflict of interest given that JPMorgan Chase is receiving $25 billion of taxpayer funds under this bailout and that the program is very likely to be buying the very toxic waste for which Mr. Eisenberg wrote legal opinions and assisted in proliferating.

What most Americans do not understand, because mainstream media rarely explains it, is the incestuous relationship between the U.S. Treasury and this small band of financial marauders who busted the entire financial system with insane levels of leveraged derivative bets.

The bulk of the $125 billion will be dispersed among Uncle Sam’s own brokers, or in street parlance, Primary Dealers. Primary dealers are those financial firms anointed by the Federal Reserve to participate in the Fed’s open market activities and are required to participate to a significant degree in buying up Treasury securities at every Treasury auction. In other words, without these firms, the U.S. Government would have no means of financing its own funding needs.

Treasury, therefore, has an obvious conflict of interest in keeping these firms alive, even when they are the walking dead. Here’s how much of the $125 Billion the Fed’s Primary Dealers will collect: Citigroup, $25 Billion; JPMorgan Chase & Co., $25 Billion; Bank of America and its soon to be acquired brokerage, Merrill Lynch, $25 Billion; Goldman Sachs, $10 Billion; Morgan Stanley, $10 Billion. In other words, of the first $125 billion outlay from the emergency bailout fund, 76% is going to shore up Uncle Sam’s brokers and $300,000 is going to retain one of Wall Street’s favorite law firms.

In 1988 there were 46 primary dealers. That number had shrunk to 30 by 1999. In June 2008 there were 20, in no small part as a result of the mergers facilitated by Simpson, Thacher & Bartlett. In rapid succession since July, three more have disappeared from bad bets: Countrywide Securities (shotgun marriage with Bank of America); Lehman Brothers, bankrupt; Bear, Stearns (shotgun marriage with J.P. Morgan Securities). That currently leaves 17 and that number will drop to 16 when Merrill Lynch is folded into Bank of America. (The rest of the 16 primary dealers that are not getting part of the $125 billion are foreign banks.)

In addition to the repeal of the depression era, investor protection legislation known as the Glass Steagall Act, the removal of credit default swaps from regulation by the Commodity Futures Modernization Act of 2000, various U.S. Supreme Court decisions upholding Wall Street’s ability to run its own private justice system shrouded in darkness, there was one more key regulatory change that greased the tracks of this train wreck. On January 22, 1992 the Federal Reserve announced that its New York region would "discontinue the ’dealer surveillance’ now exercised over Primary Dealers through the monitoring of specific Federal Reserve standards and through regular on-site inspection visits by Federal Reserve dealer surveillance staff."

In other words, as bank consolidation left the country with fewer and fewer Primary Dealers and more and more "too big to fail candidates," instead of beefing up surveillance, the Federal Reserve amazingly dropped inspections. Who was at the helm of the Federal Reserve when this nutty decision was made: the same man who lobbied for the repeal of the Glass Steagall Act that ushered in the merger of depositor banks with casino investment banks and brokerages; the same man who lobbied for the passage of the Commodity Futures Modernization Act of 2000 to allow for unregulated derivatives markets. The man, of course, is Alan Greenspan who served a breathtaking 19 years as Chairman of the Federal Reserve. That, by the way, is the approximate number I would assign to how many years it will take to repair the collapse of confidence engendered by his crony wealth transfer system created under the guise of free market capitalism.

Iceland's Economic Meltdown Is a Big Flashing Warning Sign

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By Toby Sanger

Iceland -- better known for its geothermal hot springs, abundant fish, all-night raves and eclectic musicians such as Björk and Sigur Rós -- has now become renowned for something else: It is the first catastrophic, and perhaps most unlikely, casualty of the 2008 economic and financial meltdown.

Iceland is now essentially bankrupt after the government took over its three major banks to prevent them from failing. It owes more than $60 billion overseas, about six times the value of its annual economic output. As a professor at London School of Economics said, "No Western country in peacetime has crashed so quickly and so badly."

What on earth happened to get Iceland and its banking sector into such a state?

It turns out that Iceland, despite its coalition governments and Nordic social values, became a poster child for neoconservative economic policies inspired by Milton Friedman during the past decade. Friedman himself visited Iceland in 1984 and participated in what was described as a "lively television debate" with leading Socialists. This inspired a generation of young conservatives who came to power through the Independence Party in 1991 and have run its government through different coalitions since then.

Friedman may be dead now, but the economic and financial collapse of 2008 is becoming a real-life battleground of his theories against those of the other giant of 20th century economics, John Maynard Keynes, and their respective followers. Will financial market bailouts put the economy back on track, or are more extensive reform and a more active role for the government needed?

Keynes’ analysis was complicated and nuanced. The work for which he’s best known, The General Theory of Employment, Interest, and Money, provided a theoretical basis for the economic reforms of the New Deal era -- investments in public works and deficit spending that helped countries recover from the Great Depression.

While Keynes did not dismiss the role of monetary policy in countering an economic downturn, some of his followers, notably recent 2008 Nobel economics prize winner Paul Krugman, in relation to Japan, have focused on the possibility of a "liquidity trap" that makes traditional monetary policies, such as cutting interest rates, ineffective.

Keynes’ theories, though often misapplied, provided the basis for most macroeconomic policies in the capitalist world from the 1930s until the 1970s when the oil-price shock and stagflation hit.

Friedman, in his Monetary History of the United States, argued that the Great Depression was primarily caused by negligence by monetary authorities, such as the U.S. Federal Reserve, who didn’t do enough to respond to an ordinary financial shock by expanding the money supply.

Friedman and his Chicago school of economics then very successfully spearheaded a reaction against Keynesianism, largely defining economic policy since the 1980s. The main policy prescriptions -- restricting the role of government, deregulation, privatization, cutting taxes, low inflation and the benefits of free markets -- were encapsulated in the "Washington consensus" and imposed with missionary zeal by IMF economists around the world.

While Friedman’s narrow form of money supply monetarism was quickly abandoned in the early 1980s, most governments have relied primarily on monetary instead of fiscal policy for stabilization of their economies over the past few decades. This turned Alan Greenspan, former head of the U.S. Federal Reserve and an advocate of Friedman’s policies, into the most important economic policy maker in the world. Although Greenspan was never elected, had no particular expertise in economics and was a disciple of the fringe ideology of libertarian Ayn Rand, he was able to use his considerable power to endorse tax cuts and deregulation. He is now widely considered to share the blame for creating the conditions that resulted in the current economic collapse.

Greenspan’s successor as chair of the Federal Reserve, Ben Bernanke, is also a follower of Friedman, but he is an accomplished economist. Coincidentally enough, one of his areas of expertise was in the economics of the Great Depression; he once boldly stated that the Federal Reserve was responsible for causing the Great Depression and making banking panics during it "much more severe and widespread."

Bernanke is now one of the people in charge of what is probably the most expensive experiment in human history: trying to avert another Depression, using economic policies inspired by Friedman. The cost of this to the U.S. Treasury so far has already reached well over $1 trillion and continues to rise.

So how did the much smaller but perhaps more ambitious experiment with Friedmanite economic policies fare in tiny Iceland, one of the most physically isolated countries in the world with a population of only 320,000?

Under the leadership of Prime Minister David Oddsson and explicitly inspired by Friedman, Iceland’s neoconservative young Turks implemented a radical (but now familiar) program of privatization, tax cuts, reductions in spending and deficits, inflation targeting, central bank independence, free trade and exchange rate flexibility. Corporate taxes were cut from 50 percent down to 18 percent. Privatization and deregulation were driven directly through the prime minister’s office, and the major banks were privatized.

Economic missions and reports on Iceland issued by the influential International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) largely praised and encouraged these reforms, often disregarding the rising risks for its financial sector until recently.

