Robo-signers. Moratoriums. Botched documents. In the midst of a complicated and crooked mess, New Deal 2.0 asked leading thinkers and activists to help navigate the maze of the foreclosure crisis. Our "Foreclosure 411" series focuses on the values inherent in explaining why we should care and what the crisis means to all of us. In the first part, Joe Costello argues that we have to measure the economy not by the size of bonuses but the well-being of Americans.
My new house
You should see my house
My new house
You should see my new house
According to the postman
It's like the bleeding Bank of England
My new house
Could easily crack a mortal in it
-- The Fall
The Pending Home Sales Index,* a forward-looking indicator, slipped 1.8 percent to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. However, the index remains 24.9 percent below a surge to 107.8 in September 2009 when first-time buyers were jumping into the market to take advantage of the initial deadline for the tax credit last November.
Whatever other numbers you want to use to measure the economy, housing remains key. Housing was the center of the bubble and it continues to deflate. And judging from every historical precedent, it's going to continue to deflate, no matter how many times Mr. Bernanke presses ctrl-alt-shift-$. Currently 25% of people are underwater in their mortgages, with estimates that it will reach 40% within two years. Which means that all the losses the banks are hiding are only going to grow larger. Now remember, the whole housing bubble was created to literally paper over the great imbalances in the American economy that had developed over several decades, and most significantly, the stagnation of wages. Which is also why all the cries for dumping ever greater amounts of fiscal stimulus into the economy without a serious look at correcting these imbalances is just as much a crack-pipe policy as they're smoking at the Fed.
We should stop the foreclosures, write down the mortgages so people can stay in their houses, and make the banks and bondholders take their losses, breaking up and recapitalizing where necessary. We need a reevaluation of how our economy works. Instead of judging the health of the economy by Wall Street bonuses and bank profits, we need to ask what sort of life it is providing for the vast majority of Americans. Are people living better? Not just in the amount of stuff they own, but are they more secure, healthier, and living fuller lives? GNP and profit/loss numbers aren't great metrics for measuring these things. We need a societal value shift.
Joe Costello was communications director for Jerry Brown’s 1992 presidential campaign and was a senior adviser for Howard Dean’s effort in 2004.