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Mon

05

Mar

2007

Its Time to Fight Back Against The Debt Crunch
Monday, 05 March 2007 13:34
by Danny Schechter

A year ago, I started making a film about the debt crunch in America. I subtitled it “America Before The Bubble Bursts.” It deals in part with predatory lending practices, sub prime lending by big financial institutions and the growing number of foreclosures.

The film In Debt We Trust was well received but one negative reviewer in the San Francisco Chronicle faulted it for what it didn’t and couldn’t do—explain what will happen when the burble bursts. I responded, to no avail, that I was a filmmaker, not a fortune teller.

 

Last week, we got the first taste of what IS already happening. In pary because of this crunch, stock market went into free fall, with the former Chairman of the Federal Reserve predicting a recession. (Predictably, the good news bears at Fox News ran a segment titled “Should Alan Greenspan Just Shut Up?)

JUST THE BEGINNING

A few weeks back, one of the big banks exposed in my film, HSBC, which refused an on- camera interview with me, went into a tail spin when its sub prime lending loans to people without the means to pay back—imploded and turned into a massive loss.

Credit Card Nation author Robert Manning wrot me to say: “This is just the beginning as mortgage resets on the middle class will start the next wave as the housing values fall and they can not cash out. And with the Wall Street heavyweights involved, the stock market for financial services has a very rough road ahead!”

Unfortunately, the people who were given these loans, and who were trying in many cases to climb out of poverty are the ones who will sufffer the most. The NY Times reports today:

Now an escalating crisis in the market, which seemed to reach a new crescendo late last week, is threatening a wide band of people. Foremost are the poor and minority homeowners who used easy credit to buy houses that are turning out to be too expensive for them now that mortgage rates are going up, but the pain is also being felt widely throughout the business world.

Large companies that bought subprime lenders during the boom, like H&R Block and HSBC, are now scrambling to sell them or scale back their exposure. Many investors are also likely to suffer: Wall Street firms made billions in fees, commissions and trading revenue from packaging and selling subprime mortgages to them as bonds.

The big boys want to “scale back their exposure.” To them its about money, not the lives of the people they have been profiting off of, although some big companies are under investigation for being too generous to those who can least afford it.

Most of the press which has been bostering the economy and looking the other way is finally tuning in as the government starts probing the big fish. On Saturday, the NY Times reported:

Federal prosecutors and securities regulators are investigating stock sales and accounting errors at the New Century Financial Corporation, the biggest mortgage company that specializes in lending to people with weak, or subprime, credit, the company disclosed in a corporate filing yesterday.

On Sunday, the paper’s business analyst Gretchen Morgenson was comparing this emerging scandal to ENRON.

Mortgages May Be Messier Than You Think:

WHAT investors don’t know about why the home mortgage securities market is in distress could fill volumes. As is often the case, only after fiery markets burn out do we see the risks that buyers ignore and sellers play down.

Because so many players in this world have an interest in keeping risks under wraps, a complete understanding of the mortgage market’s ills may take time. Unlike recent corporate disasters that have occurred at hyperspeed — think Enron and WorldCom — the mortgage securities boom seems to be unwinding in slow motion.

But trains wrecks are train wrecks, even when they occur at a crawl.

COMPLACENCY IN HIGH PLACES

Economist Paul Krugman, also writing in the Times last Friday also blames mounting debts as well as “growing complacency with the problem” that turned into a self-fulfilling prophecy for the market meltdown.

As the what me worry attitude spre, it became easier for questionable borrowers to roll over their debts so default rates went down…sooner or later reality was bound to intrude.”

Behind all this denial and business rhetoric is one word: PAIN. Pain for Americans who are losing their homes or face rising mortgage costs. Pain for millions trapped in debt. We are talking about a lot of people who can barely pay their loans today and live with a credit noose around their necks.

What are we going to do about this? What can we do? The progressive movement is mostly silent. We need a campaign on these issues and Bob Manning and I and others are starting one. We are calling it AMERICANS FOR DEBT RELIEF NOW.

The first stage of this effort is to promote awareness across partisan, racial and socio-economic lines. We are launching a brandnew website this week called
STOPTHE SQUEEZE.ORG. Sign Up. We are hoping to set up screenings and house parties for IN DEBT WE TRUST to start informing a country strangling in debt why this is happening and what we can do about it.

InDebtWeTrust.com is the film website.
 

This issue is about financialization by big banks that is robbing money from our pockets and communities. It is about student loans, credit card abuses, a lack of bankruptcy protection, redlining, pay day lenders, income tax preparation scams and much more.

Ultimately, this issue is about economic justice and survival.

Will you join us in this campaign? It’s easy to do. For more information, write to SBKayser@globalvision.org Signup at Stopthesqueeze.com

DAVID WALKER KNOWS

For More On The Related Fiscal Crisis, check out CBS 60 Minutes report last night on US Comptroller General David Walker whose warnings were featured in IN DEBT WE TRUST.

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