Bailout Obama

Obama Must Toss the Bums Out of Treasury, End the Wars and Start Leading

dlindorff — Thu, 19 Nov 2009 12:13:46 -0500

By Dave Lindorff

If you are sitting in class taking a test, and you’ve chosen to sit
amongst your bone-headed, slacker friends, don’t turn to them for help
when you can’t figure out of any of the answers. They may all tell you
the same thing, but they’ll all be wrong.

That’s the situation President Obama finds himself in today in the
White House. Having surrounded himself with the very Wall Street con
men who set up the crooked game that led to the current financial
crisis and economic collapse, and finding that the lousy advice they
have been giving him since last January has left the country still
mired in deepening economic decline, with the banks still not lending
and unemployment still mounting, and with growing signs that instead of
bottoming out and starting to recover, the economy is threatening to
fall a second time, to new lows and higher unemployment, Obama has
turned to the same rotten advisors for answers.

A few days ago, in an interview with Fox-TV while he was in China
off all places (a country that has made a stupendous stimulus
investment to create domestic jobs!) Obama warned, for the first time,
that America faces the possibility of a “double-dip” recession. That’s
fine as far as it goes. I agree. But what did he say the risk was? Not
that the government has been failing to put significant numbers of
people back to work, but that the government keeps piling up deficits.

This has to be the lamest economic thinking since Herbert Hoover
started tightening the screws on government spending at the onset of
the Great Depression in 1930.

Clearly the American government needs to do just the opposite of
worrying about deficits. The only growth the US economy has seen to
date has been the result of government funding—the cash-for-clunkers
program gave a brief restoration of pulse to the auto industry, and the
$8000 tax credit for buying a first home kicked up home sales briefly.
We know this because when the clunkers program ended, auto sales
crashed, and when the deadline approached for the end to the new home
tax credit, home building plunged almost 11%. The hundreds of billions
of dollars poured into so-called “shovel-ready” state and local
projects like roads, schools, etc., may have added or saved as much as
a million jobs, but the economy lost many times that many jobs over the
same period.

The problem with these stimulus programs is that they are
inefficient ways to create jobs or preserve jobs. If roughly one
million jobs were created through the stimulus spending of say $200
billion (assuming that the February $800-billion stimulus program, to
mollify Republicans, consisted of one-half tax cuts and only one-half
actual federal spending, and that this federal spending was spread
evenly over a two-year period, that’s $200,000 per job!

If, instead, Obama had chucked the dunces at Treasury and in his
Council of Economic Advisors, and instead asked your Labor Secretary to
initiate a wide-ranging $200-billion-per-year jobs program, hiring the
unemployed at perhaps $20-25,000 per person to do everything from teach
in overcrowded urban schools to laying high-speed rail trackbeds, from
cleaning up parks to putting insulation in homes, he could have given
jobs to close 8 million people—people who would have then spent their
money on goods and services and helped rally the economy from the
bottom up.

Deficits? Who gives a damn about deficits at this point! The
country is up to the gills in debt without creating any jobs. (It’s
kind of like my mortgage. Why would I worry about using my credit card
to buy food for the week if I was low on cash, when my mortgage has me
deep in the red for the next ten years? Obama’s financial advisors, on
the evidence, would tell me I should let my family go hungry, because I
need to worry about my total debt load.) If you’re worried about
deficits, Mr. Obama, end the god-damned wars in Iraq and Afghanistan.
It is costing one million dollars a year to send one lousy grunt to
Afghanistan or Iraq. And you want to have at least 100,000 guys over
there. That’s $100 billion a year right there—enough to hire four
million unemployed Americans back here at home!

This president is well on the way to rescuing President Hoover from
history’s crap heap by one-upping him in the realm of economic
mismanagement. We already have Obamavilles springing up around the
country. We haven’t started calling them that, but Naming Day isn’t far
off.

At least Hoover didn’t mire the country in another war while the economy was collapsing around him.

President Obama is on a short leash at this point. His fans, and I
was one of those who was willing to give him a shot last November, are
mostly giving up on him. Activists are already turning on him. My union
friends are disgusted. My African-American friends just shake their
heads in dismay. Liberal friends act embarrassed. A leftist friend,
retired, who devoted a month to campaigning for Obama full time in
Pennsylvania last fall now writes angry letters almost weekly to
Obama’s former campaign manager David Plouffe and others, blasting
Obama’s handling of the bank crisis and his Afghan War plans. Clearly
Obama cannot continue to appease Republicans and cater to Blue Dogs in
Congress and expect to be re-elected in 2012.

Indeed, if he doesn’t toss the crooks and charlatans in the Fed,
the Treasury and his Council of Economic Advisers out, and doesn’t stop
listening to the self-serving crazies in the military, he won’t even
have a Democratic majority in Congress by the end of next year.

President Obama, aren’t you tired of being an embarrassment to your
friends and family? Aren’t you tired of being mocked by your foes?

Come on. We’re sick of your speeches! Suck it up, be a
leader.finally and kick some butt. Do something unconventional and
daring. End the wars, bring the troops home, announce a huge jobs
program, issue an executive order expanding the Medicare program, raise
taxes on the wealthy to back where they were in the 1960s, and let’s
get the country moving forward again.
__________________________

DAVE LINDORFF is a Philadelphia-based journalist. His latest
book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work
is available at www.thiscantbehappening.net

2010 Looms: Democrats Crash and Burn in Virginia and New Jersey

dlindorff — Wed, 04 Nov 2009 10:58:27 -0500

By Dave Lindorff

It would be easy to read too much into the few statewide races that
were decided last night, but I think it’s fair to say that the results
in New Jersey and Virginia, where Republican gubernatorial candidates
won--in New Jersey’s case knocking off a well-funded Democratic
incumbent--that the results were a blow to the Barack Obama/Rahm
Emanuel strategy of playing to the right, of avoiding confrontation in
Congress and of ignoring the progressive voters whose enthusiasm and
effort back in the 2008 campaign put Obama in office.

Exit polls showed that many Obama voters sat out this election in
New Jersey and Virginia, with turnout low in both races. In part that
was because of local conditions, of course. In Virginia, Democrat R.
Creigh Deeds ran as a conservative, and was attacked by the Republican
candidate, former state attorney general Robert McDonnell, as a
tax-happy liberal. With liberal voters in Virginia unenthusiastic about
Deeds, and Republicans revved up, the loss was a foregone conclusion,
even with Obama making two visits to campaign for Deeds, and with the
national Democratic Party pumping in $6 million in campaign funding.

