The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Book Review:
Homewreckers

Mar 2, 2020

Donald Trump said he looked forward to an economic crash: “I sort of hope that happens because then people like me would go in and buy.”

Sure enough, the just-released book Homewreckers by Aaron Glantz details the story of how millions of people lost their homes to the banks following the crash of 2008, and how the banks profited from their misfortune.

Seniors, single moms, working class families, all lost their family homes. Many of these homes had been in families for decades, and were workers’ only hope of building wealth and security.

The Banks Push Easy Debt

The story is now well-known: the banks pushed cheap and easy debt to families, causing a huge bubble of debt, which of course exploded, devastating cities and communities. Banks were collapsing, and the Bush and Obama administrations bailed them out, to the tune of trillions.

The bankers were supposed to encourage refinancing and restructurings of the harmful loans with the money. Instead they kept the money, paid themselves bonuses and helped only a small fraction of homeowners, snatching thousands and thousands of homes through foreclosure and auctions. They got paid again by the government for any “losses” they incurred. Profits were in the trillions.

Then Take Workers’ Homes ...

But as the book shows, this is only the beginning of the nightmare. Banks and the federal government wound up owning millions of empty or foreclosed homes. These banks, like IndyMac, were going down or were weighed down with unprofitable mortgages. Vultures were circling. One “titan of private equity,” the hedge fund manager J. Christopher Flowers, called himself “a low-life grave dancer,” and announced that the crisis of 2008 was “the Super Bowl of investment, no time to be sitting in the bleachers.” These vulture capitalists wanted the bank assets and foreclosed homes for pennies on the dollar.

There were regulations to stop this robbery, but the moving avalanche of billions of dollars controlled by these titans always finds a way. There was a law which said no hedge fund could buy more than 25% of the bank assets without being subject to oversight. But, “no problem” for these vulture capitalists: Flowers, Steve Mnuchin, John Paulson, Thomas Barrack, Steve Schwartzman of Blackstone, Soros, and others all banded together and no one bought more than 24.795% of IndyMac.

Others, like Jamie Dimon of JP Morgan Chase, financed and benefitted from this disaster capitalism, while simultaneously decreasing investment in individual homeowners. Wilbur Ross and Sean Hannity also bought in.

And Became Landlords

What next? These vultures hid behind legal LLCs and became landlords. They discovered it was more profitable to rent the homes. They used the profits to buy up foreclosed homes as cheaply as possible, by the hundreds, in high-demand communities like Phoenix, Atlanta and elsewhere. They charge higher than average rent, and raise the rent every year, and they make renters sign a 20-page lease which says the renter must make and pay for most household repairs. Call your landlord? Impossible.

A Continuing Cash Cow

Just two years of rent paid off a house bought at an auction. Why put the house up for sale when prices and values eventually rose? Just raise the rent! Billions were rolling into their pockets. One of the biggest group of thieves, the hedge fund Blackstone, is this country’s biggest landlord, with more than 80,000 rentals!

Bundling the Debt for Other Investments

But the book shows how even this was not enough. They now bundle the homes and rental contracts into groups of around 3,000 homes and sell the bundles for hundreds of millions each, over and over again. Who owns the homes now? No one knows. And they use those profits to buy more homes, or retail operations, or nursing homes or grocery chains. Anything to plunder and strip.

The author of this book has high hopes that new laws can be passed which would stop this plunder. However, every year this moving tide of money has only adapted and accelerated, wiping out any obstacle. Some say businessmen like Trump or Bloomberg make good leaders because they know how to run a successful business. Wrong. This book shows that what is good for them is NOT good for us!