Housing Downturn Now Gets Prime Coverage
I know I'm in New Hampshire, because I've just seen my first 2008 campaign commercial -- for the New Hampshie primary, by John McCain. I guess I was misinformed when I read that he had run out of money.
But my subject today is, once again, the housing downturn, the subprime mortgage crisis, how the economic gurus in large part didn't see it coming, and how it's now being covered by the nation's news media.
It is good news that the Los Angeles Times has just transferred the able Peter Hong from his most recent assignment of covering the Phil Spector trial (another example of celebrity justice of which California can be so proud) to the Business section, where he will focus on the housing downturn and all its many ramifications.
Hong shared a headline byline yesterday on the 50% collapse of Southern California housing sales between last year and this, and, hopefully, with him writing, the story will now get regular Page 1 exposure. This is only correct, because it has become more and more obvious that the trouble is affecting many other parts of the economy, and that failing to appreciate there was a housing bubble has now impacted not only the Federal Reserve Board but the whole banking and finance industry, not to mention Wall Street and the big stock brokerages.
It is only here, at the Fairfield Inn in Manchester, that I would ever read USA Today, not my favorite newspaper, but I noticed this morning that they have an apt editorial questioning, "Why did the housing crisis catch watchdogs by surprise?"
"In case you hadn't noticed, Fed Chairman Ben Bernanke, and Treasury Secretary Henry Poulson have been taking the housing mess a lot more seriously," the editorial begins. "Both noted in speeches this week that it will continue to weigh on the economy. Poulson has been pushing a privately financed $100 billion fund to help relieve banks of some of the dubious mortgage debt they hold. And Bernanke has slashed interest rats and made funds available to encourage lending.
"This raises an obvious question. If they are so keen on the issue now, where were they -- and where were their predecessors -- when the subprime crisis was developing.
"The obvious answer is, nowhere to be found."
But I diusagree with that last sentence. It seems fairly obvious that we have been let down once again by the experts. In fact, it was just common sense that should have told them years ago that when you loan money, on adjustable terms, to people who have no resources and really can't afford repayments even at the lower rates, that when they adjust upward, many are going to go into default.
It seems clear that even if these people, including former Fed Chairman Alan Greenspan, weren't dopes, at least they were undisciplined. They let things slide in the financial system, they didn't object when all kinds of connections with made with securities speculators, European banks, and so on and on.
And now we are all reaping the harvest from these careless policies. It is not only unethical Countrywide that has hit the skids but many more innocent victims.
I've noticed it before. Many "experts" are not all that expert. Maybe, their educations weren't sufficient. Maybe, they were never all that qualified in the first place to be admitted to the best schools.
In any case, the news media must now learn about the situation and delineate it for the public in all its specifics. But the greatest specific of all is that the men and women who oversee our economy are about as efficient planners as those who supervised the Iraq war (before we finally found Gen. David Petraeus).
We need other generals now, in the Federal Reserve Board, and in the Dept. of the Treasury. I don't mean military men, but men and women who are skillful enough to rise to the occasion in this emergency.
Pending that, things will continue to slide.
Kudos to Ralph Varabedian for his story in the L.A. Times automotive section yesterday on how the insurance companies are conspiring to pervert car collision repairs by putting pressure on the body shops to cut costs, use inferior spare parts, and even pay kickbacks to get the insurers' recommendations to their policyholders who have accidents.
The only reservation I had on Varabedian's story was that he quoted Carol Thorp, a spokeswoman for the Automobile Club of Southern California, a little too much. As an insurance and consumer writer for the Times, I did not feel the Auto Club and Thorp were necessarily on the side of the good guys. After all, they are insurers too.
I found as a consumer columnist that there was more corruption in the whole business of auto sales and repair than even the California Legislature, which is saying something.
There's mixed news for the Tribune Co., and the takeover by Sam Zell, in the FCC proposal, unveiled this week, to recommend a relaxation in the ban on ownership of newspaper and TV outlets in the same big media markets. Initially, it seemed that adoption of the relaxation would clear the way for the Zell deal to take place. But later reports, including one in the Chicago Tribune itself, put that in some doubt, since the relaxation would not, in itself clear the Tribune Co., to continue cross ownership of newspaper and TV markets everywhere, and, in Los Angeles, the Tribune license to operate Channel 5 has apparently expired. Waivers would, in any event, still be needed from the FCC. In short, hurdles remain, and the credit crisis and stock market downturn may threaten the Zell deal. This could, in turn, threaten breakup of the company, and, even possibly bring about, at last, sale of the L.A Times to others. No wonder Chicago toady David Hiller, theTimes publisher, has been running around like a chicken with his head cut off.