Some in Washington want to know what the Occupy Wall Street movement “wants.” I don’t pretend to know and—refreshingly—neither do those in the streets, not specifically. They know what they are against—economic inequality—but have yet to begin to define what they are for, why they are for it, and how they might try to achieve it.
But they are out there. There are almost as many protest locations as there are Super 8 motels or Applebee’s restaurants. In Manhattan, the main Occupy Wall Street camp now offers yoga.
It would be easy to classify all this as trivial. And yet, the protests show no signs of letting up. Congress will have to take heed sooner or later. Tuesday’s protests in the Hart Building, I suspect, are just the beginning.
Again, I don’t know what the “other 99 percent” want, but I do have a sense that mistrust of America’s big banks has less to do with the Wall Street bailout and much more to do with this nation’s ongoing residential real-estate crisis. The Troubled Asset Relief Program (TARP) has disbursed $411 billion and has received $278 billion back from bailout recipients and earned $39 billion in dividends, interest payments, and stock warrants. Roughly $94 billion is outstanding. Is “the other 99 percent” going to jail over $94 billion? I suspect not.
However, the “other” bailout may be driving discontent—in the streets and in the quiet living rooms where Americans fearing foreclosure might nod in silent agreement with the disorganized plea for economic justice.
Six million homeowners are 30 days behind on their mortgage payments or in foreclosure proceedings. One quarter of all mortgages are underwater; in other words, the loan value is higher than the home price. Across the nation, homeowners underwater cumulatively owe up to $800 billion more than their homes are worth.
Two economics professors, Atif Mian of the University of California (Berkeley) and Amir Sufi of the University of Chicago, analyzed data from 238 counties with more than 100,000 residents and found that economic growth has lagged dreadfully in counties with high household debt compared to those with low household debt. Auto sales, residential investment growth, job growth, and durable goods purchases all lagged in high-debt counties compared to low-debt counties.
It’s true that the high-debt counties probably oversaturated their real-estate markets, thereby attracting a disproportionate number of construction-related jobs that have been difficult to replace. But those are yesterday’s economic decisions. Today’s economic reality is that the housing crisis persists, wealth has declined, debts frighten homeowners from buying and investing and, in all likelihood, paralysis will persist unless Washington does something.
You might be saying to yourself, Wait, didn’t the Obama administration start all these mortgage modification programs? It did. The results? Puny.
And this brings us back, possibly, to the Occupy Wall Street movement. TARP is the poster child bailout. Within it, $45.6 billion was set aside for mortgage relief. So far, only $7.6 billion has been spent and only one in four applicants has had a mortgage modified. Of some 1.6 million trial modifications started, 657,044 (about 40 percent) have been permanently modified while more than 860,000 (roughly 53 percent) were canceled at the trial modification stage or after approval.
What’s crucial is that bailout funds aimed at the real-estate black hole haven’t been spent (whereas as those to rescue bank balance sheets upfront were). Moreover, big banks have canceled more loan modifications than they have approved. When you begin to wonder what’s driving anti-Wall Street, this might seems like the bull’s-eye.
One last point, the “other” bailout is of Fannie Mae and Freddie Mac. The government-backed (to be precise, nationalized) loan entities own 90 percent of all residential mortgages and is now $141 billion in the red. The Congressional Budget Office said taxpayer exposure could grow to $317 billion. There is scant confidence these funds, unlike the TARP funds, will be paid back in part or full.
For a Congress that’s devoted scant attention to this economic calamity, opportunity and peril await.
In 1971, Marvin Gaye sang Make Me Wanna Holler, which has these lyrics: “Oh, make you wanna holler …The way they do my life … Make me wanna holler … The way they do my life.”
No one in Occupy Wall Street, so far as I know, is singing Make Me Wanna Holler. But for millions of Americans trapped in the real-estate maelstrom, hollering may be close at hand.
This article appears in the Oct. 12, 2011, edition of National Journal Daily.