BUCKNACKT'S SORDID TAWDRY BLOG We should not be a journey to the grave with the intention of arriving safely in an attractive & well preserved body, but rather to skid in sideways, chocolate, bier or wein in hand, body thoroughly used up, totally worn out and screaming "WHOO-HOO, WHAT A RIDE!!!!!!"
27 March 2010
U.S., Russia agree to nuclear arms control treaty 26MAR10
Swords to plowshares every chance we get!
By Mary Beth Sheridan and Michael D. Shear
Washington Post Staff Writers
Saturday, March 27, 2010; A02
President Obama announced a major new U.S.-Russia nuclear arms treaty Friday, gaining a critical victory as U.S. diplomats head into an intense period of international meetings aimed at keeping the devastating weapons out of the hands of rogue states and terrorists.
Just days after the new pact is signed April 8, Obama will host perhaps the biggest summit ever in Washington, to urge countries to lock down loose nuclear material. A few weeks later, the U.S. government will try to strengthen the world's bedrock agreement limiting the spread of nuclear weapons.
But if the president has gained momentum on pushing his nuclear agenda globally, he still may face a fight getting the 10-year Strategic Arms Reduction Treaty, or START, through the Senate this year. The deal with Russia will need Republican backing to get the 67 votes required for ratification.
Arms-control experts said the main virtue of the new pact was that it would allow the two countries that own nearly 95 percent of the world's nuclear weapons to continue verifying each other's stockpiles. But as details emerged Friday, it appeared the new treaty might make lower-than-advertised changes in each country's arsenals. While U.S. officials touted a 30 percent lowering of the ceiling for warheads and bombs deployed for long-range missiles, arms-control experts warned that the new pact used different counting rules than previous ones.
The new limit of 1,550 deployed warheads could represent an actual decline of only about 100 or 200 weapons -- a reduction of only as much as 13 percent -- from the comparable figure under the previous treaty, said Hans M. Kristensen, director of the Nuclear Information Project at the Federation of American Scientists.
A White House official, who like others spoke on the condition of anonymity to discuss internal deliberations, cautioned that the exact reductions had not been determined.
Each side will also reduce to 700 the number of deployed missiles and bombers that can launch nuclear weapons. That represents a reduction of about 100 to 200 from current U.S. levels, according to estimates by experts.
Sen. John F. Kerry (D-Mass.) acknowledged Friday that Senate consideration will take place in a strained legislative environment but pleaded with his colleagues to set their broader political agendas aside.
"I know there has been a partisan breakdown in recent years, but we can renew the Senate's bipartisan tradition on arms control and approve ratification of this treaty in 2010," said Kerry, who heads the Senate Foreign Relations Committee. The committee's top Republican, Sen. Richard G. Lugar (Ind.), a prominent moderate, called for quick ratification.
Several Republicans who have expressed concern about the treaty said they would wait to see it before issuing judgment. One senior Republican source, speaking on the condition of anonymity, said the key to approving the agreement would be the strength of its verification procedures.
Negotiations on START had bogged down in recent months, raising fears among arms-control activists that the president would be dealt a setback as U.S. diplomats went into critical global meetings on nonproliferation.
Negotiators said they ran into impasses over Russia's demands for less intrusive verification rules and its unwillingness to share the same amount of telemetry data on its missile tests, according to people familiar with the talks. In addition, the two sides clashed over U.S. plans for a missile defense shield in Europe. Washington says that system is aimed at Iran, but the Russians view it as a threat on their borders.
A phone call between Obama and Russian President Dmitry Medvedev on Dec. 4, the day before the old treaty expired, failed to produce momentum toward an agreement that U.S. officials had hinted might be coming.
"There were some concerns among the Russian Defense Ministry that things might not have been going the way they wanted," said one person familiar with the December discussions. "Medvedev heard the concerns of his top defense folks and realized more work needed to be done."
On the American side, negotiators were aware that any significant limits on verification or the U.S. missile shield would be unacceptable to Senate Republicans and the Pentagon. The U.S. side appears to have largely won the battle over missile defense, with a mention of it in the treaty's preamble but no new limits imposed on the American system, officials said.
American officials said Obama and Medvedev talked 10 times on the phone and five times in person throughout the past year, often at times when the negotiations in Geneva had bogged down.
The White House official said the turning point came in a testy conversation between Obama and Medvedev in late February.
"The Russians were pushing for constraints on missile defense to be incorporated into the treaty. The president said that was simply unacceptable," the official said.
Obama indicated he was willing to walk away from the treaty, the official said. "That was the breaking point."
The Russians backed off, and Obama dispatched Ellen Tauscher, the undersecretary of state for arms control, to Geneva with longtime State Department arms-control expert James Timbie. Tauscher helped spark the final push toward agreement.
"It was like a light switch," one senior administration official said.
Tauscher, a former Wall Street investment banker, said in an interview: "The test for me isn't the deal you're doing. It's whether you want to do another deal. And we have people who want to do another deal -- on both sides."
However, analysts say any new negotiations seeking deeper cuts will probably be far more difficult, with disputes over such thorny issues as missile defense, Russia's advantage in short-range nuclear weapons, and the superiority of U.S. conventional forces.
As a result, said Pavel Podvig, a scholar at the Center for International Security and Cooperation at Stanford University, the new treaty signed in April could be the last to emerge from Cold War-style negotiations, with each side seeking to balance its forces against the other's.
Alexander Konovalov, president of the Moscow-based Institute for Strategic Assessments, said any further nuclear cuts would face resistance in the Russian military, which believes Moscow needs a strong nuclear arsenal to compensate for the weakness of its conventional forces.
"It's simply fear," he said. "The military world is very conservative, and it is difficult to change their way of thinking."
Staff writer Karen DeYoung in Washington and correspondent Philip P. Pan in Moscow contributed to this report.
By Mary Beth Sheridan and Michael D. Shear
Washington Post Staff Writers
Saturday, March 27, 2010; A02
President Obama announced a major new U.S.-Russia nuclear arms treaty Friday, gaining a critical victory as U.S. diplomats head into an intense period of international meetings aimed at keeping the devastating weapons out of the hands of rogue states and terrorists.
Just days after the new pact is signed April 8, Obama will host perhaps the biggest summit ever in Washington, to urge countries to lock down loose nuclear material. A few weeks later, the U.S. government will try to strengthen the world's bedrock agreement limiting the spread of nuclear weapons.
But if the president has gained momentum on pushing his nuclear agenda globally, he still may face a fight getting the 10-year Strategic Arms Reduction Treaty, or START, through the Senate this year. The deal with Russia will need Republican backing to get the 67 votes required for ratification.
Arms-control experts said the main virtue of the new pact was that it would allow the two countries that own nearly 95 percent of the world's nuclear weapons to continue verifying each other's stockpiles. But as details emerged Friday, it appeared the new treaty might make lower-than-advertised changes in each country's arsenals. While U.S. officials touted a 30 percent lowering of the ceiling for warheads and bombs deployed for long-range missiles, arms-control experts warned that the new pact used different counting rules than previous ones.
The new limit of 1,550 deployed warheads could represent an actual decline of only about 100 or 200 weapons -- a reduction of only as much as 13 percent -- from the comparable figure under the previous treaty, said Hans M. Kristensen, director of the Nuclear Information Project at the Federation of American Scientists.
A White House official, who like others spoke on the condition of anonymity to discuss internal deliberations, cautioned that the exact reductions had not been determined.
Each side will also reduce to 700 the number of deployed missiles and bombers that can launch nuclear weapons. That represents a reduction of about 100 to 200 from current U.S. levels, according to estimates by experts.
Sen. John F. Kerry (D-Mass.) acknowledged Friday that Senate consideration will take place in a strained legislative environment but pleaded with his colleagues to set their broader political agendas aside.
"I know there has been a partisan breakdown in recent years, but we can renew the Senate's bipartisan tradition on arms control and approve ratification of this treaty in 2010," said Kerry, who heads the Senate Foreign Relations Committee. The committee's top Republican, Sen. Richard G. Lugar (Ind.), a prominent moderate, called for quick ratification.
Several Republicans who have expressed concern about the treaty said they would wait to see it before issuing judgment. One senior Republican source, speaking on the condition of anonymity, said the key to approving the agreement would be the strength of its verification procedures.
Negotiations on START had bogged down in recent months, raising fears among arms-control activists that the president would be dealt a setback as U.S. diplomats went into critical global meetings on nonproliferation.
Negotiators said they ran into impasses over Russia's demands for less intrusive verification rules and its unwillingness to share the same amount of telemetry data on its missile tests, according to people familiar with the talks. In addition, the two sides clashed over U.S. plans for a missile defense shield in Europe. Washington says that system is aimed at Iran, but the Russians view it as a threat on their borders.
A phone call between Obama and Russian President Dmitry Medvedev on Dec. 4, the day before the old treaty expired, failed to produce momentum toward an agreement that U.S. officials had hinted might be coming.
"There were some concerns among the Russian Defense Ministry that things might not have been going the way they wanted," said one person familiar with the December discussions. "Medvedev heard the concerns of his top defense folks and realized more work needed to be done."
On the American side, negotiators were aware that any significant limits on verification or the U.S. missile shield would be unacceptable to Senate Republicans and the Pentagon. The U.S. side appears to have largely won the battle over missile defense, with a mention of it in the treaty's preamble but no new limits imposed on the American system, officials said.
American officials said Obama and Medvedev talked 10 times on the phone and five times in person throughout the past year, often at times when the negotiations in Geneva had bogged down.
The White House official said the turning point came in a testy conversation between Obama and Medvedev in late February.
"The Russians were pushing for constraints on missile defense to be incorporated into the treaty. The president said that was simply unacceptable," the official said.
Obama indicated he was willing to walk away from the treaty, the official said. "That was the breaking point."
The Russians backed off, and Obama dispatched Ellen Tauscher, the undersecretary of state for arms control, to Geneva with longtime State Department arms-control expert James Timbie. Tauscher helped spark the final push toward agreement.
"It was like a light switch," one senior administration official said.
Tauscher, a former Wall Street investment banker, said in an interview: "The test for me isn't the deal you're doing. It's whether you want to do another deal. And we have people who want to do another deal -- on both sides."
However, analysts say any new negotiations seeking deeper cuts will probably be far more difficult, with disputes over such thorny issues as missile defense, Russia's advantage in short-range nuclear weapons, and the superiority of U.S. conventional forces.
As a result, said Pavel Podvig, a scholar at the Center for International Security and Cooperation at Stanford University, the new treaty signed in April could be the last to emerge from Cold War-style negotiations, with each side seeking to balance its forces against the other's.
Alexander Konovalov, president of the Moscow-based Institute for Strategic Assessments, said any further nuclear cuts would face resistance in the Russian military, which believes Moscow needs a strong nuclear arsenal to compensate for the weakness of its conventional forces.
"It's simply fear," he said. "The military world is very conservative, and it is difficult to change their way of thinking."
Staff writer Karen DeYoung in Washington and correspondent Philip P. Pan in Moscow contributed to this report.
H.R. 4789 THE MEDICARE YOU CAN BUY INTO ACT
Congress failed to pass a public option. Now, Rep. Alan Grayson is leading the charge to set things right -- with his "Medicare You Can Buy Into Act." It's a 3-and-a-half page bill, it's a stronger public option, and it's got momentum...80 co-sponsors in its first week. Watch the video and then click on the header to participate.
26 March 2010
TEACH THE CHILDREN WELL
Only when enough adults practice and teach children love and respect at home, in schools, religious congregations, and in our political and civic life will racial, gender, and religious intolerance and hate crimes subside in America and the world.
- Marian Wright Edelman, from her book Lanterns
Goodness is a process of becoming, not of being. What we do over and over again is what we become in the end.
- Joan Chittister,
Benedictine nun, author, and lecturer.
- Marian Wright Edelman, from her book Lanterns
Goodness is a process of becoming, not of being. What we do over and over again is what we become in the end.
- Joan Chittister,
Benedictine nun, author, and lecturer.
GLEANING
You shall not strip your vineyard bare, or gather the fallen grapes of your vineyard; you shall leave them for the poor and the alien.
- Leviticus 19:10
- Leviticus 19:10
OUR LIVES
If our lives demonstrate that we are peaceful, humble and trusted, this is recognized by others. If our lives demonstrate something else, that will be noticed too.
- Rosa Parks, civil rights activist (1913-2005)
- Rosa Parks, civil rights activist (1913-2005)
MY AUNT LYNN WAS KILLED IN A CAR ACCIDENT SUNDAY EVENING part 2 14MAR10
I went to Pennsville, NJ last Friday with my sister Jennie and her daughter Katie for our Aunt Lynn's funeral. We met Mom and Dad and Uncle Ralph and Aunt Pat at the hotel. Lynn was Mom's and Ralph's sister. It was a beautiful day, Spring making a welcome appearance, and I know Aunt Lynn loved that because she loved Spring and being in the county with all the trees and flowers and wildlife. We, the family, had a chance to see Aunt Lynn before the funeral, it was good to be able to see her here one last time, though it was, and is still hard to believe it was her funeral. A lot of people came to pay their respects to Aunt Lynn and her family. And it was good to be with family, good to see cousins I haven't seen for too long, though I wish it had been for another reason. The preacher had a very good message and was a great comfort to us. Aunt Lynn's wish is that she be cremated, and some of her ashes be scattered around Uncle Bill's grave and the rest be scattered along her favorite trail on Skyline Drive. She went there at least twice a year to commune with nature and refresh her soul. We will join her kids when they make the journey, probably on Mother's Day.
The young man that caused the accident that killed Aunt Lynn is in his early twenties. He was talking on his phone while driving. I believe he is being charged with vehicular homicide. I feel sorry for him too, he will have to live the rest of his life knowing his carelessness killed another person. He may have to spend some time in prison. I hope and pray he has faith and family to help him deal with this.
I am guilty of talking on my phone while driving but no more. Period. I will not answer my phone while driving and if I call someone's cell phone and they are driving I will end the call and they can call me back or I will call them back when they get to their destination. I will not risk putting another family through this.
So many friends have been so supportive of me and my family through this, I can only say thank you from the bottom of my heart and that I love you all so very much.
The young man that caused the accident that killed Aunt Lynn is in his early twenties. He was talking on his phone while driving. I believe he is being charged with vehicular homicide. I feel sorry for him too, he will have to live the rest of his life knowing his carelessness killed another person. He may have to spend some time in prison. I hope and pray he has faith and family to help him deal with this.
I am guilty of talking on my phone while driving but no more. Period. I will not answer my phone while driving and if I call someone's cell phone and they are driving I will end the call and they can call me back or I will call them back when they get to their destination. I will not risk putting another family through this.
So many friends have been so supportive of me and my family through this, I can only say thank you from the bottom of my heart and that I love you all so very much.
Healthcare and the Supreme Court from MOJO 23MAR10
An interesting article, check out the piece by Ezra Klein from the American Prospect after the story from Mother Jones. He suggest instead of fining people for not having insurance they should be able to opt out of the HRC mandates, but they have to stay out for five years, so if catastrophic illness would hit in that five year period they would have to live, or die, with their decision. Click the header for the story from MOJO.
By Kevin Drum
| Tue Mar. 23, 2010 8:39 AM PDT
A reader writes:
Of all the potential legal challenges to HCR out there, Ken Cuccinelli's planned lawsuit seems to me to potentially be the most viable. Assuming this issue gets to the U.S. Supreme Court, I wouldn't be a bit surprised if the (Republican majority) Roberts Court agreed with Cuccinelli. If that happens, what, exactly, is the Democrats' back-up plan?
I'm not sure what the best response to this is. Cuccinelli's suit argues that the individual mandate in the healthcare bill is unconstitutional: “We contend that if a person decides not to buy health insurance, that person — by definition — is not engaging in commerce, and therefore, is not subject to a federal mandate.” The argument here is that if it's not commerce, then it's not interstate commerce. And if it's not interstate commerce, then Congress has no constitutional authority to regulate it.
I'm not a lawyer, but this seems like the ultimate Hail Mary to me. There's longstanding precedent — hated by conservatives, but only slightly rolled back even by the Rehnquist court — that the interstate commerce clause gives Congress extremely wide power to regulate activity that affects interstate commerce in almost any way, and there's simply no question that the individual mandate is inextricably tied up with interstate commerce. The insurance industry and the medical industry are practically textbook definitions of interstate enterprises, and allowing healthy people to opt out of healthcare coverage has a very direct effect on that business. Frankly, even for an activist conservative court, this seems like a pretty open-and-shut case.
What's more, the penalties for not buying insurance are tax penalties, and if anything, Congress has even wider scope in the tax area than in the commerce area. The Supreme Court has frequently ruled that Congress can pass tax laws that essentially force people to do things that Congress doesn't have the direct power to require.
Bottom line, then: I'm not sure Democrats need a Plan B. But here's the thing: if the Supreme Court decided to overturn decades of precedent and strike down the mandate even though Kevin Drum says they shouldn't (hard to imagine, I know), the insurance industry will go ballistic. If they're required to cover all comers, even those with expensive pre-existing conditions, then they have to have a mandate in order to get all the healthy people into the insurance pool too. So they would argue very persuasively that unless Congress figures out a fix, they'll drive private insurers out of business in short order. And that, in turn, will almost certainly be enough incentive for both Democrats and Republicans to find a way to enforce a mandate by other means. If necessary, there are ways to rewrite the rules so that people aren't literally required to get insurance, but are incentivized so strongly that nearly everyone will do it. As an example, Congress might pass a law making state Medicaid funding dependent on states passing laws requiring residents to buy insurance. Dependent funding is something Congress does routinely, and states don't have any constitutional issues when it comes to requiring residents to buy insurance. They all do it with auto insurance and Massachusetts does it with health insurance. Or, via Ezra Klein, Congress could do something like this. There are plenty of possibilities.
So I don't think this is a big problem. It's basically a campaign issue for Republicans, who want to demonstrate to their base that they're fighting like hell against healthcare reform. It helps keep the issue alive and it helps keep the tea partiers engaged. It's sort of in the same league as their eternal promises to support a constitutional amendment to ban abortion. It's a crowd pleaser, but there's really no chance of ever pulling it off.
Averting a Health-Care Backlash from the American Prospect 8DEZ09
Copy and paste this link for the article
http://www.prospect.org/cs/articles?article=averting_a_health_care_backlash
Create a political safety-valve: let people opt out of the mandate. Just don't let them opt back in at will.
No provision of the health-care reforms being debated in Congress is as likely to generate a popular backlash as is the individual mandate -- the requirement that individuals purchase health insurance if they are not otherwise covered. But there is an alternative to the mandate as it is currently structured that can accomplish the same purpose without raising as much opposition.
The bills in Congress would impose a fine on people who decline to buy coverage after the system is reformed, unless they have a religious objection to medical care or demonstrate that paying for insurance would be a financial hardship even with the new subsidies being provided. Under the Senate bill, the fines per person would begin at $95 in 2014, rising to $750 two years later. The House bill sets the penalty at 2.5 percent of adjusted income above the threshold for filing income taxes, up to the cost of the average national premium.
The trouble with the fines is that they communicate the wrong message about a program that is supposed to help people without insurance, not penalize them. Many people simply do not understand why the government should fine them for failing to purchase health coverage when it doesn't require people to buy other products.
The rationale for the mandate is that it is necessary to carry out the other reforms of insurance that the public overwhelmingly approves -- in particular, ending pre-existing-condition exclusions by insurance companies. If legislation banned those exclusions without a mandate, healthy people would rationally refuse to buy coverage until they got sick, and the entire insurance system would break down. The mandate is designed to deter people from opportunistically dipping into the insurance funds when they are sick and refusing to contribute when they are healthy.
But Congress could address this problem more directly. The law could give people a right to opt out of the mandate if they signed a form agreeing that they could not opt in for the following five years. In other words, instead of paying a fine, they would forgo a potential benefit. For five years they would become ineligible for federal subsidies for health insurance and, if they did buy coverage, no insurer would have to cover a pre-existing condition of theirs.
The idea for this opt-out comes from an analogous provision in Germany, which has a small sector of private insurance in addition to a much larger state insurance system. Only some Germans are eligible to opt for private insurance, but if they make that choice, the law prevents them from getting back at will into the public system. That deters opportunistic switches in and out of the public funds, and it helps to prevent the private insurers from cherry-picking healthy people and driving up insurance costs in the public sector.
In the United States, an opt-out would not apply to anyone whose income was close enough to the poverty level to qualify for Medicaid. It would be available on a new income-tax form on which people with incomes above that threshold could choose between paying a fine for failing to insure or taking the five-year opt-out. (Taking the opt-out would not affect eligibility for veterans' health care, Medicare, emergency care, or any program entirely funded by a state or out of charitable donations.)
