D R A N T: DRANT #289: THE NEW TERRORISM

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None of this is by mistake.
The people who run the banks and the hedge funds and the "Federal Reserve" and the government are not stupid.
This is by design. No "mistakes" here."Terrorism" worked beautifully for the last few years -- to create massive fear and its corollary-
submissive trading of rights for safety.
Now comes the bigger one - the "financial collapse."
The latest tool for inculcating desperation, panic and submission.
( see the the last 4-5 of these- 1913, and onward)
Nothing new here, except that repression and evisceration of rights and freedoms will explode in ways we can't even imagine.
The credit card bubble is yet to burst, and the corporate loan bubble is just beginning to be noticed.The dollar's fall is barely begun.
Just try to project what all of us will do to save our families, our homes, salvage our lives.
What we will trade and abandon for imagined refuge.
This is just beginning.

Cleveland: ghost town created by America’s loan scandal
Below are excerpts -
PLEASE access the complete story at:
http://www.timesonline.co.u

k/tol/business/indus

try_sectors/construction_and_property/article3422322.ece

The Sunday Times
February 24, 2008Special report
Dominic Rushe in Cleveland, Ohio

"...Slavic Village looks as if it has been hit by a hurricane. And this man-made disaster rivals hurricane Katrina when it comes to displacing families. The 2005 storm displaced some 35,000 people in the worst-hit districts of New Orleans. Since 2003 34,156 people have lost their homes to repossession in the Cleveland area, according to Case Western Reserve University, and the pace of those losses is accelerating. The new year is barely two months old and so far there have been 1,857 foreclosures in the Cleveland area.

Slavic Village has street after empty street of boarded-up houses, their roofs caving in, collapsed balconies hanging from the fronts of buildings. Some people seem to have just upped and left, leaving their belongings behind for the rats and vandals. Owners have put up signs offering their burnt-out homes for a $500 (£250) downpayment.Bins and rubbish litter the street. Signs warn trespassers the structures are uns

afe. People have spray-painted “No copper” or “No metal” on their doors to deter crooks who have stripped anything of value from these decaying shells. Even brick steps have been ripped off, leaving houses that look as if they are floating on a dark sea of garbage.

"Slavic Village is Ground Zero for a tragedy being repeated across America. The dramatic rise and fall of the sub-prime mortgage market has left borrowers across the country facing repossession. In 2002 there were 101 foreclosures in Cleveland. In 2005 the number was 2,000, last year it was almost 8,000. Across America the number of foreclosures rose 79% last year, according to Realtytrac, an American property analyst, as people, many of whom would never have received loans in the past, have failed to keep up their mortgage payments..."

"...Similar, and in some cases worse, situations can be found in cities from California and Nevada to Michigan. The reverberations from this crisis have be

en felt across the world, wiping billions off the value of banks’ investments and making them reluctant to lend money even to each other, a problem that drove Britain’s Northern Rock to the edge of collapse..."

Cleveland’s mayor Frank Jackson knows who to blame: Wall Street. The mayor’s office is suing some of the world’s biggest banks. including Citigroup, Goldman Sachs, HSBC and Royal Bank of Scotland’s Greenwich Capital, claiming they acted like organised criminals financing the sale of products that they knew could do nothing but harm to Cleveland. Sub-prime mortgages have proved as bad as drugs in the destruction they have wrought on the community, he said.

“Follow the money,” said Jackson. “If you ask organised crime figures why they persist in doing what they are doing, knowing the damage they are doing and the risks they are taking if they are held accountable, do you know what they will say to you? The money was just too good. You ask these financiers on Wall Street why they persist in doing this when they know the risks they are running and the damage they are doing to their communities and shareholders, do you know what they will tell you? The money was just too good.”

“They created the demand and in a market like ours that was completely unable to withstand the failures that arose. We did not have the increase in the real-estate markets that other areas of the country experienced. We have had a difficult economy over the past decade as we have moved from a manufacturing economy to a services economy. We have struggled here. They created an environment where there was no other outcome than the foreclosures. We saw it coming. How could Wall Street not see it coming?”

Many others take the same view. “They knew,” said Robert Triozzi,” Cleveland’s director of law. “They knew.”

THE CRISIS is likely to get worse before it gets better. As home prices fall and lending standards tighten, more people are defaulting on their mortgages, potentially causing billions of dollars in additional losses. Some 1.6m mortgage holders defaulted on home loans last year, and at least that many are expected to default this year, according to Moody’s Economy.com, a financial website.

A December 2006 study by the Center for Responsible Lending (CRL), a Washington-based lobby group, predicted that sub-prime foreclosures would cost American households as much as $164 billion. The nationwide study predicted that 19.4% of such loans taken out between 2005 and 2006 would fail.

"...Rather than a stepping stone to standard loans, as their champions once promoted them, sub-prime loans have left borrowers mired in spiralling debts. The CRL report said: “In reality, many borrowers refinance from one sub-prime loan to another, losing equity each time to cover the cost of getting a new loan. When we analyse the likelihood of foreclosure for borrowers who repeatedly refinance, we find that the risk of losing the home climbs to 36%.”

Last month the CRL put out a new report “Sub-prime Spillover” that attempted to quantify the impact of the crisis on the larger community. According to the report, foreclosures on sub-prime home loans originated in 2005 and 2006 will devalue the properties of 40.6m neighbouring homes. Homeowners living near foreclosed properties will see their property values decrease $5,000 on average. The report estimates that the total decline in house values and tax base from nearby foreclosures will be $202 billion.

As the crisis gets worse, so will the clamour for action. So far there has been a cool reception to President George Bush’s latest action plan. Project Lifeline is backed by six big mortgage lenders and aims to slow the rising tide of foreclosures. Borrowers who are at least three months behind on mortgage payments can apply to the lender for a 30-day “pause” on foreclosure proceedings. If the delay is granted, then borrower and lender can work out a more affordable repayment scheme. Bankrupt homeowners or those who face foreclosure within the next month do not qualify."...And as home prices fall and lending standards tighten, borrowers further up the economic ladder are starting to feel the pinch. In middle-class Maple Heights, a Cleveland suburb just 15 minutes drive from Slavic Village, foreclosures are starting to take their toll.

“This is a white-collar, upper-middle-class neighbourhood,” said Lindsey Sacher of East Side Organizing Project, a Cleveland nonprofit group. “But people got sick and then they couldn’t afford their payments.”

Now with debts mounting and home values falling “people are just leaving this city. If you look at the areas of the country that are losing the most population, this region is number six. Numbers one to five are areas hit by hurricane Katrina,” said Sacher.

THE CRISIS IN FIGURES

Number of families with a sub-prime mortgage: 7.2m

Proportion of sub-prime mortgages in default: 14.4%
Sub-prime loans outstanding: $1,300 billion
Sub-prime loans outstanding in 2003: $332 billion

Percentage increase from 2003: 292%
Proportion of loans approved without fully documented income: 43%-50%
Number of sub-prime mortgages that will have their interest rate reset this year: 1.8m
Typical rise in monthly payment (third year): 30%-50%

Sub-prime share of all new mortgages in 2006: 28%
Sub-prime share of all new mortgages in 2003: 8%
Number of homes not in foreclosure whose value will decline in 2008-9 as sub-prime foreclosures lower the prices of surrounding homes: 45m
Value of that decline: $233 billion

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