In New Jersey, incumbent Democrat John Corzine was wildly unpopular
for raising taxes, so that even with Democrats holding an almost 2:1
registration advantage in the state (half of all voters are
unaffiliated), he too had no enthusiastic backing from his former base.
No amount of money poured in by the former Goldman Sachs chief
executive could overcome the negative views of his record as governor.

But despite the lackluster candidates in both Virginia and New
Jersey, I think it’s safe to say that there was also clear evidence
that the losses, and the margins of the losses—huge in Virginia’s case,
and significant in normally safely Democratic New Jersey—provide
evidence that the Obama presidency, and the prevailing Democratic
strategy of minimalist legislative initiatives on health care reform,
global warming etc., expanded and unending war in Afghanistan, support
for Wall Street and neglect of the one-in-five Americans who are
unemployed or underemployed, are a political disaster in the making for
Democrats in general and Obama in particular.

The president came into office on a wave of populist enthusiasm and
high expectations for the “change” candidate Obama promised. No change
has been forthcoming now for over nine months, and with the president
now past the first-year anniversary of his historic election victory,
the latest election results suggest that his presidency could already
be headed for the rocks.

2010 is an election year that will see all seats in the House, and
a third of the seats in the Senate up for grabs. Typically, a
president’s party loses seats in that election even when things are
going well. When things are not going well, the losses can be
significant.

Obama had a chance, coming into Washington after a big rout of
Republicans last year, to set out an agenda of major progressive
change. He could have called for expanding Medicare to cover all
Americans. Instead he handed health reform over to Congress and
immediately put out the word that he was open to compromise with
Republicans, thus dooming reform from the outset. He could have
announced a thorough review of America’s two wars, and then set in
motion a withdrawal form both Iraq and Afghanistan. Instead he dithered
on Iraq, and added troops in Afghanistan, assuring that both these
disasters inherited from the Bush/Cheney administration became his own
disasters, which will now drag on through his whole term. He could have
declared a global climate emergency, and announced a job-creating crash
program to develop renewable energy in the US and to make the US a
leader in renewable energy R&D. Instead, he did almost nothing in
this critical area. As for the economic crisis, he could have taken a
progressive stand against the abuses of Wall Street, ordered a criminal
investigation of the banking class, broken up the big banks and
established a new regulatory system to put an end to the era of casino
capitalism. Instead, he put the bankers in charge of Treasury and
poured trillions of dollars into the largest banks, allowing them to
grow even bigger and more predatory.

Voters, their collective assets shrunken over the year by $14
trillion, understandably are left wondering how, aside from better
verbal skills, this president differs from the last one. As for the
Democratic Congress, with Democrats pretending that nothing can be done
unless they have not just 60 seats in Congress, but perhaps 70 or 75
(enough to be able to survive the inevitable defection of conservative
members of the party), they can’t do anything of consequence—a claim
that only is true if, as is the case, the party’s leadership and the
president are unwilling to punish those who break rank.

If Democratic and progressive independent voters feel the same way
about Obama and the Democratic Congress next fall, it will be curtains
for the Democrats and for Obama’s presidency, such as it is.

And you know what? It won’t matter much if that happens, because
what we’re seeing is that having Obama in the White House, and
Democrats “in control” of Congress doesn’t get you much in the way of
progressive change.
___________

DAVE LINDORFF is a Philadelphia-based journalist. His latest
book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work
is available at www.thiscantbehappening.net

Loook Out Below! They Call this Season 'Fall' for a Reason

dlindorff — Mon, 28 Sep 2009 10:54:48 -0400

By Dave Lindorff

So now it turns out that the whole Troubled Assets Relief Program
(TARP) was a flop or more likely a scam. Remember Bush Treasury
Secretary Henry Paulson telling us last September that credit markets
had locked up, and then, after half of the $750 billion that he
extorted out of Congress was handed out to Wall Street firms, new
President Barack Obama justifying the spending of the second half of
the money because we needed to “get the banks lending again”?

Well, now Neil Barofsky, the special inspector general for TARP, is
telling us that all that money, and another more than $2 trillion in
loans, accomplished nothing. In an interview
with Lagan Sebert, published in Huffington Post, Barofsky says, “We
were told by Treasury that the purpose of the TARP fund was to increase
lending. But we haven’t increased lending.”

Well yeah, that’s true. Just ask any ordinary working stiff. My
little bank, the Harleysville National Bank here in eastern
Pennsylvania, far from expanding lending, has been shutting down
customer credit lines. As a bank manager told me, they were “reviewing
all our equity lines” in light of declining property values (actually,
property values in our area north of Philadelphia have remained pretty
stable). In general, banks across the country have been canceling
credit lines, closing credit card accounts on customers deemed
risky—including small businesses—and making it very hard to get a new
mortgage. (They’ve also been raising all kinds of fees, ripping
customers off in other ways, but that’s another story.)

And that goes for the biggest banks that got billions of dollars in taxpayer bailout funds.

Barofsky has been trying doggedly to find out whatever happened to
all that money of ours that was shoveled out to the banks, and as he
reports, he’s been working not just without any help from the Treasury
Department, but actually against the active resistance of Treasury,
which he accuses of having tried to dissuade him from even looking into
it.

“My biggest surprise,” he says, “is when we announced an audit (of
TARP), Treasury went out of their way to say…it would be a big waste of
time.” He says Treasury officials including Treasury Secretary Tim
Geithner, claimed that it would be impossible to find out where the
money went, on the argument that money is “fungible”—that is to say all
money is the same. Of course this is a cynical and ridiculous
assertion. If it were true, there would be no job for auditors, since
all auditors do is look to find out where money went. (Imagine telling
an IRS auditor that it is a waste of time auditing your books, because
money is fungible!)

In any event, Barofsky has gone about his work, with or without the
backing of the Obama Treasury Department, and what he found is that
instead of lending out the money that they were provided with by
taxpayers, the banks have been “acquiring other institutions, sitting
on it, paying down credit lines,” and, of course, paying out obscene
bonuses to executives.

