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Secrets and Lies of the Wall Street Bailout January 9, 2013

Posted by rogerhollander in Economic Crisis.
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Roger’s note: One does not have to have a Ph.D. in Economics to understand the words “lies” and “secrets.”  Matt Taibbi is one of the finest journalists writing today, and he painstakingly outlines the fraud perpetuated on the American people by the Republicrat government in collusion with the Wall Street financial institutions.

 

Published on Tuesday, January 8, 2013 by Rolling Stone

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come

by Matt Taibbi

It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

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(Illustration by Victor Juhasz)

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

How Wall Street Killed Financial Reform

But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn’t the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. “It is,” says former bailout Inspector General Neil Barofsky, “the ultimate bait-and-switch.”

The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven’t run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.

They Lied to Pass the Bailout

Today what few remember about the bailouts is that we had to approve them. It wasn’t like Paulson could just go out and unilaterally commit trillions of public dollars to rescue Goldman Sachs and Citigroup from their own stupidity and bad management (although the government ended up doing just that, later on). Much as with a declaration of war, a similarly extreme and expensive commitment of public resources, Paulson needed at least a film of congressional approval. And much like the Iraq War resolution, which was only secured after George W. Bush ludicrously warned that Saddam was planning to send drones to spray poison over New York City, the bailouts were pushed through Congress with a series of threats and promises that ranged from the merely ridiculous to the outright deceptive. At one meeting to discuss the original bailout bill – at 11 a.m. on September 18th, 2008 – Paulson actually told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action, and that the world economy would collapse “within 24 hours.”

To be fair, Paulson started out by trying to tell the truth in his own ham-headed, narcissistic way. His first TARP proposal was a three-page absurdity pulled straight from a Beavis and Butt-Head episode – it was basically Paulson saying, “Can you, like, give me some money?” Sen. Sherrod Brown, a Democrat from Ohio, remembers a call with Paulson and Federal Reserve chairman Ben Bernanke. “We need $700 billion,” they told Brown, “and we need it in three days.” What’s more, the plan stipulated, Paulson could spend the money however he pleased, without review “by any court of law or any administrative agency.”

The White House and leaders of both parties actually agreed to this preposterous document, but it died in the House when 95 Democrats lined up against it. For an all-too-rare moment during the Bush administration, something resembling sanity prevailed in Washington.

So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 billion of troubled mortgages from the banks and then modify them to help struggling homeowners. Section 109 of the act, in fact, specifically empowered the Treasury secretary to “facilitate loan modifications to prevent avoidable foreclosures.” With that promise on the table, wary Democrats finally approved the bailout on October 3rd, 2008. “That provision,” says Barofsky, “is what got the bill passed.”

But within days of passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favor of direct injections of billions in cash into companies like Goldman and Citigroup. Overnight, Section 109 was unceremoniously ditched, and what was pitched as a bailout of both banks and homeowners instantly became a bank-only operation – marking the first in a long series of moves in which bailout officials either casually ignored or openly defied their own promises with regard to TARP.

Congress was furious. “We’ve been lied to,” fumed Rep. David Scott, a Democrat from Georgia. Rep. Elijah Cummings, a Democrat from Maryland, raged at transparently douchey TARP administrator (and Goldman banker) Neel Kashkari, calling him a “chump” for the banks. And the anger was bipartisan: Republican senators David Vitter of Louisiana and James Inhofe of Oklahoma were so mad about the unilateral changes and lack of oversight that they sponsored a bill in January 2009 to cancel the remaining $350 billion of TARP.

So what did bailout officials do? They put together a proposal full of even bigger deceptions to get it past Congress a second time. That process began almost exactly four years ago – on January 12th and 15th, 2009 – when Larry Summers, the senior economic adviser to President-elect Barack Obama, sent a pair of letters to Congress. The pudgy, stubby­fingered former World Bank economist, who had been forced out as Harvard president for suggesting that women lack a natural aptitude for math and science, begged legislators to reject Vitter’s bill and leave TARP alone.

In the letters, Summers laid out a five-point plan in which the bailout was pitched as a kind of giant populist program to help ordinary Americans. Obama, Summers vowed, would use the money to stimulate bank lending to put people back to work. He even went so far as to say that banks would be denied funding unless they agreed to “increase lending above baseline levels.” He promised that “tough and transparent conditions” would be imposed on bailout recipients, who would not be allowed to use bailout funds toward “enriching shareholders or executives.” As in the original TARP bill, he pledged that bailout money would be used to aid homeowners in foreclosure. And lastly, he promised that the bailouts would be temporary – with a “plan for exit of government intervention” implemented “as quickly as possible.”

The reassurances worked. Once again, TARP survived in Congress – and once again, the bailouts were greenlighted with the aid of Democrats who fell for the old “it’ll help ordinary people” sales pitch. “I feel like they’ve given me a lot of commitment on the housing front,” explained Sen. Mark Begich, a Democrat from Alaska.

But in the end, almost nothing Summers promised actually materialized. A small slice of TARP was earmarked for foreclosure relief, but the resultant aid programs for homeowners turned out to be riddled with problems, for the perfectly logical reason that none of the bailout’s architects gave a shit about them. They were drawn up practically overnight and rushed out the door for purely political reasons – to trick Congress into handing over tons of instant cash for Wall Street, with no strings attached. “Without those assurances, the level of opposition would have remained the same,” says Rep. Raúl Grijalva, a leading progressive who voted against TARP. The promise of housing aid, in particular, turned out to be a “paper tiger.”

HAMP, the signature program to aid poor homeowners, was announced by President Obama on February 18th, 2009. The move inspired CNBC commentator Rick Santelli to go berserk the next day – the infamous viral rant that essentially birthed the Tea Party. Reacting to the news that Obama was planning to use bailout funds to help poor and (presumably) minority homeowners facing foreclosure, Santelli fumed that the president wanted to “subsidize the losers’ mortgages” when he should “reward people that could carry the water, instead of drink the water.” The tirade against “water drinkers” led to the sort of spontaneous nationwide protests one might have expected months before, when we essentially gave a taxpayer-funded blank check to Gamblers Anonymous addicts, the millionaire and billionaire class.

In fact, the amount of money that eventually got spent on homeowner aid now stands as a kind of grotesque joke compared to the Himalayan mountain range of cash that got moved onto the balance sheets of the big banks more or less instantly in the first months of the bailouts. At the start, $50 billion of TARP funds were earmarked for HAMP. In 2010, the size of the program was cut to $30 billion. As of November of last year, a mere $4 billion total has been spent for loan modifications and other homeowner aid.

In short, the bailout program designed to help those lazy, job-averse, “water-drinking” minority homeowners – the one that gave birth to the Tea Party – turns out to have comprised about one percent of total TARP spending. “It’s amazing,” says Paul Kiel, who monitors bailout spending for ProPublica. “It’s probably one of the biggest failures of the Obama administration.”

The failure of HAMP underscores another damning truth – that the Bush-Obama bailout was as purely bipartisan a program as we’ve had. Imagine Obama retaining Don Rumsfeld as defense secretary and still digging for WMDs in the Iraqi desert four years after his election: That’s what it was like when he left Tim Geithner, one of the chief architects of Bush’s bailout, in command of the no-strings­attached rescue four years after Bush left office.

Yet Obama’s HAMP program, as lame as it turned out to be, still stands out as one of the few pre-bailout promises that was even partially fulfilled. Virtually every other promise Summers made in his letters turned out to be total bullshit. And that includes maybe the most important promise of all – the pledge to use the bailout money to put people back to work.

They Lied About Lending

Once TARP passed, the government quickly began loaning out billions to some 500 banks that it deemed “healthy” and “viable.” A few were cash loans, repayable at five percent within the first five years; other deals came due when a bank stock hit a predetermined price. As long as banks held TARP money, they were barred from paying out big cash bonuses to top executives.

But even before Summers promised Congress that banks would be required to increase lending as a condition for receiving bailout funds, officials had already decided not to even ask the banks to use the money to increase lending. In fact, they’d decided not to even ask banks to monitor what they did with the bailout money. Barofsky, the TARP inspector, asked Treasury to include a requirement forcing recipients to explain what they did with the taxpayer money. He was stunned when TARP administrator Kashkari rejected his proposal, telling him lenders would walk away from the program if they had to deal with too many conditions. “The banks won’t participate,” Kashkari said.

Barofsky, a former high-level drug prosecutor who was one of the only bailout officials who didn’t come from Wall Street, didn’t buy that cash-desperate banks would somehow turn down billions in aid. “It was like they were trembling with fear that the banks wouldn’t take the money,” he says. “I never found that terribly convincing.”

In the end, there was no lending requirement attached to any aspect of the bailout, and there never would be. Banks used their hundreds of billions for almost every purpose under the sun – everything, that is, but lending to the homeowners and small businesses and cities they had destroyed. And one of the most disgusting uses they found for all their billions in free government money was to help them earn even more free government money.

To guarantee their soundness, all major banks are required to keep a certain amount of reserve cash at the Fed. In years past, that money didn’t earn interest, for the logical reason that banks shouldn’t get paid to stay solvent. But in 2006 – arguing that banks were losing profits on cash parked at the Fed – regulators agreed to make small interest payments on the money. The move wasn’t set to go into effect until 2011, but when the crash hit, a section was written into TARP that launched the interest payments in October 2008.

In theory, there should never be much money in such reserve accounts, because any halfway-competent bank could make far more money lending the cash out than parking it at the Fed, where it earns a measly quarter of a percent. In August 2008, before the bailout began, there were just $2 billion in excess reserves at the Fed. But by that October, the number had ballooned to $267 billion – and by January 2009, it had grown to $843 billion. That means there was suddenly more money sitting uselessly in Fed accounts than Congress had approved for either the TARP bailout or the much-loathed Obama stimulus. Instead of lending their new cash to struggling homeowners and small businesses, as Summers had promised, the banks were literally sitting on it.

Today, excess reserves at the Fed total an astonishing $1.4 trillion.”The money is just doing nothing,” says Nomi Prins, a former Goldman executive who has spent years monitoring the distribution of bailout money.

Nothing, that is, except earning a few crumbs of risk-free interest for the banks. Prins estimates that the annual haul in interest­ on Fed reserves is about $3.6 billion – a relatively tiny subsidy in the scheme of things, but one that, ironically, just about matches the total amount of bailout money spent on aid to homeowners. Put another way, banks are getting paid about as much every year for not lending money as 1 million Americans received for mortgage modifications and other housing aid in the whole of the past four years.

