Bailout Victims

Unemployment Up Dramatically! Stocks Rise! Huh?

dlindorff — Fri, 06 Nov 2009 22:29:34 -0500

By Dave Lindorff

Ordinary, average, struggling Americans might be scratching their
heads over the news today, as the Labor Department reports that
unemployment is up by four-tenths of a percent for the month to a
record 10.2%, fully three-tenths of a percent higher than economists
had been forecasting, and stocks do what? Rise by a quarter of a
percent!

What’s going on here?

Well, the tube analysts are quick to say, unemployment figures are
a “lagging” indicator. That is, employment generally lags the overall
economy, with layoffs coming after a recession kicks in, and hiring
waiting until a recovery is well underway.

But that isn’t true with a deep recession like this one, because at
some point—and we’re well past that point—high and prolonged
unemployment leads to reduced demand for goods and services, and to a
psychology of fear and consumer withdrawal. Once people feel that they
aren’t going to find a new job soon, and once those who still have jobs
feel that their employment is not secure, they no longer buy things
except what they absolutely need. And in an economy where fully 72% of
economic activity is consumer spending, that is no longer a “lagging
indicator.” High, prolonged unemployment becomes a causal factor in the
economic downturn.

If people aren’t buying stuff, then companies won’t make it, which
means that they stop hiring, and even lay more people off, and so
unemployment becomes a downward spiral of cause and effect.

But what about the stock market rise? Why would investors think that a worse-than-expected jobs report is a good thing?

There are several explanations for this ugly phenomenon. First of
all, rising unemployment—particularly sharply rising unemployment—means
that the Federal Reserve will definitely not, for the foreseeable
future, raise interest rates. A rise in interest rates would hit
companies hard, and always batters the stock market, and the government
and the Fed don’t want to do either of those things. So investors
almost always jump into the market and push stocks up when they get
some signal that the Fed is going to lower, or at least hold the line
on interest rates. With rates effectively set at 0, the Fed can’t lower
them, but it is saying, no doubt with the bad news about unemployment
in mind, that it won’t be raising them anytime soon.

But there is another reason high unemployment may excite investors.
Current layoffs are likely, for many workers, to be permanent. A recent
report that productivity—work output per worker—was up at a 9.5 annual
rate in the Third Quarter, is an indication that those companies that
haven’t shut down operations are making or doing more with fewer
workers. That kind of thing happens in recessions, because as
joblessness gets worse, those workers who still have jobs become more
docile and are willing to be worked harder by management. Of course,
you get more on-the-job injuries, more stress-related illness, etc.
along with that kind of speed-up, but over the shorter term, it looks
good on the books if you’re cranking out more product with a lower
payroll.

Of course, longer term, this is all a disaster, not just for
laid-off and afraid-to-be-laid-off workers, but for the country as a
whole. You can’t rebuild an economy with more than one-in-ten workers
unemployed. And remember, that’s just the people who are our of a job
and still looking for one; it doesn’t count those who have been out of
work for so long, or who work in professions that are so gone (like
construction or maybe manufacturing Saturns) that they’ve just given up
looking, or those who have taken part-time jobs in ice-cream parlors or
selling apples to survive but who want to be fully employed again. If
you add those people into the mix (which is the way the US used to
count unemployment until the 1980s), you get an unemployment rate
closer to 20%, or one in five! And you sure can’t rebuild an economy
with one in five workers unemployed.

That’s what makes all the happy talk in the news and in Washington
about the recession being over because last quarter showed a 3.5%
annualized jump in the so-called Gross Domestic Product so ridiculous.

Most of that rise was the result of government subsidies to
car-buyers and first-time house buyers. It was a one-shot stimulus that
pushed forward spending, but it was no indication of a recovering
economy, just a spasm of spending using taxpayer money. Furthermore, an
excellent article in Businessweek by Michael Mandel noted that fully
one-percent of that GDP gain was the result of a failure by government
economists to account for a collapse in corporate spending on research
and development and on training and retaining intellectual assets (a
complicated way of saying that engineers, scientists and technology
workers were being laid off at a higher rate than other workers, and
much R&D work was being shipped overseas for good), So really the
“growth” of GDP in the third Quarter should have been at a 2.5% rate,
and even that was largely government pump priming, not recovered
economic activity.

