Plutocratic Paranoia

Paranoia strikes deep
Into your life it will creep
It starts when you’re always afraid
Step out of line, the man come and take you away

—Stephen Stills, “For What It’s Worth

In a God-fearing, if not God-ordered, world, one would think that when a billionaire, worried about “a rising tide of hatred of the successful one percent,” stupidly compared progressive critiques of wealth inequality in America to “fascist Nazi Germany,” that reputable institutions, say, like The Wall Street Journal, would have the sense to unequivocally condemn such outrageous nonsense.

Nope. Not only did the Journal publish this disgruntled plutocrat’s letter about a week ago, today we find that the paper’s editorial writers, always happy apologists for our emerging plutocracy, have now become defenders of plutocratic paranoia. Oh, there was the gentle admission that one ought to be more careful in one’s use of comparisons to Nazi Germany, but the real condemnation was saved for what the writers called “the politics of economic class warfare,” which is how the rich right views any criticism of the one-percenters gobbling up most of the bennies the economic recovery has handed out the past four years or so.

Paranoia is striking deep into the hearts of some of America’s wealthiest folks and the ideological defenders of an out-of-adjustment economic system. Perhaps they are starting to believe that liberal critiques of what has been happening for the last 35 years are beginning to resonate with the electorate. Why else would the WSJ editorialists end their defense of the disgruntled plutocrat by falsely saying that liberals are “promoting personal vilification and the abuse of government power to punish political opponents”?

In any case, back to reality. Paul Krugman published a piece a few days ago that addressed the billionaire’s comparison of progressivism to fascism, but he went much further:

Anyway, thinking about this sort of thing makes me realize that there’s a danger, especially for progressives, of confusing the proposition that Obama’s billionaire haters are stark raving mad — which is true — with the proposition that Obama has done nothing that hurts the plutocrats’ interests, which is false. Actually, Obama has been tougher on the one percent than most progressives give him credit for.

Oh, I know that some lefties don’t want to hear it, but Krugman, who has been somewhat critical of President Obama over the years, has some facts to back up what he is saying:

Start with taxes. The Bush tax cuts haven’t gone completely away, but at the very high end they have been pretty much reversed; plus there are additional high-end taxes associated with Obamacare. The result is that taxes on wealthy Americans have basically been rolled back to pre-Reagan levels:

Meanwhile, financial reform looks as if it will have significantly more teeth than expected.

So the one percent does have reason to be upset. No, Obama isn’t Hitler; but he is turning out to be a little bit of FDR, after all.

That chart (which was lifted from an excellent article written by the Atlantic’s Jordan Weissmann) along with Krugman’s remark about the unexpected “teeth” in financial reform (“Dodd-Frank“) may explain why some billionaires, who should have nothing in the world to complain about—what good is all that dough, if you are still afraid of the rabble?—would resort to Nazi references when talking about liberals criticizing them. They feel victimized. Yep. Victimized.

Matthew O’Brien, in a piece titled, “Why Do the Super-Rich Keep Comparing Obama to Hitler?” referenced an occasion during Obama’s first term in which some really wealthy folks, including some of those Obama had referred to late in 2009 as “a bunch of fat cat bankers on Wall Street,” leaned on Obama’s campaign manager, Jim Messina, for a little love from the President. Messina was in New York looking for campaign money—since Obama had done very well among Wall Streeters in 2008—and The New York Times described what happened:

For the next hour, the donors relayed to Messina what their friends had been saying. They felt unfairly demonized for being wealthy. They felt scapegoated for the recession. It was a few weeks into the Occupy Wall Street movement, with mass protests against the 1 percent springing up all around the country, and they blamed the president and his party for the public’s nasty mood. The administration, some suggested, had created a hostile environment for job creators.

Messina politely pushed back. It’s not the president’s fault that Americans are still upset with Wall Street, he told them, and given the public’s mood, the administration’s rhetoric had been notably restrained.

One of the guests raised his hand; he knew how to solve the problem. The president had won plaudits for his speech on race during the last campaign, the guest noted. It was a soaring address that acknowledged white resentment and urged national unity. What if Obama gave a similarly healing speech about class and inequality? What if he urged an end to attacks on the rich? Around the table, some people shook their heads in disbelief.

“Most people in the financial world,” a top Obama donor later told me, “do not understand how most of America feels about them.” But they think they understand how the president’s inner circle feels about them. “This administration has a more contemptuous view of big money and of Wall Street than any administration in 40 years,” the donor said. “And it shows.”

How a group of people with more money than Allah could feel victimized by Obama or any other slightly left-of-center Democrat is beyond me. Perhaps they are starting to hear too many comparisons they don’t like. Maybe they don’t like it when they hear, as it was recently reported, that “The 85 richest people in the world now have as much money as the 3.5 billion poorest put together.”  Or maybe they don’t like it when they hear Paul Krugman’s latest comparison, which he presented yesterday on NPR’s All Things Considered:

I just had my favorite statistic of this morning. The top 40 hedge fund managers in America earned as much as 300,000 schoolteachers in 2012. So that gives you an idea of how unequal a society we’ve become.

You can see where that might ring with a sting in the ears of those “top 40 hedge fund managers,” sort of like a Hitler comparison rings in the ears of a liberal.

But let’s be clear here. No one, at least no one that I know, is talking about “punishing” rich people. It’s not a bad thing that hard work and innovation is rewarded over sloth and foolishness. As Krugman said on NPR:

Nobody thinks that we should be a society without monetary incentives. No one thinks that we should have exact equality or even anything close to that. The point, however, is that our notion of what kind of society we should be, I think, is something like the kind of society we actually were 30, 40 years ago where we had a broad middle class, where the gap between people at the top and the average or the median American was not that large.

See? There’s no need for those hyper-sensitive, fraidy cat billionaires to go all Hitler on us.

Finally, even though there is a rather robust defense of plutocratic paranoia going on among some conservatives, there is some evidence that even Republicans are starting to get the message that the inequalities we see among us threaten our stability as a nation, or, more likely, they are starting to think that such inequalities threaten their electoral prospects as a national party. They are starting to talk about the issue, even though they largely blame it on Obama, and offer as solutions the same old tax-cutting, trickle-down, anti-regulatory nonsense.

But at least for now the issue is front and center and that’s not a bad thing.

Has Obama Been Soft On Wall Street? Yep. Does That Make Him Mitt Romney? Uh, Nope.

President Obama has done some amazing things since he took office in January of 2009 (many of those things have been chronicled on this blog). Much of what he has accomplished he had to do with only Democratic support, and much of his time has been spent trying to overcome the economic recovery saboteurs in the Republican Party who were trying to destroy him politically, many of whom are still trying to undermine, if not outright destroy, his remaining presidency.

But that’s no excuse for the President’s horrible record on pursuing, or, really, not pursuing, banksters—those financial folks responsible for the ongoing economic misery among working-class people in the country, people long on class but short on work. The Administration should have been, and still should be, making the banksters, for God’s sake at least some of them, pay for their crimes.

Aggressively pursuing these miscreants from the start would not only have been the right thing to do, it would have been politically popular too. It might even have helped, ever so slightly, endear him to a few folks on the right who also hate it that big-time money men and women seem to have escaped without so much as a rugburn, after the most horrific financial meltdown in 80 years.