What would happen if after opting out, people got sick and couldn't pay their bills? In that case, by their own choice, they'd be back in the world that exists today. They could still try to buy insurance without a subsidy; they just wouldn't be guaranteed any insurer would take them.
The law ought to treat children, however, differently from adults. Just as there is a public interest in assuring that children receive an education, so there is a public interest in seeing that children receive health care. Instead of providing a five-year opt-out for children or imposing a fine on their parents for failing to cover them, a default program should cover any child who isn't otherwise registered for private or public insurance. That default program could be the State Children's Health Insurance Program or Medicaid; whether the parents owe any money for that coverage should be dealt with as part of the income tax.
These two measures -- a conditional opt-out for adults and default coverage for children -- could move the legislation away from an emphasis on fines as a means of enforcement and help avert a backlash. Many liberals have thought that a backlash is avoidable if subsidies for coverage are generous enough so as to allay any fears among those affected by the mandate. But whatever subsidies the law calls for, it is unrealistic to suppose that in the years before the mandate kicks in, people will have accurate information about the costs they are going to bear. The calculations are too complex, and the opponents of reform will play on that uncertainty.
An opt-out would provide an escape valve for people who feel, rationally or not, that the mandate threatens them economically. So let them opt out. Just don't let them back in at will, and over time people will learn to make use of the benefits that government subsidies and other reforms provide them.
The bill in the Senate defers the individual mandate along with most of the extension of coverage until 2014; the House postpones implementation until 2013. Some of the motivation for the slow timetable may be anxiety among Democrats in Congress about popular opposition to the mandate. But postponing reform is an ineffectual way to address that problem. The better alternative would be to provide a conditional opt-out for adults and default enrollment of children and to move up the timetable for carrying out the whole program.
By Kevin Drum
| Tue Mar. 23, 2010 8:39 AM PDT
A reader writes:
Of all the potential legal challenges to HCR out there, Ken Cuccinelli's planned lawsuit seems to me to potentially be the most viable. Assuming this issue gets to the U.S. Supreme Court, I wouldn't be a bit surprised if the (Republican majority) Roberts Court agreed with Cuccinelli. If that happens, what, exactly, is the Democrats' back-up plan?
I'm not sure what the best response to this is. Cuccinelli's suit argues that the individual mandate in the healthcare bill is unconstitutional: “We contend that if a person decides not to buy health insurance, that person — by definition — is not engaging in commerce, and therefore, is not subject to a federal mandate.” The argument here is that if it's not commerce, then it's not interstate commerce. And if it's not interstate commerce, then Congress has no constitutional authority to regulate it.
I'm not a lawyer, but this seems like the ultimate Hail Mary to me. There's longstanding precedent — hated by conservatives, but only slightly rolled back even by the Rehnquist court — that the interstate commerce clause gives Congress extremely wide power to regulate activity that affects interstate commerce in almost any way, and there's simply no question that the individual mandate is inextricably tied up with interstate commerce. The insurance industry and the medical industry are practically textbook definitions of interstate enterprises, and allowing healthy people to opt out of healthcare coverage has a very direct effect on that business. Frankly, even for an activist conservative court, this seems like a pretty open-and-shut case.
What's more, the penalties for not buying insurance are tax penalties, and if anything, Congress has even wider scope in the tax area than in the commerce area. The Supreme Court has frequently ruled that Congress can pass tax laws that essentially force people to do things that Congress doesn't have the direct power to require.
Bottom line, then: I'm not sure Democrats need a Plan B. But here's the thing: if the Supreme Court decided to overturn decades of precedent and strike down the mandate even though Kevin Drum says they shouldn't (hard to imagine, I know), the insurance industry will go ballistic. If they're required to cover all comers, even those with expensive pre-existing conditions, then they have to have a mandate in order to get all the healthy people into the insurance pool too. So they would argue very persuasively that unless Congress figures out a fix, they'll drive private insurers out of business in short order. And that, in turn, will almost certainly be enough incentive for both Democrats and Republicans to find a way to enforce a mandate by other means. If necessary, there are ways to rewrite the rules so that people aren't literally required to get insurance, but are incentivized so strongly that nearly everyone will do it. As an example, Congress might pass a law making state Medicaid funding dependent on states passing laws requiring residents to buy insurance. Dependent funding is something Congress does routinely, and states don't have any constitutional issues when it comes to requiring residents to buy insurance. They all do it with auto insurance and Massachusetts does it with health insurance. Or, via Ezra Klein, Congress could do something like this. There are plenty of possibilities.
So I don't think this is a big problem. It's basically a campaign issue for Republicans, who want to demonstrate to their base that they're fighting like hell against healthcare reform. It helps keep the issue alive and it helps keep the tea partiers engaged. It's sort of in the same league as their eternal promises to support a constitutional amendment to ban abortion. It's a crowd pleaser, but there's really no chance of ever pulling it off.
Averting a Health-Care Backlash from the American Prospect 8DEZ09
Copy and paste this link for the article
http://www.prospect.org/cs/articles?article=averting_a_health_care_backlash
Create a political safety-valve: let people opt out of the mandate. Just don't let them opt back in at will.
No provision of the health-care reforms being debated in Congress is as likely to generate a popular backlash as is the individual mandate -- the requirement that individuals purchase health insurance if they are not otherwise covered. But there is an alternative to the mandate as it is currently structured that can accomplish the same purpose without raising as much opposition.
The bills in Congress would impose a fine on people who decline to buy coverage after the system is reformed, unless they have a religious objection to medical care or demonstrate that paying for insurance would be a financial hardship even with the new subsidies being provided. Under the Senate bill, the fines per person would begin at $95 in 2014, rising to $750 two years later. The House bill sets the penalty at 2.5 percent of adjusted income above the threshold for filing income taxes, up to the cost of the average national premium.
The trouble with the fines is that they communicate the wrong message about a program that is supposed to help people without insurance, not penalize them. Many people simply do not understand why the government should fine them for failing to purchase health coverage when it doesn't require people to buy other products.
The rationale for the mandate is that it is necessary to carry out the other reforms of insurance that the public overwhelmingly approves -- in particular, ending pre-existing-condition exclusions by insurance companies. If legislation banned those exclusions without a mandate, healthy people would rationally refuse to buy coverage until they got sick, and the entire insurance system would break down. The mandate is designed to deter people from opportunistically dipping into the insurance funds when they are sick and refusing to contribute when they are healthy.
But Congress could address this problem more directly. The law could give people a right to opt out of the mandate if they signed a form agreeing that they could not opt in for the following five years. In other words, instead of paying a fine, they would forgo a potential benefit. For five years they would become ineligible for federal subsidies for health insurance and, if they did buy coverage, no insurer would have to cover a pre-existing condition of theirs.
The idea for this opt-out comes from an analogous provision in Germany, which has a small sector of private insurance in addition to a much larger state insurance system. Only some Germans are eligible to opt for private insurance, but if they make that choice, the law prevents them from getting back at will into the public system. That deters opportunistic switches in and out of the public funds, and it helps to prevent the private insurers from cherry-picking healthy people and driving up insurance costs in the public sector.
In the United States, an opt-out would not apply to anyone whose income was close enough to the poverty level to qualify for Medicaid. It would be available on a new income-tax form on which people with incomes above that threshold could choose between paying a fine for failing to insure or taking the five-year opt-out. (Taking the opt-out would not affect eligibility for veterans' health care, Medicare, emergency care, or any program entirely funded by a state or out of charitable donations.)
What would happen if after opting out, people got sick and couldn't pay their bills? In that case, by their own choice, they'd be back in the world that exists today. They could still try to buy insurance without a subsidy; they just wouldn't be guaranteed any insurer would take them.
The law ought to treat children, however, differently from adults. Just as there is a public interest in assuring that children receive an education, so there is a public interest in seeing that children receive health care. Instead of providing a five-year opt-out for children or imposing a fine on their parents for failing to cover them, a default program should cover any child who isn't otherwise registered for private or public insurance. That default program could be the State Children's Health Insurance Program or Medicaid; whether the parents owe any money for that coverage should be dealt with as part of the income tax.
These two measures -- a conditional opt-out for adults and default coverage for children -- could move the legislation away from an emphasis on fines as a means of enforcement and help avert a backlash. Many liberals have thought that a backlash is avoidable if subsidies for coverage are generous enough so as to allay any fears among those affected by the mandate. But whatever subsidies the law calls for, it is unrealistic to suppose that in the years before the mandate kicks in, people will have accurate information about the costs they are going to bear. The calculations are too complex, and the opponents of reform will play on that uncertainty.
An opt-out would provide an escape valve for people who feel, rationally or not, that the mandate threatens them economically. So let them opt out. Just don't let them back in at will, and over time people will learn to make use of the benefits that government subsidies and other reforms provide them.
The bill in the Senate defers the individual mandate along with most of the extension of coverage until 2014; the House postpones implementation until 2013. Some of the motivation for the slow timetable may be anxiety among Democrats in Congress about popular opposition to the mandate. But postponing reform is an ineffectual way to address that problem. The better alternative would be to provide a conditional opt-out for adults and default enrollment of children and to move up the timetable for carrying out the whole program.
KBR Bills $5 Million For Mechanics Who Work 43 Minutes a Month And as more GIs come home, the waste could get even worse. MOJO 25MAR10
Typical of the Pentagon, and I bet Congress will be spineless enough to let everything in place because the American people will be stupid enough to let it be and KBR will be laughing all the way to the bank....probably one that got TARP funds, paid obscene bonuses and is filing for a tax refund from the IRS. Click the header for the story and all the links at Mother Jones.
It was just a single contract for a single job on a single base in Iraq. The Department of Defense agreed to pay the megacontractor KBR $5 million a year to repair tactical vehicles, from Humvees to big rigs, at Joint Base Balad, a large airfield and supply center north of Baghdad. Yet according to a new Pentagon report, what the military got was as many as 144 civilian mechanics, each doing as little as 43 minutes of work a month, with virtually no oversight. The report, issued March 3 by the DOD's inspector general, found that between late 2008 and mid-2009, KBR performed less than 7 percent of the work it was expected to do, but still got paid in full.
The $4.6 million blown on this particular contract is a relatively small loss considering that in 2009 alone, the government had a blanket deal worth $5 billion [4] with KBR (formerly known as the Halliburton [5] subsidiary Kellogg Brown & Root). Just days before the Pentagon released the Balad report, KBR announced [6] it had won a new $2.3 billion-plus, five-year Iraq contract. But the inspector general's modest investigation offers new insight into just how little KBR delivers and how toothless the Pentagon is to prevent contractor waste. Moreover, the government's own auditors predict that as the military draws down its forces in Iraq, KBR will keep most of its workforce intact, enabling it to collect $190 million or more in unnecessary expenses. Much of any "peace dividend" [7] from the war's gradual end—potentially hundreds of billions of dollars—could wind up in the hands of contractors.
On March 29, the bipartisan Commission on Wartime Contracting [8]—which Congress set up in early 2007 to investigate waste and corruption in the military private sector—will hold a hearing to examine whether contractors are doing their part to prepare for leaving Iraq. Some commissioners are raring for a showdown with KBR over its drawdown plan—or lack thereof. The commission's co-chair, former Republican congressman Christopher H. Shays [9], said in a statement: "Considering that KBR was just awarded a task order—now under protest—that could bring them up to $2.3 billion in new [Iraq-related] revenues, it's very important that we get a clear picture of the quality of planning and oversight during the Iraq drawdown."
The Balad report is likely to be a hot potato at the hearing. Commissioner Charles Tiefer [10] tells Mother Jones the report is a "dynamite critique" of the firm's practices. "The numbers translate into an astonishingly large pool of KBR employees standing around idle and having the government be charged," he says.
What the DOD investigators found in Balad was astounding. Army rules require that its civilian maintenance employees are actively working 85 to 90 percent of the time they are on the clock. Yet KBR's own records showed that its workers were only engaged in labor an average of 6.6 percent of the time they were on duty. The DOD ran its own numbers, and its findings were even worse. In September 2008, for example, KBR had 144 maintenance employees at Balad, available to work 16,200 hours. Their actual "utilization rate" was a paltry 0.63 percent—which means that each of the 144 KBR employees averaged about 43 minutes of work for the entire month.
How did such a large bunch of thumb-twiddling mechanics go unnoticed? The Pentagon investigators found that the Army had no system in place to police how much work its contractors were actually doing. Plus, the unit in charge of KBR's operation at Balad reported that the contractor wouldn't reveal how many mechanics it employed there "because it believed the information was proprietary." The investigators (who eventually got the KBR data) note that as of last August, the number of KBR mechanics at Balad has since dropped to 75, but they conclude diplomatically that "opportunities for additional reductions of tactical vehicle field maintenance services at [Balad] may exist, which may provide additional cost savings to DOD." In other words, the Army should consider sending even more contractors home.
Some in the military appear to accept such waste as a matter of course. Col. Gust Pagonis, an assistant chief of staff for the 13th Expeditionary Sustainment Command, which took over command of Balad last August, responded to the DOD inspector general by explaining that "the contracting of maintenance capabilities, though not efficient, was effective in ensuring units did not experience low readiness rates and being able to perform the mission." Translation: The KBR contractors were essentially being kept around on reserve, just in case. Tiefer doesn't buy that argument. "That might justify a limited overcapacity, but nothing approaching KBR's levels," he says.
As the military draws down its own numbers in Iraq, that "just in case" fleet shows few signs [11] of going home. By this August, all US combat personnel are slated to be out of Iraq, leaving a force of about 50,000 "combat support" troops. Yet if the DOD's own optimistic estimates [12] are accurate, there will still be 75,000 contractors in Iraq at the end of summer—or 1.5 contractors for every soldier. KBR had 17,095 employees in Iraq as of last September, but when its subcontractors are included, it oversees as many as 58,000 workers. The firm has promised to reduce its staff in Iraq by 5 percent each quarter, but that may not be fast enough. Last November, April G. Stephenson, the then-head of the Defense Contract Audit Agency (DCAA), testified to the contracting commission [13] that KBR could cost the government another $193 million in unnecessary manpower between then and the August 2010 withdrawal date for combat forces. "When the military reduced its troop levels from 160,000 to 130,000—a 19 percent reduction—KBR's staffing levels remained constant," she told the commission, adding that KBR had so far refused to share "a detailed, written plan to reduce staffing levels in consonance with the military drawdown."
She added that the $193 million estimate was "conservative"; if KBR fails to meet its withdrawal goals, the price tag could balloon by hundreds of millions more. "The drawdown in Iraq and these Iraq task orders are going to become a deep pocket for these contractors," she told the panel. In light of the Balad report, Tiefer cautiously agrees. "If KBR has underutilized rates in many of its operations anywhere near the rates found by the inspector general study...that would support a search for savings on the order of $300 million," he says.
KBR rejects those assertions. The company has "been working since last year with these organizations in responsibly planning our support to the drawdown of military forces in Iraq," writes company spokeswoman Heather Browne in an email to Mother Jones.
Federal bean counters are concerned with more than just KBR's inflated contracts. In fiscal 2009 alone, the DCAA identified $20.4 billion in questionable billing [14], and another $12.1 billion in unsupported cost estimates, by contractors in Iraq and Afghanistan. Together, that's more money than any individual handout to the biggest beneficiaries [15] of the financial bailout.
In October, the Pentagon transferred Stephenson [16] to its payroll department. That move came after the Government Accountability Office complained [17] about auditing irregularities on Stephenson's watch. GAO even alleged that some DCAA reports had been modified to favor contractors—which suggests that the companies' waste in Iraq and Afghanistan may be even worse than already known. (Stephenson could not be reached for comment.) But even before her demotion, Stephenson's agency had little leverage with contractors. All the DCAA can do is make recommendations to an alphabet soup of other Pentagon bureaucracies that routinely insist that contracts and regulations prevent them from playing hardball with contractors and their paychecks. At the November hearing, Shays, the co-chair of the contracting commission, chastised a Defense Contract Management Agency representative for failing to withhold any payments to contractors—even after the DCAA had expressed doubts about the amounts the contractors were charging. "It is simply outrageous that DCMA did not respond to DCAA's findings and have any withholds," Shays said. "And it was unfortunate that DCAA did not have a way to see that resolved."
The DOD's inertia on contractor accountability is so complete that its agencies can't say with any certainty how many contractors are currently in Iraq and Afghanistan. One April 2009 estimate put the number at 160,000; a separate DOD study a month earlier said it was 240,000. The dysfunction has angered some Iraq War hawks, like Shays and contracting commission member Dov Zakheim [18]—a Bush-era undersecretary of defense who helped manage the war's initial finances. Zakheim upbraided several Pentagon officials in that November hearing for not keeping contractors accountable. "We've been at war for eight years in Afghanistan, long enough for me to actually start forgetting about what it was like at the beginning, when I was there," he said. "Eight years in Afghanistan, and we haven't resolved something like this, which I would have thought is absolutely critical."
But KBR will be in the hot seat at next week's hearing—and on the heels of the Balad report, that seat's now likely to be a lot hotter. "We're hoping to find out at this hearing how much progress KBR has made toward a viable drawdown plan with realistic assumptions," Tiefer says, adding: "I'm personally hoping to receive suggestions for how to reform monopoly cost-plus contracts like KBR's." Company spokeswoman Browne says KBR is ready to state its case, and is in the process of drafting a response to the inspector general's report.
For now, however, it's hard to see what the commission or the federal government can do to derail the KBR gravy train. Bases across Iraq remain dependent on the firm's contractors, and that dependency is only likely to increase as more troops come home. "In essence…we basically said that KBR is too big to fail," Shays said last May. "So we are still going to fund them."
Source URL: http://motherjones.com/politics/2010/03/kbr-idle-hands-iraq-balad-contract-waste-pentagon-report-hearing
It was just a single contract for a single job on a single base in Iraq. The Department of Defense agreed to pay the megacontractor KBR $5 million a year to repair tactical vehicles, from Humvees to big rigs, at Joint Base Balad, a large airfield and supply center north of Baghdad. Yet according to a new Pentagon report, what the military got was as many as 144 civilian mechanics, each doing as little as 43 minutes of work a month, with virtually no oversight. The report, issued March 3 by the DOD's inspector general, found that between late 2008 and mid-2009, KBR performed less than 7 percent of the work it was expected to do, but still got paid in full.
The $4.6 million blown on this particular contract is a relatively small loss considering that in 2009 alone, the government had a blanket deal worth $5 billion [4] with KBR (formerly known as the Halliburton [5] subsidiary Kellogg Brown & Root). Just days before the Pentagon released the Balad report, KBR announced [6] it had won a new $2.3 billion-plus, five-year Iraq contract. But the inspector general's modest investigation offers new insight into just how little KBR delivers and how toothless the Pentagon is to prevent contractor waste. Moreover, the government's own auditors predict that as the military draws down its forces in Iraq, KBR will keep most of its workforce intact, enabling it to collect $190 million or more in unnecessary expenses. Much of any "peace dividend" [7] from the war's gradual end—potentially hundreds of billions of dollars—could wind up in the hands of contractors.
On March 29, the bipartisan Commission on Wartime Contracting [8]—which Congress set up in early 2007 to investigate waste and corruption in the military private sector—will hold a hearing to examine whether contractors are doing their part to prepare for leaving Iraq. Some commissioners are raring for a showdown with KBR over its drawdown plan—or lack thereof. The commission's co-chair, former Republican congressman Christopher H. Shays [9], said in a statement: "Considering that KBR was just awarded a task order—now under protest—that could bring them up to $2.3 billion in new [Iraq-related] revenues, it's very important that we get a clear picture of the quality of planning and oversight during the Iraq drawdown."
The Balad report is likely to be a hot potato at the hearing. Commissioner Charles Tiefer [10] tells Mother Jones the report is a "dynamite critique" of the firm's practices. "The numbers translate into an astonishingly large pool of KBR employees standing around idle and having the government be charged," he says.
What the DOD investigators found in Balad was astounding. Army rules require that its civilian maintenance employees are actively working 85 to 90 percent of the time they are on the clock. Yet KBR's own records showed that its workers were only engaged in labor an average of 6.6 percent of the time they were on duty. The DOD ran its own numbers, and its findings were even worse. In September 2008, for example, KBR had 144 maintenance employees at Balad, available to work 16,200 hours. Their actual "utilization rate" was a paltry 0.63 percent—which means that each of the 144 KBR employees averaged about 43 minutes of work for the entire month.
How did such a large bunch of thumb-twiddling mechanics go unnoticed? The Pentagon investigators found that the Army had no system in place to police how much work its contractors were actually doing. Plus, the unit in charge of KBR's operation at Balad reported that the contractor wouldn't reveal how many mechanics it employed there "because it believed the information was proprietary." The investigators (who eventually got the KBR data) note that as of last August, the number of KBR mechanics at Balad has since dropped to 75, but they conclude diplomatically that "opportunities for additional reductions of tactical vehicle field maintenance services at [Balad] may exist, which may provide additional cost savings to DOD." In other words, the Army should consider sending even more contractors home.
