StopTheSqueeze.org Newsletter - Americans For Debt Relief Now!

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-- 24 October 2007 --

IT’S YOUR TURN TO ACT.

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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

Oct 24 2007: If you have been watching Major League Baseball in this playoff series, you keep seeing that promotional ad with the tag line “There Is Only One October.” That’s because October is the month of the playoffs, and the time of the World Series.

But October is also the month that the banks report their earnings (or, this year, their huge losses) and the stock market went into crash mode in l987. This has been a month in which protests resumed at the World Bank meetings in Washington and the foreclosure problem is on the verge of becoming a national issue. Jesse Jackson, for one, is on the war path having spent several days last week in Michigan hearing some of the stories of the 80,000 people losing their homes there and becoming aware that we could lose our economic moorings when the recession that so many anticipate is more widely experienced.

Jackson is going to Atlanta this week, speaking at one of Barney Frank’s hearings in Washington where he also plans to meet/confront Federal Reserve Chairman Ben Bernanke.
I know all this because “The Reverend,” as he likes to be called, called me and had me on his Sunday morning radio show where he announced a fight back against the subcrime/suprime crisis that has disproportionately targeted minorities. He encouraged me to promote my film IN DEBT WE TRUST, a sign that maybe a documentary that some critics dismissed as “alarmist” may finally have a chance of finding a bigger audience. (The film was screened in Glasgow last week and will be shown in Geneva, Belfast and Austria.)

Sub PRIMAL S C R E A M!

October 20: I stopped in for a few minutes over the weekend at the beautiful and very rustic Race Brook Inn in Sheffield MA the Berkshires. A group was holding a weeklong conference using primal screams therapy as part of self-actualization exercises in intense therapeutic sessions. I was tempted to sneer but then I started realizing that this newsletter has, in fact, been in part my own SubPRIMAL scream about the subprime crisis which I have seen from the beginning as a white collar criminal enterprise targeting borrowers in a predatory manner.

When I first heard the term, it was described to me as a reform, a way that poor people with bad credit could get access to loans. That may have been the intent, but the reform was quickly subverted by slick mortgage companies who found a way to charge more for their money, and then by Wall Street firms backed by big banks who saw a way of gobbling up the mortgage paper, “securitizing it” in all sorts of exotic and complex instruments to then reloan the money and pump it in all sorts of financial deal making. In a sense, the poor were financing the rich to become even richer without any oversight and often with the complicity of ratings agents who pronounces these practices as “kosher.”

WHO TO BLAME?

When the first problems surfaced publicly, the mortgage scammers blamed the borrowers for scamming them. The media avoided the story in part, no doubt, because newspapers were also making a lot of money on real estate ads. They also benefited because the lenders spent literally billions advertising those loans.

Those deceptive ads are still running today all over the internet including on the Mediachannel.org site I edit because internet ad agencies use word associations to see what blogs and sites are saying about this issue and then advertise on them. I wonder if I spent all my time condemning hate crimes, if we’d get ads from hate groups. It’s bizarre. The NY Times recently ran a piece reporting that the number of loan defaults are INCREASING now, and many are not subprime related.

In short, the rip-offs are STILL taking place despite all the publicity and media attention. That’s why I want to scream. We are already seeing our costs going up, the price of gas will soon skyrocket to $4 a gallon, and the winter heating season will be up 22% That’s real money, Others have it much worse because they are losing their homes, their cars, and everything else they borrowed money to buy. They are not just screaming; they are crying.

And where are the Democrats in the Congress? James Petras says they are still asleep at the switch:

"Everybody for himself and don't look back', is the watchword of leading equity bankers. The Democrats are calling for the usual inconsequential Congressional hearings about what went wrong. Congressmen Levin and Barney Frank will ask the wrong questions to the wrong people--going after the weakest fall guys--the rating agencies--for overrating the fraudulent deals, not the dealmakers themselves. The 'turds' in the briefcases are big and smelly but no one knows how big: $250 billion or $500 billion. There are a lot of bankers and hedge fund billionaires walking around with invisible clothespins on their noses."