Moreover, instead of using the bailout money as promised – to jump-start the economy – Wall Street used the funds to make the economy more dangerous. From the start, taxpayer money was used to subsidize a string of finance mergers, from the Chase-Bear Stearns deal to the Wells Fargo­Wachovia merger to Bank of America’s acquisition of Merrill Lynch. Aided by bailout funds, being Too Big to Fail was suddenly Too Good to Pass Up.

Other banks found more creative uses for bailout money. In October 2010, Obama signed a new bailout bill creating a program called the Small Business Lending Fund, in which firms with fewer than $10 billion in assets could apply to share in a pool of $4 billion in public money. As it turned out, however, about a third of the 332 companies that took part in the program used at least some of the money to repay their original TARP loans. Small banks that still owed TARP money essentially took out cheaper loans from the government to repay their more expensive TARP loans – a move that conveniently exempted them from the limits on executive bonuses mandated by the bailout. All told, studies show, $2.2 billion of the $4 billion ended up being spent not on small-business loans, but on TARP repayment. “It’s a bit of a shell game,” admitted John Schmidt, chief operating officer of Iowa-based Heartland Financial, which took $81.7 million from the SBLF and used every penny of it to repay TARP.

Using small-business funds to pay down their own debts, parking huge amounts of cash at the Fed in the midst of a stalled economy – it’s all just evidence of what most Americans know instinctively: that the bailouts didn’t result in much new business lending. If anything, the bailouts actually hindered lending, as banks became more like house pets that grow fat and lazy on two guaranteed meals a day than wild animals that have to go out into the jungle and hunt for opportunities in order to eat. The Fed’s own analysis bears this out: In the first three months of the bailout, as taxpayer billions poured in, TARP recipients slowed down lending at a rate more than double that of banks that didn’t receive TARP funds. The biggest drop in lending – 3.1 percent – came from the biggest bailout recipient, Citigroup. A year later, the inspector general for the bailout found that lending among the nine biggest TARP recipients “did not, in fact, increase.” The bailout didn’t flood the banking system with billions in loans for small businesses, as promised. It just flooded the banking system with billions for the banks.

They Lied About the Health of the Banks

The main reason banks didn’t lend out bailout funds is actually pretty simple: Many of them needed the money just to survive. Which leads to another of the bailout’s broken promises – that taxpayer money would only be handed out to “viable” banks.

Soon after TARP passed, Paulson and other officials announced the guidelines for their unilaterally changed bailout plan. Congress had approved $700 billion to buy up toxic mortgages, but $250 billion of the money was now shifted to direct capital injections for banks. (Although Paulson claimed at the time that handing money directly to the banks was a faster way to restore market confidence than lending it to homeowners, he later confessed that he had been contemplating the direct-cash-injection plan even before the vote.) This new let’s-just-fork-over-cash portion of the bailout was called the Capital Purchase Program. Under the CPP, nine of America’s largest banks – including Citi, Wells Fargo, Goldman, Morgan Stanley, Bank of America, State Street and Bank of New York Mellon – received $125 billion, or half of the funds being doled out. Since those nine firms accounted for 75 percent of all assets held in America’s banks – $11 trillion – it made sense they would get the lion’s share of the money. But in announcing the CPP, Paulson and Co. promised that they would only be stuffing cash into “healthy and viable” banks. This, at the core, was the entire justification for the bailout: That the huge infusion of taxpayer cash would not be used to rescue individual banks, but to kick-start the economy as a whole by helping healthy banks start lending again.

This announcement marked the beginning of the legend that certain Wall Street banks only took the bailout money because they were forced to – they didn’t need all those billions, you understand, they just did it for the good of the country. “We did not, at that point, need TARP,” Chase chief Jamie Dimon later claimed, insisting that he only took the money “because we were asked to by the secretary of Treasury.” Goldman chief Lloyd Blankfein similarly claimed that his bank never needed the money, and that he wouldn’t have taken it if he’d known it was “this pregnant with potential for backlash.” A joint statement by Paulson, Bernanke and FDIC chief Sheila Bair praised the nine leading banks as “healthy institutions” that were taking the cash only to “enhance the overall performance of the U.S. economy.”

But right after the bailouts began, soon-to-be Treasury Secretary Tim Geithner admitted to Barofsky, the inspector general, that he and his cohorts had picked the first nine bailout recipients because of their size, without bothering to assess their health and viability. Paulson, meanwhile, later admitted that he had serious concerns about at least one of the nine firms he had publicly pronounced healthy. And in November 2009, Bernanke gave a closed-door interview to the Financial Crisis Inquiry Commission, the body charged with investigating the causes of the economic meltdown, in which he admitted that 12 of the 13 most prominent financial companies in America were on the brink of failure during the time of the initial bailouts.

On the inside, at least, almost everyone connected with the bailout knew that the top banks were in deep trouble. “It became obvious pretty much as soon as I took the job that these companies weren’t really healthy and viable,” says Barofsky, who stepped down as TARP inspector in 2011.

This early episode would prove to be a crucial moment in the history of the bailout. It set the precedent of the government allowing unhealthy banks to not only call themselves healthy, but to get the government to endorse their claims. Projecting an image of soundness was, to the government, more important than disclosing the truth. Officials like Geithner and Paulson seemed to genuinely believe that the market’s fears about corruption in the banking system was a bigger problem than the corruption itself. Time and again, they justified TARP as a move needed to “bolster confidence” in the system – and a key to that effort was keeping the banks’ insolvency a secret. In doing so, they created a bizarre new two-tiered financial market, divided between those who knew the truth about how bad things were and those who did not.

A month or so after the bailout team called the top nine banks “healthy,” it became clear that the biggest recipient, Citigroup, had actually flat-lined on the ER table. Only weeks after Paulson and Co. gave the firm $25 billion in TARP funds, Citi – which was in the midst of posting a quarterly loss of more than $17 billion – came back begging for more. In November 2008, Citi received another $20 billion in cash and more than $300 billion in guarantees.

What’s most amazing about this isn’t that Citi got so much money, but that government-endorsed, fraudulent health ratings magically became part of its bailout. The chief financial regulators – the Fed, the FDIC and the Office of the Comptroller of the Currency – use a ratings system called CAMELS to measure the fitness of institutions. CAMELS stands for Capital, Assets, Management, Earnings, Liquidity and Sensitivity to risk, and it rates firms from one to five, with one being the best and five the crappiest. In the heat of the crisis, just as Citi was receiving the second of what would turn out to be three massive federal bailouts, the bank inexplicably enjoyed a three rating – the financial equivalent of a passing grade. In her book, Bull by the Horns, then-FDIC chief Sheila Bair recounts expressing astonishment to OCC head John Dugan as to why “Citi rated as a CAMELS 3 when it was on the brink of failure.” Dugan essentially answered that “since the government planned on bailing Citi out, the OCC did not plan to change its supervisory rating.” Similarly, the FDIC ended up granting a “systemic risk exception” to Citi, allowing it access to FDIC-bailout help even though the agency knew the bank was on the verge of collapse.

The sweeping impact of these crucial decisions has never been fully appreciated. In the years preceding the bailouts, banks like Citi had been perpetuating a kind of fraud upon the public by pretending to be far healthier than they really were. In some cases, the fraud was outright, as in the case of Lehman Brothers, which was using an arcane accounting trick to book tens of billions of loans as revenues each quarter, making it look like it had more cash than it really did. In other cases, the fraud was more indirect, as in the case of Citi, which in 2007 paid out the third-highest dividend in America – $10.7 billion – despite the fact that it had lost $9.8 billion in the fourth quarter of that year alone. The whole financial sector, in fact, had taken on Ponzi-like characteristics, as many banks were hugely dependent on a continual influx of new money from things like sales of subprime mortgages to cover up massive future liabilities from toxic investments that, sooner or later, were going to come to the surface.

Now, instead of using the bailouts as a clear-the-air moment, the government decided to double down on such fraud, awarding healthy ratings to these failing banks and even twisting its numerical audits and assessments to fit the cooked-up narrative. A major component of the original TARP bailout was a promise to ensure “full and accurate accounting” by conducting regular­ “stress tests” of the bailout recipients. When Geithner announced his stress-test plan in February 2009, a reporter instantly blasted him with an obvious and damning question: Doesn’t the fact that you have to conduct these tests prove that bank regulators, who should already know plenty about banks’ solvency, actually have no idea who is solvent and who isn’t?

The government did wind up conducting regular stress tests of all the major bailout recipients, but the methodology proved to be such an obvious joke that it was even lampooned on Saturday Night Live. (In the skit, Geithner abandons a planned numerical score system because it would unfairly penalize bankers who were “not good at banking.”) In 2009, just after the first round of tests was released, it came out that the Fed had allowed banks to literally rejigger the numbers to make their bottom lines look better. When the Fed found Bank of America had a $50 billion capital hole, for instance, the bank persuaded examiners to cut that number by more than $15 billion because of what it said were “errors made by examiners in the analysis.” Citigroup got its number slashed from $35 billion to $5.5 billion when the bank pleaded with the Fed to give it credit for “pending transactions.”

Such meaningless parodies of oversight continue to this day. Earlier this year, Regions Financial Corp. – a company that had failed to pay back $3.5 billion in TARP loans – passed its stress test. A subsequent analysis by Bloomberg View found that Regions was effectively $525 million in the red. Nonetheless, the bank’s CEO proclaimed that the stress test “demonstrates the strength of our company.” Shortly after the test was concluded, the bank issued $900 million in stock and said it planned on using the cash to pay back some of the money it had borrowed under TARP.

This episode underscores a key feature of the bailout: the government’s decision to use lies as a form of monetary aid. State hands over taxpayer money to functionally insolvent bank; state gives regulatory thumbs up to said bank; bank uses that thumbs up to sell stock; bank pays cash back to state. What’s critical here is not that investors actually buy the Fed’s bullshit accounting – all they have to do is believe the government will backstop Regions either way, healthy or not. “Clearly, the Fed wanted it to attract new investors,” observed Bloomberg, “and those who put fresh capital into Regions this week believe the government won’t let it die.”