It wasn’t as if everyone was unaware of the growing dangers of these policies. In 2001, Joseph Stiglitz, recipient of the Nobel prize in economics and one of the leading lights of the "New Keynesian" school of economics, wrote a remarkably prescient paper for the Central Bank of Iceland. In the paper, he raised alarm about a vulnerable, small, open economy such as Iceland suffering from a severe financial and economic crisis from such policies. In the absence of reforms in the "global financial architecture," Stiglitz outlined a set of regulatory and tax measures that Iceland should implement "both to reduce the likelihood of a crisis and to help manage the economy through a crisis."

Stiglitz’s paper (PDF) has invaluable advice that should have been considered by any nation -- and especially Iceland -- but it appears these recommendations were ignored. The right-wing reformers certainly didn’t change their course. Why would they? Life was good and getting better in the small island state, with showrooms full of fancy cars and booming real estate, business and financial industries.

At first, the policies appeared to be very successful. The economy grew at a strong pace, rising until Iceland achieved one of the highest per capita GDPs in the world. In 2007 it also topped the score for the United Nation’s Human Development Index.

Iceland rocketed to the top 10 in the indexes of economic freedom designed by the Fraser Institute and the Heritage Foundation. It was lauded by the conservative Cato Institute for its flat taxes, privatization and economic freedoms. The institute also criticized Naomi Klein for not mentioning Iceland (along with Ireland, Estonia and Australia) as an example of success in her book about the rise of disaster capitalism, The Shock Doctrine.

Icelandic banks and businesses, with the support of their government, expanded aggressively overseas, particularly into the U.K. and the Netherlands. The banking industry and private businesses flourished and created a number of new billionaires on the island.

Then it all came crashing down.

Inflation and short-term interest rates escalated to 14 percent, and Iceland’s currency lost half its value. Now Iceland has an external debt equivalent to about $200,000 per person with virtually no prospect of repaying it.

Iceland’s economic collapse wasn’t caused by the subprime crisis or by the Wall Street shenanigans in the biggest economic powerhouse in the world. Instead, it was caused by the same Friedman-inspired economic policies being independently applied in one of the smallest countries in the world.

Back in the United States, it appears that Washington’s experiments with Friedman-inspired economic policies are not meeting with much success. Each action taken by the U.S. Treasury and the Federal Reserve until mid-October was met with a further decline in stock prices.

Stock markets didn’t start to recover until European nations moved to effectively nationalize their major banks. This move was quickly followed by Washington, although it is far outside of what Friedman advocated. It is also diametrically opposed to a number of the 10 economic policy commandments of the old "Washington Consensus." While stock markets may recover, or continue more along their roller-coaster ride, we have yet to see how far down these Friedmanite free market policies will take the real economy of people’s jobs, incomes and living standards.

What is somewhat incredible is the apparent lack of remorse or self-reflection and doubt being expressed by the ideologues who put these policies in place. Amazingly, many neocons continue to argue that the financial collapse was caused by regulations that were too strong, or by a confluence of unlikely events, including a rise in "leftist attitudes."

There seems to be a belief among many that a financial market bailout will soon relieve the credit crunch caused by the subprime fiasco and then we can go back to business as usual. We don’t need to look too far back in time or too far abroad to see how misguided these views are. Clearly it is time to broaden our horizons, learn from Keynes and successful New Deal economic policies, and consider other imaginative solutions to our economic crisis.

Housing crisis accelerates blight in Detroit neighborhoods

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By Debra Watson and Anne Moore

Dire conditions in a once prosperous East Side Detroit neighborhood underscore the impact the wave of home foreclosures is having on working people across the United States. While the effect of the mortgage crisis on the Wall Street banks is headline news, the media rarely inquires into the social consequences of the foreclosure epidemic.

Some three-quarters of a million people have lost their homes across the US so far this year and foreclosure filings are up 82.6 percent from a year ago, according to the web site ForeclosureS.com. The same report notes that 107,500 homes were lost in September alone.

The city of Detroit has the highest repossession rate for a major city in the US, with real-estate owned (REO) homes—that is, homes repossessed by banks or mortgage holders—at 3.7 percent in 2007. Cleveland, Ohio came in a close second with a 3 percent REO rate.

The social reality behind these figures is illustrated by a recent sale of a foreclosed home in Detroit. In September, a modest two-story single-family home on Detroit’s east side near the Detroit City Airport sold for one dollar. Less than two years ago, in November 2006, the same home sold for $65,000.

While abandoned homes are hardly a new phenomenon in Detroit, the story of this one house is a testament to the speed, scope, and depth of the foreclosure crisis. The one-dollar sale of the Detroit house even made the Sunday Times of London, which recently ran a piece titled “America’s Darkest Fear: to end up like Detroit.”

The WSWS interviewed Constance and her stepdaughter Toshiana, who live near Detroit City Airport. As Toshiana explained: “I actually am surprised that you came and talked to us at all. When the news came they all were taking pictures of the place up the street that sold for a dollar.

“We finally came out to see what it was about, why the news trucks were here. It took three days before they finally came to us and asked the people on the block what they thought. I don’t think they really care about people like us and what we think.”

Prior to the collapse of auto manufacturing in Detroit, the neighborhood had been relatively prosperous and home to thousands of autoworkers. Now, foreclosed properties are lowering home values and causing urban blight throughout the area. Constance rents a house on the same street as the foreclosed home and grew up nearby.

“I heard about the house up the street selling for one dollar,” Constance told the WSWS. “They had just fixed it up real nice a year and half ago, new siding, things like that. It looked beautiful. Now it’s a mess.”

Last summer the bank foreclosed on the home after the owners fell behind on their mortgage. “They had some renters come in and then it was empty. It didn’t take long for them to come and strip the place clean,” Toshiana said.

“When I was a baby my father was at an auto plant,” Toshiana added. “He had a brother working at the plant also. I had another uncle who worked at Dodge Main in Hamtramck. They all came up from the South in the early 1970s. There are not many people around here at the plants anymore. My mother says she is leaving Michigan and moving back to Louisiana as soon as she retires.”

The term “toxic mortgage” only begins to describe the effect of the housing crisis on working class communities across the US. The family that falls behind on mortgage payments or rent is out on the street. Neighborhoods become distressed. Abandoned houses catch fire and burn—a common phenomenon in Detroit—producing a noxious odor that permeates whole neighborhoods for months.

Toshiana noted the absence of the most basic services in the city of Detroit. “We don’t even have a grocery store anymore.”

She continued, “You actually have to go back to the early ’90s to see when all this started to happen. I could tell you a couple blocks I lived on in Detroit that I watched gradually torn down. They were really nice when I was there, but what happened? One place, I came back five years after I had moved, just to visit. I could not believe what had happened. The place was a mess; the houses were in terrible shape.

“Look around here. All you see are empty lots. Realtors may call these an investment opportunity, but who wants to live next to an empty lot? Scrappers make money off tearing the houses up. I really don’t understand why they even give out junking licenses, when they know this is going on in the neighborhoods. The decline is very ugly.”

According to a report in the August 13 Detroit News, there are now several properties listed for one dollar in Detroit, including a single family home and a duplex. In some cases subprime lenders, “find themselves the owners of whole neighborhoods of vacant, deteriorating homes.”

“My 14-year-old son could buy a block of Detroit property,” said a representative of the realty management firm that sold the one-dollar house.

Foreclosures are rising in several metropolitan areas across the state of Michigan. According to figures released by RealtyTrac, the state as a whole ranked fourth nationwide in the total number of foreclosure filings in August, with 13,605. Foreclosure filings rose 17 percent over July levels. Michigan ranked fifth nationwide in foreclosure filings, with one for every 332 households. That compares with a national rate of one filing for every 416 households.

