Wednesday, May 14, 2008

HOME MORTGAGE HIJINKS

HOME MORTGAGE HIJINKS

Jon Christian Ryter

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The home mortgage default and foreclosure figures are in for February. The Bush Administration was not anxious to release them. The figures don't look good. The home mortgage crisis has become contagious. It's spreading from the subprime home market into the prime loan market. Approximately 2.3% of the holders of prime rate mortgages were at least 60 days late. That number is up 1.4% from a year ago. It is the highest level of delinquencies from prime rate borrowers in a decade. Prime rate mortgages are given only to the "A" list of credit worthiness.

First American's CLLP (Core-Logic-Loan-Performance) tracking system noted that the number of prime rate delinquencies is relatively small. Dean Baker of the Center for Economic and Policy Research agreed but feels, since February, the number of delinquencies from borrowers who previously had stellar credit, has risen substantially because all of the economic news since the first of the year has been negative. Unemployment is up. State welfare, which has declined steadily for the past decade is spiking upwards with 27 States reporting increases in applicants to the federal government's Temporary Assistance to Needy Families program. Since the program was started in 1994 to wean generational welfare recipients off the dole, 3.9 million US families (mostly adults with physical or mental handicaps that bar them from meaningful employment, or grandparents too old to find work who are raising grandchildren because the parents are out of the picture) have been on the program. Today, that number is expanding as the most likely destinations for tourists, like Florida, California and Nevada, are feeling the impact of the downsizing of the tourism industry.

Florida and Nevada both experienced 7 straight months of declining employment which not only impacts those employed in that industry, but residually, it impacts every business that is affected by the tourist dollars that feed the entire economy of the tourism States. And that, of course, is everyone. The loss of revenue dominoes from industry to industry, business to business, and reduces a whole range of incomes statewide. The States hardest hit by the slowdown in the economy are experiencing the greatest number of new mortgage delinquencies and foreclosures not only in the subprime sector of the mortgage industry, but in the prime rate sector as well.

Compounding the dilemma of the delinquent prime rate mortgage holders is that when the homeowners' mortgages move into the danger zone and their credit scores are reduced, it triggers increases across the board in a wide spectrum of the home owner's ordinary fixed monthly obligations. When the consumers' credit score drops, credit card companies have the right to increase their interest rates based on an assumed increased risk to the lender. Sadly, in the fine print on many credit card agreements (the stuff you don't bother to read when you eagerly sign on the dotted line because you want the plastic) the credit card company or bank has the right, in addition to charging late fees, to change your fixed interest rate to a variable rate if your payments become tardy.

As local bank-issued credit cards began to replace cash as the preferred medium of exchange, the banks and credit card companies used interest rate hikes to cover bad debt losses and used punitive late charges to penalize the late-paying malefactor. Initially, the late charges were percentage of the balance owed—the larger the account balance, the larger the late fee. To protect the consumers within their jurisdictions, about half of the States enacted usury laws that placed ceilings on the late charges and interest rates that could be charged to consumers.

While late fees are still based on the account balance, they are now flat fees. Cardholders with a balance of less than $100 generally pay a late fee of $15. Customers with a balance of between $100 and $1,000 can expect a late charge of $25 and those will balances over $1,000 will pay a late fee of $35. Since the average credit card balance in the United States exceeds $8,000, most late-payers are dunned $35 for the late payment. But, even worse, their interest rates will skyrocket to the maximum allowed by State law—or higher. Sometimes, to achieve the maximum, the credit card company or bank will revoke the fixed rate and charge the cardholder a variable interest rate which converts the standard credit card into a high risk credit card.

In 1978 Marquette National Bank of Minneapolis filed a lawsuit against Omaha Bank and, in Minneapolis, its subsidiary, First Omaha Service Corporation for violating Minnesota usury laws. Marquette sued to end the right of First Omaha to offer BankAmericard™ services. Marquette argued before the US Supreme Court in Marquette National Bank v First of Omaha Service Corporation, 439 US 299 that First Omaha was charging Minnesota cardholders Nebraska interest rates which were higher than those allowed by Minnesota law. The Supreme Court ruled that based on the National Bank Act of 1864 (12 USC § 85) national banks could charge whatever interest rates were allowed by their home state even if those rates exceeded the interest rate ceilings in States with lower rate ceilings.

Since about half of the States have no interest rate ceilings, most national banks simply re-incorporated in one of them. That is precisely what Bank of America, and every other credit card company in the United States has done since, according to the Supreme Court, the laws in the lenders' home State determines the rates they can charge in States with lower limits. Citibank, one of the largest credit card issuers in the country moved their credit card business to South Dakota in 1981. A year later the four largest credit card companies in Maryland moved their credit card business to Delaware. Look where your credit card statements come from, and you will see your New York or New Jersey credit card provider is billing you from Delaware, Rhode Island, Georgia, Illinois, Nebraska, South Dakota or Utah. Most of those States cap interest rates around 24% although subprime rates go as high as 27%. (By law, Arkansas has kept a lid on interest rates for over 100 years. Under Arkansas law, credit card providers may charge no more than 5% over the federal discount rate, which makes Arkansas credit cards the best value for consumers in the nation.) If you are looking for a new credit card, check out the banks in Little Rock before you look elsewhere.

Under the Financial Services Modernization Act of 1999 (Public Law 106-112), also known as the Gramm-Leach-Bliley Act, banks may once again own securities firms and insurance companies—assets that were denied them under the Glass-Stegall Act of 1934 because the financial services industry itself was responsible for the Crash of 1929. Lobbyists for the banking industry pushed hard to get the Gramm-Leach-Bliley Act enacted into law. The bankers wanted to enjoy the immense profits from the financial services industry. Unlike the 1930s when there were no financial-responsibility laws that forced car owners to purchase casualty insurance, today drivers are required by law to carry insurance.

Because banks once again own insurance companies, how you pay your insurance premiums now impacts your credit score. And that, in part, determines the rate of interest you pay on your credit cards. So, if you have a propensity to switch insurance carriers quite often, you will pay a higher rate of interest on your credit cards. And, you will suddenly discover you are a "subprime risk" for insurance, and you will pay a higher rate for coverage even if you have never had an accident or a speeding ticket. For that matter, if you drag your heels paying your gas, electric, water and phone bills, you will also be penalized when you apply for credit since that, too, will lower your credit score. With the banks controlling your credit score, anything negative about how you pay anything to anyone impacts your credit worthiness. As your credit score drops, the payments on all of your existing credit cards will increase, further impacting your personal cash flow and, ultimately, how and when you pay your monthly obligations.

Brad Dakake, a consumer advocate for the Massachusetts Public Interest Research Group told the media that "...fees are way out of control. They're not being done to penalize customers who miss payments," he said. "They're being done to maximize profits [for the lender]."

America is in crisis. It is a crisis created not by the unscrupulous mortgage brokers who sold the American dream to consumers who desperately wanted it but for whom the dream would become a nightmare. It is a crisis created by politicians in Washington who enacted the laws the bankers wanted to expand credit for the sole purpose of making the economy look robust when it was not. The politicians provided the bankers with a safety net to trap most the consumers who greedily bit off more debt than their paychecks could absorb, and were forced to flee the debt they could no longer manage—debt that fiscally-prudent lenders should never have extended. As the jobs drain continued at full throttle, the jobs created by the housing boom and the "plastic spending" were the smoke screens that concealed the true nature of the economy.

