Towards the end of play on March 14 – the day Bear Stearns’ shares tumbled by 50% – Morris Reid, erstwhile aide to former US President Bill Clinton and now a media pundit and managing director of a public affairs firm in Washington DC, dropped by for a chat.
Reid wanted to talk about the US housing and mortgage markets and the political primaries in which John McCain has emerged as the Republican presidential candidate and Hillary Clinton and Barack Obama are still slugging it out for the Democrat ticket.
Looking at the US primaries, it’s strange that the housing crisis across the Atlantic doesn’t appear to be on the political agenda. I asked Reid about it.
He confirms that it isn’t an issue despite the contagion spreading worldwide and infecting Bear Stearns, taken over by JP Morgan that weekend.
I wanted to know why it wasn’t on the radar, considering the scale of the problem. Reid says it’s not so much off the radar, it just isn’t a primary issue.
He says: “So it’s not the sub-prime market per se, it’s our economy that’s bad and the reason it’s bad is because rich people got richer on the backs of poor people in the sub-prime market. So maybe the Democrats see it as a way of furthering their agenda on the populist approach, as opposed to hitting the issue squarely.”
As to US media coverage of developments in places like Cleveland, Ohio, where repossessions are at an industrial level and neighbourhoods are turning into slums overnight, Reid says it isn’t happening.
He says: “The US media hasn’t been producing any thought-provoking pieces. They’re struggling to address how they’re going to present the news.
“You know the nightly news in the US is on the decline – fewer and fewer consumers are watching it – and those who are watching tend to be much older.”
So looking at the three presidential hopefuls, who does Reid think would be the best one to sort out the credit and housing crisis confronting the US?
He says: “None of them has a clear track record or even a plan, so the jury’s still out. The person I think could be the most courageous is Obama.
“He hasn’t been around long enough to have a track record and when you haven’t got one you can try and plead ignorance.”
He adds: “Clinton is more an insider baseball player and is more likely to dog and pony. So is McCain. He’ll dog and pony and trade off things.”
The full interview with Morris Reid will be published in the April issue of Lending Strategy.