There will be some stains on the Obama legacy, but perhaps no stain will be as dark and ugly as the President’s failure to see to it that some sense of justice was satisfied, or at least aggressively pursued, for what happened in the fall of 2008.

But having said that, I’m not one of those on the left who will write ridiculous things like Eric Zuesse wrote recently for HuffPo (“Is The Obama Administration the Most Corrupt in U.S. History?“):

The rot certainly starts at the top. I am a proud Democrat who can tell a phony one clearly, especially when it’s demonstrated by four years of remarkably consistent criminal (and profoundly conservative) decisions by him. Obama is a phony Democrat. He is, at best, Romney-light. Maybe he is, in some ways, even Bush-heavy. As regards non-prosecutions of financial fraudsters, the data show him to be Bush-heavy.

Zuesse urges Democrats to turn on Obama, mainly over his dealings with Wall Street and his proposal to possibly change the way the cost of living adjustments are made to Social Security benefits:

The rot is on both sides now. Let’s see if our side will clamp down against it – as Senator Warren obviously wishes to do. Are we with her, or are we with Obama? That question does not concern a white woman versus a black man; it concerns a nation of equality under law, versus a champion of “Too Big To Fail.” In fact, Obama has been disastrous for Blacks, and not just for the rest of “the 99%.”

The Democratic Party will have to show where it stands – and with whom, and for whom.

The Republican Party has already failed its test regarding Bush. Will the Democratic Party fail its test regarding Obama?

Come on. Sure, there is plenty to criticize the President for over his handling of the banksters. Sure, he has surrounded himself with too many people wrapped up in that Wall Street-runs-America culture. Sure, at times his actions haven’t always lived up to his campaign rhetoric.

And there are other reasons why liberals should lately be a bit upset with him, including his embracing the chained CPI scheme and the quiet, very quiet, signing of a bill last week that will undo much of a law passed in 2012 called the STOCK (“Stop Trading on Congressional Knowledge”) Act, which prohibited members of Congress and their staffs from profiting from insider trading.

By signing the latest bill—a true symbol of corruption of our political system— President Obama reveals himself to be what he has always been: a politician with political motives that often involve sweetheart deals with those in power. (For an excellent telling of this sad tale, go here.)

But Eric Zuesse calling Obama a criminal and a phony Democrat and labeling him Romney-light and Bush-heavy? Please. Give me a break. And for Zuesse to say that “corruption has…been rampant during his Presidency”? Get a bleeping grip, Eric. That’s the same kind of stuff that happens when uncompromising ideologues on the right take out after one of their own whom they perceive to be philosophically disloyal. And it’s the same kind of stuff they say about the President.

Ironically, Zuesse criticizes Obama for acting too much like a conservative, which is sometimes a fair criticism, but then Zuesse acts like the worst of the conservatives himself when he blasts him and suggests he has done nothing worthy of respect, even from people on the left.

And particularly given the environment within which President Obama has had to work since 2010—a totally hostile House and a filibuster-drunk Senate, which has to figure into any realistic evaluation of his performance—Zuesse’s comments about Obama remind me of something exiting the lips of, say, a Rush Limbaugh.


Meanwhile, for some level-headed, but hard-hitting criticism of the President’s policies vis-à-vis Wall Street, see today’s piece at HuffPo by Ryan Grim and Shahien Nasiripour, which begins:

New York Attorney General Eric Schneiderman has privately criticized the Obama administration and the Department of Justice for not aggressively investigating dodgy mortgage deals that helped trigger the financial crisis, according to senators and congressional aides who met with him this month.

As this article demonstrates, there is plenty of frustration to go around regarding the Obama administration’s failure, and it is a failure, to put orange jumpsuits on otherwise well-dressed Wall Street bankers. But that frustration should not lead those of us on the left to treat President Obama the same way hysterical conservatives have always treated him: like a Kenyan-headed American stepchild.


[image from Seeking Alpha]

“Failure Is Not An American Habit”

I’m going to quote at length a passage from President Obama’s speech in Green Bay this morning because it represents his closing pitch to Americans, and, unfortunately, most Americans won’t hear much, if any, of it, only what fits into a short segment on the nightly news or a snippet on radio or cable TV:

Back in 2008, when we talked about change, I told you, I wasn’t just talking about changing presidents, I wasn’t just talking about changing parties, I was talking about changing our politics. I ran because the voices of the American people, your voice, had been shut out of our democracy for way too long, by lobbyists and special interests, politicians who believe that compromise is somehow a dirty word.

By folks who would say anything to win office and do anything to stay there. 

The protectors of the status quo are a powerful force in Washington. And over the last four years, every time we’ve tried to make changes, they fought back with everything they’ve got. They’ve spent millions to stop us from reforming health care and Wall Street and student loans.

And their strategy from the start was to engineer pure gridlock in Congress, refusing to compromise on ideas that both Democrats and Republicans have supported in the past. And what they’re counting on now, Wisconsin, is that the American people will be so worn down by all the squabbling, so tired of all the dysfunction, that you’ll actually reward obstruction and put people back in charge who advocate the very policies that got us into this mess.

In other words, their bet is on cynicism.

But, Wisconsin, my bet is on you. My bet is on the decency and good sense of the American people. Because despite all the resistance, despite all the setbacks, we’ve won some great fights. And I’ve never lost sight of the vision we share. That you would have a voice, that there would be somebody at the table fighting every single day for middle-class Americans who work hard. 

You know, sometimes Republicans in Congress have worked with me to meet our goals, to cut taxes for small businesses and families like yours, to open new markets for American goods, or finally repeal Don’t Ask, Don’t Tell.

And sometimes we’ve had big fights, fights that were worth having. 

Like when we forced the banks to stop overcharging for student loans and make college more affordable for millions. 

Like when we forced Wall Street to abide by the toughest rules since the 1930s. 

Like when we stopped insurance companies from discriminating against Americans with pre-existing conditions like cancer or diabetes, so that nobody in America goes bankrupt just because they get sick. 

I didn’t fight those fights for any partisan advantage. I’ve shown my willingness to work with anybody of any party to move this country forward. And if you want to break the gridlock in Congress, you’ll vote for leaders, whether they are Democrats, Republicans, or Independents, who feel the same way. 

But if the price of peace in Washington is cutting deals that will kick students off financial aid, or get rid of funding for Planned Parenthood, or eliminate health care for millions on Medicaid who are poor or elderly or disabled, just to give a millionaire a tax cut, I’m not having it. 

That’s not a deal worth having. That’s not bipartisanship, that’s not change. That’s surrender to the same status quo that has hurt middle-class families for way too long. But I’m not ready to give up on that fight. I hope you aren’t either, Wisconsin. I hope you aren’t either.

See, the folks at the very top in this country don’t need another champion in Washington. They’ll always have a seat at the table. They’ll always have access and influence. The people who need a champion are the Americans whose letters I read late at night, the men and women I meet on the campaign trail every day.

The laid off furniture worker who’s retraining at the age of 55 for a career in biotechnology, she needs a champion. 

The small restaurant owner who needs a loan to expand after the bank turned him down, he needs a champion.

The cooks, the waiters, the cleaning staff, working overtime at a Vegas hotel, trying to save enough to buy a first home or send their kid to college, they need a champion.

The auto worker who is back on the job, filled with pride and dignity because he’s building a great car, he needs a champion.

The young teacher, doing her best in an over-crowded classroom, with outdated textbooks, she needs a champion. 

