When I purchased my home in 1982, there were clear regulations to determine the agreement between the bank and myself. It was very simple. I had to provide the bank a minimum deposit of 20% and the bank agreed to allow me to borrow a maximum of 2 1/2 times my annual income in order to repay the bank back over a 25 year period. I earned around £8000 per year in dana and travel expenses at the time.This was a simple and practical regulation that protected myself from getting into debt that I could not manage, as well as the bank having some assurance that the customer would be able to afford the monthly repayments. My house cost around £25,000. I gave the bank a £5000 deposit — from money that I had saved in the previous five years and some support from some people in the Sangha. Live within your means. It was the same message for others making the most expensive purchase of their life.
We are now in the midst of a global financial crisis sparked by banks in the USA selling what is known as sub-prime mortgages to customers who could ill afford the massive monthly repayments. People wish to own their own home. Why pay a monthly rent that is paying off somebody else’s mortgage? Lenders saw an opportunity to make a lot of money at the expense of poor people wishing to buy a house for their long term security. The banks gave a 90% mortgage, 100% mortgage or even 120% mortgage. Customers believed house prices could only go up. The banks allowed mortgages for four times or more their customers income. They told customers to add together every single dollar that they earned including both full time and part-time wages of both partners. Customers were told that they could repay at a very minimal interest rate for the first two years. After two years, they would pay full mortgage rates with much interest. They were led to believe their income would increase after two years to enable them to pay back the cost of the mortgage.
The banks, the estate agents, financial advisers and various agents deceive themselves and deceived the customers. It was an agreement made in hell. Governments, bankers, hedge-fund managers and the regulators all turned a blind eye to pervasive financial corruption in the City. Lehman Brothers, America’s fourth largest investment bank, collapsed after losing a staggering $14 billion – much of it on their home loans to vulnerable people, many of them first time buyers. While boards of banks and market speculators made huge sums of money for themselves – money squeezed from millions in debt, as well as from the poor worldwide. The pathology of desire and craving can never correct itself – as naive people were led to believe about the financial markets. Greed generates greed and subsequently widespread anxiety and anger. Capitalism is a mind game affecting people’s sense of self worth, savings, livelihood and destroying lives of communities around the world dependent for survival on employment from businesses and banks run with integrity.
It takes very little for the sudden drop in income — a pregnancy, loss of a job, repairs to home, a divorce, sickness, other outstanding debts. An economic downturn causes homeowners who are massively in to the bank to find themselves in a terrible crisis. I read that 7.5 million homes in the USA 2007 had oustanding subprime mortgages and 1.3 million homes were facing foreclosure filings last year because people simply cannot afford to repay the banks. In our government’s slavish conformity to the US model, numerous UK citizens are in the same plight. The banks are on bended knee for money from their govenment to keep them going.
It should remind all of us that capitalism, the so-called free market, is as rotten a system as communism since the market is used to exploit millions of people until they become wage slaves. Half the population is now far worse off than 10 or 15 years ago due to the level of debt of tens of millions of consumers. Our governments, banks and regulators have completely let us down. We have no words to communicate the amount of suffering this has brought upon the lives of working people. Capitalism is immoral as well as amoral. There is no pointing in throwing water at an apple that is rotten from the inside.