The safety net the politicians created was The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The bankers financed homes for the subprime market with toxic adjustable rate mortgages that were virtual time bombs waiting to explode. Then, the bankers and credit card companies loaded the same high risk consumers with credit cards they also couldn't afford—but not until Congress enacted The Bankruptcy Abuse Presentation and Consumer Protection Act of 2005 to provide the banks and credit card companies with a safety net that would force the consumers into repayment plans rather than liquidation if they owned their home since the bankruptcy laws were changed to exclude tax debts and any secured loans from bankruptcy. The only "escapable debt" became unsecure loans (i.e., credit cards). To protect the lenders of credit, Congress has created a myriad of laws that will allow the credit industry to recoup their bad debt losses by tightening "due dates," and assessing penalties if payments are not received on that date. Three federal agencies are currently working to reverse both the "immediate delinquent status" and the punitive "day-late" penalty fees that are currently assessed. The Federal Reserve is currently considering placing a time constraint on late fees by ruling a payment must be 21 or more days late before late fees could be assessed, and credit card companies will not be allowed to charge fees for cardholders exceeding their credit limits when hotels and/or car rental companies put "holds" on estimated card usage— particularly when the actual charges do not exceed the card's credit limits.

Banks and credit card lenders treat consumers as human capital—their personal chattel. When the economy sours and employers begin downsizing to protect their profit margins, consumers who can no longer juggle their debt feel it first. The areas of the country hit the hardest, and first, were those areas whose economies were artificially bolstered by quick fix jobs—the industrial States which had experienced the most job losses under the Clinton's 1994 NAFTA job export program.

But to understand the catalyst that brought us to this point, we have to look at the whole picture because there is more to it than just the collapse of the housing market. The economic collapse we are now experiencing began with the housing bust, but was intensified by the economic agenda of the Democrats who regained control of Congress in January, 2007. America began to get the "change" promised by Senators Barack Obama and Hillary Clinton with the first pieces of Democratic-churned legislation that was all-but guaranteed to reverse the economy in America because government is never the creator of jobs, it is the primary jobs eliminator. The Far Right sitting out the election of 2006 to teach George Bush a lesson has taught us all a lesson. Control of a democratic nation is a fragile thing. When conservatives sit out an election, and surrender their government to the far left, bad things—some of them irreversible—happen to all of us.

As the prime rate began edging up under the Democrat's austerity programs that has reversed two decades of economic growth by taxing both small business and the sweat equity of the middle class to provide new benefits for the poor. Since the Election of 2006, the Democratically-controlled House and Senate have eliminated the prosperity of the Reagan-Bush years and returned us to the horrors of the Nixon-Carter years. When Democrats assumed the reins of government in January, 2007, gasoline was $2.19 a gallon. Today it is $3.79 per gallon with pundits predicting it will break $4.00 per gallon by Memorial Day. Unemployment was at 4.5% when the Democrats took control of the helm of State. Today it is at 5%. The Far Left's declaring war on wealth was a stealth attack on the whole economy. Wall Street responded to the liberal agenda of Harry Reid and Nancy Pelosi—$2.3 trillion in stock equity vanished. Consumer confidence plummeted, buying slowed and the bottom fell out of the good luck bucket.

Hopefully, the Fed's cutting interest rates will plug the foreclosure dike by keeping toxic ARMs from birthing a new wave of foreclosures. The real tragedy of the housing boom is that unscrupulous builders, realtors and county tax appraisers are all guilty of perpetuating the myth that homes somehow became worth two to three times their actual value over a 5 year period rather than over the decades usually needed to increase the value of the traditional family home. Banks closed their eyes and approved toxic loans for eager home buyers they had to know would not be able to afford the payments once their toxic ARMs adjusted upward when the vacation from high interest rates ended. But, since HUD was backing the loans, they felt there were no losers—except the taxpayers who would be forced to foot the bill when the joyride ended.

Judge Backs Christian Soldier's Conscientious Objector Petition

Judge Backs Christian Soldier's Conscientious Objector Petition

By George Bryson

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Paratrooper was denied CO status by Army.

The Army should grant conscientious objector status to Pfc. Michael Barnes, a Fort Richardson-based paratrooper who had his request for that designation denied last year, U.S. Magistrate John D. Roberts concluded Tuesday.

In a 26-page recommendation to the U.S. District Court, Roberts noted that the Army failed to show "any basis in fact" to support its decision to deny Barnes' petition to be honorably discharged due to his religious beliefs.

At the same time, the record includes strong reasons to justify the request, including Barnes' own testimony, supporting letters from fellow soldiers and the opinion of an Army chaplain, the judge said.

"The evidence is overwhelming that Barnes, a motivated infantryman, is a person who takes his religious beliefs seriously, and there is strong evidence that his decision was motivated by those beliefs," Roberts wrote.

The government has until Friday to object to the finding. Assistant federal prosecutor Richard Pomeroy was out of state Tuesday and not available for comment. If the Justice Department appeals, a federal judge will hold a hearing in Anchorage this month. If the department doesn't appeal, the judge could simply sign off on Roberts' recommendation.

A native of Portland, Ore., Barnes, 26, said he enlisted in the Army for five years in March 2005 with the idealistic goal of "defending freedom and helping other people in countries no one else would help."

That same year, however, while training for deployment to Iraq as part of the 4th Airborne Brigade Combat Team at Fort Richardson, he grew increasingly troubled by the tales he heard from soldiers returning from Afghanistan and Iraq, Barnes noted in a statement he filed with his application.

"These stories included making the locals (do) degrading things so they could laugh at them, abusing the kids and taking others lives with ease. ... I told myself it's not really like that - that's just a few soldiers' perceptions of their experience."

But after his unit landed in Kuwait, then Iraq, in the fall of 2006, he began to witness bad behavior firsthand, Barnes said. He'd been transferred from an infantry company to the tactical operations center, where he served as a radio-telephone operator. There he grew more depressed and began to spend long hours reading the Bible. He mourned the deaths of solders he knew.

"How would I justify to the Lord that participating in war is serving him?" Barnes wrote. "I cannot. War is evil, and nothing but evil comes from it. Many of those who participate in it lose their souls along the way."

Army's Opinion

In late December 2006, he filed for conscientious-objector status. An Army review board denied his request last September - concluding that Barnes "did not present clear and convincing evidence of his sincere objection to war."

Specifically, the Army investigator noted that Barnes didn't regularly attend chapel services and earlier expressed a desire to fight on the front lines. He also pointed out that Barnes never conveyed his misgivings about the war to leaders in his chain of command until late in 2006 - after one of his friends was killed, and he was reassigned to serve as a gunner at a forward operating base.

"I do not believe that PFC Barnes ... is sincerely opposed to participating in war," wrote the staff judge advocate on the panel.

But in his ruling Tuesday, Roberts said the Army needed to buttress such opinions with "hard, reliable, provable facts" - and failed to do so.

"And there is evidence aplenty in support of Barnes' application," Roberts wrote, noting the statements by an Army chaplain and an Army psychologist who each vouched for Barnes' sincerity.

Anchorage attorney Sam Fortier, who accompanied Barnes in federal court on Monday, said he doesn't want his client to comment until the government responds.

"The cumulative evidence is that he was not acting - as the Army tried to argue - in a manipulative or an expedient fashion," Fortier said. "He was following his conscience to a much higher calling than whatever the Army was expecting him to do."

Only 1 in about 10,000 soldiers files a request to be recognized as a conscientious objector, according to Army records. About half of all requests are denied.

EU Condemns US Resumption of Executions

EU Condemns US Resumption of Executions

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Brussels - The European Union on Wednesday condemned the resumption of judicial executions in the United States and said abolishing capital punishment was fundamental to protecting human dignity and furthering human rights.

