-- 19 December 2007 --

IT’S YOUR TURN TO ACT.

Thanks for reading this newsletter. Please pass it on to friends and urge them to sign up for free at StopTheSqueeze.org, and get a copy of IN DEBT WE TRUST.

debt busters network

We are putting together a directory of solution providers that can help.

Visit the Debt Busters Network

If you are a solution provider and would like to join the network, please visit the link above for more info and review our sponsorship opportunities to see if any of them suits you.

View Sponsorship Opportunities

If you had a good experience with a solution provider, please recommend them here.

We are inviting organizations to hold screenings, sponsor house parties and otherwise promote the film. Find out more about how to host a screening.

Let us know if you find these newsletters helpful and please pass them on to your email lists. For information on how to get involved, contact us here.

STOP THE SQUEEZE WEEKLY DEBT CRISIS 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


Denial is as American as cherry pie. We are a breast-beating nation, and love to chant “We’re number #1!” as so many did after the first gulf war. Those of us who never lived though a depression can’t imagine a similar major reversal in our economic fortunes as the economy seems only capable of going up along with our waistlines and credit card bills. While we have our own fears of doom and gloom, we continue to shop on while our media urges us to Mall-out, not watch out.

Economists are debating about whether there is a recession coming or already here. It all depends, doesn’t it, on your own economic status? We know that incomes have never been more unequal and different communities experience downturns differently. Some neighborhoods are already in a depression, while others live high on the hog. Also, many are just feeling the impact. We do know that families are losing homes, tenants are facing eviction, students can’t pay loans. Credit card interest is going up. The lawyers are now getting involved big time as bankers sue mortgage companies and investment vehicles collapse. The Fed can’t solve the problem and neither is the government.

And yet despite everything we have been reporting week after week, and all the bad news in every newspaper in the world, President Bush spoke to a Rotary club at a Yad a Doo restaurant in Virginia and said the economy is sound. But ``there's definitely some storm clouds and concern'' because of the nation's credit crunch and mortgage problems, “but the underpinning is good…''

I wouldn’t bank on it.

EQUITY LOANS IN TROUBLE?

In Debt We Trust editorial advisor Robert Manning urges us to “ keep in mind that with the blow-up over home equity loans that are increasingly becoming valueless unsecured loans, the next stage of the mortgage crisis he believes, is going to be mortgage debt "forgiveness." The big difference today versus 20 years ago is that it is going to be more costly and complicated for banks due to securitization: That’s a reference to the way banks and others turned mortgages into securities. He has just published a new study on the consumer led recession which says on the basis of extensive surveys that financial anxiety is leading to consumers cutting back on shopping. That’s not good for a society driven by consumption.

This idea of debt forgiveness is not unusual. Its been done in Africa. Why not here?

MONEY MARKET FUNDS TOO
Meanwhile in Europe, Money Market Funds are taking a hit:

Ml-Implode.com: ”Money market rates tumbled after the European Central Bank injected an unprecedented $500 billion into the banking system”

DON’T KNOW MUCH ABOUT HISTORY?

This is also a time to learn some of the lessons of the past. Even business magazines are now running articles reminding us of financial calamities in the past. Here’s one from Forbes which reports that “crises have been a feature of the financial landscape for hundreds of years. They often appear with little warning, as the subprime mortgage crisis of 2007 and the Asian crisis of 1997-1998 illustrate.”

It’s hard to understand the machinations on Wall Street even as I try to demystify the ups and downs because of a sense that we are on the way down. The debt bomb is exploding and many are running for cover. Even as the Federal Reserve Bank cut interest rates again last week, most commentators assume it would do no good. In fact, more questions are being raised as to why the Bank ignored the warning signs. Sample headline in the NY Times: FED SHRUGGED AS SUPRIME CRISIS SPREAD: As the mortgage crisis threatens to tip the economy into a recession, many are asking: Where was Washington?” As criticism mounted, the Fed rolled out its own new plan to close the barn doors after the horses were gone: “The Federal Reserve unveiled a proposal Tuesday that would give people taking out home mortgages new protections against shady lending practices.”

Despite the Fed’s too little too late intervention, sure enough, the market went down. So far the banks have not been able to stem the money-letting and more have admitted giant losses on their subprime loans. A new mortgage bail out plan only covers some homeowners who are current in their payments (i.e. not in trouble) and leaves out those who need help the most.

I have been trying to call attention to the severity of these problems with my film IN DEBT WE TRUST, my new book SQUEEZED and through this weekly newsletter. Last week, I took to the streets alongside Jesse Jackson and civil rights leaders. I called on the press to investigate, regulators to regulate and prosecutors to prosecute. We held a rally on Wall Street that many media outlets like the AP’s TV company didn’t bother to cover.

WHAT IT LOOKED LIKE

Fortunately the new REAL NEWS was there and captured the spirit of the event. See their report: and a snatch of what I had to say.