The one thing the banks are not doing is lending.

But then, as I wrote last February, it was silly to think that by
shoveling money into banks during a record recession, the banks would
then lend it out. First of all, there was the awkward reality that good
companies were and still are not looking to borrow money. Rather, they
are trying to pay down debt and get their balance sheets on more solid
ground to survive a period of low or declining sales and earnings. The
only companies that would be trying to borrow right now would be the
ones that were on the rocks, and wanted money just to stay afloat. And
what banker would lend to them? And second, if the banks could make
more money by investing their new cash instead of making risky loans
with it, why would they lend? So most of them just used the money to
invest in Treasury Bonds.

The long and the short of it is that we’ve been taken for a very
big and costly ride by banks that created a huge crisis and that then
got the government to bail them out of it with our money, and by two
administrations, one Republican and now one Democratic, that have been
submissive and willing servants of the big banks.

The big surprise to me has been Paul Volcker, who I mistakenly took
to be an over-the-hill relic and Wall Street patsy. The former Carter
and Reagan-era Federal Reserve Board chairman, currently chair of
President Obama’s economic advisory panel, is publicly warning
that the president’s bank policies are preserving a system of giant
banks that are “too big to fail,” and are risking further, even larger
bailouts.

Barofsky agrees, saying that since the bailout, under Obama’s bank
policies, big banks already deemed “too big to fail” have become even
bigger, and he concludes, “We may be in a far more dangerous place
today than we were in a year ago,” for having told certain financial
companies that we will not let them fail.

Little wonder that the smart money—that would be the insiders in
corporate boardrooms and executive suites—is reportedly selling shares
as fast as they can be sold, with the experts reporting
that insider sales of company stock are running 31:1 on the sell side.
The explanation: with layoffs still running at over 500,000 a month,
and nobody hiring, these executives don’t see anything in the year
ahead or even longer that is likely to put the economy on a renewed
growth path.

Putting these bits of news together doesn’t paint a pretty picture:
We’ve got an economy that appears headed for at best a long period of
stagnation and, more likely, for a second downturn, once the effect of
last March’s stimulus package wears off. We’ve got a financial system
that has been propped up artificially, its balance sheets soggy with
underwater mortgages and worthless derivatives, and its executives
holding assurances that they can count on the government bailing them
out no matter what stupid or self-serving decisions they make. We’ve
got an economy that is 70% based upon consumer spending, in which one
in five people is unemployed or involuntarily underemployed. We’ve got
a nation that hardly makes anything, at the same time that its currency
is sinking like a stone, making imports increasingly expensive, And we
have a stock market that has been inflated into a giant bubble, just
waiting to pop.

October should be an interesting month this year.
_______________
DAVE LINDORFF is a Philadelphia-area journalist. His latest book is
“The Case for Impeachment” (St. Martin’s Press, 2006). His work is
available at www.thiscantbehappening.net

Clinton and Obama: The Worst and Best Thing to Happen to the Democratic Party in Years

dlindorff — Mon, 17 Aug 2009 13:20:06 -0400

By Dave Lindorff

Bill Clinton was the worst thing to happen to the Democratic Party
and to progressives since that racist warmonger Woodrow Wilson won the
presidency and dragged the US into the utterly pointless and incredibly
bloody First World War.

Clinton, by posing as a progressive, confused and undermined, and
ultimately betrayed the liberal/progressive wing of the party,
shattering what was left of the New Deal coalition and leaving the
American left adrift and riven by the conflict between those who
thought the Democratic Party was the only viable vehicle for
progressive reform and those who thought it was hopelessly in the grip
of corporate interests.

Barack Obama offers the hope of bringing that era of debilitating confusion to an end.

Not because he is the Great Black Hope of progressives, but because
he has taken the concept of selling out to corporate interests and
compromising with Republicans to such remarkable heights that
progressives hopefully can no longer be confused about the
irretrievably corrupted nature of the Democratic Party.

On virtually every issue of importance, President Obama has sided with corporate interests and the wealthy.

On the issue of war and peace, he has sided with the
military-industrial complex, with a policy of permanent occupation of
Iraq and endless war in Afghanistan, as well as continued funding of
the country’s colossal armory of death, from strategic missiles and
submarines to aircraft-carrier-group armadas to high-tech fighter
squadrons and space weaponry.

On civil liberties, he has sided with the police state, supporting
continuation of the Bush/Cheney administration’s insidious National
Security Agency spying program, defended military spying within the US,
and refused to prosecute obvious abuses by the prior administration.

On torture, the Obama administration is continuing the imprisonment
and torture of captives in Afghanistan and elsewhere around the world
at Bagram Air Base and, probably, at other secret sites, and instead of
closing Guantanamo as promised, is looking into transferring that
hellhole of torture and abuse to one or several sites in the mainland
US.

Health care reform has become a sad joke, with the emerging
“reform” bill looking for all the world like the Rube Goldberg creation
of the Clinton era that properly went down in flames. Instead of taking
on the insurance industry, the hospital companies and the
pharmaceutical industry and other parts of the profit-making
medical-industrial complex, Obama cut deals with all of them behind
closed doors, assuring that their profits would be left untouched, and
that they could essentially write their own “reform” bill through the
offices of bought-and-paid members of Congress like Senator Max Baucus.
Obama and his congressional allies carefully kept any discussion of the
single-payer idea—essentially Medicare for all, and the approach that
even Obama himself admits would be cheaper and more universal—out of
sight and off the table.

Climate change action, too, has been sold out, with Obama adopting
the approach favored by the energy industry—“cap and trade.” That
concept is a gold mine for Wall Street trading firms, which will be
doing trades next in pollution credits instead of subprime mortgages,
and for energy companies which will get free credits to sell, courtesy
of the taxpayer. And because it’s a system so easy to game, it will do
nothing or next to nothing to reduce greenhouse gases.

Finally, there’s economy and banking reform. Here Obama didn’t even
make a pretense of taking a progressive approach. There is a stimulus
program, but half of it was in the form of tax cuts—token for the poor
and middle class and significant for the rich and for businesses, and
half in the form of federal grants, often for unneeded projects like
roads and road repair which go to some of the higher paid members of
the working class, leaving the poor and the ununionized with no job
help. Meanwhile, bankers were the recipients of trillions of dollars in
bailout assistance, while nothing was done to break up the huge
mega-bank holding companies that brought on the financial and economic
crisis in the first place. Instead of picking economic advisers and
bank regulators from the many talented system critics like Nobelists
Joseph Stiglitz and Paul Krugman, Obama picked veterans of the
Bush/Cheney administration, and Wall Street shills like Larry Summers
and Timothy Geithner.