The U.S. state of Georgia executed convicted murderer William Earl Lynd on May 6, the first person to be put to death in the United States since the Supreme Court ended a de facto moratorium on capital punishment last month.

EU president Slovenia said it had unsuccessfully appealed for the United States to stop Lynd's execution. He was convicted of shooting his girlfriend to death in December 1988.

The death penalty does not exist in member states of the 27-nation EU, and no new country can join up without scrapping it. Some European parliamentarians have asked the EU presidency to push harder for its abolition elsewhere.

Expressing regret at Lynd's execution, a presidency statement said: "We believe that the elimination of the death penalty is fundamental to the protection of human dignity, and to the progressive development of human rights."

"Any miscarriage or failure of justice in the application of the death penalty represents an irreparable and irreversible loss of human life," it said.

The moratorium, which had been in effect since shortly after September 25, ended on April 16 when the U.S. Supreme Court decided the use of lethal injection for capital punishment was permitted by the Constitution.

US lists polar bear as threatened species

US lists polar bear as threatened species

By H. JOSEF HEBERT

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The U.S Interior Department has decided to protect the polar bear as a threatened species because of the decline in Arctic sea ice from global warming, government officials told The Associated Press.

Interior Secretary Dirk Kempthorne has scheduled a news conference Wednesday to announce the action. It comes a day before a court-imposed deadline on deciding whether the bear should be put under the protection of the federal Endangered Species Act.

In deciding to list the bear as threatened, the department will cite studies by its own scientists that the decline of Arctic sea ice off Alaska and Canada could result in two-thirds of the polar bears disappearing by mid-century.

Uncovering Secrets - Please Help

Uncovering Secrets

Freedom of Information Act Requests Demand Government Release National Mall Documents

The Partnership for Civil Justice has filed two Freedom of Information Act (FOIA) requests on behalf of the A.N.S.W.E.R. Coalition seeking critical information about the effort of the Bush Administration to privatize the National Mall.

One FOIA demands the government release information about the make-up of the Trust for the National Mall, the private business-led entity that the National Park Service (NPS) has authorized to partner in its planned remake of the National Mall. The government has so far refused to disclose critical information about the Trust, including its Board of Directors. The FOIA also demands records of communications between the Bush Administration, the NPS and the private Trust.

Since thousands of people around the country have written the NPS demanding that the National Mall remain fully open for free speech activities, the government has back-tracked and claimed that their plans to create a "protest pit" are only an option under consideration -- but two official reports put out last year by the NPS say otherwise.

The second FOIA request demands the Bush Administration's NPS release information regarding those plans, as evidenced in the reports, to restrict or ban First Amendment activities on the National Mall including their written plans to "pave civic space and speaker's corners for First Amendment Demonstrations" so as to "reduce the impact" on the "experience of other visitors."

Please make a contribution to support these efforts. The Bush Administration and the businesses have unlimited funds to pursue their goals and are raising more and more every day. Please join with tens of thousands of others who are standing up for our free speech rights by supporting this campaign. You can help make a difference in this important fight by making a generous donation today.

These FOIAs are part of the larger campaign in Defense of Free Speech Rights on the National Mall. The campaign seeks to defeat the efforts of the Bush Administration and Corporate America to inhibit, obstruct and banish Free Speech protests on the National Mall in Washington, DC and in other park lands and public spaces around the country. You can read a copy of the two FOIA requests by clicking this link (to download the first) and this link (to download the second).

Please Help with an Urgently Needed Donation

The outcome of this struggle to preserve Free Speech in Washington D.C. will have an enormous impact for many years to come. When the people come to Washington to stand up for what they believe in, the National Mall has been the central gathering place. This struggle to preserve "America's Front Yard" for Free Speech can't be done without your help. You can make a tax-deductible donation on-line or see how to send a check by clicking this link. If you want to make a donation that is not-tax-deductible you can also do so by clicking this link.


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Sign the Statement in Defense of Free Speech Rights on the National Mall
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U.S. Foreclosures Rise 65 Percent as Vacated Homes Add to Glut

U.S. Foreclosures Rise 65 Percent as Vacated Homes Add to Glut

By Dan Levy

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U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as rates on adjustable mortgages increased and vacated homes added to a glut of unsold homes, RealtyTrac Inc. said.

More than 243,300 properties, or one in every 519 households, were in some stage of foreclosure, the highest monthly total since RealtyTrac, a seller of default data, began statistics in January 2005. Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.

Properties in foreclosure ‘‘contribute to already bloated inventories of homes for sale, and put downward pressure on home values,'' RealtyTrac Chief Executive Officer James Saccacio said today in a statement.

The collapse of the U.S. housing market, the worst since the Great Depression, is contributing to the economic slowdown and may push the economy into a recession. Median prices for a single- family home fell 7.7 percent in the first quarter, the biggest drop in 29 years, the National Association of Realtors reported yesterday. There were 4.06 million U.S. homes for sale at the end of March, 40,000 more than the prior month, the Realtors association said in an April 22 report.

‘‘Inventory levels have soared to unprecedented levels'' Brian Fabbri, chief North American economist for BNP Paribas, said in an interview. ‘‘Builders and homeowners have to lower their prices significantly to sell that inventory out.''

Bank Seizures

Bank repossessions jumped 145 percent in April from a year earlier to 54,574, according to Irvine, California-based RealtyTrac. The company has database of more than 1.5 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank seizures.

Banks will seize about 60,000 properties a month through December, when about 1 million U.S. homes, or a quarter of all homes for sale, may be bank-owned, Rick Sharga, RealtyTrac's executive vice president of marketing, said in an interview.

‘‘These are the properties that are causing the bloat in the inventory,'' he said.

Delinquencies on subprime mortgages will continue to rise and defaults on prime loans also may accelerate as people lose their jobs in a slowing economy, Fabbri said. About $460 billion of adjustable-rate loans were scheduled to reset this year, according to New York-based analysts at Citigroup Inc.

Congressional Action

Foreclosures are mounting even as the Bush Administration and Congress propose relief for homeowners. The Democrat-led U.S. House of Representatives approved a $300 billion plan May 8 that would allow the government to insure refinanced mortgages. Acting Housing and Urban Development Secretary Roy Bernardi said the next day he was willing to compromise on the proposal after Republican President George W. Bush threatened to veto it.

Nevada had the highest U.S. foreclosure rate for the 16th consecutive month. One of every 146 households was in some stage of foreclosure, 3.6 times the national rate, RealtyTrac said. Filings almost doubled from a year earlier to 7,276.

California had the second-highest rate, one for every 204 households, and the most filings for the 16th consecutive month at 64,683. Filings more than doubled from a year earlier and were down less than 1 percent from March.

Arizona had the third-highest rate, one for every 224 households. Filings almost tripled from a year earlier to 11,620.

Florida had the second most filings at 35,264 and the fourth- highest rate, one for every 242 households. Foreclosures increased 146 percent from a year earlier and rose almost 17 percent from March.

Ohio ranked third in filings at 11,680. Arizona, Texas, Michigan, Georgia, Illinois, Nevada and Maryland also ranked in top 10 states with the most filings, RealtyTrac said.

Foreclosure filings in New York were up 39 percent from a year ago and up 12 percent from March. The state ranked 29th with 5,696 filings.

In New Jersey, foreclosure filings ranked 15th at 5,143, up 65 percent from a year ago and up 15 percent from March. Connecticut foreclosures ranked 19th at 1,707, down 59 percent from a year ago and down 20 percent from March.

