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Showing posts with label financial bailout. Show all posts
Showing posts with label financial bailout. Show all posts

10 February 2012

Yesterday's settlement with Wall Street, A BAD DEAL from CREDO & Settlement launches foreclosure reckoning from WASHINGTON POST 10FEB12

THE only good part of this deal is that wall street executives, directors of the financial-banking industry cabal, could still face criminal charges for their actions that caused the recession. Thanks to several strong, honest, progressive state AGs there is still a chance for justice. This from Credo, followed by an article on the deal from the Washington Post.....



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Wall Street banks fraudulently and illegally foreclose on your house. You get $2,000. The bank gets let off the hook. We'd call that a bad deal.
And yet yesterday, at the urging of the White House, federal regulators along with 49 state attorneys general announced a settlement deal for mortgage servicer abuse that does essentially that. It lets banks off the hook for widespread foreclosure fraud.
Press releases have trumpeted a $26 billion deal which may sound like a lot, but it's a paltry sum when you break down the numbers.
With an average mortgage of $180,000, and loan instruments executed illegally, a family that lost their home will get a check for just over 1% of the value of the mortgage.1 That is not a victory. The amount of money this deal makes available to help homeowners is an order of magnitude too small and incommensurate with the harm done by the banks.
The estimated $10-$20 billion in the deal for principal reduction would reduce only about 2% of the $700 billion in equity destroyed during the financial crisis. And the banks themselves will only pay $5 billion out of their own pocket. By far the lion's share of the cost will be borne by investors and taxpayers, who had no part in the robo-signing scandal. 2
No doubt the deal is far better than the deal that was offered months ago. And this most certainly is a result of activism from members of CREDO and many of our allies in the progressive movement who worked with progressive attorneys general like New York's Eric Schneiderman, California's Kamala Harris, Delaware's Beau Biden, Massachusetts' Martha Coakley and Nevada's Catherine Cortez Masto to fight a bad deal.
But the final deal, while better, still can't be characterized as a good deal or even as a good first step towards real accountability for Wall Street banks.
The reported $26 billion settlement will not come close to inflicting any real pain on the banks all of which have already reserved the full amounts required from them under the deal. As Robert Reich said, the "$26 billion settlement with banks over mortgage fraud is far short of what they should pay and distressed home owners deserve."3
One in five Americans with mortgages owe the banks more than their homes are worth, and these home owners are underwater by an average of $50,000 each. This is a collective negative equity of nearly $700 billion.4
Consider the $700 billion bailout of Wall Street paid for by U.S. taxpayers5 and the more than $1.2 trillion in loans6 provided by the Federal Reserve to Wall Street banks. Or another way to put the deal in perspective is to compare it to the tobacco industry settlement in 1998 — the largest previous multi-state agreement. That deal was worth $350 billion in today's dollars — more than ten times the size of the mortgage deal.7
And that's not even all that's wrong with this deal. The federal government's track record for enforcing settlement terms with Wall Street banks is abysmal. Furthermore, even if the banks follow the terms of the deal, it's quite possible than when all is said and done, not only will the banks have suffered no pain, they may actually come out having profited from their illegal schemes to rip off homeowners. According to the Consumer Financial Protection Bureau, the largest mortgage banks saved $20 billion by taking illegal shortcuts — an amount far greater than the $5 billion out of pocket they will be required to pay in this deal.8
All of which adds up to a scenario in which this settlement does literally nothing to deter the banks from engaging in the same fraudulent behavior in the future.
Senator Dick Durbin famously said the Wall Street banks own the politicians in Washington, DC. Today, this could not be more clearly true as we closely examine the deal that the Obama administration cut with Wall Street and pressured state attorneys general to sign.
There has yet to be a full investigation of the robo-signing scandal despite what Reuters called "copious evidence" of "widespread forgery, perjury, obstruction of justice, and illegal foreclosures...." 9
By establishing settlement terms before there has been any meaningful investigation, the deal whitewashes the widespread lawlessness of the banks and virtually ensures that no bankers will be held criminally responsible for their part in the robo-signing scandal and foreclosure fraud.
Though the exact terms of the settlement have not been disclosed, we understand that it will not cut off other important avenues to hold the banks accountable. New York Attorney General Eric Schneiderman is co-chairing a federal task force that if fully resourced and left to operate unhindered by the White House could achieve hundreds of billions in reduced principal for underwater homeowners and criminal indictments for bankers who broke the law and helped drive our economy off a cliff. And other state attorneys general can continue investigating Wall Street's role in causing the housing crisis to ensure that the banks that caused the crisis are held accountable for their wrongdoing.
This is the biggest case of fraud in our history. Homeowners deserve justice for crimes committed against them by Wall Street banks that in many cases literally stole their homes from underneath them. Unfortunately, yesterday's settlement doesn't even provide anything close to a down payment on justice.
As the election season heats up, we must be insistent about real accountability for Wall Street crooks. Pressure from activists like us will be even more important in the days to come if we are to achieve any real measure of accountability for Wall Street bankers who profited from their crimes and left the 99% to pay to the price for their reckless disregard.
Becky Bond, Political Director
CREDO Action from Working Assets