Unfortunately, not too many on Wall Street were roused to compassion or motivated to act. The New York Observer spoke with people who work there:

Despite Jesse Jackson’s warning of an impending “economic tsunami” from the subprime mortgage crisis, the only people marching on Wall Street on Monday afternoon were the business people whizzing past the few dozen protestors chanting “Restructure Loans—Don’t Repossess Homes” on the corner of Broad and Exchange streets.

Most business people strode past picket-wielding demonstrators, nonplussed by the accusations of “predatory lending” and “white-collar crime” being lobbed from the podium inside the metal barricades one block south of the New York Stock Exchange. As one speaker called on “Wall Street to help out the main street," a suited passerby shook his head and muttered, “Yeah, well, don’t buy something you can’t afford.”

So there you go again, blaming the victims for the crimes. Some more informed websites like England’s A World To Win were more sympathetic:

“In the United States, things are now so bad that people have taken to the streets – Wall Street to be exact – to protest against the way in which black communities and ethnic minorities have been hit especially hard. Yesterday, demonstrators paraded through the centre of US big business to protest against the eviction of millions of homeowners, the first ever march to target the financial markets. US civil rights leader, Jesse Jackson, who has campaigned for economic empowerment since he joined Martin Luther King as far back as 1965, led the march.

Like his mentor, Martin Luther King, Jackson sees the issue of debt as a class question as much as an ethnic issue. In Chicago, where Jackson’s Rainbow Push coalition is based in a former synagogue, 30% of homes are in foreclosure. In Detroit’s Wayne County, a quarter of homeowners are in default.”

The problem here is that people who don’t have subprime loans think they will get off scott free and have nothing to worry about. Wrong. If the house next door goes into foreclosure, your property values go down. And soon, there goes the neighborhood and your ability to sell your house.

READ THESE STATISTICS AND WEEP

We are all part of this system, and all affected by it. Did you know that mortgage debt jumped from 63 per cent of
disposable incomes in 1995 to 98 per cent in 2005.

Working families are saving less and making less as income inequality deepens. The money of the majority is being transferred to a superrich minority, The New York Times reports:

The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed.

SO WHAT DOES THIS MEAN FOR US?

It already means we are getting relatively poorer and paying more for what we need. As inflation goes up, wholesale prices went up by the fastest rate in 34 years, according to figures released last month. Energy is up. The core index is up 23%. Wholesale prices are up leading to higher retail prices. Many families have to decide whether to heat or eat as fuel and natural gas costs go up.

After We Lose Our Homes, Is Our Retirement Next?

by Tula Connell, Dec 7, 2007

Over the past months and even years, policymakers have
been puzzling about where the American consumer was
getting the cash to keep spending. Surely home equity
and credit cards had to be tapped by now. So where is
the money coming from?

Now we know.

A monthly survey of CEOs for the first time asked chief
financial officers in November if they've seen "an
increase in the number of employees taking loans or
making hardship withdrawals from their 401(k) accounts?"

A total of 18.5 percent said they had, with the most-
cited reason being the need to make mortgage payments.

Some economists are predicting the next economic crisis
will center on consumer credit card debt-and many of us
think that crisis already is well under way. But if
borrowing from our retirement future becomes a trend,
the long-term ramifications of the current economic mess
won't be felt for years or even decades.

Throughout these seven years of the Bush administration,
the middle class increasingly has been hard hit, with
more of us needing to borrow just to get by, especially
if we have to pay for health care or education for our
kids. A Federal Reserve report yesterday showed just how
tapped out we are when it comes to taking cash out of
our homes:

The amount of equity that U.S. homeowners hold in their
homes slipped in the third quarter to the lowest level
on record, just above 50 percent.

The National Post of Canada reports:

And that's just the tip of the iceberg. If the worldwide credit crisis deepens, we could be looking at a global recession, which would have dire consequences for consumers.

"I would compare what's going on now with the onset of the Depression period in the late 1920s and early 1930s," says Steven Hochberg, chief market analyst with Atlanta-based Elliott Wave International. "The potential is for it to be a lot worse simply because of the amount of credit outstanding." The total credit-market debt as a percentage of gross domestic product is more than double what it was during the Great Depression, he says.

"You know debt is forever. It has to be serviced or it has to be paid off. In some cases it has become so large that in order to service it, it becomes onerous, it starts taking away from other areas of the economy just to service the debt," Mr. Hochberg adds.

That doomsday scenario aside, the debt crisis may already be dipping into your wallet.”

THIS A TURNING POING TIME

FINANCIAL TIMES: THIS IS A HISTORICAL MOMENT

This situation is not the normal way the economy works through the magic of frequent ”adjustments” and self-correction. No, it’s much worse, as Martin Wolf writes in the Financial Times. (It’s important to read these outlets written for businessmen, not the rest of us, because they don’t like to be lied to. He says we are living in a “history moment, a turning point.”

These are historic moments for the world economy. I felt the same during the emerging market financial crises of 1997 and 1998 and the bubble in technology stocks that burst in 2000. This "credit crunch" may, I believe, be an equally important turning point for financial markets and the world economy. Why do I believe this? Let me count the ways.

