StopTheSqueeze.org Newsletter - Americans For Debt Relief Now!

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-- 02 November 2007 --

IT’S YOUR TURN TO ACT.

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QUOTE OF
THE WEEK

“Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.”

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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

Friday Nov 2: Here’s what’s scary---they don’t seem able to fix the credit and debt crisis. The brightest bulbs in the finance industry want to stablilze the markets and start making money again as soon as they can. They want to clean up the mess and contain what they call the “contagion”—that is all the bad debt swimming around in every bank and private equity deal. They profited off of the subprime mortgages but now it has come back to haunt them. What to do.

They whooped and hollered and asked for a bail-out from the Federal Reserve Bank even while denying that’s what they were getting. And the Fed complied, first by “injecting” billions into the financial system Guess what? That didn’t work.

So then they cut the interest rates once and on Wednesday this week they did it again. At the time, it looked good. At least on Wednesday:. But even as the market shot up, the panic and fear in financial circles shot up too. One day later—just one day---the market dropped by over three hundred points. So it didn’t work.

This was Wednesday’s news:

CNN: Fed cuts rates to 4.5%
Citing turmoil in the housing market, Bernanke and Co. lower a key short-term rate by a quarter of a point to keep the economy on track. But the central bank also said it's worried about inflation - news that spooked the markets.

Bloomberg News noted:

“The second reduction in as many months should help the U.S. economy withstand the fallout from August's credit collapse, the Federal Open Market Committee said in a statement after meeting today in Washington. ``After this action, the upside risks to inflation roughly balance the downside risks to growth.''

The language "has all the sublety of a sledgehammer,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. "The FOMC has just stated unequivocally that `we think we are done easing.' Whether they are or not remains to be seen, but the message is loud and clear.''

Hours earlier, the Commerce Department reported that economic growth accelerated to an annual pace of 3.9 percent in the third quarter, the fastest in more than a year. The Fed statement also warned that higher energy and commodity prices may spur faster inflation.”

INFLATION, YOU BET---OIL IS UP, UP AND AWAY

The excerpts below from an article in the WSJ summarizes the supply issues for crude oil. Assuming no severe economic downturn that would reduce the demand for oil, supply will continue to be the primary constraint in the market. This coupled with a falling dollar basically means that prices in excess of $100/barrel will be in the norm in the near future. People have done all sorts of predictions about what "Peak Oil" looks like, well this is what if looks like…..  Several leading oil experts, gathered here yesterday for an annual energy conference, sketched a near-term future in which mounting global demand and shrinking supplies push oil prices well past the $100-a-barrel mark.

GREENPAN; WARNS AGAINST FEAR IN SPEECH

And that’s because fear is pervasive on Wall Street.

The former Fed chairman also warned of the strain the baby boomers will place on the economy over the next 25 years as they age and retire.

Closing his discussion, Mr. Greenspan added that the markets are subject to emotion, not rationale, so exuberance can give way to “primordial” fear.

“Will we have another crash? Yes. Will we have another credit crisis? Yes. Can we do anything about it? No,” he said.

Are you following me? Wednesday’s cheers turned quickly into Thursday’s tears—which shows that the problem is much deeper. This was the news on Thursday:

CNN: The Dow industrials, a day after rallying on an interest rate cut by the Federal Reserve, suffered one of its biggest declines of the year on Thursday after a Citigroup downgrade reminded Wall Street that the crisis plaguing the credit crisis markets is lingering.

CNN: The prospect of rating downgrades on complex debt instruments, along with massive writedowns at big banks, are raising fears that the credit crisis may deepen. Collateralized debt obligations backed by mortgage securities are triggering another wave of worry on Wall Street. Banks have been hard-hit by a decline in the value of these securities, and investors and traders worry that more losses could result if prices fall further. 

ANOTHER SCANDAL IN THE WINGS

The Securities & Exchange Commission is looking into whether Goldman Sachs cheated its way to enormous profits - even as the rest of the financial industry was suffering through a massive downturn…. (Remember, our Treasury Secretary Paulson ran this firm!.

So there you go, the market solutions everyone wanted to work is not working. Stay tuned—this can get a whole lot nastier.

AMBROSE EVANS-PRITCHARD: THE SKY HAS FALLEN

“Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: “so when is the sky going to fall then, eh”?
Well, excuse me. The sky has fallen”

THEY ARE FREAKING OUT OVERSEAS

I was in Austria last week talking about my film IN DEBT WE TRUST at a conference on democracy. On the way to the meeting inside a mountain used by the Nazis as a bomb shelter and weapons factory employing slave laborers, in WW 2, I passed an Austrian Bank, Bawag that suffered $1 billion in losses in connection with a wall street scandal involving the looting of a firm named REFCO. (Refco was connected to that controversial investment by Hillary Clinton in Arkansas in 1978. She put up, if you recall, $1000 that turned into $100,000 in a year.) The Bank has since been sold while court cases continue.