1. "The Top Twelve Reasons Why You Should Hate the Mortgage Settlement," Yves Smith, Naked Capitalism, 02-09-12
2. "The Servicing Settlement: Banks 1, Public 0," Adam Levitin, Credit Slips, 02-09-12
3. Twitter, 02-09-12
4. "Mortgage Plan Gives Homeowners Bulk of the Benefits," Nelson D. Schwatz and Shaila Dewan, New York Times, 02-09-12
5. "Wall Street Aristocracy Got $1.2 Trillion in Secret Loans," Bradley Keoun and Phil Kuntz, Bloomberg, 08-22-11
6. "The Wall Street Bailout Plan Explained ," David Stout, New York Times, 09-20-08
7. "FAQ: The foreclosure settlement ," Sarah Halzack and Sarah Kliff, WashingtonPost.com, 02-09-12
8. "Big Banks Save Billions As Homeowners Suffer, Internal Federal Report By CFPB Finds," Huffington Post, 03-28-11.
9. "
U.S. AG Eric Holder, DoJ Head Lanny Breuer Linked To Banks Accused Of Foreclosure Fraud ," Reuters, 01-19-12.

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Settlement launches foreclosure reckoning

By and

The government’s $25 billion settlement Thursday with banks over fraudulent foreclosure practices begins a long-promised reckoning with the financial industry over its role in the worst economic crisis since the Great Depression, officials said.
The deal represents the largest industry settlement since an agreement with tobacco companies in 1998 and will force five of the nation’s largest banks to overhaul their mortgage-servicing practices and reduce loan balances for many borrowers who owe more than their houses are worth.
FAQ: The foreclosure settlement
Officials acknowledged that the final sum will reach only a fraction of homeowners across the country whose homes are collectively worth $750 billion less than what is owed on their mortgages. But they argued that it was a meaningful step in healing the housing market.
The priority of the settlement was not to punish banks, officials said. Another wave of punishment is on its way, they vowed.
“This is neither the beginning nor the end of our work to hold banks and other institutions accountable for the destruction they’ve caused families, communities and country,” said Illinois Attorney General Lisa Madigan. “Today’s settlement should serve as a warning.”
The deal was brought on by revelations that banks were using forged and shoddy paperwork to foreclose rapidly on struggling homeowners, a practice known as “robo-signing.” Outrage over those practices led to 16 months of settlement talks between state and federal officials and five large banks.
The officials who crafted Thursday’s settlement were careful to leave the door open to a wide range of future litigation, despite efforts by banks to shield themselves from such legal actions. It allows for future actions over fair-housing and fair-lending violations, as well as civil rights claims. It doesn’t bar individuals from joining class-action lawsuits. Nor does it limit the lawsuits that private investors can file in search of damages, some of which have already been launched.
That means the legal hangover from the mortgage bubble is probably far from over for many of the country’s largest banks.
Last September, federal regulators launched a broad legal assault on 17 big banks, claiming they sold nearly $200 billion in fraudulent mortgage investments to housing giants Fannie Mae and Freddie Mac.
Since then, as the housing slump has continued to weigh down the larger economy and movements as disparate as the tea party and Occupy Wall Street have raged against the lack of accountability for the crisis, the pressure for regulators to hold individuals and institutions accountable has only grown.
New investigative unit
President Obama announced in his recent State of the Union address a new unit that would would “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.” Days later, Attorney General Eric H. Holder Jr. said the Justice Department had issued civil subpoenas to 11 financial institutions.