All those kids in inner cities and small farm towns, in the valleys of Ohio, or rolling Virginia hills, or right here in Green Bay, kids dreaming of becoming scientists or doctors, engineers or entrepreneurs, diplomats, or even a president, they need a champion in Washington. They need a champion.

They need a champion because the future will never have as many lobbyists as the past, but it’s the dreams of those children that will be our saving grace. That’s why I need you, Wisconsin. To make sure their voices are heard, to make sure your voices are heard.

We’ve come too far to turn back now. We’ve come too far to let our hearts grow faint. Now’s the time to keep pushing forward. To educate all our kids, and train all our workers, to create new jobs and rebuild our infrastructure, to discover new sources of energy, to broaden opportunity to grow our middle class, to restore our democracy, and to make sure no matter who you are or where you came from or how you started out, you can work to achieve your American Dream.

You know, in the midst of the Great Depression, FDR reminded the country that “failure is not an American habit. And in the strength of great hope we must shoulder our common load.” That’s the strength we need today. That’s the hope I’m asking you to share. That’s the future in our sights. That’s why I’m asking for your vote.

I urge all of you to go here and read the complete text of the speech, given 80 years ago, from which the FDR quote above was taken. It is remarkable.

Roosevelt does a short survey of American economic history, including the Industrial Revolution, including a devastating critique of corporations, how they “threaten the economic freedom of individuals to earn a living,” how “we are steering a steady course towards economic oligarchy, if we are not there already.”

He said the day of the “financial titan” was over, and the “day of enlightened administration has come,” an administration with the task of,

distributing wealth and products more equitably, of adapting existing economic organizations to the service of the people. 

Remarkable. Imagine if Barack Obama said that!

Or this:

As I see it, the task of government in its relation to business is to assist the development of an economic declaration of rights, an economic constitutional order. This is the common task of statesman and business man. It is the minimum requirement of more permanently safe order of things….

The Declaration of Independence discusses the problem in terms of a contract. Government is a relation of give and take, a contract . . . Under such a contract, rulers were accorded power, and the people consented to that power on consideration that they be accorded certain rights. The task of statesmanship has always been the redefinition of these rights in terms of a changing and growing social order. New conditions impose new requirements upon government and those who conduct government . . .

Every man has a right to life, and this means that he also has a right to make a comfortable living. He may by sloth or crime decline to exercise that right, but it may not be denied to him. We have no actual famine or dearth; our industrial and agricultural mechanism can produce enough to spare. Our government formal and informal, political and economic, owes to every one an avenue to possess himself a portion of that plenty sufficient for his needs through his own work….

If, in accord with this principle, we must restrict the operations of the speculator, the manipulator, even the financier, I believe we must accept the restriction as needful not to hamper individualism but to protect it….

If Obama said those words, then Fox “News” commentators would undergo such ideological convulsions that all the drugs in Rush Limbaugh’s medicine chest wouldn’t be enough to calm them down.

America, The Owned

No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. You cannot serve God and mammon.”


t’s time to face some uncomfortable facts about America, as yet more banking malfeasance makes the news:

WASHINGTON — Shareholders of JPMorgan Chase filed two lawsuits Wednesday against the biggest U.S. bank, accusing it and its leaders of taking excessive risk and causing the recently disclosed $2 billion trading loss.

The provision in the Banking Act of 1933 (Glass-Steagall) that prohibited commercial banks from gambling investing gambling using depositors’ money (and vice versa) had been gradually weakened over time, apparently starting in the 1970s, through permissive interpretations of the law by federal banking regulators and the courts.

As the Congressional Research Service put it:

Facing lower profits and stiffer competition from securities firms, banks began seeking approval from regulators to engage in a greater universe of securities activities.

Facing lower profits,” you see, can justify nearly anything in an increasingly corporatized America. And if there is enough campaign money spread around (this, before Citizens United), well, things can get fixed and profits can rise again like Jesus on Easter!

Seeking to stick a fork into and finish off Glass-Steagall, in 1999 a Republican-controlled Congress (you know, the same one that impeached and tried Bill Clinton), with a shameful assist from, uh, Bill Clinton (and too many Democrats to contemplate), passed the Financial Services Modernization Act, which finally allowed commercial and investment banks and securities and insurance companies to stop slyly shacking up with each other and unite in unholy but legal matrimony.

Now, to be fair to Clinton and his conservative-minded pals, they argue that their legislative efforts to finally kill Glass-Steagall actually “softened” the Great Recession. Gulp.

Clinton actually stated:

I have really thought about this a lot. I don’t see that signing that bill had anything to do with the current crisis…On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I’d be glad to look at the evidence. But I can’t blame [the Republicans]. This wasn’t something they forced me into. I really believed that given the level of oversight of banks and their ability to have more patient capital, if you made it possible for [commercial banks] to go into the investment banking business as Continental European investment banks could always do, that it might give us a more stable source of long-term investment.

It’s nice to know that Mr. Clinton hasn’t lost his unparalleled ability to rationalize.

Fortunately, around at the time of the repeal of Glass-Steagall was Democratic Senator Byron Dorgan. Unfortunately, not many listened to him.

Dorgan was one of only seven—seven!—Democrats in the Senate who voted against finishing off Glass-Steagall (Missouri’s two senators at the time, Messrs. Ashcroft and Bond were Ya-Ya sisters). He warned us in 1999:

I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010…We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.

Fortunately, once again Dorgan the Prophet is here to present a way to fix things. Unfortunately, once again not enough people are listening to him. But you can for half a minute:

Vodpod videos no longer available.

Get that? Restore Glass-Steagall, prohibit naked credit default swaps, and break up too-big-to-fail companies. By the way, here is the way the Financial Times described naked default swaps:

A naked CDS purchase means that you take out insurance on bonds without actually owning them. It is a purely speculative gamble. There is not one social or economic benefit. Even hardened speculators agree on this point. Especially because naked CDSs constitute a large part of all CDS transactions, the case for banning them is about as a strong as that for banning bank robberies.

Pretty simple, no? So why won’t any of it happen? Oh, that’s pretty simple, too. Senator Bernie Sanders blurted it out Wednesday night in a beatified bit of truth-telling:

Let me tell you what many others might not tell you. Some people think, well, gee, the Congress regulates Wall Street. I think the truth is that Wall Street regulates the Congress.

Yikes. He restated the truth a little bit later:

Let me just say again what many people will not be happy to hear. Wall Street is extraordinarily powerful. Congress doesn’t regulate them, the big banks regulate what Congress does.

Another Senator, Dick Durbin, said three years ago:

…hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.

Well, at least we still get free checking! What? Oh my God.


Here is the entire 7-minute segment from The Ed Show, featuring Sanders:

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It’s Like Sex For Them

Remember the supercommittee from last year? Remember how it failed to engineer a deficit deal and thus triggered those dreaded sequestered cuts that were supposed to make lawmakers see the light or else?

Well, we all know that “or else” won’t likely materialize in the end, but why deprive Republicans of a little fun in the mean time? Despite knowing they will not get any cooperation from Democrats who have given too much already in exchange for, uh, not much, House Republicans are set to bring up a their own hand-crafted bill for debate this week that would replace $78 billion in sequestered cuts that are scheduled to take effect in 2013.

Now, wasting their time on such useless legislation before the election this November is perhaps understandable, since there isn’t much else for Republicans to do these days—the ongoing War on Women hasn’t exactly been a polling success.