Through behavior like this, the government has turned the entire financial system into a kind of vast confidence game – a Ponzi-like scam in which the value of just about everything in the system is inflated because of the widespread belief that the government will step in to prevent losses. Clearly, a government that’s already in debt over its eyes for the next million years does not have enough capital on hand to rescue every Citigroup or Regions Bank in the land should they all go bust tomorrow. But the market is behaving as if Daddy will step in to once again pay the rent the next time any or all of these kids sets the couch on fire and skips out on his security deposit. Just like an actual Ponzi scheme, it works only as long as they don’t have to make good on all the promises they’ve made. They’re building an economy based not on real accounting and real numbers, but on belief. And while the signs of growth and recovery in this new faith-based economy may be fake, one aspect of the bailout has been consistently concrete: the broken promises over executive pay.

They Lied About Bonuses

hat executive bonuses on Wall Street were a political hot potato for the bailout’s architects was obvious from the start. That’s why Summers, in saving the bailout from the ire of Congress, vowed to “limit executive compensation” and devote public money to prevent another financial crisis. And it’s true, TARP did bar recipients from a whole range of exorbitant pay practices, which is one reason the biggest banks, like Goldman Sachs, worked so quickly to repay their TARP loans.

But there were all sorts of ways around the restrictions. Banks could apply to the Fed and other regulators for waivers, which were often approved (one senior FDIC official tells me he recommended denying “golden parachute” payments to Citigroup officials, only to see them approved by superiors). They could get bailouts through programs other than TARP that did not place limits on bonuses. Or they could simply pay bonuses not prohibited under TARP. In one of the worst episodes, the notorious lenders Fannie Mae and Freddie Mac paid out more than $200 million in bonuses­ between 2008 and 2010, even though the firms (a) lost more than $100 billion in 2008 alone, and (b) required nearly $400 billion in federal assistance during the bailout period.

Even worse was the incredible episode in which bailout recipient AIG paid more than $1 million each to 73 employees of AIG Financial Products, the tiny unit widely blamed for having destroyed the insurance giant (and perhaps even triggered the whole crisis) with its reckless issuance of nearly half a trillion dollars in toxic credit-default swaps. The “retention bonuses,” paid after the bailout, went to 11 employees who no longer worked for AIG.

But all of these “exceptions” to the bonus restrictions are far less infuriating, it turns out, than the rule itself. TARP did indeed bar big cash-bonus payouts by firms that still owed money to the government. But those firms were allowed to issue extra compensation to executives in the form of long-term restricted stock. An independent research firm asked to analyze the stock options for The New York Times found that the top five executives at each of the 18 biggest bailout recipients received a total of $142 million in stocks and options. That’s plenty of money all by itself – but thanks in large part to the government’s overt display of support for those firms, the value of those options has soared to $457 million, an average of $4 million per executive.

In other words, we didn’t just allow banks theoretically barred from paying bonuses to pay bonuses. We actually allowed them to pay bigger bonuses than they otherwise could have. Instead of forcing the firms to reward top executives in cash, we allowed them to pay in depressed stock, the value of which we then inflated due to the government’s implicit endorsement of those firms.

All of which leads us to the last and most important deception of the bailouts:

They Lied About the Bailout Being Temporary

The bailout ended up being much bigger than anyone expected, expanded far beyond TARP to include more obscure (and in some cases far larger) programs with names like TALF, TAF, PPIP and TLGP. What’s more, some parts of the bailout were designed to extend far into the future. Companies like AIG, GM and Citigroup, for instance, were given tens of billions of deferred tax assets – allowing them to carry losses from 2008 forward to offset future profits and keep future tax bills down. Official estimates of the bailout’s costs do not include such ongoing giveaways. “This is stuff that’s never going to appear on any report,” says Barofsky.

Citigroup, all by itself, boasts more than $50 billion in deferred tax credits – which is how the firm managed to pay less in taxes in 2011 (it actually received a $144 million credit) than it paid in compensation that year to its since-ousted dingbat CEO, Vikram Pandit (who pocketed $14.9 million). The bailout, in short, enabled the very banks and financial institutions that cratered the global economy to write off the losses from their toxic deals for years to come – further depriving the government of much-needed tax revenues it could have used to help homeowners and small businesses who were screwed over by the banks in the first place.

Even worse, the $700 billion in TARP loans ended up being dwarfed by more than $7.7 trillion in secret emergency lending that the Fed awarded to Wall Street – loans that were only disclosed to the public after Congress forced an extraordinary one-time audit of the Federal Reserve. The extent of this “secret bailout” didn’t come out until November 2011, when Bloomberg Markets, which went to court to win the right to publish the data, detailed how the country’s biggest firms secretly received trillions in near-free money throughout the crisis.

Goldman Sachs, which had made such a big show of being reluctant about accepting $10 billion in TARP money, was quick to cash in on the secret loans being offered by the Fed. By the end of 2008, Goldman had snarfed up $34 billion in federal loans – and it was paying an interest rate of as low as just 0.01 percent for the huge cash infusion. Yet that funding was never disclosed to shareholders or taxpayers, a fact Goldman confirms. “We did not disclose the amount of our participation in the two programs you identify,” says Goldman spokesman Michael Duvally.

Goldman CEO Blankfein later dismissed the importance of the loans, telling the Financial Crisis Inquiry Commission that the bank wasn’t “relying on those mechanisms.” But in his book, Bailout, Barofsky says that Paulson told him that he believed Morgan Stanley was “just days” from collapse before government intervention, while Bernanke later admitted that Goldman would have been the next to fall.

Meanwhile, at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large. Stephen Friedman, a Goldman director who was also chairman of the New York Fed, bought more than $4 million of Goldman stock over a five-week period in December 2008 and January 2009 – years before the extent of the firm’s lifeline from the Fed was made public. Citigroup CEO Vikram Pandit bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans. Jamie Dimon bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans. When asked by Rolling Stone, Chase could not point to any disclosure of the bank’s borrowing from the Fed until more than a year later, when Dimon wrote about it in a letter to shareholders in March 2010.

The stock purchases by America’s top bankers raise serious questions of insider trading. Two former high-ranking financial regulators tell Rolling Stone that the secret loans were likely subject to a 1989 guideline, issued by the Securities and Exchange Commission in the heat of the savings and loan crisis, which said that financial institutions should disclose the “nature, amounts and effects” of any government aid. At the end of 2011, in fact, the SEC sent letters to Citigroup, Chase, Goldman Sachs, Bank of America and Wells Fargo asking them why they hadn’t fully disclosed their secret borrowing. All five megabanks essentially replied, to varying degrees of absurdity, that their massive borrowing from the Fed was not “material,” or that the piecemeal disclosure they had engaged in was adequate. Never mind that the law says investors have to be informed right away if CEOs like Dimon and Pandit decide to give themselves a $10,000 raise. According to the banks, it’s none of your business if those same CEOs are making use of a secret $50 billion charge card from the Fed.

The implications here go far beyond the question of whether Dimon and Co. committed insider trading by buying and selling stock while they had access to material nonpublic information about the bailouts. The broader and more pressing concern is the clear implication that by failing to act, federal regulators­ have tacitly approved the nondisclosure. Instead of trusting the markets to do the right thing when provided with accurate information, the government has instead channeled Jack Nicholson – and decided that the public just can’t handle the truth.

All of this – the willingness to call dying banks healthy, the sham stress tests, the failure to enforce bonus rules, the seeming indifference to public disclosure, not to mention the shocking­ lack of criminal investigations into fraud committed by bailout recipients before the crash – comprised the largest and most valuable bailout of all. Brick by brick, statement by reassuring statement, bailout officials have spent years building the government’s great Implicit Guarantee to the biggest companies on Wall Street: We will be there for you, always, no matter how much you screw up. We will lie for you and let you get away with just about anything. We will make this ongoing bailout a pervasive and permanent part of the financial system. And most important of all, we will publicly commit to this policy, being so obvious about it that the markets will be able to put an exact price tag on the value of our preferential treatment.

The first independent study that attempted to put a numerical value on the Implicit Guarantee popped up about a year after the crash, in September 2009, when Dean Baker and Travis McArthur of the Center for Economic and Policy Research published a paper called “The Value of the ‘Too Big to Fail’ Big Bank Subsidy.” Baker and McArthur found that prior to the last quarter of 2007, just before the start of the crisis, financial firms with $100 billion or more in assets were paying on average about 0.29 percent less to borrow money than smaller firms.

By the second quarter of 2009, however, once the bailouts were in full swing, that spread had widened to 0.78 percent. The conclusion was simple: Lenders were about a half a point more willing to lend to a bank with implied government backing – even a proven-stupid bank – than they were to lend to companies who “must borrow based on their own credit worthiness.” The economists estimated that the lending gap amounted to an annual subsidy of $34 billion a year to the nation’s 18 biggest banks.

Today the borrowing advantage of a big bank remains almost exactly what it was three years ago – about 50 basis points, or half a percent. “These megabanks still receive subsidies in the sense that they can borrow on the capital markets at a discount rate of 50 or 70 points because of the implicit view that these banks are Too Big to Fail,” says Sen. Brown.

Why does the market believe that? Because the officials who administered the bailouts made that point explicitly, over and over again. When Geithner announced the implementation of the stress tests in 2009, for instance, he declared that banks who didn’t have enough money to pass the test could get it from the government. “We’re going to help this process by providing a new program of capital support for those institutions that need it,” Geithner said. The message, says Barofsky, was clear: “If the banks cannot raise capital, we will do it for them.” It was an Implicit Guarantee that the banks would not be allowed to fail – a point that Geithner and other officials repeatedly stressed over the years. “The markets took all those little comments by Geithner as a clue that the government is looking out for them,” says Baker. That psychological signaling, he concludes, is responsible for the crucial half-point borrowing spread.

The inherent advantage of bigger banks – the permanent, ongoing bailout they are still receiving from the government – has led to a host of gruesome consequences. All the big banks have paid back their TARP loans, while more than 300 smaller firms are still struggling to repay their bailout debts. Even worse, the big banks, instead of breaking down into manageable parts and becoming more efficient, have grown even bigger and more unmanageable, making the economy far more concentrated and dangerous than it was before. America’s six largest banks – Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley – now have a combined 14,420 subsidiaries, making them so big as to be effectively beyond regulation. A recent study by the Kansas City Fed found that it would take 70,000 examiners to inspect such trillion-dollar banks with the same level of attention normally given to a community bank. “The complexity is so overwhelming that no regulator can follow it well enough to regulate the way we need to,” says Sen. Brown, who is drafting a bill to break up the megabanks.

Worst of all, the Implicit Guarantee has led to a dangerous shift in banking behavior. With an apparently endless stream of free or almost-free money available to banks – coupled with a well-founded feeling among bankers that the government will back them up if anything goes wrong – banks have made a dramatic move into riskier and more speculative investments, including everything from high-risk corporate bonds to mortgage­backed securities to payday loans, the sleaziest and most disreputable end of the financial system. In 2011, banks increased their investments in junk-rated companies by 74 percent, and began systematically easing their lending standards in search of more high-yield customers to lend to.

