Bail Out or Hand Out: White Supremacy in Crisis
The basic misconception about the so-called financial meltdown is that an overextended credit regime caused the problem. This simplification dumbs down the public response to what is really taking place. To understand this, we can ask a few questions. Like, why are retail prices on big ticket items such as plasma televisions, Cadillacs, etc. falling? In a crisis, prices are expected to rise due to inflation, yet the dollar has become stronger. Then, why are the banks, the highest level of business organization, claiming to be in trouble, when we see financial institutions all over the country either buying up assets or being bought. What is happening to the labor movement, and why hasn’t it taken the offensive defending the interests of working people?
To comprehend the “financial meltdown”, we must understand the history of those who engineered it. While the so-called crisis began in the Eighties, the tone for its demolishing effects was set in the Bush 43 administration. This trend was set with the rewarding of no-bid contracts to defense industry specialists, and a Washington political clique run by cronyism and the Texas mafia.
People must accept the view there is no real “bail out” of the finance industry. It is a government hand out so that the big capitalists can concentrate liquidity and thereby control the world economy. By concentrating liquidity, (remember, “Cash is king”) they strengthen the dollar’s purchasing power because it has become scarce. This has a weakening effect on other currencies. If there were a financial meltdown, inflation would have hit the dollar bill. But the American consumer is not being afflicted by inflation. In fact, prices on many consumer goods have plummeted. The dollar has become very strong in the wake of the so-called meltdown. So we can dismiss the idea of a crisis deriving from “overextended credit” as a culprit. So the economists and other financial experts who discuss the problem as deriving from a stressed out credit regime are deceiving the masses.
The extensive credit regime emerged because a process was needed to give workers the illusion of having attained middle class status. This went hand-in-hand with a strategy to weaken the labor movement, which had made the working class strong and kept the neo-conservative trend a marginal, at best, political movement.
Credit permitted people who had only dreamt of ever owning a home the ability to finally have that aspiration within their grasp. It allowed poor people to buy cars; credit extended folks an opportunity to buy furniture, education, electronics and other comforts of life. Credit also invented a new redline. The redline was originally the line drawn up during redistricting, which political parties had used to gerrymander black districts, thereby diluting black political power. Another form of the gerrymander was at-large elections that did not recognize districts. These practices effectively prevented black representation in public office. Redlining also became a practice, outlawed during the Seventies yet rarely enforced, which the banks used to deny loans to blacks and other colonized workers.
The adjustable rate mortgage (ARM) became the new redline. The ARM is a piece of work used to rip off consumers in the housing market. When credit rates hovered between 4.5% and 5.5%, black folks who had been shut out of the housing market due to any number of circumstances, did not have access to normal credit instruments. The ARM appeared to be a turning point in creating a friendly relationship between banks and the black community. However, the problem with the ARM is that after a period of time, say four to seven years, a prevailing high interest rate would lock in and become the defining feature of the mortgage package. So an ARM originally purchased at 5.5% in 1995 may rise to an 11% rate in 2000. That jeopardized many homeowners.
One historical and fundamental reason why Africans, why we black folks, had been shut out of the housing market was because a racist government agency known as Housing and Urban Development (HUD) tied up houses in black neighborhoods and refused to sell them for forty years. This effectively prevented a positive trend from transpiring, as the numerous community residents who had tried to buy those houses and rehab their own neighborhoods over that period were stopped cold. When the housing bubble hit, HUD sold these houses to deep pocket developers. So the government counterinsurgency against the black community collaborated with finance in a Sixties Era agency, reputedly formed to assist urban areas, to set up this current situation. These practices guaranteed than unemployment, drugs, health issues, crime and other problems would remain concentrated in the black community. So without government acquiescence in this and other areas, the credit regime could not have been imposed.
During this self-same forty year period, illegal redlining simultaneously prevailed without effective enforcement. However, a few other points must be stressed to give a more complete picture of the role credit has played. This has been explained in previous essays. The pundits have lied about credit having been overextended, thereby causing the so-called financial meltdown. Credit became a trend following the Savings and Loans scandals of the Eighties and early Nineties. Today, many banks supposedly are surviving thru drug money laundering and other illegal activities. Yet that was the cause of the S&L crisis, wherein over 600 institutions went out of business and the FDIC covered their savings. Not one person was prosecuted. No major investigations were started, revealing another case of government collaboration with the finance sector. What did happen, a huge amount of liquidity (cash) became concentrated in the hands of movers and shakers in the financial sector. Remember, concentration of wealth for private ownership and control is the major feature of capitalism.
Following the S&L scandals, another scam arose to rob the working classes. This was the stock-based retirement plan. Now, investment portfolios are not made for the working class. They do not exist for the middle class, for the most part. Anyone watching a PGA tournament can get an idea what investment capital looks like: $250k to spend in the money market. Otherwise don’t pick up the phone.
But to get their hands on lots of easy money to build million dollar portfolios, investment bankers brought in human resource managers and other people to sell workers on stock-based retirement plans. These plans, conveniently packaged in the form of 401ks, KEOGHs and IRAs, might be worth $50 to $200 per month per worker. Hence, multiply that by the number of workers who bit, and it became a tidy bit of change. Add to that retirement packages put together by unions, guilds and other bodies, and the financiers were getting totals in the tens of millions every month. So when organizations like Enron, MCI-Worldcom, Tyco, and others went under, they dragged all those stock-based retirement plans with them. For instance, the Pennsylvania Teachers Retirement Fund lost $55 million in Enron alone.
Workers’ money placed in stock-based plans is money taken out of circulation. That is money which a worker will never see, will never spend, and amounts to nothing more than a gift to the rich. That money is not being used on anything which benefits the working class; in fact, that money is being concentrated in the hands of a class at war with the working class. Since cash had begun to dry up, it became necessary to extend credit to further concentrate ever more liquidity into the hands of the bourgeoisie. The credit system was expanded so that all Americans had access to credit who wanted it. This forced people in hoc to the bank to work at a pace that actually deprived them of the very things which makes life worth living; statistically, people in this country work harder at longer hours and for more days in the year than in any other industrialized nation. The people who value freedom so preciously have given it up to the credit system.
The analysis of the nation’s economic “pundits” seems to be the prevailing opinion without any significant challenge from either the Left or the unions, even while unemployment rises and wages are being cut. We have to challenge the notion that a financial meltdown has hit the banks. We have to show how the financial institutions have created one scenario after another to concentrate greater amounts of capital in their hands. It is important to expose that the dollar is strong because the financiers have hoarded it; they have locked up liquidity and made it tough for the masses of people. Yet they are not suffering, and the system of credit is just another regime imposed upon a duped working class.
We also have to break white working collaboration with the ruling class. The white worker no longer has any stake in the concentrated class question, aka racism. When the white worker commits national suicide and unites with the workers of the world, that will bring about the end of capitalism. Yet black and Latino workers in the US do not have time to wait for that break thru. We have to deepen our solidarity, work together to build an internationalist movement, and fight against Imperialism. Say no the the bail outs! Defend the rights of our African and Latino communities! Power to the People!