-- 5 December 2007 --

IT’S YOUR TURN TO ACT.

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STOP THE SQUEEZE WEEKLY NEWSLETTER
Compiled by In Debt We Trust Director Danny Schechter, author of SQEEEZED: America As The Bubble Bursts and director of In Debt We Trust
Comments to Dissector@mediachannel.org

December is underway. The M-1 implode website says 193 lenders have now imploded. An official with the Fed says the mess will get worse: “(MarketWatch) -- Research at the Boston Fed suggests that the foreclosure crisis in subprime mortgages will get worse before it gets better, said Bank president Eric Rosengren on Monday. Just how much worse depends on the outlook for the economy and housing, he said.”

In Washington, the Treasury Department has been working around the clock to come up with a way to block foreclosures. It is unclear how many people their plan will help, Most of the media played it as a way the government seeks to help homeowners in distress. Bloomberg News plays it as the way they are trying help themselves and to stop another recession:

(Bloomberg) -- U.S. Treasury Secretary Henry Paulson, struggling to prevent a second recession in the presidency of George W. Bush, will today discuss plans to keep troubled subprime borrowers from losing their homes.”

AP Reported on the plan:

“Secretary Henry Paulson said Monday he is confident there will soon be an agreement to help thousands of homeowners avoid mortgage defaults by temporarily freezing their interest rates.

Paulson told a national housing conference that this effort involved a "pragmatic response" to current realities as the economy goes through the worst housing slump in more than two decades. The number of homeowners struggling to meet higher payments because their initial introductory rates are resetting is currently soaring.

Paulson and other top Treasury officials have been holding talks with major players in the mortgage industry over the past several weeks to hammer out an agreement that would freeze the lower introductory rates to keep them from resetting to higher levels for a period of years.”

BUSH REVERSAL

This may be too little and too late and marks a reversal of the original Bush policy as the Miami Herald reported:

"This past summer, President Bush favored government restraint as troubles grew in the nation's housing market. Now, with top Wall Street banks losing billions of dollars in investments tied to home loans, executives losing their jobs and concerns about wider economic fallout mounting, the Bush administration is pressuring the mortgage industry to offer a sweeping approach to fix, or at least mitigate, the problem."

For more of Danny Schechter’s analysis of the credit crisis, read: THE CREDIT CRISIS IS BECOMING A BATTLEGROUND

SQUEEZED: AMERICA AS THE BUBBLE BURSTS

A Full E-Book In PDF format for downloading.

The book is free but in exchange, I ask that readers make a tax-deductible contribution to:

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A DAY EARLIER

The news on Sunday always highlights what’s ahead on Wall Street in the week ahead. These reports used to be so bullish but now they project a big frown. The Dow dropped l0% last week because of the credit mess. A new jobs report is expected and its not expected to show great gains. Shopping is only so so. And more articles have been appearing questioning whether a proposed bailout of sorts for families facing foreclosures will do anything.

Yahoo noted: “If lenders temporarily freeze low introductory interest rates on home loans made to risky borrowers before they soar, it would be a modest fix for the country's fractured housing market…

But will it? New York Times columnist, the economist Paul Krugman says; “it won’t make more than a small dent in the subprime problem.”

He also asks:

Why was this allowed to happen? At a deep level, I believe that the problem was ideological: policy makers, committed to the view that the market is always right, simply ignored the warning signs. We know, in particular, that Alan Greenspan brushed aside warnings from Edward Gramlich, a member of the Federal Reserve Board, about a potential subprime crisis.

CITIES FEAR A CALAMITY, MAYORS “DESPERATE”

America’s Mayors are alarmed, reports the Trumpet:

“The intensifying mortgage crisis in America is about to drive 1.4 million more homes into foreclosure next year and push national property values down by at least 7 percent. As a result, city leaders are getting desperate.

The prediction released by the U.S. Conference of Mayors paints a gloomy picture, with soaring foreclosures, plummeting home prices, reduced property tax revenue, and increased blight and crime advancing across the nation. The report comes as the non-partisan mayors’ group begins special meetings in Detroit to address the housing crisis and its associated problems.

The group, representing 1,100 cities with populations of over 30,000, warns that cities and states will be left scrambling to cope with the situation.”

MEDIA COVERAGE UNEVEN

How great to finally see the networks jumping on the mortgage fraud issue. NBC’s Lisa Meyers did a great story last night on a mortgage broker scamming homeowners in Washington DC, getting them to put up their deeds which were then promptly resold. The folks lost their homes. I exposed a similar story in my In Debt We Trust film.

The story was then followed by a commercial for Fidelity with black customers having their money managed. Any relationship there? Of course not. Then the lovely Trish Reagan, one of CNBC’s so-called “money honeys” dropped in at 30 Rock to explain that the economy is not doing so well and that a jobs report this week is expected top show a decline. (A recent report on job gains last Spring has now being revised downwards so please take these numbers with a grain of salt. But the thrust of the story was to reinforce the pleas of investors to the Fed to cut interest rates again,

AP reports: “Wall Street's newfound confidence that interest rates are headed lower may not be enough to fuel a December rally if the economy looks like it's weakening.

