“Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education.” —Center for Responsible Lending report, “IndyMac: What Went Wrong?” June 30, 2008
“That was your homework—to watch Boiler Room.”—Lisa Taylor, Ameriquest loan agent, quoted in the Los Angeles Times, February 4, 2005
“It was unbelievable. We almost couldn’t produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce.” —Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in “The Giant Pool of Money,” This American Life, May 9, 2008
A PDF download of the original, complete “Boiler Room” story can be purchased from CJR by clicking here:
The nation’s business press at this point must be feeling a bit like the London fire department during the Blitz, scrambling from one financial emergency to the next—a Wall Street pillar collapses here, a bank seized there—each calamity more complex and dangerous than the one before, day after day, week after week.
No sooner had the ink dried on inside-the-boardroom accounts of Bear Stearns’s collapse—in The Wall Street Journal, Fortune, even, for some reason, in comic-book form in Condé Nast Portfolio—when a new series of bank write-offs threatened the global financial system—Whoops, there goes Iceland! (See: Subprime Wave Sweeps Over Iceland, The Associated Press, April 7, 2008); venerable Lehman Brothers became a running emergency, and it was followed swiftly by crisis at Fannie Mae and Freddie Mac, the twin pillars of the U.S. mortgage market. In this environment, the second-largest bank failure...
Complete access to this article will soon be available for purchase. Subscribers will be able to access this article, and the rest of CJR’s magazine archive, for free. Select articles from the last 6 months will remain free for all visitors to CJR.org.
i recall a moment, in the early eighties at a brand new snazzy bar that had sprung up at Reade and West Broadwy, in Tribeca, Manhattan, The Brass Moon, all mahagony and brass, a young blonde thing burst out "all those asshole do-gooders"; a lot of the young arbitrageurs and traders who suddenly invaded our old Tribeca Bars - Barnabus Rex, Puffys, Mickeys, The Racoon Lodge, and created their own snazzies, later ended in jail; and many more should have; it is the culture of greed gone haywire once again. a wonderful piece i must say. the most significant statement may be: "Yet to be explored fully is the extent of Wall Street’s role, the size of the transfer of wealth between classes—from millions of civilians to thousands of professionals—that resulted, and the social and economic consequences of it all." And now it is socialism for the rich! VOTE WHITE-VAN AUKEN FOR REVOLUTIONARY CHANGE http://www.wsws.org/articles/2008/sep2008/elec-s13.shtml
MICHAEL ROLOFF
Member Seattle Psychoanalytic Institute and Society
this LYNX will LEAP you to all my HANDKE project sites and BLOGS:
http://www.roloff.freehosting.net/index.html
"MAY THE FOGGY DEW BEDIAMONDIZE YOUR HOOSPRINGS!" {J. Joyce}
"Sryde Lyde Myde Vorworde Vorhorde Vorborde" [von Alvensleben]
Posted by michael roloff on Tue 16 Sep 2008 at 10:45 PM
It's a good review of the press, but you might be interested to read a more fundamental analysis of this same issue, "Liar Nation: Finally Reaping What We Have Sown" at Charles Hugh Smith's blog:
http://charleshughsmith.blogspot.com/2008/09/liar-nation-finally-reaping-what-we.html
Posted by Adamchik on Wed 17 Sep 2008 at 01:38 PM
It has always seemed to me that one of the most dangerous errors of American journalism is mistaking the center for neutral. The center is a mid-point on a sliding scale. Its place is determined by opinions and prevailing winds.
Neutral is, or should be, the radical willingness to find and communicate what's true, no matter whether that truth lies in the middle or to one side.
This is hardly a novel notion, and no decent journalist wants to be unfair or wrong. Often, we don't know the facts. But, when was the last time you read a "for the record" from a news organization apologizing for tacitly reassuring the public, often over and over again, even after the facts were in, that it had missed reporting the very heart of the matter? That reporters/editors had allowed readers to assume scary truths weren't really scary at all because they had taken the easy road and let spinmeisters' quotes in effect cancel each other out? Or that we ourselves had failed to grasp the gravity of crises because we couldn't quite believe facts we reported could be so utterly in conflict with the ideals we grew up believing in?
As Dean Starkman said in this piece, "Most journalists, I would argue, retreat to the mushy middle..."
He was talking about Wall Street and a failure to take aim at "breath-taking corruption." But, he might just as easily have been talking about foreign policy or politics.
Years ago, when I was in Little Rock covering Gennifer Flowers and began getting names over the transom of women with whom Clinton had supposedly had affairs, I asked editors back home what sort of story we wanted to pursue as a newspaper. I'll never forget the answer: "We don't want to join the circus, we just want to stay inside the tent."
That was not -- I hasten to add -- standard practice at the Los Angeles Times, which had one of the two best newsrooms in the U.S. at the time. But, in a tawdry story we didn't know what to do with because American opinion was itself so divided, it was safe under that tent with all the other journalists. We could watch the spectacle without determining the facts.
The issues in today's election are far more critical. The American public may never have needed clarity from its journalists as it does today -- not just to distinguish accurate political claims from inaccurate ones, but to distinguish what is certain from what is uncertain and separate the "esoterica," as Starkman puts it, from the "breath-taking."
Especially when resources are so limited, I hope reporters ask themselves each day, what am I writing today that truly matters? Stories aren't written by packs. Each one is the result of decisions an individual human being makes with each phone call and each keystroke, and which individual editors either validate or question at the end of the day. When we do not think clearly, or when we are not bold enough to find and put forward the facts, regardless of public opinion, we may be safe, but our readers and viewers may well wind up losing their savings, their homes, or even their lives.