This is a virtual repeat of the financial crisis, in which a wave of greed caused bankers to recklessly chase yield everywhere, to the point where lowering lending standards became the norm. Now the government, with its Implicit Guarantee, is causing exactly the same behavior – meaning the bailouts have brought us right back to where we started. “Government intervention,” says Klaus Schaeck, an expert on bailouts who has served as a World Bank consultant, “has definitely resulted in increased risk.”

And while the economy still mostly sucks overall, there’s never been a better time to be a Too Big to Fail bank. Wells Fargo reported a third-quarter profit of nearly $5 billion last year, while JP Morgan Chase pocketed $5.3 billion – roughly double what both banks earned in the third quarter of 2006, at the height of the mortgage bubble. As the driver of their success, both banks cite strong performance in – you guessed it – the mortgage market.

So what exactly did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even Too Bigger to Failier, increases risk, discourages sound business lending and punishes savings by making it even easier and more profitable to chase high-yield investments than to compete for small depositors. The bailout has also made lying on behalf of our biggest and most corrupt banks the official policy of the United States government. And if any one of those banks fails, it will cause another financial crisis, meaning we’re essentially wedded to that policy for the rest of eternity – or at least until the markets call our bluff, which could happen any minute now.

Other than that, the bailout was a smashing success.

© 2012 Rolling Stone
matt-taibbi

As Rolling Stone’s chief political reporter, Matt Taibbi’s predecessors include the likes of journalistic giants Hunter S. Thompson and P.J. O’Rourke. Taibbi’s 2004 campaign journal Spanking the Donkey cemented his status as an incisive, irreverent, zero-bullshit reporter. His books include Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History, The Great Derangement: A Terrifying True Story of War, Politics, and Religion, Smells Like Dead Elephants: Dispatches from a Rotting Empire.

The Big Banks’ Big Secret in Canada May 1, 2012

Posted by rogerhollander in Canada, Economic Crisis.
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Published on Tuesday, May 1, 2012 by The Progressive Economics Forum

 

The CCPA today released my report: The Big Banks Big Secret” which provides the first public estimates of the emergency funds taken by Canadian banks. The report bases its estimates on publicly available data from CMHC, the Office of the Superintendent of Financial Institutions, US Federal Reserve, the Bank of Canada, as well as quarterly reports from the banks themselves.

The conventional narrative about the performance Canada’s big banks during the financial crisis goes as follows: while American banks bet heavily on sub-prime real estate and had extensive shadow bank holdings, Canadian banks did not.

However, the details of exactly how much each Canadian bank received, when they received it, and what they put up as collateral, has remained locked away at CMHC and the Bank of Canada. Not even Access to Information requests have been able to free this information.

In this study I estimate that, at their neediest, Canada’s banks had received $114 billion in support, a figure equal to 7% of the size of Canada’s economy in 2009.

This is equivalent to $3,400 for every man woman and child in Canada.

It is almost 10 times more than the auto bailout for which Canadians put up $14 billion and for which the loan portion has been repaid.

During the financial crisis, Canadian banks accessed three separate programs from both the Canadian and U.S. governments. Canadian banks received $33 billion dollars (converted to $CDN) through the U.S. Federal Reserve programs. At the same time, they also accessed $41 billion at the peak of the crisis through a nearly identical Bank of Canada loan program. Finally, they received $69 billion selling mortgages to CMHC for cash. These peaks occurred at different times.

Canada’s Big 5 banks drew on government support programs for an extended period from October 2008 through June 2010. In other words, Canadian banks continued to rely on government supports for one and a half years, well after the financial crisis had subsided.

The largest recipients of aid were Scotiabank, Royal bank and TD Bank. They received an estimated $25-26 billion at their peak. CIBC received somewhat less money: an estimated $21 billion at peak. BMO received an estimated $17 billion. Most of these peaks, except for TD occurred in the early months of 2009. TD peaked much later in September 2009. (See charts below)

The banks are very different sizes in terms of market capitalization. Royal is the biggest and BMO is about a third the size or Royal. So I’ve also adjusted the figures for the size of the banks.

On the relative side, three of Canada’s biggest banks, Scotiabank, Bank of Montreal and CIBC, received estimated peak support that at some point was equal or greater than the value of the company itself. That is to say that at some point during the financial crisis, it would have cost less money for the Canadian and U.S. governments to have bought every single share in these companies rather than providing them with support.

CIBC in particular received estimated aid worth at peak 1.5 times the value of the company, it spent the better part of the first three months of 2009 underwater.

The federal government claims it was offering the banks ‘liquidity support’ but it looks an awful lot like a bailout to me. Whatever you call it, government aid for the country’s biggest banks was far more substantial than the official line would suggest.

It is worth noting: Over the entire aid period, Canada’s banks remained profitable, reporting $27 billion in total profits between them and the CEOs of each of the big banks were among the highest paid Canadian CEOs. Between 2008 and 2009, each bank CEO even received an average raise in total compensation of 19%.

In the U.S., they called these sorts of programs: bailouts, in Canada we call them backstops. In the US, they have released the full details of the support, in Canada those details remain secret. It is time for the government to come clean with the actual figures of how much support each bank received, when they received it and what they put up as collateral.

© 2012 The Progressive Economics Forum

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David MacDonald is an economist for the Canadian Centre for Policy Alternatives (CCPA).

Why Barack Obama is the More Effective Evil March 26, 2012

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Roger’s note: Newt Gingrich scares me.  Mitt Romney scares me.  Rick Santorum really scares me.  I find myself, despite my incredible disdain for Obama, worrying that he will not be re-elected.  And this scares me even more!

Wed, 03/21/2012 – 11:06 — Glen Ford

www.blackagendareport.com

l

Glen Ford at the Left Forum

No matter how much evil Barack Obama actually accomplishes during his presidency, people that call themselves leftists insist on dubbing him the Lesser Evil. Not only is Obama not given proper credit for out-evil-ing George Bush, domestically and internationally, but the First Black President is awarded positive grades for his intentions versus the presumed intentions of Republicans. As the author says, this “is psycho-babble, not analysis. No real Left would engage in it.”

 

BAR executive editor Glen Ford made the following presentation at the Left Forum, Pace University, New York City, March 17. On the panel were Gloria Mattera, Margaret Kimberley (BAR), Suren Moodliar, John Nichols, and Victor Wallis. The discussion was titled, The 2012 Elections: Lesser Evil or Left Alternative?

He has put both Wall Street and U.S. imperial power on new and more aggressive tracks – just as he hired himself out to do.”

Power to the people!

Let me say from the very beginning that we at Black Agenda Report do not think that Barack Obama is the Lesser Evil. He is the more Effective Evil.

He has been more effective in Evil-Doing than Bush in terms of protecting the citadels of corporate power, and advancing the imperial agenda. He has put both Wall Street and U.S. imperial power on new and more aggressive tracks – just as he hired himself out to do.

That was always Wall Street’s expectation of Obama, and his promise to them. That’s why they gave him far more money in 2008 than they gave John McCain. They were buying Obama futures on the electoral political market – and they made out like bandits.

They invested in Obama to protect them from harm, as a hedge against the risk of systemic disaster caused by their own predations. And, it was a good bet, a good deal. It paid out in the tens of trillions of dollars.

If you believe that what Wall Street does is Evil, then Obama’s service to Wall Street is Evil, and there is nothing lesser about it.

They had vetted Obama, thoroughly, before he even set foot in the U.S. Senate in 2004.

He protected their interests, there, helping shield corporations from class action suits, and voting against caps on credit card Interest. He was their guy back then – and some of us were saying so, back then.

He was the bankers’ guy in the Democratic presidential primary race. Among the last three standing in 2008, it was Obama who opposed any moratorium on home foreclosures. John Edwards supported a mandatory moratorium and Hillary Clinton said she wanted a voluntary halt to foreclosures. But Barack Obama opposed any moratorium. Let it run its course, said candidate Obama. And, true to his word, he has let the foreclosures run their catastrophic course.

Only a few months later, when the crunch came and Finance Capital was in meltdown, who rescued Wall Street? Not George Bush. Bush tried, but he was spent, discredited, ineffective. NotJohn McCain. He was in a coma, coming unglued, totally ineffective.

Bush’s bailout failed on a Monday. By Friday, Obama had convinced enough Democrats in opposition to roll over – and the bailout passed, setting the stage for a new dispensation between the American State and Wall Street, in which a permanent pipeline of tens of trillions of dollars would flow directly into Wall Street accounts, via the Federal Reserve.

And Obama had not even been elected yet.

True to his word, he has let the foreclosures run their catastrophic course.”

Obama put Social Security and Medicaid and all Entitlements on the table, in mid-January. The Republicans had suffered resounding defeat. Nobody was pressuring Obama from the Right.

When the Right was on its ass, Obama stood up and spoke in their stead. There was no Evil Devil forcing him to put Entitlements on the chopping block. It was HIM. He was the Evil One – and it was not a Lesser Evil. It was a very Effective Evil, because the current Age of Austerity began on that day, in January, 2009.

And Obama had not even been sworn in as president, yet.

Who is the Effective Evil? I haven’t even gotten into his actual term as president, much less his expansion of the theaters of war, his unique assaults on International Law, and his massacre of Due Process of Law in the United States. But I want to pause right here, because piling up facts on Obama’s Most Effective Evils doesn’t seem to do any good if the prevailing conversation isn’t really about facts – but about intentions.

The prevailing assumption on the Left is that Obama has good intentions. He intends to the Right Thing – or, at least, he intends to do better than the Republicans intend to do. It’s all supposed to be about intentions. Let’s be clear: There is absolutely no factual basis to believe he intends to do anything other than the same thing he has already done, whether Democrats control Congress or not, which is to serve Wall Street’s most fundamental interests.

But, the whole idea of debating Obama’s intentions is ridiculous. It’s psycho-babble, not analysis. No real Left would engage in it.

I have no doubt that Newt Gingrich and Republicans in general have worse intentions for the future of my people – of Black people – than Michelle Obama’s husband does. But, that doesn’t matter. Black people are not going to roll over for whatever nightmarish Apocalypse the sick mind of Newt Gingrich would like to bring about. But, they have already rolled over for Obama’s economic Apocalypse in Black America. There was been very little resistance. Which is just another way of saying that Obama has successfully blunted any retribution by organized African America against the corporate powers that have devastated and destabilized Black America in ways that have little precedence in modern times.

