February 22, 2009
The Housing Dilemma
Mortgages, Usury, and Class Conflict
I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
— Thomas Jefferson, The debate over the recharter of The Bank Bill, (1809)
Let's think a little about banking, in general.
I recall my pride in buying a house of my own (with, of course,
the help of a local bank) in 1962, at age 29.
I wanted to buy a house of my own in the small town in which I was living.
There was a "For Sale" sign on a house in which two elderly sisters and
their strange brother had lived for years. On my way home from work late
one afternoon I parked my car in front of the house and knocked on their front door.
The owners wanted $13,500 for their house, an amount far greater than I had.
My home-financing education was about to begin. Oddly, this important
subject had not been offered to me in school. However, I had been
obliged to memorize the names of states and their governments' capitals,
the names of the federal government's presidents, and the dates of our
government's wars. This happened to be information that, by itself, I
never found particularly useful. I'd have benefited more from practical
personal financial information. Certain facts of economic life
might trigger difficult questions in intelligent and idealistic
American youngsters. How to answer? - how to answer!
I had no debt, had been employed by a major corporation for over
two years, and was earning nearly $10,000 annually. Winter was approaching
the Hudson Highlands in Putnam County, New York. Because the brother,
co-owner of the house with his two sisters, was very anxious to move to Florida
as soon as possible, he was willing to lend me $4,000 and take back a second mortgage
if I would buy the house. He suggested to me that I use that sum as
a down-payment (our little secret) and agreed not to file his own
mortgage until after I had secured a bank loan and the sale had closed.
The local banker seemed happy to greet me when I walked in. The transaction
went smoothly and I soon owned a house and two monthly payments. To this
day I recall the exact amount of $44.41 that I mailed to Ed for the second
mortgage for ten years. The payment to the bank was around $85 a month,
payable for 20 years.
I easily calculated the amount I was required to pay was roughly
twice the price of the house. I recall mentioning this discovery to
my Dad when he and mother came to visit. I recall his rather wry comment to
me, "Persons who don't have the money must pay those who have it,
if they want a home of their own. That's the price you pay for not having the money." Although I had yet to think about economics (other than my own) or politics, I recall that this struck me as somewhat unfair, however necessary, at the time. How could I be expected to have such an amount of money so soon in life? I had perservered
to earn a college degree and was attempting to move ahead financially, employed in corporate America. Why, I thought, should I be so penalized in a democratic system? Clearly, I had much to learn.
Since 1962 there have been changes. House prices are higher, interest
rates have varied, mortgage terms have increased to thirty or more years.
Other things have not changed. For example, there is the term called
"interest front loading". Most of the interest on a mortgage loan in the USA is charged up front during the first ten or fifteen years of the loan.
Statistically the US population does not stay in the same mortgage for longer
than five to seven years. What bankers collect is "interest" and the
home "owner" actually gains very little ownership (equity). This lopsided system
results in profits for bankers and very little in the way of increased equity
and capital formation (personal assets and savings) for the average American,
even in the best of times. Real-estate inflation does create something that I
have recently called "phantom equity".
It seems clear that those who influence political decisions today will do
eveything within their power (the right word) to restore this system to its
previous status. During this present crisis in American housing, why not take
the opportunity to examine the entire system in detail? I am reminded of a quatrain
from Omar Khayyam's The Rubáiyát:
Ah Love! could you and I with Him conspire
To grasp this sorry Scheme of Things entire,
Would not we shatter it to bits--and then
Re-mold it nearer to the Heart's Desire!
We have heard it said that there are three fundamental human survival needs:
food, clothing, and shelter. Surely a matter as important as shelter ought
to be carefully considered by We The People in the interests
of the many rather than in the interests of only a few (the bankers).
The time has come for people to learn some facts about banking. Right?
The enemy of subversive thought is not suppression, but publication: truth has no need to fear the light of day; fallacies wither under it. The unpopular views of today are the commonplaces of tomorrow, and in any case the wise man wants to hear both sides of every question.
- Sir Stanley Unwin
Mar. 19, 2009:
Preparing for Civil Unrest in America
Is it over for the USA? - Can this be true?
Posted 12/13/09: A Stability Police Force for the United States