First and most important, what is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-orientated financial capitalism. A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London. From the "ninja" (no- income, no-job, no-asset) subprime lending to the placing (and favourable rating) of assets that turn out to be almost impossible to understand, value or sell, these activities have been riddled with conflicts of interest and incompetence. In the subsequent era of "revulsion", core financial markets have seized up …

My Colleague Sharon Keyser asks: Do You Feel Better Off Today than You five years ago?

It is going to get worse before it gets better: the latest report by Goldman Sachs makes it crystal clear, the global economy hits a 'crunch'. As if this weren't enough, the IMF spreads gloom on 2008 by confirming that impact would be worse in 2008. The IMF and Sachs were seconded by the US Treasury Secretary acknowledging that we must prepare for a prolonged turmoil. Debt deflation is a nasty beast. The majority of bad-debt losses will be uncollectible in whole or in large part.

Forget about the Dow 14,000 and ask yourself frankly if you feel today better off than last year, or two years ago. That consumers must now resort to their credit cards to pay their monthly bills while banks are tightening their standards is a bad omen.

THE IMPLICATIONS OF THE COMMERCIAL REAL ESTATE COLLAPSE

CALIFORNIA COURTHOUSE STEP AUCTIONS OFFER 1336 PROPERTIES IN FORECLOSURE--17 ARE SOLD

IN FLORIDA: 31 INDICTED IN MORTGAGE FRAUD

The NY Times reports more sub CRIME news.
MIAMI — Federal prosecutors on Monday announced the indictment of 31 people in connection with a mortgage fraud scheme involving at least 28 properties in South Florida and fraudulent loans totaling more than $14.2 million.
Officials said the scheme included participants at every stage of the transactions, including bank employees, title agents, appraisers and fake buyers, and involved property in Miami-Dade and Broward Counties and in the city of Marco Island on the state’s southwest coast.

TRUE CONFESSIONS

I am a former senior loan officer for a regional mortgage bank. It made me sick to see how we took advantage of consumers for thousands of extra dollars. Sometimes these were smart people who simply didn’t know any better. So I developed this simple Mortgage Loan Comparison Worksheet. If borrowers just used this easy tool when shopping for a mortgage, predatory lending in this country could virtually be eradicated:

Read it here (PDF)

Problem is, most borrowers only make a decision once every seven years, so how would they even know what to look for? As a loan officer my mission was not to educate, but to get a signature on the bottom line, at any cost.

Ok that’s some advice from an expert—mine is give copies of IN DEBT WE TRUST To members of your family to encourage them to become more aware of this crisis. My e-book SQUEEZED is online at . Please send us a donation to the Global Center’s Financial Awareness project to support this work of raising awareness about this issue.

Thanks for reading this newsletter. Please pass it on to friends and urge them to get a free sub from Stopthesqueeze.org

* * *

ALSO NEW: THE IN DEBT WE TRUST FAMILY FINANCIAL SECURITY VIDEO FEATURING FINANCIAL ADVISOR GARY KORNEGAY.  YOU CAN ORDER IT HERE.

WE NEED YOU!

We can only continue this work of informing you about the crisis with the news we need to know with your support. Tax Deductible donations to the Financial Awareness Project at the Global Center are urgently needed. The Global Center is at 575 8th Avenue #2200, New York, N.Y. 10018

Comments to Dissector@mediachannel.org

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

Get the film that started IT ALL!

NEW!!

Family Financial
Security Video
DVD $13.95

DVD $19.95

DVD+SOUNDTRACK $29.95

Join & make $$$

Showtimes

Tell A Friend

Take Action

Host A Screening

Watch Student Loan Video

Watch Foreclosure Video

Debt Busters Network
 

We Need Your Help!

Make a donation to Globalvision:

$10 donation

$25 donation

$50 donation

SPONSORED ARTICLE
suggest your own

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)

* * *

Expert Advice

Based upon my experience, here are the Top 10 Mistakes Mortgage Borrowers Make:

1. Not knowing which mortgage fees the borrower can -- and cannot -- negotiate.
    
2. Choosing and trusting the first loan officer the borrower interviews.
    
3. Using an interest-only or "payment option" adjustable-rate loan primarily to qualify for a more expensive house than you could normally afford.
    
4. Thinking the interest rate is always the main thing.
    
5. Not comparing the final fees listed on the closing documents to the up-front estimates to avoid the lender "packing the loan" with added-on fees without the borrower's knowledge.
    
6. Not knowing if the mortgage has a pre-payment penalty - until it's too late.
    
7. Thinking that renting is always just throwing money away.
    
8. The borrower does not know if he or she is paying a back-end yield spread or Service Release Premium.
    
9. Paying for mortgage life insurance, credit insurance or other expensive lender add-ons to increase the amount of kickbacks the lender can receive from various vendors.
    
10. Paying hundreds of dollars to have a company set up a biweekly mortgage payment plan, something the borrower can generally do for herself or himself -- for free.

From "Kickback: Confessions of a Mortgage Salesman," one of the best-selling books on mortgages on Amazon.com.