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US: Fighting foreclosures, making the banks pay

Stephen Lerner and Saqib Bhatti report on the scale of the housing crisis facing ordinary Americans post-crash, and the growth of housing justice and bank accountability activism across the US

April 23, 2013
11 min read

Protesters target JP Morgan Chase in support of a family who faced eviction by the bank. Photo: Slobodan Dimitrov

There are two economic stories unfolding in the United States. One is that the stock market is soaring and the super-rich are again getting richer. The very people who caused the 2008 financial collapse have seen their wealth and power grow even greater. At an investor conference in February, JP Morgan Chase CEO Jamie Dimon even bragged: ‘We actually benefit from downturns.’

Indeed, a recent study by Emmanuel Saez, an economist at the University of California, found that the top one per cent of income-earners in the US accounted for all of the pre-tax income gains during the first two years of the so‑called economic ‘recovery’ that began in 2010. The top six banks now control a larger swathe of the US economy than ever before. They hold 73 per cent of the total assets in the US banking sector and bankers at those six firms have taken home more than half a trillion dollars in bonuses and compensation since the bailout.

The situation for most Americans is far grimmer. The scale of the devastation stemming from the 2008 crash is overwhelming. Americans lost $17 trillion in household wealth, including more than $6 trillion in homeowner equity. Latinos lost 66 per cent of their household wealth after the housing bubble burst and African-American households lost 53 per cent. Across the country, communities are facing devastating cuts to essential services as state and local governments struggle to fix budget deficits. Nearly 12 million families either have lost their homes to foreclosure already or are currently in foreclosure. Another 14 million are ‘underwater’ on their mortgages – meaning they have negative equity in their homes.

This has spawned a growing economic justice movement that is working to keep people in their homes while building support for the idea that cities and municipalities should demand the renegotiation of the toxic deals they have with big banks that are strangling local government and public services.

Groups such as Occupy our Homes, City Life Vida Urbana, the Alliance for a Just Society and the Home Defenders League are part of a growing network of community groups and labour unions that are resisting foreclosures and evictions, occupying homes and increasingly looking to use local legislation to write down underwater mortgages to current market values so people can save an average of nearly $7,000 a year in mortgage payments and stay in their homes. This housing justice and anti-eviction work is grounded in a broader campaign aimed at challenging the dominance and power of Wall Street banks.

Creating jobs by fixing the housing crisis

The overhang of underwater mortgage debt is now one of the primary drags on the US economy and a key cause of the jobs crisis. Fourteen million families across the country owe $1.1 trillion more on their mortgages than their homes are worth. Even as Americans have seen their incomes slashed in the recession, they are stuck paying the banks inflated boom-era mortgages. If their mortgages were reset to fair market value, it would save the average underwater homeowner $574 per month in mortgage repayments. This would pump $95 billion a year into the national economy, creating around 1.4 million jobs.

Because the investors who own underwater mortgages and the banks that service those loans have been unwilling or unable to write down these mortgages on their own, cities are now looking to take matters into their own hands. Under a plan being considered by cities including Brockton, Massachusetts, local governments would use their power of ‘eminent domain’ to force banks to take a haircut on underwater mortgages.

The proposal calls for the cities to seize the underlying mortgage notes on underwater homes. The homeowner would get to stay in the house, but the ownership of the loan would transfer from the investor to the city. The city would pay market value for the loan, which would force the investor to absorb any potential losses. The city would then put the homeowner into a new loan with a reduced principal and interest rate. The city could either securitise the new loan and sell it to recoup its original investment or it could hold onto the mortgage and get paid back as the homeowner paid off the new loan.

Cities have never had a problem using eminent domain to seize homes to make room for stadiums and highways. Using it to seize mortgages to save neighbourhoods, fix city budgets and reset mortgages to fair market value would help jumpstart economic recovery at the local level.

Taking back what the banks stole

Cities, counties and union pension funds have started to sue to recoup the money they lost when 16 of the world’s largest banks illegally manipulated the Libor interest rate index. Public entities lost billions of dollars as a result of Libor fraud, and now there is a campaign underway to win that money back from the banks. Public employee unions have started to demand that cities stop doing business with banks that have broken the law and stolen money from taxpayers in the course of contract bargaining. Groups such as the ReFund California Coalition are demanding that elected officials claw back the billions that the banks stole from California taxpayers before there is any discussion about further cuts to services.

Some of those leading this work are long-standing community-based organising groups, while others are direct offshoots of Occupy Wall Street. Working together they have influenced each other’s approaches and tactics. Occupy activists have a commitment to direct action and a willingness to risk arrest. Community groups often have deep ties in neighbourhoods and an understanding of the legal and financial details of the foreclosure process. Working together and learning from each other’s experiences has led to significant victories. For example, Occupy Our Homes is a direct outgrowth of the Occupy movement, while groups like the Alliance of Californians for Community Empowerment (ACCE) and Neighborhoods Organising for Change (NOC) are part of existing community-based organising networks.

