The tsunami of populist rage coursing through America is bigger than Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama phenomenon itself. It could maim the president’s best-laid plans and what remains of our economy if he doesn’t get in front of the mounting public anger.
Bill Clinton’s $80 Million Payday, or Why Politicians Don’t Care That Much About Reelection August 4, 2012Posted by rogerhollander in Democracy, Economic Crisis.
Tags: Barack Obama, Bill Clinton, bribes, commodities futures, corey booker, deregulation, derivitives, Economic Crisis, hillary clinton, matt stoller, presidency, roger hollander
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Tuesday, May 22, 2012
“There was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.” – Charles Ferguson of Inside Job
“I never had any money until I got out of the White House, you know, but I’ve done reasonably well since then.” Bill Clinton
On December 21, 2000, President Bill Clinton signed a bill called the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis. Just two months later, on February 5, 2001, Clinton received $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City. A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York. It turns out, Bill Clinton could make a lot of money, for not very much work.
Today, Clinton is worth something on the order of $80 million (probably much more, but we don’t really know), and these speeches have become a lucrative and consistent revenue stream for his family. Clinton spends his time offering policy advice, writing books, stumping for political candidates, and running a global foundation. He’s now a vegan. He makes money from books. But the speaking fee money stream keeps coming in, year after year, in larger and larger amounts.
Most activists and political operatives are under a delusion about American politics, which goes as follows. Politicians will do *anything* to get reelected, and they will pander, beg, borrow, lie, cheat and steal, just to stay in office. It’s all about their job.
This is 100% wrong. The dirty secret of American politics is that, for most politicians, getting elected is just not that important. What matters is post-election employment. It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations. If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects. This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices. Running as a vague populist is manageable, as long as you’re lying to voters. If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go. And if you lose, but you were a team player, then you’ll have plenty of money and opportunity. The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did. The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.
Corruption used to be more overt. Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses. It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party. In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies. After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt. AMD stepped in, overpaying for the property. But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.
Over the course of the next ten years after his Presidency, Clinton brought in roughly $8-10 million a year in speaking fees. In 2004, Clinton got $250,000 from Citigroup and $150,000 from Deutsche Bank. Goldman paid him $300,000 for two speeches, one in Paris. As the bubble peaked, in 2006, Clinton got $150,000 paydays each from Citigroup (twice), Lehman Brothers, the Mortgage Bankers Association, and the National Association of Realtors. In 2007, it was Goldman again, twice, Lehman, Citigroup, and Merrill Lynch. He didn’t just reap speaking fee cash from the financial services sector – corporate titans like Oracle and outsourcing specialist Cisco paid up, as did many Israel-focused groups, Middle Eastern interests, and universities. Does this explain the finance-friendly, oil-friendly and Israel First-friendly policies pursued by the State Department under Hillary Clinton? Who knows? But if you could legally deliver millions in cash to the husband of a high-level political official, it wouldn’t hurt your policy goals.
Speaking fee money isn’t just money, it is easy money. In one appearance, for one hour, Clinton can make $125,000 to $500,000. At an hourly rate, that’s between $250 million to $1 billion annually. It isn’t the case that Clinton is a billionaire, but it is the case that Clinton can, whenever he wants, make money as quickly and as easily as a billionaire. He is awash in cash, and cash is useful. Cash finances his lifestyle. Cash helped backstop his wife’s Presidential campaign when it was on the ropes.
And these speaking fees aren’t the only money Clinton got, it’s just the easiest cash to find because of disclosure laws. Apparently, Clinton’s firm apparently had a paid $100k+ a month consulting relationship with MF Global, and Clinton and Tony Blair have teamed up to help hedge funds raise money. His daughter worked for a giant hedge fund and political ally (Avenue Capital). And Clinton has unusual relationships with billionaires and Dubai-based investors.
Bill and Hillary Clinton are the best at what they do, but they aren’t the only ones who do it. In fact, this is what politics is increasingly about, not elections, but staying in the club. Erskine Bowles, former White House Chief of Staff, lost two Senate elections. But he’s on the board of Facebook and Morgan Stanley, as well as authoring the highly influential Simpson-Bowles plan to gut Social Security and Medicare. Tom Daschle, who lost a Senate race in 2004, is a millionaire who in large part crafted Obama’s health care plan. Former Senator Judd Gregg is now at Goldman Sachs. Current Chicago Mayor Rahm Emanuel made $12 million in between his stint at the Clinton White House which ended in 2000 and his election to Congress in 2002. Former Congressman Harold Ford, now at Morgan Stanley, is routinely on TV making political claims. Larry Summers is on the board of the high-flying start-up Square. Meanwhile, Russ Feingold, a Senator who did go after Wall Street, is a professor in the Midwest. Eliot Spitzer is a struggling TV host and writer.
