It sounds like a joke that the 400 wealthiest Americans own more wealth than the bottom 150 million people, but think about this. The 1 percent are virtually the sole investors in the derivatives market. Estimates of the size of that market range from $200 to $500 trillion. That market includes all the bonds backed by the housing market. That means the 1 percent own much of the housing market, that part of their mortgages that homeowners have not paid off. Think about all the homeowners that are underwater. Think about all the homeowners that owe money on their homes. What they owe is owned in the form of bonds by the 1 percent.
If somebody owes $190,000 on a mortgage of $200,000, the homeowner owes 5 percent of the house and rich bond owners own the other 95 percent. Most of every payment by homeowners goes into the pockets of the owners of the mortgage backed bonds. This is an income transfer scam that never used to exist.
Forty years ago, people borrowed mortgages from banks. The banks earned their profits from the interest paid to them from homeowners and other borrowers. Shareholders received the profits in the form of dividends. But extra profits, known as retained earnings, were loaned out. This helped the economy expand and provided greater opportunities for all.
The money now paid to the mortgage backed bond owners now go toward buying politicians and legislation to redistribute income from the 99 to the 1 percent. The payments also go toward the purchase of more mortgage backed bonds. That money doesn’t go back into the economy like in the old days. That money is used to suck the middle class dry.
John Hively's Blog: News and Analysis of the War Against the Middle Class 