Last fall, I and many progressives urged voters to elect Obama, not
because we thought he was a progressive, but because we hoped that his
background—community organizer, raised by a single mother, experience
living in a third world country (Indonesia), multi-racial—would lead
him to make at least some right decisions. We, or certainly I, hoped
too that the energized young and working class electorate that came out
for him in the fall would continue to press him aggressively to do the
right thing on war, environment, civil liberties and the economy.

I was wrong on the first count: Obama has been a corporatist
through and through on all the major issues that matter. And I was
wrong on the second. Most of the left in the US, from the labor
movement to the environmentalist movement to the anti-war movement, has
to date remained glumly quiescent as Obama has sold them out on each of
their key issues.

But here is the silver lining: The sell-out this time is so much
more blatant, and so much more serious, than it was with Clinton, and
for all the talk about Obama’s ability to string words together, he is
so much less of a charismatic figure than the gregarious Bill Clinton,
that he is unlikely to hang on to the ardent support that propelled him
to his victory last November. The disappointment and sense of betrayal
among progressives this time is palpable, especially because, while
Clinton, by 1994, had the excuse that he was working with a Republican,
or partially Republican Congress, Obama has solid control of both
houses, but refuses to use it. If, as I expect, the recession continues
to deepen, with more and more people losing jobs and homes, if, as I
predict, health care continues to be unaffordable and inaccessible, if,
as I know will happen, evidence of deadly climate change continues to
pile up, and if, as I am equally certain, Iraq explodes and the war in
Afghanistan continue to worsen, the left is going to see Obama and the
Democrats in Congress as the failures and corrupt frauds they are, and
will abandon them.

That leaves the question of what to do, and where those frustrated progressives will turn.

I don’t claim to have the answer to that. Clearly the labor movement
needs to recognize that hitching its fortunes to the Democratic Party
has been and will continue to be a dismal failure. It needs to pull all
its political money back and only support those who are 100% allies in
the struggle for the rights of workers. No money for the party as a
whole. It should also go back to the pioneering work of people like the
late Tony Mazzocchi of the Oil and Chemical and Atomic Workers Union,
who before his death was tirelessly working to establish an American
labor party.

Other third parties on the left need to drop their individual
agendas and work towards unity, especially with the labor movement, in
order to create a broad-based left party that doesn’t have litmus tests
for inclusion—just broad principles like steeply progressive taxation,
an end to NAFTA and the WTO, democratization of the Federal Reserve
Bank, national health care, a wholesale slashing of the military
budget, by perhaps two-thirds or more, free education through four
years of college for all, and a crisis plan to attack climate change.

If the ever fractious US left, and the somnolent labor movement,
cannot come together as one, there is little hope of political change
in America. At that point the alternative would be an increasing
militancy over these critical issues, outside of the electoral
arena—something that has to happen anyhow, regardless of whether a real
third party force can be put together. We know that simply organizing
occasional polite marches in Washington, or in key cities, accomplishes
nothing. We have learned that email campaigns to deluge members of
Congress with canned opinions don’t work. What has worked, and will
always work, is massive campaigns of civil disobedience, tent cities in
Washington, organized disruption of war preparations, and door-to-door
organizing. The corrupt hacks who inhabit the halls of Congress and the
White House will not do the right thing just because it is the right
thing, or because we ask them nicely. They may, if we make them fear
that they will actually lose our votes in the next election. For the
most part, incumbent Democrats know that the people who peacefully
march down Connecticut Avenue are still likely to vote for them come
the next election. They’re not going to be so sure about people who are
being hit by tear gas and water cannons and who are being hauled off en
masse to jail at protests.

We may need to start sending that stronger message.
___________________

DAVE LINDORFF is a Philadelphia-based journalist. His latest
book is "The Case for Impeachment" (St. Martin's Press, 2006). His work
is available at www.thiscantbehappening.net www.thiscantbehappening.net

Where's the Anger as the Wheels Come Off Obama's and the Democrats' Recovery Program?

dlindorff — Wed, 10 Jun 2009 16:05:35 -0400

By Dave Lindorff

My bank, a small regional institution that was not involved in sub-prime lending, and that was not a recipient of any TARP bailout money, cut off my home equity line of credit two weeks ago. They did it abruptly, with no notice—I only discovered it had happened when I tried to get a $500 advance from it to cover a payment I was making on my credit card. When I asked what was going on, the local branch manager informed me that “we are closing out a lot of credit lines while we reassess the value of houses in this region, which have been falling.”

Now, in my particular case this was ridiculous. First of all, in our county, just north of Philadelphia, property prices have been static, but not falling. Furthermore, I had taken out a $160,000 mortgage 12 years ago, and it was now paid down to $60,000, and my balance on the home equity credit line was pretty small, so there was no way that we were in any way “under water”—in fact our equity in our home is much higher than it was 12 years ago.

The bank informed me that it was no problem. I could simply take out a new credit line, at no charge, and transfer the balance on the current line over to the new one. The only hitch: Instead of paying one percent over prime as I had been, I would be paying nearly 4 percent over prime on that balance, effectively doubling the cost of borrowing money.

This kind of thing is going on all across America, as banks that once spread around credit like a Philadelphia Democratic Party ward captain on Election Day, start tightening the screws on individuals and on small businesses.

While the Obama administration and the Treasury and the Fed are bulldozing funds into the coffers of the big banks, allegedly to get them to lend, the banks, from the largest to the smallest, are pulling back, afraid that borrowers will end up going bust on them. So much for economic stimulus efforts.

Not that borrowers have been lining up to get credit. Rather, most people, if they aren’t simply going bankrupt or letting collection agents harass them for nonpayment, are trying to pay off credit card balances, and to cut expenses. With official unemployment approaching 10%--a level it may hit this month—and real unemployment, as measured the way it used to be back in 1980, at closer to 20 percent, the majority of Americans not only have friends and family members who are unemployed or working part-time or at odd jobs involuntarily, but are worried about getting the axe themselves.

