Death By Foreclosure
by Douglas French
After the DJIA loses 251 points, Moody's finally released its rating cuts for 15 banks. According to Zero Hedge four firms were cut by a notch, 10 firms were downgraded two notches, and only one firm was cut three notches, with Morgan Stanley surviving with a two level drop rather than the three that was expected. Bank of America's long-term senior debt was cut to Baa2 with a negative outlook. Bruised, but the Too Big Too Fail gang continues on.
Fannie Mae reported last month that it made money in the first quarter and wouldn't require more money from the taxpayers (for now). The company reported a quarterly profit of $2.7 billion. However, the New York Times reports that the GSE received $116 billion from Treasury over the past three and half years while paying back $23 billion in dividends. At the same time, Freddie Mac needed $72 billion in bailout money while paying back $18 billion.
But while BoA, J.P. Morgan, Fannie and Freddie live on, Russia Today (RT) reports that for more and more underwater, foreclosed-upon homeowners, suicide is the only answer. Death by foreclosure is quietly going on around the country reports the RT. And as more depressed people are evicted from their homes the death toll will continue to rise.
The foreclosure suicide story is tragically under reported. While the press concentrates on looking for bad guys to blame the crisis on, the human toll is forgotten. In the Channel 8 Eyewitness News special "Desert Underwater" an officer for the constable's office that does the foreclosure evictions told channel 8 that his worst day on the job was when the man he was evicting shot himself in front of him after the man was handed the eviction notice.
Trisha Black a Las Vegas attorney who specializes in helping those in foreclosure counts 29 suicides just amongst her clients.
In a piece entitled "Battered Homeowner Syndrome", I compared underwater homeowners with battered spouses.
The abused spouse
These beliefs are strikingly similar to what underwater homeowners feel.
- believes that the violence was his or her fault,
- has an inability to place the responsibility for violence elsewhere,
- fears for his/her life and/or the lives of his/her children, and
- has an irrational belief that the abuser is omnipresent and omniscient.
The abused believes that the violence was his or her fault. “It was my own fault for buying a house at the top of the market in the first place and borrowing too much money to do it.” “I made my bed, now I must sleep in it, no matter how much financial pain it causes me.”
The abused has an inability to place the responsibility for violence elsewhere. “It’s nobody’s fault but my own,” say people with 20/20 hindsight. “Nobody made me sign the mortgage. I’m so stupid. The bank doesn’t have to negotiate with me.”
The abused fears for his/her life and/or the lives of his/her children. “My credit will be ruined. I won’t be able to rent an apartment. My low credit score may keep me from getting a job. I don’t want to uproot the kids and have to admit that daddy and mommy made a financial mistake.”
The abused has an irrational belief that the abuser is omnipresent and omniscient. The abuser in this case is the lender or owner of the mortgage. The borrower fears that these lenders can take everything they have, leave them with nothing, and make their lives miserable forever.
At the same time, default moralizers reinforce these feelings. They have no sympathy for those making a poor housing and mortgage choice. A person must suffer the consequences of their actions, it’s claimed.
For good reason, underwater borrowers feel trapped and helpless. They are forced to deal with a lender who has been bailed out through government force and doesn't have to negotiate.
How many lives must be lost before Fannie, Freddie, and the rest are allowed to fail?
Douglas E. French is senior editor of the Laissez Faire Club. He received his master's degree under the direction of Murray N. Rothbard at the University of Nevada, Las Vegas, after many years in the business of banking. He is the author of two books, Early Speculative Bubbles and Increases in the Supply of Money, the first major empirical study of the relationship between early bubbles and the money supply, and Walk Away, a monograph assessing the philosophy and morality of strategic default. He is founder and editor of LibertyWatch magazine. Write him.
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