StopTheSqueeze.org Newsletter - Americans For Debt Relief Now!

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-- 08 November 2007 --

IT’S YOUR TURN TO ACT.

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QUOTE OF
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“Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.”

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STOP THE SQUEEZE WEEKLY NEWSLETTER
In Debt We Trust director Danny Schechter reports on the film and campaign.
Comments to Dissector@mediachannel.org

November 8, 2007: Welcome to another week in the United States of Debt. Another major domo bank president (CitiBank) has bit the dust with Jimmy Kane, the CEO of Bear Sterns, rumored to be next. Fresh multi-billion dollar write downs tied to the subprime scandal are in the offing, and the Comptroller-General of the United States, whose earlier warning about the debt burden appears in my film IN DEBT WE TRUST, is at it again, as the Denver Post reports:

'Were in deep financial trouble, warns the nation's top number-cruncher. If we stay the course, we'll very likely create a debt burden that cannot be repaid.

As the nation's comptroller general, David M. Walker is essentially licensed to be one of the world's most boring people.

But then he opens his mouth, and it becomes clear that the country's top auditor is ready to bust some chops and to say things a whole lot of people don't want to hear.

The federal budget is crumbling, he says. The nation continues to borrow at an alarming rate and to saddle today's toddlers with exorbitant debt they may not ever be able to repay. The country can't afford the Medicare and Social Security benefits it has promised.

And politicians seemingly refuse to level with Americans about how much financial trouble the country faces if it sticks with the status quo much longer.

Walker, a political independent who leads the nonpartisan Government Accountability Office, is crisscrossing the nation - the "Fiscal Wakeup Tour," he calls it - to educate voters. He pleads with them to elect only presidential candidates who make budget reform a top priority.

"Let me tell it to you straight," the native Alabaman said between appearances in Denver last month. "The math politicians sell does not work. And if we don't start dealing with the truth soon, this country could face dire consequences."

HOW MUCH MONEY HAS BEEN LOST?

It depends on what figures you accept and over what period. Some say trillions worldwide. Business Week reports that so far there has been $35 billion in write-downs and a loss of more than $220 billion in stock value. Who were the top issuers of these loans? See this NY Times report

Next to fall: Bond Insurance Companies. More big bucks to be flushed down the Wall Street toilet.

Also for a frightening expose on how credit bureaus and credit card companies exploit people who have already declared bankruptcy click on this Business Week Magazine link. The article is called Prisoners of Debt.

ECONOMIC TRENDS INSTITUTE: HOLD ON TO YOUR HATS

RHINEBECK, NY, 4 November 2007 — Hold on to your hats. The big one is blowing in. An economic storm that's been building for years has hit the United States, and there are no financial remedies or political tools to stop its destructive force. The dollar is crashing, America is sinking, and the world is cashing out of "Uncle Sam’s Funny Money."

Before the dust settles, gold prices will hit – and most likely surpass – $2000 per ounce. How fast the price rises and how high it goes will be determined, in large part, on how quickly the dollar crashes and how low America goes. Considering the skill levels of the President and Congress … and the wannabes in waiting … the odds for a quick crash and a fast fall are far more probable than enlightened leadership and intelligent policy.

WHAT IS THE REAL INFLATION RATE?

How could so many things be so expensive while consumer price inflation is so modest? How is it possible that the cost of living remains, according to the feds, under control? The answer is simple; the feds are lying. So concludes the Economist in this weeks edition. It says that an average of all items is going up not at 2% or 3% per year as the US government claims, but at 16.7% per year! Food is going up even faster at 31.6%.

FAT LADY YET TO SING, SAYS COMMON FORECASTER BLOG

CNN:  Banks are likely to mark down another $10 billion of mortgage assets in the fourth quarter, according to one analyst's estimates. Merrill Lynch and Citigroup are expected to be hit the hardest. Mayo estimated each bank would write down $4 billion in the fourth quarter.  He said Bear Stearns, Morgan Stanley, B of A and Wachovia are also likely to take markdowns.  Banks have taken massive hits from risky mortgage securities in the third quarter. Merrill Lynch wrote down $7.9 billion, and Citi took a $2.2 billion markdown due to mortgage-backed securities and credit trading losses.  

The pain from the subprime wipeout isn't likely to abate anytime soon.