In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons. That’s what their policy goals are organized around. So when you hear someone talking about how politicians just want to be reelected, roll your eyes. When you hear an argument about the best message or policy framework to use for reelection, stop listening. That’s not what politicians really care about. Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury. The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters. He just wants to be slightly more appealing than Romney. He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients. We don’t call it bribery, but that’s what it is. Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall. The payout just came later, in the form of speaking fees from elite banks and their allies.
Ironically, Clinton has come to express regret about deregulating derivatives. He has not given the money back.
Why Occupy: A Chart’s Worth A Thousand Words October 24, 2011Posted by rogerhollander in Economic Crisis, Labor.
Tags: bailouts, ceo salaries, deregulation, Economic Crisis, family income, income distribution, labor, occupy wall street, real wages, roger hollander, super rich, tax rates, unions, Wall Street
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1. The American Dream is imploding…
The productivity/wage chart says it all. From 1947 until the mid-1970s real wages and productivity (economic output per worker hour) danced together. Both climbed year after year as did our real standard of living. If you’re old enough, you will remember seeing your parents doing just a bit better each year, year after year. Then, our nation embarked on a grand economic experiment. Taxes were cut especially on the super-rich. Finance was deregulated and unions were crushed. Lo and behold, the two lines broke apart. Productivity continued to climb, but wages stalled and declined. So where did all that productivity money go? To the rich and to the super-rich, especially to those in finance.
2. Our wealth is gushing to the top 1 percent…
Actually the top tenth of one percent. Because of financial deregulation and tax cuts for the rich, the income gap is soaring. Here’s one of my favorite indicators that we compiled for The Looting of America. In 1970 the top 100 CEOs earned $45 for every $1 earned by the average worker. By 2006, the ratio climbed to an obscene 1,723 to one. (Not a misprint!)
3. Family income is declining while the top earners flourish…
As women entered the workforce, family income made up for some of the wage stagnation. But now even family incomes are in trouble. Meanwhile, the incomes of the richest families continue to rise.
4. The super-rich are paying lower and lower tax rates…
To add financial insult to injury, the richest of the rich pay less and less each year as a percentage of their monstrous incomes. The top 400 taxpayers during the 1950s faced a 90 percent federal tax rate. By 1995 their effective tax rate – what they really paid after all deductions as a percent of all their income – fell to 30 percent. Now it’s barely 16 percent.
5. Too much money in the hands of the few combined with financial deregulation crashed our economy…
When the rich become astronomically rich, they gamble with their excess money. And when Wall Street is deregulated, it creates financial casinos for the wealthy. When those casinos inevitably crash, we pay to cover the losses. The 2008 financial crash caused eight million American workers to lose their jobs in a matter of months due to no fault of their own. The last time we had so much money in the hands of so few was 1929!
6. We’re turning into a billionaire bailout society…
We bailed out the big Wall Street banks and protected the billionaires from ruin. Now we are being asked to make good on the debts they caused, while the super-rich get even richer, some making more than $2 million an HOUR! It would take over 47 years for the average family to make as much as the top 10 hedge fund managers make in one hour.
7. The super-rich still control politics…
The Economic Boondoggle Explained: You’ll Laugh as You Weep November 22, 2010Posted by rogerhollander in Economic Crisis, Humor.
Tags: bailout, Ben Bernanke, corruption, deregulation, Economic Crisis, economic policy, economics, Federal Reserve, Goldman Sachs, journalism, matt taibbi, quantitative easing, robert fisk, roger hollander, the fed, Wall Street
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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:
Roger Hollander, November 22, 2010
Who Are You and What Have You Done With the Community Organizer We Elected President? November 18, 2009Posted by rogerhollander in Barack Obama, Economic Crisis.
Tags: banking collapse, chris dodd, citigroup, clinton administration, congress, deregulation, Economic Crisis, Federal Reserve, gimothy geithner, Gramm-Leach-Bliley, hartford insurance, hedge funds, lawrence summers, neal wolin, Obama, robert rubin, Robert Scheer, roger hollander, senate banking, tarp, Wall Street
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What’s up with Barack Obama? The candidate for change once promised to take on the powerful banking interests but is now doing their bidding. Finally, a leading Democrat, in this case Senate Banking Committee Chairman Chris Dodd, has a good idea for monitoring the Wall Street fat cats who all but destroyed the American economy, and the Obama administration condemns it.