Some in the military appear to accept such waste as a matter of course. Col. Gust Pagonis, an assistant chief of staff for the 13th Expeditionary Sustainment Command, which took over command of Balad last August, responded to the DOD inspector general by explaining that "the contracting of maintenance capabilities, though not efficient, was effective in ensuring units did not experience low readiness rates and being able to perform the mission." Translation: The KBR contractors were essentially being kept around on reserve, just in case. Tiefer doesn't buy that argument. "That might justify a limited overcapacity, but nothing approaching KBR's levels," he says.
As the military draws down its own numbers in Iraq, that "just in case" fleet shows few signs [11] of going home. By this August, all US combat personnel are slated to be out of Iraq, leaving a force of about 50,000 "combat support" troops. Yet if the DOD's own optimistic estimates [12] are accurate, there will still be 75,000 contractors in Iraq at the end of summer—or 1.5 contractors for every soldier. KBR had 17,095 employees in Iraq as of last September, but when its subcontractors are included, it oversees as many as 58,000 workers. The firm has promised to reduce its staff in Iraq by 5 percent each quarter, but that may not be fast enough. Last November, April G. Stephenson, the then-head of the Defense Contract Audit Agency (DCAA), testified to the contracting commission [13] that KBR could cost the government another $193 million in unnecessary manpower between then and the August 2010 withdrawal date for combat forces. "When the military reduced its troop levels from 160,000 to 130,000—a 19 percent reduction—KBR's staffing levels remained constant," she told the commission, adding that KBR had so far refused to share "a detailed, written plan to reduce staffing levels in consonance with the military drawdown."
She added that the $193 million estimate was "conservative"; if KBR fails to meet its withdrawal goals, the price tag could balloon by hundreds of millions more. "The drawdown in Iraq and these Iraq task orders are going to become a deep pocket for these contractors," she told the panel. In light of the Balad report, Tiefer cautiously agrees. "If KBR has underutilized rates in many of its operations anywhere near the rates found by the inspector general study...that would support a search for savings on the order of $300 million," he says.
KBR rejects those assertions. The company has "been working since last year with these organizations in responsibly planning our support to the drawdown of military forces in Iraq," writes company spokeswoman Heather Browne in an email to Mother Jones.
Federal bean counters are concerned with more than just KBR's inflated contracts. In fiscal 2009 alone, the DCAA identified $20.4 billion in questionable billing [14], and another $12.1 billion in unsupported cost estimates, by contractors in Iraq and Afghanistan. Together, that's more money than any individual handout to the biggest beneficiaries [15] of the financial bailout.
In October, the Pentagon transferred Stephenson [16] to its payroll department. That move came after the Government Accountability Office complained [17] about auditing irregularities on Stephenson's watch. GAO even alleged that some DCAA reports had been modified to favor contractors—which suggests that the companies' waste in Iraq and Afghanistan may be even worse than already known. (Stephenson could not be reached for comment.) But even before her demotion, Stephenson's agency had little leverage with contractors. All the DCAA can do is make recommendations to an alphabet soup of other Pentagon bureaucracies that routinely insist that contracts and regulations prevent them from playing hardball with contractors and their paychecks. At the November hearing, Shays, the co-chair of the contracting commission, chastised a Defense Contract Management Agency representative for failing to withhold any payments to contractors—even after the DCAA had expressed doubts about the amounts the contractors were charging. "It is simply outrageous that DCMA did not respond to DCAA's findings and have any withholds," Shays said. "And it was unfortunate that DCAA did not have a way to see that resolved."
The DOD's inertia on contractor accountability is so complete that its agencies can't say with any certainty how many contractors are currently in Iraq and Afghanistan. One April 2009 estimate put the number at 160,000; a separate DOD study a month earlier said it was 240,000. The dysfunction has angered some Iraq War hawks, like Shays and contracting commission member Dov Zakheim [18]—a Bush-era undersecretary of defense who helped manage the war's initial finances. Zakheim upbraided several Pentagon officials in that November hearing for not keeping contractors accountable. "We've been at war for eight years in Afghanistan, long enough for me to actually start forgetting about what it was like at the beginning, when I was there," he said. "Eight years in Afghanistan, and we haven't resolved something like this, which I would have thought is absolutely critical."
But KBR will be in the hot seat at next week's hearing—and on the heels of the Balad report, that seat's now likely to be a lot hotter. "We're hoping to find out at this hearing how much progress KBR has made toward a viable drawdown plan with realistic assumptions," Tiefer says, adding: "I'm personally hoping to receive suggestions for how to reform monopoly cost-plus contracts like KBR's." Company spokeswoman Browne says KBR is ready to state its case, and is in the process of drafting a response to the inspector general's report.
For now, however, it's hard to see what the commission or the federal government can do to derail the KBR gravy train. Bases across Iraq remain dependent on the firm's contractors, and that dependency is only likely to increase as more troops come home. "In essence…we basically said that KBR is too big to fail," Shays said last May. "So we are still going to fund them."
Source URL: http://motherjones.com/politics/2010/03/kbr-idle-hands-iraq-balad-contract-waste-pentagon-report-hearing
25 March 2010
House Gives Final Approval To Health Care Overhaul 25MAR10
In spite of all the lies and hypocrisy of the Republicans we got this done! Thank you God!!!! The first story is from NPR, the second is from the Washington Post.
Capping a bitterly fought battle over the top item on President Obama's domestic agenda, the House gave final approval to the health overhaul Thursday, after the Senate made changes and returned the measure earlier in the day.
The House voted 220-207 for bill, which now heads to President Obama for his signature. No Republicans supported the measure.
Democrats who were eager to put the long fight over health care behind them had hoped a Senate vote would finish the job. But Republicans identified problems with two provisions relating to Pell Grants for low-income students that violated the rules of the budget reconciliation process, which Democrats were using to speed the bill's passage and block a filibuster.
The provisions were stripped from the bill, and the Senate passed it on a 56-43 party line vote. No Republicans voted for the measure, and three Democrats also opposed it.
Under reconciliation rules, the legislation had to get kicked back to the House because of the changes.
Shortly before the Senate vote, President Obama delivered a message to Republicans who said they'll try to repeal his health care overhaul: "Go for it." Obama was at a campaign-style rally in Iowa to bolster support for the new law and explain what it means to average Americans.
A Barrage Of Amendments
The Senate vote followed a nine-hour marathon session stretching past 2 a.m. in which Democrats defeated 29 Republican amendments, any one of which would have sent the legislation back to the House.
Although Obama signed the health care bill into law Tuesday, the package of changes sought by the House still needed to get through the Senate. So Republicans sought to gum up the process by issuing the barrage of amendments.
One by one, Democrats voted down GOP proposals that, for example, would have rolled back cuts to Medicare and barred tax increases for families earning less than $250,000. They also defeated an amendment that would have prohibited federal money for the purchase of Viagra and other erectile dysfunction drugs for sex offenders. Sen. Tom Coburn (R-OK) introduced the amendment, saying it would save millions of dollars. Sen. Max Baucus (D-MT) called the proposed change "a crass political stunt."
"There's no attempt to improve the bill. There's an attempt to destroy this bill," Senate Majority Leader Harry Reid said.
"The majority leader may not think we're serious about changing the bill, but we'd like to change the bill, and with a little help from our friends on the other side we could improve the bill significantly," answered Senate Minority Leader Mitch McConnell (R-KY).
Democrats noted that nearly every reconciliation bill has been subject to last-minute revisions.
Republicans And 'Armageddon'
Obama's trip to Iowa City, Iowa — where as a presidential candidate he announced his health care blueprint — was the first of many appearances around the country to sell the overhaul to voters before the fall congressional elections.
"Three years ago, I came here to this campus to make a promise," Obama told the crowd gathered at the University of Iowa, "that by the end of my first term in office, I would sign legislation to reform our health insurance system."
The president said there had been "plenty of fear-mongering and overheated rhetoric" about the health care overhaul.
"Leaders of the Republican Party, they called the passage of this bill 'Armageddon,' the end of freedom as we know it," Obama said. "So, after I signed the bill, I looked around to see if there were any asteroids falling," he said to laughter and applause.
"But from this day forward, all of the cynics and the naysayers will have to finally confront the reality of what this reform is and what it isn't," the president said.
Threats And Intimidation Tactics
As Congress wrangles with legislative details, discontent over changes to the nation's health care system has spilled over into threats of violence against lawmakers who voted for the overhaul.
The FBI is investigating at least four incidents in which bricks were thrown through the windows of Democratic offices in New York, Arizona and Kansas, including Rep. Louise Slaughter's district headquarters in Niagara Falls, N.Y. And at least 10 members of Congress reported receiving threatening e-mails, phone calls and faxes.
House Speaker Nancy Pelosi said at a news conference Thursday that intimidation tactics "must be rejected," adding that such behavior has "no place in a civil debate in our country."
Some of the worst threats targeted Michigan Rep. Bart Stupak, an anti-abortion Democrat who cast a key vote for the overhaul in exchange for an executive order prohibiting federal funding of abortion. One man called Stupak's office to say he hopes the congressman gets cancer and dies, while a female caller said "millions of people wish you ill" and "those thoughts will materialize into something that's not very good for you."
House Republican leader John Boehner of Ohio said in a statement that while many Americans are angry over the bill's passage, "violence and threats are unacceptable."
"That's not the American way," he said. "We need to take that anger and channel it into positive change."
Later, House Minority Whip Eric Cantor went on the offensive, saying Democratic leaders were "reckless to use these incidents as media vehicles for political gain."
Cantor said his own campaign office had been shot at and that he had received threatening e-mails this week, but didn't elaborate. He said he would not release the e-mails "because I believe such actions will encourage more to be sent."
Material from The Associated Press was used in this report
House passes reconciliation bill on 220 to 207 vote
By Lori Montgomery, Shailagh Murray and William Branigin
Washington Post Staff Writer
Thursday, March 25, 2010; 9:10 PM
Congress passed the final piece of President Obama's landmark health-care package Thursday, the last legislative hurdle in a year-long debate over the issue.
On a 220 to 207 vote Thursday night, the House approved a reconciliation bill that amends the newly enacted health-care law and includes a major overhaul of the student loan program and expansion of Pell Grants. The bill now goes to Obama for his signature.
The House vote was actually its second on the reconciliation bill. It narrowly approved the bill late Sunday night, but it came back after Republicans identified two minor violations of reconciliation rules that forced changes to a provision on student loans.
The Senate passed the reconciliation bill -- with the two small changes -- by a vote of 56 to 43.
Democratic leaders said the provisions that were struck -- from the part of the bill dealing with Pell Grants for college students -- did not significantly affect the student loan program or the overall health-care bill.
"Of all the things they could have sent back, this is probably the most benign [and] easily fixed," House Speaker Nancy Pelosi (D-Calif.) told reporters.
Senators stood and voted from their desks as the roll was called, a tradition reserved for high-profile bills. Before the vote, the Senate observed a moment of silence for the late senator Edward M. Kennedy (D-Mass.), the Democratic champion of health-care reform, who died last year midway through the debate.
Three Democrats voted against the bill: Sens. Blanche Lincoln and Mark Pryor, both of Arkansas, and Sen. Ben Nelson of Nebraska. All three lawmakers supported the legislation that was signed into law on Tuesday but objected to particular provisions in the reconciliation bill.
In Iowa, Obama dared Republicans to make good on their pledge to run in November's midterm elections on a platform of repealing the health-care overhaul, telling them to "go for it" if they want to campaign on rolling back benefits he said would start taking effect this year.
The return to the House of the reconciliation bill was required after Senate parliamentarian Alan Frumin "struck two minor provisions," because they were found to violate reconciliation rules, the complicated set of procedures that protected the bill from filibuster, Jim Manley, spokesman for Senate Majority Leader Harry M. Reid (D-Nev.), told reporters shortly after 3 a.m.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) said one of the deleted provisions was a technical item that he considered "as close to a 'nothing' as you can come around here." The second, more substantive provision would have set a formula for establishing maximum Pell Grant awards. But Conrad said the formula would not have taken effect for two years, giving Congress time to restore it in another bill.
Frumin deemed both measures to be out of order because they had no budget implications, Conrad said Thursday.
For much of Wednesday and into Thursday morning, Senate Republicans offered dozens of amendments, which would have altered central elements of the health-care law, but each one was rejected.
As the Senate staged a series of rapid-fire votes, only a handful of Democrats defected, suggesting that the package of changes would easily be approved in the final vote.
Although much smaller than the bill Obama has signed, the reconciliation bill makes major changes to that legislation to bring the final package in line with a compromise worked out between House and Senate leaders. Federal subsidies will be expanded slightly for people who need help buying insurance, and the coverage gap known as the doughnut hole in the Medicare prescription drug program will be closed by 2020. Seniors who fall into the doughnut hole this year will be eligible for a $250 rebate.
The measure also changes the annual penalty on individuals who do not purchase insurance to at least $695 a year or as much as 2.5 percent of annual income. And it dramatically increases the penalty facing employers who do not offer affordable coverage, to as much as $2,000 per worker.
The most significant change, however, is the method of financing the overhaul. A new 40 percent excise tax on high-cost insurance policies will be delayed until 2018 and replaced by a new tax on the nation's highest earners. Families earning more than $250,000 a year will for the first time have to pay a 3.8 percent Medicare payroll tax on capital gains, dividends and other investment income.
Staff writer Ben Pershing contributed to this report.
Capping a bitterly fought battle over the top item on President Obama's domestic agenda, the House gave final approval to the health overhaul Thursday, after the Senate made changes and returned the measure earlier in the day.
The House voted 220-207 for bill, which now heads to President Obama for his signature. No Republicans supported the measure.
Democrats who were eager to put the long fight over health care behind them had hoped a Senate vote would finish the job. But Republicans identified problems with two provisions relating to Pell Grants for low-income students that violated the rules of the budget reconciliation process, which Democrats were using to speed the bill's passage and block a filibuster.
The provisions were stripped from the bill, and the Senate passed it on a 56-43 party line vote. No Republicans voted for the measure, and three Democrats also opposed it.
Under reconciliation rules, the legislation had to get kicked back to the House because of the changes.
Shortly before the Senate vote, President Obama delivered a message to Republicans who said they'll try to repeal his health care overhaul: "Go for it." Obama was at a campaign-style rally in Iowa to bolster support for the new law and explain what it means to average Americans.
A Barrage Of Amendments
The Senate vote followed a nine-hour marathon session stretching past 2 a.m. in which Democrats defeated 29 Republican amendments, any one of which would have sent the legislation back to the House.
Although Obama signed the health care bill into law Tuesday, the package of changes sought by the House still needed to get through the Senate. So Republicans sought to gum up the process by issuing the barrage of amendments.
One by one, Democrats voted down GOP proposals that, for example, would have rolled back cuts to Medicare and barred tax increases for families earning less than $250,000. They also defeated an amendment that would have prohibited federal money for the purchase of Viagra and other erectile dysfunction drugs for sex offenders. Sen. Tom Coburn (R-OK) introduced the amendment, saying it would save millions of dollars. Sen. Max Baucus (D-MT) called the proposed change "a crass political stunt."
"There's no attempt to improve the bill. There's an attempt to destroy this bill," Senate Majority Leader Harry Reid said.
"The majority leader may not think we're serious about changing the bill, but we'd like to change the bill, and with a little help from our friends on the other side we could improve the bill significantly," answered Senate Minority Leader Mitch McConnell (R-KY).
Democrats noted that nearly every reconciliation bill has been subject to last-minute revisions.
Republicans And 'Armageddon'
Obama's trip to Iowa City, Iowa — where as a presidential candidate he announced his health care blueprint — was the first of many appearances around the country to sell the overhaul to voters before the fall congressional elections.
"Three years ago, I came here to this campus to make a promise," Obama told the crowd gathered at the University of Iowa, "that by the end of my first term in office, I would sign legislation to reform our health insurance system."
The president said there had been "plenty of fear-mongering and overheated rhetoric" about the health care overhaul.
"Leaders of the Republican Party, they called the passage of this bill 'Armageddon,' the end of freedom as we know it," Obama said. "So, after I signed the bill, I looked around to see if there were any asteroids falling," he said to laughter and applause.
"But from this day forward, all of the cynics and the naysayers will have to finally confront the reality of what this reform is and what it isn't," the president said.
Threats And Intimidation Tactics
As Congress wrangles with legislative details, discontent over changes to the nation's health care system has spilled over into threats of violence against lawmakers who voted for the overhaul.
The FBI is investigating at least four incidents in which bricks were thrown through the windows of Democratic offices in New York, Arizona and Kansas, including Rep. Louise Slaughter's district headquarters in Niagara Falls, N.Y. And at least 10 members of Congress reported receiving threatening e-mails, phone calls and faxes.
House Speaker Nancy Pelosi said at a news conference Thursday that intimidation tactics "must be rejected," adding that such behavior has "no place in a civil debate in our country."
Some of the worst threats targeted Michigan Rep. Bart Stupak, an anti-abortion Democrat who cast a key vote for the overhaul in exchange for an executive order prohibiting federal funding of abortion. One man called Stupak's office to say he hopes the congressman gets cancer and dies, while a female caller said "millions of people wish you ill" and "those thoughts will materialize into something that's not very good for you."
House Republican leader John Boehner of Ohio said in a statement that while many Americans are angry over the bill's passage, "violence and threats are unacceptable."
"That's not the American way," he said. "We need to take that anger and channel it into positive change."
Later, House Minority Whip Eric Cantor went on the offensive, saying Democratic leaders were "reckless to use these incidents as media vehicles for political gain."
Cantor said his own campaign office had been shot at and that he had received threatening e-mails this week, but didn't elaborate. He said he would not release the e-mails "because I believe such actions will encourage more to be sent."
Material from The Associated Press was used in this report
House passes reconciliation bill on 220 to 207 vote
By Lori Montgomery, Shailagh Murray and William Branigin
Washington Post Staff Writer
Thursday, March 25, 2010; 9:10 PM
Congress passed the final piece of President Obama's landmark health-care package Thursday, the last legislative hurdle in a year-long debate over the issue.
On a 220 to 207 vote Thursday night, the House approved a reconciliation bill that amends the newly enacted health-care law and includes a major overhaul of the student loan program and expansion of Pell Grants. The bill now goes to Obama for his signature.
The House vote was actually its second on the reconciliation bill. It narrowly approved the bill late Sunday night, but it came back after Republicans identified two minor violations of reconciliation rules that forced changes to a provision on student loans.
The Senate passed the reconciliation bill -- with the two small changes -- by a vote of 56 to 43.
Democratic leaders said the provisions that were struck -- from the part of the bill dealing with Pell Grants for college students -- did not significantly affect the student loan program or the overall health-care bill.
"Of all the things they could have sent back, this is probably the most benign [and] easily fixed," House Speaker Nancy Pelosi (D-Calif.) told reporters.
Senators stood and voted from their desks as the roll was called, a tradition reserved for high-profile bills. Before the vote, the Senate observed a moment of silence for the late senator Edward M. Kennedy (D-Mass.), the Democratic champion of health-care reform, who died last year midway through the debate.
Three Democrats voted against the bill: Sens. Blanche Lincoln and Mark Pryor, both of Arkansas, and Sen. Ben Nelson of Nebraska. All three lawmakers supported the legislation that was signed into law on Tuesday but objected to particular provisions in the reconciliation bill.
In Iowa, Obama dared Republicans to make good on their pledge to run in November's midterm elections on a platform of repealing the health-care overhaul, telling them to "go for it" if they want to campaign on rolling back benefits he said would start taking effect this year.
The return to the House of the reconciliation bill was required after Senate parliamentarian Alan Frumin "struck two minor provisions," because they were found to violate reconciliation rules, the complicated set of procedures that protected the bill from filibuster, Jim Manley, spokesman for Senate Majority Leader Harry M. Reid (D-Nev.), told reporters shortly after 3 a.m.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) said one of the deleted provisions was a technical item that he considered "as close to a 'nothing' as you can come around here." The second, more substantive provision would have set a formula for establishing maximum Pell Grant awards. But Conrad said the formula would not have taken effect for two years, giving Congress time to restore it in another bill.
Frumin deemed both measures to be out of order because they had no budget implications, Conrad said Thursday.
For much of Wednesday and into Thursday morning, Senate Republicans offered dozens of amendments, which would have altered central elements of the health-care law, but each one was rejected.
As the Senate staged a series of rapid-fire votes, only a handful of Democrats defected, suggesting that the package of changes would easily be approved in the final vote.