A number of these networks embrace direct action. National People’s Action (NPA) the Leadership Center for the Common Good (LCCG), the Alliance for a Just Society (AJS), and Right to the City all existed before the financial crisis. Each has affiliates and partners in cities across the country, operating under different names. The financial crisis has seen these groups grow, embrace direct action and nonviolent civil disobedience, and offer increasingly sophisticated analyses and critiques of how the financial system operates. Just as Occupy Wall Street was starting, these groups joined together to stage weeks of direct action around the country, which fed into, supported, and grew in conjunction with the Occupy movement.

Other groups, such as Occupy Our Homes, the Home Defenders League and the New Bottom Line, were born after and in direct response to the financial crisis. All of them work together, support each other’s campaigns, and have helped spawn new emerging groups in cities around the country.

Groups that have been fighting to hold Wall Street accountable over the past few years have developed a series of creative and effective tactics to stop foreclosures and force the banks to confront the devastation they have unleashed on our communities.

Stopping foreclosures

Housing justice organisers have used some of the most militant and creative tactics to physically stop foreclosures and evictions. People have physically blocked sheriffs’ deputies – the law enforcement officers authorised to enforce foreclosures – from evicting families. Eviction blockades have successfully stopped many families from being thrown out of their homes. Hundreds have been arrested in such actions, and in some cases they have even faced down heavily armed SWAT teams trying to remove them. In Minneapolis a jury recently found home defenders innocent of trumped up felony charges that could have resulted in several years in jail if they had been convicted.

In Atlanta and Minneapolis, Occupy Our Homes and NOC have set up encampments around homes threatened with eviction, using nonviolent civil disobedience to physically interfere with foreclosure. These have gone on for months, with many stand-offs with the police. In New York and San Francisco, people have disrupted foreclosure auctions by making a lot of noise to make it difficult for potential buyers to hear the auctioneer. This too has resulted in many arrests.

These kinds of actions have stopped evictions and foreclosures in cities across the country, both helping individuals stay in their homes and increasing the ranks of people willing to directly interfere with the foreclosure and eviction machine. Occupy Our Homes has even developed a home defence manual that can be found on its website called ‘How to Defend Your Home’ that describes some of these tactics.

Taking the fight to the banks

In addition to defending homes, campaigners have gone on the offensive against the banks for their role in destroying our communities. For example, after homes are foreclosed, they often sit vacant for months or even years. Vacant, foreclosed homes often become blighted, overrun with garbage and magnets for crime. Neighbours living in nearby homes are forced to suffer the consequences and local governments are forced to spend taxpayer dollars to prevent further deterioration. Communities are fighting back by collecting trash from these homes and ‘depositing’ it in the lobbies of foreclosing banks through a tactic called a ‘trash-in’. Members from Action Now in Chicago, Communities United for Action in Cincinnati, ACCE in California, 1Miami, and Occupy St. Louis are among the many who have used this tactic to force banks to deal with the neighbourhood impacts of foreclosure.

Move-ins have been another effective tactic that have forced banks to directly confront the human impacts of foreclosure. When a family is fighting to save their home, groups such as Occupy Wall Street and ACCE move their furniture into the branch or office of the foreclosing bank, shutting down business as usual at the bank.

Groups across the country have also carried out actions where they deliver giant bills at bank offices and branches, demanding that the banks pay back the money they stole from the community through illegal or unethical business practices. Sometimes the bill is paired with a giant cheque from the bank to taxpayers that community members ask the bank manager to sign. When they refuse to pay, taxpayers can foreclose on the bank itself. Another version of this involves wrapping the outside of the bank with crime-scene tape when the bank refuses to pay up. Community members in Portland, San Francisco, Los Angeles, Minneapolis, and Chicago have all used variations of this tactic.

Some of these tactics have also been targeted at industry gatherings and events. For example, Chicago’s Southsiders Organised for Unity and Liberation (SOUL) carried out an inside/outside action at the Mortgage Bankers Association convention. Sixteen SOUL members got arrested after setting up a living room inside the hotel where the convention was being held and refusing to leave, while hundreds rallied outside in the street and cheered them on. The American Bankers Association conventions in Chicago and Boston have been met with similar actions.

The ‘too big to fail’ Wall Street banks are unrepentant, unpunished, unreformed, and unsustainable. However, for those very reasons, they are increasingly viewed by the public as criminal manipulators of the global financial system. This presents us with an opportunity to ask bigger questions about how the economy is organised. If we add up all of the different groups that are doing bank accountability work, from the fights to save homes to the campaigns to win back taxpayer money that the banks stole from us, we have the beginnings of a movement to challenge the domination of finance capitalism. The seeds are being planted and will grow into a broader movement fighting income inequality and demanding the redistribution of wealth and power away from the tiny elite that now runs the country.

Stephen Lerner is a labour and community organiser. He is the architect of the Justice for Janitors campaign and works on Wall Street accountability campaigns. Saqib Bhatti is a campaigner with the Home Defenders League.

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