I was talking about the subcrime scandal touched on in my film. The press there is very aware of it and worry about its fall off. The International Herald Tribune in Paris put the story as its lead on page one. This was the headline: “EUROPE FEELS CHILL OF SUBPRIME FIASCO. Economic Forecasts Show Continent Still Vulnerable.”

SQUEEZE LIKE A DISASTER MOVIE

The Financial Times published in London, went further in editorial titled “CREDIT SQUEEZE-THE DISASTER MOVIE.” They compared the credit “squeeze” (does that term sound familiar) to “the plot of a hundred disaster movies.” They said, “the longer this goes on, the greater the risk to the real economy.” I enjoyed this because months ago, CNN Money compared In Debt We Trust to the horror Movie Carrie commenting my documentary is ‘even scarier.” The Economist compared the subprime scandal to a “toffee apple with a maggot at its core.” All of these news outlets say this scandal is not going away anytime soon.

Paul Krugman commented in the New York Times, “Maybe the subprime disaster will be enough to remind us why financial regulation was introduced in the first place.” Interesting that he—a Princeton economist as well as an op-ed columnist calls this crisis a “disaster”

ELSEWHERE: (BBC) Personal debt levels in Northern Ireland are spiralling out of control, the Irish League of Credit Unions has said.

Debt-ridden Britons owe £216billion on credit cards and unsecured loans but are refusing to rein in their spending, new figures show.

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NOW AVAILABLE: A FAMILY FINANCIAL VIDEO WITH PERSONAL FINANCIAL ADVISOR GARY KORNEGAY FEATURING EXCERPTS FROM IN DEBT WE TRUST.

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NEW YORK (MarketWatch) -- Merrill Lynch, the nation's largest broker, on Tuesday reported its first loss in about six years, saying bad judgment and weak risk management strategies forced it to write down almost $8 billion of mortgage and related assets, well above its own previous estimate. (Merill’s CEO was then forced to resign because of thse losses))

Note: Merrill did another write down a week later of $4.5 billion. The Financial Times commented: “The sense that valuation is still matter of “pick a number and divide by the chief trader’s golf handicap” seems to be pervasive. Can you believe this? Even Hollywood couldn’t make up something as fiip as that golf handicap comment---as sign of how arbitrary these people are.). At least Merrill confessed to “bad judgment.”

GREED GONE WILD

Somehow I think it was more than that. It think this is another instance of “Greed Gone Wild” to quote former Congresswoman Cynthia McKinney who also spoke at the Elevate Democracy conference I took part in.

BANKS TO CUSTOMERS: DROP DEAD

SO NOT OVER BUT MANY AMERICANS HAVE NOT YET FELT THE PAIN

Agora Financial Reports:

"Despite record levels of both national and personal debt - and the dwindling value of the dollars that must make the repayments – American consumers don’t seem overly fussed about the whole situation. Last week we reported that, according to Bankrate.com, “9 out of 10 American’s said credit card debt had never been a significant source of worry.”

You wouldn’t listen to the local drunk’s advice on the safe level of moonshine consumption…so why gauge the strength of the national economy on the fickle caprices of 300 million consumers armed with little more than a quiver full of maxed out credit cards?"

COUNTRYWIDE CAVES TO CONSUMER BOYCOTT

Countrywide and NACA Announce Groundbreaking Initiative to Help Borrowers Preserve Homeownership (See NACA.COM)

Washington, DC (October 24, 2007) -- Countrywide Financial Corporation (NYSE:CFC) and the Neighborhood Assistance Corporation of America (NACA) announce a joint initiative aimed at their common goal of preserving homeownership. NACA will assist Countrywide borrowers facing financial difficulties in communities across the country to identify solutions to help them save their homes.

While there is a lot of talk about the at-risk homeowners, NACA and Countrywide have met and developed an effective solution for some borrowers facing a crisis. Under this program, homeowners have a “waterfall” of options, from a payment plan, to modification, to refinancing and finally to restructuring. Homeowners will be able to achieve a mortgage program that provides a payment they can afford over the long-term.

The agreement leverages Countrywide’s market leading home retention programs and NACA’s unique model for counseling borrowers. The program is based on NACA’s comprehensive Home Save approach that includes individual counseling and development of a documented Affordability Budget. NACA will work with Countrywide borrowers who come to NACA for assistance to develop the most effective plan to save their homes, then submit the plan to Countrywide for approval and implementation.