Freddie Mac Posts $151 Million Loss

Freddie Mac Posts Third Straight Loss, Will Raise $5.5 Billion

By Dawn Kopecki

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Freddie Mac, the second-largest U.S. mortgage-finance company, posted a $151 million first-quarter loss as tumbling home prices and record foreclosures drove up credit costs. The company will raise $5.5 billion in capital.

The net loss amounted to 66 cents a share, and compares with the 84 cent average estimate of 11 analysts surveyed by Bloomberg. Fannie Mae, Freddie Mac's bigger competitor, last week posted a larger-than-expected $2.19 billion loss for the quarter and raised $6 billion.

Freddie Mac, based in McLean, Virginia, and Fannie Mae agreed to raise capital to overcome losses from IND' ))">loan delinquencies. Those losses and other impairments will likely deepen, according to analysts including Christopher Whalen, a managing director at Institutional Risk Analytics. Chief Executive Officer Richard Syron said in March he won't raise capital at the expense of shareholders.

‘‘People need to accept the fact that the rest of the year for the enterprises and the rest of the mortgage market are going to be really ugly,'' said Whalen, who helped co-found Torrance, California-based Institutional Risk Analytics.

Fannie Mae and Freddie Mac, both government sponsored enterprises, own or guarantee almost half of the $12 trillion in U.S. residential mortgages outstanding. The worst IND' ))">housing market since the Great Depression, caused Freddie Mac's fair value of assets to decline. Fannie Mae's assets dropped fell to $12.2 billion from $35.8 billion in the period.

‘‘The credit losses for both GSEs will ramp up over the next few quarters and they will have to raise capital again,'' said Ajay Rajadhyaksha, the head of fixed-income strategy at Barclays Capital.

Credit Losses

Freddie Mac has said its credit losses would rise to the equivalent of 12 basis points, or $2.2 billion, in 2008 and 14 basis points, or $2.9 billion, next year, less then some analyst estimates. Fannie Mae last week boosted its estimates for this year to a range of 13 to 17 basis points.

Credit Suisse analyst Moshe Orenbuch in New York expects Freddie Mac's credit losses to rise to 20 basis points this year and 29 basis points in 2009. Fannie Mae's losses will grow to 21 basis points in 2008 and 24 basis points next year, he said.

The first-quarter net loss is Freddie Mac's fourth in the past six quarters. Freddie Mac reported a net loss of $211 million, or 46 cents a share, in the year-earlier period.

Most of Freddie Mac's record $2.45 billion fourth-quarter loss stemmed from a surge in costs to cover foreclosures and losses on derivatives used to hedge its credit and interest-rate risk. The company's costs to cover credit losses and other related expenses soared to $3.46 billion in that quarter, while losses on its derivatives portfolio mushroomed to $2.09 billion.

Accounting Issues

Freddie Mac has plunged about 63 percent in the past year in New York Stock Exchange composite trading. The stock declined 94 cents to $24.96 yesterday. Fannie Mae fell 13 cents to $28.12 and has dropped 55 percent in the past 12 months.

Fannie Mae and Freddie Mac were created by Congress to increase mortgage financing and provide market stability. They make money by holding mortgage assets that yield more than their debt costs, and by guaranteeing bonds they create out of loans.

Fannie Mae and Freddie Mac since 1970 have been exempt from registering their stock and debt securities because of their government-chartered status. The companies bowed to congressional pressure in 2002 and agreed to register stock, plans that stalled when auditors uncovered what would amount to $11.3 billion in accounting errors and forced an overhaul of internal controls.

Freddie Mac began the process of registering again in March and has said it expects to finish by mid-year. The first-quarter loss is the company's fourth in the past six quarters. Freddie Mac reported a net loss of $211 million, or 46 cents a share, in the year-earlier period.

Capital Raising

Fannie Mae Chief Executive Officer Daniel Mudd, 49, and Freddie Mac's Syron, 64, agreed in March to raise capital after Ofheo, allowed the companies to add more assets in an effort to pump cash into the housing market and promote lending. Ofheo Director James Lockhart said yesterday that Ofheo will continue easing the companies' capital restrictions as they raise more reserves.

Financial firms have raised more than $246 billion as losses and writedowns at the world's biggest banks exceed $335 billion. Analysts surveyed by Bloomberg said Freddie Mac will have to raise as much as $15 billion in capital to keep investors happy.

Fannie Mae, which sold $7 billion in preferred shares in December, yesterday raised $2 billion of perpetual preferred stock to further help replenish capital lost in credit and derivative writedowns. Since reporting its third straight quarterly loss on May 6, the company has also sold $2.25 billion of common stock and $2.25 billion of convertible preferred stock.

New Business

Their special government-linked status has driven most of the new mortgage business for conforming loans, which are under $417,000, to Fannie Mae and Freddie Mac in the past year. The two companies were responsible for 81 percent of mortgage securities issued in the fourth quarter, up from 42 percent the year before.

Ofheo lifted limits on the size of Fannie Mae's and Freddie Mac's investment portfolios this year, ending more than two years of restrictions. Ofheo's Lockhart said at the time the companies are needed to bolster the mortgage market. Ofheo in March eased the surplus requirement to 20 percent from 30 percent for both companies. Last week it cut Fannie Mae's requirement down to 15 percent after the Washington-based company announced plans to raise capital.

FOOD CRISIS

FOOD CRISIS (Part One): 'The greatest demonstration of the historical failure of the capitalist model'

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“If the government cannot lower the cost of living it simply has to leave. If the police and UN troops want to shoot at us, that’s OK, because in the end, if we are not killed by bullets, we’ll die of hunger.” — A demonstrator in Port-au-Prince, Haiti

In Haiti, where most people get 22% fewer calories than the minimum needed for good health, some are staving off their hunger pangs by eating “mud biscuits” made by mixing clay and water with a bit of vegetable oil and salt.[1]

Meanwhile, in Canada, the federal government is currently paying $225 for each pig killed in a mass cull of breeding swine, as part of a plan to reduce hog production. Hog farmers, squeezed by low hog prices and high feed costs, have responded so enthusiastically that the kill will likely use up all the allocated funds before the program ends in September.

Some of the slaughtered hogs may be given to local Food Banks, but most will be destroyed or made into pet food. None will go to Haiti.

This is the brutal world of capitalist agriculture — a world where some people destroy food because prices are too low, and others literally eat dirt because food prices are too high.

Record prices for staple foods

We are in the midst of an unprecedented worldwide food price inflation that has driven prices to their highest levels in decades. The increases affect most kinds of food, but in particular the most important staples — wheat, corn, and rice.

The UN Food and Agriculture Organization says that between March 2007 and March 2008 prices of cereals increased 88%, oils and fats 106%, and dairy 48%. The FAO food price index as a whole rose 57% in one year — and most of the increase occurred in the past few months.

Another source, the World Bank, says that that in the 36 months ending February 2008, global wheat prices rose 181% and overall global food prices increased by 83%. The Bank expects most food prices to remain well above 2004 levels until at least 2015.

The most popular grade of Thailand rice sold for $198 a tonne five years ago and $323 a tonne a year ago. On April 24, the price hit $1,000.

Increases are even greater on local markets — in Haiti, the market price of a 50 kilo bag of rice doubled in one week at the end of March.

These increases are catastrophic for the 2.6 billion people around the world who live on less than US$2 a day and spend 60% to 80% of their incomes on food. Hundreds of millions cannot afford to eat.

This month, the hungry fought back.

