Quarterly Jamaica Diaspora & Returnee Update — January to March 2008

Published: 2 April 2008 | Jamaica Homes News

Key Takeaways

• Bear Stearns Collapses; Fed Arranges Emergency JPMorgan Rescue
• Obama and Clinton Battle in History-Making Democratic Primary
• UK Nationalises Northern Rock in First Bank Rescue in Decades
• Jamaica’s PM Golding Settles Into First Months of Office
• 3rd Biennial Jamaica Diaspora Conference Set for June 2008
• Diaspora Remittances Hold Firm Despite Growing Economic Turbulence

Introduction: The Year the System Started to Break

Q1 2008 presented Jamaica’s diaspora with the opening tremors of what would prove to be the deepest financial crisis since the Great Depression, alongside a US presidential primary contest of historic significance for communities of African descent. The two stories — financial vulnerability and political possibility — ran in parallel through the quarter, each shaping the community’s experience of a period that would define years to come. This update draws on Jamaica Gleaner, Jamaica Observer, Bank of Jamaica, PIOJ, MFAFT, and Caribbean diaspora media through 31 March 2008.

Bear Stearns: The Crisis Comes Into Focus

The emergency rescue of Bear Stearns — the fifth-largest US investment bank — on 14 March 2008, arranged by the Federal Reserve and executed through JPMorgan Chase at the extraordinary price of $2 per share (subsequently raised to $10) — was the moment that the US subprime mortgage crisis became legible as a systemic financial crisis rather than a sectoral problem. Bear Stearns’ exposure to mortgage-backed securities and the collapse of two of its hedge funds in June 2007 had been warning signals that the broader market had chosen to discount. The March 2008 rescue — which involved the Federal Reserve taking the unprecedented step of lending directly to a non-bank institution — signalled that the central bank itself now understood the threat to be systemic.

For Caribbean-American diaspora households concentrated in the housing markets of Florida, New York, and New Jersey that had been among the most overheated during the boom years, the financial system’s visible stress was the macro-level confirmation of what they were already experiencing in their own lives. Adjustable-rate mortgages that had been sold with low introductory rates through the boom years were resetting to higher rates. Property values that had been expected to continue rising were falling. Refinancing options that had been the assumed backstop against payment shock were becoming unavailable as mortgage lending standards tightened rapidly.

Community organisations in South Florida, in the New York metropolitan area, and in the Atlanta communities where Caribbean-heritage populations had been buying homes in significant numbers since the early 2000s were beginning to field calls from homeowners in financial distress. Housing counsellors working with Caribbean-heritage clients were dealing with the particular complexity of families who had stretched to purchase homes as a core component of their wealth-building and return-migration strategy, and who were now facing the prospect that the value of that investment had fallen below their outstanding mortgage balance.

The Democratic Primary: History Being Made

The 2008 Democratic presidential primary that had opened with Senator Obama’s Iowa caucus victory on 3 January 2008 — a victory in one of America’s most racially homogeneous states that immediately reframed the question of whether a Black American could win the presidency — continued through Q1 in a pattern of oscillating momentum that kept the outcome genuinely uncertain. Senator Clinton’s victories in New Hampshire in January, in Nevada and Florida in subsequent contests, and in the Super Tuesday states of California, Massachusetts, and New York maintained her credibility as the frontrunner even as Obama’s delegate accumulation strategy — built on caucus states and congressional districts — was steadily narrowing the delegate gap.

Caribbean-American community organisations were engaged in the primary with an unusual intensity for a Democratic nomination contest. The community’s political leadership was divided between long-standing Clinton loyalties — built through the 1990s, when the Clinton administration had been notably engaged with Caribbean community policy priorities — and the historic pull of Obama’s candidacy. Community members who had been active in New York Democratic politics for decades found themselves navigating between an institutional allegiance to Clinton and a communal pull toward Obama that was, in many households, generational: parents backing Clinton, children for Obama.

UK: Northern Rock Nationalisation and British-Jamaican Anxiety

The UK government’s nationalisation of Northern Rock on 22 February 2008 — following the first bank run in Britain since the Overend Gurney crisis of 1866, in September 2007 — confirmed that the credit crisis was not an exclusively American phenomenon. Northern Rock’s collapse had exposed the particular vulnerability of a bank whose business model had been built on short-term wholesale funding in a market that had frozen. Its nationalisation was the first in Britain since the 1970s and signalled the depth of the financial system’s vulnerability.

For British-Jamaican communities in London, Birmingham, and the UK’s other major cities, the financial turbulence’s UK dimension was adding to anxieties already generated by the US housing crisis and its implications for family members in America. The UK housing market’s deceleration — with mortgage approvals falling and house price growth stalling after years of sustained increase — was beginning to affect the property investment strategies that many British-Jamaican households had pursued as a vehicle for both UK wealth building and eventual Jamaica return financing.

Jamaica: Golding’s Early Months and the 3rd Biennial Countdown

Prime Minister Bruce Golding’s JLP government was settling into office in the early months of 2008, managing the transition from PNP governance after eighteen consecutive years and establishing the new administration’s priorities. The 3rd Biennial Jamaica Diaspora Conference — scheduled for June 2008 — was the first biennial under JLP governance and provided the new government with an early opportunity to signal its approach to the diaspora relationship.

Remittances through Q1 2008 remained at approximately US$2.0 billion annual pace — maintaining the level established through 2007 — as the housing and financial market distress in the US had not yet translated into the broad employment losses that would later compress the diaspora’s remittance capacity. The Easter transfer spike in late March provided the quarter’s seasonal boost. We report next from 2 July 2008.

This Quarterly Jamaica Diaspora and Returnee Update is researched and published by Jamaica Homes News. Sources include Jamaica Gleaner, Jamaica Observer, Bank of Jamaica, PIOJ, MFAFT, and PICA. All figures and developments are accurate as of the publication date, 2 April 2008.

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