The truth is, we’re falling deeper into recession, and apparently,
according to the October unemployment figures, at an accelerating rate.
And there is no indication that the Obama Administration or the
Democratic Congress are planning any significant jobs-creation program.
They seem to be happy with this.

So quick, run out and buy some stock! It’s the American thing to
do. Probably not a bad idea either, since those dollars you are using
will keep sinking in value as long as the Fed is constrained from
jacking up interest rates.
______________

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

A Theme Song for Capitalism

davidswanson — Sun, 04 Oct 2009 19:10:57 -0400

By David Swanson

Michael Moore's movie motivated me to bring this out. Here's a theme song for Capitalism that I wrote at the time of Paulson's Plunder. Here it is sung by Timbrewolf:

And sung by leading Mad As Hell Doctor, Margaret Flowers:

And here is audio by Great Rain: The Day Hank Paulson Lied (Audio)
Original Song by Don McLean
Lyrics by David Swanson
Performed by Great Rain, Vashon Island's "acoustic insurgents," Frank Hein, Greg Parrott, and introducing Hannah Smith on Vocals. Visit their website: http://www.greatrain.com

A long, long time ago...
I can still remember
Seeing houses used to make me smile.
And I knew if I got a loan
That I could call some house my own
And, maybe, we’d be happy for a while.

But the predatory lies and fees
Left me shaking on my knees
Locked out on the doorstep;
I couldn’t take one more step.

I can’t remember if I cried
When we first had to sleep outside,
But something touched me deep inside
The day Hank Paulson lied.

So bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

Now did you write the Emergency Economic Stabilization Act of 2008?
And is your soul filled up with hate?
My family has no place to go.
Do you believe in trickle down?
Did the speaker buy you a plastic crown?
Where should my children sleep when there's snow?

Well, I know that you’re in love with cash
I saw lobbyists shoving it up your
As soon as you're done playing the fool
Man, can you try to recall the golden rule?

I was a lonely teenage broncin’ buck
With two jobs, a mortgage, and a pickup truck,
But I knew I was out of luck
The day Hank Paulson lied.

I started singin’,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

Now for eight years we’ve been on our own
Living in a Bushville, missing our home,
But that’s not how it used to be.
When the Congress sang for the beauty queen,
Palin jumped into the scene,
And nobody gave a damn for you and me,

Oh, and while the king was looking down,
The Alaskan stole his thorny crown.
The Republic was adjourned;
The Kingdom was returned.
And while wars happen with a spark,
There's lighter fluid in the park,
And we sang dirges in the dark
The day Hank Paulson lied.

We were singing,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

Helter skelter in a summer swelter.
There ain't no bankers in the homeless shelter,
Stock market's high and falling fast.
It landed foul on the grass.
The Congress tried for a forward pass,
The Constitution on the sidelines in a cast.

Now the half-time air was sweet perfume
While the sergeants played a fascist tune.
We all got up to dance,
Oh, but we never got the chance!
`cause the people tried to take the field;
The ninja turtles wouldn't yield.
Do you recall what was revealed
The day Hank Paulson lied?

We started singing,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

Oh, and there we were all in one place,
Pinnned in by cops from outer space
With tasers, guns, and pepper spray.
So come on: Jack be nimble, Jack be quick!
The blood and smoke have made Jack sick,
Cause fire is Dick Cheney's only friend.

Oh, and as I watched him on the stage
My hands were clenched in fists of rage.
No angel born in hell
Could break that Fuhrer’s spell.
And as the flames climbed high into the night
To light the sacrificial rite,
I saw Cheney laughing with delight
The day Hank Paulson lied.

He was singing,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

I met a girl who sang the blues
And I asked her for some happy news,
But she just smiled and turned away.
I went down to the barren shore
Where I’d heard the truth told years before,
But the man there said the truth just didn't pay.

And in the streets: the children screamed,
The lovers cried, and the poets dreamed.
But not a word was spoken;
Democracy was broken.
And the three men this delighted most:
Dubya, Poppy, and Prescott's ghost,
They drove their limos to the coast
The day Hank Paulson lied.

And they were singing,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

They were singing,
bye-bye, oh America why?
For jobs, health, and education,
All the wells have run dry.
And friends of Henry Paulson, not a tear in their eye
Singin’, "nothing kills as good as a lie.
Now watch this old democracy die."

-david swanson, afterdowningstreet.org

TRAILER: Michael Moore's 'Capitalism: A Love Story'

davidswanson — Fri, 21 Aug 2009 09:38:38 -0400

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.

