Uncle Sam is Rich Enough to Give Us All a Farm (or at least our Houses back)

Sharon September 16th, 2008

A  welcome, warm and hearty, do we give the sons of toil

To come to the West and settle and labor on free soil;

We’ve room enough and land enough, they needn’t feel alarm -

O! come to the land of freedom and vote yourself a farm.

Then come along, come along, make no delay;

Come from every nation, come from every way.

Our lands, they are broad enough – don’t be alarmed,

For Uncle Sam is rich enough to give us all a farm.


Yes! we’re bound to lead the nations for our motto’s “Go ahead,”

And we’ll tell the foreign paupers that our people are well fed;

For the nations must remember that Uncle Sam is not a fool,

For the people do the voting and the children go to school.

Then come along, come along, make no delay;

Come from every nation, come from every way.

Our lands, they are broad enough – don’t be alarmed,

For Uncle Sam is rich enough to give us all a farm.

- Uncle Sam’s Farm, a patriotic song of the Westward Movement,

I recognize that as modest proposals go, this is of far lower likelihood of implementation than eating Swift’s suggestion that we should eat the children of the poor ;-) .  Still, I feel obliged to mention that there is a way of transforming the nationalization of Freddie, Fannie and the bailout of almost every mortgage-holding bank (at some level or other – they’ve all been bellying up to the Fed’s lending table, using your mortgage as collateral) from a straight out blind rape of the taxpayer and the sale of their children’s future to something reasonably just and good (not perfect).  Because it would be reasonably just and good, and because it would strip the assets of many rich people, it will not happen.  Still, I think it is worth mentioning that given that we’ve all just committed to nationalizing our mortgages – and as long as the taxpayers are going to be paying for millions of mortgages anyway, and as long as we’re nationalizing everything in sight, there really isn’t any reason I can see (other than that it would be a just decision and wouldn’t serve the rich) that we couldn’t simply give everyone with a mortgage held by Fannie and Freddie their houses, free and clear.  And for that matter, anyone with a mortgage held by any bank that needs a massive federal bail out.

There’s even some precedent for this – in the 19th century the US got “rich enough” to give us all (an exaggeration) a farm by buying a large chunk of what is now the US, from people who had previously stolen it from the people who lived there.  The US then promptly stole it some more (I realize this is not a technical description, but it is fairly accurate), and killed off millions of the denizens, and gave away (in trade for improvement and modest fees) a lot of land.  It then helped subsidize other people to buy back the improved or partially improved land from failed homesteaders, and to a degree, improving the lot of many people who went to live in the West on the land of the people they’d destroyed to get it.

There are other precedents as well – in the 1980s, Fannie Mae took over mortgages on New York City apartments that were so far behind code that it was cheaper to sell them to the residents and stick them with the burden of repair than it was to actually fix the buildings and bring them to code.  Friends of mine living in Harlem were offered a chance to buy their apartment for $1 from Fannie Mae – they declined, arguing that $1 was overpriced, and insisting that their landlord bring the building to code, but the precedent suggests that when faced with an irredeemable loss, even the institutions in question know that a below-market sell-off is better than the alternative. 

We effectively have the government owning millions of mortgages, many of which are bad paper or likely to become it. They are, in the net, not assets, but liabilities. The government isn’t precisely rich enough to do much of anything – and they are pouring money into a losing proposition – millions of those houses are going to have negative equity, millions will go into foreclosure – many already are approaching it, since 1 in every 10 Americans is having trouble paying their mortgage.  As the houses are foreclosed upon, millions of Americans get poor, angry and desperate, and most of the foreclosed properties will never even sell at auction – they will be stripped of value, dismantled, squatted in and then bulldozed.  The government will be sued by municipality after municipality because of losses of property values, upkeep, etc…. Right now the government is facing the total loss of a large percentage of the things we invested our wealth in for the last decades.

Or, they could do something truly remarkable and radical – they could obviate the mortgages, speed up the inevitable demise of the companies but allow them a massive tax writeoff, and sell every mortgage held by the government directly, or every corporation that requires a government bailout to the homeowner for a nominal sum – I would suggest $100.  That’s it, you own your house free and clear, the broken remains of our financial system will prevent you from getting a new mortgage, so I hope you like the place, but with that sized investment, most of us would get to have houses and we’d have the pleasure of seeing the housing market hit bottom right fast. 