Helping to lead the new investigative unit is New York Attorney General Eric Schneiderman, who for months had been critical of the foreclosure settlement because of concerns that it might prevent deeper investigations into mortgage misdeeds and could let banks off too easily.
Schneiderman, who ultimately signed on to Thursday’s settlement, last week filed lawsuits against several banks, claiming that they deceived homeowners and court officials by filing bogus documents through a popular electronic mortgage registry. He and his counterparts from states such as California, Delaware, Massachusetts and Nevada have vowed to press forward with their inquiries — an approach that has been cheered by liberal groups and consumer advocates.
Separately, the Securities and Exchange Commission is examining whether banks fully disclosed the risks to investors who bought packages of loans that financed the housing boom. The agency has continued digging for evidence that firms failed to disclose important information when selling the securities to investors, SEC enforcement director Robert Khuzami said recently. The SEC also has sent banks a flurry of requests for documents and interviews with witnesses.
Goldman Sachs settled an SEC complaint for $550 million in 2010, but its last quarterly report — like those of other banks — describes a variety of pending lawsuits and government investigations that the firm faces. “There remains significant uncertainty surrounding the nature and extent of any exposure for participants in this market,” Goldman said in the report.
The passage of time since the housing crash first hit could affect the government’s ability to impose penalties on financial firms. Generally speaking, under a statute of limitations, the SEC can only obtain penalties for fraud within the past five years. But the SEC and other agencies could argue that the clock didn’t start ticking until it was apparent that fraud occurred.
Thursday’s settlement, which would require a judge’s consent, won approval from 49 states. Oklahoma was the lone holdout.
Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. It provides incentives for actions taken within the first 12 months so that the aid can get to homeowners sooner rather than later.
The settlement also includes about $17 billion that would go toward foreclosure-prevention measures, such as lowering the loan balance for borrowers who owe more than their homes are worth. Other provisions would provide for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each.
The five banks at the heart of the settlement are Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup. Ultimately, the amount of aid to homeowners could reach $40 billion, officials said, adding that they hope other banks will soon sign similar agreements and adopt the new standards set out by the deal.
Consumer impact uncertain
Several Washington area housing counselors said the deal would probably do little to help their clients but that they needed to learn the details of the aid to be sure.
Cherelle Silue, manager of housing services at United Communities Against Poverty in Prince George’s County, said her first impression is that a homeowner could wind up not getting much.
For homeowners who are trying to catch up on their mortgages, “we are talking thousands and thousands of dollars,” Silue said. “I am sure that it is going to be able to help someone, but I am not sure how many.”
In any case, the celebrations among state and government officials over a significant settlement for homeowners on Thursday included numerous reminders that the victory marked a beginning rather than an ending.
“This settlement also protects our ability to further investigate the practices that caused this mess. And this is important,” Obama said at White House, adding: “We’re going to keep at it until we hold those who broke the law fully accountable.”

Staff writers David S. Hilzenrath, Sarah Kliff, Luz Lazo and Jeremy Borden contributed to this report.