Meanwhile, the short-lived but incredibly expensive Obama rescue program, like a stagecoach at the end of a spaghetti western chase scene, is about to have the wheels fall off and go sliding over a cliff.

Bond yields and commodity prices are spiking as investors are waking up to the reality that massive borrowing by the US Treasury and massive printing of money by the Federal Reserve are going to lead to serious, perhaps even hyper inflation of the dollar. That in turn will force the Fed at some point, probably fairly soon, to raise interest rates, choking off not only those so-called economic “green shoots” that the cheerleading media have been citing as evidence that the recession is “bottoming out,” but also even the recent stock market rise, which was being touted as one of those signs of economic “spring.” On Tuesday, the interest rate or “yield” on the benchmark 10-year Treasury Bill jumped from 3.86% to 3.98 percent, and at one point went over 4%. Meanwhile, crude oil prices rose to over $70/barrel—an odd thing given the significant decline in demand caused by the global recession, but evidence that investors are anticipating a dollar slump and aren’t interested in supply and demand issues. Other commodity prices are also jumping for the same reason.

News that the big banks that were recipients of hundreds of billions of dollars in federal TARP loans were paying some of that money back to the government in order to be able to go back to their old ways was hardly reassuring. Those banks, like Bank of America and Citibank and Goldman Sachs, are not suddenly healthy. They have used accounting gimmicks to disguise the fact that they are what some economists have dubbed “zombies,” with bad debts far in excess of their assets. And they will stay that way, while enriching their top managers with bloated salaries and “bonus” payments, while keeping credit tight and available only to the absolutely best corporate borrowers.

Obama’s wars in Iraq and Afghanistan are going from bad to worse. There is no savings coming out of Iraq, as he had claimed would happen during last year’s presidential campaign, and even if there were, it’s all simply being transferred over to Iraq, where the US war effort is morphing from a small special forces operation into a full-scale war, destined to rival or even surpass the one in Iraq in terms of human and financial costs.

It’s all coming unglued, just as the president puts forward his signature program—a health care reform scheme that is supposed to guarantee health care for everyone in the country.

Fat chance that one has. When America’s economic house of cards finally really collapses, which looks to be starting to happen now, there simply won’t be any cash in the till for health care.

So far, most Americans remain unaware of the scale of this crisis. The news media continue to tout shamelessly whatever signs of recovery they can detect, leaving all those whose personal finances are falling apart to feel like it’s just their problem. Astonishingly, given the extent of the joblessness, there has been no national jobs march on Washington, no mass protests over the inadequacy of unemployment benefits, which reach only a minority of workers and are at levels far below what they were in prior recessions, no sit-down strikes at companies that are laying workers off or cutting salaries. The labor movement, such as it is at this point, is so wedded to Obama and the ruling Democrats, and so narrowly focused on trying to win passage of the seemingly doomed Employee Free Choice labor law reform bill, that the unions aren’t trying to organize any mass actions to demand economic justice.

Maybe this public passivity in the face of rampant corporate welfare and corporate pillage will come to an end as unemployment benefits begin to run out and unemployment rates continue to climb.

The coach is heading for the cliff, but there is still time for people to jump out.

_____________

DAVE LINDORFF is a Philadelphia-based journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and available on my website in signed collector edition). His work is available at www.thiscantbehappening.net

Fantasy Finance and Real Fixes

davidswanson — Fri, 22 May 2009 12:48:16 -0400

By David Swanson

If you're like me you find it at least a bit disturbing that we're giving trillions of dollars to save the economy to the very people who wrecked it, and more disturbing that we're doing so without any solid basis for expecting to get much of it back and without making fundamental changes to prevent a repetition. But if you're like me, you also aren't 100 percent certain how a credit default swap works with a cubed collateralized debt obligation, much less whether such a monstrosity needs to be eliminated or reformed. What to do?

Well, a coalition of concerned citizens called "A New Way Forward" ( http://anewwayforward.org ) is organizing teach-ins everywhere on June 10th ( http://anewwayforward.org/demonstrations ) and if you don't have people who feel up to the role of teachers, or even if you do, there's a terrific video at that website to download, show, and discuss. Just doing this much will make you more confident in discussing the single largest transfer of wealth any of us have seen, and it will connect you with others who share your concerns as well as your hesitations. There is also a wonderful collection of articles and books available on the right hand side of this page: http://anewwayforward.org/blog

A New Way Forward has digested this information and arrived at three proposals:

"NATIONALIZE: Experts agree on the means -- Insolvent banks that are too big to fail must incur a temporary FDIC intervention - no more blank check taxpayer handouts.
REORGANIZE: Current CEOs and board members must be removed and bonuses wiped out. The financial elite must share in the cost of what they have caused.
DECENTRALIZE: Banks must be broken up and sold back to the private market with strong, new regulatory and antitrust rules in place-- new banks, managed by new people. Any bank that's "too big to fail" means that it's too big for a free market to function."

I'm inclined to agree with those general ideas, but I've also just read an excellent new book that takes a broader view and offers broader solutions while calling into doubt the idea that the fixes listed above will be sufficient on their own. I recommend adding to any financial shenanigans reading list "The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity, And What We Can Do About It," by Les Leopold. The introduction to this book ends thus:

"And then there's the subprime-mortgage puzzle. The financial media has all but concluded the crash was caused by risky mortgages taken out by poor people and deadbeats who couldn't afford them, and issued by reckless lenders who should have known better. About $1.3 trillion worth of such mortgages are out there. Of that, about $300 billion are in default or nearly so…. Please, can someone explain how that amount (about 2 percent of household net worth, could devastate the world's financial system? To date, the taxpayer has put up about $2 trillion in bank bailouts and loan guarantees. Why didn't that take care of the problem long ago? Like some perverse modern-day miracle of fishes and loaves, how did $300 billion of bad debt multiply into trillions of dollars in financial toxic waste? Poor people did all that? In this book I go after these questions -- and I hope the answers will tell us a good deal about our economic woes and what to do about them. At the very least, I hope to contribute modestly to our collective financial literacy. In short, if I can understand this crap, so can you."