A 2006 Association of Community Organizations for Reform Now (ACORN) report, “The Impending Rate Shock,” singled out Detroit as one of the cities likely to experience a housing disaster. In 2005 more than half the home purchase loans made in Detroit were high-cost loans, “making the city particularly vulnerable to rate shock,” the report noted. There were 23 metropolitan areas in the US where high-cost loans represent at least one of every three loans made to homebuyers.

The Rising Body Count on Main Street

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By Nick Turse

The Human Fallout from the Financial Crisis

On October 4, 2008, in the Porter Ranch section of Los Angeles, Karthik Rajaram, beset by financial troubles, shot his wife, mother-in-law, and three sons before turning the gun on himself. In one of his two suicide notes, Rajaram wrote that he was "broke," having incurred massive financial losses in the economic meltdown. "I understand he was unemployed, his dealings in the stock market had taken a disastrous turn for the worse," said Los Angeles Deputy Police Chief Michel R. Moore.

The fallout from the current subprime mortgage debacle and the economic one that followed has thrown lives into turmoil across the country. In recent days, the Associated Press, ABC News, and others have begun to address the burgeoning body count, especially suicides attributed to the financial crisis. (Note that, months ago, Barbara Ehrenreich raised the issue in the Nation.)

Suicide is, however, just one type of extreme act for which the financial meltdown has seemingly been the catalyst. Since the beginning of the year, stories of resistance to eviction, armed self-defense, canicide, arson, self-inflicted injury, murder, as well as suicide, especially in response to the foreclosure crisis, have bubbled up into the local news, although most reports have gone unnoticed nationally -- as has any pattern to these events.

While it’s impossible to know what factors, including deeply personal ones, contribute to such extreme acts, violent or otherwise, many do seem undeniably linked to the present crisis. This is hardly surprising. Rates of stress, depression, and suicide invariably climb in times of economic turmoil. As Kathleen Hall, founder and CEO of the Stress Institute in Atlanta, told USA Today’s Stephanie Armour earlier this year, "Suicides are very much tied to the economy."

With predictions of a long and deep recession now commonplace, it’s not too soon to begin looking for these patterns among the human tragedies already sprouting amid the financial ruins. Troubling trends are to be expected in the years ahead, especially as hundreds of thousands of veterans of the Iraq and Afghan Wars, their families often already under enormous stress, are coming home to scenarios of joblessness and, in some cases, homelessness. Consider this, then, an attempt to look for early anecdotal signs of the fallout from hard times, the results, in this case, of a review of local press reports from across the nation, some tiny but potentially indicative of larger American tragedies, and all suggesting a pattern that is likely to grow more pronounced.

Extreme Evictions

In February, when a sheriff’s deputy went to serve an eviction notice on a home owner in Greeley, Colorado, he found the man had slashed his wrists and was lying in a pool of blood. Rushed to a nearby hospital, the man survived, while the Sheriff’s office tried to downplay economic reasons for the incident, saying, according to the Denver Post, that "it wasn’t linking the suicide attempt to the eviction because the man had known for a week that he was to be kicked out."

In March, Ocala, Florida resident Roland Gore killed his dog and his wife, set fire to his home which was in foreclosure, and then killed himself.

In April, Robert McGuinness, a 24-year-old process server, arrived at the Marion County, Florida doorstep of Frank W. Conrad. According to an article in the local Star Banner, the 82-year-old Conrad was reportedly "cordial" at first. When McGuinness produced the foreclosure notice, however, Conrad got angry and left the room. He returned with a .38 caliber pistol and announced, "You have two seconds to get off my property or you will go to the hospital." Marion County sheriff’s deputies later arrested Conrad.

On June 3rd, agents of the Federal Emergency Management Agency (FEMA) set out to inform New Orleans resident Eric Minshew that he would be evicted from his "Katrina" trailer. After Minshew threatened them, the FEMA employees called the police. When they arrived, Minshew allegedly threatened them as well and "locked himself in his partially-gutted home, adjacent to his trailer." A SWAT team was called in and tear-gassed the man. Interviewed by the Times-Picayune, local resident Tiffany Flores said, "Some SWAT members told my husband they had never seen anyone withstand that much tear gas." The standoff went on for hours before "an assault team of tactical officers" invaded the home. Though Minshew opened fire, they eventually cornered him on the upper floor. When -- they claimed -- he refused to drop his weapon, they gunned him down.

That same day, in Multnomah County, Oregon, sheriff’s deputies served an eviction notice on a desperate tenant. According to Deputy Travis Gullberg, the Multnomah County Sheriff’s Public Information Officer, the evictee promptly pulled a gun from his pocket and pointed it at his head before being disarmed by the deputies.

Hard Times

Recently, according to the Los Angeles Times, Rich Paul, a vice president at ValueOptions Inc., which handles mental health referrals, said that over the last year stress-related calls arising from foreclosures or financial hardship had gone up 200% in California. Similarly, Dr. Mason Turner, chief of psychiatry at Kaiser Permanente’s San Francisco Medical Center, reported "a fourfold increase in psychiatric admissions at his hospital during August, with roughly 60% of patients saying financial stress contributed to their problems."

Of course, many victims of the linked economic crises never receive treatment. In July, Sacramento County Sheriff’s Deputy Mark Habecker told the Sacramento Bee that twice this year "homeowners about to be evicted have committed suicide as he approached to do a lockout." In another case, he said, "a fellow Sacramento deputy found a note in the home that told him where to find the foreclosed homeowner’s body." The Bee reported that such cases "received no publicity when they happened," which raises the question of just how many similar suicides have gone unreported nationwide.

In July, when police delivered an eviction notice at the Middleburg, Florida home of George and Bonnie Mangum, the couple barricaded themselves inside. Eventually, George Mangum was talked into surrendering and was arrested. "He did the only thing he knew to do, protect his family, all he did was sit on the other side of the door and say I have a gun, I have a gun and that’s why he’s going to jail because he threatened the police," said Bonnie. The couple’s daughter Robin added, "This is my home, this is all our home and I don’t think it’s right. My dad was a Green Beret, he’s sick, how are you going to kick him out?"

Pinellas Park, Florida resident Dallas Dwayne Carter was a 44-year-old disabled, single dad who lost his job, fell into debt, and was faced with eviction. "He always talked about needing help -- financially and help with the kids," neighbor Kevin Luster told the St. Petersburg Times. On July 19th, Carter apparently called the police to say he was armed and disturbed. When they arrived, Carter fired his pistol and rifle inside the apartment, before emerging and pointing his weapons at the officers on the scene. Police say they ordered him to drop them. When he didn’t, they killed him in a 10-round fusillade.

On July 23d, about 90 minutes before her foreclosed Taunton, Massachusetts home was scheduled to be sold at auction, Carlene Balderrama faxed a letter to her mortgage company, letting them know that "by the time they foreclosed on the house today she’d be dead." She continued, "I hope you’re more compassionate with my husband and son than you were with me." After that, she took a high-powered rifle and, according to the Boston Globe, shot herself. In an interview with the Associated Press, Balderrama’s husband John said, "I had no clue." His wife handled the finances and had been intercepting letters from the mortgage company for months. "She put in her suicide note that it got overwhelming for her," he said. In the letter, she wrote, "take the [life] insurance money and pay for the house."

The day after Balderrama took her life, 50 miles away in Worcester, Massachusetts, a 64-year-old man, who had already been evicted, barricaded himself inside his former home. Police were called to the scene to find him reportedly prepared to ignite four propane tanks. "His intention was to burn the house down with him in it," Sgt. Christopher J. George told the Telegram & Gazette. With the man becoming "even more despondent" as "a moving van arrived on the street," police stormed the house to find him "holding a foot-long knife to his own chest" as a piece of paper burned near the propane. The man was disarmed and the fire extinguished.