26 October 2011

Everything The Media Told You About Occupy Wall Street Is Wrong 19OKT11

ADDRESSING the lies about the Occupy Wall Street protest in NYC being broadcast by fox "news", the right wing media and the gop / tea-bagger politicians.....
After 10 days out of town, I finally made it to Occupy Wall Street on Tuesday and had a chance to see for myself what's going on. My conclusion: almost everything the media told me about the protest is wrong.
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Based on my observations, here's what I consider the Top Ten Myths About Occupy Wall Street.
Myth #1. The Movement Is Violent.
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One of the most striking images I witnessed at the demonstration was a young black man holding a sign that read "End NYPD Violence!" in front of a group of police officers.
The officers quickly challenged his accusation. But the young man didn't leave. Next, the police turned away and ignored him. But he still didn't leave. Then the officers chuckled and let out an unexpected laugh when they realized the man wasn't going away. The scene was confrontational, but definitely not violent.
In fact, one of the first things I noticed was a sign posted on a wall that embraced "Kingian Nonviolence," the peaceful principles that guided Dr. Martin Luther King, Jr.
Principles of Kingian Nonviolence
Myth #2. It's Just A Bunch Of Pampered Kids.
Although I supported the concept of the Occupy Wall Street movement when I first heard of it, I admit I didn't think the group had much to offer me. From what I could see in the media, they were well-educated, well-intentioned young white people, but they didn't really represent me.
I was wrong.
What I found was a wide-ranging group of people from various backgrounds, young and old, male and female, black, white, Latin, Asian and mixed. It was the essence of New York, the reason why I moved to this city 10 years ago.
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Myth #3. There Are No Black People Involved.
I was taken aback by how many black and Latino participants I noticed at the demonstration. I hadn't seen them on the television coverage of the movement, but they were clearly there.
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Myth #4. They're Anti-American.
In my experience, I saw a lot of American flags being waved proudly at the demonstration. The protesters may not all think the same things, but many of them were clearly hoping America would live up to its promise as a land of opportunity where the rules are fair and all are welcome.
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Myth #5. They're Just Modern-Day Hippies.
To watch some of the media coverage of the movement, you would think the protest was filled with long-haired hippies left over from the 1960s. In fact, from my experience, I saw a few people who might fit this description, but I also saw just about every type of person you could imagine at the demonstration.
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There were high school-aged kids with their parents, college students in their school sweatshirts, men in business suits, mothers with baby carriages, people with jobs, people who were unemployed, white-haired retirees, African drummers, rhythmic dancers, and one person who appeared to be wearing pajamas.
Myth #6. They Don't Know What They Want.
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I found many different people gathered in Zuccotti Park with many different interests and agendas, but they seem to be unified by one common purpose. They're tired of a system that seems only to cater to the rich and powerful while ignoring the concerns of the vast majority of Americans.
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Myth #7. The Labor Unions Are Behind This.
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I saw only one labor union table at the demonstration, but most of the people seemed to have no connection to organized labor. Even if they had, there's nothing wrong with that. Labor unions are an important part of our country, and while not perfect, they've helped throughout history to improve working conditions for millions of Americans.
Myth #8. They're Pro-Obama. They're Anti-Obama.
"I don't have facts to back this up," Republican presidential candidate Herman Cain said in an interview recently, "but I happen to believe that these demonstrations are planned and orchestrated to distract from the failed policies of the Obama administration." That seems unlikely.
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Not long after I arrived I found a Hispanic man in a camouflage jacket complaining about Obama to a small crowd of onlookers. "Obama is not the savior," he cried out. Moments after he finished, a young black man in a sweat jacket stood up to defend Obama to the crowd, acknowledging that the president wasn't perfect but he was doing the best job he could to clean up the mess he had inherited.
Both sides had their points to make and both were respectfully acknowledged.
Myth #9. They're In The Wrong Place.
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I love to hear conservatives complaining that the protesters should be in Washington instead of Wall Street, as if the conservatives were really concerned about the most effective way for the demonstrators to make their case.
This location-based argument suggests a limiting "either/or" mentality that you can't be in both places, and also assumes that there's no reason to be on Wall Street at all.
As Herman Cain said recently, "Don't blame Wall Street. Don't blame the big banks. If you don't have a job and you're not rich, blame yourself.
But there's a good reason why Wall Street serves as an ideal venue for the demonstration. Unlike politicians in Washington, who have to answer to voters every few years, corporate executives on Wall Street don't have to answer to the public, even though their actions have a huge impact on all of us. It seems to me, the protesters picked a reasonable venue to launch their movement. In fact, judging by the row of satellite trucks parked outside the protest, I'd say Wall Street was exactly the right place to draw attention to their cause.
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Myth #10. They're Taking Over Wall Street.
I've lived in New York City for 10 years, but I'd never been to Zuccotti Park until the Occupy Wall Street protests took place. I assumed the protesters were camped out at a park somewhere at the end of Wall Street, throwing around garbage and creating a mess.
Once again, I was wrong.
First, the group was clean, neat and orderly when I saw them. The park was actually cleaner than any park I've ever seen in New York City. Some demonstrators even walked around with brooms to clean up any mess that might have been left, and signs were posted advising the occupiers to observe a "good neighbor policy."
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Finally, as it turns out, Zuccotti Park isn't even on Wall Street. It's a couple blocks away. As you can see from the image below, the only mess on Wall Street came from the police horses standing guard in front of the New York Stock Exchange.
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Follow Keith Boykin on Twitter: www.twitter.com/keithboykin

This Powerful Clip Is Exactly Why Everyone Should Support #OccupyWallStreet

A great video explaining how we got where we are today, and why we should support the Occupy Wall Street movement across the country.

