Faux Capitalism and the Great Middle Class Debt Anchor
By M.N. Gordon
Economies, like ocean tides, rise and fall. So, too, they fall and rise. Sometimes a rising tide floats up all boats…even those captained by freeloaders. Other times a falling tide pulls down vessels crewed by even the most industrious deckhands.
There are times when just showing up to work each day is rewarded with abundance. Conversely, there are times when showing up and working like a mule earns you a kick in the teeth. No doubt, most anecdotes of recent years have been of an economy yielding few rewards and plenty of hard knocks. On Monday the Fed confirmed such anecdotes…and it’s worse than we thought…
According to the Fed’s Survey of Consumer Finances, U.S. wealth fell nearly 40 percent between 2007 and 2010…erasing 18 years of gains for median U.S. household net worth. Specifically, median net worth declined to $77,300 in 2010 from $126,400 in 2007. The last time median net worth was at this level was 1992.
Obviously, the housing crash – and the disappearance of illusory wealth – was the main contributor to the decline in middleclass net worth. But incomes are falling too. In fact, according to the Fed, the median family income fell from $49,600 in 2007 to $45,800 in 2010, which amounts to a 7.7 percent decline.
For some, however, losses have been much greater…
Meet the Smith Family
Take the Smith family of Morris County, New Jersey. “Four years ago, Mr. Smith lost his six-figure job of twenty years at a telecom company and ended up selling shoes for $10 an hour,” reports CNNMoney.com.
“He quickly depleted his 401(k) as the family went from $130,000 a year in income to just $15,000. In this area of New Jersey, the United Way says it takes at least $60,000 a year for a family of four just to get by.
“The $250 in food stamps his family gets could come to an end soon because he has a new job selling janitorial supplies, putting him over the threshold for aid. He’s now making about $15 an hour, while his wife works part-time at a local bakery, for $9 an hour. That’s raised their yearly income to about $18,000.
“Unable to sell their home, the Smiths stopped making mortgage payments in 2009 and expect to be foreclosed on any day now. At that point, they hope they’ll be able to move in with friends.”
We don’t doubt that the Smiths are decent people. They just happened to be in the wrong place at the wrong time. Through no fault of their own they’ve been whipsawed by the reverse of the debt super cycle. How could they’ve known that this has been bearing down on them for the last 60-years?
A grieving father struggles to pay off his dead son’s student loans
By Pro Publica
By Marian Wang, ProPublica
A few months after he buried his son, Francisco Reynoso began getting notices in the mail. Then the debt collectors came calling.
“They would say, ‘We don’t care what happened with your son, you have to pay us,’” recalled Reynoso, a gardener from Palmdale, Calif.
Reynoso’s son, Freddy, had been the pride of his family and the first to go to college. In 2005, after Freddy was accepted to Boston’s Berklee College of Music, his father co-signed on his hefty private student loans, making him fully liable should Freddy be unwilling or unable to repay them. It was no small decision for a man who made just over $21,000 in 2011, according to his tax returns.
“As a father, you’ll do anything for your child,” Reynoso, an American citizen originally from Mexico, said through a translator.
Now, he’s suffering a Kafkaesque ordeal in which he’s hounded to repay loans that funded an education his son will never get to use 2014 loans that he has little hope of ever paying off. While Reynoso’s wife, Sylvia, is studying to be a beautician, his gardening is currently the sole source of income for the family, which includes his 18-year-old daughter Evelyn.
And the loans are maddeningly opaque. Despite the help of a lawyer, Reynoso has not been able to determine exactly how much he owes, or even what company holds his loans. Just as happened with home mortgages in the boom years before the 2008 financial crash, his son’s student loans have been sold and resold, and at least one was likely bundled into a complex Wall Street security. But the trail of those transactions ends at a wall of corporate silence from companies that include two household names: banking giant UBS and Xerox, which owns the loan servicer handling the bulk of his loans. Left without answers is a bereaved father.
