From Volume 37, Issue 29 of EIR Online, Published July 30, 2010

U.S. Economic/Financial News

First Obamavilles, Now Debtors Prisons!

July 18 (EIRNS)—A sign of the times: Debtors are being jailed, in record numbers, for failing to pay credit card and other debts, which have been taken over by debt collection agencies which buy up uncollected consumer debts at pennies on the dollar, and abuse an already stressed law enforcement and judicial system, to force debt payments by getting people arrested and jailed. On July 9, the Minneapolis Star Tribune published an exposé of just such debtor prison policies in Minnesota and other states. "In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man 'to indefinite incarceration' until he came up with $300 toward a lumber yard debt," the Star Tribune reported. "The laws allowing for the arrest of someone for an unpaid debt are not new. What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect."

The article catalogued a dozen cases of debtors being hauled off to jail and held overnight or longer. Ostensibly, they were arrested for failure to appear in court on a civil summons, but often, according to the Star Tribune investigation, the bail is set at the exact amount owed on the debt, and the bail money is then turned over to the collection agency by the court.

Federal imprisonment for unpaid debts was outlawed in 1833, and most states outlawed debtors' prisons around the same time; but the trend is being reversed under current conditions of economic collapse.

Personal Bankruptcies Reaching Historic Highs

July 18 (EIRNS)—In its history of keeping records of bankruptcies, which began in 1982, the state of Minnesota has never had so many people file bankruptcy in a half-year period as this last six months, when the White House has declared that the economy is in the jobless recovery! In the first six months of 2010, 11,532 people in Minnesota filed for bankruptcy, which is 10.5% higher than one year ago. On the national level, according to the National Bankruptcy Research Center, there were 770,117 bankruptcy filings—that is one in every 150 households—an increase of 14% over one year ago, reported the Minneapolis Star Tribune. The paper also reports that the post-2005 drop in personal bankruptcies is over. In 2005, the Federal laws were made much tougher and required repayment of some debts. So, in order to come in under the wire before the law changed, in Minnesota, there were 25,635 filings in 2005, but in 2006, the bankruptcy filings dropped to 7,729. In 2009, there were 21,302 bankruptcies filed in Minnesota, and this year's total is expected to be much higher.

'Community Organizer' Obama Targets Housing for Poor

July 19 (EIRNS)—Former "community organizer" Barack Obama has now offered a plan to sell the nation's low-income housing to the highest bidder, and in the process, throw 2.3 million poor residents to the will of the "markets." The bill, currently still in draft form, is titled the Preservation, Enhancement and Transformation of Rental Assistance Act (PETRA), and was unveiled in front of Rep. Barney Frank's House Financial Services Committee in May. It provides for owners of public housing complexes (mostly large municipalities) to "open their units to private investment," in the words of the Washington Post. Considering that public housing nationwide suffers a $30 billion deficit in basic maintenance, and that the Obama proposal also allows for housing complexes to be shut down if not deemed viable, this puts housing for 2.3 million people at risk. Alternatively, the bill would provide for subsidies to residents, so the poor could afford to pay market rate rents, thus subsidizing the landlords from the government till.

Indeed, the nation's public housing program is in a mess. The misnamed Office of Housing and Urban Development currently supervises 13 different programs, mostly offering capital assistance and operating funds to local authorities, and rental assistance (Section 8 housing) in others. Stimulus cash ($4 billion) is running out, and Obama's 2011 budget cuts capital funding to municipal authorities by almost $500 million. As "protection," the bill would demand long-term 20-year contracts, with included 30-year restrictions on property usage, but the "transformation," once enacted, would remove the government from the "responsibility" of providing housing for all of its citizens.

The proposal has an up-hill battle, and many detractors. Rep. Maxine Waters (D-Calif.), chair of the Housing Subcommittee, warned that the bill could "lead to the permanent loss of public housing," and even Rep. Barney "Bailout" Frank (D-Mass.) noted there was "widespread opposition" to the sellout. Linda Couch, senior vice president of the National Low-Income Housing Coalition, noted, "Everyone seems to understand that there's not going to be a massive new infusion of capital funds, and without that, what do you do?" She did not mention Lyndon LaRouche's proposed Homeowners and Bank Protection Act of 2007, or his call for a new Glass-Steagall law.

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