Subprime Or Subcrime? Time To Investigate And Prosecute
By Danny Schechter
11 August, 2007
MediaChannel.org
There comes a time when the frame of a news story changes. It happened in Iraq when the "war for Iraqi freedom" became seen as a bloody occupation, not a beneficent liberation. It is happening as the war on terror is increasingly perceived a war of error and when voting problems are reframed as electoral fraud.And it will happen in the economic arena too, when we see the "subprime" credit crunch for what it is: a sub-crime ponzi scheme in which millions of people are losing their homes because of criminal and fraudulent tactics used by financial institutions that pose as respectable players in a highly rigged casino-like market system.
Suddenly, after years of denial and inattention, the press has discovered what they call "the credit crisis." Vague words like "woes" are still being used to mask a financial calamity that some analysts are already calling an apocalypse as lenders go under and the Stock Market melts down.
A French bank froze billions Thursday saying, ""The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets." Translation from the French: We are all in deep shit.
On Thursday morning, President Bush was asked about this at a press conference. He blamed borrowers for not understanding the documents they signed. But if you have ever tried to read the documents banks prepare for mortgage closings, you will know that they are written by risk-minimizing lawyers and are too long and dense to be understood. (Later in the day, the market reacted to Bush's upbeat assessment with the Dow plunging 387 points.)
The financial insiders who watched were more than skeptical. Here are some quotes from a discussion on the Mi-implode Web site. One of the discussants calls our fearless leader, "President Pumpkinhead:"
Why'd president pumpkinhead have a news conference in the morning? Probably hoping no one would see it and he wouldn't have to lie to as many people.Another described what he was watching with more than disbelief:
"He's being hit with a lot of questions on mortgages, credit crisis, and the economy ... and of course the economy is 'in for a soft landing,' he's been assured by the treasury that 'there is plenty of liquidity,' yadda-yadda-yadda.But he is stumbling over his words more then usual, not making eye contact, not finishing his sentences ... and when he wonders a bit, he quickly goes back on script. It is very odd to watch, to say the least."
"Odd?" Not for him, but, of course, there is more than one man to hold accountable. This is a deeper structural problem that implicates a whole industry and the process of "financialization" it promotes. This crisis is an example of what goes around comes around as the companies that suspended their usual "standards" and "rules" and self-styled "due diligence" knowingly sucked money out of people with poor credit records and who now find their own companies imploding and collapsing worldwide. Many of the victims are people of color. They were targeted by predators.
Underscore that this was done deliberately, with forethought and malice, a well orchestrated plan to create armies of "suckers" and steal -- yes, I said it -- their monies to leverage even bigger deals. Their greed had no limits, until the scheme collapsed.
Behind it all were the so-called "Masters of the Universe," the wise men of Wall Street who worked behind the scenes to turn mortgage brokers and small lenders into part of what will one day be seen as a criminal network worthy of prosecution under the RICO conspiracy laws used against the mob and drug dealers. Read this account from the Wall Street Journal:
Lou Barnes, co-owner of a small Colorado mortgage bank called Boulder West Inc., has been in the mortgage business since the late 1970s. For most of that time, a borrower had to fully document his income. Lenders offered the first no-documentation loans in the mid-1990s, but for no more than 70% of the value of the house being purchased. A few years back, he says, that began to change as Wall Street investment banks and wholesalers demanded ever more mortgages from even the least creditworthy -- or "subprime" -- customers."All of us felt the suction from Wall Street. One day you would get an email saying, 'We will buy no-doc loans at 95% loan-to-value,' and an old-timer like me had never seen one," says Mr. Barnes. "It wasn't long before the no-doc emails said 100%."
You don't read many accounts like this of businessmen bashing Wall Street in the business press. Could it all have been stopped? Of course, if there were real regulators and rules protecting consumers and the public interest. And if there were a social movement that championed economic justice.And also, if there were investigative journalists like the ones who just wrote a series on the "debacle" of the "debt bomb" in the Journal -- but after the collapse, not before. And what do they admit now? That this is not just a subprime problem but far more serious and global.
They note that "credit problems once seen as isolated to a few subprime mortgage lenders are beginning to propagate across markets and borders in unpredicted ways and degrees. A system designed to distribute and absorb risk might, instead, have bred it by making it so easy for investors to buy complex securities they didn't fully understand. And the interconnectedness of markets could mean that a sudden change in sentiment by investors in all sorts of markets could destabilize the financial system and hurt economic growth."
Will the rest of the media follow up and explain what is really going on?
This is very serious, but far too many progressives, activists and politicians alike haven't spoken out about the crime behind this rolling scandal. We should be calling for major debt reform in America like Bono advocates for Africa. We should demand criminal penalties for the profiteers who started out to enrich themselves and seem to have ended up destroying the very system they misused. We should press the Congress to use its subpoena power to investigate the corporate criminals and their government enablers.
When they propose a bailout, we should demand a "jailout." The Washington Post reports that the US has started a bailout "pumping more than $150 billion into the financial system to keep it operating smoothly." Where is this money coming from? Not from the military budget you can be sure.
Blogger Carolyn Baker writes that we all must become more engaged with these issues saying she is "aware of the role of economic issues -- perhaps more than militarism, health care, education, politics, or any other institution, in the dead-ahead demise of empire.
"I also notice that few in the left-liberal end of the political spectrum have a firm grasp on economic issues which I suspect comes from a fundamental polarization between activism and financial intelligence," she writes.
Reviewing conservative author Michael Panzer's book, Financial Armageddon, she criticizes his analysis as limited, and by extension, the left's avoidance of these issues as well.
"What is most disturbing to me," she writes, "about the book is what appears to be a total lack of perception regarding the role of fraud, theft, and malicious intent in the American and global financial train wreck which has been exacerbating over recent decades."
Indeed! What are we going to do about this? How about starting with becoming more aware?
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