Taking to the streets

In Haiti, on April 3, demonstrators in the southern city of Les Cayes built barricades, stopped trucks carrying rice and distributed the food, and tried to burn a United Nations compound. The protests quickly spread to the capital, Port-au-Prince, where thousands marched on the presidential palace, chanting “We are hungry!” Many called for the withdrawal of UN troops and the return of Jean-Bertrand Aristide, the exiled president whose government was overthrown by foreign powers in 2004.

President René Préval, who initially said nothing could be done, has announced a 16% cut in the wholesale price of rice. This is at best a stop-gap measure, since the reduction is for one month only, and retailers are not obligated to cut their prices.

The actions in Haiti paralleled similar protests by hungry people in more than twenty other countries.

  • In Burkino Faso, a two-day general strike by unions and shopkeepers demanded “significant and effective” reductions in the price of rice and other staple foods.
  • In Bangladesh, over 20,000 workers from textile factories in Fatullah went on strike to demand lower prices and higher wages. They hurled bricks and stones at police, who fired tear gas into the crowd.
  • The Egyptian government sent thousands of troops into the Mahalla textile complex in the Nile Delta, to prevent a general strike demanding higher wages, an independent union, and lower prices. Two people were killed and over 600 have been jailed.
  • In Abidjan, Côte d’Ivoire, police used tear gas against women who had set up barricades, burned tires and closed major roads. Thousands marched to the President’s home, chanting “We are hungry,” and “Life is too expensive, you are killing us.”
  • In Pakistan and Thailand, armed soldiers have been deployed to prevent the poor from seizing food from fields and warehouses.

Similar protests have taken place in Cameroon, Ethiopia, Honduras, Indonesia, Madagascar, Mauritania, Niger, Peru, Philippines, Senegal, Thailand, Uzbekistan, and Zambia. On April 2, the president of the World Bank told a meeting in Washington that there are 33 countries where price hikes could cause social unrest.

A Senior Editor of Time magazine warned:

“The idea of the starving masses driven by their desperation to take to the streets and overthrow the ancien regime has seemed impossibly quaint since capitalism triumphed so decisively in the Cold War…. And yet, the headlines of the past month suggest that skyrocketing food prices are threatening the stability of a growing number of governments around the world. …. when circumstances render it impossible to feed their hungry children, normally passive citizens can very quickly become militants with nothing to lose.”[2]

What’s Driving Food Inflation?

Since the 1970s, food production has become increasingly globalized and concentrated. A handful of countries dominate the global trade in staple foods. 80% of wheat exports come from six exporters, as does 85% of rice. Three countries produce 70% of exported corn. This leaves the world’s poorest countries, the ones that must import food to survive, at the mercy of economic trends and policies in those few exporting countries. When the global food trade system stops delivering, it’s the poor who pay the price.

For several years, the global trade in staple foods has been heading towards a crisis. Four related trends have slowed production growth and pushed prices up.

The End of the Green Revolution: In the 1960s and 1970s, in an effort to counter peasant discontent in south and southeast Asia, the U.S. poured money and technical support into agricultural development in India and other countries. The “green revolution” — new seeds, fertilizers, pesticides, agricultural techniques and infrastructure — led to spectacular increases in food production, particularly rice. Yield per hectare continued expanding until the 1990s.

Today, it’s not fashionable for governments to help poor people grow food for other poor people, because “the market” is supposed to take care of all problems. The Economist reports that “spending on farming as a share of total public spending in developing countries fell by half between 1980 and 2004.”[3] Subsidies and R&D money have dried up, and production growth has stalled.

As a result, in seven of the past eight years the world consumed more grain than it produced, which means that rice was being removed from the inventories that governments and dealers normally hold as insurance against bad harvests. World grain stocks are now at their lowest point ever, leaving very little cushion for bad times.

Climate Change: Scientists say that climate change could cut food production in parts of the world by 50% in the next 12 years. But that isn’t just a matter for the future:

  • Australia is normally the world’s second-largest exporter of grain, but a savage multi-year drought has reduced the wheat crop by 60% and rice production has been completely wiped out.
  • In Bangladesh in November, one of the strongest cyclones in decades wiped out a million tonnes of rice and severely damaged the wheat crop, making the huge country even more dependent on imported food.

Other examples abound. It’s clear that the global climate crisis is already here, and it is affecting food.

Agrofuels: It is now official policy in the U.S., Canada and Europe to convert food into fuel. U.S. vehicles burn enough corn to cover the entire import needs of the poorest 82 countries.[4]

Ethanol and biodiesel are very heavily subsidized, which means, inevitably, that crops like corn (maize) are being diverted out of the food chain and into gas tanks, and that new agricultural investment worldwide is being directed towards palm, soy, canola and other oil-producing plants. The demand for agrofuels increases the prices of those crops directly, and indirectly boosts the price of other grains by encouraging growers to switch to agrofuel.

As Canadian hog producers have found, it also drives up the cost of producing meat, since corn is the main ingredient in North American animal feed.

Oil Prices: The price of food is linked to the price of oil because food can be made into a substitute for oil. But rising oil prices also affect the cost of producing food. Fertilizer and pesticides are made from petroleum and natural gas. Gas and diesel fuel are used in planting, harvesting and shipping.[5]

It’s been estimated that 80% of the costs of growing corn are fossil fuel costs — so it is no accident that food prices rise when oil prices rise.

* * *

By the end of 2007, reduced investment in third world agriculture, rising oil prices, and climate change meant that production growth was slowing and prices were rising. Good harvests and strong export growth might have staved off a crisis — but that isn’t what happened. The trigger was rice, the staple food of three billion people.

Early this year, India announced that it was suspending most rice exports in order to rebuild its reserves. A few weeks later, Vietnam, whose rice crop was hit by a major insect infestation during the harvest, announced a four-month suspension of exports to ensure that enough would be available for its domestic market.

India and Vietnam together normally account for 30% of all rice exports, so their announcements were enough to push the already tight global rice market over the edge. Rice buyers immediately started buying up available stocks, hoarding whatever rice they could get in the expectation of future price increases, and bidding up the price for future crops. Prices soared. By mid-April, news reports described “panic buying” of rice futures on the Chicago Board of Trade, and there were rice shortages even on supermarket shelves in Canada and the U.S.

Why the rebellion?

There have been food price spikes before. Indeed, if we take inflation into account, global prices for staple foods were higher in the 1970s than they are today. So why has this inflationary explosion provoked mass protests around the world?

The answer is that since the 1970s the richest countries in the world, aided by the international agencies they control, have systematically undermined the poorest countries’ ability to feed their populations and protect themselves in a crisis like this.

Haiti is a powerful and appalling example.

Rice has been grown in Haiti for centuries, and until twenty years ago Haitian farmers produced about 170,000 tonnes of rice a year, enough to cover 95% of domestic consumption. Rice farmers received no government subsidies, but, as in every other rice-producing country at the time, their access to local markets was protected by import tariffs.

In 1995, as a condition of providing a desperately needed loan, the International Monetary Fund required Haiti to cut its tariff on imported rice from 35% to 3%, the lowest in the Caribbean. The result was a massive influx of U.S. rice that sold for half the price of Haitian-grown rice. Thousands of rice farmers lost their lands and livelihoods, and today three-quarters of the rice eaten in Haiti comes from the U.S.[6]

U.S. rice didn’t take over the Haitian market because it tastes better, or because U.S. rice growers are more efficient. It won out because rice exports are heavily subsidized by the U.S. government. In 2003, U.S. rice growers received $1.7 billion in government subsidies, an average of $232 per hectare of rice grown.[7] That money, most of which went to a handful of very large landowners and agribusiness corporations, allowed U.S. exporters to sell rice at 30% to 50% below their real production costs.