Although much smaller than the bill Obama has signed, the reconciliation bill makes major changes to that legislation to bring the final package in line with a compromise worked out between House and Senate leaders. Federal subsidies will be expanded slightly for people who need help buying insurance, and the coverage gap known as the doughnut hole in the Medicare prescription drug program will be closed by 2020. Seniors who fall into the doughnut hole this year will be eligible for a $250 rebate.
The measure also changes the annual penalty on individuals who do not purchase insurance to at least $695 a year or as much as 2.5 percent of annual income. And it dramatically increases the penalty facing employers who do not offer affordable coverage, to as much as $2,000 per worker.
The most significant change, however, is the method of financing the overhaul. A new 40 percent excise tax on high-cost insurance policies will be delayed until 2018 and replaced by a new tax on the nation's highest earners. Families earning more than $250,000 a year will for the first time have to pay a 3.8 percent Medicare payroll tax on capital gains, dividends and other investment income.
Staff writer Ben Pershing contributed to this report.
Thank You, Wall Street. May We Have Another? from MOJO JAN/FEB 2010
Click the header for the story on MOJO.....and check out the list of what $14 TRILLION (the real cost of the bailout) could have bought and the end of the article.
Americans are angry at the financial crisis—just not at the fat cats who caused it.
— By David Corn
LAST JANUARY, shortly before President Obama took office, veteran Democratic pollster John Marttila conducted a series of focus groups on a range of issues in the Philadelphia and Baltimore areas. When the conversations turned to the economy, Marttila was shocked. In the middle of the financial collapse, these people—men and women of different ages, incomes, races, and political affiliations—were predictably ticked off. But, he recalls, the "dominant emotional dynamic was self-criticism. They really felt that they had failed. They had spent too much on things they didn't need." The pollster had expected rage at Wall Street and George W. Bush, but the people in the groups barely mentioned Bush. And though they were upset by the shady and incomprehensible machinations of big banks, they were not revved up for revenge. "Their intellectual criticism was directed at the financial world," Marttila says, "but their emotional criticism was directed at themselves." Bottom line: They were not reaching for the pitchforks.
A year later, as Congress struggles with financial reform, populist fury aimed at the one-time masters of the universe has yet to materialize in any targeted manner; there's no mass movement demanding fundamental change. Sure, outrage over executive compensation caught the attention of regulators and lawmakers, and President Barack Obama and the Federal Reserve have taken limited steps to curb pay. But lawmakers have apparently not been fretting too much about public sentiment as they followed the urgings of finance lobbyists and weakened legislation to rein in Wall Street.
So where's the wrath? I asked a number of public opinion experts and politicians that question. Most of them said there was indeed anger outside the Beltway—just not the sort of vocal indignation that directly translates into action in Washington. Why?
Politicians Don't Care. "People don't know what to do with the anger they do have," says Marttila, because they feel blocked by "senators, representatives, and [Treasury Secretary] Timothy Geithner, who speaks gobbledygook." Wall Street, in other words, is protected by the people's representatives. "There is a layer between Americans and the villains of Wall Street, and that's Congress," Marttila contends. With Obama adopting mostly mainstream positions on economic issues, no national figure has stepped in to rally the resentment. Nobody has put popular anger to good use, because nobody really wants to.
Fear, Not Loathing. As a leading Democratic opponent of the banking bailouts, Rep. Brad Sherman of California has thought a fair amount about public sentiment and the economic crisis. "The public is very angry at Wall Street," he says. "But they are constantly told by all the respected voices that if we don't protect and preserve the institutions on Wall Street, we'll be fighting for rat meat on the streets." And this fearmongering works. Fear, Sherman says, is generally stronger than anger. The resentment that does exist is diffuse; it is not channeled toward specific solutions. The fear, however, is specific: What will happen to me and my family? With authorities in government and the media incessantly bleating that what's good for Wall Street is good for the country, Sherman adds, "we're angry at those people and we're too fearful to do anything about it."
It's Complicated. There's no doubt Americans are upset about paying for the failures of banks and corporations, says Democratic pollster Mark Mellman. But the financial issues involved appear "incredibly arcane and difficult to penetrate. How do you regulate derivatives when 99 percent of the public don't understand it?" Marttila agrees: "The public policy implications are beyond the reach, vocabulary, and discussion of many. So the bad guys escape."
Big Business vs. Big Government. For many decades, Americans have held negative attitudes toward the titans of industry. "It's a constant," says Frank Newport, editor-in-chief of the Gallup Poll. "You never go wrong vilifying big business." But Americans also don't fancy the counterbalance to corporate power: government. Since 1965, Gallup has asked survey respondents to choose the biggest future threat to the country: big business, big labor, or big government. Big government always wins—by a lot. In December 2006, 61 percent said they fretted about the government, compared with 25 percent who feared corporate power. Last spring, when Wall Street was in deep disrepute, the numbers changed only slightly: 55 percent still fingered big government as the greatest threat. "People always have concern about the government doing too much," says Newport, "even when [it's] regulating financial institutions they don't like." In fact, as recently as September, Gallup found that 45 percent of Americans believed there was too much government regulation of business. Only 24 percent said there was too little. "The lucky thing for business is that its foil is government," concludes Andrew Kohut, president of the Pew Research Center.
This past summer, right-wing activists appeared to corner the market on populist rage. David Winston, a Republican consultant, maintains that this particular anger—over "death panels" and Obama "socialism"—was not widespread. Still, in September, when Rasmussen pollsters asked people how angry they were at current federal policies, without specifying which ones, two-thirds said "very" or "somewhat." Another Rasmussen poll found that 53 percent opposed greater regulation of the finance industry.
And even when Americans like a new regulatory idea—such as the proposed Consumer Financial Protection Agency, which several pollsters said is popular—public sentiment hasn't been powerful enough to give lawmakers pause. Without noticeable public demand for an agency with teeth, it was easy for Congress to water down the proposal. As the House was working on this legislation in October, a consultant for the financial services industry told me that big banks were even cutting back on public relations help because they weren't sensing much popular animus and, consequently, did not expect to be whacked too hard on the Hill.
Too Many Targets. Wall Street is also fortunate that it's not the only target of popular anger. Kohut's polls have found resentment at bailed-out banks, at homeowners who purchased houses they couldn't afford, and at the ballooning federal deficit. Because banks are seen as just one of the problems, "there's a little more support—but not a sea change—in how people feel about the government overseeing financial institutions." And in polling conducted since Obama took power, Kohut notes, respondents have been giving more conservative answers over time. In exit polls on Election Day 2008, more voters were in favor of activist government than had been four years earlier. But by February 2009, as an activist president settled into office, that number had already started dropping. The Obama presidency practically began with a backlash.
Jobs, Jobs, Jobs. Winston, the GOP consultant, says that Americans share "a broad sense of frustration that Wall Street has been taken care of"—and they've gotten nothing. Even though the Obama administration and the Democratic Congress passed a hefty stimulus package that likely contributed to GDP growth, the jobs picture—what Americans care about the most—keeps getting worse. "Unemployment trumps Wall Street malfeasance," Winston maintains. "And most people don't see a financial protection agency or more regulation as a solution to unemployment."
So is Wall Street in the clear? Just a few new regulations here and there, and then it's game on? The pollsters I consulted agreed that anyone tracking popular anger in the coming months should be watching not the Dow but the unemployment numbers. Anger prompted by joblessness will focus on politicians, not hedge fund managers. Which means that if politicians let Wall Street get away with shenanigans that kill jobs, they could end up paying for it with their careers. "Wall Street has probably weathered the worst," Rep. Sherman says ruefully. "And Washington has not faced the worst."
David Corn is Mother Jones' Washington bureau chief.
WHAT ELSE COULD $14 TRILLION BUY?
That's the real size of the bailout.
What else could it buy?
—Marian Wang
Toddlers
10 years of vaccines for kids in 117 countries
$110 billion
10 years of $10,000 bonuses for all US public school teachers
$318 billion
Sending all 2009 US high school grads to private college
$347 billion
Doubling US spending on HIV/AIDS and cancer research for 20 years
$493 billion
10 years of CO2 offsets for all Americans
$559 billion
Meeting UN anti-poverty goals by 2015
$757 billion
20 years of universal preschool in US
$860 billion
House
Buying a house for every homeless American
$878 billion
10 years of helping developing countries deal with the effects of climate change
$2 trillion
iPhone
Buying the world an iPhone 3GS
$2 trillion
10 years of private health insurance for uninsured Americans
$2.2 trillion
Paying off 1/3 of US home mortgages
$3.5 trillion
Total: $14 trillion
Americans are angry at the financial crisis—just not at the fat cats who caused it.
— By David Corn
LAST JANUARY, shortly before President Obama took office, veteran Democratic pollster John Marttila conducted a series of focus groups on a range of issues in the Philadelphia and Baltimore areas. When the conversations turned to the economy, Marttila was shocked. In the middle of the financial collapse, these people—men and women of different ages, incomes, races, and political affiliations—were predictably ticked off. But, he recalls, the "dominant emotional dynamic was self-criticism. They really felt that they had failed. They had spent too much on things they didn't need." The pollster had expected rage at Wall Street and George W. Bush, but the people in the groups barely mentioned Bush. And though they were upset by the shady and incomprehensible machinations of big banks, they were not revved up for revenge. "Their intellectual criticism was directed at the financial world," Marttila says, "but their emotional criticism was directed at themselves." Bottom line: They were not reaching for the pitchforks.
A year later, as Congress struggles with financial reform, populist fury aimed at the one-time masters of the universe has yet to materialize in any targeted manner; there's no mass movement demanding fundamental change. Sure, outrage over executive compensation caught the attention of regulators and lawmakers, and President Barack Obama and the Federal Reserve have taken limited steps to curb pay. But lawmakers have apparently not been fretting too much about public sentiment as they followed the urgings of finance lobbyists and weakened legislation to rein in Wall Street.
So where's the wrath? I asked a number of public opinion experts and politicians that question. Most of them said there was indeed anger outside the Beltway—just not the sort of vocal indignation that directly translates into action in Washington. Why?
Politicians Don't Care. "People don't know what to do with the anger they do have," says Marttila, because they feel blocked by "senators, representatives, and [Treasury Secretary] Timothy Geithner, who speaks gobbledygook." Wall Street, in other words, is protected by the people's representatives. "There is a layer between Americans and the villains of Wall Street, and that's Congress," Marttila contends. With Obama adopting mostly mainstream positions on economic issues, no national figure has stepped in to rally the resentment. Nobody has put popular anger to good use, because nobody really wants to.
Fear, Not Loathing. As a leading Democratic opponent of the banking bailouts, Rep. Brad Sherman of California has thought a fair amount about public sentiment and the economic crisis. "The public is very angry at Wall Street," he says. "But they are constantly told by all the respected voices that if we don't protect and preserve the institutions on Wall Street, we'll be fighting for rat meat on the streets." And this fearmongering works. Fear, Sherman says, is generally stronger than anger. The resentment that does exist is diffuse; it is not channeled toward specific solutions. The fear, however, is specific: What will happen to me and my family? With authorities in government and the media incessantly bleating that what's good for Wall Street is good for the country, Sherman adds, "we're angry at those people and we're too fearful to do anything about it."
It's Complicated. There's no doubt Americans are upset about paying for the failures of banks and corporations, says Democratic pollster Mark Mellman. But the financial issues involved appear "incredibly arcane and difficult to penetrate. How do you regulate derivatives when 99 percent of the public don't understand it?" Marttila agrees: "The public policy implications are beyond the reach, vocabulary, and discussion of many. So the bad guys escape."
Big Business vs. Big Government. For many decades, Americans have held negative attitudes toward the titans of industry. "It's a constant," says Frank Newport, editor-in-chief of the Gallup Poll. "You never go wrong vilifying big business." But Americans also don't fancy the counterbalance to corporate power: government. Since 1965, Gallup has asked survey respondents to choose the biggest future threat to the country: big business, big labor, or big government. Big government always wins—by a lot. In December 2006, 61 percent said they fretted about the government, compared with 25 percent who feared corporate power. Last spring, when Wall Street was in deep disrepute, the numbers changed only slightly: 55 percent still fingered big government as the greatest threat. "People always have concern about the government doing too much," says Newport, "even when [it's] regulating financial institutions they don't like." In fact, as recently as September, Gallup found that 45 percent of Americans believed there was too much government regulation of business. Only 24 percent said there was too little. "The lucky thing for business is that its foil is government," concludes Andrew Kohut, president of the Pew Research Center.
This past summer, right-wing activists appeared to corner the market on populist rage. David Winston, a Republican consultant, maintains that this particular anger—over "death panels" and Obama "socialism"—was not widespread. Still, in September, when Rasmussen pollsters asked people how angry they were at current federal policies, without specifying which ones, two-thirds said "very" or "somewhat." Another Rasmussen poll found that 53 percent opposed greater regulation of the finance industry.
And even when Americans like a new regulatory idea—such as the proposed Consumer Financial Protection Agency, which several pollsters said is popular—public sentiment hasn't been powerful enough to give lawmakers pause. Without noticeable public demand for an agency with teeth, it was easy for Congress to water down the proposal. As the House was working on this legislation in October, a consultant for the financial services industry told me that big banks were even cutting back on public relations help because they weren't sensing much popular animus and, consequently, did not expect to be whacked too hard on the Hill.
Too Many Targets. Wall Street is also fortunate that it's not the only target of popular anger. Kohut's polls have found resentment at bailed-out banks, at homeowners who purchased houses they couldn't afford, and at the ballooning federal deficit. Because banks are seen as just one of the problems, "there's a little more support—but not a sea change—in how people feel about the government overseeing financial institutions." And in polling conducted since Obama took power, Kohut notes, respondents have been giving more conservative answers over time. In exit polls on Election Day 2008, more voters were in favor of activist government than had been four years earlier. But by February 2009, as an activist president settled into office, that number had already started dropping. The Obama presidency practically began with a backlash.
Jobs, Jobs, Jobs. Winston, the GOP consultant, says that Americans share "a broad sense of frustration that Wall Street has been taken care of"—and they've gotten nothing. Even though the Obama administration and the Democratic Congress passed a hefty stimulus package that likely contributed to GDP growth, the jobs picture—what Americans care about the most—keeps getting worse. "Unemployment trumps Wall Street malfeasance," Winston maintains. "And most people don't see a financial protection agency or more regulation as a solution to unemployment."
So is Wall Street in the clear? Just a few new regulations here and there, and then it's game on? The pollsters I consulted agreed that anyone tracking popular anger in the coming months should be watching not the Dow but the unemployment numbers. Anger prompted by joblessness will focus on politicians, not hedge fund managers. Which means that if politicians let Wall Street get away with shenanigans that kill jobs, they could end up paying for it with their careers. "Wall Street has probably weathered the worst," Rep. Sherman says ruefully. "And Washington has not faced the worst."
David Corn is Mother Jones' Washington bureau chief.
WHAT ELSE COULD $14 TRILLION BUY?
That's the real size of the bailout.
What else could it buy?
—Marian Wang
Toddlers
10 years of vaccines for kids in 117 countries
$110 billion
10 years of $10,000 bonuses for all US public school teachers
$318 billion
Sending all 2009 US high school grads to private college
$347 billion
Doubling US spending on HIV/AIDS and cancer research for 20 years
$493 billion
10 years of CO2 offsets for all Americans
$559 billion
Meeting UN anti-poverty goals by 2015
$757 billion
20 years of universal preschool in US
$860 billion
House
Buying a house for every homeless American
$878 billion
10 years of helping developing countries deal with the effects of climate change
$2 trillion
iPhone
Buying the world an iPhone 3GS
$2 trillion
10 years of private health insurance for uninsured Americans
$2.2 trillion
Paying off 1/3 of US home mortgages
$3.5 trillion
Total: $14 trillion
DC'S STOCKHOLM SYNDROME (BANKS AND WALL STREET) 8JAN10
Click the header to watch the program on Bill Moyers Journal on PBS. I saw the broadcast, it was fascinating. Below this short article about the show from Mother Jones are the transcripts from the show....but believe me, going to Bill Moyer's Journal website and watching the show is time well spent.
Watch: DC's Stockholm Syndrome
— By Monika Bauerlein
Mon Jan. 11, 2010 1:01 PM PST
Copy and paste this link to go to the Mother Jones story
http://motherjones.com/mojo/2010/01/watch-dcs-stockholm-syndrome
We've getting emails all weeekend from friends, family, MoJo readers, and random strangers about David Corn and Kevin Drum's turn on Bill Moyers' Journal. It was really an astonishingly good show, and well worth watching in the context of... just about everything happening in Washington right now. Take your pick: Today, there's a kerfuffle about the shadow of the possibility of a financial transaction fee, a tiny amount the government could collect from banks to get a little something back for taxpayers--or, more to the point, for our children, who will be paying for the deficit we ran up for the bailout. (Yes, some banks are repaying TARP money, but do you know just how tiny fraction of the total bailout that is? Our handy chart, along with lots more data geekery on shameless bonuses and such, is here. The "Too Big to Jail" package that inspired Moyers to ask Kevin and David to come on is here.) As with every other proposal to make Big Finance bear any part of the burden for the disaster it has caused, this won't fly unless politicians feel they have more to lose from satisfying Wall Street than they do from offending it. So watch the show and forward it to your friends. It's as informative as it is outrage-building—and on this topic, we could use more information and more outrage.
If You Liked This, You Might Also Like...
*
Thank You, Wall Street. May We Have Another?
Americans are angry at the financial crisis—just not at the fat cats who caused it.
*
How Big Finance Bought Uncle Sam
A year after the biggest bailout in US history, Wall Street lobbyists don't just have influence in Washington. They own it lock, stock, and barrel.
*
The Bonus Boom
How Wall Street's barons made out like bandits.
*
MoJo Media Roundup
Watch David Corn and Kevin Drum talk about Wall Street, the housing crisis, and politicizing terror on TV.
January 8, 2010
BILL MOYERS: Welcome to the Journal.
The ancient Romans had a proverb: "Money is like sea water. The more you drink, the thirstier you become." That adage finds particular meaning today on Wall Street, which began this New Year riding a tidal wave of bonuses in a surging ocean of greed.
Thanks to taxpayers like you who generously bailed banking from the financial shipwreck it created for itself and for us, by the end of 2009 the industry's compensation pool reached nearly $200 billion. And despite windfall profits, the banks will claim almost $80 billion in tax deductions. And nearly $20 billion of those deductions will go to just three institutions — Morgan Stanley, JP Morgan Chase, and Goldman Sachs.
Ah, yes — Goldman Sachs, that paragon of profit and probity — which bet big on the housing bubble and when it popped — presto! — converted itself from an investment firm into a bank so it could get your bailout money. Now consider this: in 2008, Goldman Sachs paid an effective tax rate of just one percent. I'm not making that up — one percent! — while their CEO Lloyd Blankfein pulled down over $40 million. That's God's work, if you can get it. And, believe me, Wall Street bankers know how to get it.
What's their secret? How do the bankers pick our pockets so thoroughly with barely a pang of guilt or punishment? You will find some answers in this current edition of "Mother Jones" magazine, one of the best sources of investigative journalism around today. Most of this issue is devoted to what the editors call "Wall Street's accountability deficit."
In it, the Nobel Prize economist Joseph Stiglitz writes of the "moral bankruptcy" by which bankers knowingly trashed our economy and tore up the social contract.
The magazine's David Corn examines why there's no mass movement demanding fundamental change.
And blogger Kevin Drum tours Washington's heart of darkness from down Pennsylvania Avenue, over to K Street where the lobbyists cluster like vultures, then past the local branch of Goldman Sachs — also known as the U.S. Treasury — and up to Capitol Hill, where key members kneel in supplication to receive their morning tithes from the holy church of the almighty dollar. As Kevin Drum writes, a year after the biggest bailouts in U.S. History, Wall Street owns Washington lock, stock and debit card.
Kevin Drum, formerly with "Washington Monthly," is now the political blogger at "Mother Jones." He's here to talk about his report, along with David Corn, who's been covering Washington for 23 years and is now "Mother Jones'" Washington Bureau Chief. Welcome to you both.
BILL MOYERS: Welcome to both of you.
DAVID CORN: Good to be with you, Bill.
KEVIN DRUM: Good to be with you, Bill.
BILL MOYERS: Let me read you a letter that was posted on our website a few days ago from a faithful viewer. His name is Mike Demmer. I don't know him personally, but I like to hear from him. He says, dear Bill, I watch your program all the time. What I don't understand is how a bunch of greedy bankers could bring the world to the edge of catastrophe and then in less than a year, already move back to their old ways. How do they do it?
KEVIN DRUM: Well, that's the $64 million question. Or maybe it's the $64 billion question these days. Yeah, how they do it? They've got all the money. And they use all the money. And they use it in Congress to get rules passed and get laws passed that they want. They use it to lobby the Fed, they use it to lobby the S.E.C. They use it to lobby the executive branch. And they get rules passed that allow them to make a lot of money. Just like any of us would. It's not that American bankers are greedier than anybody else's bankers. It's that our rules, our laws, allow them to do things that they can't do everywhere else. We let them take advantage of the system.