Dodd wants to take supervisory power from the Federal Reserve, which is controlled by the banks it pretends to monitor, and put it in the hands of a new independent agency. That makes sense given the Fed’s abject failure to properly monitor the financial sector over the past decade as that industry got drunk on greed. As Dodd’s spokeswoman Kirstin Brost put it: “The Federal Reserve flat out failed at supervising the largest, most complex firms.” But White House economic adviser Austan Goolsbee frets that taking power from the Fed would cause financial industry “nervousness.” Isn’t that the whole point of government regulation-to make the bandits look over their shoulders before they launch their next destructive scam?
Not so in the view of Deputy Treasury Secretary Neal Wolin, who blithely insists that the Fed “is the best agency equipped for the task of supervising the largest, most complex firms,” despite the mountain of evidence to the contrary. There is some irony in the fact that the largest of those complex firms got to be “too big to fail” because of the radical deregulatory legislation that Wolin drafted during his previous incarnation as the Treasury Department’s general counsel in the Clinton administration. Wolin is now deputy to Timothy Geithner, who as head of the New York Fed in the five years preceding the banking meltdown looked the other way as the disaster began to unfold.
Why is Barack Obama allowing these retreads from the Clinton era who went on to great riches on Wall Street to set economic policy for his administration? The fatal hallmark of this president’s financial policy is that it is being designed by the very people whose previous legislative efforts created the mess that enriched them while impoverishing the nation, and they now want more of the same.
In the Clinton years, Wolin was general counsel to then-Treasury Secretary Lawrence Summers, the key architect of the radical deregulation that caused the recent banking collapse. Summers went off to work for hedge funds and banks that paid him $15 million in 2008 while he was advising Obama. Meanwhile, Wolin became general counsel for Hartford Insurance Corp., which had to be bailed out by the taxpayers because it took advantage of the radical deregulation that he helped write into law.
Wolin, Geithner and Summers were all protégés of Robert Rubin, who, as Clinton’s treasury secretary, was the grand author of the strategy of freeing Wall Street firms from their Depression-era constraints. It was Wolin who, at Rubin’s behest, became a key force in drafting the Gramm-Leach-Bliley Act, which ended the barrier between investment and commercial banks and insurance companies, thus permitting the new financial behemoths to become too big to fail. Two stunning examples of such giants that had to be rescued with public funds are Citigroup bank, where Rubin went to “earn” $120 million after leaving the Clinton White House, and the Hartford Insurance Co., where Wolin landed after he left Treasury.
Both Citigroup and Hartford would not have gotten into trouble were it not for the enabling legislation that the three Clinton officials pushed through while they were in power. But even with that law, had Geithner been on the case protecting the public interest while head of the New York Fed much of the damage could have been avoided.
Thanks to the legislation that Wolin helped write, the limits preventing mergers between insurance companies and banks imposed during Franklin Roosevelt’s presidency was reversed. Hartford got into banking, and as The Washington Times observed in a scathing editorial, “Hartford … rushed to buy regulated savings and loans just so they could call themselves banks and qualify for government TARP funds.” Wolin collected his millions while the taxpayers were obliged to cover Hartford’s losses.
It is depressing for a columnist who had great hopes for Obama to be forced by the facts to credit editors at the right-wing Washington Times for getting it right when they opined: “Revolving doors between industry and the administration and fat-cat political contributors getting bailed out at taxpayer expense sound like business as usual. This certainly isn’t change we can believe in.” Please, Mr. President, say it ain’t so.
Robert Scheer is editor of Truthdig.com and a regular columnist for The San Francisco Chronicle.
Tags: AIG, Alan Greenspan, bailout, bill black, brooksley born, bush administration, chris dodd, deregulation, derivitive market, Economic Crisis, gary gensler, glenn greenwald, Goldman Sachs, lawrence summers, Lehman Brothers, Merrill Lynch, obama administration, paulson, president obama, robert rubin, roger hollander, simon johnson, subprime scandal, tarp, tim geithner, Wall Street
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Published on Saturday, April 4, 2009 by Salon.com
Lawrence H. Summers, one of President Obama’s top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .
Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
That’s $135,000 paid by Goldman Sachs to Summers — for a one-day visit. And the payment was made at a time — in April, 2008 — when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama’s election). Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama’s top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It’s basically an advanced bribe. And it’s paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government’s response to the financial crisis.