But as I suggested there must be some fun in it for the hard-core legislators, and sure enough here it is:

In addition to the $78 billion in sequester replacement, the bill contains an additional $180 billion in cuts aimed at reducing the deficit. Among the federal programs hit are food stamps, funding for the 2010 healthcare and financial regulatory laws and the refundable child tax credit.

Ah, there’s the orgasmic rub: Besides taking a stab at the Affordable Care Act, they’re putting a hurt on those most in need by cutting food stamps and healthcare funding and the refundable Child Tax Credit—such needy folks aren’t exactly big donors to GOP campaigns, now are they?—all the while making sure that Wall Street gets to take off its greed-monitoring ankle bracelet and go back to its life of slime.

Fun, fun, fun!  The collective conservative climax that will result should this Republican effort pass the House this week will likely be audible all the way to Joplin. Ozark Billy‘s in for a good time as he contemplates how much damage his (likely) vote can do to folks around here who need food stamps and a little money refunded to help raise their kids.

Vulture Class Says To The Carcass Class: Stop Your Bellyachin’

The Plum Line’s Greg Sargent pointed out “an extraordinary anecdote” in an upcoming New York Times Sunday magazine article:

Wall Streeters are so upset about Obama’s harsh populist rhetoric that they privately called on him to make amends with a big speech — like his oration on race — designed to heal the wounds of class warfare in this country.

Now let me get this straight: Wall Streeters—let’s call them the Vulture Class—want Mr. Obama—let’s call him the champion of the Carcass Class—to apologize for his “contemptuous view of big money and of Wall Street,” as the New York Times article suggests.

In other words, the vultures want the carcasses to stop whining about getting their bones picked.

Oh, my.

Here’s how Ed Schultz handled it on Wednesday night, with help from Bernie Sanders:

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Obama Created The Financial Crisis, Says The Stanford Man

Thomas Sowell is a regular columnist appearing in the Joplin Globe. Thus, the locals are exposed to his, uh, erudite opinions. Here is one that appeared in Wednesday’s paper: 

Washington gridlock may turn out to be the salvation of the Obama administration.

Not only does gridlock allow the president to blame Republicans for not solving the financial crisis that his own runaway spending created, the inability to carry out as much government intervention in the economy as when the Democrats controlled both Houses of Congress means that the market can now recover on its own to some visible extent before the next election.

Rarely have I read such breathtaking foolishness from the mind of an educated man, and a man who is a senior fellow at Stanford’s Hoover Institution. 

Obama “created” the financial crisis with his “runaway spending”? Is Thomas Sowell and Rush Limbaugh sharing the same warped brain? Are you kidding me?

Where do you go after reading something like that except to scientific journals to see if we have all been ushered into a parallel universe where white is black and black is white and Thomas Sowell is a genius? It is hard to come to grips with something so appalling, written by a nationally syndicated columnist and author of multiple books. 

That one subordinate clause, “Not only does gridlock allow the president to blame Republicans for not solving the financial crisis that his own runaway spending created…,” should disqualify Mr. Sowell from any consideration as anything other than a print version of Sean Hannity. 

And isn’t it convenient that a columnist has set himself up for a later column or two or three where he can say, if the economy turns around significantly, that Obama’s policies had nothing to do with it? And if it doesn’t turn around he can say it was, after all, Obama’s policies that kept it from performing. That’s job security, I suppose.

Later in the column he writes, incredibly: 

First of all, this country existed for a century and a half without the federal government intervening to save the economy.

Yes, and the country existed for a century and a half without the federal government intervening to insist on clear air and clean water and food that doesn’t poison us and air traffic controllers and on and on. Surely, even a Stanford fellow can understand that the complex economy of our times is a little different from the one in which our forefathers lived and moved and had their being, as an old Greek poet might say. 

All of which makes the point that the financial crisis was a crisis that could only have been realized in our time, in our complicated time, when banksters on Wall Street and beyond had the technological capacity to put the world’s financial system in unspeakable jeopardy. 

And make no mistake about it: The financial crisis was averted by the intervention of the government, ours and governments elsewhere.

And apparently it takes more, or less, than a Stanford man to figure that out.


A “Crude And Poisonous” Political Lie

I don’t know how many times I have addressed the falsehood, widely circulated among conservatives and transmitted through talk radio and talk television, that the financial crisis of 2008 was the fault of sappy-hearted Democrats who used government—the Community Reinvestment Act of 1977, for instance— to force banks to make loans to poor folks so they could purchase unaffordable homes.

But here we go again. Friday’s Joplin Globe featured an editorial by Jay Ambrose, whose column attacking filmmaker Michael Moore contained the following paragraph, pregnant with deceit:

That’s not to say joblessness doesn’t haunt us. Here’s why: a fiscal crisis brought on by the Federal Reserve and mostly liberals conniving in Congress with Fannie Mae and Wall Street to get mortgages in the hands of people who could not afford them. That gave us a fiscal crisis and a recession made worse by President Obama’s mismanagement of deficits and additional regulations scaring businesses out of expansion.

Now, that is fairly standard bulldook from conservatives, but it seems as if these people really do believe that if they keep passing this stuff off so matter-of-factly that it will actually become a matter of fact.

Fortunately, Friday’s Globe also carried a column by Gene Lyons that began this way:

So here’s my question: If the Community Reinvestment Act of 1977 effectively caused the Wall Street meltdown of 2007 by forcing banks to make bad home loans to improvident poor people (and we all know exactly who I mean), how come it took 30 years for the housing bubble to burst?

Next question: If fuzzy-thinking Democratic do-gooders enacted such laws in defiance of common sense and sound economics, why didn’t Republican Presidents Reagan, Bush I or Bush II do something? Was Rep. Barney Frank, D-Mass., secretly running the country?

Exactly how did the wealthiest and most powerful individuals in the United States — the investment bankers and corporate execs who host the $1,000-a-plate fundraisers, scoop up the Cabinet appointments and ambassadorships, and party down at White House galas — end up having less power over the U.S. economy than unskilled day laborers in Newark, N.J., or Oakland, Calif.?

The columnist went after New York City mayor Michael Bloomberg, who last week said,

It was not the banks that created the mortgage crisis. It was plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp …

Lyons called that “a conspiracy theory so absurd that it had previously been confined to such dark corners of American life as the Rush Limbaugh and Sean Hannity programs and the Wall Street Journal editorial page.”  He said that Bloomberg couldn’t possibly believe such a “crude and poisonous” political lie.

But it really doesn’t matter much whether Bloomberg believes it.  The point is that he wants you and me to believe it because it is designed to deflect attention away from the banksters in his fair city and elsewhere around the country and around the world.

Lyons makes these devastating points:

♦ …there was no law forcing or even encouraging banks to make shaky loans. The Community Reinvestment Act merely required FDIC-insured institutions to apply the same standards to all borrowers — i.e., no more “redlining.”

♦ …the law applied only to retail banks, never to Wall Street investment houses or mortgage companies…and 84 percent of subprime mortgages were written by private, totally unregulated lenders.

♦ Fannie and Freddie, the quasi-governmental mortgage underwriting companies, don’t actually make loans…Did they buy worthless mortgage-backed securities along with other victimized investors? Yes, but too little and too late to have caused the crisis. Although far from pristine, they were more victims than perps.