That very same day, in Visalia, California, a Tulare County sheriff’s deputy tried to serve an eviction notice to Melvin Nicks, 50. Nicks responded by stabbing the deputy with a knife and barricading himself in the house for several hours. He later surrendered.

No Way Out

Bay City, Michigan residents David and Sharron Hetzel, both 56, "lost their home to foreclosure and filed for bankruptcy protection. But they did not follow through with the Chapter 13 proceedings." On August 1st, say police reports, David Hetzel mailed a letter of apology to his family members. Later that night, according to the local police, he attacked his sleeping wife, striking her in the head with a golf club and repeatedly stabbing her with a kitchen knife. After that, he began setting fires throughout the house before crawling into bed beside his wife and killing himself with "a single, fatal wound to his torso."

On August 12th, sheriff’s deputies arrived at the Saddlebrook, New Jersey home of 88-year-old Beatrice Brennan, another victim of the mortgage crisis, who had refinanced her home and fallen behind on payments. Refusing to stand idly by while his mother was put out on the street, her 60-year-old son John pulled a .22 caliber handgun on the lawmen. That sent the movers, waiting for a court-imposed 10 a.m. deadline, scurrying for their van. Brennan was able to delay the eviction briefly before a SWAT team arrested him and his mother lost her home. "I’m heartbroken over this," Vincent Carabello, a longtime neighbor, told the local paper, the Record. "How could this happen?"

Roseville, Minnesota resident Sylvia Sieferman was under a great deal of stress and beset by financial difficulties. She worried about how she would care for her two 11-year-old daughters. On August 21st, according to police reports, Sieferman "repeatedly stabbed the girls and herself." "She reached her limit," her friend Carrie Micko told the Star Tribune. "She couldn’t cope anymore… she felt that her daughters were suffering because she was failing to provide for them." As Micko further explained, "After a series of financial mishaps, she just couldn’t see her way through. She was under extreme financial, emotional and spiritual distress and didn’t want to fail them."

By Any Means Necessary

The Boston Globe reported that, on September 5th, "[f]our protesters trying to prevent the eviction of a Roxbury woman from her home were arrested… after they chained themselves to the steps of her back porch." As 40 protesters chanted in the street, officials from Bank of America ordered Paula Taylor out of her house. "This is our eighth blockade and the first time there have been arrests," said Soledad Lawrence, an organizer with City Life, a non-profit organization seeking to halt the large numbers of foreclosures and evictions in Boston neighborhoods. "They can be more aggressive and we’ll be more aggressive," she added.

On September 25th, as politicians in Washington tried to hash out a massive bailout package for financial institutions, six Boston police officers confronted about 40 City Life activists in front of the home of Ana Esquivel, a public school employee, and her husband Raul, a construction worker, both in their fifties. The Globe reported that four protesters were arrested as police shoved their way through in order to allow a locksmith into the house to bar the Esquivels from their home. "We’ve been destroyed by the bank," Ana Esquivel said, sobbing. "The bank is too big for us." While the Esquivel blockade failed, Steven Meacham, a City Life organizer, told a Globe reporter that "the protests have helped to stop about nine evictions. In the successful blockades, the homeowners were given additional time by their mortgage holders to negotiate alternatives to foreclosure."

Two days earlier, Los Angeles County sheriff’s deputies came to the Monrovia home of 53-year-old Joanne Carter and her 67-year-old husband John to serve an eviction notice. Joanne Carter refused to accept it. According to "Monrovia spokesman" Dick Singer, as reported in the Pasadena Star-News, she "told deputies she had guns in the house and showed them a shotgun." The next day, Monrovia police officers showed up at the home after being informed that the woman "may have made threats to a workers compensation agency." Police Lieutenant Michael Lee said that Carter told them if they "tried to come in, she would defend her house at any means necessary." She and her husband then reportedly barricaded themselves inside, after which a shotgun was fired. Police from other local departments were called in. Following an hours-long standoff, the Carters surrendered and were arrested.

That same day, in northern California, Cliff Kendall, Petaluma’s chief building official, shot himself with a rifle. A week earlier, Kendall had learned that he was being laid off. "He was afraid we’d lose our home, and we probably will because I can’t afford to keep it," his wife Patricia, who is on disability with a back injury, told the Press Democrat. "He was extremely upset about it and hurt."

On October 3rd, the day before Karthik Rajaram’s mass murder/suicide in Los Angeles, 90-year-old Addie Polk was driven to extremes by the financial crisis. With sheriff’s deputies at the door, Polk evidently took the only measure she felt was left to her to avoid eviction from her foreclosed home. She tried to kill herself. Her neighbor Robert Dillon, hearing loud noises from her home, used a ladder to enter the second floor window. He found Polk lying on her bed. "Then she kind of moved toward me a little and I saw that blood, and I said, ’Oh, no. Miss Polk musta done shot herself.’" While she was in the hospital recovering from two self-inflicted gunshot wounds, Fannie Mae spokesman Brian Faith announced the mortgage association had decided to forgive her outstanding debt and give her the house "outright."

On October 6th, in Sevier County, Tennessee, sheriff’s deputies, with police in tow, arrived to evict Jimmy and Pamela Ross from their home. They heard a shot and entered the home to find 57-year-old Pamela dead of a self-inflicted gunshot wound to the chest. Neighbor Ruth Blakey told WVLT-TV, "I know she really hated to leave that house. She did not want to leave that house."

Wanda Dunn told neighbors she would rather die than leave her home. On October 13th, the day she was to be evicted, the 53-year-old Pasadena, California native apparently set fire to the home "where her family had lived for generations" before shooting herself in the head. "We knew it was going to happen," neighbor Steve Brooks told the Los Angeles Times. "It was nobody’s fault; it was everybody’s fault."

Outsourcing Suicide

In September, readers at Slate’s "Explainer" column asked the following question: If the financial crisis was so dire, "how come we aren’t hearing about executives jumping out of windows?" Writer Nina Shen Rastogi dutifully answered:

"Because the current situation hasn’t had nearly as devastating an effect on people’s personal finances. The Great Crash of 1929 -- and, to a lesser extent, the crash of 1987 -- did lead some people to commit suicide. But in nearly all of those cases, the deceased had suffered a major loss when the market collapsed. Now, due in large part to those earlier experiences, investors tend to keep their portfolios far more diversified, so as to avoid having their entire fortunes wiped out when stocks take a downturn."

Perhaps this is true. So far, at least, Wall Street’s suicides seem to have been outsourced to places that its executives have probably never heard of. There, on the proverbial main streets of America, the Street’s financial meltdown is beginning to be measured not only in dollars and cents, but in blood.

Right now, there are no real counts of the many extreme acts born of the financial crisis, but assuredly other murders, suicides, self-inflicted injuries, acts of arson and of armed self-defense have simply gone unnoticed outside of economically hard-hit neighborhoods in cities and small towns across America. With no end in sight for either the foreclosures or the economic turmoil, Americans may have to brace themselves for many more casualties on the home front. Unless extreme economic steps, like mortgage- and debt-forgiveness, are implemented, the number of extreme acts and the ultimate body count may be far more extreme than anyone yet wants to contemplate.

Freddie Mac secretly paid Republican firm to kill regulation

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Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.

In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel (R-Neb.).

DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.

Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.

In the midst of DCI's yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist to allow a vote.

''If effective regulatory reform legislation . . . is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole,'' the senators wrote.

Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents.

In the end, there was not enough Republican support for Hagel's bill to warrant bringing it up for a vote because Democrats also opposed it and the votes of some would be needed for passage. The measure died.

McCain was not a target of the DCI campaign. He signed Hagel's letter.

The Republican senators targeted by DCI began hearing from prominent constituents and financial contributors, all urging the defeat of Hagel's bill because it might harm the housing boom. The effort generated newspaper articles and radio and TV appearances by participants who spoke out against the measure.