Last night, former Reagan-era S&L regulator and current University of Missouri Professor Bill Black was on Bill Moyers’ Journal and detailed the magnitude of what he called the on-going massive fraud, the role Tim Geithner played in it before being promoted to Treasury Secretary (where he continues to abet it), and — most amazingly of all — the crusade led by Alan Greenspan, former Goldman CEO Robert Rubin (Geithner’s mentor) and Larry Summers in the late 1990s to block the efforts of top regulators (especially Brooksley Born, head of the Commodities Futures Trading Commission) to regulate the exact financial derivatives market that became the principal cause of the global financial crisis. To get a sense for how deep and massive is the on-going fraud and the key role played in it by key Obama officials, I highly recommend watching that Black interview (it can be seen here and the transcript is here).
This article from Stanford Magazine — an absolutely amazing read — details how Summers, Rubin and Greenspan led the way in blocking any regulatory efforts of the derivatives market whatsoever on the ground that the financial industry and its lobbyists were objecting:
As chairperson of the CFTC, Born advocated reining in the huge and growing market for financial derivatives. . . . One type of derivative—known as a credit-default swap—has been a key contributor to the economy’s recent unraveling. . .
Back in the 1990s, however, Born’s proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists. . . . But even the modest proposal got a vituperative response. The dozen or so large banks that wrote most of the OTC derivative contracts saw the move as a threat to a major profit center. Greenspan and his deregulation-minded brain trust saw no need to upset the status quo. The sheer act of contemplating regulation, they maintained, would cause widespread chaos in markets around the world.
Born recalls taking a phone call from Lawrence Summers, then Rubin’s top deputy at the Treasury Department, complaining about the proposal, and mentioning that he was taking heat from industry lobbyists. . . . The debate came to a head April 21, 1998. In a Treasury Department meeting of a presidential working group that included Born and the other top regulators, Greenspan and Rubin took turns attempting to change her mind. Rubin took the lead, she recalls.
“I was told by the secretary of the treasury that the CFTC had no jurisdiction, and for that reason and that reason alone, we should not go forward,” Born says. . . . “It seemed totally inexplicable to me,” Born says of the seeming disinterest her counterparts showed in how the markets were operating. “It was as though the other financial regulators were saying, ‘We don’t want to know.’”
She formally launched the proposal on May 7, and within hours, Greenspan, Rubin and Levitt issued a joint statement condemning Born and the CFTC, expressing “grave concern about this action and its possible consequences.” They announced a plan to ask for legislation to stop the CFTC in its tracks.
Rubin, Summers and Greenspan succeeded in inducing Congress — funded, of course, by these same financial firms — to enact legislation blocking the CFTC from regulating these derivative markets. More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive (naturally) who was as instrumental as anyone in blocking any regulations of those derivative markets (and then enriched himself by feeding on those unregulated markets).
Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government. Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced. This corruption is so tawdry and transparent — and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity — that it is mystifying that it is not provoking more mass public rage.
All of that leads to things like this, from today’s Washington Post:
The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials. . . .
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials. . . .
In one program, designed to restart small-business lending, President Obama’s officials are planning to set up a middleman called a special-purpose vehicle — a term made notorious during the Enron scandal — or another type of entity to evade the congressional mandates, sources familiar with the matter said.
If that isn’t illegal, it is as close to it as one can get. And it is a blatant attempt by the White House to brush aside — circumvent and violate — the spirit if not the letter of Congressional restrictions on executive pay for TARP-receiving firms. It was Obama, in the wake of various scandals over profligate spending by TARP firms, who pretended to ride the wave of populist anger and to lead the way in demanding limits on compensation. And ever since his flamboyant announcement, Obama — adopting the same approach that seems to drive him in most other areas — has taken one step after the next to gut and render irrelevant the very compensation limits he publicly pretended to champion (thereafter dishonestly blaming Chris Dodd for doing so and virtually destroying Dodd’s political career). And the winners — as always — are the same Wall St. firms that caused the crisis in the first place while enriching and otherwise co-opting the very individuals Obama chose to be his top financial officials.
Worse still, what is happening here is an exact analog to what is happening in the realm of Bush war crimes — the Obama administration’s first priority is to protect the wrongdoers and criminals by ensuring that the criminality remains secret. Here is how Black explained it last night:
Black: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have masses losses, and that they’re fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because…
Moyers: What do you mean?
Black: Well, Geithner has, was one of our nation’s top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he’s a failed legacy regulator. . . .
The Great Depression, we said, “Hey, we have to learn the facts. What caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters?” Where’s our investigation?