It is hard to avoid all of this negativity but these warnings are NOT being discussed in most of the media and by most of our politicians. What can be done because it seems clear, as I have written earlier, the wizards of Wall Street have done and possibly cannot contain this crisis. See my article on HUMPTY DUMPTY Riding the waves.

THE INTEREST RATE CUT: A “TEASPOON OF A TONIC”

One thing is for sure; the Federal Reserve Bank’s interest rate cut will do little to make a difference as Gail Marks Jarvis explained in a Detroit newspaper:

The Federal Reserve gave the economy another teaspoonful of tonic last week, and investors gulped it down and liked it.   The hope is that it will cure what could ail the economy and keep the doctor away.  

But it's too early to expect a clean bill of health. The incubation period for economic remedies and problems is often six to 12 months, and the economy could be sickened by more than tumbling home prices and the potential that house-poor consumers might not spend much.   There remains a hangover from the summer's credit crunch and ongoing weakness and mistrust in the financial system.

LETS MAKE THIS REAL—CHECK OUT THIS REPORT FROM JAPAN

MONITORING CONGRESSIONAL REFORM

Last week, I wrote about a Congressional reform bill to eliminate predatory lending. It now appears that the industry and the Wall Steet firms are prevailing on Congress to water it down. The NY Times comments editorially on November 6:

What a difference a day makes. Just yesterday, this page praised the House Financial Services Committee for producing an exemplary bill, the Mortgage Reform and Antipredatory Lending Act of 2007, and urged its members to make only a few improvements before passing the measure. When they meet today, the committee chairman, Barney Frank, is prepared to offer an amendment that will make the weakest part of the bill even weaker.

Under the bill as currently drafted, borrowers have only limited ability to pursue legal claims against Wall Street investment banks and other investors, two groups that have profited greatly from mortgage lending, which turned out to be abusive. The lack of redress is a significant flaw. It would leave many aggrieved borrowers without adequate relief and would give the biggest players in the mortgage market insufficient incentive to avoid buying abusive loans.

The Times also exposes improper fees in bankruptcy proceedings.

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WHO CAN WE TRUST---HOW ABOUT OURSELVES?

Last weekend, when was in Boston, I visited the offices of NACAm the Neighborhood Assistance Corporation of America. It is a non-profit people-based organization offering mortgages with no down payments, no closing costs, no fees and no perfect credit. And no it is not a mirage or a subprime racket.

The CEO Bruce Marks has been fighting against predatory lending for 21 years. He testified before Barney Frank’s committee in Congress last week and all the other witnesses admitted that NACA has the best program and deals. Check it out yourself on NACA.com or call them at 1-888-302-NACA.

What I like about their program is that have organized people to participate and become members for $20. The members they are serving have to take a participation pledge that says:

“I understand that community advocacy is the major reason that NACA can provide America’s Best Homeownership program including free individualizied comprehensive housing services. I embrace NACA’s mission to revitalize communities, address financial exploitation. Promote economic justice and eliminate predatory and discriminatory lending practices.

Each family that gets a loan has “to promise to participate in at least five actions and activities a year such as neighborhood outreach, rallies, demonstrations and public education…”

Wow. Bruce told me that when he was in Washington, several members of the Capitol police force disclosed they were NACA members as well as the President’s hair dresser. NACA has 35 offices nationwide and a very sophisticated web-based software program to facilitate loans. Also, because of their advocacy work have access to a billion dollars in mortgage money.

Double wow.

PROGRESS CENTER ON THE ISSUES

Its good to see politicians and think tanks taking up these issues. The Democratic leaning Center for American Progress circulated this news on the issue:

Charles Prince III resigned yesterday as chairman and CEO of Citigroup, the world's largest bank, after the corporation sustained massive losses due to "large exposure to bad loans." Robert Rubin, who served as Treasury Secretary during the Clinton administration, will take over for Prince to "reassure Wall Street" in the wake of Citigroup's announcement that it will write-down, or acknowledge the depreciation of its assets, by between $8 and $11 billion. This amount comes on top of the $5 billion in losses that Citigroup has already suffered in the subprime mortgage crisis. In return for overseeing Citigroup during a year in which its stock value dropped by 31 percent, Prince will receive a severance package worth an estimated $40 million.

Merrill Lynch also announced recently that it was incurring a $7.9 billion, subprime-related write-down. These write-downs -- admissions that banks "woefully overestimated the value of assets on [their] books" -- are evidence of the expanding shadow that the sup-prime mortgage crisis is casting over the economy. Initially thought to be a problem for only a few overly-aggressive hedge funds, the subprime crisis has since spread to the world's largest banks, the American housing market, and gradually, the entire American economy.