Inside Freddie Mac headquarters, the few dozen people who knew what DCI was doing referred to the initiative as ''the stealth lobbying campaign,'' according to three people familiar with the drive.

Freddie Mac executive Hollis McLoughlin oversaw DCI's drive, according to the three people.

''Hollis's goal was not to have any Freddie Mac fingerprints on this project and DCI became the hidden hand behind the effort,'' one of the three said.

Freddie Mac acknowledged that the company ''did retain DCI to provide public affairs support at the state and local level.'' DCI said it complied with federal and state laws and regulations in representing Freddie Mac.

Kucinich calls for probe of bonuses for Wall Street aid recipients

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Congressman Dennis Kucinich (D-OH) has called for a probe into $70 billion worth of pay deals planned for employees of failed banking firms receiving government aid.

Kucinich said Sunday that he was directing his staff to immediately probe Wall Street firms that have received any portion of the $700 billion bailout plan recently passed by Congress, in response to a recent report by The Guardian outlining the firms’ dramatic drops in revenue, but not in executive compensation.

That Friday report showed that over $70 billion was to be allocated towards pay deals, including discretionary bonuses, at firms such as Goldman Sachs and Citigroup.

"When Congress placed restrictions on excessive executive pay, it had no intention of permitting business as usual with respect to bonus structures," Kucinich said. "It would add insult to injury to ask taxpayers not only to bailout a firm, but to pay for bonuses as well. The Guardian’s report necessitates an immediate inquiry."

Arson, Suicide, and Murder Mark the Economic Crisis, and We're Not Hearing About it

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By Nick Turse

On October 4, 2008, in the Porter Ranch section of Los Angeles, Karthik Rajaram, beset by financial troubles, shot his wife, mother-in-law, and three sons before turning the gun on himself. In one of his two suicide notes, Rajaram wrote that he was "broke," having incurred massive financial losses in the economic meltdown. "I understand he was unemployed, his dealings in the stock market had taken a disastrous turn for the worse," said Los Angeles Deputy Police Chief Michel R. Moore.

The fallout from the current subprime mortgage debacle and the economic one that followed has thrown lives into turmoil across the country. In recent days, the Associated Press, ABC News, and others have begun to address the burgeoning body count, especially suicides attributed to the financial crisis. (Note that, months ago, Barbara Ehrenreich raised the issue in the Nation.)

Suicide is, however, just one type of extreme act for which the financial meltdown has seemingly been the catalyst. Since the beginning of the year, stories of resistance to eviction, armed self-defense, canicide, arson, self-inflicted injury, murder, as well as suicide, especially in response to the foreclosure crisis, have bubbled up into the local news, although most reports have gone unnoticed nationally -- as has any pattern to these events.

While it’s impossible to know what factors, including deeply personal ones, contribute to such extreme acts, violent or otherwise, many do seem undeniably linked to the present crisis. This is hardly surprising. Rates of stress, depression, and suicide invariably climb in times of economic turmoil. As Kathleen Hall, founder and CEO of the Stress Institute in Atlanta, told USA Today’s Stephanie Armour earlier this year, "Suicides are very much tied to the economy."

With predictions of a long and deep recession now commonplace, it’s not too soon to begin looking for these patterns among the human tragedies already sprouting amid the financial ruins. Troubling trends are to be expected in the years ahead, especially as hundreds of thousands of veterans of the Iraq and Afghan Wars, their families often already under enormous stress, are coming home to scenarios of joblessness and, in some cases, homelessness. Consider this, then, an attempt to look for early anecdotal signs of the fallout from hard times, the results, in this case, of a review of local press reports from across the nation, some tiny but potentially indicative of larger American tragedies, and all suggesting a pattern that is likely to grow more pronounced.

Extreme Evictions

In February, when a sheriff’s deputy went to serve an eviction notice on a home owner in Greeley, Colorado, he found the man had slashed his wrists and was lying in a pool of blood. Rushed to a nearby hospital, the man survived, while the Sheriff’s office tried to downplay economic reasons for the incident, saying, according to the Denver Post, that "it wasn’t linking the suicide attempt to the eviction because the man had known for a week that he was to be kicked out."

In March, Ocala, Florida resident Roland Gore killed his dog and his wife, set fire to his home which was in foreclosure, and then killed himself.

In April, Robert McGuinness, a 24-year-old process server, arrived at the Marion County, Florida doorstep of Frank W. Conrad. According to an article in the local Star Banner, the 82-year-old Conrad was reportedly "cordial" at first. When McGuinness produced the foreclosure notice, however, Conrad got angry and left the room. He returned with a .38 caliber pistol and announced, "You have two seconds to get off my property or you will go to the hospital." Marion County sheriff’s deputies later arrested Conrad.

On June 3rd, agents of the Federal Emergency Management Agency (FEMA) set out to inform New Orleans resident Eric Minshew that he would be evicted from his "Katrina" trailer. After Minshew threatened them, the FEMA employees called the police. When they arrived, Minshew allegedly threatened them as well and "locked himself in his partially-gutted home, adjacent to his trailer." A SWAT team was called in and tear-gassed the man. Interviewed by the Times-Picayune, local resident Tiffany Flores said, "Some SWAT members told my husband they had never seen anyone withstand that much tear gas." The standoff went on for hours before "an assault team of tactical officers" invaded the home. Though Minshew opened fire, they eventually cornered him on the upper floor. When -- they claimed -- he refused to drop his weapon, they gunned him down.

That same day, in Multnomah County, Oregon, sheriff’s deputies served an eviction notice on a desperate tenant. According to Deputy Travis Gullberg, the Multnomah County Sheriff’s Public Information Officer, the evictee promptly pulled a gun from his pocket and pointed it at his head before being disarmed by the deputies.

Hard Times

Recently, according to the Los Angeles Times, Rich Paul, a vice president at ValueOptions Inc., which handles mental health referrals, said that over the last year stress-related calls arising from foreclosures or financial hardship had gone up 200% in California. Similarly, Dr. Mason Turner, chief of psychiatry at Kaiser Permanente’s San Francisco Medical Center, reported "a fourfold increase in psychiatric admissions at his hospital during August, with roughly 60% of patients saying financial stress contributed to their problems."

Of course, many victims of the linked economic crises never receive treatment. In July, Sacramento County Sheriff’s Deputy Mark Habecker told the Sacramento Bee that twice this year "homeowners about to be evicted have committed suicide as he approached to do a lockout." In another case, he said, "a fellow Sacramento deputy found a note in the home that told him where to find the foreclosed homeowner’s body." The Bee reported that such cases "received no publicity when they happened," which raises the question of just how many similar suicides have gone unreported nationwide.

In July, when police delivered an eviction notice at the Middleburg, Florida home of George and Bonnie Mangum, the couple barricaded themselves inside. Eventually, George Mangum was talked into surrendering and was arrested. "He did the only thing he knew to do, protect his family, all he did was sit on the other side of the door and say I have a gun, I have a gun and that’s why he’s going to jail because he threatened the police," said Bonnie. The couple’s daughter Robin added, "This is my home, this is all our home and I don’t think it’s right. My dad was a Green Beret, he’s sick, how are you going to kick him out?"

Pinellas Park, Florida resident Dallas Dwayne Carter was a 44-year-old disabled, single dad who lost his job, fell into debt, and was faced with eviction. "He always talked about needing help -- financially and help with the kids," neighbor Kevin Luster told the St. Petersburg Times. On July 19th, Carter apparently called the police to say he was armed and disturbed. When they arrived, Carter fired his pistol and rifle inside the apartment, before emerging and pointing his weapons at the officers on the scene. Police say they ordered him to drop them. When he didn’t, they killed him in a 10-round fusillade.

