The Bailout is Costing You $42,100
Documentary filmmakers Andrew Cockburn and Leslie Cockburn premiere their new film, American Casino, on the subprime mortgage crisis at the Tribeca Film Festival next week. Here’s an advance peek.
Back during the German hyperinflation of the early 1920s, when the price of a cup of coffee would double in the time it took to drink it and an egg cost a hundred million marks, people, so it is recorded, began losing their sense of numerical reality. Otherwise sane individuals would declare they were billions of years old or had trillions of children.
We’re not there yet, but we might be heading in that direction, with our financial overseers leading the way. Take the bailout, for example. Once upon a time, back when it was being rammed through Congress last September, the $700 billion Troubled Assets Relief Program seemed like a lot of money. Germans probably felt the same way when eggs went over a million. But even by the time President Bush left office that $700 billion had faded into a simple line item on a list of Wall Street assistance programs that topped $8 trillion. It has taken just three more months in the current administration to push that figure to $12.8 trillion, either pledged—$4.16 trillion—or on offer to the credit-mongers who got us into this fiasco in the first place.
Bloomberg News reporters Mark Pittman and Bob Ivry, compilers of the $12.8 trillion figure, helpfully point out that the sum amounts to $42,105 for every man, woman and child in the United States. Looked at another way, the money would pay off most of the $14 trillion owed on home mortgages in this country. But no one on Wall Street is worried that the government will use the cash that way—as Pittman memorably remarks in our new film, American Casino, “When you’re in the Street’s casino, you play by their rules.”
Once in a while though, it’s worth going back and looking at an old fashioned small number, like $28,000. That was the total of the Reverend Almalene Wade’s mortgage on her house in northwest Baltimore. Subprime borrowers have been routinely accused of initiating the collapse of the global financial system by “buying houses they couldn’t afford.” But Almalene, like a huge proportion of borrowers in the subprime universe, already owned her house free and clear. She simply wanted to make some home improvements. However an even smaller number intervened: her monthly loan repayments. Falling behind, and lacking a bailout, she lost the house and is currently homeless. “It’s hard to believe,” she remarks in the documentary, “that all this was lost over $28,000.”
Somewhere, deep down in the pools of residential mortgage backed securities, collateralized debt obligations (CDOs,) CDO Squareds, and other financial exotica that have brought us to ruin, Almalene’s loan lurks as a sub-particle of an electronic blip of a securitized “toxic asset” visible only on financial trading screens. The millions of Americans caught in traumas like Almalene’s never normally learn their particular place in the toxic universe. Nevertheless, determined to put a face on a blip, we were actually able to connect Denzel Mitchell, a schoolteacher battling foreclosure in another Baltimore neighborhood, with the subprime bond in which his mortgage ended up: GSAMP 2006 HE2.
This is a Goldman Sachs product issued, as the name suggests, in 2006. With over twenty percent of the mortgages it houses currently in foreclosure or close to it, this easily qualifies for Secretary of the Treasury Timothy Geithner’s $1 trillion “Public-Private Investment Program,” designed to restore investor confidence in toxic assets.Denzel has a role on an even bigger stage, for this GSAMP was a component of the ABX index, a system set up by banks in the bubble years that allowed them to “hedge” against the mortgage bonds they were peddling to customers. Simply put, as Pittman explains in American Casino, it enabled them to “bet more.”
Knowing his place in the financial zeitgeist isn’t much help to Denzel. “It’s the Matrix,” he said. No one is offering him a slice of that $1 trillion, still less the other trillions being tossed out the windows of the Treasury and Federal Reserve. It’s enough to make anyone feel a billion years old.
Andrew Cockburn is the co-producer of American Casino, a documentary on the subprime mortgage crisis, which is directed by Leslie Cockburn, and premiering at the Tribeca Film Festival on April 26. For further details, consult americancasinothemovie.com.