Obama Administration Careening Towards Disaster (and Taking the Country With It)

dlindorff — Sun, 22 Mar 2009 18:36:09 -0400

By Dave Lindorff

Six months after the failed Bush administration effort to "rescue"
the US financial system, and after two months of failed efforts by his
own new administration, at an expense to the American public of several
trillion dollars and counting, the Obama administration is announcing
plans to blow another $1 trillion in a massive taxpayer giveaway to
investors who will be subsidized in an effort to get them to buy the
so-called toxic assets on the books of the nation's biggest banks.

The problem with this plan is that its goal--getting these zombie banks to start lending again--is not going to work.

It doesn't matter how good the balance sheets of the banks are. Good
companies, and even individuals and families with good credit, are
simply not borrowing. As I wrote last month in the magazine Treasury and Risk,
the problem isn't that banks are too weak to lend (though the zombie
banks certainly are), it's that the strong banks don't want to throw
money at bad borrowers.

It is the nature of economic downturns like this current one that
companies and ordinary families don't borrow, but rather cut back on
their spending and try to reduce their debt, the better to ride out the
hard times. It is only the companies that are in trouble, like General
Motors, Ford and Chrysler, that are looking for loans, and no bank is
going to want to lend to them regardless of how much money the
government pumps into it. (And if the public decides that it is in the
national interest to prop up such companies, it is much more effective
to have the government loan them the money directly, rather than try to
get banks to lend it to them at much higher interest.)

What this means is that all the Obama administration, the US
Treasury and the Federal Reserve are doing by buying the toxic assets
off the books of banks like Citigroup, Bank America or Wells Fargo is
giving a taxpayer handout to those banks' investors and
bondholders--the very people who enabled those companies to invest in
the corrupt credit default swaps and other shady derivatives in the
first place.

What should happen? Citibank, Bank of America, Goldman Sachs, and
the other financial institutions that made bad bets on these structured
financial instruments, should be allowed to fail, taking with them the
investors who played this dirty game, and the managers who decided to
gamble instead of run conservative banking operations.

The government would protect the assets of depositors in those
failed banks, which would be sold to healthier, better run banks,
making those banks much stronger and better capitalized in the
process--and thus ready to start lending as needed. This is standard
operating procedure for the Federal Deposit Insurance Corp.

Note that this process would mean no crisis in the economy, since
the ability to access credit would not be crimped in the least by the
failure of some of the country's larger banks. It would, in fact,
probably be enhanced.

The toxic assets would be eliminated through the bankruptcies, and
the government--and taxpayers--would be $1 trillion less in the red.

Why isn't the Obama administration doing this? Because Obama has put
his trust in the advice of men--Treasury Secretary Tim Geithner, Chief
Economic Advisor Larry Summers, and, informally, former Clinton
Treasurer Robert Rubin, all linked to the investment bank Goldman
Sachs, which was also the corporate home of Bush Treasury Secretary
Henry Paulson. The same Goldman Sachs which was given $10 billion in
Troubled Assets Relief Program funds directly, and which then snagged
another $13 billion in TARP funds in secret, which was laundered
through the now-government-owned insurance company AIG.

It should be clear at this point that the Goldman cabal burrowed
deep inside the Washington apparatus is working not to rescue the US
economy, but rather to ensure the survival and enrichment of the big
banking establishment, and of course Goldman Sachs.

What we are witnessing in the policies of the Obama administration
is not the creative experimentation of a modern-day Franklin Roosevelt,
but rather the greatest heist in the history of mankind, as trillions
of dollars in public funds are shifted from taxpayers' pockets into the
hands of the very banks and bankers and bank investors who brought us
this financial debacle.

Instead of decrying the bonus payments to AIG executives, the
American public should be demanding the indictment of Paulson, Summers,
Geithner and Co. for IGL: Incomprehensibly Grand Larceny.

Instead of trying to rescue the nation's giant banks, we should be demanding that they be shattered into little harmless pieces.

Come to think of it, maybe it's time for a run on the banks--not
because your money is not safe at Chase or Citibank or B of A, but
because these institutions need to be killed off for the good of the
nation.