On July 23d, about 90 minutes before her foreclosed Taunton, Massachusetts home was scheduled to be sold at auction, Carlene Balderrama faxed a letter to her mortgage company, letting them know that "by the time they foreclosed on the house today she’d be dead." She continued, "I hope you’re more compassionate with my husband and son than you were with me." After that, she took a high-powered rifle and, according to the Boston Globe, shot herself. In an interview with the Associated Press, Balderrama’s husband John said, "I had no clue." His wife handled the finances and had been intercepting letters from the mortgage company for months. "She put in her suicide note that it got overwhelming for her," he said. In the letter, she wrote, "take the [life] insurance money and pay for the house."

The day after Balderrama took her life, 50 miles away in Worcester, Massachusetts, a 64-year-old man, who had already been evicted, barricaded himself inside his former home. Police were called to the scene to find him reportedly prepared to ignite four propane tanks. "His intention was to burn the house down with him in it," Sgt. Christopher J. George told the Telegram & Gazette. With the man becoming "even more despondent" as "a moving van arrived on the street," police stormed the house to find him "holding a foot-long knife to his own chest" as a piece of paper burned near the propane. The man was disarmed and the fire extinguished.

That very same day, in Visalia, California, a Tulare County sheriff’s deputy tried to serve an eviction notice to Melvin Nicks, 50. Nicks responded by stabbing the deputy with a knife and barricading himself in the house for several hours. He later surrendered.

No Way Out

Bay City, Michigan residents David and Sharron Hetzel, both 56, "lost their home to foreclosure and filed for bankruptcy protection. But they did not follow through with the Chapter 13 proceedings." On August 1st, say police reports, David Hetzel mailed a letter of apology to his family members. Later that night, according to the local police, he attacked his sleeping wife, striking her in the head with a golf club and repeatedly stabbing her with a kitchen knife. After that, he began setting fires throughout the house before crawling into bed beside his wife and killing himself with "a single, fatal wound to his torso."

On August 12th, sheriff’s deputies arrived at the Saddlebrook, New Jersey home of 88-year-old Beatrice Brennan, another victim of the mortgage crisis, who had refinanced her home and fallen behind on payments. Refusing to stand idly by while his mother was put out on the street, her 60-year-old son John pulled a .22 caliber handgun on the lawmen. That sent the movers, waiting for a court-imposed 10 a.m. deadline, scurrying for their van. Brennan was able to delay the eviction briefly before a SWAT team arrested him and his mother lost her home. "I’m heartbroken over this," Vincent Carabello, a longtime neighbor, told the local paper, the Record. "How could this happen?"

Roseville, Minnesota resident Sylvia Sieferman was under a great deal of stress and beset by financial difficulties. She worried about how she would care for her two 11-year-old daughters. On August 21st, according to police reports, Sieferman "repeatedly stabbed the girls and herself." "She reached her limit," her friend Carrie Micko told the Star Tribune. "She couldn’t cope anymore she felt that her daughters were suffering because she was failing to provide for them." As Micko further explained, "After a series of financial mishaps, she just couldn’t see her way through. She was under extreme financial, emotional and spiritual distress and didn’t want to fail them."

By Any Means Necessary

The Boston Globe reported that, on September 5th, "[f]our protesters trying to prevent the eviction of a Roxbury woman from her home were arrested after they chained themselves to the steps of her back porch." As 40 protesters chanted in the street, officials from Bank of America ordered Paula Taylor out of her house. "This is our eighth blockade and the first time there have been arrests," said Soledad Lawrence, an organizer with City Life, a non-profit organization seeking to halt the large numbers of foreclosures and evictions in Boston neighborhoods. "They can be more aggressive and we’ll be more aggressive," she added.

On September 25th, as politicians in Washington tried to hash out a massive bailout package for financial institutions, six Boston police officers confronted about 40 City Life activists in front of the home of Ana Esquivel, a public school employee, and her husband Raul, a construction worker, both in their fifties. The Globe reported that four protesters were arrested as police shoved their way through in order to allow a locksmith into the house to bar the Esquivels from their home. "We’ve been destroyed by the bank," Ana Esquivel said, sobbing. "The bank is too big for us." While the Esquivel blockade failed, Steven Meacham, a City Life organizer, told a Globe reporter that "the protests have helped to stop about nine evictions. In the successful blockades, the homeowners were given additional time by their mortgage holders to negotiate alternatives to foreclosure."

Two days earlier, Los Angeles County sheriff’s deputies came to the Monrovia home of 53-year-old Joanne Carter and her 67-year-old husband John to serve an eviction notice. Joanne Carter refused to accept it. According to "Monrovia spokesman" Dick Singer, as reported in the Pasadena Star-News, she "told deputies she had guns in the house and showed them a shotgun." The next day, Monrovia police officers showed up at the home after being informed that the woman "may have made threats to a workers compensation agency." Police Lieutenant Michael Lee said that Carter told them if they "tried to come in, she would defend her house at any means necessary." She and her husband then reportedly barricaded themselves inside, after which a shotgun was fired. Police from other local departments were called in. Following an hours-long standoff, the Carters surrendered and were arrested.

That same day, in northern California, Cliff Kendall, Petaluma’s chief building official, shot himself with a rifle. A week earlier, Kendall had learned that he was being laid off. "He was afraid we’d lose our home, and we probably will because I can’t afford to keep it," his wife Patricia, who is on disability with a back injury, told the Press Democrat. "He was extremely upset about it and hurt."

On October 3rd, the day before Karthik Rajaram’s mass murder/suicide in Los Angeles, 90-year-old Addie Polk was driven to extremes by the financial crisis. With sheriff’s deputies at the door, Polk evidently took the only measure she felt was left to her to avoid eviction from her foreclosed home. She tried to kill herself. Her neighbor Robert Dillon, hearing loud noises from her home, used a ladder to enter the second floor window. He found Polk lying on her bed. "Then she kind of moved toward me a little and I saw that blood, and I said, ’Oh, no. Miss Polk musta done shot herself.’" While she was in the hospital recovering from two self-inflicted gunshot wounds, Fannie Mae spokesman Brian Faith announced the mortgage association had decided to forgive her outstanding debt and give her the house "outright."

On October 6th, in Sevier County, Tennessee, sheriff’s deputies, with police in tow, arrived to evict Jimmy and Pamela Ross from their home. They heard a shot and entered the home to find 57-year-old Pamela dead of a self-inflicted gunshot wound to the chest. Neighbor Ruth Blakey told WVLT-TV, "I know she really hated to leave that house. She did not want to leave that house."

Wanda Dunn told neighbors she would rather die than leave her home. On October 13th, the day she was to be evicted, the 53-year-old Pasadena, California native apparently set fire to the home "where her family had lived for generations" before shooting herself in the head. "We knew it was going to happen," neighbor Steve Brooks told the Los Angeles Times. "It was nobody’s fault; it was everybody’s fault."

Outsourcing Suicide

In September, readers at Slate’s "Explainer" column asked the following question: If the financial crisis was so dire, "how come we aren’t hearing about executives jumping out of windows?" Writer Nina Shen Rastogi dutifully answered:

"Because the current situation hasn’t had nearly as devastating an effect on people’s personal finances. The Great Crash of 1929 -- and, to a lesser extent, the crash of 1987 -- did lead some people to commit suicide. But in nearly all of those cases, the deceased had suffered a major loss when the market collapsed. Now, due in large part to those earlier experiences, investors tend to keep their portfolios far more diversified, so as to avoid having their entire fortunes wiped out when stocks take a downturn."

Perhaps this is true. So far, at least, Wall Street’s suicides seem to have been outsourced to places that its executives have probably never heard of. There, on the proverbial main streets of America, the Street’s financial meltdown is beginning to be measured not only in dollars and cents, but in blood.

