Danny Schechter: The effects of the financial meltdown are spreading as the bailout fails to work

Story Transcript

BELLA LAM, REAL NEWS MEMBER: It offers a deeper analysis from different sources, and it gives a space, I think, for people’s voices to be heard.

PAUL JAY, SENIOR EDITOR, TRNN: It’s been almost one month since Congress approved President Bush’s $700 billion bailout plan, and markets worldwide are still in free-fall, unemployment continues to rise, and the foreclosure crisis is deepening. Joining us from his office in New York City to discuss the situation is Danny Schechter. Danny is editor of Mediachannel.org and author of Plunder: Investigating Our Economic Calamity and the Subprime Scandal. Welcome, Danny.

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DANNY SCHECHTER, MEDIA CRITIC AND AUTHOR: Hey. Great to be with you. You know, you’ll notice that suddenly the entire official government position has changed. Initially it was, “We have to do this deal. We have to do it right now, in fact, in seven days—the same amount of time it took God to create the universe.” And they got it through Congress, and Congress authorized $700 billion to buy up bad mortgages from various banks. President Bush said this must be done immediately to stop the crisis from getting worse. Now Bush is saying in the long run we’re going to solve this problem. He’s not giving any dates, any times. He’s just announced a global summit in Washington with 20 different countries coming, which he is hosting, which probably means he’ll be serving refreshments. So that’s coming up 11 days after the election. Today, the ILO, the International Labour Organization, projected 20 million people worldwide being unemployed as a result of this crisis. The Food and Agricultural Organization says 117 million people may slip into hunger as a result of this because of the effect on food prices and the like. So the crisis is much deeper than we really sense here in the United States. What we’re watching are markets going up and down: “The Dow is up today. Oops! There it goes. There, it’s down now.” This type of coverage. But it doesn’t really explain the fundamental problems that we’re dealing with here and some of the reasons that this isn’t working. You know, there are papers like The Financial Times out of London, which does a fairly good job; The Wall Street Journal does have some interesting coverage. But in the mass media outlets, I think they’re really kind of behind on this story. Today, for example, The New York Times ran a front page interview with Henry Paulson, the Treasury secretary, analyzing what he did two weeks ago, okay? Then, like, two weeks later we’re finding out that Paulson himself is saying, “Gee—maybe I should have looked into this subprime lending crisis earlier,” he admits. But then he goes on to say, “Well, even if I had, I don’t think I would have done anything differently. Alan Greenspan, meanwhile, is saying he is shocked, just shocked by this crisis. He told Congress today that he himself believed that we didn’t need regulation, and he was wrong. So we’re inching towards a mea culpa from people in high places, but they’ve yet to apologize, they’ve yet to really account for how their own policies contributed to the deepening of this crisis.

JAY: The media that I’ve observed seems not to want to deal with one of the underlying causes of the problem, which is purchasing power based on debt and not on wages, and nobody wants to actually take up the question of why are wages so low. What have you seen on this?

SCHECHTER: Well, there has been some reporting on, you know, the growing gap between CEO pay and ordinary people’s pay. Like, it was, like, I think, 300-to-1; now it’s, like, 500-to-1. These trends of deepening inequality really define the story, but they have not been defined in the story, and that’s one of the problems that we’ve had. We also have a growing number of people in the industry who are also bailing out—not bailing out with money, but bailing out with their lives. I love this little quote here from a guy [inaudible] Andrew Lahde, who was running a big hedge fund. And he says, you know, he was referencing a Wall Street Journal article where a guy in the hedge fund business said, “I hate it.” And this guy says, “I couldn’t agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting” what he calls “the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America,” he said. (Andrew Lahde letter, October 17, 2008.) I quit. You know, so you’re finding people who are losing confidence. The very people who you assume would have more confidence now that the government is acting, they just want to get out. They don’t think anything is working. This is a disaster as far as they’re concerned. But I think this is the story I tell in my book Plunder. I started tracking this crisis after I did my film In Debt We Trust, the response to which was, “You are an alarmist, Danny. You are exaggerating the problem. It’s not as bad as you say. We’ll get through this okay.” And then, last August, the markets melted down; the government started cutting interest rates—eight times now—injecting hundreds of billions of dollars into banks and other financial instruments and institutions. And guess what? Nothing has been, quote, “fixed.” The public, meanwhile, has been led to believe that the government is fixing it, that the bailout will fix it, that the various measures being taken will fix it. Every time they try something, they recognize it’s not working, and then they try something else. So it’s really like throwing stuff up on the wall, you know, throwing, basically, darts up on the wall, seeing what sticks and what doesn’t stick. This is not something to inspire confidence, is it?

JAY: Yeah. Doug Henwood once made a good point, I thought. This one is: when a government needs money, it has two choices: borrow it or tax it. And [inaudible] But eventually when you print it, something’s going to have to back the printing, and then you’re going to go back to borrowing or taxing.

SCHECHTER: What’s happening is debt is out of control. I’m reading think-tank reports out of Europe that are saying the United States is going to default on its debt come next year, that there’s no way that we can pay off this debt. Debt is just climbing rapidly. Inflation is climbing rapidly as well. So every, you know, measure that they take has an unanticipated consequence which is often moving in the other direction. And that’s why we have to analyze and understand this. And I wish more progressives would be as concerned about this issue as they are about Sarah Palin’s, you know, budget for her clothing. You know, I mean, this is much more serious and will affect us all. Already layoffs are starting in municipal services—cops, education. People are getting cut back in health care institutions. This is going to affect every single person in this country.

JAY: Well, in the next segment of our interview let’s talk about what’s happening on the ground as foreclosures are taking place. And there’s a lot of conversation about whether banks have to find some way to leave people in their houses without a complete collapse of the housing market. On the other hand, there are some instances of resistance against foreclosures. So please join us for the second part of our interview with Danny Schechter.

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