“NACA’s Home Save approach provides unprecedented options to working people at risk of foreclosure.” states NACA CEO Bruce Marks. “The Countrywide agreement has already had a huge impact with homeowners having their loans restructured to as low as five percent.”

BENEFITED WITH AN INTEREST RATE AS LOW AS 5%,
CONGRESS PLANNING A REFORM BILL

Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) introduced a mortgage reform act into the US House of Representatives, according to a joint press statement issued by the House Financial Services Commitee. The “Comprehensive Mortgage Reform and Anti-Predatory Lending Act of 2007” is said to be the most comprehensive legislation to combat abuses in the mortgage lending market, and to provide basic protections to mortgage consumers and investors.

The reform legislation comes after recent market turmoil and the decline of the housing market in the United States. Nearly $600 billion in adjustable-rate subprime mortgages are expected to reset to a higher monthly payment by the end of next year. Credit market problems led to a slew of forecloses and losses at Wall Street banks and investment firms.

The bill is set to reform mortgage practices in three areas. First, the representatives' bill will establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers.

Second, the new legislation will set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay.

Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. However, it was noted that individual investors in these securities would not be liable.

Finally, the bill will attempt to expand and enhance consumer protections for “high-cost loans” under the Home Ownership and Equity Protection Act and include important protections for renters of foreclosed homes.

Let The Battle Begin!
COMMENT BY Diana Olick on ML-IMPLODE.COM

The bill also makes securitizers responsible for bad loans; yup, that’s you Wall St. Not totally responsible, of course, but there would be “assignee liability” to ensure that folks like Bear Stearns and the like are really making sure those new underwriting standards are enforced. The idea is that borrowers should not be given loans they can’t afford (did we need a law for that?? Guess so.)

Reaction? Mixed. The Fed Chairman, Ben Bernanke, has given a thumbs up in the past to limited assignee liability, but the Treasury Secretary, Hank Paulson has expressed concern that this would make investors slightly skittish.

TRANSLATION: This Administration Wants To Protect The Lenders:

THE SUBCRIME CRISIS AND THE WAR ON IRAQ

Leave it to that truthsmith/wordsmith Lewis H. Lapham to see a parallel between the collapse of the Housing Bubble and the War in Iraq that has eluded most commentators. Writing in Harper’s Magazine, he notes, ‘ I was struck by the resemblances between the speculation floated on the guarantee of easy money on Wall Street and the one puffed up in the premise of an easy victory in Iraq.

He compares the NINJA LOANS in the US to the freedom loving Sheiks in Iraq, THE NEUTRON LOAN that removes occupants but leaves the property intact to the massive displacement of people by the tens of thousands in Baghdad, The TEASER LOAN that gets people in mortgages at a low rate and quickly escalates to the rising costs of the war which was “originally priced” at $50 billion and is now estimated at $2 TRILLION. This is a brilliant comparative analysis that shows how the suspension of reality by politicians or bankers has the same result: DISASTER.

OAKLAND FIGHTS PREDATORY LENDING

REUTERS: WORLD BANKERS WORRY ABOUT “INFLECTOION POINT

WASHINGTON (Reuters) - World credit markets "have lived through an earthquake" and the question is now whether the global economy has reached a turning point after five years of strong growth, the head of the International Monetary Fund said on Monday.

Addressing the IMF's 185 member countries, IMF Managing Director Rodrigo Rato warned of aftershocks in markets, saying the full effects of the credit crunch, which began in the U.S. subprime mortgage market, were still not fully understood.

"We already know that we should not try to regulate crises out of existence: that would be like trying to ban earthquakes," he said. "But the weaknesses in our infrastructure that have been exposed need to be addressed."

Rato added: "The question is now whether the global economy is at an inflection point."

For many bankers, this is the TERROR ERA, An era of fear—not of terrorists—but of the implications of their own decicions.

CREDIT CARD SCAM SYNDICTES TARGET SOUTH AFRICAN WAITERS

With the festive season approaching fast and the 2010 World Cup getting ever closer, credit card skimming syndicates are targeting cash-strapped and drug-hungry waiters at top restaurants across the country.

Experts say waiters could be earning double their boss's profits a night as syndicates pay waiters, known as "runners".

And the higher the available credit on the skimmed card, the more the runner is paid.

It is believed underpaid waiters are eager to participate, some even going as far as approaching syndicates to start skimming operations at the restaurants they work at.

IN DEBT WE TRUST SCREENS NOVEMBER 4th AT 2 PM at the Brooklyn Society of Ethical Culture.

COMING SOON---SQUEEZED—my new book of articles on the crisis from Coldtype.net.

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