Not mentioned in NBC’s story is that any rate cut will also mean more inflation which is a way of stealing peoples money with rising prices even as investors cash in. NBC left that out. In their mortgage fraud expose, they mentioned that the fraudsters would finagle people out of their deeds and resell them Ok, Lester Holt, who bought them and how much money did they make?

This is at the heart of the sub crime story because it was Wall Street firms that snatched up the mortgage paper and turned it into a pool of securities in the process called securitization.

The problem is that the scammers in the ghettos are the small fry who exploited their own communities; the scammers on Wall Street were exploiting each other and the whole economy. Ben Stein, not my favorite economic columnist for reasons I will explain, at least put his finger on the deeper problem in the Sunday Times Business pages---typically at the end of his column. (I keep telling you, read the Times from the bottom up.)

“HERE is a query, as we used to say in law school: Should Henry M. Paulson Jr., who formerly ran a firm that engaged in this kind of conduct (i.e. was deeply involved in the subprime ponzi scheme), be serving as Treasury secretary? Should there not be some inquiry into what the invisible government of Goldman (and the rest of Wall Street) did to create this disaster, which has caught up with some Wall Street firms but not the nimble Goldman?”

Well thank you Ben for columnizing on this especially since this same Business section you appear in ran a big feature two weeks ago lauding GoldmanSachs to the sky and not asking tough questions or showing Goldman’s complicity in all this.

Stein’s piece only turns critical at the very end. His lengthy diatribe was mostly devoted to discrediting an analysis from a top economist at Goldman, Dr. Jan Hatzius. Hatzius predicts that the damage to our economy is going to be much greater than any of us think. “It would get so bad,” writes Stein, “that it would affect aggregate lending extremely adversely and slow down growth.”

Stein’s central message: the economy is doing well and Goldman’s analysis is just too doomy, wrong, wrong, wrong. At the same time, he argues to further invalidate what the Bank says, it should cop to its complicity in the subprime scandal. Unmentioned in all of his flip cleverness is the fact that he scoffed months ago on the air at warnings of a subprime collapse. Robert Manning was on a show with him and he was totally unconcerned about what he now calls a disaster.

Whatever happens, Stein will be remain a high profile pundit able to speak confidently on every side of the issue. Many of his projections were off base in the past and are spoofed on the itulip.com website.

Meanwhile we have yet to see a major investigation or any prosecution of the people who profited off the misery of homeowners who may be out in the streets. Efforts by the Fed to cut rates or the Treasury Department to freeze mortgage interest may be too little and too late.

THINK I AM EXAGGERATING?

The Times of London, a Murdoch paper, speaks of a dark mood:

“Suddenly the mood has darkened. Just when bankers and investors were hoping the worst was over, a second devastating wave of write downs from major banks has rocked confidence. In recent weeks, Citi announced it would write down a further $6.4 billion in losses related to the sub-prime mortgage crisis. Merrill has also revealed more losses, while HSBC last week said it would take $45 billion back onto its balance sheet by rescuing two structured-investment vehicles. Last month Barclays wrote off $1.3 billion.

More pain looks inevitable. Analysts expect Citi to be hit with a further $15 billion of writedowns. Investors will be nervously scrutinising a Royal Bank of Scotland trading statement this Thursday when the bank is expected to reveal sub-prime-related losses of more than £1 billion. Goldman Sachs analysts have estimated that the total sub-prime-linked losses could reach a whopping $500 billion – far higher than Federal Reserve chairman Ben Bernanke’s initial estimate of $50 billion, later revised to $150 billion.

To add to the gloom there are mounting fears that the problems could engulf other types of American debt – credit cards, car finance and unsecured loans.”

Welcome to the rest of our lives.

A MORTGAGE FOR A CAT?

The Denver Post came up with a number I hadn’t seen before: “…before the subprime boom ended, an estimated $182 billion or more in profit was shared by brokers, lenders and investment banks.

Subprime mortgages are high-interest loans designed for people with poor or blemished credit.

"Lenders (also) started using subprime to get middle-income people in high-priced markets into a house," said Kevin Gillen, a research fellow at the University of Pennsylvania's Wharton School. "You had subprime stretching to cover so many different types of people in so many markets: a 28-year-old real-estate agent who's a property-flipper…”

Veteran mortgage broker Jim Spray says the quality of some loans deteriorated to the point "I should have tried to get my cat a mortgage. I'm sure I could have." (Post | Cyrus McCrimmon) an upper-middle-class couple in San Francisco, a working-class African-American household in Detroit."

Even today, as the subprime-lending crisis forces Wall Street investment banks to swallow multibillion-dollar losses, 85 percent of all homeowners with subprime loans are making their payments on time.