Those “worthless mortage-backed securities” were created by the financial industry, cut up and sold by the financial industry, rated as AAA by the financial industry, and insured by the financial industry.

A commenter responding to one of my columns in the paper wrote that it was “government social engineering that started the financial fiasco in the first place.”  Okay. Let’s pretend that statement is true for a second. That’s a little like saying that it was a Chinese butterfly flapping its dainty wings in early May that created the EF-5 tornado that wasted a third of Joplin later that month.  I mean, sure, you could weirdly make the case that an unwitting lepidopteran in Shanghai was responsible for the scorched earth here in our town, but that would leave out a lot of significant intervening events, wouldn’t it?

In the case of the financial disaster, those significant intervening events involved spectacularly stupid—because they were so spectacularly greedy—people on Wall Street and elsewhere. 

I remained amazed at how conservatives have created all kinds of ingenious explanations to explain away one brute fact about the financial crisis: the free market failed to account for and control the behavior of greedy banksters. 

And conservatives in the media continue to hope that repeating their lies about the cause of the crisis will morph not necessarily into the truth, but at least into common wisdom.

Alan Greenspan And The Un-American Mob

“For who hath despised the day of small things?”

—Zechariah 4:10

Herman Cain will never be president. 

But he does serve to represent something important—at least in terms of temperament and values, if not in complexion—about a rather large constituency in the Republican Party.  He famously remarked to the Associated Press that the Occupy Wall Street protesters were “un-American” and anti-capitalist, and, naturally, it’s all Obama’s fault:

I don’t have facts to back this up, but I happen to believe that these demonstrations are planned and orchestrated to distract from the failed policies of the Obama administration. Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself! It is not a person’s fault if they succeeded, it is a person’s fault if they failed.

I don’t have facts to back this up, but I happen to believe…”  That introductory clause represents a terrifying peek into the Republican mind these days.  Beliefs need not be supported by facts.

But beyond what Cain’s remarks reveal about the quality of analysis of the average GOP presidential candidate and the average GOP primary voter, Cain essentially voices what a lot of Rightists believe about the 99% of folks who don’t enjoy the best of the best in American society: If you aren’t scarfing down the majority of Grandma Margie’s Magic Pie, then it’s because your fork is too small.

Either get a bigger fork or get up from the table.

Majority Leader Eric Cantor says he is “increasingly concerned about the growing mobs,” and Glenn Beck, hiding somewhere on the Internet, said:

Capitalists, if you think that you can play footsies with these people, you’re wrong. They will come for you and drag you into the streets and kill you.

But believe it or not, most revealing and disturbing of all  is what Republican Congressman Peter King of New York said:

It’s really important for us not to give any legitimacy to these people in the streets. I remember what happened in the 1960s when the left-wing took to the streets, and somehow the media glorified them and it ended up shaping policy. We can’t allow that to happen.

No legitimacy.  That’s why Fox “News” ridicules the Wall Street protesters, whose diverse faces look like the America to come, not the America that was.  After months and months of promoting the pale-faced Tea Party movement with orgasmic fervor, suddenly Fox goes limp over the sudden appearance of a leftish backlash against greed and inequality.

The Right must not, as King pointed out, allow the media to “glorify” the Wall Street protesters, lest they end up “shaping policy.”

Well, notwithstanding the remonstrations of Mr. King and Mr. Cantor and Mr. Beck and other voices of the moneyed class, the mostly young and diverse folks that make up the Occupy Wall Street movement—whose unfocused demands are rooted in a very focused moral outrage about what greedy banksters have done to the country—will play a role in shaping policy.

Whether it will be through this current fire of protests, or whether it will be through a fire to come, frustrated young folks will do what they have done throughout American history: help clear the social forest of underbrush in this tall-tree democracy.

Forget Peter King’s fear of the protest movements in the streets of the 1960s. The best analogy to what is happening now is from the 1930s. Robert Cohen wrote of the great student movements at that time:

During its peak years, from spring 1936 to spring 1939, the movement mobilized at least 500,000 collegians (about half of the American student body) in annual one-hour strikes against war. The movement also organized students on behalf of an extensive reform agenda, which included federal aid to education, government job programs for youth, abolition of the compulsory Reserve Officers’ Training Corps (ROTC), academic freedom, racial equality, and collective bargaining rights.

The impetus, of course, for this youthful activity was the Great Depression:

Undergraduates in the early 1930s faced hard times, with the collapse of the job market and the exhaustion of student loan funds and parental financial support. In 1932 and 1933 even the student body itself began to diminish because of the sinking economy; some eighty thousand youths who in more prosperous times would have attended college were in these years unable to enroll. The economic crisis and its growing impact on campus led students to start questioning both the logic and value of American capitalism.

Sounds eerily familiar today, doesn’t it?

Young folks should question “both the logic and value of American capitalism.” And sober adults should be able to answer their questions, not with a knee-jerk response like Herman Cain’s or a stupid assertion like Glenn Beck’s or with expressions of fear from Republican congressmen, but with an acknowledgement that American capitalism is sick and it needs a regimen of life-saving treatment.

Some of us want to save it and have been arguing accordingly.

In the late 1990s, Alan Greenspan—who is to laissez-faire capitalism what Herman Cain is to pizza—was worrying about the uneven distribution of America’s wealth and income, and none other than The Wall Street Journal would jump his Randian behind for “blathering about income inequality.”

In 2002 Greenspan said of the increasing compensation for corporate executives:

It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously.

And in 2005 he dared to say:

In a democratic society, a stark bifurcation of wealth and income trends among large segments of the population can fuel resentment and political polarization. These social developments can lead to political clashes and misguided economic policies that work to the detriment of the economy and society as a whole.

About the widely divergent outcomes of people in the labor market, Greenspan told a Joint Economic Committee in 2005:

As I’ve often said, this is not the type of thing which a democratic society – a capitalist democratic society – can really accept without addressing.

The way Republicans these days have chosen to address the fruit of Alan Greenspan’s fears—the Wall Street protesters around the country—is by calling them an un-American mob who must be delegitimized and ridiculed at all costs.

A sure sign that the protesters are having an effect.

Is Ben Bernanke A Closet Democrat?

If you watched the television reporting on Federal Reserve Chairman Ben Bernanke’s appearance before Congress’ Joint Economic Committee yesterday, you likely don’t know much of what he said, except for this:

…the economy is, the recovery is close to faltering.

That clip was played over and over, without proper context.  What Bernanke was doing, in context, was simply defending the Fed’s decision a couple of weeks ago (“Operation Twist”) to replace $400 billion worth of short-term securities in the Fed’s portfolio with longer-term securities.  While not a game-changing move, said Bernanke, it was,

…particularly important now that the economy is, the recovery is close to faltering.

His expectation, though, for the economic recovery is that it will continue, albeit slowly, and that GDP growth should pick up the second half of this year.

That’s not very exciting for broadcast on cable or nightly news, however.

And what you may have missed in the sensationalist TV coverage is that Bernanke essentially informed Congress in rather loud terms—for  a Fed chief—that it had better get its act together and (1) address “long-run fiscal sustainability” while (2) avoiding “fiscal actions that could impede the ongoing economic recovery.”  If that sounds familiar, that is exactly what President Obama and the Democrats have been saying since the fuss over the national debt became a going-over-the-cliff-tomorrow issue.