BILL MOYERS: But how do you measure their power? Lobbying doesn't happen in the public, in the open. We can't sit in the bleachers and watch the game being played. How do you know they have this power?
DAVID CORN: You can read the lobbying reports. You know that there are scores if not hundreds of lobbyists. And where do they come from? They come from the committees that they're lobbying. People used to work on the committee, whether they were members, Congressmen or Senators, or staffers. And they spent a lot of time — because, ultimately, Bill, this is about knowledge. This is about information. This stuff is really complicated and convoluted. And, you know, you try reading any of one of these bills and figuring out what's actually being said. It's mystifying. And so, these guys who know the rules, they know the language, and they have the access, and they're giving contributions to the people writing the rules, have all the advantages.
BILL MOYERS: But Barney Frank would disagree with both of you. I don't know that he's read your piece yet, but I'm sure he will.
DAVID CORN: Yeah, I'm sure he would.
BILL MOYERS: Barney Frank, Chairman of the House Committee on Financial Services, and a liberal Democrat, said the other day, look, it's not — I'm not affected by campaign contributions. The members of my committee are not affected by campaign contributions. The problem is democracy. He says everybody sitting on this committee represents somebody back home, a local bank, a car dealer, an insurance company. And they come to the committee and they press, as you do in a democracy, for their interests as you just said.
DAVID CORN: But wait a second. I mean when you look at something like derivatives — derivatives, which were used to enable the subprime lending mess that led to the near collapse of the U.S. and global economy- I'm not sure there are bankers back home who are lobbying, you know, the committee. There aren't local derivative dealers that you meat in Main Street, when you go back to town hall meetings. It's a very small group of people who understand this. And we have seen-- the "Wall Street Journal" is reporting this week that there's no real action on regulating derivatives.
BILL MOYERS: I brought that story, because I wanted to read it. Quote, "Lobbying by Wall Street has blunted efforts to step up regulation on derivatives trading by carving out exceptions or leaving the status quo in place. Derivatives take blame for some of the worst debacles of the financial crisis. But a year after regulators and critics began calling for an overhaul in the way they're traded, some efforts have been shelved, and others have been watered down." What does it say when "Mother Jones" and the "Wall Street Journal" reach the same conclusion? That our government cannot stand up to the lobby even on an issue like derivatives, which were at the root of much of our problem over the last few years?
KEVIN DRUM: Well, it doesn't say anything good. And derivatives are a good example of how this stuff works. I mean, take a look at what happened. Derivatives were at the center of the financial meltdown in 2008. And at first everybody was all ready to regulate derivatives. And the big idea was to put them on an exchange, like a stock exchange, where they're all traded publicly and transparently. What happened was there were corporations — you know, if you're an airline, and you're worried about the price of jet fuel, you might want to buy a hedge. Hedge the price of jet fuel. And so, the airlines and some other companies went to Congress and said, look, those are derivatives, but they shouldn't be traded on the exchange, because that's not the financial stuff that blew up the world. No problem. Everybody pretty much agreed they ought to be exempted from that. But then it's all in how you write the rules. So, the rules got written. And as they slowly got changed, it turns out you've got to define who is an end user. Who is a corporation, as opposed to a bank? And the rules got written and they got written a little more broadly and a little more broadly until eventually if you read the rules right, it looked as though pretty much anybody was an end user. Goldman Sachs would end up being an end user. And 80 percent of the derivatives would have been exempt.
BILL MOYERS: And what does that say to us?
KEVIN DRUM: It says that the banks are in charge. And they're in charge, they get people, you know, right now, banks are in, you know, nobody wants to be around Goldman Sachs, right? So, what they do is what you were talking about. They get the car dealers and they get the local banks and the credit unions and so forth to basically front for them. And these corporations go in and they say, "We want an end user exception." And they get it. And then all it takes is a few congressional aides here and there to change the wording a little bit--
DAVID CORN: Now, the interesting thing is at this point having a conversation like this, we've already lost. Because now we're arguing about how the technical side of things are handled. And we- what the Wall Street collapse didn't really lead in Washington or anyplace else was sort of a reevaluation of what finance is supposed to be about. And what government's role might be in advancing a financial system that benefits citizens at large. Wall Street has become a place- and the banking industry, where you don't lend money to improve local businesses and industry. You basically, you know, create new- they call them instruments, devices- to make money yourself. It's really turned into nothing except a casino, in which they lend money and then they make bets and side bets and bets on the side bets about what's going to go up and down. So, a lot of the action is really, at the end of the day, not about providing credit and keeping capital flowing. It's about what- how they think they can make more money through more trades.
BILL MOYERS: Yeah, I was struck by the — by that paragraph in your story, where it said the financial industry has persuaded us, convinced us over the last 30 years that the purpose of the financial industry is not to serve companies needing capital or consumers needing credit, but to make money for themselves. And you go on to say that in a very fundamental way, this financial lobby has changed America. What do you mean by that? That goes deeper than campaign contributions and money and even influence in Washington. You say they've changed our framework.
KEVIN DRUM: Yeah, yeah. It goes a lot deeper. It's what Simon Johnson the chief- former chief economist for the I.M.F., it's what he calls Intellectual Capture. And-
BILL MOYERS: Intellectual Capture.
KEVIN DRUM: Right. It goes beyond regulatory capture, where, say the banks control the S.E.C. That's one thing. Intellectual Capture means that essentially the financial industry has convinced us, you know, in the '50s what was good for General Motors was good for America. Now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America. We should ask what's productive, what's efficient, what helps grow the economy.
DAVID CORN: This is the Stockholm Syndrome. Where you're hostage starts identifying with the people holding them captive. Americans have been, you know, have been talk- said- told over and over again that if the Dow's going up, if Wall Street's making money, it's good for you.
BILL MOYERS: Often when workers are being laid off. That's-
DAVID CORN: Yeah, but other measurements of the economy aren't taken to- aren't held in such high esteem. And so, when I was talking to members of Congress and pollsters about why there was not more popular, you know, revulsion against Wall Street that was leading to action in Washington, Congressman Brad Sherman — he's a Democrat from California. He led during the whole TARP argument- what he called the skeptics caucus. They were kind of opposed, but they were just raising questions. And he says the problem is that people are told that if you don't serve Wall Street, Americans will be out on the streets fighting for rat meat. That basically the whole-
BILL MOYERS: Rat meat?
DAVID CORN: Rat meat. Those- that's his- those are his words, not mine. I never- think I never would come up with that. With that image. But that- basically, we'd all be out fighting for grub on our own. And that so- what happens is people are — while they're angry at Wall Street, particularly on the, you know, on the corporate compensation front, which is very easy to get angry about. They also are fearful of taking Wall Street on, because they've been taught that if, you know, if the DOW falls, if you take on the big banks, it's going to be bad for all of us. So, it really is this Stockholm Syndrome, where we're forced to identify with people who are holding us hostage without our interest in mind.
BILL MOYERS: So, your conclusion from all of this is, and I'm quoting you, "…the simplest, most striking proposals for reigning in bank behavior aren't even getting a serious hearing."
KEVIN DRUM: Back in March of last year Congress was considering a bill to deal with bankruptcy and home foreclosures. And the Obama Administration thought this goal was a shoe in. They really didn't think they were going to have any problem passing it. And it failed. And--
BILL MOYERS: Fail? You mean it was beaten?
KEVIN DRUM: It was beaten by the banks. They got the bill rewritten. And in fact, not only did they get the bill rewritten the way they liked it. They actually got several billion dollars of extra bailout money put in at the same time.
BILL MOYERS: This was the cram- so called cram down proposal that was designed to help homeowners who were in trouble get through the hard times?
KEVIN DRUM: That's right. And I think what happened was the Obama Administration saw what happened with a bill that they thought would pass easily, and they realized what they were up against. And so, even their original proposals, I think they were watered down even before they went to Congress. And then once they're in Congress, they get watered down some more. And once it gets to the Senate, it's going to get watered down even more.
BILL MOYERS: So, if we get financial reform at all, it will be financial reform riddled with loopholes to benefit the very people who got us in this mess in the first place?
KEVIN DRUM: It's going to be financial reform on the margins. You know, complexity is the friend of the financial industry. If you really want to control them, you need simple rules. So, for example, Paul Volcker, former Fed Chairman. He thinks that we ought to simply prevent banks from being in the securities business. They should make loans. They should underwrite bonds. They should give advice on mergers and acquisitions. The sort of things they've done for years. But they shouldn't be trading securities. We should leave that to hedge funds. We should leave that to other people for--
BILL MOYERS: Take the- let them take the big risks. Don't take the big risks with the money you and I deposit.
KEVIN DRUM: Don't take risks inside the banking system, where you can blow up the world.
DAVID CORN: Where you're also federally insured.
KEVIN DRUM: Right.
DAVID CORN: Right? With our money.
BILL MOYERS: It's government-backed money that they're taking the risk with, right? And so, they tried to eliminate that.
KEVIN DRUM: And that- but that was never on the table. That sort of simple regulation was never on the table.
BILL MOYERS: Why?
DAVID CORN: That's what I mean. They're — for all the talk of what goes on in Washington. And, you know, there's reams of newspaper stories. There are hearings every other week. I mean, there's a lot of activity on this front. But it's on the edges, and it's not about any paradigm shifts. It's about just trying to keep things going as they are. You know, so the airplane, you know, has a few holes in the wings. Let's patch it up and keep flying the same way. And this is where, you know, I think Kevin's right. You need someone to step in whether it's the President or some other voice and say, "Wait a second. There's something cockamamie about the entire system. There's something rotten at its core. We want to look at it deep down."
BILL MOYERS: But don't you think people sense that? That there's something rotten at the core?
DAVID CORN: Yes! But I think they don't know where to turn to. I think a lot of people would follow the President if he did this. He made an early decision in his presidency. And it happened even before he was elected. It was, you know, September 2008, when the market tanked that day and John McCain was flailing and not knowing whether he was going to listen to Newt Gingrich or somebody else. And Obama came out with press conferences, surrounded by Robert Rubin, Larry Summers, and all the guys who had a hand in what went wrong. And saying, hey, I'm with the adults. What he was saying, really, was, I'm with the conventional thinkers.
KEVIN DRUM: There's also tremendous pressure on presidents. I mean, when Bill Clinton came into office, there were things he wanted to do. And he learned very quickly that he had to do what the bond market wanted him to do. And he famously said what? "I have to do what the bond market says?"
BILL MOYERS: What does that mean? To do what the bond market wants?
KEVIN DRUM: It basically means doing what Wall Street wants. It means that if you run a big deficit, if you raise taxes, the interest rates will go up. The economy will tank. And that's what he was told. And eventually he caved in.
BILL MOYERS: In the magazine you have a story about how there was a hearing before Barney Frank's House Financial Services Committee. This was on the derivatives reform. Called seven witnesses for the banking industry and only one critic of the banking industry. And he'd only gone six and a half minutes before the Chairman cut him off. Now, what does that tell you?
KEVIN DRUM: It tells you that the banking industry has convinced us that only the banking industry has the expertise to deal with these very, very complex issues. And we bought it. We all believe that. These guys are the experts. And it is very complicated. This stuff is very, very complex. And that is exactly the reason why you need simple rules to rein it in. Because the more complexity you have, the more loopholes there are. The more you can take advantage. The banks-
BILL MOYERS: But you said a moment ago that you have to save the bad guy to serve the good guy. The airline industry needed the quote derivatives in order to get that, they had to go and give the banking the very- almost the same power they had prior to the meltdown.
DAVID CORN: Well, they don't have to
KEVIN DRUM: They didn't have to, but they did.
DAVID CORN: Yes.
KEVIN DRUM: It probably was-
BILL MOYERS: And they did because?
KEVIN DRUM: It probably was a good idea to try to exempt ordinary corporations who were just trying to hedge uncertainty. But then they took that and expanded it. They didn't have to do that. They did that because the banks were in there lobbying. And it looked like they could get away with it. I mean, the wording was very, very tricky. I mean, you would never notice it unless you were a real expert and looked at the legislative language and realized that a word here and a word there and a word here changed the whole thing.
DAVID CORN: It's like money in politics, which we're talking about a little bit, too. You try to set up these convoluted rules to deal with campaign cash and deal with constitutional issues and it's almost, you know, it's- I won't say it's impossible — but it's tremendously difficult to do it in a way so that you don't leave openings for others to take advantage of, particularly when they have access to the people writing the laws. I mean- Mark Mellman, a Democratic pollster told me, listen, if 99 percent of Americans can't understand derivatives, you can't regulate derivatives in our Democratic process. And I think there's a lot of truth to that. I mean, people have to understand it. If only the people who benefit from them understand what's going on, they have the leg up. And there's no way for average citizens to even enter the process.
BILL MOYERS: Well, yeah, the one guy who goes into the House Financial Services Committee and raises questions about derivatives, he's given six minutes and shown the door, right?
DAVID CORN: Right.
BILL MOYERS: What does this say to you from your many years in watching Washington? Barney Frank's committee, The House Committee on Financial Services received more than $8 million from the industry last year, 2009. Might that explain why seven witnesses for the industry got a hearing?
DAVID CORN: Well, the House Banking Committee is called a money committee. And Congress on the House and Senate side, there are couple committees that they refer to as money committees. Not because they necessarily deal with money. It's because if you serve on that committee, you have access to a lot of money. Campaign cash. Because you deal with industries that are wealthy. As Kevin said, the banks have all the money, literally. And they will give money to people on the committee, if not to vote their way, at least to hear them out. So, their witnesses get perhaps more attention at some of these hearings. And also what the Democrats do, and it's common practice, is you take vulnerable freshman and you put them on the House Banking Committee so they can raise a ton of cash and maybe scare away Republican opponents.
KEVIN DRUM: This is why Barney Frank can tell you he's not affected by campaign contributions. Well, maybe he's not. His seat is safe. But, you know, there's a lot of people on his committee, the freshmen, the second term congressman, who are affected by money, because they do need to get reelected.
BILL MOYERS: Did you see the posting on TalkingPointsMemo.com this week? While Congress was trying to write these new rules to clamp down on the risky derivative trading that we were talking about, several of these New Democrats were in New York meeting privately with executives from Goldman Sachs and J.P. Morgan. And they also managed, while they were here, to sandwich in a fundraiser. I mean, does this raise your eyebrow just a tiny bit?
DAVID CORN: Well it does, and I mean, this stuff happens all the time. It's not new. And, of course, you know, we're talking about the Democrats, because they control Congress. Now, look, Republicans do it when they don't control it. And when they had control, they had lobbyists actually in writing legislation, as well, on financial and other industry matters.
Why do these people feel they can do this without any risk to them? Well, that's because I don't think their voters or voters in general are saying, "Wait a second. This really ticks me off. Why are you meeting with Goldman Sachs and J.P. Morgan? These guys who nearly, you know, brought down our economy. Why talk to them at all outside of a hearing room? You know, outside of grilling? You know, let alone, why take cash?" I mean, our whole system where the guys in charge of regulating or writing the laws would take cash from the people who want favors, you know, it's kind of, you know, bizarre to begin with.
BILL MOYERS: It's a little bit like going to the umpire behind the plate before a game, isn't it? And saying, you know, "Here's $1,000 bucks for whatever purpose. I'll lend it to you."
DAVID CORN: Exactly. So, but there's not the popular revulsion against this S.O.P., the standard operating procedure that happens all the time. And even after what we've seen with Wall Street and even after people who are indeed mad at least in a general way with big banks, these guys still feel they can, you know, fly up or train up to New York City and hang out with them. Take their money. And then go back to Washington and do the people's work?
BILL MOYERS: Look at this. This is a list of all the contributions over the last 20 years to Members of finance-related Congressional Committees. Let's just take the first eight. Out of the first eight, six of them are Democrats. And those six Democrats have received from the financial industry some $68 million. What does it mean to take that much money? And it's Democrats at the top of this.
KEVIN DRUM: It's Democrats and Republicans. But, yes. Look, there's no way you can take that money. I mean, if you talk to Chuck Schumer, you talk to Barney Frank, you talk to these guys. They'll tell you that they take the money, but then they're going to do the right thing anyway. Well, that's just not possible. You know, Chuck Schumer to take an example, he raised so much money up through I think 2004-2005. He actually stopped taking personal contributions.
He had so much money, he stopped taking contributions and headed up the Democratic fundraising Senate Committee. The overall Senate Fundraising Committee. Raised a couple hundred million dollars, a lot of it from the financial industry. And that went to all Democrats. Not just Schumer. It went to all Democrats who were running for the Senate. Well, there's no way you can take that money and not at least be leaning in their direction, one way or another.
BILL MOYERS: Well, let's one example that you report in your story in "Mother Jones." This is the carried interest rule. The one that declares that compensation from capital gains will be treated as ordinary income. So that the tax rate for hedge fund managers will be 15 percent instead of 35 percent.
They're paying a lower tax rate than secretaries, janitors, nurses, school teachers, members of our team here. What happened when reformers tried to eliminate that loophole?
KEVIN DRUM: If you're running a hedge fund, you are using other people's money and investing it. Now, by any ordinary definition, that's just ordinary income. If I make ten percent or 20 percent, I'm paid basically a commission, that's ordinary income. But the law right now says it's capital gains.
There no excuse for that. There's no excuse for it to be taxed at the lower capital gains rate. It should be taxed at the higher rate. In 2007, after Democrats took over Congress, there was a movement to change that. To tax it as ordinary income, which is how it should be taxed.
And what happened was that the hedge funds who had not really had a big lobbying presence on the Hill before. Because they weren't regulated, so they didn't really need to. They suddenly got religion. And the private equity contributions to Members of Congress suddenly skyrocketed. And eventually Chuck Schumer decided that he would only support a change to the law if it also affected some other industries. And that was just enough to get opposition from other quarters and the bill failed.
DAVID CORN: He basically found a poison pill way to kill it. And Chuck Schumer could say, "Hey, you know, this is a New York issue. Hedge funds are based in New York."
BILL MOYERS: My constituents.
DAVID CORN: "For my constituents." But you know, but really. I mean, you look at all his constituents out in Staten Island and Brooklyn and upstate New York. And you say, "Does this really serve them? So that the guys who play with money, the hedge fund managers, you know, personally, are taxed at 15 percent rather than 35 percent. Is that really a good deal for everybody writ large? The answer, of course, is no.
BILL MOYERS: You know, I've been around a lot longer than the two of you. And I'm still amazed, though, at how brazen this is. I mean, capital gains are, as you said, the profits you make on investing your own money. But these guys, as you also said, were investing other people's money and getting a piece of the action. Under what Webster definition can you call that ordinary income?
KEVIN DRUM: You can't. That is what makes this so brazen. They're not just lobbying for things, "Well, you could argue one way or the other. Maybe one side is right." This is something where there's simply no excuse. And yet, they get away with it anyway.
BILL MOYERS: How do they get away with it? Because, the tea party was about taxes, right? The — one of the causes of the American Revolution was unfair taxation. And yet--
DAVID CORN: We've been talking a lot about politicians and money. There's something they care about more than money, ultimately. And that is votes. That is their job, you know, protection. People in Congress generally want to win their next reelection.
BILL MOYERS: Well, 96 percent of the incumbents usually do.
DAVID CORN: And they usually do. So, they would care to a certain degree about popular anger if it was pointed enough and directed at them sharply enough. But, you know, people don't raise a fuss about this, if there's an angry editorial in the "New York Times" or we rail about it at "Mother Jones" or you do a commentary. You know, they can survive that.
Believe you me, they may not like it. Maybe next time, you know, you run into Chuck Schumer somewhere. He'll point his finger at you. But they can survive that. What they can't survive is people realizing, "Hey, you're not looking out for me. You're looking out for those rich other guys. Because they're giving you money."
And until people get, you know, demonstrate in big enough numbers, that this is a direct concern to them. And every once in awhile, you know, there's an eruption. There's a bubble of activity along those lines. They don't have to worry about it. They live in their own Washington bubble. And they see, you know, they have decades of empirical evidence to base their actions on. They can say, "Yeah, I can get away with this. I can get away with that. I can get away with this. Guess what? I can get away with most anything I try."
BILL MOYERS: Your article confirms for me, reinforces for me what David is talking about. That there are two parallel universes in America today. And that Washington is, as you said a moment ago, a bubble in which they know, the people who write the rules, the beltway press, the people in power, know that they can get away with this, because there's no significant way that the popular angst can penetrate that bubble.
DAVID CORN: Well, I wouldn't say--
BILL MOYERS: We live in two different worlds.