When the Right was on its ass, Obama stood up and spoke in their stead.”

Obama has protected these Wall Streeters from what should be the most righteous wrath of Black folks. To take a riff from Shakespeare’s Othello, “Obama has done Wall Street a great service, and they know it.” He has proven to be fantastically effective at serving the Supremely Evil. Don’t you dare call him the Lesser.

He is the More Effective Evil because Black Folks – historically, the most progressive cohort in the United States – and Liberals, and even lots of folks that call themselves Marxists, let him get away murder! Yet, people still insist on calling him a Lesser Evil, while he drives a stake through Due Process of Law.

I have not spoken much about the second half of Obama’s first term in office. That is the period when the Left generally becomes disgusted with what they call his excessive “compromises” and “cave-ins” to Republicans. But that is a profoundly wrong reading of reality. Obama was simply continuing down his own Road to Austerity – the one he, himself, had initiated before even taking office. The only person caving in and compromising to the Republicans, was the Obama that many of YOU made up in your heads.

The real Obama was the initiator of this Austerity nightmare – a nightmare scripted on Wall Street, which provided the core of Obama’s policy team from the very beginning. That’s why Obama’s so-called Financial Reform was so diligent in making sure that Derivatives were virtually untouched.

The real Obama retained Bush’s Secretary of War, because he was determined to re-package the imperial enterprise and expand the scope and theaters of war.

He would dress up the war machine head-to-foot in a Chador of Humanitarianism, and march deep and deeper into Africa.

He would make merciless and totally unprovoked war against Libya – and then tell Congress there had been no war at all, and it was none of their business, anyway.

And he got away with it.

Now, that is the Most Effective Evil war mongering imaginable. Don’t you dare call him a Lesser Evil. Obama is Awesomely Evil.

The real Obama was the initiator of this Austerity nightmare.”

Obama has advanced the corporatization of the public schools beyond Bush’s wildest dreams, methodically constructing a national, parallel system of charter schools that, in practice, undermine and subvert the traditional public schools. In some places, they have replaced, or soon will replace, the public schools. The hedge funds and billionaires are ecstatic! The teachers unions then endorse their undertaker, foolishly believing he is the Lesser Evil.

So, what does the Left do in this election? The Left should do what it is supposed to do here in the Belly of the Beast at all times: disarm the Beast. This is their singular duty – not to advise the Beast, but to disarm it. At this time on the world historical clock, that means ripping the farcical “humanitarian” veil from the face of U.S. wars – and that face is Obama’s face.

No genuine anti-war activist can endorse the war-maker, Obama. If you want to resist actual imperial wars, you must fight Obama. Period. Anything else is to endorse or acquiesce in his wars.

You can attend the United National Anti-War Coalition conference in Stamford, Connecticut, next weekend, where you can meet with an array of organizations to begin a calendar of activities that will stretch past Election Day. You can join with UNAC in working to stop Obama from doing a repeat of Libya in Syria and Iran. If you can’t bring yourself to do that, then I have no advice for you, because the alternative is acquiescence to Obama’s cynical duplicities.

If the Green Party or any other party firmly opposes Obama’s humanitarian, Orwellian farce, then support them. If they don’t, then don’t lift a finger for them.

If you are going to fight for anything, you’ve got to fight for the right to fight. That means fighting for the rule of law. So, if you don’t plan to go underground or into exile anytime soon, you must fight the president who claims the right to imprison or kill any person, of any nationality, any place on Earth, for reasons known only to him. The man who excelled George Bush by shepherding preventive detention through Congress – Barack Obama, the More Effective Evil.

Fight him this election year. Fight him every year that he’s here.

Power to the People!

BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.

Freedom Rider: Obama Usurps the GOP March 2, 2012

Posted by rogerhollander in 2012 Election, Barack Obama, Political Commentary.
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Roger’s note: I generally stay away from posting articles analyzing the 2012 election, not because it is irrelevant, but because the election “debate” has little to do with the real world and the dangers therein, it is rather an exercise in surrealistic entertainment that would be funny if it weren’t tragically and menacingly insane.  The Black Agenda Review web site has consistently told it like it is about the Obama presidency, and this article while not necessarily brilliant, does put things in their proper perspective. 

by BAR editor and senior columnist Margaret Kimberley, www.blackagendareport.com, February 29, 2012

Republicans don’t know how to run against Obama because he has governed as one of them from the start.”

It seems strange that the issues of abortion and contraception have taken up such a large proportion of Republican campaign rhetoric. Every Republican presidential debate features candidates outdoing one another in declaring their opposition to a woman’s right to choose abortion.

I’m against abortion,” one will say, only to be silenced by another candidate declaring that he has been opposed to abortion longer, or with more vehemence, or even in cases of rape. Bizarre statements about contraception are the order of the day, and former senator Rick Santorum uses his home schooled children as a rallying point, unless of course he is telling Americans not to enjoy sex, because it is only for making babies. Liberals, who love nothing more than feeling superior to conservatives, are mystified by the campaign, which looks more like a trip in a time machine back to the 1950s.

Why would the Republicans use campaign issues which appeal to such a small group of their electorate? It is true that religious conservatives make up a large portion of their base of support, but there is something else going on, too.

The prominence of these outlier issues are a direct result of Barack Obama having taken over every other Republican talking point. Before he even took office Obama showed whose side he was on when he made it clear that he would continue the bailouts to the banks that George W. Bush began. He has expanded America’s defense budget and the wars that inevitably result. His “grand bargain” with conservatives has resulted in cuts to government programs and an agreement on austerity measures which are the exact opposite of what should be done to improve the economy and prospects for unemployed people.

Bizarre statements about contraception are the order of the day.”

Republicans don’t know how to run against Obama because he has governed as one of them from the start. They may mutter about “Obamacare” but his health care plan is a bailout of the health insurance industry and Big Pharma. They can’t call him weak on defense issues when he sends drones to kill people in Afghanistan or Pakistan or when he makes good on his threat to kill Muammar Gaddafi. Even American citizens like Anwar al-Awlaki are not safe when the president decides to literally take them out.

What is a conservative to do? Conservative pundit Bill Kristol called Obama a born again neo-con and Republican commentator Ben Stein said that Obama was the perfect Republican candidate. There is nowhere for the Republican faithful to go except to rail against the birth control mandate in the health care plan and call Obama an enemy of the Catholic church.

It isn’t difficult to amuse oneself when Rick Santorum says he throws up thinking about John F. Kennedy’s promise to the American public to keep religion out of government. It is all seemingly harmless theater, but the economic elite, the 1% if you will, win no matter who is in office.

It is indeed appalling when state legislatures across the country take on extreme positions in order to attack abortion. But make no mistake about it, there is never any opposition to thievery at the top because both parties kiss the rings of the rulers. The divide and conquer strategy is at work once again. While it is necessary to point out the dangerous Republican positions regarding women’s reproductive rights, it is also necessary to remember who runs the country and how they and their corporate media spokespersons never allow us to truly debate the most fundamental issues of the day.

Conservative pundit Bill Kristol called Obama a born again neo-con and Republican commentator Ben Stein said that Obama was the perfect Republican candidate.”

The media do not point out the inherent dangers of a billion dollar presidential campaign. If they did so, they would have to reveal how they manufacture public opinion and create phony outrage regarding a number of topics. Despite all the campaign rhetoric to the contrary, Mitt Romney, Rick Santorum, Newt Gingrich and Barack Obama are all conservatives. Gingrich may call Obama the food stamp president now, but neither man had any problems with the other when they joined forces to conduct a jeremiad against public education. Gingrich was welcomed to the White House, and he joined Obama mininion Al Sharpton in pushing for privatization of the schools and promoting a panoply of deadly corporate school “reform” measures.

We are fed a steady diet of manufactured opinion, pure propaganda which diverts our attention from the one constant in American politics. Money rules, and it will rule in January 2013 on inauguration day. Barack Obama will be that person because he plays the game better than anyone else. He has moved as far to the right as Ronald Reagan but Democrats still see him as their savior, the facts be damned. While the media have succeeded in creating smoke screens around contraception or the debate over the role of religion and government, the bailouts continue.

On Election Day in November 2012, we the people will lose, no matter who is giving a concession speech. All the outrage will have been misplaced and another defender of corporate control will rule over the rest of us. The divide and conquer strategy still wins the day.

Margaret Kimberley’s Freedom Rider column appears weekly in BAR, and is widely reprinted elsewhere. She maintains a frequently updated blog as well as at http://freedomrider.blogspot.com.Ms. Kimberley lives in New York City, and can be reached via e-Mail at Margaret.Kimberley(at)BlackAgendaReport.com.

Obama Sells Out Homeowners Again: Mortgage Settlement a Sad Joke February 23, 2012

Posted by rogerhollander in Barack Obama, Economic Crisis, Housing/Homelessness.
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Published on Thursday, February 23, 2012 by Common Dreams

by  Ted Rall

Joe Nocera, the columnist currently challenging Tom Friedman for the title of Hackiest Militant Centrist Hack–it’s a tough job that just about everyone on The New York Times op-ed page has to do–loves the robo-signing settlement announced last week between the Obama Administration, 49 states and the five biggest mortgage banks. “Two cheers!” shouts Nocera.

Too busy to follow the news? Read Nocera. If he likes something, it’s probably stupid, evil, or both.

(Photo: CNN)

As penance for their sins–securitizing fraudulent mortgages, using forged deeds to foreclose on millions of Americans and oh, yeah, borking the entire world economy–Ally Financial, Bank of America, Citibank, JPMorgan Chase and Wells Fargo have agreed to fork over $5 billion in cash. Under the terms of the new agreement they’re supposed to reduce the principal of loans to homeowners who are “underwater” on their mortgages–i.e. they owe more than their house is worth–by $17 billion.

Some homeowners will qualify for $3 billion in interest refinancing, something the banks have resisted since the ongoing depression began in late 2008.

What about those who got kicked out of their homes illegally? They split a pool of $1.5 billion. Sounds impressive. It’s not. Mark Zuckerberg is worth $45 billion.

“That probably nets out to less than $2,000 a person,” notes The Times. “There’s no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file.”

Readers will recall that I paid more than that for a speeding ticket. 68 in a 55. This is the latest sellout by a corrupt system that would rather line the pockets of felonious bankers than put them where they belong: prison.

