The Twin Disasters: California Burning and Wall Street Churning

New York, October 29: Two disasters side by side. Both involve a massive loss of people’s homes. One is about California burning, the other about Wall Street churning. The one we saw on TV the most was not necessarily the most serious.

In one, the flames of out of control fires, perhaps, in a few instances, the work of firebugs, becomes a spectacle for wall-to-wall “BREAKING NEWS” coverage. There was around the clock helicopter shots and constant online webcam footage, as well as a visit by a President feigning concern and throwing money at the problem.

In the other, there are far fewer humanizing feature stories along with a great deal of dry and arcane business section commentaries. TV crews are not going live to the neighborhoods facing massive foreclosures or investigating the “mortgage bugs” who profited from the far less visible subprime fraud disaster. There are no webcams with time-lapse photography chronicling the decline of neighborhoods as homeowners default on unaffordable loans.

The President is not speaking at photo-ops on Wall Street to denounce the investment banks and hedge fund financiers responsible for losing billions, plunging the country into a recession and upsetting the world financial system.

Both stories are dramatic—and both have led to suffering. The forest fires have claimed lives, including several immigrants, as of Friday. “I imagine we will be finding bodies into next year,” Sgt. Mike Radovich of the San Diego Sheriff’s Department told the New York Times.

In all, 1800 homes were destroyed in California as of Friday. A half a million acres had been consumed. Those responsible for containing the damage blamed the weather in the short-term and climate change in the long-term, as well as earlier fire-fighting techniques. This disaster is expected to cost $1 billion dollars.

There were reports that some of the relief helicopters had been grounded for bureaucratic reasons and worries that arsonists contributed to the conflagration. Some of the fires appeared to have been set intentionally.

Yet, intentional actions also drove the targeting of families in a pervasive subprime mortgage fraud that threatens to lead to far more homes lost, not 1800, but an estimated two and a half million. (The LA Times says foreclosures in California are at a record high. The third quarter’s total surpasses 24,000, which is a record.) More homes are at risk in the fires that have yet to be contained.

Its hard to predict how many of these people will get sick or die because of psychological disorientation and homelessness. Many of them are poor, while those scarred by the fire lived largely in affluent communities.

Which victims are getting the most positive media attention? That’s a no-brainer. It’s the suburbanites, not the urbanites, who are the most sympathetic.

Senator Chris Dodd, chairman of the Senate Banking Committee, characterized the subprime crisis as a ”50 State Katrina.” This disaster has already cost over a trillion dollars—maybe more. Meanwhile, President Bush used Katrina as a partisan political symbol, contrasting California’s hands-on Republican Governor with the former Democratic Governor of Louisiana who he blamed for the weak response to that crisis. He declined to discuss questions comparing the federal response to both calamities.

“There are many factors that separate the chaos and death that swallowed New Orleans in the wake of Hurricane Katrina and the orderly evacuation and relatively minuscule loss of life in this week’s wildfires,” reported the Toronto Star. “ In politics, image can sometimes trump substance, and that lesson appears to have been at the heart of the response of California Governor Arnold Schwarzenegger, who, in a dizzying schedule of events, has comforted victims, firefighters and the displaced and freed up the state’s resources.”

Of course most of the media coverage has stayed with the “action” and pathos in the present, showing spectacular flaming forests like some 60’s light show, and then the aftermath with families in tears at the burned out shells of what were once their homes.

The coverage, however, asked few questions about who and what’s behind this apocalypse now. Author Mike Davis, who has followed California fires and analyzes them in depth, adds a context that is missing in most of the reporting, writing:

“Exactly a decade ago, between Oct. 26 and Nov. 7, firestorms fanned by Santa Anas destroyed more than a thousand homes in Pasadena, Malibu, and Laguna Beach. In the last century, nearly half the great Southern California fires have occurred in October.

This time climate, ecology, and stupid urbanization have conspired to create the ingredients for one of the most perfect firestorms in history. Experts have seen it coming for months.”

He dismisses the blame-the-arsonists-news frame in a piece on TomDispatch.com:

“This is a specter against which grand inquisitors and wars against terrorism are powerless to protect us. Moreover, many fire scientists dismiss ‘ignition’ — whether natural, accidental, or deliberate — as a relatively trivial factor in their equations. They study wildfire as an inevitable result of the accumulation of fuel mass. Given fuel, ‘fire happens.’

The best preventive measure, of course, is to return to the native-Californian practice of regular, small-scale burning of old brush and chaparral. This is now textbook policy, but the suburbanization of the fire terrain makes it almost impossible to implement it on any adequate scale. Homeowners despise the temporary pollution of ‘controlled burns’ and local officials fear the legal consequences of escaped fires.”

The scale of the “suburbanization of the fire terrain” in the last few years was immense. USA Today reported that more than 55,000 people moved to the neighborhoods that were affected since 2000. They are living in the epicenter of the fires. They were allowed to settle in the riskiest wildlife areas vulnerable to the types of firestorms we’ve seen. The real estate industry encouraged this settlement with support from local authorities. They knew the region was fire prone.

So, when you scratch the scorched surface of this newsy inferno you get deeper causes, a lack of planning and monitoring, not to mention inattention by government. Sound familiar?