If you have an account at any national bank, go there tomorrow and
take it out. Transfer it to a local bank in your community. You'll get
better service, your money will still be just as safe, and you won't be
propping up institutions that have been stealing the country blind.
_____________
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His
latest book is "The Case for Impeachment" (St. Martin's Press, 2006 and
now available in paperback from www.thiscantbehappening.net). His work is available at www.thiscantbehappening.net

Holiday Spine Awards: Nadler, Frank, Bair

davidswanson — Thu, 25 Dec 2008 07:56:06 -0500

Bleed The World

prodemswny — Sat, 20 Dec 2008 11:47:45 -0500

I received this link from my cousin in England. Appears to have
generated a lot of controversy over there for the Christmas season.
With only 5 days left until Christmas let's get the ball rolling here -
better late than never.

This is a take off on the Christmas time song of "Feed the World."

Click to view: http://www.bleedtheworld.com/

A Car Dealer Explains Why the Bailout is a Raw Deal

dlindorff — Sun, 07 Dec 2008 11:52:05 -0500

By Dave Lindorff

A brief conversation I had earlier this week with a car dealership
executive while standing in a post office line demonstrated simply both
why the bank deregulation and consolidation process of the past two
decades has been a screw job for ordinary people, and why the
Washington bailout has been both a taxpayer rip-off and a failure (if
it was even intended to work!).

I was chatting with the guy standing behind me who works at one of
the 14 dealerships in a Philadelphia-area regional family-owned chain
of GM dealerships called Bergey’s. Noting that a number of big dealers
like Knopf (a Chrysler Dealer) and McGarrity’s (Ford) had been closing,
I asked this Bergey’s manager if the problem was that the banks had
frozen lending, making it hard for people to buy new cars.

He laughed. “There’s no problem getting car loans from the small
community banks around our dealerships,” he said. “They’ve got plenty
of money to lend, and they’re happy to lend it to car buyers. The
problem is that people are too worried about the economy and about
their jobs to go out and buy a new car.”

And that’s it in a nutshell. The so-called “credit freeze” is a
problem afflicting the giant national and global banks, like Citibank
and B of A, which went on a tear with all of those derivative
investments and loans, like CDOs and subprime mortgages, and which have
been pushing credit on consumers with usurious rates that could only
lead to default eventually. Most smaller community banks, many of them
family owned or privately held, credit unions, and S&Ls (which were
suitably chastened by their own disastrous scandals of two decades
ago), have been lending responsibly and are fully solvent and happy to
extend credit to people who are credit-worthy.

The big banks may be technically insolvent, and in desperate need of
federal bailouts lest they go under and leave their investors holding
the empty bag, but the small banks that serve most of the nation’s
ordinary folks have a different problem. They themselves aren’t
insolvent, but their clients are—or at least they are worried that they
might become that way.

That’s why they aren’t buying houses and seeking mortgages, and it’s why they aren’t buying cars.

What’s needed, clearly, is not money for the big commercial banks
that got greedy and ran into a ditch. It’s support for the American
people, so that they don’t have to hunker down into a crouch and not
continue to participate in the economy.

When you see foreclosed signs going up along your own street, it
makes you start worrying about making your own mortgage payments. When
one in eight people are losing their jobs, just about everyone with a
job starts to have friends and relatives who are out of work, and that
paycheck starts to seem pretty precarious.

The hundreds of billions of dollars paid to and invested in big
commercial banks that don’t do much for the little guy anyway is doing
nothing at all to ease that pain and anxiety among the grassroots.
Instead, it’s just being pocketed by bank managers and rich investors,
to be put to a “higher” use somewhere else than on a depressed “Main
Street.” (Note that the government has put no strings on the money,
much of which is being used to buy other banks, or even to lend
overseas.)

That’s why all those car dealerships are folding.

This brings me to that feeding frenzy of bank deregulation I
mentioned earlier. The whole idea of allowing the creation of national
banks like Citibank and Bank of America and Wells Fargo, and of going
one step further and allowing banks to merge with brokerages and
insurance companies, which began in earnest during the Clinton
administration and went ballistic in the Bush administration, was
deceptively marketed to the public as being “good for the consumer.”
The come-on was that by allowing state and regional banks to merge into
national institutions, and by allowing them to add investment banking
and insurance operations, consumers would get more services from their
bank and have the supposed "advantage" of “one-stop shopping” at their
bank.