Remember TARP, the initial bailout? Democrats and Republicans, George W. Bush and Barack Obama agreed to dole out $700 billion in public–plus $7.7 trillion funneled secretly through the Fed–to the big banks so they could “increase their lending in order to loosen credit markets,” in the words of Senator Olympia Snowe, a Maine Republican.

Never happened.

Three years after TARP “tight home loan credit is affecting everything from home sales to household finances,” USA Today reported. “Many borrowers are struggling to qualify for loans to buy homes…Those who can get loans need higher credit scores and bigger down payments than they would have in recent years. They face more demands to prove their incomes, verify assets, show steady employment and explain things such as new credit cards and small bank account deposits. Even then, they may not qualify for the lowest interest rates.”

Financial experts aren’t surprised. TARP was a no-strings-attached deal devoid of any requirement that banks increase lending. You can hardly blame the bankers for taking advantage. They used the cash–money that might have been used to help distressed homeowners–to grow income on their overnight “float” and issue record raises to their CEOs.

Next came Obama’s “Home Affordable Modification Program” farce. Another toothless “voluntary” program, HAMP asked banks to do the same things they’ve just agreed to under the robo-signing settlement: allow homeowners who are struggling to refinance and possibly reduce their principals to reflect the collapse of housing prices in most markets.

Voluntary = worthless.

CNN reported on January 24th: “The HAMP program, which was designed to lower troubled borrowers’ mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners–a far cry from the promised 4 million.”

Or the 15 million who needed help.

As usual, state-controlled media is too kind. Banks didn’t “lose” documents. They threw them away.

One hopes they recycled.

I wrote about my experience with HAMP: Chase Home Mortgage repeatedly asked for, received, confirmed receiving, then requested the same documents. They elevated the runaround to an art. My favorite part was how Chase wouldn’t respond to queries for a month, then request the bank statement for that month. They did this over and over. The final result: losing half my income “did not represent income loss.”

It’s simple math: in 67 percent of cases, banks make more money through foreclosure than working to keep families in their homes.

This time is different, claims the White House. “No more lost paperwork, no more excuses, no more runaround,” HUD secretary Shaun Donovan said February 9th. The new standards will “force the banks to clean up their acts.”

Don’t bet on it. The Administration promises “a robust enforcement mechanism”–i.e. an independent monitor. Such an agency, which would supervise the handling of million of distressed homeowners, won’t be able to handle the workload according to mortgage experts. Anyway, it’s not like there isn’t already a law. Law Professor Alan White of Valparaiso University notes: “Much of this [agreement] is restating obligations loan servicers already have.”

Finally, there’s the issue of fairness. “Underwater” is a scary, headline-grabbing word. But it doesn’t tell the whole story.

Tens of millions of homeowners have seen the value of their homes plummet since the housing crash. (The average home price fell from $270,000 in 2006 to $165,000 in 2011.) Those who are underwater tended not to have had much equity in their homes in the first place, having put down low downpayments. Why single them out for special assistance? Shouldn’t people who owned their homes free and clear and those who had significant equity at the beginning of crisis get as much help as those who lost less in the first place? What about renters? Why should people who were well-off enough to afford to buy a home get a payoff ahead of poor renters?

The biggest fairness issue of all, of course, is one of simple justice. If you steal someone’s house, you should go to jail. If your crimes are company policy, that company should be nationalized or forced out of business.

Your victim should get his or her house back, plus interest and penalties.

You shouldn’t pay less than a speeding ticket for stealing a house.

© 2012 Ted Rall

 

Ted Rall

Ted Rall is the author of the new books “Silk Road to Ruin: Is Central Asia the New Middle East?,” and “The Anti-American Manifesto” . His website is tedrall.com.

 

 

It’s Labor vs. Capital, Stupid October 7, 2011

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Published on Friday, October 7, 2011 by On the Commons

Now that we’re in the streets, what are we asking for?

  by  David Morris

A few months ago Nassim Taleb, author of the Black Swan, an influential book about the crucial importance of unpredictable, unforeseen events on our financial system was asked whether the hundreds of thousands taking to the streets in Greece was a Black Swan event. He replied, “No. The real Black Swan event is that people are not rioting against the banks in London and New York.”

They are now. Not rioting perhaps but vigorously protesting. Occupy Wall Street is moving into its second month. Twenty thousand strong demonstrated in New York City this week. Similar demonstrations are spreading nationwide.

 

From 1980 to 2005, more than 80 percent of the increase in personal incomes went to one percent of the population. One percent of Americans now take in more than quarter of the nation’s income every year. (photo: Massachusetts Cop Block)

In the 1976 movie, Network, anchorman Howard Beale tells his viewers,

Things have got to change. But first, you’ve gotta get mad!… You’ve got to say, ‘I’m as mad as hell, and I’m not going to take this anymore!’ Then we’ll figure out what to do about the depression and the inflation and the oil crisis. But first get up out of your chairs, open the window, stick your head out, and yell, and say it: “I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!”

We’re mad as hell and we’re not going to take this anymore. That is the message of the sit-ins by U.S. Uncut, the protests against Bank of America, the occupation of Freedom Plaza in Washington, D.C. to protest the war, Occupy Wall Street and the growing numbers of #Occupy demonstrations around the country.

We’re mad at the devastation wrought in the last four years by the toxic combination of unrestrained greed and concentrated wealth. Twelve to fifteen million families have received foreclosure notices. Seven to ten million more are unemployed. Median household income has fallen to its lowest level in more than a decade while the poverty rate is at a 17-year high. The number of homeless in New York City rose to an all-time high last year—higher even than during the Great Depression—with a record 113,000 men, women, and children, many of them comprising whole families, retreating night after night to municipal shelters.

We’re mad at Wall Street for taking our money and giving nothing back. This Administration has given Wall Street nearly $10 trillion in various programs, from insuring money market accounts to the Fed’s buying of troubled assets to loaning money to banks at near-zero interest rates.

Wall Street has used the bailout to enrich themselves. In 2010, it handed out $149 billion in bonuses and compensation, near an all time high. But it did not pass that largesse down. While bank profits have risen 136 percent since the financial crisis bank lending has fallen by 9 percent.

We’re mad at the 1 percent of the country who make decisions that enrich themselves while impoverishing the rest of us. From 1980 to 2005, more than 80 percent of the increase in personal incomes went to one percent of the population. One percent of Americans now take in more than quarter of the nation’s income every year. In New York City, home to Wall Street, the top 1 percent took for themselves close to 44 percent of all income in New York during 2007 (the last year for which data is available). According to the Fiscal Policy Institute the wealth of this 1 percent derived almost entirely from the financial services sector. To qualify for inclusion on the 2011 Forbes list of the richest 400 Americans you need to be worth at least $1 billion. In 2009 those 400 had average incomes of $227 million.

“We are the 99%” is a fitting slogan for the new movements.

Labor vs. Capital

We know who the enemy is. The Michigan teachers recently released a video showing CEOs marching into classrooms and literally taking desks away from children, a visualization of the impact of a $1.8 billion reduction in corporate taxes coupled with a $1 billion cut in education funding the Republican legislature enacted. Six hundred pilots marched on Wall Street to protest the refusal of the CEOs of their airlines to bargain in good faith.

We are beginning to reframe the debate, shifting from a focus on deficits to the more fundamental issue: the relationship of labor and capital.

One indication of the new mood is the willingness of opinion leaders to use heretofore impermissible language to describe the crisis. One of the nation’s leading economists, Nouriel Roubini informs the Wall Street Journal, “Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand.”

Another reflection of the new mood is the emergence of a new kind of folk hero. People like New York Attorney General Eric Schneiderman who last August rejected a proposed nationwide settlement that would have absolved the country’s biggest banks from future lawsuits in return for a paltry $20 billion. As Matt Tabbibi of Rolling Stone points out, “in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.” (mortgage-backed securities)

Mr. Schneiderman’s audacity led to his being kicked off the executive committee of state attorneys general in charge of the case. “Ever since,” the New York Times explains, “the four-member Correspondence Unit in Mr. Schneiderman’s office, in a building wedged between the New York Stock Exchange and the New York Federal Reserve Bank, has been dealing with a flood of mail. It is, by all accounts, a spontaneous and grass-roots eruption of thank-you notes.”

“I’m just doing my job,” says Schneiderman. “At heart, Americans are not cynical people. I think they want to believe that there’s one set of rules for everybody, that there are still good cops on the beat to keep things honest.”

Yes we do. Which makes us furious when Kathryn Wylde, the Fed Board member who ostensibly represents the public, tells the Times that Schneiderman should cease and desist his attacks on Wall Street. “It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Unless they are doing something indefensible?

The 2011 Academy Award for best documentary went to Inside Job, a searing indictment of Wall Street. Its director, Charles Ferguson told the audience, “Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.”

Seven hundred Wall Street protestors were arrested in a single day. They were disrupting traffic. The CEOs of Wall Street firms disrupted the lives of hundreds of millions.

Conservatives have been remarkably successful in persuading us that government is the enemy. The 99 percenters know that is true only inasmuch as the government is captured by the 1 percenters. We are angry at government, but what makes us more angry is that in this system you get the government you pay for and 99% of us are not doing any buying.

We’re mad at government, but we haven’t given up on governance, on the right to make the rules.

Last week the General Assembly of Occupy Wall Street adopted a declaration of principles that will inform the new rules.

As we gather together in solidarity to express a feeling of mass injustice, we must not lose sight of what brought us together. We write so that all people who feel wronged by the corporate forces of the world can know that we are your allies.

As one people, united, we acknowledge the reality: that the future of the human race requires the cooperation of its members; that our system must protect our rights, and upon corruption of that system, it is up to the individuals to protect their own rights, and those of their neighbors; that a democratic government derives its just power from the people, but corporations do not seek consent to extract wealth from the people and the Earth; and that no true democracy is attainable when the process is determined by economic power. We come to you at a time when corporations, which place profit over people, self-interest over justice, and oppression over equality, run our governments. We have peaceably assembled here, as is our right, to let these facts be known.

From that declaration of principles a program will emerge. Conversations about the elements of that program have already begun. Grassroots driven fundamental change is not without precedent. We can look to the Arab spring. #Occupy Wall Street was self-consciously inspired by the occupation by Egyptians of Tahrir Square.

But we can also look to our own history. At the end of the 19th century a political movement arose to confront many of the same concerns that torment us: concentrated wealth, corporate power, the influence of money on democracy. The populist uprising led not only to the passage of state and national laws (e.g. anti trust legislation, minimum wage and maximum hour statutes) but several Constitutional amendments. In 1913 the 16th Amendment allowed an income tax; the 17th Amendment, ratified the same year required the direct election of Senators; the 19th Amendment, ratified in 1920, gave women the right to vote.