THE G-WORD

What is driving it? Hint: it is one word, an idea showcased in Oliver Stone’s movie Wall Street a few years back It’s Greed, the “G-WORD”. Remember his stockbroker character Gordon Gekko who said “Greed Is Good? In fact, greed remains all over this story. Honest people in the industry admit it. Example: “The mortgage crisis is "a case study on the way that greed convinced everyone there wasn't risk," says Ivy Zelman, CEO of Zelman & Associates, an independent real-estate research firm.” Those words again: “greed convinced everyone.”

And who was in that “everyone?” I call it the coalition of the greedy? Try many of our biggest banks and most credible financial institutions. Many have since screwed themselves too, reporting BILLIONS in losses. And the losses are continuing. They have also laid off over 150,000 employees. 167 lending companies have imploded. Now read this!

AN ADMISSION

CLAIM: Bankers saw crisis coming, but were powerless:

"WASHINGTON (MarketWatch) -- The world's biggest bankers said Sunday their greed made them powerless to prevent the train wreck in credit markets, even though they recognized that markets weren't pricing the risk of subprime default appropriately.

Rex Nutting (MarketWatch story writer): "The dispersion of risks through securitization has freed up capital, but also has a big downside, as we are now discovering."

The stock market initially thought that when the Federal Reserve Bank cut its interest rate, it was all over. It wasn’t. There were some impressive one day rallies but, sad to say, the market suffered its biggest drop in the month of October. AP reported: “On the 20th anniversary of Black Monday, the Dow dropped nearly 400 points as investors worry about corporate profits and the continuing credit crisis”

Reports Reuters: More “Whopper Write-downs” To Come

NEW YORK (Reuters) - Wall Street and big U.S. banks should be wary of cash-strapped consumers. And they should not relax after writing down the value of leveraged loans and other assets by billions of dollars.

Some analysts say more whopper write-downs are coming.

Hit hard by an evaporating market for the corporate debt that fueled a globe-girdling buyout boom, U.S. banks now look forward with trepidation at escalating problems, such as consumers missing payments on their automobiles and credit cards. The consumer safety cushion, raising cash by refinancing their mortgages, is losing air as banks restrict lending more and more while adjustable-rate loans reset at higher interest rates.”

BANKS SET UP A SUPERFUND

Then our brilliant Treasury Secretary and three big banks came up with an idea—set up a multi-billion fund to restore confidence. Treasury Secretary Henry Paulson was all smiles on the day it was announced. The next day, he was expressing doubts that it would work. A day later, the people organizing the fund reported they were having problems financing it. An economist from Goldman Sachs, Paulson’s old firm, told the New York Times it wouldn’t work and that he saw it as a PR move.

Mike Whitney writes on dissidentvoice.org:  "The Treasury Dept is directly involved in a scam that saves the banks while trying to “persuade” investors to “pour more money” into toxic mortgage-backed sludge.”

The Wall Street Journal is warning that this situation is getting worse, reporting: “ Now, the U.S. Treasury and the world's biggest banks are grappling with their own baffling knot: how to prevent the unraveling of an entire class of such funds -- called structured investment vehicles -- from turning into a financial and economic disaster.”

 "Fears are rife that dozens of huge, structured investment vehicles, or SIVs, many of them affiliated with banks, will be forced to unload billions of dollars of mortgage-backed securities and other assets. Such a fire sale could cripple debt markets that play a crucial role in the global economy by providing financing for everything from company payrolls to mortgage loans."

Here’s what Comstock Partners reported:

A while ago we quoted a trader who said "We don’t know what we don’t know and we don’t know anyone who knows what we don’t know." We were reminded of this remark by this morning’s front page Wall Street Journal article on the evolution of the SIV problem. Referring to a meeting of bankers initiated by the Treasury Department, the article states that "In the room was Nazareth Festekjian, a 15-year Citigroup veteran who runs a group that deals with unusual situations, such as the restructuring of Iraq’s debt in 2005. Mr. Festekjian, 46 years old, hadn’t known what an SIV was until he received a call several weeks earlier from a government contact asking him to work on a solution." It all leaves us wondering what will blow up next.