KEVIN DRUM: One thing we haven't talked about yet. And one place where I think you lay some of the-- we should lay some of the blame is the media. And the financial media. I mean, you talk about the carried interest rule that we were just talking about. That's complex. It's sort of down in the weeds. And it gets no attention. People don't see it enough to get angry about it. You can't get angry about something unless you're told about it.
And if you go out and talk to people, there isn't one person in 100, who even knows the carried interest rule was ever up before Congress. Let alone what it means, why it's outrageous, and why they should care about it. And they can't care about it until they know about it.
BILL MOYERS: Where is the countervailing power in Washington? If the press is falling down. If the executive branch is compromised, as you said earlier, by Obama's approach to conventional wisdom. If the bankers are in charge of Congress, and you described there. You also make the very strong case in your article that the Fed is involved in this, as well. The bankers really know how to work the Fed. Where is the countervailing power?
DAVID CORN: There isn't any countervailing power.
BILL MOYERS: You mean I have cancer and there's nothing I can do about it? I'm serious.
DAVID CORN: Well, there could be.
BILL MOYERS: This discourages a lot of people when you give this depressing analysis.
DAVID CORN: I understand that. And I wish I could be more hopeful. And we had a President who ran on a hope platform. You have just described all the major actors in Washington. And, you know, they are, to some degree, responsive to what happens outside of Washington. But if there's no pressure coming into Washington on this stuff, particularly given, as we've talked about, its tremendously profound complication. Then things just sort of, the status quo wins out.
BILL MOYERS: I mean, in Washington, if you are a critic, if you're a journalist in Washington, who reports the kind of-- on Washington the way you do, you get marginalized right?
KEVIN DRUM: Yes. Yes. I think you do. You're not part of Wall Street. You don't really understand what's going on. That's how they feel about it. I think that the Obama Administration — all the people in there — I think they have become convinced, like a lot of people, that if they don't do what Wall Street says, terrible things are going to happen. I mean, if they try to reign in Wall Street, all of our financial business will move to the Bahamas. And we'll lose trillions of dollars. And they believe that. And that's what the banks are--
BILL MOYERS: But as you say so astutely in this article, that happened for 20 years. Washington-- 30 years. Washington did what Wall Street wanted. And we had a debacle anyway.
KEVIN DRUM: Right.
BILL MOYERS: Have we learned nothing?
KEVIN DRUM: The Stockholm Syndrome, as David puts it, is so strong that they still believe it. And, you know, one of the things that happened here is that the bailout last year succeeded in a way, too well. I mean, it worked. TARP worked. All the actions that Ben Bernanke--
BILL MOYERS: Kept us from going over.
KEVIN DRUM: Took us-- yeah, kept us from getting into a second Great Depression. And so, now, what we've got is to a lot of people, just a big recession. There's a lot of unemployment. But it seems familiar. It's a recession. The crisis is over. And now we can go back to business as usual. Because maybe it wasn't as bad as we thought. Memories, memories fade. But, you know, the same thing is going to happen again if we don't reign in the banks.
BILL MOYERS: Yeah, you make that point is that they've actually set up a situation in which we can repeat what happened 18 months ago, right?
KEVIN DRUM: You know, the key thing, I mean, the key thing that drove the housing bubble of the last decade was debt. Was leverage. Banks weren't just making investments, they were borrowing huge sums of money to make investments. That's what makes a bubble bad. Is huge amounts of leverage. Huge amounts of debt.
DAVID CORN: And betting on those--
KEVIN DRUM: Right. Betting with borrowed money. That's the key. You know, the dotcom bubble, when it burst, it was not that bad. There was a recession that followed, but no banks failed. The financial system didn't meltdown. The reason is because it was a bubble, but it wasn't debt-fueled. The housing bubble was debt-fueled. The--
DAVID CORN: 'Cause when we've had housing bubbles in the past that have failed, without, you know, the daisy chain effect.
KEVIN DRUM: We had one in Southern California, where I live. Back in the late '80s and early '90s. And it was bad for Southern California, because again, it was debt-fueled. Now, the regulations that are being pushed through Congress right now, they do almost nothing about that. I mean, they talk about derivatives. They have a consumer finance protection agency. Those are good things.
But the key thing they ought to be getting at is debt. They need to restrict the amount of debt, the amount of leverage that the financial system can use. You don't get rid of it. Credit is the oxygen of the financial system. But you've got to limit it. And they've done almost nothing about that.
BILL MOYERS: And this is-- why?
KEVIN DRUM: Because debt and leverage are the keys to making money. The one thing that Wall Street needs to make money is lots of leverage. They have to have that to make money. So, that's the one thing they will fight for harder than almost anything. And they fought for it so hard that, in fact, the regulations hardly do anything at all.
BILL MOYERS: Well, as you say in the piece, the overdraft fees that they can now charge can equal something like 10,000 percent? I mean, the mafia would like that, right?
KEVIN DRUM: That's right. It's, you know, it's a small part of the picture, but it shows how much power they've got. What happened was overdraft fees on your debit card. The average overdraft is $17. And it's not hundreds or thousands of dollars. The average overdraft is $17. And it gets paid off in five days. And the average overdraft charge is $39. Now, do the math on that, and that's a 10,000 percent rate of interest.
And the only reason banks can do that is because in 2004, the Fed, after being lobbied by the credit card industry, being lobbied by the banks, ruled that even though overdraft protection was marketed as a loan, was marketed as a line of credit, consumers all thought of it that way. It wasn't, in fact, a loan. And so, since it's not a loan, they can charge any interest rate they want.
DAVID CORN: Well, you know, one of the small debates in Washington has been what type of consumer financial protection agency there should be that would look at things like this.
Elizabeth Warren, it was her idea, initially, to even have such an agency, which she proposed a couple years ago. And she wants it, you know, have the power to regulate, you know, banks and credit card companies and others that provide financial services and financial products. And she wants there to be some very simple rules.
For instance, like you have to-- every credit card company would have to provide what they call vanilla products. Whereby, "Here's your credit card. You have, I don't know, 12 percent interest. It doesn't change. No other fees. Until we let you know in a letter with bold print that it's going to change. And we give you the right to keep the card or not keep the card." Something very simple.
And the agency would also have the right to, you know, write these rules and then regulate the companies. So, it goes into, you know, the Washington hopper. And now, you know, it starts getting watered down. They take out the vanilla product stuff. So, the things that would make things easy for consumers to avoid getting caught in scams like the one that Kevin just described, you know, is removed from the bill.
And they say, "Well, you know, maybe we'll have this little agency write its little rules. But we'll let the banking regulators enforce them." The groups that, to date, have really been held hostage by the people they're supposed to regulate. We have a lot of debate in Washington over this. You know, compared to the big picture that Kevin and others have described, this is really a minor reform. But even this minor reform gets sliced and diced until yeah, something might pass.
KEVIN DRUM: People are more afraid of big government than they are of big banks, despite what happened over the last couple of years. And they shouldn't be. They should be-- what they should be is demanding a better government. A government that regulates without being captured by all the special interests. A government that puts in place regulations that are simple and clear. So, David, what you're saying. The vanilla products option, for example, in the CFPA was a nice-- the reason the banks hated it was because it was so simple.
A nice simple regulation. There's no way to get around it. If the rule says you have to offer as an option, this is not the only thing. You have to offer if you're going to do a home loan one option has to be a standard, 30-year, fixed rate mortgage. And you can have all your other options, but you've got to at least tell people they can have that. That's a very simple regulation. There's no way to get around it. And that's why banks hate it.
DAVID CORN: Bill, you keep coming back to the same question. How can they get away with it? I mean, that's really what it all boils down to.
BILL MOYERS: And it's a serious question for this reason. You know, we don't always have popular representation in the government. But from time to time, Civil Rights movement, Suffragette movement, the Gilded Age, the first time-- people do get heard. And men and women in power begin to speak for them. The worry is have we become so big and things become so complex. Have people been so politically abused as a psychologist recently said, that the will to fight for democracy, the political will has been dissipated?
DAVID CORN: Well, I think there may be something to that. It's also-- you know, it takes time and energy to do that. You know, people who are stressed out over, you know, losing jobs or maintaining their jobs, you know, may not, you know, sometimes that leads people to fight. Sometimes it leads people to resignation. Sometimes it leads people just to focus on getting by.
Think about what's happened to our economy. For the aughts, the last decade, there was no net job growth, at all, from 2000 to 2009. For every other decade prior to that, whether it was Republican or Democratic President in charge, the growth was between 20 percent and 38 percent in jobs. So, we've gone from-- that's pretty healthy. Even though at times there have been recessions and wages may not have gone up as much as the number of jobs created. But in the aughts, nothing. This represents, I think, a fundamental turning point for our economy. And that has people--
BILL MOYERS: For our country.
DAVID CORN: Our country. Wigged out. They don't know the future. They don't know who to turn to. They saw what happened with the economic collapse last year. And, you know, it's hard to know, you know, if you can be angry, who to march on. Or whether you're going to hunker down, and try to just get by on your own. They look at rising powers, economic powers overseas. And how we're going to compete with them. It may be a form of abuse, but they certainly look to the Washington system. And this gets to the point that, you know, that Kevin raised. You know, in poll after poll for decades now, if you asked people who are you more scared of in terms of America's future, is it big government or big corporations? Big government always wins by a landslide.
KEVIN DRUM: And remember one thing is that over the last 20-30 years, people have been told over and over and over again that the economy is doing well. The economy's doing great. The Dow is up. And yet, they themselves, most of them, aren't actually making more money. Median wages have hardly gone up at all in the last 30 years. So, you've got all these people who aren't really making any more money. They're treading water. And yet, everywhere they turn, they're being told the economy's doing well. And they start, I think, a lot of people start to blame themselves. They wonder, "If the economy's doing so well, how come I'm not doing better? It must be me." And what they don't see is, no, it's not them. It's the way the system works.
BILL MOYERS: The Republican Congressman from Wisconsin, Paul Ryan, wrote an essay in the December issue of "Forbes" magazine, the title of which was "Down with Big Business." What do you make of that?
DAVID CORN: Well, the Democrats have to worry. Because there is an opening here for the Republicans. If the Republicans looked at what the, you know, see any anger out there about the economy. And they, you know, start attacking the Democrats and say one reason that this is going on is because of Democrat ties to business and show that chart. And yes, we've had our own problems as well. You know, it could be sort of you know a major shift. I don't think they're going to do that. I don't think they're smart enough to do that, quite frankly. Or have the courage to do that. But that is one opening to have a major strategic change in the face of American politics.
KEVIN DRUM: You know, one thing that certainly the Democrats need, I think the country needs is, you know, President Obama really needs to take the lead on this. And he hasn't. He has been in favor of financial reform, but he hasn't really spoken out about it. He hasn't really pushed the banks. He has made a strategic decision that he needs to cooperate with the banks. Cooperate with Wall Street so as not to cause more panic.
And, you know, it this is not this is not something like health care or climate change, where you can see a lot of moving parts that go together. And you can sort of understand why there's a lot of compromise in those things. With financial reform, he could go out there and start pushing on bits and pieces of it. And even if he loses, even if he loses, it doesn't wreck all the rest of it. He doesn't wreck the chances of financial reform in general if he pushes on one pieces and loses.
DAVID CORN: But better yet, that would mobilize people. I mean, sometimes in politics-- I mean, you know this. Sometimes a clear loss is actually a win politically. Because you draw the lines. You show people who's on what side. And you show them what you're fighting for.
BILL MOYERS: Someone said to me the other day, "Obama has not had his Reagan moment. His defining moment." Remember in the early '80s, when Reagan came to the White House. The one of the first things he did was to fire the air control workers. And it was the moment that for conservatives and a lot of independents, who wanted a tough President to stand up to something, I'm not saying Obama should fire anybody. But he hasn't defined himself by his stand.
KEVIN DRUM: Obama wasn't even willing to fire Ben Bernanke. The head of the--
DAVID CORN: Who's now "Time" man of the year.
KEVIN DRUM: The head of the Federal Reserve. And, you know, Ben Bernanke did, I think, a good job after the crisis hit. He didn't recognize the crisis before it hit. After the crisis hit, he did a good job. But that doesn't mean-- you don't deserve to get reappointed to the Federal Reserve. He did a good job managing the crisis. What we need now, though, is somebody who is going to manage the aftermath of the crisis. Somebody who is genuinely dedicated to re-regulating the financial sector.
BILL MOYERS: Let me show you something that Ben Bernanke said to the annual meeting of economists earlier this week, last Sunday, I think it was.
BEN BERNANKE: The best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.
DAVID CORN: Whoops.
BILL MOYERS: Whoops what?
DAVID CORN: Well, now he's saying what a lot of us said earlier? That we should have had better regulation, you know, rather than just fiddling with interest rates? Kevin mentioned well, he should you know, maybe Obama should not have retained Ben Bernanke. But, you know, we are so far away from that discussion when you look at everything else that's happened. You know, who are some of the top people at Treasury now? A lot of them came from Goldman Sachs.
BILL MOYERS: You have a great chart in your story in "Mother Jones" on that.
DAVID CORN: I mean, my favorite one that I wrote about, and I don't know him personally. He could be a great guy. Never even met him. I tried to interview him, but he wouldn't consent. Mark Patterson. He's the chief of staff for Timothy Geithner, the Treasury Department Secretary. He was a lobbyist for Goldman Sachs. What did he do as a lobbyist for Goldman Sachs? He lobbied against a bill in the Senate to restrain it was a very modest bill, to restrain CEO compensation.
Basically, gave shareholders the right to say, "We think you're paying them too much." It wasn't even mandatory. It wouldn't even cut back pay. He you know, Goldman Sachs would have none of that. He lobbied against that bill. Who authored that bill? Barack Obama, when he was a Senator. So, the guy who fought Barack Obama on CEO pay, an issue that Barack Obama says he cares about. And I believe he does. Is now running the Treasury Department for Tim Geithner. I mean, this really doesn't make a lot of sense to me.
BILL MOYERS: So, what would happen you both talk about mobilization. Let's say that President Obama in his upcoming State of the Union speech called for mobilization. Asked people to do something about this. What would that mean? What would what shape would mobilization take?
KEVIN DRUM: He could do it in a State of the Union address and that might be a place to start. But you know, Barack Obama famously won election through a huge grassroots movement. He's got an enormous, I think 13 million names on his email list. And so forth. But he's refused to use that. He
BILL MOYERS: Write the first email he would send, if you were Obama. What would you send those millions of young people and others who are looking for real change in the elections of 2008. What would you say?
KEVIN DRUM: If it were my email, I would say, "Look, we need to break up the big banks." Look, Alan Greenspan of all people, has said if a bank is too big to fail, it's too big. Allen Greenspan said that. If Alan Greenspan thinks that we ought to break up big banks, if Paul Volcker thinks we ought to break up big banks, this is not a fringe, left view. This is this ought to be a mainstream view. And yet, it's nowhere. That kind of thing should--
DAVID CORN: I'll give you the, I'll give you the first line. The first line should be, "We've been taken for a ride. You know what happened in 2008. I came into office promising change. I've sent some bills up there. They were strong. Maybe they could have been stronger. And I see that they're being weakened. This only makes me believe that we have to bear down harder. And I can only do this with your help."
BILL MOYERS: Okay, I've read that. I'm really excited about that, President Corn. What do you mean? What can I help you do?
DAVID CORN: Send me that $50 as well, Bill.
BILL MOYERS: Well, that's what can I do to help?
DAVID CORN: Okay, well, then been then he would have to he would say, "I have you know, I have I have reset my legislative agenda on this front. Here are the five, you know, provisions I want to see passed this year on regarding financial reform. I want the Consumer Finance Protection Agency to have teeth and be able to offer this. I want, you know, derivatives full, you know, fully transparent. Okay? I want to put back the wall between in banking. Let me tell you why." Now, a lot of this you know, some of this goes to fundamental issues, some of it doesn't. But at least move the, you know, move the ball in that direction.
KEVIN DRUM: If you want to have real change, there's only one place that can come from. That's out of Congress. Congress is the only body which is big enough to actually restrain Wall Street. One way or another, you have to take your 13 million or your 15 million or whatever number of people you've got. You've got to mobilize them to tell their Congressmen that they're mad as hell. And they're not going to vote for them if they don't pass this legislation.
BILL MOYERS: But no one can.
DAVID CORN: It's the only way.
BILL MOYERS: No one can read your piece in "Mother Jones" without thinking, "So, these guys must be laughing all the way to the bank." I mean, the same people who, bought the government off, brought the economy down, caused suffering to millions of people from Orange County to Portland, Maine, are winning all over again, you say. Because, you say, in the same issue, no one's fighting back.
DAVID CORN: My guess is that they feel they dodged the biggest bullet of their lives. I mean who would have thought a year ago that we'd be back we'd be at this point? I mean, I think they probably, you know, worried that, you know that that there'd be communist laws passed. You know, that people would be so angry.
DAVID CORN: Tremendous money and power and influence to wield to get their way. Versus the rest of us, who get nickeled and dimed and we have other things to worry about. You know? People are you know, have you know are worrying about their maybe what their kids going to school safely and getting good educations.
I mean, we have everything to worry about. The bankers and the investment bankers and the financiers, they can grease the way with millions of dollars that gets them billions of dollars in the in return. And it it's not a fair fight.
KEVIN DRUM: People need to have someone to rally around. If they're going to make this happen. And I think that needs to be Barack Obama. He needs to be willing to really take on the bankers. You know, Franklin Roosevelt in his first term. I remember he has a famous quote where he talked about there are you know, there are people out there who hate me. I have earned their hate. And I embrace their hate. And I think Barack Obama needs to be willing to earn the hate of some bankers.
BILL MOYERS: But I don't believe that is his nature, do you? It seems to me after all this time his nature is of a conciliator.
KEVIN DRUM: Conciliation is a good trait. In most cases, I actually think it I think it works well for Obama. But sometimes there are times for a conciliatory attitude. There are times to take somebody on.
Now, one thing one place where I think he's missing a bet is Barack Obama came into office feeling like he did want to bring the country together. He wanted to try to end the partisan wars. But, you know, this issue of Wall Street is one where if he took on Wall Street, the bankers might hate him, but I think that would bring the country together more than you'd think.
'Cause I think there is a lot of anger toward Wall Street. It's latent, but it's there. Among liberals, among conservatives, among libertarians, among independents. I think if there's any one issue where a real show of emotion on his part and a real show that he was going to take these guys on, could bring the country together. It very well might be taking on Wall Street.
BILL MOYERS: So, how you know, how long do we wait for Godot?
KEVIN DRUM: Well, that's up to Godot. That's up to Obama. Nobody knows.
BILL MOYERS: David Corn and Kevin Drum, thank you for being with us on the Journal.
Watch: DC's Stockholm Syndrome
— By Monika Bauerlein
Mon Jan. 11, 2010 1:01 PM PST
Copy and paste this link to go to the Mother Jones story
http://motherjones.com/mojo/2010/01/watch-dcs-stockholm-syndrome
We've getting emails all weeekend from friends, family, MoJo readers, and random strangers about David Corn and Kevin Drum's turn on Bill Moyers' Journal. It was really an astonishingly good show, and well worth watching in the context of... just about everything happening in Washington right now. Take your pick: Today, there's a kerfuffle about the shadow of the possibility of a financial transaction fee, a tiny amount the government could collect from banks to get a little something back for taxpayers--or, more to the point, for our children, who will be paying for the deficit we ran up for the bailout. (Yes, some banks are repaying TARP money, but do you know just how tiny fraction of the total bailout that is? Our handy chart, along with lots more data geekery on shameless bonuses and such, is here. The "Too Big to Jail" package that inspired Moyers to ask Kevin and David to come on is here.) As with every other proposal to make Big Finance bear any part of the burden for the disaster it has caused, this won't fly unless politicians feel they have more to lose from satisfying Wall Street than they do from offending it. So watch the show and forward it to your friends. It's as informative as it is outrage-building—and on this topic, we could use more information and more outrage.
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Watch David Corn and Kevin Drum talk about Wall Street, the housing crisis, and politicizing terror on TV.
January 8, 2010
BILL MOYERS: Welcome to the Journal.
The ancient Romans had a proverb: "Money is like sea water. The more you drink, the thirstier you become." That adage finds particular meaning today on Wall Street, which began this New Year riding a tidal wave of bonuses in a surging ocean of greed.
Thanks to taxpayers like you who generously bailed banking from the financial shipwreck it created for itself and for us, by the end of 2009 the industry's compensation pool reached nearly $200 billion. And despite windfall profits, the banks will claim almost $80 billion in tax deductions. And nearly $20 billion of those deductions will go to just three institutions — Morgan Stanley, JP Morgan Chase, and Goldman Sachs.
Ah, yes — Goldman Sachs, that paragon of profit and probity — which bet big on the housing bubble and when it popped — presto! — converted itself from an investment firm into a bank so it could get your bailout money. Now consider this: in 2008, Goldman Sachs paid an effective tax rate of just one percent. I'm not making that up — one percent! — while their CEO Lloyd Blankfein pulled down over $40 million. That's God's work, if you can get it. And, believe me, Wall Street bankers know how to get it.