Five New Rules

The conversation about program will go on for months. To contribute to that conversation I offer five new rules: two of them Constitutional Amendments and three of them laws.

1. Corporations are not persons.

The 14th Amendment, ratified in 1868 gave blacks the constitutional right of citizenship: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

In 1886, in a case that had nothing to do with corporate personhood, the court clerk wrote a headnote to the case that contained these fateful sentences, “The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

Since the case itself never addressed the question these words did not comprise a legal precedent. Nevertheless, from then on the Supreme Court has considered the question settled. Some 65 years later Justice William O. Douglas observed, “the Santa Clara case becomes one of the most momentous of all our decisions. Corporations were now armed with constitutional prerogatives.” And they made the most of these new prerogatives.

The 14th Amendment, written to protect weak and largely defenseless ex-slaves, was mostly used to protect big and powerful corporations. Of the 150 cases based on the 14th amendment the Supreme Court heard between 1886 and 1896, 15 involved blacks and 135 involved business entities.

In the next 20 years, relying on the 1886 “precedent” the Supreme Court steadily expanded the number of Constitutional rights accorded to this new type of person. The Women’s International League for Peace and Freedom (WILPF) offers a partial list: in 1893 the Court accorded corporations the right of due process under the 5th Amendment. In 1906 it extended to them the protection against search and seizure in the 4th Amendment. In 1908 it extended to corporations the 6th Amendment right to a trial by jury.

By the 1940s Justice Felix Frankfurter could accurately declare, “Artificial or not, corporations have won more rights under law than people have– rights which government has protected with armed force.”

In early 2010 the Supreme Court gave corporations the right, as persons, to spend unlimited amounts of money to influence elections.

Does it need to be said that unlike a real person, a corporation lacks a conscience. It is guided neither by ethics nor morality but rather by laws that required its Boards to elevate the maximization of profits above all other concerns. Does it need to be said that if a person makes a decision that kills or maims people he will go to jail. If a CEO makes such a decision he, at worst, receives a golden parachute.

A wonderful sign at the Occupy Wall Street protest reads, “I won’t believe corporations are people until Texas executes one.”

We need a constitutional amendment consisting of four words. Corporations are not persons.

2. Money is not speech

In 1976 the Supreme Court ruled that money is speech and therefore protected by the First Amendment. Today members of Congress now spend 25-40 percent of their time begging for money. Political scientist Thomas Ferguson observes, “Public opinion has only a weak and inconstant influence on policy. The political system is largely investor-driven, and runs on enormous quantities of money”.

When states or the federal government have tried to make elections fairer the Supreme Court says no. Vermont passed a law to cap campaign expenditures for state offices. The Court struck it down.

Congress tried to close a loophole in the campaign finance law that allowed billionaire candidates to spend an unlimited amount of their own money on their own campaigns. The Court struck down the law. Speaking for a 5-4 majority, Justice Samuel Alito told Congress that trying to “level electoral opportunities for candidates of different personal wealth” is not “a legitimate government objective.”

The Supreme Court rulings declaring money is speech and corporations are persons make for a lethal cocktail. Jamie Raskin, a Maryland state senator and law professor at American university points out that Fortune l00 corporations had profits in 2008 totaling about $600 billion. If they spent only l percent of their profits on elections, a trivial sum to protect and foster their interests, the total comes to $6 billion. That is more money than was spent for and on behalf of all congressional and presidential candidates in 2008.

We need a Constitutional Amendment consisting of four words. Money is not speech.

3. Tax Financial Transactions

In 1936, John Maynard Keynes first proposed a financial transactions tax. “The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States.”

Economist Dean Baker suggests that a modest tax (0.25 percent) could easily raise more than $100 billion a year. “A small increase in trading costs would be a very manageable burden for those who are using financial markets to support productive economic activity. However, it would impose serious costs on those who see the financial markets as a casino in which they place their bets by the day, hour or minute.”

4. Tax all income as ordinary income

Billionaire Warren Buffett has commented on the unfairness of having a lower tax rate than his secretary. That is so because most of his income derives from dividends and capital gains taxed at half the rate as income from work. (I think it altogether fitting that economists use the term “unearned income” to describe this kind of income.)

In 2007 the 400 Americans with the highest income—nearly $345 million—were taxed at less than 17 percent, less than half the ordinary income tax rate of 35 percent because most of their income was derived from investments. If we were to require that all their income be taxed at the 1999 tax rate of 39.6% this alone would generate an additional $300 billion in revenue over the next 10 years.

5. Declare a moratorium on foreclosures

Foreclosures hurt individuals, neighborhoods and the economy. Dumping millions of homes on the market depresses the overall value of all real estate, increases unemployment and disrupts lives and neighborhoods.

The most effective way to stop the tidal wave of foreclosures is through permanent, sustainable loan modifications that reduce homeowners’ mortgage principal and interest rates to market value. In a 2010 report, National Peoples Action proposed one strategy. “Across the country, some 11 million homeowners are $766 billion under water with their mortgages. Paid off over 30 years this means $73 billion a year needed to reset all underwater homeowners’ principals and interest rates would be about half of the $143 billion the top six banks alone are getting ready to pay in 2010 in bonuses and compensation. Even if the top six banks were to absorb the full cost of modifying all underwater mortgages in the country, they would still have $70 billion left for bonuses and compensation.”

The Wall Street occupiers have taken a stand against monied democracy and corporate power. We would do well to join them. Make your voices heard. And demand new rules that will honor the 99% and restore democracy to the nation.

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–>

David Morris

David Morris is Vice President and director of the New Rules Project at the Institute for Local Self-Reliance, which is based in Minneapolis and Washington, D.C. focusing on local economic and social development.

The Economic Boondoggle Explained: You’ll Laugh as You Weep November 22, 2010

Posted by rogerhollander in Economic Crisis, Humor.
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I came across this amazing video while Googling Matt Taibbi, who in is own right is an amazing journalist, writes for Rolling Stone.   Go to www.alternativeradio.org and order his amazing “Corruption: From Russia to Wall Street,” an address he gave in Boulder, Colorado.  While you’re there, check out Robert Fisk, another incredibly incisive tell-it-like-it-is journalist.  You won’t find this kind of reporting in the mainstream media.

Go to the following link and listen to what is without a doubt the funniest video ever made about the Fed, quantitative easing, and Ben Bernanke. Make sure you’re in a place where you can laugh freely, and press play:

http://blogs.reuters.com/felix-salmon/2010/11/12/eat-your-heart-out-matt-taibbi/

Enjoy!

Roger Hollander, November 22, 2010

Don’t Blame Bunning March 3, 2010

Posted by rogerhollander in Economic Crisis.
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Published on Wednesday, March 3, 2010 by TruthDig.comby Robert Scheer

How convenient that seemingly everyone in the liberal blogosphere, and even at many points to the right, got to use Jim Bunning as a scapegoat. The venom of the attacks suggests that the maverick Republican senator from Kentucky provided a welcome alternative to the real villains: bankers much closer to the centers of power. As if Bunning’s denial of unanimous consent to a stopgap extension of unemployment insurance-easily overcome, as was demonstrated Tuesday night-is at the root of our economic crisis. 

It isn’t, and it is vicious nonsense to transform Bunning, who has a long record of opposition to the bipartisan policies that caused America’s financial mess, into a poster boy for economic heartlessness. The issue was not one of extending aid for another month to those whose benefits had run out but rather holding the government accountable for the means of payment. 

Bunning’s action was a sideshow, a boneheaded symbolic gesture that backfired with slight consequences. Yet the senator was made to look the dangerous fool in media accounts while many of those who enabled the financial catastrophe continue to be treated as reasonable experts after being rewarded for their folly with the highest posts in both the Bush and Obama administrations. 

The real issue here is the banking bailout, a bipartisan swindle that Bunning opposed and that has led to a dangerously spiraling deficit without providing relief to ordinary folk. It is the same issue that carried Texas Gov. Rick Perry to victory Tuesday in his state’s Republican gubernatorial primary, in which he defeated U.S. Sen. Kay Bailey Hutchison in part because of her support of the bank bailout. 

As with the January defeat of the Democratic candidate in the Massachusetts election for a U.S. Senate seat, the message from voters is loud and clear: The political establishment cares only about the fat cats and not the people who are hurting. Bunning’s gesture was not intended, as his critics insisted, to increase that pain but rather to hold the government accountable for the money it is spending. He has consistently blasted the bailout as a shameless gift to the Wall Street hustlers and urged that the money being wasted on them instead be spent to aid homeowners and other victims of their greed.

This is not the first time that Bunning has stood alone in Congress. He was the sole member of the Senate to vote against the nomination of Ben Bernanke to be head of the Federal Reserve. That appointment came from Republican President George W. Bush, and yet it was Republican Sen. Bunning who warned that Bernanke as a Fed governor had been allied with then-Fed Chairman Alan Greenspan in his disastrous policymaking. 

That was four years ago, when Greenspan was still being lionized by most Democratic and Republican politicians as well as by much of the media. On Jan. 28 of this year, Bunning once again rose in the Senate to challenge Bernanke, this time after President Barack Obama had nominated him for a second term:

“Chairman Bernanke … bowed to the political pressure of the Bush and Obama administrations and turned the Fed into an arm of the Treasury. … Instead of taking that money and lending to consumers and cleaning up their balance sheets, the banks started to pocket record profits and pay out billions of dollars in bonuses. … So if you like those bailouts, by all means vote for Chairman Bernanke.  But if you want to put an end to bailouts and send a message to Wall Street, this vote is your choice.”

He is right to point out that enormous sums always seem to exist to aid Wall Street but that assistance to average Americans has consistently been only an afterthought. And he does have a point in noting that if the latest spending extension was felt to be so important, why wasn’t it funded in a timely manner or in an orderly procedure by his congressional colleagues from both parties who are now trouncing him? 

The money is always there when they want it, as we have witnessed throughout the banking bailout when enormous sums have suddenly been made available to those who least need it. The Treasury Department managed to find $200 billion last week to deposit with the Fed to increase the purchase of toxic mortgages to $1.25 trillion to make the bankers whole.

But the level of vituperation unleashed against this senator is so disproportionate to his role in the economic catastrophe as to raise questions of motive. The overreaction to Bunning’s protest was never anything more than a ploy for Democratic and Republican leaders to profess great sorrow for the folks on Main Street while they continue to coddle Wall Street.