And you really can and it's really worth doing. The bulk of "The Looting of America" is devoted to the explanation of what's happened. And the root cause turns out not to be deregulation or oversized banks or a lack of accountability for fools and crooks, although all of those things helped. The tragic flaw in the system turns out to be the now-thirty-year-old divergence of productivity and income, the denial of a steady share of our own earnings to working people, the gradual transfer of great sums from the rest of us to a very small group of extremely wealthy people. Of course, such a transfer of wealth might seem offensive, but how could it actually cause the situation in which we needed to transfer another huge pile of wealth to the same people through our government? Well, essentially we created a situation in which investors couldn't find anything in the real economy to invest in anymore. All the real stuff was already invested in. Had someone created a way to invest in new industries, infrastructure, green energy, and mass transit, we might all be smiling about it now. Instead, investors figured out ways to invest in fantasies, to make bad investments look good, and to gamble other people's money on the fate of yet other people's investments without investing in anything real at all.

Credit: http://www.dilbert.com

So, when Leopold comes to his recommendations at the very end of the book, some of them may sound familiar and others harebrained, unless you've read the preceding chapters, in which case they all sound sensible or newly strengthened. The recommendations include (in a list I've created by pulling ideas out of the text):
1-Financial disaster insurance: we should collect premiums (or taxes) from all financial transactions to sure up the real economy against the next collapse of the fantasy one by investing in infrastructure and all the useful real investments that those with too much money on their hands don't always manage to find or create on their own.
2-Without expecting that we can prevent the next bubble and burst, we should attempt to lessen it by establishing a Financial Product Safety Commission that would ban dangerous financial "products" like collateralized debt obligations. Any product too difficult for skilled regulators to comprehend would be banned for that reason alone.
3-Undo the transfer of the wealth from our increased productivity: "If each billionaire inside the casino walked out with 'only' $100 million per person, they would leave $1.52 trillion sitting on the table. If these chips landed in the public coffers, let's say via steeply progressive income and wealth taxes, we could invest $150 billion a year in developing and deploying renewable energy alternatives -- ten times what President Obama called for during his campaign. Or we could provide free tuition for every student at every public college and university -- in perpetuity."
4-Re-unionize. Permit it by passing the Employee Free Choice Act.
5-Cap the salaries at any financial company taking government money at the salary level of the U.S. president ($400,000). Or do that for all companies taking public handouts.
6-Create single-payer health coverage, which would provide a significant stimulus to the economy.
7-Create a maximum wage.
8-Raise the minimum wage.

Another central concern for many worried about our financial fate is the role played by the Federal Reserve, which someone rightly remarked is no more federal than Federal Express. It's a private company running our financial policies and inventing and distributing money. Not only does the Constitution place such powers in Congress, but the Congress is currently not even permitted to know what the Fed is up to. It would be, however, if H.R. 1207, the Federal Reserve Transparency Act of 2009, were to pass the House of Representatives and an unprecedented avalanche of public pressure force the Senate to miraculously go along. The House bill has 179 cosponsors plus one sponsor. That's almost unheard of. No bill has that many cosponsors. It only takes 218 votes to pass. So, if we could get 38 more cosponsors we'd be getting somewhere. Here's a page on which to take action:
http://action.firedoglake.com/page/s/Fed1207

(And, by the way, applause to my congressman Tom Perriello who has signed onto this -- the second thing he's ever done that I applauded.)

There's also a particular regulation that ought to be enforceable and in fact used to be enforced fairly well, that would limit the ability of the non-working class to rip the rest of us off. I'm talking about a ban on usury. There are bills in both houses of congress to limit the interest that creditors can charge. Senator Bernie Sanders' bill (S. 582) would limit interest to 15 percent. Even those who believe we would all perish if billionaires had to fly on the same airplanes as other people and couldn't purchase that third yacht might support the idea of limiting the interest on their own credit cards to 15 percent. Surely the masters of the universe can make a dishonest living at 15 percent the same as at 22 percent or 400 percent, right? Now would be a good time to call your senator and representatives.

Teabag THIS

davidswanson — Sun, 12 Apr 2009 03:40:11 -0400

Flyers to take to teabag rallies:

Large jpg. PDF. Word. Old Word.

Politicized Accounting: No End to the Scams

dlindorff — Tue, 07 Apr 2009 11:55:46 -0400

By Dave Lindorff

The accounting profession might seem like the last place that you’d
find serious political hanky-panky going on, and it’s probably not on
very many people’s A-list of fun subjects to read about, but the
Financial Accounting Standards Board, a quasi-governmental body that
has statutory authority to regulate and establish the rules by which
public companies, including banks, do their books, has just caved in to
pressure from those banks and from the large number of members of
Congress who pocket huge piles of campaign swag and perks from those
banks and other public companies, and gravely undermined the integrity
of corporate balance sheets.

This may sound incredibly arcane, but what the FASB has done is
declare that assets held by companies (including banks) on their books
will no longer have to be valued at their current market value. Under
new guidelines, effective retroactively to March 15, these assets can
now be valued at what the corporate managers think (or pretend to
think) they will be worth at some time in the future when they might
try to sell them.

Think about it for a minute. Say you own a house, which you might
have bought 10 years ago for $200,000, using a $180,000 mortgage.
Today, depending on where you live in the country, that house might be
worth as little as $100,000. If you still owe $100,000 on your
mortgage, that would give you a net worth of 0 (a lot more than what
Citibank and Bank of America are worth today). Now let’s say you want
to go out and buy a $20,000 car on credit. The auto dealer, before
extending you a car loan, will want to know what your net worth is.
Under market-to-market accounting rules, you would have to say that
your net worth is 0, and you probably wouldn’t get a loan—especially if
your employment, like that of many Americans, is iffy, and you’re
carrying a big balance on your credit cards. But under the new FASB
guidelines, if you were to be treated like a bank, you could estimate
the value of your house as $200,000 (the price you paid for it), or
perhaps even $250,000 (the price you “expect” it to get when you decide
to sell it). You have no real way of knowing whether your house will
ever return to being worth $200,000. For all you know, it could fall
further over the next five years to $75,000 or $50,000, but that
doesn’t matter. You, the owner, are saying that your “reasonable
expectation” is that this asset of yours is “worth” $200,000. And
bingo, thanks to the magic of modern FASB-approved accounting, your net
worth, instead of being 0, is now $100,000. You can buy your car.