What's their secret? How do the bankers pick our pockets so thoroughly with barely a pang of guilt or punishment? You will find some answers in this current edition of "Mother Jones" magazine, one of the best sources of investigative journalism around today. Most of this issue is devoted to what the editors call "Wall Street's accountability deficit."
In it, the Nobel Prize economist Joseph Stiglitz writes of the "moral bankruptcy" by which bankers knowingly trashed our economy and tore up the social contract.
The magazine's David Corn examines why there's no mass movement demanding fundamental change.
And blogger Kevin Drum tours Washington's heart of darkness from down Pennsylvania Avenue, over to K Street where the lobbyists cluster like vultures, then past the local branch of Goldman Sachs — also known as the U.S. Treasury — and up to Capitol Hill, where key members kneel in supplication to receive their morning tithes from the holy church of the almighty dollar. As Kevin Drum writes, a year after the biggest bailouts in U.S. History, Wall Street owns Washington lock, stock and debit card.
Kevin Drum, formerly with "Washington Monthly," is now the political blogger at "Mother Jones." He's here to talk about his report, along with David Corn, who's been covering Washington for 23 years and is now "Mother Jones'" Washington Bureau Chief. Welcome to you both.
BILL MOYERS: Welcome to both of you.
DAVID CORN: Good to be with you, Bill.
KEVIN DRUM: Good to be with you, Bill.
BILL MOYERS: Let me read you a letter that was posted on our website a few days ago from a faithful viewer. His name is Mike Demmer. I don't know him personally, but I like to hear from him. He says, dear Bill, I watch your program all the time. What I don't understand is how a bunch of greedy bankers could bring the world to the edge of catastrophe and then in less than a year, already move back to their old ways. How do they do it?
KEVIN DRUM: Well, that's the $64 million question. Or maybe it's the $64 billion question these days. Yeah, how they do it? They've got all the money. And they use all the money. And they use it in Congress to get rules passed and get laws passed that they want. They use it to lobby the Fed, they use it to lobby the S.E.C. They use it to lobby the executive branch. And they get rules passed that allow them to make a lot of money. Just like any of us would. It's not that American bankers are greedier than anybody else's bankers. It's that our rules, our laws, allow them to do things that they can't do everywhere else. We let them take advantage of the system.
BILL MOYERS: But how do you measure their power? Lobbying doesn't happen in the public, in the open. We can't sit in the bleachers and watch the game being played. How do you know they have this power?
DAVID CORN: You can read the lobbying reports. You know that there are scores if not hundreds of lobbyists. And where do they come from? They come from the committees that they're lobbying. People used to work on the committee, whether they were members, Congressmen or Senators, or staffers. And they spent a lot of time — because, ultimately, Bill, this is about knowledge. This is about information. This stuff is really complicated and convoluted. And, you know, you try reading any of one of these bills and figuring out what's actually being said. It's mystifying. And so, these guys who know the rules, they know the language, and they have the access, and they're giving contributions to the people writing the rules, have all the advantages.
BILL MOYERS: But Barney Frank would disagree with both of you. I don't know that he's read your piece yet, but I'm sure he will.
DAVID CORN: Yeah, I'm sure he would.
BILL MOYERS: Barney Frank, Chairman of the House Committee on Financial Services, and a liberal Democrat, said the other day, look, it's not — I'm not affected by campaign contributions. The members of my committee are not affected by campaign contributions. The problem is democracy. He says everybody sitting on this committee represents somebody back home, a local bank, a car dealer, an insurance company. And they come to the committee and they press, as you do in a democracy, for their interests as you just said.
DAVID CORN: But wait a second. I mean when you look at something like derivatives — derivatives, which were used to enable the subprime lending mess that led to the near collapse of the U.S. and global economy- I'm not sure there are bankers back home who are lobbying, you know, the committee. There aren't local derivative dealers that you meat in Main Street, when you go back to town hall meetings. It's a very small group of people who understand this. And we have seen-- the "Wall Street Journal" is reporting this week that there's no real action on regulating derivatives.
BILL MOYERS: I brought that story, because I wanted to read it. Quote, "Lobbying by Wall Street has blunted efforts to step up regulation on derivatives trading by carving out exceptions or leaving the status quo in place. Derivatives take blame for some of the worst debacles of the financial crisis. But a year after regulators and critics began calling for an overhaul in the way they're traded, some efforts have been shelved, and others have been watered down." What does it say when "Mother Jones" and the "Wall Street Journal" reach the same conclusion? That our government cannot stand up to the lobby even on an issue like derivatives, which were at the root of much of our problem over the last few years?
KEVIN DRUM: Well, it doesn't say anything good. And derivatives are a good example of how this stuff works. I mean, take a look at what happened. Derivatives were at the center of the financial meltdown in 2008. And at first everybody was all ready to regulate derivatives. And the big idea was to put them on an exchange, like a stock exchange, where they're all traded publicly and transparently. What happened was there were corporations — you know, if you're an airline, and you're worried about the price of jet fuel, you might want to buy a hedge. Hedge the price of jet fuel. And so, the airlines and some other companies went to Congress and said, look, those are derivatives, but they shouldn't be traded on the exchange, because that's not the financial stuff that blew up the world. No problem. Everybody pretty much agreed they ought to be exempted from that. But then it's all in how you write the rules. So, the rules got written. And as they slowly got changed, it turns out you've got to define who is an end user. Who is a corporation, as opposed to a bank? And the rules got written and they got written a little more broadly and a little more broadly until eventually if you read the rules right, it looked as though pretty much anybody was an end user. Goldman Sachs would end up being an end user. And 80 percent of the derivatives would have been exempt.
BILL MOYERS: And what does that say to us?
KEVIN DRUM: It says that the banks are in charge. And they're in charge, they get people, you know, right now, banks are in, you know, nobody wants to be around Goldman Sachs, right? So, what they do is what you were talking about. They get the car dealers and they get the local banks and the credit unions and so forth to basically front for them. And these corporations go in and they say, "We want an end user exception." And they get it. And then all it takes is a few congressional aides here and there to change the wording a little bit--
DAVID CORN: Now, the interesting thing is at this point having a conversation like this, we've already lost. Because now we're arguing about how the technical side of things are handled. And we- what the Wall Street collapse didn't really lead in Washington or anyplace else was sort of a reevaluation of what finance is supposed to be about. And what government's role might be in advancing a financial system that benefits citizens at large. Wall Street has become a place- and the banking industry, where you don't lend money to improve local businesses and industry. You basically, you know, create new- they call them instruments, devices- to make money yourself. It's really turned into nothing except a casino, in which they lend money and then they make bets and side bets and bets on the side bets about what's going to go up and down. So, a lot of the action is really, at the end of the day, not about providing credit and keeping capital flowing. It's about what- how they think they can make more money through more trades.
BILL MOYERS: Yeah, I was struck by the — by that paragraph in your story, where it said the financial industry has persuaded us, convinced us over the last 30 years that the purpose of the financial industry is not to serve companies needing capital or consumers needing credit, but to make money for themselves. And you go on to say that in a very fundamental way, this financial lobby has changed America. What do you mean by that? That goes deeper than campaign contributions and money and even influence in Washington. You say they've changed our framework.
KEVIN DRUM: Yeah, yeah. It goes a lot deeper. It's what Simon Johnson the chief- former chief economist for the I.M.F., it's what he calls Intellectual Capture. And-
BILL MOYERS: Intellectual Capture.
KEVIN DRUM: Right. It goes beyond regulatory capture, where, say the banks control the S.E.C. That's one thing. Intellectual Capture means that essentially the financial industry has convinced us, you know, in the '50s what was good for General Motors was good for America. Now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America. We should ask what's productive, what's efficient, what helps grow the economy.
DAVID CORN: This is the Stockholm Syndrome. Where you're hostage starts identifying with the people holding them captive. Americans have been, you know, have been talk- said- told over and over again that if the Dow's going up, if Wall Street's making money, it's good for you.
BILL MOYERS: Often when workers are being laid off. That's-
DAVID CORN: Yeah, but other measurements of the economy aren't taken to- aren't held in such high esteem. And so, when I was talking to members of Congress and pollsters about why there was not more popular, you know, revulsion against Wall Street that was leading to action in Washington, Congressman Brad Sherman — he's a Democrat from California. He led during the whole TARP argument- what he called the skeptics caucus. They were kind of opposed, but they were just raising questions. And he says the problem is that people are told that if you don't serve Wall Street, Americans will be out on the streets fighting for rat meat. That basically the whole-
BILL MOYERS: Rat meat?
DAVID CORN: Rat meat. Those- that's his- those are his words, not mine. I never- think I never would come up with that. With that image. But that- basically, we'd all be out fighting for grub on our own. And that so- what happens is people are — while they're angry at Wall Street, particularly on the, you know, on the corporate compensation front, which is very easy to get angry about. They also are fearful of taking Wall Street on, because they've been taught that if, you know, if the DOW falls, if you take on the big banks, it's going to be bad for all of us. So, it really is this Stockholm Syndrome, where we're forced to identify with people who are holding us hostage without our interest in mind.
BILL MOYERS: So, your conclusion from all of this is, and I'm quoting you, "…the simplest, most striking proposals for reigning in bank behavior aren't even getting a serious hearing."
KEVIN DRUM: Back in March of last year Congress was considering a bill to deal with bankruptcy and home foreclosures. And the Obama Administration thought this goal was a shoe in. They really didn't think they were going to have any problem passing it. And it failed. And--
BILL MOYERS: Fail? You mean it was beaten?
KEVIN DRUM: It was beaten by the banks. They got the bill rewritten. And in fact, not only did they get the bill rewritten the way they liked it. They actually got several billion dollars of extra bailout money put in at the same time.
BILL MOYERS: This was the cram- so called cram down proposal that was designed to help homeowners who were in trouble get through the hard times?
KEVIN DRUM: That's right. And I think what happened was the Obama Administration saw what happened with a bill that they thought would pass easily, and they realized what they were up against. And so, even their original proposals, I think they were watered down even before they went to Congress. And then once they're in Congress, they get watered down some more. And once it gets to the Senate, it's going to get watered down even more.
BILL MOYERS: So, if we get financial reform at all, it will be financial reform riddled with loopholes to benefit the very people who got us in this mess in the first place?
KEVIN DRUM: It's going to be financial reform on the margins. You know, complexity is the friend of the financial industry. If you really want to control them, you need simple rules. So, for example, Paul Volcker, former Fed Chairman. He thinks that we ought to simply prevent banks from being in the securities business. They should make loans. They should underwrite bonds. They should give advice on mergers and acquisitions. The sort of things they've done for years. But they shouldn't be trading securities. We should leave that to hedge funds. We should leave that to other people for--
BILL MOYERS: Take the- let them take the big risks. Don't take the big risks with the money you and I deposit.
KEVIN DRUM: Don't take risks inside the banking system, where you can blow up the world.
DAVID CORN: Where you're also federally insured.
KEVIN DRUM: Right.
DAVID CORN: Right? With our money.
BILL MOYERS: It's government-backed money that they're taking the risk with, right? And so, they tried to eliminate that.
KEVIN DRUM: And that- but that was never on the table. That sort of simple regulation was never on the table.
BILL MOYERS: Why?
DAVID CORN: That's what I mean. They're — for all the talk of what goes on in Washington. And, you know, there's reams of newspaper stories. There are hearings every other week. I mean, there's a lot of activity on this front. But it's on the edges, and it's not about any paradigm shifts. It's about just trying to keep things going as they are. You know, so the airplane, you know, has a few holes in the wings. Let's patch it up and keep flying the same way. And this is where, you know, I think Kevin's right. You need someone to step in whether it's the President or some other voice and say, "Wait a second. There's something cockamamie about the entire system. There's something rotten at its core. We want to look at it deep down."
BILL MOYERS: But don't you think people sense that? That there's something rotten at the core?
DAVID CORN: Yes! But I think they don't know where to turn to. I think a lot of people would follow the President if he did this. He made an early decision in his presidency. And it happened even before he was elected. It was, you know, September 2008, when the market tanked that day and John McCain was flailing and not knowing whether he was going to listen to Newt Gingrich or somebody else. And Obama came out with press conferences, surrounded by Robert Rubin, Larry Summers, and all the guys who had a hand in what went wrong. And saying, hey, I'm with the adults. What he was saying, really, was, I'm with the conventional thinkers.
KEVIN DRUM: There's also tremendous pressure on presidents. I mean, when Bill Clinton came into office, there were things he wanted to do. And he learned very quickly that he had to do what the bond market wanted him to do. And he famously said what? "I have to do what the bond market says?"
BILL MOYERS: What does that mean? To do what the bond market wants?
KEVIN DRUM: It basically means doing what Wall Street wants. It means that if you run a big deficit, if you raise taxes, the interest rates will go up. The economy will tank. And that's what he was told. And eventually he caved in.
BILL MOYERS: In the magazine you have a story about how there was a hearing before Barney Frank's House Financial Services Committee. This was on the derivatives reform. Called seven witnesses for the banking industry and only one critic of the banking industry. And he'd only gone six and a half minutes before the Chairman cut him off. Now, what does that tell you?
KEVIN DRUM: It tells you that the banking industry has convinced us that only the banking industry has the expertise to deal with these very, very complex issues. And we bought it. We all believe that. These guys are the experts. And it is very complicated. This stuff is very, very complex. And that is exactly the reason why you need simple rules to rein it in. Because the more complexity you have, the more loopholes there are. The more you can take advantage. The banks-
BILL MOYERS: But you said a moment ago that you have to save the bad guy to serve the good guy. The airline industry needed the quote derivatives in order to get that, they had to go and give the banking the very- almost the same power they had prior to the meltdown.
DAVID CORN: Well, they don't have to
KEVIN DRUM: They didn't have to, but they did.
DAVID CORN: Yes.
KEVIN DRUM: It probably was-
BILL MOYERS: And they did because?
KEVIN DRUM: It probably was a good idea to try to exempt ordinary corporations who were just trying to hedge uncertainty. But then they took that and expanded it. They didn't have to do that. They did that because the banks were in there lobbying. And it looked like they could get away with it. I mean, the wording was very, very tricky. I mean, you would never notice it unless you were a real expert and looked at the legislative language and realized that a word here and a word there and a word here changed the whole thing.
DAVID CORN: It's like money in politics, which we're talking about a little bit, too. You try to set up these convoluted rules to deal with campaign cash and deal with constitutional issues and it's almost, you know, it's- I won't say it's impossible — but it's tremendously difficult to do it in a way so that you don't leave openings for others to take advantage of, particularly when they have access to the people writing the laws. I mean- Mark Mellman, a Democratic pollster told me, listen, if 99 percent of Americans can't understand derivatives, you can't regulate derivatives in our Democratic process. And I think there's a lot of truth to that. I mean, people have to understand it. If only the people who benefit from them understand what's going on, they have the leg up. And there's no way for average citizens to even enter the process.
BILL MOYERS: Well, yeah, the one guy who goes into the House Financial Services Committee and raises questions about derivatives, he's given six minutes and shown the door, right?
DAVID CORN: Right.
BILL MOYERS: What does this say to you from your many years in watching Washington? Barney Frank's committee, The House Committee on Financial Services received more than $8 million from the industry last year, 2009. Might that explain why seven witnesses for the industry got a hearing?
DAVID CORN: Well, the House Banking Committee is called a money committee. And Congress on the House and Senate side, there are couple committees that they refer to as money committees. Not because they necessarily deal with money. It's because if you serve on that committee, you have access to a lot of money. Campaign cash. Because you deal with industries that are wealthy. As Kevin said, the banks have all the money, literally. And they will give money to people on the committee, if not to vote their way, at least to hear them out. So, their witnesses get perhaps more attention at some of these hearings. And also what the Democrats do, and it's common practice, is you take vulnerable freshman and you put them on the House Banking Committee so they can raise a ton of cash and maybe scare away Republican opponents.
KEVIN DRUM: This is why Barney Frank can tell you he's not affected by campaign contributions. Well, maybe he's not. His seat is safe. But, you know, there's a lot of people on his committee, the freshmen, the second term congressman, who are affected by money, because they do need to get reelected.
BILL MOYERS: Did you see the posting on TalkingPointsMemo.com this week? While Congress was trying to write these new rules to clamp down on the risky derivative trading that we were talking about, several of these New Democrats were in New York meeting privately with executives from Goldman Sachs and J.P. Morgan. And they also managed, while they were here, to sandwich in a fundraiser. I mean, does this raise your eyebrow just a tiny bit?
DAVID CORN: Well it does, and I mean, this stuff happens all the time. It's not new. And, of course, you know, we're talking about the Democrats, because they control Congress. Now, look, Republicans do it when they don't control it. And when they had control, they had lobbyists actually in writing legislation, as well, on financial and other industry matters.
Why do these people feel they can do this without any risk to them? Well, that's because I don't think their voters or voters in general are saying, "Wait a second. This really ticks me off. Why are you meeting with Goldman Sachs and J.P. Morgan? These guys who nearly, you know, brought down our economy. Why talk to them at all outside of a hearing room? You know, outside of grilling? You know, let alone, why take cash?" I mean, our whole system where the guys in charge of regulating or writing the laws would take cash from the people who want favors, you know, it's kind of, you know, bizarre to begin with.
BILL MOYERS: It's a little bit like going to the umpire behind the plate before a game, isn't it? And saying, you know, "Here's $1,000 bucks for whatever purpose. I'll lend it to you."
DAVID CORN: Exactly. So, but there's not the popular revulsion against this S.O.P., the standard operating procedure that happens all the time. And even after what we've seen with Wall Street and even after people who are indeed mad at least in a general way with big banks, these guys still feel they can, you know, fly up or train up to New York City and hang out with them. Take their money. And then go back to Washington and do the people's work?
BILL MOYERS: Look at this. This is a list of all the contributions over the last 20 years to Members of finance-related Congressional Committees. Let's just take the first eight. Out of the first eight, six of them are Democrats. And those six Democrats have received from the financial industry some $68 million. What does it mean to take that much money? And it's Democrats at the top of this.
KEVIN DRUM: It's Democrats and Republicans. But, yes. Look, there's no way you can take that money. I mean, if you talk to Chuck Schumer, you talk to Barney Frank, you talk to these guys. They'll tell you that they take the money, but then they're going to do the right thing anyway. Well, that's just not possible. You know, Chuck Schumer to take an example, he raised so much money up through I think 2004-2005. He actually stopped taking personal contributions.
He had so much money, he stopped taking contributions and headed up the Democratic fundraising Senate Committee. The overall Senate Fundraising Committee. Raised a couple hundred million dollars, a lot of it from the financial industry. And that went to all Democrats. Not just Schumer. It went to all Democrats who were running for the Senate. Well, there's no way you can take that money and not at least be leaning in their direction, one way or another.
BILL MOYERS: Well, let's one example that you report in your story in "Mother Jones." This is the carried interest rule. The one that declares that compensation from capital gains will be treated as ordinary income. So that the tax rate for hedge fund managers will be 15 percent instead of 35 percent.
They're paying a lower tax rate than secretaries, janitors, nurses, school teachers, members of our team here. What happened when reformers tried to eliminate that loophole?
KEVIN DRUM: If you're running a hedge fund, you are using other people's money and investing it. Now, by any ordinary definition, that's just ordinary income. If I make ten percent or 20 percent, I'm paid basically a commission, that's ordinary income. But the law right now says it's capital gains.
There no excuse for that. There's no excuse for it to be taxed at the lower capital gains rate. It should be taxed at the higher rate. In 2007, after Democrats took over Congress, there was a movement to change that. To tax it as ordinary income, which is how it should be taxed.
And what happened was that the hedge funds who had not really had a big lobbying presence on the Hill before. Because they weren't regulated, so they didn't really need to. They suddenly got religion. And the private equity contributions to Members of Congress suddenly skyrocketed. And eventually Chuck Schumer decided that he would only support a change to the law if it also affected some other industries. And that was just enough to get opposition from other quarters and the bill failed.
DAVID CORN: He basically found a poison pill way to kill it. And Chuck Schumer could say, "Hey, you know, this is a New York issue. Hedge funds are based in New York."
BILL MOYERS: My constituents.
DAVID CORN: "For my constituents." But you know, but really. I mean, you look at all his constituents out in Staten Island and Brooklyn and upstate New York. And you say, "Does this really serve them? So that the guys who play with money, the hedge fund managers, you know, personally, are taxed at 15 percent rather than 35 percent. Is that really a good deal for everybody writ large? The answer, of course, is no.
