NEW YORK—If you were a banker on The Street this past Sunday, you realized that your "master of the universe" days may be over. "Layoff Fear in Stox Shocks" was the headline in the New York Post. Prosperity has been displaced by panic.
Eight thousand jobs had been lost before Bear Stearns—"the Bear," the nation's number 5 broker—was sold at a ridiculous discount, bought with $30 billion pumped through JPMorgan, which picked up what was left of the firm at $2 a share. (It had been trading a year earlier at $170.)
Many more and other dominos are expected to fall.
Some experts believe that JPMorgan overpaid because the shares they bought actually had no value. The money was used to monetize junk sub-prime holdings not yet written off—so much for the doctrine of "moral hazard" that holds speculators should not be rewarded. In fact, there is evidence, not only of unethical practices, but Enronesque illegal ones.
A week earlier, Bear Stearns' former CEO bought a Manhattan condo for $28 million, no mortgage needed. In December, compromised Wall Streeters walked off with $31 billion in bonuses, just a billion below the record set a year earlier.
The résumés are flying now with fears of mass layoffs spreading. The people who will be hurt initially are the lower-paid, back-office workers.
The pain will not remain there.
How you understand these fast moving developments depends on where you sit in our highly stratified culture and how much you know about why a Wall Street crash can ripple into all of our lives.
If your name is Hank Paulson or Ben Bernanke, you have been huddling in alarm with the White House's "Plunge Protection" team, coming up with inventive new rationalizations for printing new money and bailing out bankers. With the president directed to sound upbeat, the ex-banker and former professor are contradicting all their earlier assurances that the market would correct itself.
If your name is Max Wolff, a New School professor and brilliant young economist, you were on a panel at the Left Forum in New York about "The Coming Depression," explaining how the derivative game had been repackaging fraudulent mortgages and then, slicing, dicing, and "securitizing" them off quickly within 72 hours to buyers all over the world.
Those buyers were mesmerized by the high returns, but then found there were no assets behind these "asset-based securities." Once turned on by Wall Street, they are now turning on it. The lawsuits blaming our "suits" are coming. Foreigners have lost their confidence in how assets are valued.
If your name is Nicklaus Skaggs of Vacaville, California, you are one of tens of thousands of homeowners who are walking away from your home and its mortgage burdens.
Reported the San Francisco Chronicle: "As their home values tumble and their mortgages rise, these 'walk away' homeowners decide to cede their houses to their lenders. "'It's throwing good money away after bad' to pay an escalating mortgage on a home that's plunging in value, said Army Sgt. 1st Class Nicklaus Skaggs. He and his wife Tishara stopped paying their mortgage in February. They signed up with a new company called You Walk Away to help guide them through the multi-month foreclosure process."
Other homeowners are so angry that they trashing or burning their own homes. Still others are moving into tent cities springing up near Los Angeles. It took a British media outlet, the BBC, to report on that.
Has our media prepared us for this disaster? Yes, there are headlines now since these developments can't be ignored. But where were the TV networks and the press when all these practices that we now hear denounced were first taking place and building steam?
Where were the warnings and the outcry against the engineered dropping of the dollar and the likelihood that the interest rate cuts would drive up prices and lead to the stagflation we are now experiencing. Unfortunately, this was not a celebrity sex scandal. Those worries were buried.
The business press told us about the ups and downs of the market, not how the underlying debt burden and all the subcrime game-playing could destroy our economy. Concludes Dean Starkman in the Columbia Journalism Review: "Today, as the credit crisis unravels, the business press can be fairly blamed for inattentiveness to the growing strains on middle-income borrowers. Maybe that's why so many middle-income people don't read it."
If they had, they would have seen the chorus of complementary coverage of Alan Greenspan who was lionized as a genius. Now critics point to how his policies created the housing bubble. Today, he says the economy is at its "worst point since WWII." One blogger dismisses him as "Mr. Obvious."
I met him—and have less amusing words to describe him with.
But what are we seeing in the rest of the press and TV media? More and more ads selling us deceptive mortgages and credit cards. The media is always more about selling (and buying) than telling the truth. Their failure as watchdogs helped bring about this economic failure. And they make money on the misery.
Even today, it's hard to get a critical narrative out on these issues. Some months ago, the Independent Film Channel told me they would broadcast "In Debt We Trust" (Indebtwetrust.com), the documentary I made warning of the crisis. Late last week, they killed it—no real reason given.
On the same day, John Conyers, chairman of the House Judiciary Committed, had staffers meet with me to schedule a screening on the Hill. He thinks members of Congress should see it urgently.
This is part of the media-reality disconnect we have to confront. You can't trust the financiers or the media that gave them a pass. We have to arm ourselves with information and prepare for the possible catastrophe to come.
News Dissector Danny Schechter edits Mediachannel.org. He is looking for a publisher for We Are Screwed, a new book he's written about the crisis. Comments to dissector@mediachannel.org
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