Newspaper die-off... by gimleteye

We depend on the free and independent press for speaking truth to power, even though the mainstream press has been neither free nor independent for a long time.

The industry's death-spiral began with the advent of television and info-tainment but quickly accelerated with the 1990's dot.com boom. Audiences were migrating to internet based sources of news at the same time Wall Street demanded that newspapers compete, head-to-head, in terms of profit.

As newspaper profits became more and more difficult to inch up, executives (with compensation packages calibrated to profit) turned increasingly reliant on advertising revenues from the real estate industry; especially from production home builders and automobile manufacturers.

Discerning readers understood that the toxic reliance on real estate advertisers was a killer-- skewing editorial bias toward Chamber of Commerce values, against the public interest in sound quality of life, clean air and water, and good government, and losing readership in the process.

The Florida landscape-- and not just Florida-- is etched with evidence. Just a few days ago, the Associated Press reported, "Chesapeake watermen fear blue crab not coming back" (July 16, 2008). " Crabs have thrived in the bottom muck of the Chesapeake and its tributaries even as centuries of overfishing harmed oysters, fish and other species in the nation's largest estuary. Now blue crabs are in trouble, too, and when they go, a way of life is sure to go with them."

"Thomas Courtney, who sells Kellam the alewife fish he uses for bait, laughs when asked whether state efforts to revive blue crabs will bring them back. "It ain't what we're pulling out of the water. It's what we're putting in the water," says Courtney, 62. "You've got a cornfield, 20 acres, you put 80 or 90 houses on it, hook 'em up to sewer pipes, put roads and ditches down. That's what's destroyed the bay. It ain't us. They let development take over and then, that's it, we're done."

Mr. Courtney is right. It is the same in Biscayne Bay. Or the Everglades. "They let development take over."

Print media executives found themselves on the same side of the ledger as the housing industry and land speculators. At The Miami Herald-- where opinion writer Carl Hiaasen has been the snarling pitbull for the other team-- in-depth, page one stories on the calamitous effects of the housing boom in South Dade farmland were suppressed by top editors. To the extent these stories existed, they were relegated to the neighbors section or a few paragraphs in letters to the editor.

In its place are puff pieces and outright BS, like painting Broward's Ron Bergeron as "a conservation activist" or yesterday's incredible story in the Sun Sentinel: describing the chief apologist and advocate for Weston, Roy Rogers of Arvida, as an environmentalist: "How does a man with his environmental credentials reconcile turning 25 square miles of Everglades into a town? "The two can co-exist, and I'm proof positive," Rogers said. "You don't get to do that kind of thing [lead environmental advocacy groups] without being what you purport to be."

The crawl of suburbs and deformation of representative democracy, turning local government into permitting mills for sprawl, enriched developers and created a permanent incumbency in local and state legislatures.

Some Florida papers, like the St. Pete Times, have excelled at reporting the underbelly of the beast. Notably, the St. Pete Times is owned by a charitable foundation; a step removed from Wall Street's influence.

An economy based solely on real estate speculation is a ticking time bomb. Now that the bomb has gone off, reports are emerging-- as in the Herald's excellent story today-- "Ex-convicts active in mortgage scams". This multi-part series shows the powerful capacity of journalism.

Nevertheless, the criticism of the mainstream media's performance stands: while the sacred cow, real estate development, was being fattened there were very few stories of the slaughtered public interest.

On Saturday, The New York Times put the story above the fold, "A slowdown at every turn".

"On Every Front, Anxious Questions and Discomfiting Answers" is the subheading of the full page story in the A section. Those questions were being asked long ago by keen civic activists, observers, policy experts and even brave scientists, but the mainstream media ignored them.

The Times writes: "The downturn has its roots in the real estate frenzy that turned lonely Nevada ranches into suburban ranch homes and swampland in Florida into condominiums."

For the past year, the Times and The Wall Street Journal have been stalwart anchors, reporting the implosion of trillions of dollars of toxic debt, foreclosures and malfeasance. But the underlying forces that created this economic nightmare are stories yet to be told to the general public.

The press has failed to surface the historical facts how the rise of Jeb Bush in Florida and W. was tied firmly to condominiums (ie. Al Hoffman, WCI Communities) in swampland. The Times article provides a neat summary that could have been cut and paste from this blog, but that could also have been written years ago. "Now comes the day of reckoning."

A further reckoning might look at the pattern and distribution of campaign contributions from executives of leading Wall Street financial institutions, like Lehman Brothers or Bear Stearns or Merrill Lynch, who originated billions in toxic debt, reaping commissions in the billions in aggregate and tied to local politics through lower level operators and developers and land speculators in states like Florida.