These same deeper causes led to the runaway subprime scandal that has already caused losses in the TRILLIONS, and the clear complicity of leading banks that are seeking bailouts to cover up (and seek compensation) for their role in crimes that have triggered a global financial meltdown and a developing recession, and perhaps something worse to come. Democrats charge that the Bush Administration is not acting on the crisis because of its fanatical free-market ideology.

New York Times columnist Paul Krugman also sees this crisis as a “disaster,” noting, “Maybe the subprime disaster will be enough to remind us why financial regulation was introduced in the first place.” The Financial Times compared it to “the plot of a hundred disaster movies.”

Most of the world sees the US response to this second crisis as morally wrong because it bails out the people who caused it. They also denounce US hypocrisy because it ignores the advice that American officials heaped on Asia during its financial crisis.

William Pesek of Bloomberg News writes:

“Asians were berated for a lack of transparency. In the late 1990s, the US demanded that reserves figures be published and that clear lines be drawn between governments and private sectors. In the US, dubious mortgage products were sold, repackaged and resold with negligible transparency, while ratings companies approved of the process. The government and the Fed just stood by….

None of this is to defend the economic systems that led to the Asian crisis. Yet now the US is at the center of what Nouriel Roubini, chairman of Roubini Global Economics LLC in New York, calls the ‘first crisis of financial globalization and securitization’. And what is the US doing? Playing a role in hypocritically bailing out those who should have known better.”

In short, this still unfolding episode of self-inflicted disaster capitalism take us not only to the realm of irresponsible financial policies but to other parallels, like the War in Iraq suggests Lewis Lapham in Harpers: “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 premiere of an easy victory in Iraq.”

He compares the subprime NINJA (No Income, No Jobs, No Assets) LOANS in the US to “freedom loving” Sheiks in Iraq, and THE NEUTRON LOAN that removes occupants but leaves the property intact to the massive displacement of people by the tens of thousands in Baghdad. He also notes that 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 TRILLLION.

This is a brilliant comparative analysis that shows how the suspension of reality by politicians or bankers has the same result: misery for millions.

So by all means let’s be supportive towards the fire victims who have lost their homes in California’s “natural” disaster–and those that may in fires that may soon have Texas burning–but we should do so without forgetting the millions of Americans who will soon lose their homes and their economic stability in Wall Street’s man-made storm. Unfortunately most Americans and most progressives seem to be in denial about the economic disaster we are facing.

– News Dissector Danny Schechter directed the film IN DEBT WE TRUST (indebtwetrust.com) and writes about the crisis in SQUEEZED, a forthcoming book from Coldtype.net. Comments to dissector@mediachannel.org

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4 October 2007

A Penny Saved is a Penny Spent –
by Someone Else!

By Phil Linehan

When I was young and pocket money was doled out
my parents left me in not the slightest doubt
that the road to happiness was paved with the pennies I saved
instead of spending them on the goodies that I craved.

Dickens’ Mr. Micawber got many a mention
as time and again it was brought to my attention
that if I kept my pennies safe and sound
they would very quickly become a dollar and even a pound.

If only I learned to save my money
I would soon be having my tea with honey.
Could I put it in a pillow under my head?
or perhaps keep in a box stashed under my bed?

No, in a local bank I should put my dough
where I could watch it steadily grow and grow.
If I left it there for quite a while
I’d wake up one day to find it had become a pile.

It was on banks, they said, I could depend
because, if they were asked for money, including mine, to lend,
they would carefully check every single reference
and only to the safest borrowers would they give preference.

I was also told that instead of banks
I could always go and join the ranks
of those who placed their hard earned cash in trust
to companies that never could go bust.

They meant, of course, the mortgage lenders
who would be my savings best defenders.
They would refuse to give out any loan
to anyone who did not collateral own.

As the building societies would look after every single cent,
I was assured that I could rest content.
So, acting on the advice of those who knew
I deposited my humble savings without more ado.

Admit, I must, that I at times regretted
not having occasionally become indebted
to buy that very special treat
that would, I thought, have made my life complete.

But my feet on the ground were firmly set
and I was glad I had not got into debt.
I pitied those who kept on spending
on a spree that seemed to be never ending.

They wanted a house of their very own
to acquire which they would need a loan.
When they told the banker they hadn’t got a dime
he said not to worry, they are what are called sub-prime.

What does that mean, one might well inquire.
That those whose finances are in straits dire
can borrow like there is no tomorrow,
a practice that can only lead to sorrow.

The day came, as expected, when they could not repay
the cash with which they had been making hay.
What I did not know, I must recognize
is that I was among the duped fall guys.

The returns to which I believed I had a right
very soon began to fade from sight.
My bank was handing on a well polished plate
my savings to the profligate.

How could that happen, one can only query.
Did not those in charge become quite leery
when it was clear things were getting out of hand,
and decide that someone would have to take a stand?

No, not at all, said Fed Chairman Bernanke,
as the lenders kept on playing hanky-panky.
He could, like his predecessor, cut interest rates even more
as our savings kept flying out the door.

So the savers who can be called meticulous
are rewarded by interest rates that are ridiculous.
When they see how the dollar continues to get thrashed
they wonder if those at the helm are constantly smashed.

Thus, the lesson to be learned by all who save
as Mr. Micawber keeps spinning in his grave,
is that to those we entrusted our cash we should give no thanks,
as Greenspan is in Europe to count his euros, pounds and, of course, Swiss francs.

******
You must excuse me now while I seize the chance
To buy a sturdy mattress made in France.