In short, Haiti was forced to abandon government protection of domestic agriculture — and the U.S. then used its government protection schemes to take over the market.

There have been many variations on this theme, with rich countries of the north imposing “liberalization” policies on poor and debt-ridden southern countries and then taking advantage of that liberalization to capture the market. Government subsidies account for 30% of farm revenue in the world’s 30 richest countries, a total of US$280 billion a year,[8] an unbeatable advantage in a “free” market where the rich write the rules.

The global food trade game is rigged, and the poor have been left with reduced crops and no protections.

In addition, for several decades the World Bank and International Monetary Fund have refused to advance loans to poor countries unless they agree to “Structural Adjustment Programs” (SAP) that require the loan recipients to devalue their currencies, cut taxes, privatize utilities, and reduce or eliminate support programs for farmers.

All this was done with the promise that the market would produce economic growth and prosperity — instead, poverty increased and support for agriculture was eliminated.

“The investment in improved agricultural input packages and extension support tapered and eventually disappeared in most rural areas of Africa under SAP. Concern for boosting smallholders’ productivity was abandoned. Not only were governments rolled back, foreign aid to agriculture dwindled. World Bank funding for agriculture itself declined markedly from 32% of total lending in 1976-8 to 11.7% in 1997-9.”[9]

During previous waves of food price inflation, the poor often had at least some access to food they grew themselves, or to food that was grown locally and available at locally set prices. Today, in many countries in Africa, Asia and Latin America, that’s just not possible. Global markets now determine local prices — and often the only food available must be imported from far away.

* * *

Food is not just another commodity — it is absolutely essential for human survival. The very least that humanity should expect from any government or social system is that it try to prevent starvation — and above all that it not promote policies that deny food to hungry people.

That’s why Venezuelan president Hugo Chavez was absolutely correct on April 24, to describe the food crisis as “the greatest demonstration of the historical failure of the capitalist model.”

What needs to be done to end this crisis, and to ensure that doesn’t happen again?
Part Two of this article will examine those questions.

Ian Angus is the editor of Climate and Capitalism


Footnotes

[1] Kevin Pina. “Mud Cookie Economics in Haiti.” Haiti Action Network, Feb. 10, 2008. http://www.haitiaction.net/News/HIP/2_10_8/2_10_8.html

[2] Tony Karon. “How Hunger Could Topple Regimes.” Time, April 11, 2008. http://www.time.com/time/world/article/0,8599,1730107,00.html

[3] “The New Face of Hunger.” The Economist, April 19, 2008.

[4] Mark Lynas. “How the Rich Starved the World.” New Statesman, April 17, 2008. http://www.newstatesman.com/200804170025

[5] Dale Allen Pfeiffer. Eating Fossil Fuels. New Society Publishers, Gabriola Island BC, 2006. p. 1

[6] Oxfam International Briefing Paper, April 2005. “Kicking Down the Door.” http://www.oxfam.org/en/files/bp72_rice.pdf

[7] Ibid.

[8] OECD Background Note: Agricultural Policy and Trade Reform. http://www.oecd.org/dataoecd/52/23/36896656.pdf

[9] Kjell Havnevik, Deborah Bryceson, Lars-Erik Birgegård, Prosper Matondi & Atakilte Beyene. “African Agriculture and the World Bank: Development or Impoverishment?” Links International Journal of Socialist Renewal, http://www.links.org.au/node/328




FOOD CRISIS (Part Two): Capitalism, Agribusiness, and the Food Sovereignty Alternative

By Ian Angus

Go To Original

(Ian Angus is editor of Climate and Capitalism. Part One of this article was published in Socialist Voice and in The Bullet (Socialist Project), on April 28, 2008.)

"Nowhere in the world, in no act of genocide, in no war, are so many people killed per minute, per hour and per day as those who are killed by hunger and poverty on our planet." —Fidel Castro, 1998

When food riots broke out in Haiti last month, the first country to respond was Venezuela. Within days, planes were on their way from Caracas, carrying 364 tons of badly needed food.

The people of Haiti are "suffering from the attacks of the empire's global capitalism," Venezuelan president Hugo Chàvez said. "This calls for genuine and profound solidarity from all of us. It is the least we can do for Haiti."

Venezuela's action is in the finest tradition of human solidarity. When people are hungry, we should do our best to feed them. Venezuela's example should be applauded and emulated.

But aid, however necessary, is only a stopgap. To truly address the problem of world hunger, we must understand and then change the system that causes it.

No shortage of food

The starting point for our analysis must be this: there is no shortage of food in the world today.

Contrary to the 18th century warnings of Thomas Malthus and his modern followers, study after study shows that global food production has consistently outstripped population growth, and that there is more than enough food to feed everyone. According to the United Nations Food and Agriculture Organization, enough food is produced in the world to provide over 2800 calories a day to everyone — substantially more than the minimum required for good health, and about 18% more calories per person than in the 1960s, despite a significant increase in total population.[1]

As the Food First Institute points out, "abundance, not scarcity, best describes the supply of food in the world today."[2]

Despite that, the most commonly proposed solution to world hunger is new technology to increase food production.

The Alliance for a Green Revolution in Africa, funded by the Bill and Melinda Gates Foundation and the Rockefeller Foundation, aims to develop "more productive and resilient varieties of Africa's major food crops … to enable Africa's small-scale farmers to produce larger, more diverse and reliable harvests."[3]

Similarly, the Manila-based International Rice Research Institute has initiated a public-private partnership "to increase rice production across Asia via the accelerated development and introduction of hybrid rice technologies."[4]

And the president of the World Bank promises to help developing countries gain "access to technology and science to boost yields."[5]

Scientific research is vitally important to the development of agriculture, but initiatives that assume in advance that new seeds and chemicals are needed are neither credible nor truly scientific. The fact that there is already enough food to feed the world shows that the food crisis is not a technical problem — it is a social and political problem.

Rather than asking how to increase production, our first question should be why, when so much food is available, are over 850 million people hungry and malnourished? Why do 18,000 children die of hunger every day?

Why can't the global food industry feed the hungry?

The profit system

The answer can be stated in one sentence. The global food industry is not organized to feed the hungry; it is organized to generate profits for corporate agribusiness.

The agribusiness giants are achieving that objective very well indeed. This year, agribusiness profits are soaring above last year's levels, while hungry people from Haiti to Egypt to Senegal were taking to the streets to protest rising food prices. These figures are for just three months at the beginning of 2008.[6]

Grain Trading

  • Archer Daniels Midland (ADM). Gross profit: $1.15 billion, up 55% from last year
  • Cargill: Net earnings: $1.03 billion, up 86%
  • Bunge. Consolidated gross profit: $867 million, up 189%.

Seeds & herbicides

  • Monsanto. Gross profit: $2.23 billion, up 54%.
  • Dupont Agriculture and Nutrition. Pre-tax operating income: $786 million, up 21%

Fertilizer

  • Potash Corporation. Net income: $66 million, up 185.9%
  • Mosaic. Net earnings: $520.8 million, up more than 1,200%

The companies listed above, plus a few more, are the monopoly or near-monopoly buyers and sellers of agricultural products around the world. Six companies control 85% of the world trade in grain; three control 83% of cocoa; three control 80% of the banana trade.[7] ADM, Cargill and Bunge effectively control the world's corn, which means that they alone decide how much of each year's crop goes to make ethanol, sweeteners, animal feed or human food.