I like Dean Starkman's simple, intuitive term "The Mushy Middle." It sounds like a kindergarten sandbox, a circumscribed place where you can build all sorts of things in an afternoon that don't survive the next rain.
I hope the term catches on as a sort of short-hand so it can be recognized as the public hazard it is. Maybe if we identify the default habits that lead to the Mushy Middle, we can stop ourselves before we step in it.
Posted by Laurie Becklund on Wed 17 Sep 2008 at 02:36 PM
FREE MONEY TO ALL MY FRIENDS !!!
The Root of the issue starts with Fractional Reserve Banking and Fiat Monetary Policy and is accelerated with Financial Engineering. This System Always Ends The Same. Economic Collapse And The Consolidation Of Wealth And Power.
When You Can Create Money Out Of Thin Air You Can Buy Governments.
This Is Not A Repub VS Dem issue; To Phrase It As Such Is To Hide The True Nature And Mislead The Masses.
There Will Be No Investigation Into How We Came To This Point Because Both Parties Of Power Have Colluded Against The Public. They Are One – The Money Party.
Case In Point:
From Bill Moyer’s Journal Sept 12 2008 Citing A New York Times Article By Jackie Calmes:
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Both Barack Obama and John McCain say the Fannie and Freddie mess is the result of the cozy ties between lobbyists and politicians, the very thing they will "change" if elected. But guess what? Neither one of them has ever had, quote, "A record of directly challenging the companies."
To the contrary, Obama is second among members of Congress in donations from Fannie Mae and Freddie Mac's employees and political action committees, even though he's only been in the Senate since 2005. The former chairman of Fannie Mae originally led Obama's vice presidential search committee but had to step down in a controversy over favorable loans he received, while at Fannie, from a company doing business with Fannie.
Among Obama's contributors are three directors and one senior vice president of the two companies. Furthermore, Obama's fellow Democrats in Congress have long been enablers of both corporations.
And what about John McCain? His entire campaign team stepped right out of a predator's ball. His confidante and top adviser lobbied several years for Freddie Mac. His deputy fundraiser lobbied Fannie Mae, and his campaign manager lobbied for both of them, leading a coalition of beltway insiders whose goal was to "stave off regulations" that might have short circuited this nightmare.
One wealthy member of Freddie Mac's board has contributed more than $70,000 to McCain and Republican Party members working for McCain's election.
Even the guy who vetted John McCain's vice presidential options is a former lobbyist for Fannie Mae.
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Things Are More Dire Than Many Would Like To Face. Safety Is A Function Of Awareness.
Another “Fox Guarding The Hen House” Anomaly From the article http://www.atimes.com/atimes/Global_Economy/JI18Dj01.html :
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Fixated as I am on inflation in prices because it scares The Living Hell (TLH) out of me, I was drawn to how Peter Schiff of Euro Pacific Capital was amused that the government and its minions have reported that "the GDP deflator, used in the report to downwardly adjust GDP to account for inflation, was shown at just 1.2% annualized ... the lowest deflator in 10 years", while at the same time "the latest reading on consumer prices (CPI) in the second quarter shows year-on-year inflation running at a 5.6% rate, a seventeen-year high!"
He asks, without the slightest hint of the venomous sarcasm you would expect, "How can it be that inflation is simultaneously running at a 17-year high and a 10-year low? Welcome to the Alice in Wonderland world of government statistics."
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Another thing that you will not find in any media is that the Securities Exchange Commission has stopped all short selling of small bank stocks. Doom Approaches.
When The Election Is Over And Power Seated The Financial Circus Will Reach New Heights. Do Not Be Lulled Into Believing The Scapegoat Scenarios. The Problem Is Endemic In The System. The Complexity Of Corruption Is Vast.
Wish More People Would Have Debated Ron Paul Rather Than Dismissed Him. Debate Is The Distillation Of Reality.
Anyone Advocating A Return Toward The Constitution Is An Ally. If The Constitution Was Followed The Scenario We Are In Would Be Less Likely.
The Circus Continues But The Bread Is Almost Gone.
Posted by PainfullyAware on Wed 17 Sep 2008 at 03:24 PM
"The failure of the business press to understand and pursue this angle is so far the biggest failing in the post-crash reporting."
That there was virtually no *pre*-crash reporting seems more significant to me.
Posted by Nancy Irving on Sun 21 Sep 2008 at 02:57 AM
But an excellent piece, I hasten to add.
Posted by Nancy Irving on Sun 21 Sep 2008 at 02:59 AM
great article, thanks
i am reading so much info about this mess and you gave a great overview of all the overviews, i still cannot understand how the big banks morgan goldman and the likes, were able to find willing buying for these risky stocks, called collaterized debt obligation maybe, and did the big banks buy it from each other is that why they all lost so much money, bc i thought the goal of selling the risky diced up morgates as stocks was to unload the risk, but they crashed bc they all had taken on took much risk right?
Posted by Ian on Thu 23 Oct 2008 at 10:27 AM
alright, im reading the giant pool of money transcript, its killer,
this whole thing reminds me of 9-11, and the iraq war, its like every level of checks and balances fell asleep at the wheel, or they all went on lunch break at the same time
Posted by Ian on Thu 23 Oct 2008 at 10:52 AM
@michael roloff:
"who suddenly invaded our old Tribeca Bars - Barnabus Rex, Puffys, Mickeys, The Racoon Lodge"
;)
I must have met you at one time or another.
I was friends with Louise Earhardt, who owned Barneys - with Andreas - who was a bartender at Barneys and also worked at Mickeys, and later was one of the owners of Racoon along with Gary, and also friends with one of the owners of Puffys.
Ah, the old days.
Posted by LordP on Sun 16 Nov 2008 at 08:12 PM