What We Don’t Know Will Hurt Us-Frank Rich"Yet we are constantly shocked,shocked by the foreseeable"

[underpants]

http://www.nytimes.com/2009/02/22/opinion/22rich.html?_r=1

This phenomenon could be seen in two TV exposés of the mortgage crisis broadcast on the eve of the stimulus signing. On Sunday, “60 Minutes” focused on the tawdry lending practices of Golden West Financial, built by Herb and Marion Sandler. On Monday, the CNBC documentary “House of Cards” served up another tranche of the subprime culture, typified by the now defunct company Quick Loan Funding and its huckster-in-chief, Daniel Sadek. Both reports were superbly done, but both could have been reruns.

The Sandlers and Sadek have been recurrently whipped at length in print and on television, as far back as 2007 in Sadek’s case (by Bloomberg); the Sandlers were even vilified in a “Saturday Night Live” sketch last October. But still the larger message may not be entirely sinking in. “House of Cards” was littered with come-on commercials, including one hawking “risk-free” foreign-currency trading — yet another variation on Quick Loan Funding, promising credulous Americans something for nothing.

This cultural pattern of denial is hardly limited to the economic crisis. Anyone with eyes could have seen that Sammy Sosa and Mark McGwire resembled Macy’s parade balloons in their 1998 home-run derby, but it took years for many fans (not to mention Major League Baseball) to accept the sorry truth. It wasn’t until the Joseph Wilson-Valerie Plame saga caught fire in summer 2003, months after “Mission Accomplished,” that we began to confront the reality that we had gone to war in Iraq over imaginary W.M.D. Weapons inspectors and even some journalists (especially at Knight-Ridder newspapers) had been telling us exactly that for almost a year.

...

Steroids, torture, lies from the White House, civil war in Iraq, even recession: that’s just a partial glossary of the bad-news vocabulary that some of the country, sometimes in tandem with a passive news media, resisted for months on end before bowing to the obvious or the inevitable. “The needle,” as Danner put it, gets “stuck in the groove.”
...

In states like Nevada, Florida and Arizona, Gelinas sees “huge neighborhoods that will become ghettos” as half their populations lose or abandon their homes, with an attendant collapse of public services and social order. “It will be like after Katrina,” she says, “but it’s no longer just the Lower Ninth Ward’s problem.” Writing in the current issue of The Atlantic, the urban theorist Richard Florida suggests we could be seeing “the end of a whole way of life.” The link between the American dream and home ownership, fostered by years of bipartisan public policy, may be irreparably broken.
...

The difficulty of walking this fine line can be seen in the drama surrounding the latest forbidden word to creep around the shadows for months before finally leaping into the open: nationalization. Until he started hedging a little last weekend, the president has pointedly said that nationalizing banks, while fine for Sweden, wouldn’t do in America, with its “different” (i.e., non-socialistic) culture and traditions. But the word nationalization, once mostly whispered by liberal economists, is now even being tossed around by Lindsey Graham and Alan Greenspan. It’s a clear indication that no one has a better idea.
...

Nationalization would likely mean wiping out the big banks’ managements and shareholders. It’s because that reckoning has mostly been avoided so far that those bankers may be the Americans in the greatest denial of all. Wall Street’s last barons still seem to believe that they can hang on to their old culture by scuttling corporate jets, rejecting bonuses or sounding contrite in public. Ask the former Citigroup wise man Robert Rubin how that strategy worked out.

We are now waiting to learn if Obama’s economic team, much of it drawn from the Wonderful World of Citi and Goldman Sachs, will have the will to make its own former cohort face the truth. But at a certain point, as in every other turn of our culture of denial, outside events will force the recognition of harsh realities. Nationalization, unmentionable only yesterday, has entered common usage not least because an even scarier word — depression — is next on America’s list to avoid.

[ejpoeta]

1. it's a scary time, indeed. and i think the worst part has always been

when the media keeps telling us not to believe our own eyes. I mean, we see our family members and friends getting laid off. so far I have not had any one lose their home, but there are a couple I am holding my breath for. We can see for ourselves how tight it's getting. And the media keeps telling us everything is ok. Now they say things are bad. geesh.... thanks for noticing. Then they have arguments over whether telling us things are bad is causing things to go bad. if we act happy we'll be happy i guess.

I particularly liked suze orman yesterday on cnn with that ali velshi guy. she kept telling them that they are blaming the victims here and that most homeowners did get mortgages they could afford but then lost their job. then she told him that it isn't right that people are expected to carry the economy on their backs and spend. She said people need to be concerned about their own individual situation and not fixing the overall economy. If you have credit card debt, or don't have an eight month savings cushion, or aren't contributing the max to your 401k.... then you can't contribute to the economy right now. and while sometimes i think suze orman can be crazy over the top, in this instance, I totally agree with her. Look at how homeowners are being treated because of the plan to help them.

