Subprime or Subcrime? Time To Investigate and Prosecute

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

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%."

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News Dissector Danny Schechter edits Mediachannel.org and directed the new film "In Debt We Trust: America Before The Bubble Bursts." To get involved, visit Stopthesqueeze.org.