06 October 2011

OCCUPY WALL STREET & Follow the Money: Behind Europe's Debt Crisis Lurks Another Giant Bailout of Wall Street 5OKT11

THE OCCUPY WALL STREET movement is spreading across the nation, especially since the mass arrest on the Brooklyn Bridge in NYC on 1OKT11. Here is the policy statement from the http://www.october2011.org website. One course of action everyone can take is to move their money to smaller local and regional banks, financial institutions that are more likely to invest in the local economy and create jobs. Following the statement is a warning from Robert Reich on the real possibility of a second wall street bailout due to the European financial crisis, the kind of bailout the Occupy Wall Street movement is opposed to without a massive restructuring of the financial institutions and corporate America that own our government....
A Call to Action - Oct. 6, 2011 and onward
October 2011 is the 10th anniversary of the invasion of Afghanistan and the beginning of the 2012 federal austerity budget. It is time to light the spark that sets off a true democratic, nonviolent transition to a world in which people are freed to create just and sustainable solutions.
We call on people of conscience and courage—all who seek peace, economic justice, human rights and a healthy environment—to join together in Washington, D.C., beginning on Oct. 6, 2011, in nonviolent resistance similar to the Arab Spring and the Midwest awakening.
A concert, rally and protest will kick off a powerful and sustained nonviolent resistance to the corporate criminals that dominate our government.
Forty-seven years ago, Mario Savio, an activist student at Berkeley, said, "There's a time when the operation of the machine becomes so odious—makes you so sick at heart—that you can't take part. You can't even passively take part. And you've got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you've got to make it stop. And you've got to indicate to the people who run it, to the people who own it, that unless you're free, the machine will be prevented from working at all."
Those words have an even greater urgency today. We face ongoing wars and massive socio-economic and environmental destruction perpetrated by a corporate empire which is oppressing, occupying and exploiting the world. We are on a fast track to making the planet unlivable while the middle class and poor people of our country are undergoing the most wrenching and profound economic crisis in 80 years.
"Stop the Machine! • Create a New World!" is a clarion call for all who are deeply concerned with injustice, militarism and environmental destruction to join in ending concentrated corporate power and taking direct control of a real participatory democracy. We will encourage a culture of resistance—using music, art, theater and direct nonviolent action—to take control of our country and our lives. It is about courageously resisting and stopping the corporate state from destroying not only our inherent rights and freedoms, but also our children’s chance to live, breathe clean air, drink pure water, grow edible natural food and live in peace.
As Mother Jones said, "Someday the workers will take possession of your city hall, and when we do, no child will be sacrificed on the altar of profit!"
We are the ones who can create a new and just world. Our issues are connected. We are connected. Join us in Washington, D.C., on Oct. 6, 2011, to Stop the Machine.
***************************************************************************************
Take the pledge and sign up to attend here. Let America know you are coming to make history and a new world!
"I pledge that if any U.S. troops, contractors, or mercenaries remain in Afghanistan on Thursday, October 6, 2011, as that occupation goes into its 11th year, I will commit to being in Freedom Plaza in Washington, D.C., with others on that day with the intention of making it our Tahrir Square, Cairo, our Madison, Wisconsin, where we will NONVIOLENTLY resist the corporate machine to demand that our resources are invested in human needs and environmental protection instead of war and exploitation. We can do this together. We will be the beginning ."

Pledge

"I pledge that if any U.S. troops, contractors, or mercenaries remain in Afghanistan on Thursday, October 6, 2011, as that occupation goes into its 11th year, I will commit to being in Freedom Plaza in Washington, D.C., with others on that day or the days immediately following, for as long as I can, with the intention of making it our Tahrir Square, Cairo, our Madison, Wisconsin, where we will NONVIOLENTLY resist the corporate machine by occupying Freedom Plaza to demand that America's resources be invested in human needs and environmental protection instead of war and exploitation. We can do this together. We will be the beginning."
You do not have to sign up or log-in to Facebook in order to take the pledge or register with october2011.org.
The Facebook form is only a convenience for current Facebook users.

