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A Savage Sorting of Winners and Losers, and Beyond 25 had grown to many millions by 2007 and as it became evident that it was impossible to trace the toxic component in their investments. A mix of conditions, among them the fall in housing prices, led to extremely negative outcomes for households. Among the most biting of these outcomes was the sharp rise in foreclosures. In 2008, for instance, on average ten thousand households lost their home to foreclosure every day. An estimated ten to twelve million households in the United States will not be able to pay their mortgage over the next four years and, under current conditions, will lose their home. Indeed the available evidence for the first quarter of 2010 shows the highest levels of foreclosure yet of this current period that began in the early 2000s. This is a brutal form of primitive accumulation. Presented with the possibility (which turned out to be mostly a deception) of owning a house, modest-income people will put whatever few savings or future earnings they have into a down payment. Further, all the mortgage sellers were after was the contract representing the material asset (the residence). The negative effects on the household, on the neighborhood, on the city—none of that mattered. The whole process has become a reconditioning of the modest-income household sector, a more backward sector of capital, for its incorporation into a more advanced form of capitalism—high-finance. Subprime mortgages can be valuable instruments to enable modestincome households to buy a house or even to get a second mortgage or a mortgage on a home that is already paid for. But what happened in the United States over the past few years was an abuse of the concept. The small savings or future earnings of modest-income households or the ownership of a modest house were used to enter into a contract necessary to develop a high-finance instrument that could make profits for investors even if those households defaulted and lost everything. This has turned out to be a catastrophic and life-changing event for many of these households, and by extension, for whole neighborhoods now filled with foreclosed homes. It becomes clear in the microcosm that is New York City. Table 1.1 shows how whites, who have a far-higher average income than all the other groups in New York City, were far less likely to have subprime mortgages than all other groups, reaching just 9.1 percent in 2006, compared with 13.6 percent of Asian Americans, 28.6 percent of Hispanic Americans, and 40.7 percent of African Americans. The table also shows that all groups, regardless of incidence, had high 26 Sassen growth rates in subprime lending from 2002 to 2006. If we consider the most acute period, 2002 to 2005, it more than doubled for whites, it basically tripled for Asians and Hispanics, and it quadrupled for blacks. The subprime mortgage instrument developed in these years is just one case that serves to illustrate the specific role of finance in developing instruments that allow financial experts to “make” major additions to financial value on even very modest assets and future losses of assets. The complexity of what it takes to have a gain in high-finance contrasts with what it takes in traditional banking. In traditional banking, the gain is on the sale of money the bank has. In finance, the gain is on the sale of money the institution does not have. As a result, finance needs to “make” capital, which means speculative instruments and financializing of non­ financial sectors, subjects I return to later in this chapter and develop more fully elsewhere.5 Crisis as Systemic Logic Financial profit is a construction which either can be promptly materialized into a nonfinancial asset, such as an investment into building a dam or buying a telecommunications corporation, or can be used as a platform for further financial constructions, that is, speculation. The latter is what has dominated the past twenty years and generated the 2002 2003 2004 2005 2006 White 4.6% 6.2% 7.2% 11.2% 9.1% Black 13.4% 20.5% 35.2% 47.1% 40.7% Hispanic 11.9% 18.1% 27.6% 39.3% 28.6% Asian 4.2% 6.2% 9.4% 18.3% 13.6% Table 1.1: Rate of Conventional Subprime Lending by Race in New York City, 2002 to 2006. Source: Furman Center for Real Estate & Urban Policy...

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