The Columbia Journalism offers a scary primer on the issue.

The Financial Times also says the damage is deeper than we think: “What started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected,” said Michael Mayo, Deutsche Bank analyst, reported the Financial Times."

IMPLOSIONS UP

The number of imploded lenders is now up to 175. Here’s how customers were treated by one of the biggest, Ameriquest, when they closed their doors:

“Ex-Ameriquest customers' information may have been compromised: "Boxes and boxes of tax returns, credit histories and social security numbers." -- in a dumpster behind an apartment complex!”

STAGGERING LOSSES

So far housing sales and value has only fallen 4% but that’s the biggest drop in the housing index since l933. That’s not good. The people tracking this for the industry expect the drop to continue. One influential blog noted:

Should house prices fall by 10% over the next two years -- an outcome analysts see as entirely possible -- losses stand to be staggering. Thomas Zimmerman, head of mortgage credit research at UBS in New York, estimates that in such a scenario losses due to defaults could wipe out as much as 16% of the nearly $600 billion in subprime-backed securities issued in 2006. In August, such losses were equivalent to less than 1% of the total.

The jobs market also plays a key role. If the unemployment rate ticks upward by a percentage point or more, Mr. Zimmerman believes losses due to defaults could easily exceed 20% -- enough to hit even some of the most highly rated securities.

And what about jobs. How are they doing?

JOBLESS CLAIMS BIGGER THAN EXPECTED

WHY DOES THE MEDIA MISS THE STORY

I was very intrigued by reading a Boston based blog criticising the Boston Globe for hyping the real estate market in one suburban community when all the evidence suggested it was in a serious downturn. The writer wrote to the Globe which predictably defended its inaccurate reporting.

The blogger then investigated more deeply and made a fascinating discovery. The Globe, he says, is part of the problem, noting:

The Boston Globe is not pandering to real estate advertisers… it is PART of the real estate industry.

Don’t believe me? Just take a look at the Boston.com real estate section.

The Boston Globe has a direct relationship with real estate financial information firm the Warren Group and TOGETHER they sell home reports for virtually any home in the region. You buy them right through the Boston.com website.

The Globe also hosts MLS searches right on their main real estate web page which means they have established a significant relationship with the MLS Property Information Network (MLS-PIN) which owns the data.

Why is this important? Because this is not mere advertising.

With the property search and all of the associated tools and accoutrements (town stats, open house postings, mortgage rate lookups, embedded videos etc.) they are actually assisting buyers in ferreting out inventory and in nearly every aspect of the sales process.

Yes this is probably good for the consumer… the tools are useful but the fact remains that these are not mere Sunday sections or even banner ads…. we are in a new era of advertising.

These tools represent a nearly complete synthesis of news media and consumption where you literally read news and can simultaneously participate in buyer or seller activity in the same dynamic frame of reference.

DUMBING IT DOWN: THE FOX DISTRACTION NETWORK

Here’s Joe Nocera in the NY Times on why the Fox Business channel will not help you understand what’s going on:

One minute Fox was doing a segment that included a $1 million diamond; the next it was giving tips on how to avoid foreclosure. It would home in on the stock market and then report on the death of a teenager in Virginia from a staph infection, reports that included several truly silly efforts to frame the tragedy as a business story. On Tuesday afternoon, while CNBC was dissecting Intel’s earnings, Fox was running its “Happy Hour” show, which is set in a bar. A co-host named Cody, a dude so hip he doesn’t tuck his shirt in, was interviewing a random customer about his plans for Christmas spending. “Expensive chocolates,” was the man’s reply.

… In a week when Countrywide’s chief executive was discovered to be under S.E.C. investigation, when the market lost about 4 percent of its value, when evidence emerged that the housing slump was deepening, the tone at Fox Business was upbeat. Relentlessly, incorrigibly, unapologetically upbeat.

HOUSING FLAME-OUT: CALIFORNIA FALLS INTO THE SEA

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