I’m sure this idea will take hold in congress any time now, since we all know that Bush and Co. are all for the “ownership society.”  The last decade saw more people than ever before owning their houses – and we could, once and for all, make that ownership lasting and profound, allocate property ownership to millions of people facing foreclosure or endless debt slavery.  It would be an economic stimulus package of a sort never before offered.  It would win the election and the love of the people for whoever offered it.  It would transform something nearly worthless into something of infinite value.  It would screw the companies and save the people – because if we can hold on to those small plots of land and the houses that shelter us, we can find ways to grow food, make do, make use of what we have. 

I know that our leadership won’t do this.  But there is also another alternative – we could do it.  During the Great Depression, many rural areas had “penny auctions” for foreclosures – local residents would keep out (often with force) buyers looking for a bargain, and not allow them to bid when houses came up for foreclosure.  And then, as one’s house and goods came up for auction, each person in the community would bid a penny for each item.  At the end of the auction, a hand full of change would be dispensed and the farm and land returned to the original owners.  In other places, groups of tenant activists barred evictions, and sherriffs and city leaders declined to enforce evictions or foreclosures.

The truth is that there’s a great deal that could be done to reallocate housing to the people who need it, and housing wealth to the people who will appreciate it as true wealth – a place of their own, a bit of land to grow food on.  It would require great commitment, organization, a sense of justice and a good bit of anger.  The good thing is that events are certainly proceeding towards anger, anyway.  The truth is that Uncle Sam may not do much for us in the coming years, but he could give us our houses, our little backyard farms.

Not holding my breath, though.

94 Responses to “Uncle Sam is Rich Enough to Give Us All a Farm (or at least our Houses back)”

  1. Meadowlark says:

    Shiner, “If we have a crash this is all a moot point as people will just live wherever they want and no one will have the werewithall to move all of us anyway.”

    I am not sure history bears that out. There were plenty of people moved out of houses at gunpoint or with threat of arrest who were left with nothing.

  2. Sharon says:

    Dewey, I think that’s not quite right – it is going to suck money out of your pocket no matter what. Either it sucks the money out to give it to corporations, and the survivor corps get the paper, so they can keep sucking money out, and making rich assholes richer, or the money will come out and be allocated to your neighbors – including the ones who made perfectly reasonable mortgages, and are going to be foreclosed upon shortly not because they got an ARM and thought they could flip before it reset, but because they are about to lose their jobs, as are the rest of us.

    The thing is, by the time you could implement it, most of the flippers will be out anyway, most of the ARM people will be out.

    Just fyi, this wouldn’t benefit me worth jack, at least directly – we’ve been paying off the mortgage ahead – we’ve paid it almost down (we bought some additional property later we still owe on, but it isn’t the lot the house is on, so wouldn’t be relevant), put down a lot, etc… But it would benefit me indirectly to see my neighbors, including the one who had to take on a big new mortgage to keep her house after her dickwad of a husband left her not have to move away, it would benefit me to see the houses not ripped for their copper and aluminum and made derelict. It would benefit me to keep the family who got a regular mortgage and put money down, but have seen the donations that make up their salary (they are both ministers) drop as everyone gets hosed with the costs of gas and food – stay in their house instead of moving back to Albany. It would benefit me to see the folks who are going to lose their houses, because even though they put plenty down on their 30 year mortgages, they’ve only been there 8 years, and both are going to lose their financial sector jobs not have to move away.

    And as MEA says, honestly, there is so much excess housing inventory that there’s no reason we can’t let the renters in on the deal too – and should. Housing starts are down the most in 17 years as of today – but we’re still going to build nearly a million more units this year – talk about nuts, we can spread it around.

    Sharon

  3. Theresa says:

    I’m all for doing this on a global scale as well and just forgiving the debt of countries that will never be able to pay. These days, I guess that includes the USA.

  4. Mara says:

    Becky: yes. Resistance is futile.

    I happen to work for the company doing a lot of taking-over lately (The Bank That Must Not Be Named) and it’s kind of freaking me out. In just a few years– MBNA, Countrywide, now this?

    TBH, I don’t really “get” the government bailouts, they don’t seem to do much good. How can they believe in free markets, no regulation, then refuse to let these companies fail? It’s so hypocritical.

  5. WOW Trainee says:

    Please consider that a variation of the tough times we’ve been preparing for is here now. No, it’s not the Post Peak Oil scenerio we considered. Rather, its about our available options and how we live our rapidly changing lives.
    Today I’ve felt very fortunate that I found this site and have been able to implement some of the ideas. I’ve also gained comfort from Sharon’s information about living in place. No matter where we live, all of us are involved in the United States meltdown. I thank all of you for sharing.