I hope all these homeowners remember who stepped up to help THEM!! the republicans are all for helping wall street and rich folks, but don't dare try to help the rest of us. we do need to be looking out for our own economic stability. These plans may not be perfect, but at least obama is trying!!

[underpants]

2. 24 hour news cycle

Our bubble news operations can't take time (they tell us) to discuss anything in a sober mature fashion so they give us daily snippets usually bookended with "Remain calm! All is well!"

Orman is dead on right. The problem isn't really that a bad product was sold (anyone can do that) in the form of loans that should have never been APPROVED let alone that they should have never been MARKETED. The problem is that the "Masters of the Universe"s took these bad products that they either sold or underwrote and then SOLD THEM TO THEMSELVES. That is the problem we are facing.

[Doctor_J]

3. Things will start to turn around when Big Media is made an example of

When it is blown to bits and the purveyors of hate, lies, and right-wing propaganda have been silenced. Until then , little will change.

[Joe Chi Minh]

5. Very good point.

[Omnibus]

9. They say Rupert's second wife is making him more liberal...

...I'll believe it when he tears down Fox News and the rest of his nasty reich-wing propaganda machine.

Getting rid of Newscorp would be a good start toward restoring media integrity in this country.

[grasswire]

4. extremely interesting!!

Thanks very much. This part toward the end is illuminating:

"So how do we move past the bubble, the crash, and an aging, obsolescent model of economic life? What’s the right spatial fix for the economy today, and how do we achieve it?

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

The foreclosure crisis creates a real opportunity here. Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.) A bigger, healthier rental market, with more choices, would make renting a more attractive option for many people; it would also make the economy as a whole more flexible and responsive.

Next, we need to encourage growth in the regions and cities that are best positioned to compete in the coming decades: the great mega-regions that already power the economy, and the smaller, talent-attracting innovation centers inside them—places like Silicon Valley, Boulder, Austin, and the North Carolina Research Triangle.

Whatever our government policies, the coming decades will likely see a further clustering of output, jobs, and innovation in a smaller number of bigger cities and city-regions. But properly shaping that growth will be one of the government’s biggest challenges. In part, we need to ensure that key cities and regions continue to circulate people, goods, and ideas quickly and efficiently. This in itself will be no small task; increasing congestion threatens to slowly sap some of these city-regions of their vitality.

Just as important, though, we need to make elite cities and key mega-regions more attractive and affordable for all of America’s classes, not just the upper crust. High housing costs in these cities and in the more convenient suburbs around them, along with congested sprawl farther afield, have conspired to drive lower-income Americans away from these places over the past 30 years. This is profoundly unhealthy for our society."

[Joe Chi Minh]

6. The politicians' acquiescence to the wholesale deregulation of the banks

had a very precise rationale. Our respective right-wing governments knew that the ever-rocketing house values achieved by the credit "bubble" was the sweetest carrot in their armoury for keeping much of the voting public onside. Doubtless it was the same in the US. Not that the Republicans have won an honest election in decades, probably.

[underpants]

7. I haven't finished reading it but you might want to give this Atlantic article a look

This is the one linked to in Rich's article
http://www.theatlantic.com/doc/200903/meltdown-geography

[Gregorian]

8. I read this article this morning, and I want to extrapolate from it.

I think there is something implicit in Rich's article. There are still so many people in denial. We can play around with some of the problems. We might end up unemployed. But let's just talk about global warming. Or world population, is an even better example. Most people aren't even willing to entertain the discussion. I mean, what can we do about it? Why even talk about it? How dare you, it's my right. That's personal.

Well, I think we're at the point in human history where we have some crucial decisions to make. And I think Rich is not just talking economics.

[Two Americas]

10. many people in denial

I am not so sure that there are many people in denial. However, all we hear are voices from those in denial. We are led to think that the opinion makers, from the news pundits to the most domineering voices right here, are "the people." Poor people, blue collar people, and minority people - and that is 70-80% of the people in the country - may as well be invisible. They merely serve as background, as extras in the ongoing drama, in the narrative of the fortunate few, the "winners," be they "liberal" or "conservative." But those people are only about 10% of the population, though they control 90% of the discussion, and are not representative pf the people at all. They are the ones for whom "the system worked" or who believe in the system and they first and foremost defend the system. This is not liberals versus conservatives, neither of which represent the people, it is the haves versus the have nots. The have nots are not in denial, but we never hear from them. The narrative of the liberal haves and the conservative haves differ only in relatively minor details and in surface appearances. The two upscale groups share much more than either share with the working class, be people in the working class Democratic or Republican voters.

The people who are most in denial are those who have the most to lose, and that means the upper 10%. That upper 10% dominates the political discussion in the country, here and everywhere.

[Gregorian]

11. Absolutely accurate.

You've said what I subconsciously feel.

Damn. I wish everyone could see what you've written.