As the editors of Hungry for Profit write, "The enormous power exerted by the largest agribusiness/food corporations allows them essentially to control the cost of their raw materials purchased from farmers while at the same time keeping prices of food to the general public at high enough levels to ensure large profits."[8]

Over the past three decades, transnational agribusiness companies have engineered a massive restructuring of global agriculture. Directly through their own market power and indirectly through governments and the World Bank, IMF and World Trade Organization, they have changed the way food is grown and distributed around the world. The changes have had wonderful effects on their profits, while simultaneously making global hunger worse and food crises inevitable.

The assault on traditional farming

Today's food crisis doesn't stand alone: it is a manifestation of a farm crisis that has been building for decades.

As we saw in Part One of this article, over the past three decades the rich countries of the north have forced poor countries to open their markets, then flooded those markets with subsidized food, with devastating results for Third World farming.

But the restructuring of global agriculture to the advantage of agribusiness giants didn't stop there. In the same period, southern countries were convinced, cajoled and bullied into adopting agricultural policies that promote export crops rather than food for domestic consumption, and favour large-scale industrial agriculture that requires single-crop (monoculture) production, heavy use of water, and massive quantities of fertilizer and pesticides. Increasingly, traditional farming, organized by and for communities and families, has been pushed aside by industrial farming organized by and for agribusinesses.

That transformation is the principal obstacle to a rational agriculture that could eliminate hunger.

The focus on export agriculture has produced the absurd and tragic result that millions of people are starving in countries that export food. In India, for example, over one-fifth of the population is chronically hungry and 48% of children under five years old are malnourished. Nevertheless, India exported US$1.5 billion worth of milled rice and $322 million worth of wheat in 2004.[9]

In other countries, farmland that used to grow food for domestic consumption now grows luxuries for the north. Colombia, where 13% of the population is malnourished, produces and exports 62% of all cut flowers sold in the United States.

In many cases the result of switching to export crops has produced results that would be laughable if they weren't so damaging. Kenya was self-sufficient in food until about 25 years ago. Today it imports 80% of its food — and 80% of its exports are other agricultural products.[10]

The shift to industrial agriculture has driven millions of people off the land and into unemployment and poverty in the immense slums that now surround many of the world's cities.

The people who best know the land are being separated from it; their farms enclosed into gigantic outdoor factories that produce only for export. Hundreds of millions of people now must depend on food that's grown thousands of miles away because their homeland agriculture has been transformed to meet the needs of agribusiness corporations. As recent months have shown, the entire system is fragile: India's decision to rebuild its rice stocks made food unaffordable for millions half a world away.

If the purpose of agriculture is to feed people, the changes to global agriculture in the past 30 years make no sense. Industrial farming in the Third World has produced increasing amounts of food, but at the cost of driving millions off the land and into lives of chronic hunger — and at the cost of poisoning air and water, and steadily decreasing the ability of the soil to deliver the food we need.

Contrary to the claims of agribusiness, the latest agricultural research, including more than a decade of concrete experience in Cuba, proves that small and mid-sized farms using sustainable agroecological methods are much more productive and vastly less damaging to the environment than huge industrial farms.[11]

Industrial farming continues not because it is more productive, but because it has been able, until now, to deliver uniform products in predictable quantities, bred specifically to resist damage during shipment to distant markets. That's where the profit is, and profit is what counts, no matter what the effect may be on earth, air, and water — or even on hungry people.

Fighting for food sovereignty

The changes imposed by transnational agribusiness and its agencies have not gone unchallenged. One of the most important developments in the past 15 years has been the emergence of La Vía Campesina (Peasant Way), an umbrella body that encompasses more than 120 small farmers' and peasants' organizations in 56 countries, ranging from the Landless Rural Workers Movement (MST) in Brazil to the National Farmers Union in Canada.

La Vía Campesina initially advanced its program as a challenge to the "World Food Summit," a 1996 UN-organized conference on global hunger that was attended by official representatives of 185 countries. The participants in that meeting promised (and subsequently did nothing to achieve) the elimination of hunger and malnutrition by guaranteeing "sustainable food security for all people."[12]

As is typical of such events, the working people who are actually affected were excluded from the discussions. Outside the doors, La Vía Campesina proposed food sovereignty as an alternative to food security. Simple access to food is not enough, they argued: what's needed is access to land, water, and resources, and the people affected must have the right to know and to decide about food policies. Food is too important to be left to the global market and the manipulations of agribusiness: world hunger can only be ended by re-establishing small and mid-sized family farms as the key elements of food production.[13]

The central demand of the food sovereignty movement is that food should be treated primarily as a source of nutrition for the communities and countries where it is grown. In opposition to free-trade, agroexport policies, it urges a focus on domestic consumption and food self-sufficiency.

Contrary to the assertions of some critics, food sovereignty is not a call for economic isolationism or a return to an idealized rural past. Rather, it is a program for the defense and extension of human rights, for land reform, and for protection of the earth against capitalist ecocide. In addition to calling for food self-sufficiency and strengthening family farms, La Vía Campesina's original call for food sovereignty included these points:

  • Guarantee everyone access to safe, nutritious and culturally appropriate food in sufficient quantity and quality to sustain a healthy life with full human dignity.
  • Give landless and farming people — especially women — ownership and control of the land they work and return territories to indigenous peoples.
  • Ensure the care and use of natural resources, especially land, water and seeds. End dependence on chemical inputs, on cash-crop monocultures and intensive, industrialized production.
  • Oppose WTO, World Bank and IMF policies that facilitate the control of multinational corporations over agriculture. Regulate and tax speculative capital and enforce a strict Code of Conduct on transnational corporations.
  • End the use of food as a weapon. Stop the displacement, forced urbanization and repression of peasants.
  • Guarantee peasants and small farmers, and rural women in particular, direct input into formulating agricultural policies at all levels.[14]

Nearly 400 immigrant workers arrested in slaughterhouse raid

Nearly 400 immigrant workers arrested in slaughterhouse raid

By Bill Van Auken
Go To Original

In one of the largest ever government dragnets against immigrant workers, federal agents swooped down upon a meatpacking plant in northeastern Iowa Monday, rounding up nearly 400 workers.

Heavily armed squads of US Immigration and Customs Enforcement (ICE) agents, backed by state and local police, stormed Agriprocessors Inc. in Postville, Iowa, the largest kosher slaughterhouse in the world, while two government helicopters hovered overhead.

In all, 16 local, state and federal agencies were involved in the raids, which had been prepared for months.

Most of those arrested were from either Mexico or Guatemala, while some others were immigrants from Israel and Ukraine. The bulk of them were charged with Social Security fraud for using false numbers—a supposedly criminal offense that results in their forfeiting the contributions deducted from their paychecks—or with the civil offense of lacking proper immigration status.

After being interrogated and handcuffed at the plant, the workers were taken away in Homeland Security buses with covered windows. Over 300 male employees were taken to a makeshift detention camp at the National Cattle Congress fairgrounds in nearby Waterloo, Iowa, where armed guards were posted at the gates. Meanwhile, 76 women were crowded into the Hardin County Jail.

Violeta Aleman, a worker at the plant and a US citizen since 2003, told the Cedar Rapids Gazette that the armed agents herded the workers into the cafeteria and ordered them to form two lines, “one for US citizens and one for legal residents,” while the undocumented immigrants were told to remain seated.

To be released, workers had to present proof of their legal status, forcing Aleman to call her husband to come to the slaughterhouse with her passport.

The Gazette reported: “On her way out of the plant, she said, she walked past a group of detainees, many of whom she knew. Some asked her to make a phone call for them, others asked her to take their belongings and cell phones home with her. ‘They were looking at me,’ she said, her voice breaking, ‘There was nothing I could do.’”