  6. WOW Trainee says:

    As for the government bailouts, we are a debter nation. A lot of our economy is based upon foreign funding. A lot of the debt owed by these large companies is actually by foreign countries and individuals. This has very real global implications.
    I know this is very simplified but this is how I understand it. For instance, if our notes or IOUs are presented for payment, we as a country are in a real mess. We don’t actually have anything behind our dollars. It’s just special paper printed on a printing press and given with good will and hope. There is no limit to how many dollars we can print or state in the computer data base.
    Also our nation’s future is based upon being able to finance and increase our debt owed to other countries. It’s kinda like borrowing on credit cards to pay other debts. We just get deeper and deeper in debt. Until like Argentina, the Soviet Union or the former Rhodesia, the process no longer works.
    So how are we as citizens going to pay for all this? I think the word is hyperinflation combined with depression.

  7. Shamba says:

    A good point about the AIG bailout: my mother, who is 87 and lives in a home foro those with Alzheimer’s and needs 24 day care gets 1/5 of her income from an investment in AIG. It was money she and my dad saved and saved and saved and has taken care of her for 10 years. She may not live more than a year or two, she’s less and less interested in eating and more and more in sleeping. She still knows who I am when she’s awake though she doesn’t always remember much else from her life.

    I am greatly relieved that the AIG thing has gone through and hope it stays that way but I can understand the variety of opinions and feelings about the government bailing out banks and insurance companies.

    cheers,
    shamba

  8. Handygirl says:

    I still wonder what, exactly, would happen if every single country up and said, “Well, that’s it, then. We’re declaring amnesty on every debt, no matter how small. Every single person, every single business, every single non-profit, every single government is today starting from absolute zero in terms of debt. What you have today you own outright and we’re starting over.”

    What would happen?

  9. MEA says:

    Handygirl — it would be a jubilee.

    Sharon — while I think we might as well cut renters in on the deal, I wasn’t the OP on that.

  10. Texicali says:

    and that Jubilee would be a great leveler of society. Much of what the wealthy hold is not tangible, rather it is notes on the debt of someone else. Such wealth would evaporate, and everyone would be back to the tangible wealth. For that matter any cash held in banks would disappear as well, because all banks would disappear. Instant barter economy.

  11. bewildered says:

    Sharon – Thanks for sharing your brilliant idea. I appreciate your historical reference and your capacity to think outside of the box. Clearly, we need to think outside of the box! The idea that it’s acceptable and normal (even preferrable) to pay for our housing by going into debt and then later making (or hoping to) a profit is utterly ridiculous to me. In my opinion, the mess in which we find ourselves stretched and stressed is (in part) a result of accepting the notion that housing ourselves could be a profit-making venture.

    Truth is we all need a place to live, to eat well, and to be part of our communities. I wonder if we would be less estranged from eachother (and the earth) if we didn’t have to drive each and every day to our jobs to pay for our mortgages (or rent, for that matter). Imagine if you could work a little less and have more time to spend with your family, friends, and neighbors doing things that really matter – like feeding ourselves, cleaning our rivers and public spaces, and expressing our creativity, for example. Yes, some folks might take advantage of the situation and get another boat or car or take another extravagant vacation “on the house” so to speak. But haven’t the big time money mongers already had several rounds “on the house”?! It seems to me that having our homes, yards, and farms without indentured servitude is the first step in turning our culture on its head.

  12. dewey says:

    Sharon – if the banks will really be unable to lend out those houses that they may foreclose on, so that the alternative to the mortgage-cancelling scheme is believed to be leaving those houses to be derelict and stripped for metals, then both buyers and banks ought to accept a forced-rental scheme. Let’s say one of your neighbors can’t pay her $1000 mortgage. The feds could freeze the mortgage interest and require the bank to let her go on living in the house indefinitely, paying only $250 in rent, but not acquiring equity until and unless she pays more. If the likely alternative in this market is that the house is wrecked by pillagers, with the bank receiving $0 from it, the bank may grouse about having such a deal forced upon them, but should secretly welcome it. Your proposal would have the feds nullify her mortgage, pay the bank $250 in partial compensation, then jack up someone else’s taxes $300 to pay for the compensation plus program management.

    You may argue that you expect your neighbor to be totally unable to pay even token rent, but in that case, it’s fair to ask whether her current house is larger than reasonable for charity housing. If some workers are expected to pay for both their own housing costs and those of strangers, especially in an economic crisis so severe that many people have no income, they will not like to know that the strangers are living better than their own families can now afford to.

  13. MEA says:

    I don’t mind stranger living better than I do nearly as much as I mind my own family .

    I think, dewey, and I apologize if I am wrong, that you are thinking in terms of justice on an indivual scale, and Sharon in terms of mercy on a socital scale.