So here we are in December 2007, the last month of the year, the month Jesus was born in, to quote the carol. I will have to leave my chronicle here and keep it going at the stopthesqueeze.org website.

One last thought:

I keep thinking of that British Bank Customer on the line outside the Northern Rock bank waiting to take her money out. A BBC reporter asked her if she had heard that the Bank of England was now guaranteeing the bank. If so, why was she there. She replied, “Yes and I heard that the Captain of the Titanic said he would get to New York in record time.”

That image came back to me because another ship, this time in the Arctic Circle, hit an iceberg a week or so ago, and like the Titanic, went down to a watery grave. So history does repeat, although this time there were no casualties. And speaking of the arctic, a Norwegian Bank reported a big supreme writedown for loans it had made in a town near the North Pole.

No, you can’t make this stuff up.

CRISIS CHALLENGES CAMPAIGN

Democratic candidates are finally speaking out about the credit crisis. John Edwards put forth a plan. NB Brooks questions Senator Chris Dodd’s analysis on Daily Kos:

Last week, Senator Chris Dodd’s campaign put up a web page highlighting Senator Dodd’s proposed policy responses to the subprime mortgage crisis, and the general sense of economic unease felt by most Americans. Unfortunately, Dodd’s proposed policies serve as a case study of what’s wrong with economic thinking in this country, including even the Democratic Party.

According to the Dodd campaign’s web page, "The current foreclosure crisis is rooted in shameful predatory lending practices on the part of unscrupulous lenders."

False.

The current foreclosure crisis is rooted in the stagnation of wages and earnings the past 30 years. If, since Reagan took office, average weekly earnings had continued to grow at the same rate they had grown from 1964 to 1980, the typical household in the U.S. would have had around $30,000 more in income than it does now. That's right, nearly twice the income. There would not have been a "market" for sub-prime mortgages in those circumstances, and the opportunities for predatory lending would have been almost non-existent.

Inflation is underway. Food prices are up 21% and so is the debt:

NATIONAL DEBT RISES AT $1 MILLION PER MINUTE!

And so at long last a debate is underway, along with protests. This problem, which we have been covering for months—and were among the first to spotlight in IN DEBT WE TRUST — is now a global crisis.

It is time to get involved. Please pass this newsletter on to friends and family members. Support our work. Show our film. And speak up for your economic rights before the economy melts down in front of our eyes.

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Comments to Dissector@mediachannel.org

Danny Schechter
Editor Mediachannel.org
Director IN DEBT WE TRUST
InDebtWeTrust.com
212 246-0202x3006

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Here’s something special for StopTheSqueeze.org subscribers: a copy of the timely new 180-page e-book by Danny Schechter, the News Dissector …

Squeezed: America As The Bubble Bursts

Free with a donation of $25 or more to Globalvision

Here’s how Danny Schechter describes his latest work:

‘This instant internet E-Book, published by ColdType.net in Canada in a first edition in the Adobe PDF format, was inspired by the tradition of American pamphleteering exemplified by the work of the American revolutionary Tom Paine (who, of course, has no responsibility for this effort) and the Soviet-era samizdat publishers forced to work underground.

‘In our culture, we do have many publishers of small and large presses but as someone who has had eight books published that way, I know how long it takes to go from pitch or proposal to book in hand. And then the real battle begins for attention and distribution in an environment dominated by big names and bigger budgets. I don’t want to get into how many books reflecting years of work languish because of poor marketing and promotion.

Often, issue-oriented books appear well after the fact, not when they can best stimulate or contribute to an ongoing debate. Publishing this way is more immediate, accessible and timely. Squeezed primarily chronicles events over six months in 2007 and the explosion/implosion of an economic crisis that had been building for many years. Happily, it can be available in this same year just in time for the Christmas shopping season which the prognosticators already fear will be a disaster.

‘It is the work of a journalist who often finds himself ‘ahead of the curve.’ My book Embedded: Weapons of Mass Deception on the media war in Iraq was published by ColdType.net this way in the early summer of 2003 in a stunning climate of patriotically correct denial. I can only hope that this one has more impact if only because of the way so many institutions we trusted are loosing that trust so quickly. And also, lest I remind you, how this affects our wallets and financial survival.

‘I am sure we will soon be deluged with barrels of more books on the issues I treat, written by authors far more expert than I. Journalism has been called the ‘first draft of history’ but this is a history we can, hopefully, still influence if we wake up and have the courage to proclaim a state of economic emergency to do what must be done. For starters, we need to arm ourselves with information (or harm ourselves) and then drive the money changers from our temples.’

SEND A TAX-DEDUCTIBLE CONTRIBUTION TO THE FINANCIAL AWARENESS PROJECT AT THE GLOBAL CENTER (575 8th Avenue #2200 NY NY 10018. We will tell you where to download the book)