Nightwind’s home

For years and years, the USA has tried to build an image for itself. At least in the minds of the gullible, USA was the land of all opportunities, where you can earn big, live cheap, while the economic system watches over small details like mortgage, health insurance, social security. It was supposed to be the place where any enterprise could flourish, in democracy and a free market, with no direct control from the government as the government itself would be just a player.

Your chances to prosper would only be limited by your cunning and your ability to decipher the mind of the customer.

I’m not sure if I ever informed you, dear reader, why I hate the USA so much. Well, now I can tell you. It’s because due to USA’s hunger for a free market (where USA would of course be the dominant one since it’s a young state and as such it still has plenty of resources that haven’t been exploited for thousands of years, not too much anyway) there’s also an obsession for publicity. Publicity, as we now know, it’s the “soul” of commerce (if one could say that economy actually has a soul) and being a state based on commerce and trading with “the Old Continent”, the USA is a master of publicity and advertising. It has mastered that to such an extent that the appearance you get is that of a wondrous place where milk and honey flows freely and you start to believe that state institutions are there to actually help you.

If you’ve ever believed that, then you’re definitely in danger. Not sure if you noticed but I’ve used the term USA just one would use the name of a person. But USA is not a person, right? Well, no, it’s not a person but it’s not far from that. It’s an entity apparently born from that thin separation between state and federal power. Here, the state is actually that smaller administration unit ruled by a governor … while the federal is that power which transcends state. That is, the US government, with it’s Congress and House of Representatives and … of course … the White House. But that’s not the only power that transcends state. The big corporations have come to transcend even the federal power to such an extent that a good part of the global economy relies on them.

This has come to my attention last week when something unbelievable has happened. The US government came in and gave a hand to two big money lending machines (the mortgage dealers) Fannie Mae and Freddy Mac. Skipping the “friendly” sounding names, the two are giant corporations that between them cover the mortgages of more than half of the properties in the entire USA! Their power and influence extends such that they were close to be called in as monopoly (and honestly, who knows what deals are made behind close curtains - having the unsuspecting american family as victim).

First of all, how do mortgage dealers work? Let’s say you buy a house. Right? Right. For that you take a loan at a bank, which makes you pay a certain interest rate on your loan (that’s normal since a bank isn’t a charity, they gotta make a profit somehow, even if it’s form your need to have a nice white picket fence home). After a while, maybe, you get into trouble and find that you can’t pay that interest rate. But since America is the land of opportunities, you don’t panic, there’s a solution. What if you could pay less? That’s a dream right, you keep your home but pay less every month to have it. That’s what the mortgage lender does, basically it gives you the money to pay the bank, but with better interest than the bank, in exchange with taking ownership of the property. On this path it might sound like a dream, but it’s not. First of all, you end up paying more (sometimes more than double) than the initial price of the property. This is dangerous because the asking value (not real value) of the house rises sharply (surely, if you’d have/like to move from your home, you won’t sell it for less that what you’ve been paying for it, right? even if it’s more than what was written on paper in the beginning) but the actual value of the land might in fact fall. Of course, at least in the beginning, you don’t think about moving and the fact that you’ll be paying more doesn’t really matter because you pay for a longer time so the amount you pay every month is very small and all that matters is that you have a house for your children and even if after your death they’ll still be paying the mortgage, you hope that they’ll actually own the house one day.

Planning for such a long time however has its risks as millions of americans have learned since last year. This system might work as long as people keep paying. But what if many people will find themselves in the impossibility to pay for a longer time? Well, since they don’t own their homes, they’ll be thrown out on the streets. That’s just step one. But since they haven’t been paying for a while, their money hasn’t went to the corporate lenders. That’s ok you say, since the lender got the house, all they have to do is sell it and get their money back. the family on the street will pick up, get better jobs and they’ll get another loan later. Right? Wrong. Given the extend of the inability to pay, a family who’d like to get the now vacant house won’t be able to, because since the lenders don’t have money, they can’t finance them to buy it (in a way, in such a situation, the lender finds itself in the position of giving itself money) so nobody will buy the house.

The deficit in the lender’s pockets will rise and the only plan B is to rise the interest on the remaining home owners. But such a move will put more of them in the situation where they can’t handle payments and the crisis grows to the extent we know it today. But the problem is bigger. You see, such corporations pay taxes and are part of the money flow in an economy. If they collapse, the national budget is hit, banks are hit, the flow is hit severely. If a corporation falls, then the chain reaction in such a crisis can affect the US economy and all the international economies that have relations with it … and we know that about every country in the world has relations with the US one way or another.

But the trouble is that … well … these are the risks of a free market. A lender takes a risk when lending money to someone. If that person can’t pay then nothing can help you. Putting that person in jail doesn’t help you getting money back. Seizing and selling that person’s things helps you only to the extent that there’s someone willing to buy them. If the risk is too great and you miss, tough luck. Thank you for playing the capitalist game in a democratic state and we hope that the next player is better than you.

But no, in the case of Fannie Mae and Freddie Mac, there was divine intervention. Well, not really divine. The American government came in and … guess what … they gave access to unlimited state financial resources to the two giants. That goes like this: they can use whatever amount of money they want, for free, from the money already payed (as taxes) by the same people that were already paying them mortgage interests to stay in their houses. Does that sound fair to you? It surely doesn’t sound fair to me and neither to the people living in their houses paying “rent” to Fannie Mae and Freddie Mac anda find themselves paying even more as their state tax money goes to the same companies.

Of course, that’s also not fair to any and all American companies in financial difficulty. Why do these two get so much aid? Why does the state help big companies in debt but doesn’t help the poor people who can’t even pay health insurance and are left to die on hospital doorsteps? Why does the state help big corporations who have offices in other countries depriving their fellow citizens of jobs?

But the hipocrisy of the American state doesn’t stop here. The US has always criticized states who protect national companies. Romania was criticized for protecting the National Railways Company (the CFR, which was eventually split in several smaller companies, resulting in increased ticket prices for the population). Venezuela was criticized for throwing away foreign companies and having a state company exploit the oil reserves (creating jobs for the local population and keeping the profit from oil, instead of letting it go into Bush’s pockets). Russia was criticized for protecting Gazprom with lower taxes. Now comes US protecting two large mortgage lending corporations (in case you missed it, read again - US doesn’t protect its citizens from debts, doesn’t protect small job-creating companies, instead it protects two overly fat corporations that actually threw families out of their homes).

I already hear marxist enthusiasts rubbing their hands with glee, now that the proponent of “free trade” has proven that having “free market” is impossible. Between the completely free market, regulated by demand/offer (US) and the completely closed market controlled by state (China), perhaps we should look at the middle solution (Russia or France). Personally, I’d like to see some balance between offering equal chances to regular families and having a free-opportunity market. It’s not ok to punish a smart individual who knew how to seize an opportunity, but it’s just as wrong to punish a loving family who fell on hard-times, there’s got to be balance somewhere.

For now, it must be great to be a corporate CEO in the US, knowing that if you fail there’s always the government ready to give a hand and have the taxpayers pay for your mistakes.

In the meantime, America fell into its own trap, showing that the government cares more about companies than about the “old american family”. What can I say? Good night America. And good luck. You reap what you’ve sown.