MONITORING THE MELTDOWN
The Weekly Stop The Squeeze Newsletter
In Debt We
Trust director Danny Schechter reports on the film and campaign.
It’s been another week in the credit
catastrophe as the subprime time bomb keeps ticking. Housing sales
and prices are dropping. Big deals financed by questionable debt
deals are being renegotiated. Home Depot lost $2 billion on one such
arrangement. The number of imploded companies is up to 136. At least
40,000 people in the industry handling these not-so-asset-based
securities have been laid off.
Banks fear that they will lose money as a result of subprime
shenanigans but they all say they DON”T KNOW what their exposure is,
and how toxic their involvement is. Imagine these are people who
write to you if you are one-cent off on a deposit and they are
pleading ignorance to how much they are at risk. Even more obscene
are all the people who point to how much money they are making and
assure us “they can handle it.” The question is: can we their
customers handle it?
Economists are predicting a fall off in economic growth and fears
that money market funds will be affected in a negative way. Reuters
reports: “Former Treasury Secretary Lawrence Summers said on Sunday
the risks of a recession are greater now than at anytime since the
September 11 attacks due to real estate and mortgage market
troubles.”
The National Association for Business
Economics says:
"The combined threat of subprime
loan defaults and excessive indebtedness has supplanted
terrorism and the Middle East as the biggest short-term threat
to the U.S. economy."
And all of this, as you can see, is
directly tied into the role of debt and credit—the very issues
raised in my film
IN DEBT WE
TRUST.
Fortune reports, “in a clear sign that the credit crunch is still
affecting the nation's largest financial institutions, the Federal
Reserve agreed this week to bend key banking regulations to help out
Citigroup.” Would they bend banking rules for the rest of us?
At the same time, ads and commercials for cheap mortgages are all
over the internet with the NY Times reporting that the industry has
spent FIVE BILLION on media advertising since 2000 which may be one
reason that so-many media outlets ignored signs of the crisis. (See
my article on the media’s responsibility from Mediachannel.org)
Maybe it's time for NBC’s embarrassing “To Catch A Predator” to turn
its attention to Predatory lending. How about entrapping them, and
foil their plots against people who don’t know how to defend
themselves? If you like this idea, write to David Corvo at NBC
News, 30 Rockefeller Center, NY NY 10020.
THE GREED GAME
We are finally getting some attention paid to the greedy flim-flam
strategies that led to this crisis. The New York Times did a story
on the country’s biggest lender Countrywide reporting on their
sleazy practices:
”… potential borrowers were often
led to high-cost and sometimes unfavorable loans that resulted
in richer commissions for Countrywide’s smooth-talking sales
force, outsize fees to company affiliates providing services on
the loans, and a roaring stock price that made Countrywide
executives among the highest paid in America.
Countrywide’s entire operation,
from its computer system to its incentive pay structure and
financing arrangements, is intended to wring maximum profits out
of the mortgage lending boom no matter what it costs borrowers,
according to interviews with former employees and brokers who
worked in different units of the company and internal documents
they provided."
The CEO of this company recently
cashed out some of his holdings. Isn’t it time for an investigation
with Subpoenas of these sleaze merchants?
MONITORING MARKETS
The markets are not back to “normal” with many taking their money
out of dicey derivatives and putting it into treasury
bills—something real. The scale of this crisis is just making itself
felt. Banks are expected to start losing money. There was a lot more
fear and loathing in high places than we even knew just judging by
the amount of money “injected” to prop up markets by Central Banks.
The Vigilant Investor website finally has come up with some figures.
"Its difficult right now to get
clear figures on what happened regarding the world’s central
banks injecting fresh money into the system in order to allow
the big players to avoid selling off otherwise healthy assets in
order to cover for heavy losses related to the unfolding housing
debacle in the U.S. lead over the cliff by subprimes. Contained
has turned into contagion when you consider some of the numbers
we’re hearing:
US Federal Reserve $86 billion
($48 + $38 repo’s)
European CB $230 billion
Japan $100 billion
Australia $42 billion
Fancy! That’s $460 billion in one week, according to our
sources. Granted, these are technically only repo’s –which
should be temporary."
ARE WE CLUELESS?
As Julian Delasantellis noted in Asia Times, most people don’t know
what’s going on or how serious it is:
"Some stories, such as corpse
custody battles between sleazy lawyers and semi-literate Texas
trailer trash et al, the US news media handle really well. On
others, such as goings-on in the world's financial markets, they
don't have a clue."
Remember this money from the Fed took
a while in coming. Writes Delasantellis:
"The Fed and other central banks
put up a good fight for their virtue. After the Fed's August 7
meeting, its board of governors produced a statement
aggressively optimistic about the state of the US economy and
contemptuously dismissive about the possibility that the
subprime crisis might represent a potential cloud or two on this
relentlessly blue horizon. After reading it, one might have
wondered if chairman Ben Bernanke needed his manic-depressive
prescription refilled.
The next day, as markets reacted against the Fed statement and
the attendant realization that no immediate central bank help
was on the horizon, the Fed and the world's other major central
banks reversed themselves and went full-throttle floozy for the
rest of the week...