Follow the Money: Behind Europe's Debt Crisis Lurks Another Giant Bailout of Wall Street

http://www.huffingtonpost.com/robert-reich/europe-debt-crisis_b_996528.html
Today Ben Bernanke added his voice to those who are worried about Europe's debt crisis.
But why exactly should America be so concerned? Yes, we export to Europe -- but those exports aren't going to dry up. And in any event, they're tiny compared to the size of the U.S. economy.
If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.
Financial chaos.
Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.
The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That's no big deal.
But a default by Greece or any other of Europe's debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.
That's where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.
The Street's total exposure to the euro zone totals about $2.7 trillion. Its exposure to to France and Germany accounts for nearly half the total.
And it's not just Wall Street's loans to German and French banks that are worrisome. Wall Street has also insured or bet on all sorts of derivatives emanating from Europe -- on energy, currency, interest rates, and foreign exchange swaps. If a German or French bank goes down, the ripple effects are incalculable.
Get it? Follow the money: If Greece goes down, investors start fleeing Ireland, Spain, Italy, and Portugal as well. All of this sends big French and German banks reeling. If one of these banks collapses, or show signs of major strain, Wall Street is in big trouble. Possibly even bigger trouble than it was in after Lehman Brothers went down.
That's why shares of the biggest U.S. banks have been falling for the past month. Morgan Stanley closed Monday at its lowest since December 2008 -- and the cost of insuring Morgan's debt has jumped to levels not seen since November 2008.
It's rumored that Morgan could lose as much as $30 billion if some French and German banks fail. (That's from Federal Financial Institutions Examination Council, which tracks all cross-border exposure of major banks.)
$30 billion is roughly $2 billion more than the assets Morgan owns (in terms of current market capitalization.)
But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan feels as if it's not exposed.
But does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn't pay up.
Haven't we been here before?
Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan's exposure to European banks or derivatives -- or that of most other giant Wall Street banks -- shows Dodd-Frank didn't go nearly far enough.
Regulators still don't know what's happening on the Street. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.
Which is why Washington officials are terrified -- and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.
Several months ago, when the European debt crisis first became apparent, Wall Street banks said not to worry. They had little or no exposure to Europe's problems. The Federal Reserve said the same. In July, Ben Bernanke reassured Congress the exposure of U.S. banks to European nations in trouble was "quite small."
Now we're hearing a different tune.
Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode -- taking Wall Street with them.
One of the many ironies here is some badly-indebted European nations (Ireland is the best example) went deeply into debt in the first place bailing out their banks from the crisis that began on Wall Street.
Full circle.
In other words, Greece isn't the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system -- centered on Wall Street. And we still haven't solved it.
Robert Reich is the author of "http://www.amazon.com/Aftershock-Next-Economy-Americas-Future/dp/0307592812" target="_hplink">Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

14 July 2011

America Needs a President Who Will Confront the Financial Industry's Hegemony Over Our Lives 14JUL11