What would happen if after a plane crashes, we said, “Oh, we don’t want to look in the past. We want to be forward looking. Many people might have been, you know, we don’t want to pass blame. No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. . . .
Moyers: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
Moyers: You are.
Black: Absolutely, because they are scared to death. . . . What we’re doing with — no, Treasury and both administrations. The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson’s firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn’t want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG.
Where Congress said, “We will not give you a single penny more unless we know who received the money.” And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.
Moyers: Even though Goldman Sachs had a big vested stake.
Black: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he wouldn’t be allowed in civilized society.
This is exactly what former IMF Chief Economist Simon Johnson warned about in his vital Atlantic article: ”that the finance industry has effectively captured our government — a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises.” This is the key passage where Johnson described the hallmark of how corrupt oligarchies that cause financial crises then attempt to deal with the fallout:
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique — the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large. . . .
As much as he campaigned against anything, Obama railed against precisely this sort of incestuous, profoundly corrupt control by narrow private interests of the Government, yet he has chosen to empower the very individuals who most embody that corruption. And the results are exactly what one would expect them to be.
In for a Penny, In for $2.98 Trillion April 1, 2009Posted by rogerhollander in Economic Crisis.
Tags: AIG, auto bailout, auto workers, auto workers pensions, bailout, bailout fraud, bernard madoff, chrysler, congressional oversight, deregulation, derivitives, Federal Reserve, geithner, general moters, gm, gm bankruptcy, lawrence summers, Obama, president clinton, Robert Scheer, roger hollander, taxpayers, treasury, Wall Street, white house advisors
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Posted on Mar 31, 2009, www.truthdig.com
|AP photo / Mary Altaffer|
The good news on the government’s “No Banker Left Behind” program is that according to the special inspector general’s report on Tuesday, the total handout to date is still less than 3 trillion dollars. It’s only 2.98 trillion to be precise, an amount six times greater than will be spent by federal, state and local governments this year on educating the 50 million American children in elementary and secondary schools.
The bad news is that even greater amounts of money are to be thrown down what has to be the world record for rat holes.
Where did the money go? Almost all of it went to the bankers and stockbrokers who got us into this mess by insisting that the complex-by-design derivatives they trafficked in should not be regulated by government since they were private transactions between consenting professionals. Sort of like a lap dance: If it doesn’t work out, that’s the problem of the parties involved and no concern of the government.
For the government to intervene would have created “legal uncertainty” in the derivatives market, an argument that a Republican-dominated Congress and President Clinton bought in authorizing the Commodity Futures Modernization Act in December of 2000. That law brought “legal certainty” to the market, a phrase that Lawrence Summers, then Clinton’s secretary of the treasury and now Barack Obama’s top White House economics adviser, deployed incessantly as a calming mantra as the financial derivatives market swirled out of control.
Now Summers and the other finance gurus who move so easily from Wall Street to Pennsylvania Avenue assure us that those professionals who made the toxic swap deals are too big to fail and must be entrusted with 3 trillion of our dollars to save themselves from disaster. And thanks to the laws they wrote, the bankers are likely to be covered for their socially destructive behavior by a get-out-of-jail-free card.
Well, maybe not all of them. A shudder must have run through the former Wall Street buddies of Bernie Madoff—once the highly respected chairman of the Nasdaq stock exchange—when Inspector General Neil Barofsky warned on Tuesday that “we are looking at the potential exposure of hundreds of billions of dollars in taxpayer money lost to fraud.”
How naive. The fraud no doubt has occurred and will occur again, but the exposure part is more questionable, if by that is meant bringing the criminals to account. As opposed to welfare cheats who end up imprisoned over scams that involve hundreds of dollars, these guys have brilliant lawyers who tell them how to steal legally when it comes to billions in fraud.
But most likely the white-collar criminals, if they are high enough up the food chain, will not even be quizzed about their activities. As the independent Congressional Oversight Panel has reported, there has been no serious accounting of the bailout money. It took major pressure from a Congress reacting to an outraged public to discover that AIG, in addition to handing out hundreds of millions in bonuses to the very hustlers who created the firm’s swindles, was a conduit for at least $70 billion in taxpayer money to reimburse the banks and stockbrokers who got us into this crisis with their bad bets.