This is what the FASB is now saying banks and other companies can do.

If you are an investor, or a potential investor, you now have to be
very wary. After all, how are you top establish what a company is
really worth, if the management is able to play games with the value of
its assets? The answer is you really can’t know. Things get much worse
when it comes specifically to banks, which after all, are all about the
assets.

Remember those “toxic” assets—the alphabet soup of debt products
with initials like CDO, CDS, SIV, all composed of diced and sliced debt
that for the most part is close to worthless? Well, thanks to the
FASB’s accommodating change in the rules, instead of valuing those debt
holdings (remember, loans are assets to a bank) at what they are worth
on the market today, the banks are now able to value them at what they
supposedly think they will be worth at some future date when the bank
might want to sell them. This is a wholly fictional figure, of course.
Nobody knows what, if anything, these crap debt instruments are going
to be worth, but it’s a fair bet that most of them won’t be worth any
more a decade hence than they are worth today (and maybe less). But who
cares? The important thing is that now the banks, who have huge black
holes in their balance sheets, can now fill those holes with
artificially inflated assets and make themselves look a whole lot
better financially than they really are.

There’s an irony here. The big banks that hold most of the toxic
debt (and especially the five largest banks that hold 96% of the
garbage) desperately wanted this FASB rule change because they wanted
to prettify their balance sheet in hopes of boosting their share values
and of maintaining the pretense that they are not zombies. But in doing
this, they are undermining a key goal of the Obama administration and
of Treasury Secretary Tim Geithner and Federal Reserve Chair Ben
Bernanke, who wanted to have the government and private investors start
buying those trillions of dollars’ worth of toxic assets off of the
banks’ hands.

Remember, if the banks declare that the toxic assets on their books
are worth some fictitious amount, they have to sell them at that price,
or stand accused of faking their books, i.e. fraud. But investors, like
hedge funds and other institutional investors, are not going to want to
buy those assets at anything but distressed bargain-basement prices,
because even with the government assuming 92 percent of the risk, they
are not going to buy these trash assets unless they see the chance for
a significant upside.

So with the new rule, the banks will end up being stuck holding the
very toxic assets that have sent them into a tailspin in the first
place.

The vote to end market-to-market accounting rules was controversial
even on the five-member FASB board, which ended up narrowly voting 3-2
in favor of the measure. One member who voted against the change,
Thomas Linsmeier, decried what he said was “pressure” on the board to
act. A House committee had threatened to introduce legislation that
would force the change if the FASB didn’t act on its own.

The US budget has long been a work of fiction. Now the books of the
nation’s banks and of many of its public companies will also be pure
works of fiction.

As columnist Jonathan Weil wrote in Bloomberg.com last month as the
FASB was considering making this change in its rules, “The FASB ought
to change its name to the Fraudulent Accounting Standards Board.”

The road to ruin, it turns out, is not paved with good intentions
after all. It is paved by powerful lobbyists buying short-term benefits
at the public’s expense.

By the way, if you think Citigroup is solvent, I have a great deal on a house for you.
________________________

DAVE LINDORFF is a journalist based in Philadelphia. His latest
book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work
is available at www.thiscantbehappening.net

History Lesson: And These Are the People We Expect to Fix Things Now?

dlindorff — Fri, 27 Mar 2009 13:03:54 -0400

By Dave Lindorff

George Santayana once famously said, “Those who cannot learn from
history are doomed to repeat it.” But what about those who don’t just
ignore history, but who hire and take counsel from those who committed
historic follies in the past?

Back in November 1999, Congress passed legislation pushed by then
Sen. Phil Gramm (R-TX), rescinding the Depression-era Glass-Steagall
Act. The measure, backed by the Clinton administration, and
overwhelmingly passed by the Senate (90-8) and the House (362-57),
opened the way for banks to merge with investment banks and insurance
companies, and led directly to the current financial cataclysm.

A report on that Congressional action written by reporter Stephen
Labaton and published in the New York Times on Nov. 5, 1999 under the
headline “Congress Passes Wide-Ranging Bill Easing Bank Laws,” includes some remarkable quotes from key players in that sellout to the financial sector.

Here’s Larry Summers, a chief architect of the current financial
industry multi-trillion-dollar bailout giveaway being orchestrated by
the Obama administration, where he serves as director of President
Obama’s National Economic Council:

''Today Congress voted to update the rules that have governed
financial services since the Great Depression and replace them with a
system for the 21st century. This historic legislation will better
enable American companies to compete in the new economy.''

And here’s what Sen. Charles Schumer (D-NY), awash in Financial
industry campaign donations but currently in high dudgeon over the Wall
Street’s bonus payments to executives, speaking about the ’99 measure
eliminating Glass-Steagall:

''If we don't pass this bill, we could find London or Frankfurt
or years down the road Shanghai becoming the financial capital of the
world. 'There are many reasons for this bill, but first and foremost is
to ensure that U.S. financial firms remain competitive.”

The article quotes the Clinton administration and Summers’ Treasury
Department as predicting that revoking Glass-Steagall and permitting
banks to expand into investment banking and insurance would save
consumers “$18 billion a year” through economies of scale—a figure that
seems rather quaint as taxpayers now pony up trillions of dollars to
rescue those same institutions. (The article notes that critics of
deregulation argued that even those paltry savings, probably
overstated, would flow to financial sector investors, not to consumers.)

The old Times clip (brought to my attention by alert
veteran radical writer and activist Bert Schultz of Philadelphia), does
highlight a couple of prophetic heroes, too.

Sen. Byron Dorgan (D-ND), one of seven Senate Democrats who voted against revoking Glass-Steagall, said:

“I think we will look back in 10 years' time and say we should not
have done this but we did because we forgot the lessons of the past,
and that that which is true in the 1930's is true in 2010. I wasn't
around during the 1930's or the debate over Glass-Steagall. But I was
here in the early 1980's when it was decided to allow the expansion of
savings and loans. We have now decided in the name of modernization to
forget the lessons of the past, of safety and of soundness.''

