Subprime or Subcrime? Time To Investigate and Prosecute

Dankdude · #1 08-10-2007, 01:57 PM

By Danny Schechter, MediaChannel.org. Posted August 10, 2007.

The "subprime" credit crunch is really a sub-crime ponzi scheme in which millions of people are losing their homes because of criminal tactics by financial institutions.

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 hat 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 bilions 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 website. 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 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?

ViRedd · #2 08-10-2007, 02:10 PM

9-11 was putting the economy in the tank. The Federal Reserve started lowering interest rates ... and kept on lowering them. Mortgage rates eventually hit 4.5% for a 30-year-fixed. That brought millions of first-time buyers into the market. With the huge demand that caused, prices started to soar ... and soared past the moon. The whole thing was artificial ... a pipe dream. Then the Fed started raising the rates. As a result, the housing boom is over and we are experiencing deflation in housing. Those buyers who were the last ones into the game are the ones who are losing.

Want someone to blame? Blame the Federal Reserve's mismanagement of monetary policy.

Vi

Token · #3 08-10-2007, 02:21 PM

Damn, the longer bush is president the more he acts like nixon

Plato Is Boring · #4 08-10-2007, 02:21 PM

I suppose instead of lowering the ffr you would've had them do what? Should they have raised them at that point? I suppose they should've been really focusing on the housing market, when they have those little things like unemployment and economic expansion to consider. You sure don't mind telling us how great of a job Bush did with the Fed's economy (oh, it is) in the wake of September 11th.

ViRedd · #5 08-10-2007, 02:35 PM

Quote:

Originally Posted by Plato Is Boring

I suppose instead of lowering the ffr you would've had them do what? Should they have raised them at that point? I suppose they should've been really focusing on the housing market, when they have those little things like unemployment and economic expansion to consider. You sure don't mind telling us how great of a job Bush did with the Fed's economy (oh, it is) in the wake of September 11th.

Plato ...

Tell me if this is incorrect: When the Fed lowers or raises their rates, it has a delayed effect on the mortgage market. The Fed was looking for instant gratification and kept lowering and lowering the rates ... I believe it was 14 times. When it finally took effect, the senerio I painted took effect ... and because of artifically low interest rates, demand for housing went through the roof. Then the fed kept raising the rates to cool off the economy and inflation in the housing market ... and here we are today.

Correct or incorrect?

Vi

Wavels · #6 08-10-2007, 02:36 PM

Wow, borrowers given access to easier money cannot make their payments as agreed upon.
Yup, it is all the fault of those bamboozling, evil lenders!
Why should the borrower bear any responsibility whatsoever?
These poor hapless victims never read their contracts or understood them; of course it can't be their fault!

7xstall · #7 08-10-2007, 02:57 PM

Quote:

Originally Posted by Wavels

Wow, borrowers given access to easier money cannot make their payments as agreed upon.
Yup, it is all the fault of those bamboozling, evil lenders!
Why should the borrower bear any responsibility whatsoever?
These poor hapless victims never read their contracts or understood them; of course it can't be their fault!

couldn't have said it better myself!!

.

medicineman · #8 08-10-2007, 03:45 PM

Quote:

Originally Posted by 7xstall

couldn't have said it better myself!!

.

Here's the real crime. The Housing speculators (Read real estate agents) artificially bumped the price of houses up so their commissions would be larger, IE 3% of 600K is more then 3% of 300K. My house that I did absolutely nothing to except a paint job and a new roof and a few maintenance projects, trippled in price in 5 years once the California Real estate speculators moved in to Vegas and drove the prices up. People like VI will tell you it was the low interest rates that made prices go up, Bullshit, it was the agents that told their clients to list their homes for 20K more than the last one sold then told the buyers they were getting a bargain while sitting on a few houses they bought for cheap, crooks to the bone. What is sad, is the ones that bought in last. A friend in the Air force bought in last year in central Ca. for 450K, that house is now not sellable @ 300K and his payment keeps going up. I'm sure he is going to lose it. Granted the loan speculators added fuel to the fire, but everyone wants to be part of the American dream, and they aren't all lawyers when it comes to reading contracts.

Wavels · #9 08-10-2007, 03:52 PM

Med, the sellers would have realized a portion of the "inflated" price as well as the agent.
Seems like a "win win" to me.
Ever heard of caveat emptor?
Just because PT Barnum was correct, this does not call for the Government to save people from themselves?
Or does it?
Mary Poppins anyone?

medicineman · #10 08-10-2007, 04:09 PM

Quote:

Originally Posted by Wavels

Med, the sellers would have realized a portion of the "inflated" price as well as the agent.
Seems like a "win win" to me.
Ever heard of caveat emptor?
Just because PT Barnum was correct, this does not call for the Government to save people from themselves?
Or does it?
Mary Poppins anyone?

The housing market was artificially inflated by unscrupulous real estate agents for their benefit. They blame it on low interest loans (BS). Now the average worker can't afford to buy a house.
My son lives in CA. He has a degree in economics and makes 50K a year. He doesn't qualify to buy a 400K shitbox house because the asshole real estate agents have inflated the prices beyond the average workers qualifying range, all to line their pockets. Any young person starting out in CA. today that doesn't have 100-200K to invest in a house is SOL.
My reasoning says the price of homes must come down or no young people will ever realize the American dream. I owned 4 houses before I was 30. I could qualify to buy them on union wages. If I had to buy my house now, I couldn't afford it. Thanks to real estate speculators and crooked agents. Are you listening VI?

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