No surprise there, given the incestuous world of finance, where the revolving doors between the Treasury Department, the Fed and executive offices in the industry have been swinging throughout both Republican and Democratic administrations. As a result, those orchestrating the bailout and those grabbing the money are for the most part friends and former colleagues, with enormous respect for each other but not for the American taxpayer and homeowner. Or for the autoworkers who had nothing to do with creating this problem but stand to lose their retiree health benefits and pensions if the Obama administration goes though with its threat to use bankruptcy to discharge GM and Chrysler from their obligations to their workers. Why float a company like AIG to the tune of $170 billion to keep that massive conglomerate from bankruptcy but balk at a much smaller commitment to keep GM solvent?
The money involved in the auto bailout is chump change compared with what Wall Street got, and it is far better spent. As opposed to the financial high rollers richly rewarded for crawling in and out of balance sheets, the folks who crawl in and out of cars along an assembly line are left with permanent aching backs and hard-won health care and retirement plans about to disappear through their company’s bankruptcy. Where’s their bonus package?
Canada’s star left-winger February 15, 2009Posted by rogerhollander in Barack Obama, Canada, Economic Crisis, Political Commentary.
Tags: AIG, Alan Greenspan, american left, bailout, banks, banks bankrupt, banks nationalized, Barack Obama, Bill Clinton, Bush, Canada, cheney, clinton foreign policy, deregulation, disaster capitalism, Economic Crisis, economic recovery, fannie may, franklin roosevelt, Freddie Mac, haroon siddiqui, Iraq, iraq economic sanctions, Larry Summers, left wing politics, milton friedman, naomi klein, neo-conservative, New Deal, no logo, privatization, roger hollander, ronald reagan, shock doctrine, tax cuts, university of chicago, Wall Street
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Toronto Star, Feb 15, 2009
She fits the cliché of the Canadian who is a celebrity abroad but is mostly ignored at home.
Naomi Klein shot to international fame eight years ago with her book No Logo, which has since sold 1 million copies.
The Shock Doctrine: The Rise of Disaster Capitalism, published 15 months ago, has already sold 800,000 copies and been translated into 26 languages. Last week, a documentary based on the book was released at the Berlin Film Festival.
Her speaking engagements and political activism keep her on the road, around the world. Her newsletter goes to 30,000 subscribers.
No Logo charted the corporate commodification of youth pop culture and the casualization of labour (what’s sold in the West are expensive brands, not products, which can be manufactured cheaply in the East).
The Shock Doctrine is about the globalization of the neo-conservative ideas pioneered by Chicago economist Milton Friedman and popularized by Ronald Reagan. There was the massive privatization – not only of public services at home but wars abroad (private security forces and contractors galore in Iraq and Afghanistan) and even disaster relief (post-tsunami and Katrina). There was the deregulation of the markets, which led, inevitably, to the current economic meltdown.
Critics attack her for seeing corporate conspiracies. They particularly sneer at her hypothesis, announced in the book’s subtitle, that right-wing economic policies have faced such popular resistance that they can only be introduced in the jet stream of shock-and-awe wars and natural disasters (laying off tens of thousands of Iraqis in order to sell state enterprises; building tourist beach hotels in Southeast Asian fishing villages washed away by the tsunami).
Her admirers see the economic crisis as proof of her prescience.
The New Yorker magazine recently ran a 12-page profile: “She has become the most visible and influential figure on the American left – what Howard Zinn and Noam Chomsky were 30 years ago.”
She has campaigned against the University of Chicago’s plan to build a $200 million Milton Friedman Institute to honour its former professor, who died in 2006. “The crash on Wall St. should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism, an indictment of an ideology,” she has said.
In a twist of fate, the economic crisis has dried up funding for the institute, and it has been put on hold – much to her delight.
In an interview Tuesday, Klein, 38, said she welcomes the election of Barack Obama. But she has two problems: his refusal to insist on accountability for recent American misdemeanours abroad and at home; and his “narrative that everything went wrong only eight years ago” with the election of George W. Bush.
It was Bill Clinton who periodically bombed Iraq and tightened the economic sanctions that killed 1 million Iraqis, including 500,000 children, according to UNICEF. It was he who axed the Depression-era restrictions that had prevented investment banks from also being commercial banks. He and Alan Greenspan resisted the regulation of the huge derivatives industry.
If you develop amnesia about all that, “then you do exactly what Obama is doing. You resurrect the Clinton economic and foreign policy apparatus, and you appoint Larry Summers, the key architect of the economic policy that has imploded at this moment.”
Obama’s economic recovery plan, especially the bank bailout, is a disaster.
It is “layering complexity over complexity. What got us into this mess in the first place were these complex financial instruments that nobody understood. Now they have a bailout that nobody understands.