  14. dewey says:

    I’m not offended by the suggestion that I think in terms of justice; I do. I don’t think coerced mercy that results in injustice is a great idea. I don’t want the government stepping in and making it cost-free for some people to own houses at the cost of making it harder, or even impossible, for some other people to own houses. What, precisely, makes the first group of people so much more deserving of mercy than the second group? Nor do I think that a free-McMansion scheme is necessary for mercy. Mercy requires that the homeless should be sheltered, but provision of shelter does not equate to provision of the title to a preferred single-family dwelling. Plenty of people live their whole lives in rented housing, sometimes from choice – look at the poster in the thread above who was so hostile to his wife’s desire for ownership. People who can’t afford to buy the house they want to occupy shouldn’t be offended by having to pay a reasonable rent, if the alternative is that some apartment dweller is forced to pay their rent (through taxes) on top of his own rent.

  15. Sharon says:

    Dewey, I guess the major objection I have to your scheme isn’t the justice vs. mercy argument, so much as that I think that your system involves vastly more pocket picking – because if the government ends up owning and managing this housing, they need to create an enormous beaurocracy to manage – by law they will be responsible for upkeep, for evictions, for mediating legal issues, etc…. What’s left of our economy, I think is not best spent creating a new class of people to manage what was once private housing.

    As for renters, as I’ve said repeatedly, I favor getting them into housing as well – there’s a huge stock of uninhabited second homes (it goes without saying that you only get one house if you get one), half built houses owned by builders, and places where people genuinely are going to be evicted anyway. Honestly, if we’re halfway rational, there’s enough housing to go around.

    Sharon

  16. Lynnet says:

    I’ve been thinking about another solution to the foreclosure problem.

    I’d like to see a time limit for banks/mortgage companies. It could be 6 months, or 1 year. Certainly 6 months for already-foreclosed houses. The bank would have to sell the house by that time, taking the hit if need be. If they did not sell the house, it would revert, free and clear, to the municipality it is in, or the county if out in the country. The bank would get nothing, not even the expenses of foreclosure.

    One reason that the backlog of foreclosed houses is so big is that most banks refuse to settle for any less than the current principal balance, even if the house is worth 25% less than that.

    This would give the banks some real incentive to sell and settle the debt; otherwise they would lose the entire principal sum. Or they could revalue the houses and change the mortgage terms, to avoid the foreclosure risk.

    The municipalities/counties could decide to refurbish the homes and sell them or rent them, or bulldoze them for parks, community gardens, or urban farms, depending on their condition and neighborhood.

    In a few months, residential real estate would be fairly valued again, which is a necessity for getting out of this hole. I don’t understand why banks don’t see that it is better to sell those houses for what they can get, instead of waiting for them to become empty and derelict.

    Municipalities/counties would have a new source of income, and could reduce taxes, increase services, etc.

    People who have equity (according to a current appraisal) would get their money first (not last) if the house is sold.

    This plan does an end-run around the problem of “we followed the rules and we’re suffering, but they’re bailing out the profligate”. It will bring the price of these houses down to their worth, and enable more people to be in homes.

    It also hits the banks hard, if they refuse to show a community spirit and either redo the mortgages or sell the houses at a reasonable price. Every other business reduces their prices to move stock; banks should be encouraged to do this too.

  17. Tim says:

    Hi Sharon,

    This is fascinating. I’m in the UK and we have largely the same issues although maybe not quite as far along the line (yet) as in the US.
    I am just weighing up the relative merits of giving houses back to people, versus rewriting their mortgage contracts to be interest free.
    It strikes me that getting off the interest component could be enough and would sidestep the free-rider-mc-mansion-dweller that has been talked about in the coments so far.

    I would break it down like this;

    Problem: A sizable portion of the nations economy is focused on paying for housing that already exists – distracting from more productive activities like insulating that housing, growing vegetables or spending time with friends.

    Context: Britain already has a housing stock – which is increasingly owned by banks – which in turn are now increasingly owned by the state – which may well fail to make a decent return on its purchase

    Action: Consolidate the nationalised banking assets – Offer all new and existing mortgages (from the state bank) to be rewritten as 0%interest+Inflation+Administration – essentially interest free loans with an agreed repayment schedule

    Result: The shareholders of the bank (The UK) benefits less through dividends to the government but gain through ownership of UK residential properties reverting to the people – lower mortgage repayments – more disposable income for insulation – more disposable time for veg and friends.

    Bonus: A chunk of the UK economy gets smoothly off its growth fix

    It’s been a few months since you put up your post. I would be interested to know where your thoughts have moved to on it and what modifications if any you would make if you were to take it seriously?…

    Tim.

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