Anyone who watched it happen, however, saw how bogus that claim was.
I lived in New York City as it was going on, and as banks like Citibank
bought up their competitors, fees began to appear for services that had
no fees before, like checking and even passbook savings, savings
accounts began to require minimum deposits, CD interest rates fell as
penalties proliferated, and small loans became harder to get. Some
banks actually began to state, at least to analysts and to reporters in
the financial press, that they were no longer interested in serving
“small” clients, and were instituting measures designed to discourage
them or drive existing small clients away.

Soon, it was impossible in many neighborhoods of New York to find a bank to serve ordinary people.

As a matter of fact, these big banks don’t even help when it comes
to “big bank”-type stuff. Consider international finance activities
like foreign currency exchange. When my wife, a harpsichordist, came
home last week from a month-long tour of performances in China, Taiwan,
Hong Kong and Macau, she had with her $1000 worth of Taiwanese
currency—the fee for a gig that she had not had time to change into US
currency while in Taiwan or Hong Kong, where such transactions are
commonplace and inexpensive. Back in Philadelphia, we called around to
the big commercial banks—all global institutions—to see if they could
change the money. They could, but at absurd cost. Take Citibank. That
institution said it would only change up to $700 worth of bills unless
my wife had an account with them, and in any event, it was offering a
rate of 39.5 Taiwanese dollars to one US dollar—way worse than the
posted rate that day of 33.5/1. In other words, they were willing to
change up to $700 worth of currency, but at a cost of 18%, plus a $10
fee! That means they’re making 35% on a two-way conversion of currency!
Thanks a lot! The other banks were no better.

Want another example. Bank of America was a big recipient of taxpayer
funded bailout money from the US Treasury and the Federal Reserve Bank.
But it has refused to lend money to Republic Windows & Doors Co., a
factory in Chicago, that has been forced to close and lay off its 300
workers with only three days' notice, foregoing the legally required
60-days' pay and earned vacation pay. This is a story that will be
repeated more and more. At Republic, the workers, members of the United Electrical Workers union, are fighting back with a sit-down strike
demanding their money. If you want to support them, go to:
Union Voice Campaign

It’s all been a scam, and now we’re seeing the result: banks have
become so huge and their tentacles have been allowed to reach into so
many parts of the economy, that all of the national ones are deemed
“too big to fail.” Hence the outrageous bailout, which now has the
government pledged to back over $8 trillion in bank debts. (We’re
talking about a government, remember, that is itself was already
technically insolvent).

So back to my car d
ealer in the post office line. “We’re not going to see things get
better until people are confident enough in their incomes to invest in
a new car,” he said.

How will we get there? Certainly not by keeping Citibank or B of A
afloat. Those big banks should all be busted up, with the fragments
left to compete, and to sink or swim along with the rest of the
nation’s banks. No bank should be national in scope, and no banking
institution should be able to extort federal aid by claiming it is “too
big to fail.”

Instead of bailing out the big banks and their investors, the
government should be expanding and making more generous the nation’s
unemployment compensation program, which has always been scandalously
inadequate both in the percentage of the unemployed who are covered,
and in the size of the checks paid out, as well as the duration of the
benefit. It should be expanding welfare benefits. It should be
establishing a program to help people in danger of foreclosure to stay
in their homes (note: only the wealthy get tax subsidies, in the form
of 100% deductibility of mortgage interest rate payments—those too poor
to use itemized deductions get no help). And it should be establishing
a major program of publicly funded jobs for those whose employers have
gone bust.
___________________
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His
latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and
now available in paperback). His work is available at www.thiscantbehappening.net

Idiots and Bailouts

dlindorff — Mon, 24 Nov 2008 10:54:55 -0500

By Dave Lindorff

It’s a safe bet that within the next several months, Congress will
vote to bail out General Motors. It will be a colossal boondoggle
involving, probably, upwards of $50 billion when it’s through, and it
will fail in the end.

The reason is before our eyes. This bloated megacorporation is being run by idiots.

For years, as it became evident to everyone that oil prices were
going to soar because demand has been exceeding both production and
supply and will continue to do so, it has been obvious that to succeed,
a car company had to offer well-made cars that could demonstrate high
gas mileage. GM, perhaps more than any other company, ignored that
reality and has been paying the price, watching its share of the car
market wither.