“The facts are easy to understand, namely, that these banks are bankrupt and they should be allowed to go under or be nationalized because there also needs to be a workable financial sector.
“The amount of money that’s at stake in the bailout – if you include everything, the deposit guarantees, the loans, Fannie May and Freddie Mac and AIG – is now up to $9 trillion. The American GDP is only $14 trillion. So they’ve put more than half the American economy on the line to try to fix a mess that actually cannot be fixed in this way. Just look at what happened to Iceland. The debt that their three top banks held was 10 times their GDP. You can bankrupt the country this way.”
Obama’s stimulus package is not big enough. Almost 40 per cent goes to tax cuts. “And to pay for the cuts, they had to drastically scale back much more important and stimulative spending, on such things as public transit.”
Among the many parallels to the 1930s, the one Klein finds most useful is that president Franklin Roosevelt was under constant public pressure to improve the New Deal. That “history of resistance, struggle and community organizing” needs to be replicated to keep Obama honest.
“Obama is an important change from Bush, and the reason why he is important is that he is susceptible to pressure from everyone. He is susceptible to pressure from Wall Street, to pressure from the weapons companies, from the Washington establishment. But unlike Bush and (Dick) Cheney, I don’t think he’d ignore mass protest.
“The irony is that just at the very moment when that kind of grassroots organizing and mobilization could have an impact, we are demobilizing and waiting for the good acts to be handed down from on high, whether it is the withdrawal from Iraq or the perfect economic stimulus package.”
It is equally important that America come to terms with its recent past.
“So much of this moment for me comes down to whether there’s going to be any accountability for what happened – whether it’s the illegal occupation of Iraq or torture or the economic crimes that led to this disaster.
“The FBI believes that there’s a huge criminality at the heart of the economic meltdown but they’ve made a decision not to prosecute because they were afraid that might send panic through the market.
“All this argument for impunity, amnesia is really corrosive.”
Haroon Siddiqui’s column appears Thursday and Sunday. email@example.com
Tsunami Of Populist Rage Coursing Through America February 8, 2009Posted by rogerhollander in Economic Crisis.
Tags: AIG, Alston & Bird, bank rescue, bob dole, ceo bonus, citygroup, crony capitalism, deregulation, derivative markets, Economic Crisis, economic meltdown, frank rich, Goldman Sachs, great depression, Hank Paulson, health care reform, income inequality, job loss, Joe the Plumber, Larry Summers, McCain, ordinary americans, Palin, paul volcker, Pepsi and Viagra, Phil Gramm, president obama, public anger, Rahm Emanuel, retirement savings, revolving door, Robert Reich, roger hollander, salary caps, slumdog milionaire, tarp, tax delinquency, tax evasion, timothy geithner, tom daschle, treasury secretary, unemployment
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In New York, editorial pages on both ends of the political spectrum, The Wall Street Journal and The Times, called for Daschle to step down. But not The Washington Post. In a frank expression of the capital’s isolation from the country, it thought Daschle could still soldier on even though “ordinary Americans who pay their taxes may well wonder why Mr. Obama can’t find cabinet secretaries who do the same.”
As Jon Stewart might say, oh those pesky ordinary Americans!
In reality, Daschle’s tax shortfall, an apparently honest mistake, was only a red flag for the larger syndrome that much of Washington still doesn’t get. It was the source, not the amount, of his unreported income that did him in. The car and driver advertised his post-Senate immersion in the greedy bipartisan culture of entitlement and crony capitalism that both helped create our economic meltdown (on Wall Street) and failed to police it (in Washington). Daschle might well have been the best choice to lead health-care reform. But his honorable public record was instantly vaporized by tales of his cozy, lucrative relationships with the very companies he’d have to adjudicate as health czar.
Few articulate this ethical morass better than Obama, who has repeatedly vowed to “close the revolving door” between business and government and end our “two sets of standards, one for powerful people and one for ordinary folks.” But his tough new restrictions on lobbyists (already compromised by inexplicable exceptions) and porous plan for salary caps on bailed-out bankers are only a down payment on this promise, even if they are strictly enforced.
The new president who vowed to change Washington’s culture will have to fight much harder to keep from being co-opted by it instead. There are simply too many major players in the Obama team who are either alumni of the financial bubble’s insiders’ club or of the somnambulant governmental establishment that presided over the catastrophe.
This includes Timothy Geithner, the Treasury secretary. Washington hands repeatedly observe how “lucky” Geithner was to be the first cabinet nominee with an I.R.S. problem, not the second, and therefore get confirmed by Congress while the getting was good. Whether or not this is “lucky” for him, it is hardly lucky for Obama. Geithner should have left ahead of Daschle.