Today, jobs at newspapers are following job losses in real estate and the housing sector down the drain.

Florida papers are suffering major cutbacks as profits dwindle and stock prices plunge. (click on "read more") The Orlando Sentinel reports of staff reductions, too.

Yesterday, the St. Pete Times observed that not a single Florida reporter is accompanying Governor Charlie Crist on a European trip with nearly 100 representatives from aerospace, real estate and Big Sugar.

The only dim light in Florida's economy are bargain basement hunters bearing Euros. It's the lead story on Yahoo this morning, from AFP: "MIAMI (AFP) - Reeling from a real estate collapse and battered by hurricanes, Floridians can at least take heart from one economic bright spot: European tourists are coming to spend, spend, spend. As the dollar sinks against the Euro, more and more European travelers are arriving on Florida shores. And whether it's a mojito at a swanky South Beach club, a swim with dolphins in the Keys, or a spin around a massive retail mall, they're finding their money stretches further. "What we see is Europeans taking even short holidays to get some sun and take advantage of the great value," said Bud Nocera, president of Visit Florida, the state's tourism promotion agency. "People are actually coming over without any luggage at all, and they not only buy clothes, but the suitcases to take it home in. That gives you an idea what a great bargain it is."

Since when did a superpower's assets go begging on the discount rack?

The die-off of the coral reef, of Florida Bay covered in slime, of ratty suburban tracts and how newspapers stood by idling or scared to death, as their proponents like Arvida's Roy Rogers touted sprawl as "what the market wants": these seem to me chords of a new national anthem.

With those chords in my ear, I listen to webcasts of the county commission with shock, the dissonance of our so-called representative democracy.

I think of Charlie Crist in Europe, with no reporter covering how the gamblers and high rollers are selling the State of Florida like chop shop owners.

If that is a silver lining, America is in much deeper trouble than our government is admitting, or, that newspapers report.


300+ Accept Post Buyouts; Layoffs Lurking

Thu Jul 17, 2008 at 10:53:23 AM

More than 300 Palm Beach Post employees have applied for buyouts and all
have been accepted, according to an internal memo obtained by the Pulp.

Though the newspaper announced it would cut 300 jobs, there will be
additional layoffs. According to the memo:

The number of applications was more than expected. However, we
received too many in some areas and not enough in others, So we still
expect to begin a small number of involuntary separations, or layoffs,
the week of Aug. 18 in some departments as needed. Thanks to all
who applied. You have greatly reduced the number of involuntary
separations needed. Your contribution to PBNI over the years and
your dedication and patience during these recent difficult times is
greatly appreciated.

Those layoffs, according to sources, are expected to hit the newsroom, which
had 81 buyout applications by the initial deadline on Friday. The newspaper
plans to cut a total of 130 from the newsroom. Sources say that since the
Friday dealine, several newsroom staffers have applied for the buyout and
been accepted. The buyouts become official on August 11.

#######



NEW YORK TIMES
July 19, 2008
Uncomfortable Answers to Questions on the Economy

By PETER S. GOODMAN
You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street.

Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead.

Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power.

“The open question is whether we’re in for a bad couple of years, or a bad decade,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard.


Is this a recession?

Officially, no. The economy is not in recession until a panel at a private institution called the National Bureau of Economic Research says so. Unofficially, many economists think a recession started six or seven months ago, even as the economy has continued to expand — albeit at a tepid pace.

Many assume that if the economy expands at all, then it isn’t a recession, but that’s not true. The bureau defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.” If enough people lose their jobs, factories stop making things, stores stop selling things, and less money lands in people’s pockets, it is probably a recession.

Whatever it is called, it is a painful time for tens of millions of people. Indeed, this may turn out to be the most wrenching downturn since the two recessions in the early 1980s; almost surely worse than the recession that ended the technology bubble at the beginning of this decade; perhaps worse than the downturn of the early 1990s that followed the last dip in real estate prices.

But, despite what some doomsayers now proclaim, this is not the Great Depression, when unemployment spiked to 25 percent and millions of previously working people woke up in shantytowns. Not by any measure, even as your neighbors make cryptic remarks above dusting off lessons passed down from grandparents about how to turn a can of beans into a family meal.

How bad is housing?

Bad in many markets, awful in some, and still O.K. in a few.

