(Published at Counterpunch.com) The mainstream media in Florida sheds no light on the $13 billion dollar losses of the state-run Local Government Investment Pool. Those losses are tied to financial derivatives that underwrote suburban sprawl and the political fortunes of elected officials sitting at the knee of the Growth Machine.
So far, the media has only reported the story as it is being framed by Congress and the White House: tighter lending standards, tighter standards for mortgage brokers, and limited relief of foreclosures. Perhaps the media is being jaw-boned to be “responsible” in its coverage.
In Florida, municipalities and other state-run organizations whose employees paychecks are tied to the emptying investment pool have been able to withdraw limited deposits, to prevent a “run on the bank”. It is no different than nervous depositors milling around, outside the local bank branch in 1933.
It is important to understand the nature of this waiting game-an exercise in finger-crossing and wishful thinking that at some indeterminate point in the future, that harm to investors will somehow ameliorate like the charm of faith.
Monetary policy is a flimsy tool for an economic crisis of this scale, tied directly to irrational growth policies embraced in the United States. The use of derivatives, through which billions in fees and commissions to Wall Street were paid out long ago, was celebrated as a way to “diversify risk”. Instead has concentrated risk on an unprecedented scale.
The media behaves as though it is the natural order of things for financial executives to be chased from penthouses suites with hundred million dollar golden handshakes. Apparently, it doesn’t even require spin doctors from PR factories to be dumb on the subject.
The Miami Herald editorial page argues that the state of Florida has taken prudent steps in its effort to “firewall” the investment in financial derivatives, tied to housing mortgages. Its attitude is – we’re all in this together.
“The state investment pool, moreover, never guaranteed a risk-free investment.” It takes very tight blinders to make that statement with peace and equanimity. They said the same, from behind the bank vault doors in 1933.
The mainstream media needs to free itself from lock-step with the Growth Machine, which it has followed as obediently as it did the Bush White House to a trillion dollar war in Iraq.
Understand that what comes next had better not be more of the same-because big sovereign nations underwriting our national debt are not waiting for fiscal sanity’s appearance on the scene. It is one thing to squander our own national wealth. It is another thing, to squander theirs.
The reason the Florida Local Government Investment Pool is in trouble is because it invested in exactly those risky derivatives tied to mortgages that have fueled the Growth Machine, which in turn bribed local legislatures in the cash-infused atmosphere where regulation was thrown straight out the window. They used to get away calling it, “the free market”.
It is not enough to regulate the lenders, the mortgage brokers, and tighten standards for consumers. The operating schematics of the Growth Machine need to be fundamentally changed, or, we can just wait for the result: an ownership society rewarding, first and foremost, vultures.