1. Bail-out
v. (to bail out) To secure the release of by providing security, by transferring property to another for a special purpose but without permanent transference of ownership. To inject liquidity into a bankrupt or nearly bankrupt entity (e.g.- a bank) in order for it to meet its short-term obligations.
n. (the Bailout—USA, 2008) $700 billion (although in reality hundreds of billions more) of taxpayer money injected into collapsed banks by the US Department of Treasury to get them off the hook for the tremendous losses occurred from their free market opportunism. Capitalism once again paying off its masters leaving the rest of the world to suffer their consequences. Or, the largest act of class war in recent history
2. Collateralized Debt Obligation (CDO)
n. A collateralized debt obligation is similar to the MBS, but what distinguishes a CDO is that these securities are divided up into three general classes of securities, or “tranches” – equity, mezzanine, and senior. The higher the credit risk of a tranche, the higher is the premium, or interest rate, paid to investors in this tranche. If defaults began to occur, these losses are first charged against the lower grade, or “equity tranche”. Investors in this type of debt can suffer loses, up to the full value of their initial investment.
3. Deregulation
n. The stripping away of government oversight of global capital flow, whether this be taxes and tariffs or protections against labor exploitation, environmental degradation, or overtly risky and economically dangerous loan acquisition and transaction. A core principle of conservative “free market” ideology, espoused when translated into the attainment of vast amounts of cash-money and disposed of when deemed economically convenient (see “bailout”).
4. Financial Crisis (USA, 2008)
n. A large sudden drop in the economy and the subsequent “recession” (read: depression) triggered by the collapse of mortgage companies, investment firms, and government-sponsored enterprises that had invested heavily in subprime mortgages. The impact on Wall St. has been relatively minimal following a government bailout and continued bonuses in the millions of dollars for executives. Additional consequences have been millions of home foreclosures and lay-offs, as well as the sudden realization that we are all fucked.
5. Foreclosure
n. The legal process for a creditor to seek possession of the piece of property for which a loan was issued normally as a result of a default on loan repayment. Foreclosed property most commonly refers to residential housing, especially as of late with the recent bursting of the housing bubble. A generally accepted and commonly used synonym for “theft by bank.” An excellent place and concrete way to begin organizing against the financial crisis and its devastating effects for the working-class. Housing is a right not a privilege.
6. Glass-Steagall Act
n. The Glass-Steagall Act of 1933 was a piece of legislation passed during the Great Depression to restore stability to the financial system. The major component of Glass-Steagall was the strict segregation of the activities of commercial and investment banks. Commercial banks were prohibited from underwriting bonds and corporate securities. Banks ability to engage in “regulatory arbitrage”, particular after 1982, has allowed them to find ways to circumvent the provisions of Glass-Steagall, rendering it increasing irrelevant and ineffective. Congress abolished the Act in 1999.
7. Hedge Fund
n. a private investment fund, with a broad range of investments, from shares, debt and commodities to works of art. Hedge funds have been known to receive loans, in the billions of dollars, where the amount loaned was 200 times the amount of capital that particular hedge fund owned. Hedge funds are traded with a lot of unprotected money. They invested in the finance of capital seeking mass profits, which drove up the prices for commodities in general, including foods, corn/ethanol, and energy. Know what I’m sayin’?
8. The Housing Bubble
n. refers to a situation where the prices being paid for homes rises to levels that exceed the ability of borrowers to repay the loans used to purchase these housing assets. As the Federal Reserve began to increase interest rates after 2004, many of the initial “teaser rates” that allowed households to pay rates below the actual amount stated on the mortgage contract for an initial 2-4 year period began to reset at the now higher interest rates. This drove up defaults as highly indebted households found they couldn’t make their payments, leading to foreclosures and falling prices. The bubble burst, and the whole process is now going in reverse.
9. Main Street
n. Any small town and/or the people who inhabit it; generally used to represent the middle class in the United States whom will in turn pay for the bailout. Or, a fictional street found in Disney theme parks around the world, where one can relive old world charm and fantasize about a world without evictions, foreclosures and debt.
10. Mortgage pool
n. A mortgage pool is created when an investment bank or Government Sponsored Entity such as Freddie Mac or Fannie Mae buys up a large number of mortgages for originators and puts these mortgages in to a large pool that is used to create a mortgage-backed security. A typical pool can include 10,000 mortgages, or more.
11. Mortgage-Backed Security
n. A MBS is a type of bond that pays its holder principle and interest based on the pass-through of cash flows emitted by the mortgages held in the underlying mortgage pool.
12. Nationalization
n. The act of bringing industry, property, or assets under public control through their absorption by a national government. Typically referenced in connection with Left Socialism, this process of developing a state-controlled economy has also historically been used by fascist states and most recently so-called “democratic” states to reinforce the elite. Salvador Allende, Socialist President of Chile, was overthrown and murdered in a US-backed coup on September 11, 1973 as a result of his nationalization of industry, most notably copper and banking. (Oh yeah, we went there.)
13. Neoliberalism
n. An ideologically-driven set of strategies for reorganizing national economies and structuring a global hierarchical trading system that gained prominence during the 1970s and early-1980s. Dictates that a capitalist market free from state intervention is the most efficient model for organizing a society and advocates deregulation of industries, widespread privatization, cuts in social programs, and the commodification of all aspects of life. While theoretically anti-state, in practice neoliberalism relies on a strong state to guarantee the basic requirements for a functioning capitalist market. Police and legal structures that protect private property, a stable monetary system, and the ability to intervene and prop up failing industries remain essential roles for the neoliberal states. Recent developments such as the rise of strong state-controlled economies (e.g.- China), the collapse of numerous global trade talks, and the most current global financial meltdown lead many to conclude that the era of neoliberal ideological hegemony is quickly drawing to a close.
14. Securitization of Mortgage Finance n. the process of transforming mortgages issued by originating institutions (mortgage brokers, thrifts, or commercial banks) into a large mortgage pool whose cash flows are used to issue securities sold to final investors—typically pension funds, insurance companies, hedge funds, or investment and commercial banks. A large number of securitized mortgages are also owned by Government Sponsored Entities such as Fannie Mae and Freddie Mac, who issue the largest number of Mortgage Backed Securities.
15. Sub-Prime Loan
n. a loan given to a borrower with a weak credit history, also called a B and C loan or nonprime loan. Borrowers with previous delinquencies pay a higher rate of interest than A-rated borrowers. Mortgages, home equity loans, and debt consolidation loans are common examples of sub-prime loans. Or, another way that capitalism concentrates poverty within communities of color and working-class communities by exploiting their labor within the marketplace and then recycling their labor into more debt. This also is a good way for capitalism to evade responsibility for its inherent failures by lending people doomed loans and then blaming them for the entire collapse of the system.
16. Wall Street
n. A famous street in Manhattan’s financial district where the New York Stock Exchange is located. More generally, the term for high finance—big banks, brokerages, insurance companies and others—and those whose economic interests are identified with high finance. Both the cause of the financial crisis and the major beneficiary of the resulting 800 billion dollar bailout. While Wall Street is named after the literal wall which used to protect the rich European New Yorkers from the surrounding Native American tribes, now Wall Street functions as the economic wall between the rich and the white inside, and everyone else confined to the outside.
Contributions Index:
1, 3, 4, 5, 12—David Zlutnick
2, 6, 8, 9, 10, 11, 14—Karl Beitel
7—Javier Armas
13—Tim Simons
15—Sam Aranke
9, 16—Ian Alan Paul