Here is what Bernanke said in his statement:

These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term.

Here’s what Mr. Obama said in August:

When Congress gets back in September, my basic argument to them is this:  We should not have to choose between getting our fiscal house in order and jobs and growth.  We can’t afford to do just one or the other.  We got to do both. 

Hmm. No wonder the right-wing wants to indict Bernanke for treason. He agrees with Obama on the salient economic issue of our times.

In any case, an interesting question was asked of Bernanke by an interesting man, Vermont Senator Bernie Sanders:

SANDERS: …Mr. Chairman, as you know there are people demonstrating against Wall Street in New York City and other cities around the country, and I think the perception on the part of these demonstrators—and millions of Americans—is that as a result of the greed, the recklessness and the illegal behavior on Wall Street, we were plunged into this horrendous recession we are currently in. Do you agree with that assessment? Did Wall Street’s greed and recklessness cause this recession that led to so many people losing their jobs?

BERNANKE: Excessive risk-taking on Wall Street had a lot to do with it and so did some failures on the parts of regulators.

Note that Bernanke didn’t say that efforts to help poor minorities buy houses was the cause of the problem—a typical charge from conservatives.  “Excessive risk-taking” translates into “greed and recklessness.” And the “failures on the parts of regulators” tranlates into a repudiation of Republcan anti-regulatory philosophy.  Period.

Also interesting was Bernanke’s acknowledgement of the incredible wealth gap in America.  Rep. Maurice Hinchey (D-NY) read off the following statistics:

♦ The top 1% of Americans hold 33% of the total wealth.

♦ The top 5% hold nearly 60% of the total wealth.

♦ The top 10% hold 72% of the total wealth.

♦ The bottom 50% of Americans hold only 3% of the total wealth.

Mr. Hinchey asked Bernanke what caused this gap and what can we do about it.  Bernanke said:

It’s not a new phenomenon, it’s been going on for 30 or 40 years.

Let me see… What happened a little over 30 years ago?  Oh, yeah. Reaganomics was born.

But Bernanke said of the wealth inequality that “a lot of it has to do with divergent educational skill levels,” which, of course, is true.  But he ignored the point of Rep. Hinchey’s question, which was our tax policies—tax cuts—have had a lot to do with it, too.

Finally, Bernanke was asked about the role the housing crisis is playing relative to the sputtering economy, and he said, “Housing is very central to the situation we have now.”  Loss of equity means less willingness to spend, he noted.

Rep. Elijah Cummings (D-MD) asked him:

CUMMINGS: Would you agree that it’s going to be impossible to resolve our economic situation, when you’ve got people losing their houses at the rate they are losing them?  Would you agree with that?

BERNANKE: I would agree with that, yeah.

Think about that. The Chairman of the Federal Reserve—essentially our national economist—agrees that it is “impossible to resolve our economic situation” while folks are losing their homes at breathtaking rates. 

And while neither political party has made the foreclosure issue a national priority—as they should—some Democrats have urged President Obama to take some additional action beyond his mortgage modification program, which hasn’t worked so well.  

Just six weeks ago, Sen. Jeff Merkley (D-OR) wrote the President a letter strongly advising him to do something about the foreclosure crisis:

…we can and should adopt an aggressive strategy to substantially reduce foreclosures nationally.  There are as many as five million foreclosures anticipated to come – this is a huge tragedy for individual families but it is also a drag on our communities and our economy as a whole.  Our economy cannot get out of the ditch with so much uncertainty hovering over so many homeowners.

Again, if you followed Bernanke’s testimony on this and other issues, he and the Democrats seem to be on the same page. Which means that should Rick Perry get elected president, Bernanke can expect to be charged with treason soon after.

Mayor Bloomberg And Zuccotti Park

There are a lot of things to like about New York City mayor Michael Bloomberg, who has a net worth of about a gazillion dollars.  But Bloomberg’s recent response to the ongoing demonstrations on Wall Street, known as OccupyWallStreet, is not one of the things to like.

To be sure, some of the stuff happening in and around the privately-owned Zuccotti Park in Lower Manhattan is not pretty, but the protests seem to be generated by a what-else-can-we-do frustration with an unsettling fact:  Wall Street banksters nearly brought down the economy and instead of receiving punishment, they were bailed out and subsequently rewarded for their greed and institutional corruption.

That sort of thing tends to piss off working people.

But Bloomberg’s response on Friday was not just off-putting, it was typical of the moneyed class.  The response came during a local radio show, hosted by John Gambling:

GAMBLING: Mr. Mayor, let’s talk about Zuccotti Park and the protesters. How do you end that thing?

BLOOMBERG: The protesters are protesting against people who make $40-50,000-a-year and are struggling to make ends meet. That’s the bottom line. Those are the people that work on Wall Street or on the finance sector…People in this day and age need support for their employers. We need the banks—if the banks don’t go out and make loans we will not come out of our economic problems, we will not have jobs. And so anything we can do to responsibly help the banks do that, encourage them to do that, is what we need.

I think we spend much too much time in this country worrying about how we got into problems as opposed to how we go forward…Also we always tend to blame the wrong people. We blame the banks. They were part of this, but so were Freddie Mac and Fannie Mae and Congress and you and me and everybody…

You see?  Forget for a moment the lie about the target of the protesters, which most certainly isn’t the janitors or the doormen or whoever those $40-50,000-a-year folks are that Bloomberg referenced.

Bloomberg is saying that when it comes down to it, everybody is to blame, not just those greedy bankers.  And besides that, we need those greedy bankers because without them our economy won’t work—and “we will not have jobs” and, “People in this day and age need support for their employers.”

So, the gilded-class’ line is, as expressed through Bloomberg’s nothing-to-see-here analysis: We are just supposed to forget about the greed, the corruption, and the criminality in the years leading up to the 2008 near-death of not only our economy, but the world’s. In the name of “jobs,” instead of looking back we should be good little minions and give the banksters our blessing to continue doing to us what they are so good at. 

That kind of thinking, advanced by a man who never has to worry about where his next Delmonico Double Rib Chop will come from, is what has kept working people from getting a proportional piece of the economic pie, and it is why thousands continue to protest in Zuccotti Park and elsewhere.

“Cash Warfare”

The “leaderless resistance movement” known as Occupy Wall Street, in case you haven’t noticed, has been scaring conservatives for almost two weeks now.

Related to that, there was a brilliant, must-see opening segment on Thursday night’s Rachel Maddow Show:

Vodpod videos no longer available.

When Will Democrats Learn?

Sam Stein reported this today:

There is increasing concern among Democratic officials both on and off the Hill that Republicans will draw out negotiations over raising the nation’s debt ceiling in an effort to institute one of several blunter deficit-reduction measures.

In recent days, chatter among operatives and Hill aides has centered on one specific addition the GOP is pushing in exchange for signing off on a debt limit increase. A cap on overall government spending — bringing it to 20.6 percent of GDP over the course of ten years — has been sharply criticized as too crude and potentially damaging for a fragile economy.

Stein says that this so-called “CAP Act” has bipartisan support in both the House and Senate. Missouri’s own Claire McCaskill is a co-sponsor in the Senate, and Stein mentioned that McCaskill’s office did not indicate whether the CAP Act should be attached to any deficit ceiling vote.

It should not be.

Here’s my point: Whether the spending cap idea is good or bad, it’s preposterous that Democrats should negotiate over the idea while Republicans are holding hostage a raise in the debt ceiling next month. 