Now the company, worth about what Starbucks used to be worth, its
stock now down to where it was in the depths of the Great Depression,
has bet the farm on a new car, the Volt, which it promises will, two
years from now, be able to go all of 40 miles purely on electric power.
It will have a motor too, and not a small one, but rather one the size
of what you get in a typical conventional Honda Civic—1.4 ltr. That
motor wouldn’t drive the car; rather it would keep charging the Volt’s
huge lithium-ion battery so the car could keep going for a few hundred
miles.

Wow.

The management wizards at GM obviously don’t do much driving. If
they did, and found themselves in typical commuter traffic, they’d see
that maybe 90% of the cars, or more, have only one person in them.
Occasionally, they’d see a passenger. On a typical 45-minute trip from
the burbs into Philadelphia at rush hour, I can count the number of
cars I see with three or more people in them on my fingers.

So why is GM making the Volt as a full-sized four or five-passenger
car? That’s not where the market for an electric car is. What is needed
is a two-seater little car.

Because GM is trying to make an electric family car, they’ve made
something so big that, if they are lucky, they’ll be able to get it to
40 miles on electric drive only, but at a cost in excess of $40,000 and
perhaps much higher, which will put it out of almost everyone’s reach.
The car is destined to be a bust.

And yet, because President-elect Obama will want to win Michigan
next election, and because Congressional Democrats don’t want to be
seen as ignoring the fate of GM’s workers, GM will be bailed out and
the Volt will be funded right through to its introduction and
subsequent disaster in the market.

I’m not opposed to the idea of government support of industry, but
that support has to involve government input or even control over
decision-making.

Maybe GM wouldn’t make much profit on a little electric commuter
car, but a little two-seater electric commuter car would have a huge
impact on reducing the output of hydrocarbons into the atmosphere,
particularly if efforts were made to increase solar and wind-generated
electricity. A small electric commuter car would also massively reduce
the amount of oil the US imports, making a major contribution to
reducing the nation’s trade deficit. Those are results that justify a
bailout.

Making an overpriced electric family car is not.

At this point, since the Democrats in Congress and the White House
are congenitally incapable of imagining a state-owned or partially
state-owned enterprise, it would be better to just let GM go under, and
maybe Ford too, if it comes to that (another stupid company). The
pieces could be sold off, and allowed to sink and swim on their own.
Maybe one of those smaller, more entrepreneurial fragments would see
the wisdom of developing what the public really needs.

The truth is that the entrepreneurs over at Tesla, a star-up in
California, have already made that car—a high-performance two-seater
commuter car that can go 200 miles on a charge and that doesn’t need an
auxiliary engine. Their problem is that small size and too little
capital have forced them to pimp it up into a high-priced luxury
show-off item for rich people costing $100,000. If they were to team up
with a GM spin-off—say Saturn—they could make a stripped-down version
of that baby and crank out 100,000 of them to start at a price ordinary
people could afford.

Meanwhile, regarding those poor autoworkers, they have a legitimate
complaint. While Republicans like to blame the auto industry’s problems
on them, saying they have demanded too much pay, and too much in
healthcare benefits, it’s not their fault that GM and Ford executives
have been stupid and greedy and short-sighted (besides, the high wages
and benefits that the United Auto Workers won over decades of bitter
struggle helped to set standards that raised the wages of all workers
across the nation). But let’s do the math. There are about 125,000
unionized hourly workers at the two companies. For a lousy $8.7
billion, every one of those people could receive a $70,000 buyout from
Congress. Double that if you want to give them two years to adjust and
find new work at an electric car plant or something else. That would
cost $17 billion, or less than half of what the doomed bailout of GM is
going to end up costing.

And of course, with the rest of us suffering from the massive
mismanagement of the nation’s economy by its corporate leaders and
their puppets in Washington, there’s no reason why our tax dollars
should be subsidizing those particular workers tat that high a level.
After all, companies are failing and will be failing all over the
place, without such largesse. Besides, if the bailout goes ahead, all
it will do is delay the time these workers will be out on the street
anyhow.

The point is, however, there are more cost-effective ways to help
out workers in failing businesses than to have the government simply
subsidize the continued operation of enterprises that have been
destroyed by management. In truth, all the talk in congress and in the
Obama camp about rescuing jobs is just a cover for bailouts that are
really aimed at rescuing managers and investors, not workers.

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

Cummings Calls Kashkari a Chump, Kucinich Proposes Congress Undo Paulson's Plunder

davidswanson — Fri, 14 Nov 2008 21:34:40 -0500