Boston, July 26, 2008: The questions we face in late July, as regulators seize two more failing banks, is this: will we be engulfed by a further collapse in our economy or can the damage be contained, or, even turned around?
We know what goes up must come down but when will what's down go back up?
It isn't looking good -- and, even now, the two presumptive major party presidential candidates are talking about everything but this deepening crisis. They are debating terrorists and Afghanistan and how to leave Iraq without leaving, but not the reality that so many Americans are living with: a squeeze that is leaving so many of us broke, deeper and deeper in debt and disgusted.
Until now, the doom and gloomsters were mostly to be found in the margins, in financial blogs or in the campaigns of Ron Paul, Ralph Nader or the Greens. The mainstream media has often been looking the other way and mostly downplaying the unfolding disaster. Even as foreclosures double, and the price of gas and food rises sharply, it's been business as usual on the business pages, and among the liberal political pundits who would rather debate the cover of the New Yorker than the growing desperation of so many Americans.
The Congress finally passed a housing bill a year into the crisis with most of the money allocated to try to shore up two housing agencies with more than a half a trillion in housing assets. The markets are melting down with more major stocks tanking, banks writing off still more billions. and unemployment rising.
People in the know like George Soros are saying this is the worst financial crisis since the depression. Others fear another depression. This pessimism has reached Newsweek, a guardian of conventional wisdom, which now says "It's Worse Than You Think," writing...
"this downturn is likely to last longer than the eight-month-long recession of 2001. While the U.S. financial system processes popped stock bubbles quickly, it has always taken longer to hack through the overhang of bad debt. The head winds that drove the economy into this dead calm -- a housing and credit crisis, and rising energy and food prices -- have strengthened rather than let up in recent months. To aggravate matters, the twin crises that dominate the financial news -- a credit crunch and the global commodity boom -- are blunting the stimulus efforts."
We have two challenges: understanding the gravity of what is threatening us, and then discussing what could or should be done. We might also want to think about what the press should be reporting and what policy makers should be proposing.
On the foreclosure crisis, for example, I was just in Washington for five days with NACA, the Neighborhood Assistance Corporation of America, which took over a major hotel and set up a shop to offer free counseling to at risk home owners and advocate for affordable loans.
The Washington Post, based just across the street from the lines of some 20,000 people seeking help, did not cover it until it was over. But, to their credit, when they did they recognized that this effort by a not for profit citizens organization was more effective in responding to the crisis than all the government agencies put together.
Writes Post Business columnist Steven Pearlstein:
"They came by plane and train, car and subway, starting before dawn and continuing late into the night, all of them clutching tattered folders and envelopes stuffed with the documentary evidence of their financial hardship and miscalculation.
"It was striking how well-organized and executed it all was. Outside, there were plenty of volunteers and staff -- 350 were flown in from around the country -- doling out information, advice and sympathy to those waiting in line. ...
"In the space of 30 to 60 minutes, the well-trained, upbeat counselors managed to win the trust of their new clients, wring promises of a more frugal lifestyle and enter into their computers the relevant financial details. At a push of a button, NACA's underwriting system declared how much the client could afford in monthly mortgage payments, and automatically requested the mortgage servicing company to modify the loan accordingly. Depending on the service and the loan, the answer might be available in a matter of days or even hours. In about half the cases, the result is likely to be a below-market, fixed-rate loan with hundreds of dollars cut from their monthly payments."
So here's one example of what can be done by an economic justice organization fusing services and advocacy. This all happened three blocks from the White House. While federal regulators visited, none of the progressive DC think tanks or even unions showed up in solidarity even though AFL-CIO headquarters is a block away.
Individuals need help but we all need change. Are we dealing with just another market mistake, the latest bubble gone bust in a volatile business cycle, or a straining system on the verge of breakdown? Can we solve all this with an Alka-Seltzer-like infusion of new taxes or regulations?
Or, is Gerry Gold, economics editor of the UK's A World to Win, right when he argues, "The urgency of building a movement to replace capital, not to rescue it, cannot be overstated. This will mean a major program extending social ownership to all sectors of the economy, ending the distribution of profits to shareholders, and replacing the system of selling labor for wages with collective decision-making about the distribution of an organization's income."
Pie in the sky? Or is the sky really falling, made worse by global warming, wars without end, and resource depletion? If Obama or McCain are to "fix" what's broken, they better start talking about it. And once they inevitably do, will either one of them, once elected, be able to overcome Congressional inertia and the power of corporate/finance industry lobbies?
If the rest of us see what's coming, we better speak up too. Remember, when you see something say something. It's also time to act, not just react to the endless campaign!
To see Danny Schecter at NACA's Save the American Dream event in Washington.