The US media report stories like this in much the same way they
report baseball statistics or Hollywood blood-alcohol test
results - lots of coverage but little real understanding. It is
only in knowing the mechanics and causation of these events that
one can understand just how serious this crisis is now
becoming."
Confidence in the US markets is shot
world-wide as The Globalist reported:
Subprime mortgages are hardly the
whole credit market, but the meltdown of their bonds cast a
spotlight on the decaying integrity of investment banks and bond
rating agencies.
These institutions underwrite and rate all manner of credit, and
if they could be corrupted in the subprime mortgage market then
all commercial paper and bonds becomes suspect.Over the last
several weeks, creditors have increasingly sensed they cannot
trust banks or bond rating agencies, and they have fled to
short-term Treasury securities.
This was much worse than the collapse of mortgage companies that
originated housing loans, because it caused all segments of the
credit market to collapse."
WHO WILL BE HURT?
Economist Steven Lendman writes:
"In the end, this scandal may be
more far-reaching than earlier ones because so many underwriters
and other firms are part of the fraud or are seeking to profit
from it. At this point, it's hard separating villains from
victims as, in some cases, they may be one in the same. They're
all involved in dispersing up to trillions of dollars of risks
through the derivative alchemy of highly complex, hard to value,
packages of mostly subprime CDO and various other type debt
instruments that may even end up in so-called safe money market
funds unbeknownst to their unsuspecting owners.
Before this scandal ends, they'll
be plenty of pain to go around, but as always, small investors
and low
income subprime and other mortgage homeowners will be hurt
most."
CRISIS ACUTE FOR FAMILIES
The crisis is already acute on the other side of the spectrum in
ways that don’t get the coverage I read from a Florida paper:
"Connie and Timothy Pent and
their two teenage children are living out of boxes as they wait
for a dreaded knock at the door of their three-bedroom house in
Ocala, Fla. They've fallen behind in payments on a their home
loan, and their lender told them in July that foreclosure was
imminent."
FLORIDA IS NOT ALONE
The NY Post Reports:
August 22, 2007 — The nation’s
housing foreclosure crisis has walloped Manhattan with a vengeance
this summer - as the number of filings leaped 184 percent in one
month alone, according to new statistics released yesterday.
Staten Island also suffered from the frightening flood of
foreclosures between June and July, recording a 102 percent jump,
reports industry expert RealtyTrac.
“It may have taken a little bit
longer, but the subprime [mortgage foreclosure] wave has finally hit
New York,” one industry source said
WE ARE NOT ALONE
The British press is reporting: “Britons have racked up so much debt
on loans and credit cards that the total borrowed now exceeds the
entire value of the economy, new research shows today.
The financial consultant Grant
Thornton is forecasting that gross domestic product (GDP) will hit
£1.33 trillion this year, less than the £1.35trn which was
outstanding on mortgages, credit cards and personal loans in June.
The symbolic overtaking is the first time that the country's 60
million people owe more to the banks than the value of everything
made by every office and factory in the country. It prompted a
warning that personal borrowing was so out of control that many more
people would be pushed over the "financial edge".
AUSTRALIA TOO
"The number of families with children struggling with higher
mortgage repayments has almost doubled in five years, census figures
show.
Almost half of all households below the median household income of
about $53,000 are in rental stress.
The Australian Bureau of Statistics has released a breakdown of the
latest census figures showing a million households to be in housing
stress where more than 30 per cent of gross income is spent on
rent or mortgage repayments."
Read the full article...
UP NEXT: LAWSUITS
CNN: “It’s a three-part business
cycle now,” said Don Lampe, a partner with the law firm Womble
Carlyle, whose specialty is mortgage matters. “Boom, bust and
recrimination. We’re moving into the recrimination phase.”
“Most claims will be against mortgage
brokers for putting them into loans where they shouldn’t have been,”
said Dan Mulligan, a California-based real estate attorney.
Isn’t it interesting that the people
who defrauded others have brought down their own house of cards?
Talk about Karma. But just reporting on how srewec up they are is
not going to help. We need to fight back and challenge these guys.
We have to demand an investigation of this calamity, the prosecution
of those profiting on other people’s misery, and for real reforms.
That’ why it is important for you to get others to sign up for this
newsletter and make AMERICANS FOR DEBT RELIEF A REALITY!
Visit
StopTheSqueeze.org. Organize screenings and get involved!
In Debt We Trust
Screenings
There are more screenings of In Debt We Trust underway.
You can organize a screening in your neighborhood.
Help us get the word out.
* * *
Your comments and experiences are welcome. Write: Dissector@mediachannel.org.
You can read more of my daily blogs and articles on Mediachannel.org
We are also maintaining a
DEBT BLOG
on this site. Please visit it and tell us what you think
Please send this newsletter to your friends.
We are also looking for some donors to support our not-for-profit
outreach and educational campaign with tax-deductible donations to:
The Global Center
575 8th Avenue, suite 2200
New York, New York 10018
If you have comments or suggestions,
share them with me at
dissector@mediachannel.org.
Danny Schechter
Editor
Mediachannel.org
Director IN DEBT WE TRUST
InDebtWeTrust.com
212 246-0202x3006 |