The risk of cosigning on Freddy’s loans seemed to have been worth it when he graduated in May 2008 and began looking for a job in the music industry. He was on the way back from a job interview on the evening of Sept. 4 when he lost control of his car and it rolled over. Freddy’s family learned of his death the next morning.
The grief was relentless; the debt collectors, ruthless. By law, debt collectors must go through a debtor’s attorney if one has been hired, but even after Reynoso hired an attorney, he said they continued to call him every day, several times a day, for about a year and a half: “I would tell them to call the lawyer. And they would still say, ‘The lawyer doesn’t owe us. You’re the one who owes us. You’re the one who has to pay us.’”
Meanwhile, Reynoso was still reeling: “I was crying for him every day,” he said.
Signs of economic chaos: Repo men tow car with owner, daughter inside
by: Jonathan Benson, staff writer
Rosalind had originally obtained a loan from AFS Acceptance back in 2010, which she used to purchase a car. Not long after, Rosalind admittedly defaulted on her loan, which prompted AFS to hire Equitable Services to come and repossess the car. But Equitable repo men inflicted serious emotional harm on Rosalind and her daughter when they attempted to tow away the car while the two women were still inside it.
According to the suit, Smith’s daughter Rashai first climbed into the car as the repo men were cabling it up to the tow truck, presumably to prevent them from seizing it. Rosalind followed her daughter, as the men proceeded to lift it up and begin towing it down the street. Neighbors and others were reportedly screaming and telling the men to release the vehicle, but they refused until police arrived on the scene and ordered them to put the vehicle back into the driveway.
Rosalind later sued both AFS and Equitable for violating Illinois’ Repossession Statute, for willful and wanton behavior, and for inflicting emotional distress. The defendants filed a motion to dismiss the case, but in her ultimate ruling, U.S. Federal Judge Elaine Bucklo decided that the suit had some merit, which led her to both deny in part, and grant in part, the motion to dismiss.
“[T]he conduct alleged — towing two women down the street with the doors opened — is sufficiently outrageous in nature as to constitute a basis for recovery under intentional infliction of emotional distress” wrote Judge Bucklo in her opinion and order. “There is no suggestion that the tow truck operators were unaware of the women’s presence in the vehicle, and thus the most likely explanation of the agents’ behavior is that they intended to severely frighten the women.”
You can read the details of the case here:
Unemployment rates rose in 18 US states last month
WASHINGTON—Unemployment rates rose in 18 U.S. states in May, the most in nine months. Increasing unemployment in more than a third of U.S. states is the latest evidence of a weaker job market.
The Labor Department said that unemployment rates fell in only 14 states. That’s fewer than the previous month, when rates fell in 37 states. Rates were unchanged in 18 states.
Nationally, the rate rose to 8.2 percent in May from 8.1 percent in April, the first increase in almost a year. Employers added only 69,000 jobs, the fewest in 12 months.
Still, 27 states added jobs in May. California gained the most, adding 33,900. Ohio was next with 19,600.
North Carolina reported the biggest loss, shedding 16,500 jobs. It was followed by Pennsylvania, which lost nearly 10,000.
Nevada had the nation’s highest unemployment rate, at 11.6 percent, followed by Rhode Island’s 11 percent and California’s 10.8 percent.
Wealth of Americans plummets 40 percent during Obama’s reign in office
It is. And what’s more, it’s likely a lot worse than you thought.
According to federal figures, the average American household’s wealth declined by a staggering 40 percent since President Obama took office, wiping out nearly 20 years’ worth of wealth accumulation and growth; middle-class families bore the brunt of that decline, by the way (what else is new?).
In real numbers, that’s a decline from $126,400 in 2007 to $77,300 in 2010, which is about where Americans were in 1992.
Those figures and others were contained in the Federal Reserve’s June 2012 Bulletin, and the economic picture it paints for American families – gathered via the Fed’s Survey of Consumer Finances – is bleak, to say the least.
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