The Militant (logo)  

Vol. 73/No. 46      November 30, 2009

 
Foreclosures mount as
capitalist crisis deepens
(front page)
 
BY BRIAN WILLIAMS  
Despite government programs attempting to stem the crisis in the capitalist housing market, foreclosures continue to rise. The number hit a record high in the third quarter with more than 937,000 filings. So far this year 3.8 million notices of default have been filed, according to Moody’s Economy.com.

The crisis goes far beyond those who have taken out subprime mortgage loans, which require no money down but have interest rate payments that increase. Millions who had signed up for adjustable rate mortgages (ARM) are facing similar prospects of foreclosure.

About 10 percent of all mortgages in the United States are scheduled to “adjust” in the next few years, with the numbers peaking in the second half of 2011, according to First American CoreLogic. Those loans are worth about $1 trillion. Nearly 20 percent of the borrowers who have them are already seriously behind on their monthly payments, reported the Washington Post. Many will owe more than their homes are worth.

The Federal Housing Administration (FHA), the government agency that insured $360 billion of single-family mortgages in the United States last year, announced November 12 that its insurance reserves had fallen below its congressionally mandated threshold to their lowest level ever.

As of the end of September, the FHA’s capital reserve fund fell to $3.6 billion, down 72 percent from a year earlier and just 0.53 percent of the $685 billion in loans the agency insures. Congress has mandated that the FHA’s funds-to-loans ratio must go no lower than 2 percent. The ratio was 6.4 percent in 2007.

The FHA and the government-sponsored housing agencies Fannie Mae and Freddie Mac provide about 90 percent of all new mortgages on housing in the United States. Fannie Mae in early November announced its ninth consecutive quarterly loss—$19.8 billion—and for the fourth time requested federal funds to remain solvent. Both Fannie Mae and Freddie Mac were given a $200 billion government bailout in September 2008.  
 
Crisis in shipping industry
The contraction of capitalist production and the resulting decline in world trade are having a big impact on workers employed in the shipping industry, where a number of companies face bankruptcy and foreclosure. After Eastwind Maritime went bankrupt this summer, the company’s ships, which are a main mover of Chiquita Brands fruits and vegetables, were left stranded in open water and in one case no funds were provided for food and water for the crew, according to the New York Times.

The proportion of the container fleet remaining idle could rise up to 20 percent over the next year, according to Glen Lodden, a shipping analyst for DnB Nor, a Norwegian investment bank.

Banks in Europe, which have made more than $350 billion in loans to the shipping industry, face the prospect of having to write them off as “toxic assets.”  
 
U.S. bank failures
So far this year, 120 U.S. banks have failed, virtually depleting the funds the Federal Deposit Insurance Company (FDIC) has on hand to reimburse depositors at failed banks. As of the end of the second quarter, the fund, which insures $4.8 trillion in U.S. bank deposits, had just over $10 billion on hand, a 0.22 percent reserve ratio.

At a banking conference in New York November 10, FDIC chairperson Sheila Bair said the economy would decline further without increased access to credit, reported Associated Press. She said the agency’s upcoming quarterly report will show that the biggest banks aren’t doing much lending. Instead, they’re taking advantage of near-zero interest rates to borrow dollars cheaply and buy higher yielding assets like stocks or commodities. “It used to be you take deposits and you lend out money. We’d like to see more of that,” she said.

Meanwhile, with official unemployment levels at 10.2 percent, President Barack Obama announced plans to hold a “jobs summit” in December. Those invited will be business executives, economists, financial experts, and union officials, the president said. Obama did admit that not much will be accomplished there. It is “important we don’t make any ill-considered decisions even with the best of intentions, particularly at a time when our resources are so limited,” he stated.
 
 
Related articles:
Nearly 50 million lack adequate food in U.S.  
 
 
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