BILL MOYERS: You know, I've been around a lot longer than the two of you. And I'm still amazed, though, at how brazen this is. I mean, capital gains are, as you said, the profits you make on investing your own money. But these guys, as you also said, were investing other people's money and getting a piece of the action. Under what Webster definition can you call that ordinary income?
KEVIN DRUM: You can't. That is what makes this so brazen. They're not just lobbying for things, "Well, you could argue one way or the other. Maybe one side is right." This is something where there's simply no excuse. And yet, they get away with it anyway.
BILL MOYERS: How do they get away with it? Because, the tea party was about taxes, right? The — one of the causes of the American Revolution was unfair taxation. And yet--
DAVID CORN: We've been talking a lot about politicians and money. There's something they care about more than money, ultimately. And that is votes. That is their job, you know, protection. People in Congress generally want to win their next reelection.
BILL MOYERS: Well, 96 percent of the incumbents usually do.
DAVID CORN: And they usually do. So, they would care to a certain degree about popular anger if it was pointed enough and directed at them sharply enough. But, you know, people don't raise a fuss about this, if there's an angry editorial in the "New York Times" or we rail about it at "Mother Jones" or you do a commentary. You know, they can survive that.
Believe you me, they may not like it. Maybe next time, you know, you run into Chuck Schumer somewhere. He'll point his finger at you. But they can survive that. What they can't survive is people realizing, "Hey, you're not looking out for me. You're looking out for those rich other guys. Because they're giving you money."
And until people get, you know, demonstrate in big enough numbers, that this is a direct concern to them. And every once in awhile, you know, there's an eruption. There's a bubble of activity along those lines. They don't have to worry about it. They live in their own Washington bubble. And they see, you know, they have decades of empirical evidence to base their actions on. They can say, "Yeah, I can get away with this. I can get away with that. I can get away with this. Guess what? I can get away with most anything I try."
BILL MOYERS: Your article confirms for me, reinforces for me what David is talking about. That there are two parallel universes in America today. And that Washington is, as you said a moment ago, a bubble in which they know, the people who write the rules, the beltway press, the people in power, know that they can get away with this, because there's no significant way that the popular angst can penetrate that bubble.
DAVID CORN: Well, I wouldn't say--
BILL MOYERS: We live in two different worlds.
KEVIN DRUM: One thing we haven't talked about yet. And one place where I think you lay some of the-- we should lay some of the blame is the media. And the financial media. I mean, you talk about the carried interest rule that we were just talking about. That's complex. It's sort of down in the weeds. And it gets no attention. People don't see it enough to get angry about it. You can't get angry about something unless you're told about it.
And if you go out and talk to people, there isn't one person in 100, who even knows the carried interest rule was ever up before Congress. Let alone what it means, why it's outrageous, and why they should care about it. And they can't care about it until they know about it.
BILL MOYERS: Where is the countervailing power in Washington? If the press is falling down. If the executive branch is compromised, as you said earlier, by Obama's approach to conventional wisdom. If the bankers are in charge of Congress, and you described there. You also make the very strong case in your article that the Fed is involved in this, as well. The bankers really know how to work the Fed. Where is the countervailing power?
DAVID CORN: There isn't any countervailing power.
BILL MOYERS: You mean I have cancer and there's nothing I can do about it? I'm serious.
DAVID CORN: Well, there could be.
BILL MOYERS: This discourages a lot of people when you give this depressing analysis.
DAVID CORN: I understand that. And I wish I could be more hopeful. And we had a President who ran on a hope platform. You have just described all the major actors in Washington. And, you know, they are, to some degree, responsive to what happens outside of Washington. But if there's no pressure coming into Washington on this stuff, particularly given, as we've talked about, its tremendously profound complication. Then things just sort of, the status quo wins out.
BILL MOYERS: I mean, in Washington, if you are a critic, if you're a journalist in Washington, who reports the kind of-- on Washington the way you do, you get marginalized right?
KEVIN DRUM: Yes. Yes. I think you do. You're not part of Wall Street. You don't really understand what's going on. That's how they feel about it. I think that the Obama Administration — all the people in there — I think they have become convinced, like a lot of people, that if they don't do what Wall Street says, terrible things are going to happen. I mean, if they try to reign in Wall Street, all of our financial business will move to the Bahamas. And we'll lose trillions of dollars. And they believe that. And that's what the banks are--
BILL MOYERS: But as you say so astutely in this article, that happened for 20 years. Washington-- 30 years. Washington did what Wall Street wanted. And we had a debacle anyway.
KEVIN DRUM: Right.
BILL MOYERS: Have we learned nothing?
KEVIN DRUM: The Stockholm Syndrome, as David puts it, is so strong that they still believe it. And, you know, one of the things that happened here is that the bailout last year succeeded in a way, too well. I mean, it worked. TARP worked. All the actions that Ben Bernanke--
BILL MOYERS: Kept us from going over.
KEVIN DRUM: Took us-- yeah, kept us from getting into a second Great Depression. And so, now, what we've got is to a lot of people, just a big recession. There's a lot of unemployment. But it seems familiar. It's a recession. The crisis is over. And now we can go back to business as usual. Because maybe it wasn't as bad as we thought. Memories, memories fade. But, you know, the same thing is going to happen again if we don't reign in the banks.
BILL MOYERS: Yeah, you make that point is that they've actually set up a situation in which we can repeat what happened 18 months ago, right?
KEVIN DRUM: You know, the key thing, I mean, the key thing that drove the housing bubble of the last decade was debt. Was leverage. Banks weren't just making investments, they were borrowing huge sums of money to make investments. That's what makes a bubble bad. Is huge amounts of leverage. Huge amounts of debt.
DAVID CORN: And betting on those--
KEVIN DRUM: Right. Betting with borrowed money. That's the key. You know, the dotcom bubble, when it burst, it was not that bad. There was a recession that followed, but no banks failed. The financial system didn't meltdown. The reason is because it was a bubble, but it wasn't debt-fueled. The housing bubble was debt-fueled. The--
DAVID CORN: 'Cause when we've had housing bubbles in the past that have failed, without, you know, the daisy chain effect.
KEVIN DRUM: We had one in Southern California, where I live. Back in the late '80s and early '90s. And it was bad for Southern California, because again, it was debt-fueled. Now, the regulations that are being pushed through Congress right now, they do almost nothing about that. I mean, they talk about derivatives. They have a consumer finance protection agency. Those are good things.
But the key thing they ought to be getting at is debt. They need to restrict the amount of debt, the amount of leverage that the financial system can use. You don't get rid of it. Credit is the oxygen of the financial system. But you've got to limit it. And they've done almost nothing about that.
BILL MOYERS: And this is-- why?
KEVIN DRUM: Because debt and leverage are the keys to making money. The one thing that Wall Street needs to make money is lots of leverage. They have to have that to make money. So, that's the one thing they will fight for harder than almost anything. And they fought for it so hard that, in fact, the regulations hardly do anything at all.
BILL MOYERS: Well, as you say in the piece, the overdraft fees that they can now charge can equal something like 10,000 percent? I mean, the mafia would like that, right?
KEVIN DRUM: That's right. It's, you know, it's a small part of the picture, but it shows how much power they've got. What happened was overdraft fees on your debit card. The average overdraft is $17. And it's not hundreds or thousands of dollars. The average overdraft is $17. And it gets paid off in five days. And the average overdraft charge is $39. Now, do the math on that, and that's a 10,000 percent rate of interest.
And the only reason banks can do that is because in 2004, the Fed, after being lobbied by the credit card industry, being lobbied by the banks, ruled that even though overdraft protection was marketed as a loan, was marketed as a line of credit, consumers all thought of it that way. It wasn't, in fact, a loan. And so, since it's not a loan, they can charge any interest rate they want.
DAVID CORN: Well, you know, one of the small debates in Washington has been what type of consumer financial protection agency there should be that would look at things like this.
Elizabeth Warren, it was her idea, initially, to even have such an agency, which she proposed a couple years ago. And she wants it, you know, have the power to regulate, you know, banks and credit card companies and others that provide financial services and financial products. And she wants there to be some very simple rules.
For instance, like you have to-- every credit card company would have to provide what they call vanilla products. Whereby, "Here's your credit card. You have, I don't know, 12 percent interest. It doesn't change. No other fees. Until we let you know in a letter with bold print that it's going to change. And we give you the right to keep the card or not keep the card." Something very simple.
And the agency would also have the right to, you know, write these rules and then regulate the companies. So, it goes into, you know, the Washington hopper. And now, you know, it starts getting watered down. They take out the vanilla product stuff. So, the things that would make things easy for consumers to avoid getting caught in scams like the one that Kevin just described, you know, is removed from the bill.
And they say, "Well, you know, maybe we'll have this little agency write its little rules. But we'll let the banking regulators enforce them." The groups that, to date, have really been held hostage by the people they're supposed to regulate. We have a lot of debate in Washington over this. You know, compared to the big picture that Kevin and others have described, this is really a minor reform. But even this minor reform gets sliced and diced until yeah, something might pass.
KEVIN DRUM: People are more afraid of big government than they are of big banks, despite what happened over the last couple of years. And they shouldn't be. They should be-- what they should be is demanding a better government. A government that regulates without being captured by all the special interests. A government that puts in place regulations that are simple and clear. So, David, what you're saying. The vanilla products option, for example, in the CFPA was a nice-- the reason the banks hated it was because it was so simple.
A nice simple regulation. There's no way to get around it. If the rule says you have to offer as an option, this is not the only thing. You have to offer if you're going to do a home loan one option has to be a standard, 30-year, fixed rate mortgage. And you can have all your other options, but you've got to at least tell people they can have that. That's a very simple regulation. There's no way to get around it. And that's why banks hate it.
DAVID CORN: Bill, you keep coming back to the same question. How can they get away with it? I mean, that's really what it all boils down to.
BILL MOYERS: And it's a serious question for this reason. You know, we don't always have popular representation in the government. But from time to time, Civil Rights movement, Suffragette movement, the Gilded Age, the first time-- people do get heard. And men and women in power begin to speak for them. The worry is have we become so big and things become so complex. Have people been so politically abused as a psychologist recently said, that the will to fight for democracy, the political will has been dissipated?
DAVID CORN: Well, I think there may be something to that. It's also-- you know, it takes time and energy to do that. You know, people who are stressed out over, you know, losing jobs or maintaining their jobs, you know, may not, you know, sometimes that leads people to fight. Sometimes it leads people to resignation. Sometimes it leads people just to focus on getting by.
Think about what's happened to our economy. For the aughts, the last decade, there was no net job growth, at all, from 2000 to 2009. For every other decade prior to that, whether it was Republican or Democratic President in charge, the growth was between 20 percent and 38 percent in jobs. So, we've gone from-- that's pretty healthy. Even though at times there have been recessions and wages may not have gone up as much as the number of jobs created. But in the aughts, nothing. This represents, I think, a fundamental turning point for our economy. And that has people--
BILL MOYERS: For our country.
DAVID CORN: Our country. Wigged out. They don't know the future. They don't know who to turn to. They saw what happened with the economic collapse last year. And, you know, it's hard to know, you know, if you can be angry, who to march on. Or whether you're going to hunker down, and try to just get by on your own. They look at rising powers, economic powers overseas. And how we're going to compete with them. It may be a form of abuse, but they certainly look to the Washington system. And this gets to the point that, you know, that Kevin raised. You know, in poll after poll for decades now, if you asked people who are you more scared of in terms of America's future, is it big government or big corporations? Big government always wins by a landslide.
KEVIN DRUM: And remember one thing is that over the last 20-30 years, people have been told over and over and over again that the economy is doing well. The economy's doing great. The Dow is up. And yet, they themselves, most of them, aren't actually making more money. Median wages have hardly gone up at all in the last 30 years. So, you've got all these people who aren't really making any more money. They're treading water. And yet, everywhere they turn, they're being told the economy's doing well. And they start, I think, a lot of people start to blame themselves. They wonder, "If the economy's doing so well, how come I'm not doing better? It must be me." And what they don't see is, no, it's not them. It's the way the system works.
BILL MOYERS: The Republican Congressman from Wisconsin, Paul Ryan, wrote an essay in the December issue of "Forbes" magazine, the title of which was "Down with Big Business." What do you make of that?
DAVID CORN: Well, the Democrats have to worry. Because there is an opening here for the Republicans. If the Republicans looked at what the, you know, see any anger out there about the economy. And they, you know, start attacking the Democrats and say one reason that this is going on is because of Democrat ties to business and show that chart. And yes, we've had our own problems as well. You know, it could be sort of you know a major shift. I don't think they're going to do that. I don't think they're smart enough to do that, quite frankly. Or have the courage to do that. But that is one opening to have a major strategic change in the face of American politics.
KEVIN DRUM: You know, one thing that certainly the Democrats need, I think the country needs is, you know, President Obama really needs to take the lead on this. And he hasn't. He has been in favor of financial reform, but he hasn't really spoken out about it. He hasn't really pushed the banks. He has made a strategic decision that he needs to cooperate with the banks. Cooperate with Wall Street so as not to cause more panic.
And, you know, it this is not this is not something like health care or climate change, where you can see a lot of moving parts that go together. And you can sort of understand why there's a lot of compromise in those things. With financial reform, he could go out there and start pushing on bits and pieces of it. And even if he loses, even if he loses, it doesn't wreck all the rest of it. He doesn't wreck the chances of financial reform in general if he pushes on one pieces and loses.
DAVID CORN: But better yet, that would mobilize people. I mean, sometimes in politics-- I mean, you know this. Sometimes a clear loss is actually a win politically. Because you draw the lines. You show people who's on what side. And you show them what you're fighting for.
BILL MOYERS: Someone said to me the other day, "Obama has not had his Reagan moment. His defining moment." Remember in the early '80s, when Reagan came to the White House. The one of the first things he did was to fire the air control workers. And it was the moment that for conservatives and a lot of independents, who wanted a tough President to stand up to something, I'm not saying Obama should fire anybody. But he hasn't defined himself by his stand.
KEVIN DRUM: Obama wasn't even willing to fire Ben Bernanke. The head of the--
DAVID CORN: Who's now "Time" man of the year.
KEVIN DRUM: The head of the Federal Reserve. And, you know, Ben Bernanke did, I think, a good job after the crisis hit. He didn't recognize the crisis before it hit. After the crisis hit, he did a good job. But that doesn't mean-- you don't deserve to get reappointed to the Federal Reserve. He did a good job managing the crisis. What we need now, though, is somebody who is going to manage the aftermath of the crisis. Somebody who is genuinely dedicated to re-regulating the financial sector.
BILL MOYERS: Let me show you something that Ben Bernanke said to the annual meeting of economists earlier this week, last Sunday, I think it was.
BEN BERNANKE: The best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.
DAVID CORN: Whoops.
BILL MOYERS: Whoops what?
DAVID CORN: Well, now he's saying what a lot of us said earlier? That we should have had better regulation, you know, rather than just fiddling with interest rates? Kevin mentioned well, he should you know, maybe Obama should not have retained Ben Bernanke. But, you know, we are so far away from that discussion when you look at everything else that's happened. You know, who are some of the top people at Treasury now? A lot of them came from Goldman Sachs.
BILL MOYERS: You have a great chart in your story in "Mother Jones" on that.
DAVID CORN: I mean, my favorite one that I wrote about, and I don't know him personally. He could be a great guy. Never even met him. I tried to interview him, but he wouldn't consent. Mark Patterson. He's the chief of staff for Timothy Geithner, the Treasury Department Secretary. He was a lobbyist for Goldman Sachs. What did he do as a lobbyist for Goldman Sachs? He lobbied against a bill in the Senate to restrain it was a very modest bill, to restrain CEO compensation.
Basically, gave shareholders the right to say, "We think you're paying them too much." It wasn't even mandatory. It wouldn't even cut back pay. He you know, Goldman Sachs would have none of that. He lobbied against that bill. Who authored that bill? Barack Obama, when he was a Senator. So, the guy who fought Barack Obama on CEO pay, an issue that Barack Obama says he cares about. And I believe he does. Is now running the Treasury Department for Tim Geithner. I mean, this really doesn't make a lot of sense to me.
BILL MOYERS: So, what would happen you both talk about mobilization. Let's say that President Obama in his upcoming State of the Union speech called for mobilization. Asked people to do something about this. What would that mean? What would what shape would mobilization take?
KEVIN DRUM: He could do it in a State of the Union address and that might be a place to start. But you know, Barack Obama famously won election through a huge grassroots movement. He's got an enormous, I think 13 million names on his email list. And so forth. But he's refused to use that. He
BILL MOYERS: Write the first email he would send, if you were Obama. What would you send those millions of young people and others who are looking for real change in the elections of 2008. What would you say?
KEVIN DRUM: If it were my email, I would say, "Look, we need to break up the big banks." Look, Alan Greenspan of all people, has said if a bank is too big to fail, it's too big. Allen Greenspan said that. If Alan Greenspan thinks that we ought to break up big banks, if Paul Volcker thinks we ought to break up big banks, this is not a fringe, left view. This is this ought to be a mainstream view. And yet, it's nowhere. That kind of thing should--
DAVID CORN: I'll give you the, I'll give you the first line. The first line should be, "We've been taken for a ride. You know what happened in 2008. I came into office promising change. I've sent some bills up there. They were strong. Maybe they could have been stronger. And I see that they're being weakened. This only makes me believe that we have to bear down harder. And I can only do this with your help."
BILL MOYERS: Okay, I've read that. I'm really excited about that, President Corn. What do you mean? What can I help you do?
DAVID CORN: Send me that $50 as well, Bill.
BILL MOYERS: Well, that's what can I do to help?
DAVID CORN: Okay, well, then been then he would have to he would say, "I have you know, I have I have reset my legislative agenda on this front. Here are the five, you know, provisions I want to see passed this year on regarding financial reform. I want the Consumer Finance Protection Agency to have teeth and be able to offer this. I want, you know, derivatives full, you know, fully transparent. Okay? I want to put back the wall between in banking. Let me tell you why." Now, a lot of this you know, some of this goes to fundamental issues, some of it doesn't. But at least move the, you know, move the ball in that direction.
KEVIN DRUM: If you want to have real change, there's only one place that can come from. That's out of Congress. Congress is the only body which is big enough to actually restrain Wall Street. One way or another, you have to take your 13 million or your 15 million or whatever number of people you've got. You've got to mobilize them to tell their Congressmen that they're mad as hell. And they're not going to vote for them if they don't pass this legislation.
BILL MOYERS: But no one can.
DAVID CORN: It's the only way.
BILL MOYERS: No one can read your piece in "Mother Jones" without thinking, "So, these guys must be laughing all the way to the bank." I mean, the same people who, bought the government off, brought the economy down, caused suffering to millions of people from Orange County to Portland, Maine, are winning all over again, you say. Because, you say, in the same issue, no one's fighting back.
DAVID CORN: My guess is that they feel they dodged the biggest bullet of their lives. I mean who would have thought a year ago that we'd be back we'd be at this point? I mean, I think they probably, you know, worried that, you know that that there'd be communist laws passed. You know, that people would be so angry.
DAVID CORN: Tremendous money and power and influence to wield to get their way. Versus the rest of us, who get nickeled and dimed and we have other things to worry about. You know? People are you know, have you know are worrying about their maybe what their kids going to school safely and getting good educations.
I mean, we have everything to worry about. The bankers and the investment bankers and the financiers, they can grease the way with millions of dollars that gets them billions of dollars in the in return. And it it's not a fair fight.
KEVIN DRUM: People need to have someone to rally around. If they're going to make this happen. And I think that needs to be Barack Obama. He needs to be willing to really take on the bankers. You know, Franklin Roosevelt in his first term. I remember he has a famous quote where he talked about there are you know, there are people out there who hate me. I have earned their hate. And I embrace their hate. And I think Barack Obama needs to be willing to earn the hate of some bankers.
BILL MOYERS: But I don't believe that is his nature, do you? It seems to me after all this time his nature is of a conciliator.
KEVIN DRUM: Conciliation is a good trait. In most cases, I actually think it I think it works well for Obama. But sometimes there are times for a conciliatory attitude. There are times to take somebody on.
Now, one thing one place where I think he's missing a bet is Barack Obama came into office feeling like he did want to bring the country together. He wanted to try to end the partisan wars. But, you know, this issue of Wall Street is one where if he took on Wall Street, the bankers might hate him, but I think that would bring the country together more than you'd think.
'Cause I think there is a lot of anger toward Wall Street. It's latent, but it's there. Among liberals, among conservatives, among libertarians, among independents. I think if there's any one issue where a real show of emotion on his part and a real show that he was going to take these guys on, could bring the country together. It very well might be taking on Wall Street.
BILL MOYERS: So, how you know, how long do we wait for Godot?
KEVIN DRUM: Well, that's up to Godot. That's up to Obama. Nobody knows.
BILL MOYERS: David Corn and Kevin Drum, thank you for being with us on the Journal.
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