Over the last year, it has become more evident that this site’s audience has become increasingly skewed, and that appears to be the result of different segments of readers seeing some topics as more “their topics” than others. But from our perspective (and here “our” is yours truly and Lambert, and not the executive “our”) this schism is at least in part due a big chunk of the audience seeing issues as discrete when they are in fact connected.
To put it in crude terms, we see a split between readers who are primarily interested in social justice issues, and ones that are more interested in the more technical aspects of finance and economics. For instance, we’ve had members of Occupy Wall Street complain to us about the amount of non-finance discussion in comments, that from their perspective, it made the comments section (which we’ve regarded as one of the strong features of the site) unusable for hard core finance types.
While the number of comments might suggest that readers are much more interested in the social justice articles, in fact, the traffic counts show much less disparity. And traffic is far from the only metric we care about. We know that regulators and journalists read our wonky finance posts. So perversely, for us to do any real good in social justice terms, we need to keep a strong anchor in the more technical aspects of finance.
Mind you, it’s not as if we haven’t been here before, but not to this degree. For instance, in 2009, we kept posting on CDOs even though we didn’t get much reader engagement. We had a strong instinct that they were an important driver of the crisis. And our plugging away did produce some concrete outcomes. For instance, we are convinced that our and Tom Adams’ posts showing how much information about AIG’s CDOs was already available to traders led Darryl Issa to release information about all of them.
That effort led two whistleblowers to come forward who helped us put together the massive role that the Magnetar trade had in turning what would otherwise have been a contained subprime crisis into a global financial crisis. And getting to understand the structure of those deals positioned us to get well down the curve on foreclosure fraud and chain of title abuses before that story broke into the mainstream.
But as the ripples from the crisis widen further and further, two things have happened. The big one is what Lambert calls narrative repression. The Fed’s efforts to fight the crisis along with some but not enough reform, has led many people to take less interest in finance. There was a sense of urgency and outrage after the crisis, but with the prospect of additional reform seemingly nil, it would seem that finance is no longer where the action is.
That attitude, unfortunately, is the foundation of crises. It is precisely at the times when risk is perceived to be low that investors and speculators pile into hazardous positions and eventually blow themselves up. But the conundrum is that “eventually” can be a while in coming. Record 2006 and 2007 Wall Street bonuses show that going along for the ride, even if you know better, is a rewarding strategy, provided you are playing with other people’s money.
And from a pure social justice perspective, many of the woes that are continuing to befall what is left of the middle class are the result of past and continuing financial looting. Consider, for instance, what Richard Smith calls the helotization of New Zealand. Via e-mail:
Chinese oligarchs buying up New Zealand farms (many crippled by GFC era interest rate derivatives deals, natch) via opaque offshore mechanisms. See Russians in London, and Manhattan also, for comparison.
And that is leading to political pressure to further weaken New Zealand’s environmental standards (waterways are already showing discoloration and groundwater is increasingly contaminated) in the name of growth, specifically, converting more land to dairy production. So while this might look like a foreign capital trumping local and national sovereignity, what produced the vulnerability were general and specific effects of the global financial crisis, namely, the lean post crisis years and the damage inflicted on farmers through derivative bets gone bad. Bear in mind this was not normal agricultural hedging gone awry. From NZFarmer:
In a war that has cost her a lifetime of work, former north Taranaki farmer Angela Potroz says she has finally won a battle.
The Commerce Commission announced today it intended to take ANZ, ASB and Westpac banks to court for “misrepresenting” sales of interest rate swap loans to rural customers.
Potroz and her husband John were some of the hundreds of farmers persuaded by The National Bank (now branded ANZ) to take the financial product in 2007 as a way to “beat” rising interest rates.
Nearly inexplicable to all but financial experts, the products were often sold to farmers as being fixed rate loans “with benefits”.
But when the global economy fell apart, interest rates on the swaps soared and fine print penalty clauses kicked in.
With the bank refusing to offer the Potrozes any relief and refinancing costs in the millions, the couple said they were doomed to fail.
In November 2012 they sold four sheep and beef farms valued at $18.85 million in 2010 for just $12.08m after the bank demanded their $11m swap be repaid in full.
“Someone said they did wrong. It wasn’t that we were stupid people who got greedy. This justifies that we were ripped off. For me that battle is won,” Potroz said of the commission’s decision…
“We have lost everything, our way of life, who we are. There is no good outcome. It’s too late for us but maybe not others.”
So our frustration is when we start explaining how the SEC has approved a raft of retail products with derivatives embedded in them, or how private equity firms abuse their limited partners, these are not as remote from you as you may think. There are tons of people who were never within hailing distance of a subprime loan who nevertheless suffered in ways small and large as a result of the global financial meltdown.
It thus remains a subject of considerable frustration that it is hard to marshall reader interest in what are clearly problematic and in many cases fraudulent practices. Mind you, it isn’t just that lack of reader engagement is demotivating to us. It’s that it sends the wrong message to regulators and investigators. If they see few comments on posts describing certain types of bad conduct on a site geared towards smarter, savvier readers, they may well assume that the public doesn’t care about this issue and thus they have little reason to stand up to financial services industry demands.
As Simon Johnson described in a seminal 2009 Atlantic article, The Quiet Coup, the financial crisis was not merely a massive transfer of wealth to financiers but allowed them to capture the US government. The banking industry also emerged more powerful in the Eurozone.
It is not obvious how to break the stranglehold of elite financiers. But remaining ignorant about how they operate guarantees that they will be able to improve upon their already advantaged position. Remember, as much as debating news stories on Ukraine may sharpen your resistance to propaganda, you can’t influence that course of events. By contrast, you can have an impact on the banking front, in ways small and large, from warning friends and colleagues about the dangers of various borrowing and investment products, to writing regulators about why you are opposed to yet more concessions to a bloated financial services industry. This is a front where citizens like you can take ground back, but only if you go to the effort to arm yourself with information.