The downturn has its roots in the real estate frenzy that turned lonely Nevada ranches into suburban ranch homes and swampland in Florida into condominiums. Speculators drove home prices beyond any historical connection to incomes. Gravity did the rest. After roughly doubling in value from 2000 to 2005, home prices have fallen about 17 percent — and more like 25 percent in inflation-adjusted terms — according to the widely watched Case-Shiller index.

Even so, most economists think house prices must fall an additional 10 to 15 percent to get back to reality. One useful measure is the relationship between the costs of buying and renting a home. From 1985 to 2002, the average American home sold for about 14 times the annual rent for a similar home, according to Moody’s Economy.com. By early 2006, home prices ballooned to 25 times rental prices. Since then, the ratio has dipped back to about 20 — still far above the historical norm.

With mortgages now hard to obtain and speculation no longer attractive, arithmetic has replaced momentum as the guiding force for housing prices. The fundamental equation points down: Even as construction grinds down, there are still many more houses on the market than there are people to buy them, and more on the way as more homeowners slip into foreclosure.

By the reckoning of Economy.com, enough houses are on the market to satisfy demand for the next two-and-a-half years without building a single new one.

The time it takes to sell a newly completed house has expanded from an average of four months in 2005 to about nine months, according to analysis by Dean Baker, co-director of the Center for Economic and Policy Research.

And many sales are falling through — more than 30 percent in some parts of California and Florida — as buyers fail to secure financing, exacerbating the glut of homes, Mr. Baker said.

No wonder that in Los Angeles, San Francisco, Phoenix and Las Vegas, house prices have in recent months declined at annual rates of more than 33 percent.

When will banks revive?

So far, they have written off more than $300 billion in loans. Many experts now predict the toll will rise to $1 trillion or more — a staggering sum that could cripple many institutions for years.

Back when home prices were multiplying, banks poured oceans of borrowed money into real estate loans. Unlike the dot-com companies at the heart of the last speculative investment bubble, the new gold rush was centered on something that seemed unimpeachably solid — the American home.

But the whole thing worked only as long as housing prices rose. Falling prices landed like a bomb. Homeowners fell behind on their loans and could not qualify for new ones: There was no value left in their house to borrow against. As millions of people defaulted, the banks confronted enormous losses in a bloody period of reckoning.

In March, the Federal Reserve helped engineer a deal for JPMorgan Chase to buy troubled investment bank Bear Stearns. Many assumed the worst was over. But, this month, the open distress of Fannie Mae and Freddie Mac — two huge, government sponsored institutions that together own or guarantee nearly half of the nation’s $12 trillion in outstanding mortgages — sent a signal that more ugly surprises may lie in wait.

To calm markets, the government last weekend hurriedly put together a rescue package for Fannie and Freddie that, if used, could cost as much as $300 billion. The urgent need for a rescue — together with another round of billion-dollar write-offs on Wall Street — has unnerved economists and investors.

“I was a relative optimist, but I’ve certainly become more pessimistic,” said Alan S. Blinder, an economist at Princeton, and a former vice chairman of the board of governors at the Federal Reserve. “The financial system looks substantially worse now than it did a month ago. If the Freddie and Fannie bailout were to fail, it could get a hell of a lot worse. If we get more bank failures, we have the possibility of seeing more of these pictures of people standing in line to pull their money out. That could really scare consumers.”

In one respect, Mr. Blinder added, this is like the Great Depression. “We haven’t seen this kind of travail in the financial markets since the 1930s,” he said.

More than two years ago, Nouriel Roubini, an economist at the Stern School of Business at New York University, said that the housing bubble would give way to a financial crisis and a recession. He was widely dismissed as an attention-seeking Chicken Little. Now, Mr. Roubini says the worst is yet to come, because the account-squaring has so far been confined mostly to bad mortgages, leaving other areas remaining — credit cards, auto loans, corporate and municipal debt.

Mr. Roubini says the cost of the financial system’s losses could reach $2 trillion. Even if it’s closer to $1 trillion, he adds, “we’re not even a third of the way there.”

Where will the banks raise the huge sums needed to replenish the capital they have apparently lost? And what will happen if they cannot?

The answers to these questions are unknown, an unsettling void that holds much of the economy at a standstill.

“We’re in a dangerous spot,” said Andrew Tilton, an economist at Goldman Sachs. “The big threat is more capital losses.”

Banks are a crucial piece of the economy’s arterial system, steering capital where it is needed to fuel spending and power growth. Now, they are holding tight to their dollars, starving businesses of loans they might use to expand, and depriving families of money they might use to buy houses and fill them with furniture and appliances.

From last June to this June, commercial bank lending declined more than 9 percent, according to an analysis of Federal Reserve data by Goldman Sachs.

