Editor's Note: Three years ago, Wall Street's financial collapse began with the first major cracks in a foundation built on the sand of securitized sub-prime mortgages, complex credit default swaps, and the avarice of investment banks and hedge funds.
Soon, some of Wall Street's most "esteemed" institutions like Bear Stearns and Lehman Brothers were toppling; a blight of foreclosures was spreading across the country; eight million Americans were losing their jobs; and well-heeled bankers in their corporate jets were winging down to Washington demanding a bailout a man-made disaster that Danny Schechter reviews in this guest essay:
We live in the United States of Amnesia and selective memory. As we debate the breaking news, we easily forget the sequence of events that broke the banks and left us broke.
Three years ago, when the idea of an Obama presidency was sill a fantasy in polite company, a non-seismic financial earthquake began to rumble in ways we then could barely anticipate.
Buildings didn't fall as they did in
Haiti's nightmare, only a financial system. And, there are still piles
of rubble everywhere here, too.
It was August 2007, and I was blogging about the coming economic collapse even as it appeared that our economy had nowhere to go but up.
What began with a few "incidents," such as the collapse of New Century Financial and the demise of Bear Stearns, turned into a nonstop months-long drama of economic convulsion as fear turned into panic with calls for intervention.
Slowly, like an apple being peeled, the truth got more apparent the closer you got to the core. Suddenly, a crisis that many had warned about or feared was beginning to erupt.
In August, the crisis exploded, ruining many a Hedge Fund manager's vacation in the Hamptons.
Armies of too clever by half money managers had been making a fortune feeding off the housing bubble with practices that are now being characterized as "outright fraud" by none other than President George W. Bush's chairman of the Federal Reserve.
Most of their wheeling and dealing flew under the radar of public scrutiny with the press bolstering the rise of the stock market without examining the precarious "infrastructure" underpinning that "STREET."
A week earlier, Credit Suisse predicted a big stock market fall in six months because securities were overvalued. The Fed warned of $l00 billion in credit losses.
The Guardian reported, "Some analysts said they feared a broader credit crunch if a collapse in confidence in the US mortgage market rippled out to other parts of the debt markets."
A New York Post article suggested that over two TRILLION dollars was at risk. Of course, all of this was offered as speculative.
Now we know, all of these estimates understated the calamity, often by a factor of ten.
I went to a dinner party early in August and met a financial executive who worked at one of Wall Street's top investment firms. He acknowledged to me that the people shoveling out those sub-prime loans KNEW many of the borrowers couldn't afford to pay back.
They knew what misery they'd cause, but that didn't stop them.