Something so serious should not be negotiated at the point of a gun. But Republicans have achieved so much by holding a gun to the heads of ordinary Americans, they naturally want to continue with that strategy.

But this time they would be holding a gun to the heads of Wall Street banksters and Democrats need to understand that Republicans will not pull the trigger because of that.  Therefore they should not make any kind of deal over the debt ceiling that would lock in a cap on government spending or anything else of consequence.  Those kinds of ideas belong in the 2012 budget debate, not in a debate about the full faith and credit of our federal government.

The truth is that no matter what teapartiers in the House demand, Boehner, if he wants to act responsibly, needs only a handful of Republicans to pass an increase in the debt ceiling.  There are plenty of Democrats in the House to get a relatively clean bill passed.

If Boehner cannot get a handful of Republicans, then America should know that Republicans are willing to risk a financial calamity in service to their extremist ideology.

In the Senate, it’s fairly obvious now that no Republican senator is willing to filibuster the debt ceiling bill, therefore only 50 votes are needed to pass a relatively clean one. 

Given these realities, Democrats need to stiffen their spine and tell Republicans that they will not be rolled again.  Sending signals like those Sam Stein reported is not a good strategy.

When will they ever learn?

Democrats Have A Choice

I have heard liberals and Democrats I respect very much get it all wrong regarding the nature of the upcoming battle over raising the federal debt ceiling.

One analysis has it that Speaker Boehner is hamstrung by the Tea Party in the House and he can use that as leverage during upcoming negotiations with Obama and Reid. 

The gist of it is that Boehner can say to Democrats that he wants to do the right thing but those crazy teapartiers won’t let him.  He will argue that he needs something big—substantial cuts, say—to take back to the ravenous nuts in order to keep them in line. Otherwise, he will claim, those crazy extremist Republicans would be willing to tank the economy.

But that analysis is wanting.  Boehner can’t credibly make the argument that there’s no way to raise the debt ceiling without giving irresponsible House Republicans want they want.  Somehow, people forget that there are 193 Democrats in the House.  Only a handful of responsible Republicans—if there are any left in the House—are needed to get the debt ceiling raised and fend off a potential crisis.

If Boehner can’t find a handful of Republicans who care more about the country than they do their conservative ideology, then Democrats should stand back and watch Republicans destroy themselves, as the ideologues put the financial industry—and likely the entire economy—in the proverbial ditch again.  Not to mention that those around the world who buy U.S. Treasury bonds would have good reason to believe that America is no longer a stable place in which to invest.

Yes, Democrats must have the guts to call Boehner’s and the Tea Party’s bluffs.  If the GOP sabotages Wall Street (very unlikely since they have recently kissed and made up) and by extension Main Street, then that once-noble party will seal its fate for a generation.  The likely scenario, though, is that enough Republicans will join Democrats and raise the debt ceiling, thus averting potential disaster. 

Democrats, therefore, shouldn’t give an inch on the debt ceiling debate.

The other analysis I have heard involves the fact that 235 House Republicans have made love to tax-hater Grover Norquist and pledged their undying fealty to the concept that the government already taxes too much.  In post-orgasmic promise mode, they promise Grover never to raise taxes.

Never mind that revenues, as part of the overall economy, are lower now than any time since 1950. Never mind that the top marginal rates are lower than they’ve been since 1931.  Never mind that we are running huge deficits and piling up unfathomable debt, substantially due to a lack of federal income.

This analysis, much like the other one, seems to put Democrats in a box.  Republicans will not compromise on the revenue issue, so Democrats have to compromise on budget austerity.  In fact, under this analysis, Democrats have to essentially rubber-stamp the severe austerity advocated by the most extremist Republicans in history or watch the economy crumble. 

Again, Boehner, unless he meant it when he said there is no daylight between him and the Tea Party, can rely on sensible Democrats to pull his party’s chestnuts out of the debt-ceiling fire.  He can make a deal that will satisfy Democrats and save the economy and simultaneously allow his extremist colleagues to vote against the debt ceiling increase.  Or, he can risk our economic recovery—and risk the full faith and credit of the United States—and possibly send us into a recession greater than the one we just witnessed—or worse.

In short, Democrats can force some in the Republican Party to be responsible stewards of the nation’s business.  Or they can join in with Republicans and kill our nation’s well-being cut by cut by cut by cut.

Democrats, who control two-thirds of the relevant government in this case, have that obvious choice. It’s time Democrats—and the rest of America—find out if Republicans are willing to throw America’s economic fortunes to the wind out of a fanatical and dangerously misplaced loyalty to a discredited political ideology.

[top photo: AP; bottom: LA Progressive]

Obama’s Real Waterloo?

Much anger has been directed toward TARP—colloquially known as the bank bailout—and some of it is totally justified. 

In yesterday’s New York Times, Neil Barofsky, on his last day as special inspector general of the Troubled Asset Relief Program, wrote that the program,

failed to meet some of its most important goals.

Those goals, he argues, involved “protecting home values and preserving homeownership.”  He wrote:

These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide.

The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.

Obviously, judging by the condition of the economy—significantly hamstrung by the home mortgage nightmare—not much was done in terms of purchasing mortgages and helping homeowners.  Instead,

Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.

Naturally, the promise to restore lending wasn’t backed up with an “effective policy or effort to compel the extension of credit“:

There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.

Despite a feeble and mostly failed attempt in 2009 to help distressed homeowners, “foreclosures continue to mount, with 8 million to 13 million filings forecast over the program’s lifetime.”  And according to Barofsky, Tim Geithner and Treasury have no plans to change things.

On top of all that, Barofsky makes the sad claim that it appears the too-big-to-fail banks—who “no matter how reckless” “reasonably assume” taxpayers will bail them out again—are still too big to fail, the Treasury Department failing to “support real efforts at reform,” including efforts “to simplify or shrink the most complex financial institutions.”

As Barofsky notes,

The biggest banks are 20 percent larger than they were before the crisis and control a larger part of our economy than ever.

That statement is supported by the Wall Street Journal, which reported that all of the gains leading to record-setting fourth-quarter corporate profits were “in the financial sector“:

After rising like the Phoenix, the financial industry now accounts for about 30% of all operating profits. That’s an amazing share given that the sector accounts for less than 10% of the value added in the economy.

Here’s the dramatic swing, from the Journal article:

Look at that chart and remember the Journal‘s point:

That’s an amazing share given that the sector accounts for less than 10% of the value added in the economy.”  Less than 10%.

TARP was necessary to avoid a complete collapse of the financial system, Barofsky says, but its most lasting legacy may be that,

Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals — whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in — may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises.

If so, this may be Obama’s Waterloo.

Blanche Lincoln: A New Hero Of The Left?

A story today by The New Republic about the financial reform efforts in Congress begins ominously:

Some two dozen executives from large corporations will be descending on Capitol Hill today to make the case against over-regulating derivatives.

Oh, no.  This financial stuff is hard enough to follow without also having to worry about a legion of Wall Street defenders assaulting our legislators.

The source of the latest angst among Chamber-of-Commerce types apparently comes from none other than Blanche Lincoln, the Democrat that lefties hate for her role in the health care reform fiasco in Congress, who now appears to be out-leftying other more liberal Senators on financial reform.