Now more than ever, the president must inspire confidence and stave off panic. As Friday’s new unemployment figures showed, the economy kept plummeting while Congress postured. Though Obama is a genius at building public support, he is not Jesus and he can’t do it all alone. On Monday, it’s Geithner who will unveil the thorniest piece of the economic recovery plan to date — phase two of a bank rescue. The public face of this inevitably controversial package is now best known as the guy who escaped the tax reckoning that brought Daschle down.
Even before the revelation of his tax delinquency, the new Treasury secretary was a dubious choice to make this pitch. Geithner was present at the creation of the first, ineffectual and opaque bank bailout — TARP, today the most radioactive acronym in American politics. Now the double standard that allowed him to wriggle out of his tax mess is a metaphor for the double standard of the policy he must sell: Most “ordinary Americans” still don’t understand why banks got billions while nothing was done (and still isn’t being done) to bail out those who lost their homes, jobs and retirement savings.
As with Daschle, the political problems caused by Geithner’s tax infraction are secondary to the larger questions raised by his past interaction with the corporations now under his purview. To his credit, Geithner, like Obama, has devoted his career to public service, not buckraking. But he still has not satisfactorily explained why, as president of the New York Fed, he failed in his oversight of the teetering Wall Street institutions. Nor has he told us why, in his first major move in his new job, he secured a waiver from Obama to hire a Goldman Sachs lobbyist as his chief of staff. Nor, in his confirmation hearings, did he prove any more credible than the Bush Treasury secretary, the Goldman Sachs alumnus Hank Paulson, in explaining why Lehman Brothers was allowed to fail while A.I.G. and Citigroup were spared.
Citigroup had one highly visible asset that Lehman did not: Robert Rubin, the former Clinton Treasury secretary who sat passively (though lucratively) in its executive suite as Citi gorged on reckless risk. Geithner, as a Rubin protégé from the Clinton years, might have recused himself from rescuing Citi, which so far has devoured $45 billion in bailout money.
Key players in the Obama economic team beyond Geithner are also tied to Rubin or Citigroup or both, from Larry Summers, the administration’s top economic adviser, to Gary Gensler, the newly named nominee to run the Commodity Futures Trading Commission and a Treasury undersecretary in the Clinton administration. Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin. We must take it on faith that they have subsequently had judgment transplants.
Obama’s brilliant appointees, we keep being told, are irreplaceable. But as de Gaulle said, “The cemeteries of the world are full of indispensable men.” You have to wonder if this team is really a meritocracy or merely a stacked deck. Not only did Rubin himself serve on the Obama economic transition team, but two of the transition’s headhunters were Michael Froman, Rubin’s chief of staff at Treasury and later a Citigroup executive, and James S. Rubin, an investor who is Robert Rubin’s son.
A welcome outlier to this club is Paul Volcker, the former Federal Reserve chairman chosen to direct Obama’s Economic Recovery Advisory Board. But Bloomberg reported last week that Summers is already freezing Volcker out of many of his deliberations on economic policy. This sounds like the arrogant Summers who was fired as president of Harvard, not the chastened new Summers advertised at the time of his appointment. A team of rivals is not his thing.
Americans have had enough of such arrogance, whether in the public or private sectors, whether Democrat or Republican. Voters turned on Sarah Palin not just because of her manifest unfitness for office but because her claims of being a regular hockey mom were contradicted by her Evita shopping sprees. John McCain’s sanctification of Joe the Plumber (himself a tax delinquent) never could be squared with his inability to remember how many houses he owned. A graphic act of entitlement also stripped naked that faux populist John Edwards.
The public’s revulsion isn’t mindless class hatred. As Obama said on Wednesday of his fellow citizens: “We don’t disparage wealth. We don’t begrudge anybody for achieving success.” But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression.
This is why “Slumdog Millionaire,” which pits a hard-working young man in Mumbai against a corrupt nexus of money and privilege, has become America’s movie of the year. As Robert Reich, the former Clinton labor secretary, wrote after Daschle’s fall, Americans “resent people who appear to be living high off a system dominated by insiders with the right connections.”
The neo-Hoover Republicans in Congress, who think government can put Americans back to work with corporate tax cuts but without any “spending,” are tone deaf to this rage. Obama is not. It’s a good thing he’s getting out of Washington this week to barnstorm the country about the crisis at hand. Once back home, he’s got to make certain that the insiders in his own White House know who’s the boss.