Right now, there are no real counts of the many extreme acts born of the financial crisis, but assuredly other murders, suicides, self-inflicted injuries, acts of arson and of armed self-defense have simply gone unnoticed outside of economically hard-hit neighborhoods in cities and small towns across America. With no end in sight for either the foreclosures or the economic turmoil, Americans may have to brace themselves for many more casualties on the home front. Unless extreme economic steps, like mortgage- and debt-forgiveness, are implemented, the number of extreme acts and the ultimate body count may be far more extreme than anyone yet wants to contemplate.

IMF: Spain to be hit hard by recession

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By Keith Lee and Paul Bond

Spain’s Socialist Workers Party (PSOE) government, after months of denying that the country would be hit hard by the worldwide banking crisis, must now face the reality of recession.

A recent forecast by the International Monetary Fund predicts Spain will enter recession next year and will be “harder-hit than other countries.” Treasury Secretary Carlos Ocana admitted that the economy might not recover until 2011.

The government has drafted a $136 billion plan to aid the banks. It will guarantee up to €100 billion of new bank debt for 2008. It had already followed the rest of the euro zone economies in establishing a $41 billion fund—possibly rising to $68 billion—to buy bank assets. The plan mirrored the American rescue plan to prop up its economy. “The fundamental objective is to promote the smooth functioning of Spanish credit markets,” Prime Minister José Luis Rodriguez Zapatero said before the latest legislation. He went on to say that the fund would buy “assets of the highest quality,” and told reporters that the fund would be closed when market conditions return to normal.

The Spanish banking system has come under increased pressure from a massive increase in loan defaults, as a 10-year property boom comes sharply to a halt. Miguel Angel Ordonez, Spain’s European Central Bank (ECB) governor, admitted in a statement to the Spanish Cortes that the world confronts a crisis of “enormous proportions.” The Ibex 35, the benchmark index of the Madrid stock market, has fallen 38 percent since January.

Finance Minister Pedro Solbes told El Mundo that he was concerned by the rapid rate at which bad debt ratios had risen. “Non-performing loans ... have risen extremely fast and that is worrying. It’s not the level of bad debt, but the rapid rise,” Solbes said.

When the financial crisis broke, the ECB had already expressed concerns about the state of Spanish banks, especially savings banks. Large numbers will be affected by tighter ECB rules on lending to banks throughout the euro zone. The ECB was concerned by the growing dependence of many euro zone banks (not just in Spain) on ECB liquidity in order to survive the global credit crunch. Accordingly it issued strict new guidelines on the amount of assets banks can submit as collateral.

Saving banks account for close to 70 percent of the total growth in funds by Spanish financial companies from the ECB, according to a survey by Banco Santander. In July this year Spanish banks borrowed €49.38 billion from the ECB, three times last year’s amount. Many regulators claim that the ECB is close to breaking European Union rules, which do not allow banks to be propped up by ECB funding in the long term.

Savings banks are not the only casualty of the collapse of the Spanish economy. Morgan Stanley has given the most pessimistic outlook, issuing a major alert on the health of Spanish banks. It warned that Spain could face a crisis on the magnitude of the Exchange Rate Mechanism (ERM) of the 1990s, which could wipe out completely some of the most exposed financial institutions.

“A momentous economic slowdown is now under way. We believe the deterioration in Spain is just in the beginning stages. The bulk of the pain will be suffered in 2009,” said a recent report, warning that “If the ERM scenario were to become reality the main concern would not be earnings, but capital.”

The report said that a non-performing loan ratio of 10-15 percent for developers’ loans would fully erase earnings in 2009.

There has not been universal agreement among economists of the extent of Spanish banks’ involvement in the exotic and toxic type of investments that brought about the global credit crunch. Many economists have argued that Spanish banks were not heavily involved in the creation of “structured investment vehicles” (SIVs). By aggregating large numbers of mortgages into debt packages to be sold off, SIVs were supposed to shift risk off the balance sheets of banks and other financial institutions. But the risky debts were often purchased by off-balance-sheet organisations set up by the banks, and remained risks nevertheless.

According to the Financial Times, Guillermo Ortiz, Mexico’s central bank governor, was watching Spanish banks closely. Ortiz claims that a number of high-profile banks had secretly approached the Spanish central bank, requesting that Spanish banks be allowed to do what other international banks were doing without restraint, and set up networks of SIVs.

Many heads of Spanish banks were dismissive of claims by foreign critics that there was any problem. They claimed that home equity withdrawals and “piggy back loans” are rare and mortgages in theory were mostly limited to 80 percent of house prices. But economists pointed out that they simply did not know whether the banks’ claims were in any way supportable. According to Ramon Lobo, a former bank auditor, many sub-prime type deals were done through the back door, and many house valuations were inflated by as much 25 percent.

Morgan Stanley issued its report after raising concerns about Spanish banks in the wake of the €5.1 billion collapse of Martinsa-Fadesa, the country’s biggest builder. Many of Spain’s biggest banks are heavily involved in lending to other developers. Loans to developers make up to 26.1 percent of total bank lending by Sabadell, 21.9 percent from Banesto, and 19.4 percent from Popular.

The report warns that this would leave them open to an ERM-type bust. “Such a scenario cannot be disregarded, in our view,” it said, adding that developers may face an even more drastic challenge than they did in the early 1990s.

The crisis in Spanish banking is one expression of a general economic malaise. The Spanish GDP grew at just 0.1 percent in the second quarter of this year. Much of Spain’s economic growth over the last decade was fuelled by cheap money from Europe and a housing boom created largely by debt. Like elsewhere, many Spanish banks lent money to the poorest and most vulnerable sections of society, making a killing in the process.

The housing sector, which is responsible for 18.5 percent of Spain’s economy, was the speculative basis for much economic development. House prices continue to fall, declining 1.3 percent in the three months through September on the previous quarter. In Madrid, this figure rose to 2.8 percent on the previous quarter. One economist has predicted a decline of up to 10 percent by the end of next year. It has been estimated that some 930,000 new homes will remain unsold at the end of the year.

A downturn in this sector is having huge repercussions throughout the economy. In the first seven months of the year the government had built up a budget deficit of 9.97 billion euros. The scale of the impact of the global economic crisis is shown in the fact that Spain’s budget was in surplus only last year. Some 80 percent of household assets in Spain are tied up in real estate.

Unemployment reached 11.3 percent in September, its highest level since 1997. This is a dramatic change from the days, not so long ago, when Spain was creating roughly a third of all new jobs in the euro zone. Unemployment has risen for five consecutive months, with analysts predicting that Spain will top the European region for unemployment. Rafael Pampillón of the Instituto de Empresa business school has predicted over three million unemployed by the middle of 2009, with no abatement until all of the speculatively built properties have been sold. He believes this will take “two or three years.”

One sector hit particularly hard by the growing economic crisis is the airline industry. Futura, which sought bankruptcy protection last month, has now closed. Around 1,200 jobs are likely to be lost. With the auto industry also in sharp decline, General Motors and Ford have said they will cut production, shedding 2,000 jobs. Car sales in September were down more than 30 percent on the same period last year.

Joblessness is rising three times faster among immigrant workers, four million of whom arrived in Spain in the last decade to work in the construction industry and other services. Over the last four years, they have been responsible for borrowing about €172 billion—nearly a third of all lending.

With the collapse of the housing sector, the PSOE hoped that the crisis would be offset by Spain’s other major industry, tourism, which accounts for ten percent of Spain’s economy. The unprecedented drop in the number of people from abroad coming to Spain has dashed these hopes.

The PSOE government was thrown into turmoil by the economic crisis. It had thought it could ride out the storm by relying on budget surpluses, but these have been wiped out. Solbes told the pro-PSOE newspaper El Pais late last month that the economic situation is worse than predicted.

