Last week, there was panic in the streets of New York after a steam pipe exploded in mid-Manhattan. One person died, another is in coma, but the real fear is that asbestos belched into the air could eventually have a deadly effect on many more people like it did at the World Trade Center in the aftermath of 9/11. In that event, city officials like Rudy Giuliani did not insist on protective clothing and safety rules. Thousands of rescue workers are still dying.
This time the city responded more swiftly with clean up crews in space suits. The cause of the explosion was determined to be buried beneath the surface in an aging infrastructure which only gets tended to AFTER highly visible accidents occur, rarely before. The public, initially worried about the presence of terrorists, appears to have relaxed when the culprit was identified as an old pipe. New Yorkers are a hearty lot and the saying "shit happens" is commonplace.
Yet the real danger may not be explosions in the center of town, but "implosions" on Wall Street. The former can be covered easily because they are localized; the latter spread globally and seem harder to track.
The press was all over the mayhem in midtown right on their doorstep but down the Island, in the downtown financial district, another shit storm is building steam although this one is hard for most people to decode. That is, unless they follow the business news closely and understand arcane terms like "securitization" That describes a financial instrument in which mortgage money, often invested by poor people in subprime loans is recycled by Wall Street firms and turned into leverage used to finance all of these buyouts we have been hearing about.
Armies of too clever by-a half money managers had been making a fortune on all of this with practices that are now being characterized as "outright fraud" by none other than President Bush's Chairman of the Federal Reserve. Most of their wheeling and dealing flew under radar of public scrutiny with the press boostering the rise of the stock market without examining the precarious "infrastructure" under that street, also known as THE STREET.
I have been trying to blow the whistle on this scandal as have experts who know a lot more than I do. I wrote an article back in 2005 calling for better coverage of the credit and debt complex by the media. It appeared on Mediachannel and in Nieman Reports, a journalism magazine read by top editors. The reaction was minimal. Sure there been a slew of stories on consumer fraud and identity theft but not many dissecting the process of financialization that permits big banks and Wall Street firms to dominate our economic and political system.
Progressive journalists for the most part were not paying attention either. Michael Moore's film SICKO on the heath care crisis does touch on debt, so maybe this is changing.
I made a film too, IN DEBT WE TRUST (InDebtWeTrust.com) to sound the alarm but it was tough to get distribution to challenge the financial power structure when advertising by lenders and credit cards is all over the media. (We are setting up screenings and selling the DVD to promote a campaign by America for Debt Relief -- see stopthesqueeze.org)
Then, as predicted but at first downplayed, the bubble began to burst. Suddenly, it was not just poor people to be blamed for being financially irresponsible -- even as two million families face foreclosures of their homes -- but the whole financial industry itself.
Wall Street is far more culpable than main street.
Last week, Credit Suisse, predicted a big stock market fall in 6 months because securities are overvalued. The Fed warned of 100 Billion in credit losses. The Guardian reported, "Some analysts said they feared a broader credit crunch if a collapse in confidence in the US mortgage market rippled out to other parts of the debt markets." A NY Post article suggested that over two TRILLION dollars is at risk. Of course, all of this is speculative but as they say, when there is smoke in high places, fire can't be far behind.
Last Saturday, the New York Times reported, "Anxiety over securities backed by risky mortgage and rising interest rates has roiled the credit market for several moths. Now the CONTAGION (caps mine) from those troubles seems to be spreading into other parts of the marketplace."
Terms like "roiled" and "contagion" are insider words for a spreading panic Writing on Money And Markets.com, Mike Larson declares "ITS ALL HITTING THE FAN.
He says two Bear Sterns funds simply "VAPORIZED" explaining, "In plain English, here's what happened:
"These funds invested in complicated mortgage securities ...
They used extensive leverage, or borrowed money, to improve returns ...
Then, delinquencies and foreclosures started surging, and the value of the underlying loans and bonds tied to them began sinking fast."
Now private equity firms which have been making monster deals built on debt are being squeezed. Much of the debt is being seen as junk. We have also learned that the agencies rating credit and debt offerings had their heads in their rear ends. They have lost credibility putting the market at more risk.
The excellent website Ml-explode.com reports that since late 2006 100 major US Lenders have collapsed or "imploded." The editor sums up the reasons this way: "Thank you greed; thank you delusion; thank you anti-regulation -- we couldn't have done it without you!"
The press is beginning to wake up and realize how important this is. They have been talking about the rise of the stock market as if that tells the whole story. Yes, some corporate profits are up but what's happening down below is alarming. Note, the market fell nearly 150 points after last weeks high of 14,000.
Business Week says that the subprime crisis is spreading to other kinds of debt, and far more serious than thought writing it is "Only a surprise to those who listened exclusively to soundbite-based talking-heads belaboring "subprime" as an isolated implosion. Around here, long ago we were forwarding along data and analysis showing sharp rises in delinquencies in virtually all classes of consumer debt."
More Contagion.
We are finally beginning to talk about real money and a real danger of the kind that terrifies bankers and the elite. They may not care about the poor, but they do about themselves! As Mike Larson suggests: "Ultimately, losses on subprime mortgage bonds alone may total as much as $90 billion, according to one estimate. Losses on collateralized debt obligations (CDOs), investment vehicles created from slices of various mortgage-backed securities and asset-backed securities, may total billions more."
In an interdependent interlaced economy, a problem in one sector quickly ripples elsewhere just like the South East Asian financial crisis ten years ago. It's like cancer, not easily checked.
I went to a dinner party last week and met a credit expert who works at one of Wall Street's top investment firms. He acknowledged to me that the people shoveling out those subprime loans KNEW many of the borrowers couldn't afford to pay back.
I asked: "So what happened to due diligence?" one of the "market disciplines" that these bankers are always preaching?
He shrugged, indicating that there was so much to be made that normal safeguards and standards were pushed to the side or forgotten. He says there are many investigations underway right now.
We can't allow them to investigate themselves.
Where are the TV series on this pernicious corporate crime? Where are the investigative reporters showing how this is connected to government policies in the so-called "ownership society?" Where are the Democrats and their candidates on these issues? And where is the progressive community?
It is clearly time for our political and social movements to engage on this problem that is causing so much economic pain and revealing the gangsterism at the heart of the economy.
As Rick Pearlstein explained on TomPaine.com, this problem is an issue and a movement for economic justice just waiting to happen. Once you look into it in depth, "You'll find out how the' foreclosure crisis spun of short-sighted Republicans' political greed can spur a new (old) progressive politics of homeownership that could someday save the world.."
What are we waiting for?
News Dissector Danny Schechter is "blogger-in chief" of Mediachannel.org, His new film is IN DEBT WE TRUST: America Before the Bubble Burst (Indebtwetrust.com) Comments to Dissector@mediachannel.org