And then there’s the late Sen. Paul Wellstone (D-MN), who died in a
tragic and still unexplained plane crash during his campaign for re-election in 2002. Congress, he
said, seemed:

“…determined to unlearn the lessons from our past mistakes.
Scores of banks failed in the Great Depression as a result of unsound
banking practices, and their failure only deepened the crisis.
Glass-Steagall was intended to protect our financial system by
insulating commercial banking from other forms of risk. It was one of
several stabilizers designed to keep a similar tragedy from recurring.
Now Congress is about to repeal that economic stabilizer without
putting any comparable safeguard in its place.''

For the record, also voting against Glass-Steagall repeal in the
Senate were lone Republican Richard Shelby of Alabama, and six other
Democrats: Barbara Boxer (CA), Richard Bryan (NV), Russ Feingold (WI),
Tom Harkin (IA), and Barbara Mikulski (MD). 51 Democrats, 5 Republicans
and 1 independent voted against the measure in the House.

Treasury Secretary Tim Geithner, a key player in the current bailout
scheme, isn’t mentioned in the Times article about Glass-Steagall, but
at the time was a protégé of Summers, working as undersecretary of the
treasury for international affairs.

While they are thankfully well out of the loop in the current
scramble in Washington to both reverse the economic collapse
and try and help financial companies and financiers profit from it,
it’s worth reading too in this 10-year-old clip what Phil Gram and then
Sen. Bob Kerrey (D-NE and now embattled president of the New School in
New York City) had to say about ending Glass-Steagall.

Sen. Gramm:

'The world changes, and we have to change with it. We have a new
century coming, and we have an opportunity to dominate that century the
same way we dominated this century. Glass-Steagall, in the midst of the
Great Depression, came at a time when the thinking was that the
government was the answer. In this era of economic prosperity, we have
decided that freedom is the answer.''

And then Sen. Kerrey, with a line that should probably be etched someday on his tombstone as his most memorable line:

“The concerns that we will have a meltdown like 1929 are dramatically overblown.”
__________________
DAVE LINDORFF is a Philadelphia-based journalist. His latest book
is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is
available at www.thiscantbehappening.net

Treasury and the Fed Don't Need New Powers, They Need to Use the Power They Have

dlindorff — Tue, 24 Mar 2009 14:33:36 -0400

By Dave Lindorff

Wait a minute! Did I hear correctly? Did Treasury Secretary and
former New York Federal Reserve Bank screw-up Tim Geithner really tell
a House Financial Services Committee today that he needed “new powers”
to allow the federal government to take control of non-bank financial
corporations whose actions threaten the financial system or the economy
and “break them up”?

The subject under discussion at the hearing was AIG, and Geithner
and Fed Chairman Ben Bernanke, under attack for those AIG “bonus
payments” to executives, were trying to talk tough about the evil
insurance giant.

But aren’t the powers that Geithner is calling for exactly the
powers that he and Bernanke already have in the case of the banking
industry?

Yes they are.

So why aren’t we seeing the Obama administration and the Fed going
after the banking giants that have been co-conspirators with AIG in
wreaking havoc with the US and the global economy by creating dodgy
structured financial instruments that allowed banks and other financial
companies to make huge off-balance-sheet bets that virtually guaranteed
a future collapse?

Good question, but not one that the House Finance Committee was asking.

Instead of doing the obvious—which would be to use the Fed’s and
the Federal Deposit Insurance Corporation’s powers to take over failed
banking institutions, break them up, and sell the healthy parts off to
stronger institutions—Geithner, Bernanke and the Obama financial team
have been pouring dollars into a group of zombie banks that are already
technically insolvent by any honest accounting standards, and that have
no chance of standing on their own. They are borrowing money at such a
prodigious rate that the Chinese government, America’s major creditor,
and the United Nations, are talking about the need to do away with the
dollar as the global currency, to be replaced by some basket of
currencies, and in the process virtually assuring that the US currency
will shrink dramatically in value, They are putting a colossal debt
upon future generations of Americans. And they are putting at risk all
the progressive goals that voters sent Obama to Washington expecting
him to enact: health care reform, energy reform, education reform, etc.

If Geithner and Bernanke think it is important, and appropriate, to
break up dangerously large and threatening enterprises like AIG, why
are they not even talking about breaking up Citigroup, Bank of America,
Wells Fargo, Goldman Sachs and other overlarge large banking firms?

Too big to fail should simply mean too big to exist. It’s that simple.

Not one more dollar should be spent trying to rescue these zombie
banks. In fact, they should be ordered to give back the hundreds of
billions of dollars that were already poured into them, most of which
they have reportedly simply invested in Treasury notes, since there was
nobody creditworthy who wanted to borrow the money. Then the regulators
should move in and shut all the big banks down, and begin the process
of tearing them apart. Those parts that are deemed hopelessly in debt
because of huge holdings of Credit Default Swaps and other toxic
financial products should be shut down, with shareholders and
bondholders taking the hit. The healthy parts—the banks with all the
deposits—can be auctioned off in pieces to smaller state and regional
banks.

Never again should there be federal banks whose branches and
brokerage and insurance subsidiaries span the nation and the globe.

There is no need for such entities. For one thing, they are too
powerful politically, with operations in every congressional district,
much like the Pentagon and the arms industry, and we’ve seen where that
gets us. For another, particularly when it comes to insurance, the
regulators are state based, making national companies largely out of
reach. Finally, national banks have little or no interest in small
businesses and their credit needs.

If large global firms need bank loans, let the banks organize
syndications to accommodate them. That has always worked in the past,
and in fact, is still done for big global firms.

Geithner should be forced to explain why he needs new powers to
break up non-bank financial companies, if he is unwilling to use the
powers he already has to break up too-large banks.

Then he should be fired and someone should be brought in to replace him who will demand the breakup of those banks.

While we’re at it, President Obama should also be asked why his
Treasury Secretary needs “new powers” to go after companies like AIG
that are too large for the good of the country. That power already
resides in the Federal Trade Commission and the Justice Department,
both of which can use their anti-trust authority to break up companies
that are deemed anti-competitive—surely an apt characterization of AIG.

While average Americans all know that corporations have become far
big and too powerful, making the old Rockefeller Standard Oil Trust
look quaint by comparison, anti-trust in Washington has become almost a
dirty word. It needs to be dusted off and trotted out as a major policy
tool, if this country is to return to economic health.
_________________
DAVE LINDORFF is a Philadelphia-based journalist. His latest book
is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is
available at www.thiscantbehappening.net