“We thought it would happen slowly but instead it has hit fast,” said Solbes. He told El Pais that the property boom had degenerated into a “bubble”, but said there was little the government could reasonably do about it. “What was the state supposed to do? Stop people building houses? That wouldn’t be reasonable. Tell the banks who they can lend money too? We couldn’t do that either. We warned that building 800,000 homes a year was not sustainable: and that granting mortgages for 40 years was folly, but there are certain things the government cannot prohibit,” he said.

At the beginning of this year the government pumped €18 billion into the economy, which barely had an impact on the problem. Most of its measures have been attempts to shield big business from the impact of the credit crunch, such as eliminating the wealth tax, which brings around €1.4 billion a year. Banco Santander, now Europe’s largest bank, has been rapaciously buying up failing British and American banks.

While the PSOE has sought to help big business, it has given next to nothing in aid to the Spanish working class. One of its first measures when the credit crunch hit was to attack the most impoverished and vulnerable sections of the working class, such as immigrants. It has all but closed the door to migrant workers, and by its actions has scapegoated them for Spain’s economic woes.

Economists and bankers are calling for further drastic attacks on the wages and conditions of the working class. The International Monetary Fund has demanded deep cuts in the welfare system and an end to index linked wage increases—demands echoed by the Financial Times, which says other EU states should demand that “the beneficiaries end the silly policies that got them into the mess in the first place.”

France: €360 billion to bail out the banks

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By Antoine Lerougetel

With minimal debate, the French National Assembly endorsed the government’s €360 billion rescue plan for the banks, a massive transfer of public funds to the financial elite, by a majority of 224 to 23. It is part of a coordinated €2.7 trillion action by the governments of the euro zone (15 countries whose currency is the euro) and Britain. The governing UMP (Union for a Popular Movement) was supported by the New Centre and the MoDem (Democratic Movement of François Bayrou). The Socialist Party (PS) and the Greens abstained and the Communist Party (PCF) voted against.

Forty billion euros are earmarked for recapitalising failing banks by buying up their shares and assets. The remaining €320 billion are a pledge to guarantee inter-bank loans. Finance Minister Christine Lagarde has claimed that the plan would not affect the budget. This implies heavy borrowing, increasing the already bloated public debt, which, currently at above 65 percent of GDP, is well over the European Union stability pact’s 60 percent norm.

The rapidity with which the government has found cash for the banks in contrast with the reluctance to fund essential social needs has not been lost on the population, with seven million already under the poverty line. Pensioners protested in 80 towns all over France on Thursday against their diminishing purchasing power and the outrageous sums being made available for the banks. Pensions have gone up this year by less than two percent while inflation at the end of August was 3.2 percent.

The deficits for the private sector social security and health insurance for 2008 are calculated at €9 billion and €4.1 billion respectively. The government has used these figures, minuscule next the €360 billion for the banks, to justify cutbacks in health and the social services.

Laurence Parisot, the leader of the main big business association MEDEF (Movement of the Enterprises of France) praised the plan as “the best possible for the present situation”. She then stressed that she expects the government to continue with its austerity measures and that she would be asking the prime minister to “withdraw the transport bonus from the draft 2009 budget”, supposed to alleviate the rising cost of travel to work.

The Socialist Party finance commission, meeting before the parliamentary debate on the rescue plan, unanimously recommended voting with the government. Later in the day, when the meeting of the full SP parliamentary group decided to abstain, first secretary of the SP, François Hollande explained, “It’s out of the question to oppose a plan which at a European level enables us to emerge from out the first storms of the financial crisis. Out of the question too to give our approval to Nicolas Sarkozy’s economic policies, because they too are responsible for the situation we are in.”

The PS is fundamentally in agreement with the government’s economic policies. A more plausible explanation for the abstention was its need to maintain an appearance of independence from Sarkozy. SP spokesman Julien Dray said, “A vote for it could give the appearance of ‘a prelude’ to a government of national unity.”

The PCF, for decades the junior partner of the PS, in and out of government, and at present in an electoral alliance with the PS and the Greens for the European elections in 2009, made some anti-capitalist rhetoric—correctly pointing out that the government’s plan represents “a bonus for all the predators.” But this verbal opposition is belied by the support the PCF has given to the CGT (General Confederation of Labour, close to the PCF), which has constantly collaborated with President Sarkozy since his election in May 2007, notably in the destruction of the special pension schemes of railway and gas and electricity utility workers, and also the deregulation of working hours.

The government assurances that French banks were not severely affected by the credit crisis were somewhat dented when the Franco-Belgian bank Dexia, which handles the finance for local government in Belgium and France, had to be bailed out to the tune of €6.4 billion, €3 billion for each government. Its shares have fallen since and there are still doubts as to its solvency.

There is also strong evidence that one of the oldest banking institutions for small savers and for home loans, the CNCE (The National Bank of Savings Banks), founded 190 years ago, known as the Squirrel, has a crisis of liquidity. The satirical weekly, Le Canard Enchaîné, reports in its October 1 edition that because of a subsidiary Natixis’s involvement in the US sub-prime market: “the CNCE must find 6.5 billion ... With such an abyss to fill it is going to become the champion of France for the depreciation of its assets, ahead of Crédit Agricole (close to 6 billion).”

At the beginning of the year, in order to comply with the minimum legal capital requirement, CNCE had been obliged to “siphon off €3.3 billion from its 17 regional savings banks ... and some of them scarcely have any reserves left.”

The Canard quotes a financier: “There’s a consensus of bankers and the government to say nothing about the situation of the Squirrel and to avoid starting a panic.”

A further loss of €600 million from speculative operations has just been revealed. Fillon’s announcement of the government’s intention to dip into the funds of the Livret A saving scheme has also created a furore and contributed to the sense of insecurity felt by the millions of lower and middle income families who rely on it.

The three main French banks, Crédit Agricole, Société Générale and BNP Paribas, have denied the need to avail themselves of the state funds. However, the following exchange in the discussions recorded on the National Assembly site gives a different picture.

Pushed by Lionel Tardy, a UMP-aligned deputy, to reveal the amount of toxic credit in the French banking system, Georges Pauget, the president of Crédit Agricole, replied, “As far as concerns of the French banking system, I am unable to provide you with an up-to-date reply ... Only the Banking Commission has the detailed figures ... I do not have the figures in my head, but the information is available, and has been certified.”

Tardy then suggested: “So even in France it is not known.” Pauget replied: “No, it is known, but the figures are in the hands of the guardians of the Temple.”

Nouvel Observateur quotes Fillon telling RTL Radio: “The financial crisis is not ‘behind us’. We are not immune from a systemic crisis, brought on by the fact that some banks may have large quantities of toxic products, French banks too.... There is so much interconnection in the system.”

He continued, “For the moment we are receiving forecasts [of growth] for 2009 in the order of 0.2 percent, which is extremely weak. It’s a breakdown of growth with consequences for employment, for economic activity, for purchasing power. But if America goes into recession, it is obviously very, very, very bad news for us because all of the developed countries will experience a very, very difficult 2009.”

Fillon is preparing for this. He emphasised that “what counts for us, is to keep hold of expenditure ... we will be uncompromising on expenditure.”

This means that the working class will have to shoulder the burden of the crisis and the government is preparing for this and demanding the support of the other major parties. Sarkozy’s close advisor Henri Guaino’s insisted, “this is not the time for debate ... on every decision taken” stressing, “the Executive is in charge of carrying out its duties.”

Les Echos’ editorial of October 15 focuses on the social effects of the crisis. It warns: “The effect on the morale of French people, and thus on their consumption will of course be inevitable.... According to a survey of 150 directors of human resources it is advisable ‘to take seriously the rise of conflicts’ and not to forget that the financial crisis ‘is going to make the social climate turbulent’.”

It suggests that, in concert with the employers and the unions, initial increases in unemployment benefit to soften the immediate blow of redundancy, be then progressively diminished in order to force workers into low-paid and part time employment.