“You have another wave of anxiety, another tightening of credit,” said Robert Barbera, chief economist at the research and trading firm ITG. “The idea that we’ll have a second half of the year recovery has gone by the boards.”

Is my job safe?

Economic slowdowns always mean job losses. Unemployment already has risen, and almost certainly will increase more.

The first signs of distress emerged in housing. Construction companies, real estate agencies, mortgage brokers and banks began laying people off. Next, jobs started being cut at factories making products linked to housing, from carpets and furniture to lighting and flooring.

But as the real estate bust spilled over into the broader economy, depleting household wealth, the impacts rippled out to retailers, beauty parlors, law offices and trucking companies, inflicting cutbacks throughout the economy, save for health care, farming and energy. Over the last six months, the economy has shed 485,000 private sector jobs, according to the Labor Department. Many people have seen hours reduced.

The unemployment rate still remains low by historical standards, at 5.5 percent. And so far, the job losses — about 65,000 a month this year — do not approach the magnitude of those seen in past downturns, particularly the twin recessions at the beginning of the 1980s, when the economy shed upward of 140,000 jobs a month and the unemployment rate exceeded 10 percent.

But Goldman Sachs assumes unemployment will reach 6.5 percent by the end of 2009, which translates into several hundred thousand more Americans out of work.

These losses are landing on top of what was, for most Americans, a remarkably weak period of expansion. From 1992 to 2000 — as the technology boom catalyzed spending and hiring — the economy added more than 22 million private sector jobs. Over the last eight years, only 5 million new jobs have been added.

The loss of work is hitting Americans along with an assortment of troubles — gasoline prices in excess of $4 a gallon, over all inflation of about 5 percent, and declining wages.

“In every dimension, people are worse off than they were,” said Mr. Roubini, the New York University economist.

Are consumers done?

That is a major worry.

The fate of the economy now rests on the shoulders of the American consumer, whose spending amounts to 70 percent of all economic activity.

When people go to the mall and buy televisions and eat out, their money circulates through the economy. When they tighten their belts, austerity ripples out and chokes growth.

Through the years of the housing boom, many Americans came to treat their homes like automated teller machines that never required a deposit. They harvested cash through sales, second mortgages and home equity lines of credit — an artery of finance that reached $840 billion a year from 2004 to 2006, according to work by the economists James Kennedy and Alan Greenspan, the former Federal Reserve chairman. That allowed Americans to live far in excess of what they brought home from work.

But by the first three months of this year, that flow had constricted to an annual rate of about $200 billion.

Average household debt has swelled to 120 percent of annual income, up from 60 percent in 1984, according to the Federal Reserve.

And now the banks are turning off the credit taps.

“Credit is going to remain tight for a time potentially measured in years,” said Mr. Tilton, the Goldman Sachs economist.

This is the landscape that has so many economists convinced that consumer spending must dip, putting the squeeze on the economy for several years.

“The question is, will it get as bad as the 1970s?” asked Mr. Rogoff, recalling an era of spiking gas prices and double-digit inflation.

Long term, Americans may have no choice but to spend less, save more and reduce debts — in short, to live within their means.

“We’re getting a lot of the adjustment and it hurts,” said Kristin Forbes, a former member of the Council of Economic Advisers under President George W. Bush, and now a scholar at M.I.T.’s Sloan School of Management. “But it’s an adjustment we’re going to have to make.”

Who’s to blame?

There is plenty to go around.

In the estimation of many economists, it starts with the Federal Reserve. The central bank lowered interest rates following the calamitous end of the technology bubble in 2000, lowered them more after the terrorist attacks of Sept. 11, 2001, and then kept them low, even as speculators began to trade homes like dot-com stocks.

Meanwhile, the Fed sat back and watched as Wall Street’s financial wizards engineered diabolically complicated investments linked to mortgages, generating huge amounts of speculative capital that turned real estate into a conflagration.

“At the end of this movie, it’s clear that the Fed will have to care about excesses,” Mr. Barbera said.

Prices multiplied as many homeowners took on more property than they could afford, lured by low introductory interest rates that eventually reset higher, sending many people into foreclosure.

Mortgage brokers netted commissions as they lent almost indiscriminately, offering exotically lenient terms — no money down, no income or job required. Wall Street banks earned billions selling risky mortgage-linked securities around the world, aided by ratings agencies that branded them solid.

Through it all, a lot of ordinary Americans borrowed a lot more money then they could afford to pay back, running up enormous credit card bills and borrowing against the value of their homes. Now comes the day of reckoning.


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