THE SUBPRIME'S CRUNCH: Recently, Federal Reserve Chairman Ben Bernanke said that the housing slump will continue be a "significant drag" on U.S. growth. While the United States is not yet in a recession, there are some troubling economic indicators. "Spending on new homes and renovations dropped by 20.1 percent in the third quarter -- the largest decrease in a year, and the seventh quarterly decline in a row."

Wage growth remained low, while the amount of debt looming over the average American family has continued to rise. President Bush has pointed to recent job growth as an indicator of a sound economy, however, "job growth is still weak by historical standards and perhaps most importantly, remains concentrated in just a few industries." The subprime housing bust has already lead to massive losses for U.S. home owners, with total losses in "real estate wealth expected to range from $2 trillion to $4 trillion."

BLINK OF DAILY KOS ON ROBERT RUBIN TAKING OVER AT CITIBANK

Rubin, of course, has long been associated with Citigroup and its subsidiaries. Shortly after leaving his post as Bill Clinton's Treasury Secretary, he brokered a deal on behalf of Citigroup that resulted in an en masse abandonment of regulations that had protected the financial services industry and its customers for decades. For his trouble, he was rewarded with a seat on the board and the title of "Chairman of the Executive Committee."

The former Secretary is a close economic advisor to Nancy Pelosi. She even brought him to Washington after the 2006 elections to lecture the incoming Freshman class on how things were done inside the Beltway, as far as economic policy was concerned.

We couldn't have Freshman Dems getting any populist ideas into their heads.

He also heads the so-called Hamilton Project, a group of influential bankers, economists and lobbyists whose job is to make sure that Democrats don't deviate from right-wing "free market" policies where Wall St. is concerned.

So what does this mean for Citigroup?

My interpretation:

Citigroup has decided that it's time to seek a political, rather than financial solution to problems resulting from the collapse of the housing bubble, the sub-prime mortgage meltdown and the global credit crunch.

Rubin's appointment is a sign that Citigroup knows it can't keep going without the help of the American taxpayer.

FROM HEDGE NEWS ON FINTAG.COM

Citi is a full blown US national treasure, a bit like the Queen. Sometimes people don't like to hear the truth like the US is turning into France or New York is no longer cool. Well, if Citi has been hiding the truth from us, then we should be very concerned indeed. Just like its auditors.

THE SQUEEZE HITS CREDIT CARD USERS IN BRITAIN

Telegraph: “Credit card users hurt by squeeze”

Nearly half of all shoppers seeking new credit cards are being refused, as a money squeeze begins to hit ordinary borrowers.

The number of applications refused by card providers has risen by 17 per cent to an estimated 3.27 million in the past six months, figures released yesterday showed, while those who are granted a card are being forced to pay higher interest rates and charges. There have been 125 separate fee and rate increases over the past two months.

Young people aged between 25 and 34 are most likely to be refused a card, according to Moneyexpert.com, the price comparison website. But financial experts said that people already struggling with debt would be hardest hit by the clampdown.

LETTER FROM BOB MANNING

Robert Manning, author of Credit Card Nation and the editorial advisor to IN DEBT WE TRUST writes:

What is not discussed is how the national deficit, war in Iraq, and balance of trade deficit are making the US so dependent on foreign invest(ors)ment. When foreign investors stopped buying mortgage backed securities, the US economy nearly came to a halt until the Fed responded with an infusion of liquity. Very pathetic that the only policy lever is cutting interest rates... By the way, I am analyzing the survey data from the study sponsored by Fidelity. It looks pretty clear that we will be in recession by next fall...

THE NEWS IS NOT ENOUGH—GET INVOLVED!

Screen In Debt We Trust for your friends and community. DVD copies available through this newsletter. Your comments are welcome as well. Please support our efforts to keep Americans informed about the deepening economic squeeze—and what we can do about it. Comments and suggestions to Dissector@mediachannel.org

SEE THE FILM, READ THE BOOK

COMING SOON: “SQUEEZED,” an In Debt We Trust Reader featuring Danny Schechter’s detailed reporting on the crisis. Published by ColdType.net. This book will be available soon. Stay tuned for more information.

See Danny’s latest article on Mediachannel.org on Humpty Dumpty and Wall Street.

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