Because of the large number of detained immigrants involved, judges and court personnel are being brought in to conduct summary legal proceedings in the fairgrounds. The local press reported that the first of these hearings took place Tuesday, with ten workers, shackled at the waist and ankles, herded single file into a ballroom to face a judge.

The raid was the biggest ever conducted in Iowa and may be the largest single-facility arrest ever carried out by US immigration authorities. It was launched in the midst of a nationwide crackdown on immigrant workers that has created a reign of terror in many towns and cities across the country.

On Tuesday the plant reopened, despite having had fully one third of its work force hauled away in shackles. It was unclear, however, whether the large numbers of ICE agents assembled in Iowa would strike again. The search warrants released by federal officials provided for the arrest of 697 individuals.

Federal authorities announced that 56 of those detained Monday were subsequently granted supervised release, most of them to make arrangements for the care of their children, who in many cases are US citizens. One of the most brutal effects of these raids is to divide families, some of which have resided in the US for many years.

ICE was clearly attempting to avoid the criticism that has been generated by similar workplace raids after children have been left abandoned in local schools or their homes when their parents were jailed.

Rumors flew through immigrant communities in the surrounding area that the immigration enforcers were preparing to raid other plants or even pull people from their homes. ICE issued statements denying that it intends to conduct any “random arrests,” but made no comment on whether further workplace raids were planned.

Nonetheless, hundreds of immigrants turned up at local churches, including St. Bridget’s Catholic Church, just five blocks from the Postville slaughterhouse, seeking aid and advice. Many filled out legal forms granting power of attorney to assure that their children would be cared for in the event that they too are detained.

“The people right now are hearing and seeing the helicopters,” Sister Mary McCauley, a Roman Catholic nun at St. Bridget’s, told the Associated Press. “They are just panic-stricken and very frightened and some of them are coming to the church as a safe haven.” Family members of the arrested slaughterhouse workers had come to the church in tears, she added.

At Queen of Peace Catholic Church in Waterloo, some 500 immigrants gathered on Monday night to seek advice from lawyers on what to do if arrested.

Local stores were empty as immigrants stayed away. There were reports that many families were staying in their homes and keeping their children out of school for fear of being picked up.

Iowa’s Democratic Governor Chet Culver issued a statement supporting the raid. “I believe it is important that we crack down on illegal immigration,” he said. “Illegal means illegal.”

While Culver minimized the role played by the state in the operation, Iowa state troopers were used to secure the plant, while their squad cars were used—one in front and one in back of each Homeland Security bus—to escort the immigrant workers to detention facilities.

Suspicion that the state may have played a larger role in helping prepare the raid was raised by a report from the local school district that it had received a state subpoena issued last month seeking the records of Postville middle and high school students, and in particular the names of children who had worked part-time at two local apartment buildings owned by the Agriprocessors CEO, Sholom Rubashkin.

Postville’s Mayor Robert Penrod was less supportive of the ICE action, warning that if Agriprocessors—the largest employer in Iowa’s Allamakee County—shut down, the city would turn into “a ghost town.”

“There’s people who hate the Hispanics, and there’s people who don’t like the Jews and would like to run them out of town,” he said, but he added that the majority of the town’s residents understood the plant’s importance for the local economy.

Hundreds of people turned out Monday night at the gates of the Cattle Congress, where the bulk of the immigrant workers are detained. “We are with you,” and “We are all equal,” they chanted. Some waved signs reading “Honk for human rights.”

Barely half a dozen anti-immigrant protesters squared off with the large crowd, shouting, “Send them back.” The crowd answered, “We have a right to be here too.”

One of those joining the protest was Beth Berger, 23, of Waterloo. She told the Cedar Rapids Gazette that her boyfriend, Carlos, had stayed away from work for fear of being arrested. The two are expecting a baby in four months.

“I probably can’t do much, but I am here to support them,” she told the newspaper. “They act like they’re animals. They’re not animals. They’re just like everybody else.”

The United Food and Commercial Workers, which had been attempting to unionize workers at the plant, revealed Monday that it had advised US immigration authorities that there was an ongoing labor dispute at the plant and a pending investigation into workplace abuses that would be disrupted by any immigration raid.

The meatpacking plant was reportedly paying some of its employees sub-minimum wages and employing under-age workers off the books.

“With these labor disputes in progress, we urge you to suspend any potentially existing enforcement efforts and refuse to be involved in this labor dispute in accordance with the internal guidance, ‘Questioning Persons During Labor Disputes,’” UFCW Vice President Mark Lauritsen wrote ICE on May 2. US and Iowa Labor Department officials confirmed that there were ongoing investigations into exploitive practices at the slaughterhouse.

Clearly, the union’s warning did nothing to dissuade ICE from conducting the raid, and may have even accelerated it. Rubashkin, Agriprocessors’ CEO, is a major contributor to the Republican Party. Citing Federal Election Commission records, the DesMoines Register reported that Rubashkin has made $23,750 in federal campaign contributions to Republican candidates and committees since 2000.

While ICE has dramatically increased its workplace raids since the agency was folded into the new Department of Homeland Security in 2003, few employers have been charged with any offense for hiring undocumented workers.

In December 2006, nearly 1,300 workers were rounded up at six Swift & Co. meatpacking plants, for example, but no Swift executive was ever prosecuted.

In fiscal 2007, while 4,900 undocumented workers were arrested, just 92 company owners or corporate officials were charged. The number of workers detained has increased 45-fold since 2001. The number of employers prosecuted has fallen dramatically, however, from 182 in 1999 to less than half that number last year.

The net impact of the immigration crackdown is to terrorize a substantial section of the US workforce, creating more favorable conditions for their unfettered exploitation and thereby furthering the profit interests of the US ruling elite.

The detentions in Iowa follow a wave of raids across the country. On May 2, ICE agents descended on 11 “El Balazo” restaurants in California’s Bay Area, arresting 63 undocumented workers. The raids came just a day after thousands of immigrant advocates had marched in the city demanding an end to such punitive measures.

The previous week, ICE agents had turned up at elementary schools in Oakland, California, a provocative action that sparked heated protests.

In other raids over the past month, ICE detained:

* Over 100 workers at Pilgrim’s Pride poultry plants in Texas, Arkansas, Florida, Tennessee and West Virginia.

* 24 construction workers employed at a project in the Little Rock, Arkansas airport.

* 28 landscaping workers in El Paso, Texas.

* 55 Mexican restaurant workers and the restaurants’ owners in New York, Pennsylvania, Ohio and West Virginia.

Meanwhile, 114 employees of a Los Angeles high-tech company filed a lawsuit against ICE on April 25 charging that they were illegally detained and harassed by immigration agents during a raid last February.

ICE raided the plant of Micro Solutions Enterprises, which produces remanufactured imaging supplies, arresting 138 employees, virtually all of whom were subsequently released and are presently fighting deportation orders.

Those suing ICE and the Department of Homeland Security are US citizens and legal residents, who charge that their constitutional rights were violated by being subjected to a “group detention” during the factory raid.

“During the raid, Micro Solutions was sealed off and effectively locked down by armed ICE agents,” said Peter Schey, the attorney representing the workers. “These armed government agents issued orders directing everyone in the building where to go, where to stand, and where to line up. Those detained were not permitted to use their cell phones. This mass detention of US citizens and lawful residents took place without a warrant or probable cause to believe every worker had violated the law and was therefore subject to temporary detention.”

In carrying out its punitive policy against undocumented immigrants, the US government is introducing into the American workplace the type of measures that are generally associated with a police-military dictatorship.