Big investment funds are attacking the middle class and winning

Neoliberalism: a political approach that favors free-market capitalism, deregulation, and reduction in government spending; neoliberalism is a political development of capitalism and a political and economic ideology that seeks to (i) maximize the freedom of the market by removing barriers to the private accumulation of wealth, and (ii) become a power over and above the state directed to the ends of profit without government interference; neoliberalism opposes regulation over which it has no control; the controlling ethic of capitalism is prudence which leads to wealth, but the ethic of neoliberalism is the accumulation of wealth for its own sake which leads to political power; neoliberalism, as the de facto only available political and economic option has had catastrophic effects on society and the environment



The Pandora Papers is an investigation based on about 11.9 million leaked confidential documents that show flows of money, property and other assets hidden in the global offshore financial system and some American states such as South Dakota. The Washington Post and other news organizations exposed the involvement of political leaders in this system of wealth flow. In the United States, secrecy hides assets from local, state and federal governments, creditors and people abused or exploited by wealthy and powerful people and interests. This confidential information leak is the largest of its kind made public so far. The documents were obtained by the International Consortium of Investigative Journalists, which organized the investigation.

The Washington Post reports on the activities of a huge investment fund called Progress Residential. The venture buys single family homes and other residential properties based on computer analysis. It makes cash offers to quickly obtain property. It then rents out the property and makes profit. The WaPo writes:

The venture, Progress Residential, acquires as many as 2,000 houses a month through the use of a computerized property-search algorithm and swift all-cash offers. Progress executives boast that the company’s efficient management practices have been a boon to their tenants who cannot afford to buy one of the “entry level” homes.

But according to previously undisclosed documents and dozens of interviews with renters and former employees, Progress Residential has been ringing up substantial profits for wealthy investors around the world while outbidding middle-class home buyers and subjecting tenants to what they allege are unfair rent hikes, shoddy maintenance and excessive fees.

“There’s just no human decency,” said Victoria Bates, an Amazon warehouse worker who lives on Tammy Sue Lane with her husband and 10-year-old daughter. Bates said the company regularly failed to fulfill ordinary maintenance requests. While the company said it “addressed” within five days most of the 37 work orders she submitted, Bates said most of the time it didn’t fix what was needed: It took several months for the company to repair a leaky water heater, she said.

Meanwhile, Bates said, the firm levies a profusion of fees that “take advantage of regular people working paycheck to paycheck.” 

In a statement, Progress Residential defended its operations, including the treatment of tenants, saying that its rents and fees are in line with industry standards and market rates.

“All of our entities conduct business according to the highest ethical and legal standards,” the company said.

Behind Progress Residential is Pretium Partners, a New York-based investment firm whose business plan and investors are revealed in the Pandora Papers, a trove of offshore financial records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with The Washington Post. 

The plan sought to exploit the 2008 U.S. housing crash, which forced millions of homeowners into foreclosure and left a glut of cheap houses for sale. The financiers’ plan called for buying up tens of thousands of these properties at depressed prices and renting them to families who had lost their homes or, because of tightened lending practices, could no longer qualify for a mortgage.

To raise money for the project, Pretium Partners sent confidential invitations to people wealthy enough to put up at least $2 million. Executives projected annualized returns of 15 to 20 percent, according to a 238-page solicitation to investors in 2012. In total, Pretium Partners raised more than $1 billion, and the resulting real estate venture became Progress Residential.

Unfortunately, both the Democratic and Republican Parties are heavily influenced by neoliberalism and the corrupting money it puts into our pay-to-play system of politics. By not being able to buy a home, middle class families cannot accumulate intergenerational wealth by that means. Living paycheck to paycheck hollows out the middle class. In time, the middle class will shrink to a small and politically unimportant force in American politics. 

Neoliberal capitalists love this. They feast on the middle class. There’s just so damn much money to be made by just squeezing the middle class for all its has.

Questions: Progress Residential claims to operate according to high ethical and legal standards, and from the company's point of view, they arguably do, but do they from the average person’s point of view? Why is home ownership out of reach for so many average Americans, many of whom live paycheck to paycheck[1]? 

Footnote: 

1. The middle and lower classes are under severe financial stress. Once source comments: About 54% of Americans live paycheck to paycheck. And nearly 40% of high earners — those making more than $100,000 annually — said they live that way. 

Another source: According to Nielsen data, the American Payroll Association, CareerBuilder and the National Endowment for Financial Education, somewhere between 50 percent and 78 percent of employees earn just enough money to pay their bills each month. Should they miss a paycheck, some of those bills would go unpaid. Almost 3 in 10 adults have no emergency savings at all, according to Bankrate’s July 2019 Financial Security Index, while the January 2020 Financial Security Index survey showed that 4 in 10 U.S. adults would cover the cost of a $1,000 car repair or emergency room visit using savings. In a 2019 report on the economic well-being of U.S. households, the Federal Reserve Bank determined that nearly 40 percent of U.S. adults wouldn’t be able to cover a $400 emergency with cash, savings or a credit card charge that they could quickly pay off.