© 2010 TruthDig.com

Robert Scheer is editor of Truthdig.com and a regular columnist for The San Francisco Chronicle.

The Fix January 15, 2010

Posted by rogerhollander in Economic Crisis, Humor.
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There recently was an article in the  St. Petersburg Fl. Times. The Business Section asked readers for ideas on:  “How Would You Fix the Economy?”

I think this guy nailed it!
 _____

Dear Mr. President,

Please find below my suggestion for fixing America’s economy.  Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan. You can call it the “Patriotic Retirement Plan”:

There are about 40 million people over 50 in the work force.  Pay them $1 million apiece severance for early retirement with the following stipulations:

1) They MUST retire.  Forty million job openings – Unemployment fixed.

2) They MUST buy a new American CAR.  Forty million cars ordered – Auto Industry fixed.

3) They MUST either buy a house or pay off their mortgage – Housing Crisis fixed.

It can’t get any easier than that!!

Mr. President, while you’re at it, make Congress retire on Social Security and Medicare. I’ll bet both programs would be fixed pronto!

P.S. If more money is needed, have all members in Congress pay their taxes…

If you think this would work, please forward to everyone you know.

If not, please disregard.

The Underlying Divisions in the Health Care Debate December 18, 2009

Posted by rogerhollander in Barack Obama, Democracy, Health, Political Commentary.
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(Roger’s note: Hmm, “the merger of government power and corporate interests.”  Now, where have I heard that before?  Yes, now I remember, it was called National Socialism and occurred in post-Weimar Germany in the 1930s.  The article below discusses the corporatist phenomenon but stops short of calling a spade a spade.  Corporatism = Capitalism.  Plain and simple.  The inner logic of capitalism, whether it occurs in a political democracy or in a Communist dictatorship in the form of state capitalism, is accumulate, accumulate, accumulate.  The big keeps getting bigger, the rich richer, the poor poorer.  With greater economic concentration comes the ability to hijack the political process, which is exactly what we are seeing in the United States.  Big Corporate America owns Congress, the Presidency, and via the Presidency the Supreme Court.  “We the People” are the ones left out.  Permanent war, billions upon billions spent upon nuclear and non-nuclear armaments; permanent economic crisis; continuing deterioration of the social safety net; continuing environmental degradation: these are the by-products of worldwide capitalism.  Nothing short of revolutionary changes can save the planet [or do you think the heads of state meeting at Copenhagen -- the heads of state of the industrial nations fronting for oil and coal, the heads of state of the poor nations bludgeoned by the likes of Hillary Clinton and Rahm Emanuel into submission -- do you think they can or will do it?])
 
Published on Friday, December 18, 2009 by Salon.comby Glenn Greenwald
Ed Kilgore has a very perceptive analysis in The New Republic about the underlying (and largely unexamined) ideological and strategic differences among progressives that are at least partially driving the rift over the health care bill.  He argues — correctly — that the current debate “displays a couple of pretty important potential fault lines within the American center-left” that have manifested in other disputes as well.  That was the principal point of this much-maligned Daily Kos post observing that many (but not all) of the progressive bloggers most vehemently demanding passage of the health care bill also supported the Iraq War.  As the author of that post (Jake McIntyre) explicitly said, his intent wasn’t to suggest that those individuals shouldn’t be listened to because of their Iraq position six years ago (that would be an invalid and unfair claim), but simply that — as Kilgore says — there are underlying and significant differences in strategic and ideological outlook driving the health care debate that have been present for some time but are typically ignored.Shared contempt for the Bush administration (at least once Bush and the Iraq War became discredited) largely obscured these differences when Bush was in office.  The desire to undermine the Bush GOP and dislodge that movement from power subsumed all other objectives and united people with vastly different political outlooks and agendas.  There is still a shared revulsion towards the Palin/Limbaugh Right, but that faction is too marginalized and impotent to serve the same function.  With the unifying force of Bush/Cheney gone, the divisions Kilgore describes are now vibrant and increasingly potent.  In addition to health care and Iraq, roughly the same progressive fault lines are seen over the bank bailout, escalation in Afghanistan, Obama’s economic team, tolerance for Obama’s embrace of Bush/Cheney civil liberties polices, and even the reaction to Matt Taibbi’s recent Rolling Stone article on Obama’s subservience to Wall Street. 

There are many reasons for the progressive division on the health care bill.  There are differences over the narrow question of health care policy, with some believing the bill does more harm than good just on that ground alone.  Some of it has to do with broader questions of political power:  if progressives always announce that they are willing to accept whatever miniscule benefits are tossed at them (on the ground that it’s better than nothing) and unfailingly support Democratic initiatives (on the ground that the GOP is worse), then they will (and should) always be ignored when it comes time to negotiate; nobody takes seriously the demands of those who announce they’ll go along with whatever the final outcome is.  But the most significant underlying division identified by Kilgore is the divergent views over the rapidly growing corporatism that defines our political system.

Kilgore doesn’t call it “corporatism” — the virtually complete dominance of government by large corporations, even a merger between the two — but that’s what he’s talking about.  He puts it in slightly more palatable terms:

To put it simply, and perhaps over-simply, on a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. This approach was a hallmark of the so-called Clintonian, “New Democrat” movement, and the broader international movement sometimes referred to as “the Third Way,” which often defended the use of private means for public ends.

As I’ve written for quite some time, I’ve honestly never understood how anyone could think that Obama was going to bring about some sort of “new” political approach or governing method when, as Kilgore notes, what he practices — politically and substantively — is the Third Way, DLC, triangulating corporatism of the Clinton era, just re-packaged with some sleeker and more updated marketing.  At its core, it seeks to use government power not to regulate, but to benefit and even merge with, large corporate interests, both for political power (those corporate interests, in return, then fund the Party and its campaigns) and for policy ends.  It’s devoted to empowering large corporations, letting them always get what they want from government, and extracting, at best, some very modest concessions in return.  This is the same point Taibbi made about the Democratic Party in the context of economic policy:

The significance of all of these appointments isn’t that the Wall Street types are now in a position to provide direct favors to their former employers. It’s that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants.

One finds this in far more than just economic policy, and it’s about more than just letting corporations do what they want.  It’s about affirmatively harnessing government power in order to benefit and strengthen those corporate interests and even merging government and the private sector.  In the intelligence and surveillance realms, for instance, the line between government agencies and private corporations barely exists.  Military policy is carried out almost as much by private contractors as by our state’s armed forces.  Corporate executives and lobbyists can shuffle between the public and private sectors so seamlessly because the divisions have been so eroded.  Our laws are written not by elected representatives but, literally, by the largest and richest corporations.  At the level of the most concentrated power, large corporate interests and government actions are basically inseparable.

The health care bill is one of the most flagrant advancements of this corporatism yet, as it bizarrely forces millions of people to buy extremely inadequate products from the private health insurance industry — regardless of whether they want it or, worse, whether they can afford it (even with some subsidies).   In other words, it uses the power of government, the force of law, to give the greatest gift imaginable to this industry — tens of millions of coerced customers, many of whom will be truly burdened by having to turn their money over to these corporations — and is thus a truly extreme advancement of this corporatist model.  It’s undeniably true that the bill will also do some genuine good, as it will help many people who can’t get coverage now to get it (though it will also severely burden many people with compelled, uncontrolled premiums and will potentially weaken coverage for millions as well).  If one judges the bill purely from the narrow perspective of coverage, a rational and reasonable (though by no means conclusive) case can be made in its favor.  But if one finds this creeping corporatism to be a truly disturbing and nefarious trend, then the bill will seem far less benign.

As I’ve noted before, this growing opposition to corporatism — to the virtually absolute domination of our political process by large corporations — is one of the many issues that transcend the trite left/right drama endlessly used as a distraction.  The anger among both the left and right towards the bank bailout, and towards lobbyist influence in general, illustrates that.  Kilgore says that anger among the left and right over corporatism is irreconcilable, and this is the point I think he has mostly wrong:

To put it more bluntly, on a widening range of issues, Obama’s critics to the right say he’s engineering a government takeover of the private sector, while his critics to the left accuse him of promoting a corporate takeover of the public sector. They can’t both be right, of course, and these critics would take the country in completely different directions if given a chance.  But the tactical convergence is there if they choose to pursue it.

This supposedly irreconcilable difference Kilgore identifies is more semantics than substance.  It’s certainly true that health care opponents on the left want more a expansive plan while opponents on the right want the opposite.  But the objections over the mandate are largely identical — it’s a coerced gift to the private health insurance industry that underwrites the Democratic Party.  The same was true over opposition to the bailout, objections to lobbying influence over Washington, and most of all, the growing anger that Washington serves the interests of financial elites at the expense of the working class.  

Whether you call it “a government takeover of the private sector” or a “private sector takeover of government,” it’s the same thing:  a merger of government power and corporate interests which benefits both of the merged entities (the party in power and the corporations) at everyone else’s expense.  Growing anger over that is rooted far more in an insider/outsider dichotomy over who controls Washington than it is in the standard conservative/liberal ideological splits from the 1990s.  It’s true that the people who are angry enough to attend tea parties are being exploited and misled by GOP operatives and right-wing polemicists, but many of their grievences about how Washington is ignoring their interests are valid, and the Democratic Party has no answers for them because it’s dependent upon and supportive of that corporatist model.  That’s why they turn to Glenn Beck and Rush Limbaugh; what could a Democratic Party dependent upon corporate funding and subservient to its interests possibly have to say to populist anger?

Even if one grants the arguments made by proponents of the health care bill about increased coverage, what the bill does is reinforces and bolsters a radically corrupt and flawed insurance model and and an even more corrupt and destructive model of “governing.”  It is a major step forward for the corporatist model, even a new innovation in propping it up.  How one weighs those benefits and costs — both in the health care debate and with regard to many of Obama’s other policies — depends largely upon how devoted one is to undermining and weakening this corporatist framework (as opposed to exploiting it for political gain and some policy aims).  That’s one of the primary underlying divisions Kilgore identifies, and he’s right to call for greater examination and debate over the role it is playing.

Copyright ©2009 Salon Media Group, Inc.

Glenn Greenwald was previously a constitutional law and civil rights litigator in New York. He is the author of the New York Times Bestselling book “How Would a Patriot Act?,” a critique of the Bush administration’s use of executive power, released in May 2006. His second book, “A Tragic Legacy“, examines the Bush legacy.

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