Lincoln has a new proposal to regulate derivatives, described by Andy Kroll of Mother Jones as,

…those tricky financial products, whose value is linked to the price of commodities or interest rates, used to hedge risk and also make risky gambles.

Calling for transparency in derivatives trading, something now lacking in the system, Lincoln proposes an exchange that will, if enacted, protect against another “AIG-esque collapse” because the inherent risk in such trading will not be concentrated in one place, but spread throughout the members of the clearinghouse.

Another important feature of Lincoln’s proposal, according to Kroll:

Lincoln’s bill would also call for swaps outfits [derivatives trading] to be cut out of big investment banks and essentially made into separate operations. This, of course, would prevent crippling losses on a swap desk from dragging down the rest of the firm—again, a la AIG’s Financial Products division mortally wounding the entire company.

Kroll quotes Felix Salmon, a financial journalist and blogging editor at Reuters, who is not exactly optimistic about Lincoln’s proposal suceeding:

…it’s also pretty clear that none of this is going to happen. Never mind Republican support: this is going to have a hard time even getting Democratic support. It’s all a good idea, but it’s far too radical: while it might have had more of a chance if it had been introduced during the height of the crisis, at this point the banks have got their mojo working again and will quite easily be able to ensure that the beating heart of Lincoln’s proposals is surgically excised before it even gets anywhere near a vote.

The reference to “banks” and “mojo” leads us back to today’s article in The New Republic. As the TNR article makes clear, Lincoln’s proposal rightly exempts from onerous regulation, “derivatives used in commercial activity,” such as when an airline tries to lock in future fuel prices by signing a contract today and betting prices will be higher later:

What the Lincoln bill would regulate is the use of derivatives for more speculative purposes, like a straight-up bet between two Wall Street firms on the future price of oil.

So, why would corporate leaders, who engage in the kind of derivative trading exempted by Lincoln’s bill, make a well-orchestrated appearance in Washington D.C.? TNR writer, Noam Scheiber, explains:

Big financial firms like Goldman Sachs and JP Morgan generate billions of dollars each year as derivatives dealers. But, over the past several weeks, as Democrats’ have escalated their rhetoric and explicitly targeted Wall Street, the big banks have had trouble getting their message out on Capitol Hill. All the more so thanks to Friday’s SEC complaint accusing Goldman of fraud. “The banks’ credibility, their ability to influence this, is limited,” says one derivatives industry lawyer.

And so, instead of mostly making the pitch against regulation themselves, the big derivatives dealers are counting on their corporate clients to do a lot of heavy lifting for them…

In other words, these days no one would believe anything proceeding from the mouths of bankers* who almost bankrupted the nation through, among other things, unfettered trading in derivatives, so they have to go to the bullpen for some help, namely corporate leaders who can leverage the fact that they “employ hundreds of thousands of people across the country.”

While this tactic may seem cynical, worse yet is an even more cynical argument designed to water down any final reform bill, as reported by Scheiber:

…top Wall Street executives have conveyed directly to senior White House officials in recent days, that the administration faces almost as much peril as Wall Street does if it brings a partisan bill to the Senate floor. Should that happen, the argument goes, Senate liberals like Maria Cantwell and Byron Dorgan could triumph on amendments that would move the bill well to the left of where even the administration wants it.

Let’s hope that the high-rollers on Wall Street are once again wrong about their calculations and this time their gambling failures will result not in the near-collapse of our financial system, but in legislation that will finally address their irresponsibility and profligacy, funded most recently by American taxpayers.


*”Bankers” is a term used loosely here. Just to illustrate what’s at stake for the so-called bankers, here are some facts from
Globally, the $450 trillion over-the-counter derivatives market is big business for the banks. Scaling back these operations, or forcing high-volume contracts to move to exchanges, could make trading much less profitable for dealers. Customized contracts would continue but face higher costs.
Lawmakers have sought ways to rein in the opaque world of over-the-counter derivatives after the financial instruments were blamed for exacerbating the financial crisis and prompting the U.S. government bailout of companies such as American International Group (AIG.N).
Jamie Dimon, chief executive of JPMorgan Chase & Co (JPM.N), told bank analysts on Wednesday that forcing dealers to trade derivatives on exchanges could cost his firm up to a couple of billion dollars in revenue annually.
“It will be a negative,” he said. JPMorgan has the largest derivatives exposure of the U.S. banks.
Just five banks account for 97 percent of the total $212.8 trillion worth of derivatives contracts held by U.S. commercial banks, according to a fourth-quarter survey by the Office of the Comptroller of the Currency.


Can anyone say, “Too big to fail?”

Ready For Your Breakfast, Goldman Sachs?

Admittedly, some of the stuff surrounding the near-collapse of the financial industry and the current reform efforts to prevent another disaster are a little hard to understand sometimes, but Wednesday Barney Frank offered some clarity. 

He said that the Republican’s opposition to the Democratic financial reform bill in the Senate was based either on ignorance or dishonesty. It’s not that Republicans are in bed with Wall Street bankers, he said, it’s that Wall Street bankers are in bed and Republicans are serving them breakfast in bed.

Now, that I can understand.

All day Wednesday I listened to the on-the-half-hour news updates on right-wing radio, I listened to NPR, and I watched the network news Wednesday evening,  and I heard pretty much the same thing: Republicans oppose the financial reform bill proposed by the Democrats because, in the words of Mitch McConnell, the chief of Republican obstructionists in the U.S. Senate, it “guarantees future bailouts of Wall Street banks” and “endless taxpayer bailouts of Wall Street banks.

The only problem with what McConnell said is that it happens to be a lie, and it is a lie that all national reporters know is a lie, but for some reason neglected to point out. 

In fact, it is a lie constructed by the Republican propagandist and lie-maker, Dr. Frank Luntz, as Sam Stein pointed out a few months ago:

…Republican message guru Frank Luntz has put together a playbook to help derail financial regulatory reform… Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.

Stein obtained a 17-page memo titled, “The Language of Financial Reform,” and you have to hand it to the Republicans: they know how to stick to a game plan. 

Unfortunately for the American people, that game plan is designed to offer lies to voters in order to exploit their dislike of Wall Street, all the while Republicans are whispering to the nervous bankers/gamblers that they will do everything they can to protect their racket, particularly their gambling in the mystical world of derivatives.

Most galling of all, though, is Luntz’s view on the Consumer Financial Protection Agency, which as proposed would put the interests of consumers ahead of the often predatory lenders who caused so much damage to the economy. Luntz wrote:

Ordinarily, calling for a new government program “to protect consumers” would be extraordinary popular. But these are not ordinary times.  The American people are not just saying “no.”  They are saying “hell no” to more government agencies, more bureaucrats, and more legislation crafted by special interests.

Why would the American people reject an agency designed to protect their interests?  Because the Republicans were so bad at regulating the financial industry (deliberately or not), the public does not trust the government to do so in the future. In other words, because of either Republican malfeasance—failure to adequate do the job of ensuring that things were not spinning out of control—or because of an ideological willingness to let bankers have their way—all government efforts are tainted. 

Here are a couple of graphs Luntz uses to show the lack of confidence among the public:

I can’t think of anything more cynical than to use your own failures as a way to both screw the public and get yourself elected, but then we are talking about the Republican Party. 

Are you ready for your breakfast, Goldman Sachs?  Need your pillow fluffed up?  How about a….

That’ll have to wait until Republicans are in power again.

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