THANK YOU SHEILA BAIR, we are already missing you! You are quite a lady for sure!!!!
No one in a position of authority in our government today seems to understand fully the threat to American institutions and ideals represented by the untrammeled clout the financial industry now holds permeating the halls of government through the power of influence and money. We are barreling toward a destabilizing schism in our society where one interest group, the finance world and its allies, are running the nation to their own economic benefit, oblivious of the pain and loss being endured by their fellow citizens on the Main Streets of our towns and villages and the neighborhoods and tenements of our cities
Our president, whose objectives are certainly sincere, has surrounded himself with men whose formation and ties run deep into the culture of Wall Street -- be it his Chief of Staff William Daley, formerly Midwest Chairman of JPMorgan Chase; Treasury Secretary Timothy Geithner, Former Chair of the New York Fed, or Gary Gensler, Chairman of the Commodity Futures Trading Commission and former Goldman Sachs partner -- while consulting freely with Warren Buffet, that champion of and investor in Goldman Sachs. In many ways very little has changed from the previous administration when the Treasury and virtually all government agencies responsible for financial oversight were in some manner beholden to Wall Street houses and banks, and when the crunch came in September 2008 it was their "club" members who were bailed, while the rest of the country sank into a miasma of recession and unemployment. As Sheila Bair was quoted in the New York Times Magazine saying to Joe Nocera: "You know, Wall Street barely missed a beat with their bonuses. Isn't that ridiculous?"
Nor has their been a serious effort made by prosecutors in the Obama administration and its agencies to hold individuals responsible nor to claw-back the billions of dollars paid out as bonuses for phony profits that were booked by creating and marketing fundamentally flawed financial instruments such as the now notorious C.D.O.'s. The Justice Department opted for a policy known as 'deferred prosecutions'. The guidelines left open a possibility other than guilty or not guilty, giving leniency all too often if companies investigated and reported their own wrongdoing. In return the government would enter agreements to delay or cancel prosecution if companies promised to change their behavior -- in other words, no punishment and little assurance that it wouldn't happen again.
Yet there was one player in government, that progressively rare breed, a moderate republican appointee holdover from the Bush Administration, who fought tooth and nail against the clubhouse fraternity that had taken over the fiscal soul of the nation. She was unflinching in defending the interests of the nation's citizens, becoming an equal opportunity irritant to Democrat and Republican alike. And she knew what she was talking about.
I personally have had the good fortune of hearing her speak at an Aspen Ideas Festival event just over a week ago. She was lucid, forthright, without hyperbole conveying a sense of reasoned indignation felt by too many of us, at the unfairness of the present structure. Where we, as citizens seem unable through our elected officials to stem the influence, the systematic 'heads I win, tails you lose' construct of our financial institutions and their growing impact on the functioning of our society.
Upon her retirement as Chairman of the FDIC (Federal Deposit Insurance Corporation) this July 8th Sheila Bair received this accolade from the Wall Street Journal's Deborah Salomon: "Sheila Bair, who is stepping down as Chairman of the Federal Deposit Insurance Corp. this week, leaves behind an agency transformed from a sleepy bank overseer into a financial regulatory powerhouse focused on preventing another financial crisis." The article goes on to report that at her last FDIC meeting the agency finalized a rule allowing the government to recover compensation from executives responsible for a financial firm's collapse. Only someone with the gumption of Bair could have achieved such a result given the opposition massed against her.
In an in-depth article by Joe Nocera, Nocera writes that Bair began sounding the alarm about the dangers posed by the explosive growth of subprime mortgage rates in June 2006. At the time, "Bair insisted that she and her agency have a seat at the table and fought Henry Paulson and Timothy Geithner, the President of the New York Federal Reserve, as they tried to cobble together solutions that would keep the financial world from going off a cliff: She and the F.D.I.C. managed a number of huge failing institutions during the crisis including Indy Mac, Wachovia, and Washington Mutual."
Of particular significance was Bair's belief in market discipline where, according to Nocera, she found herself at variance with Obama's Treasury Department, meaning she held that shareholders and debt holders should take losses ahead of depositors and taxpayers. "She was tough-minded and straight-forward." And as she would be quoted, "Our job is to protect bank customers, not banks."
She fought for increasing the capital requirements for banks in the face of banks who lobbied strenuously against her. Lower capital requirements allow for more risk, ergo larger bonuses. She fought against the United States' adoption of the bank boondoggle called Basel II which would have lowered bank capital requirements and worse, self selection of risk models thereby significantly exposing the system to even greater bank failures. Nocera would declare "I've long believed her opposition to Basel II has been a hugely underappreciated factor in helping to save the financial system when the crisis came."
And on it went. Geithner, in full Wall Street mode, wanted the F.D.I.C. to guarantee all debt issued by bank-holding companies (such as JPMorgan Chase, Goldman Sachs, Morgan Stanley). Sheila Bair said NO!
To Bair, her fight with the Treasury and the federal Reserve was ultimately about the bondholders. According to Bair "They did not want to impose losses on bondholders and we did...there is no insurance premium on bondholders... For the little guy on Main Street who has bank deposits, we charge the banks a premium for that, and it gets passed along to the customer. We don't have the same thing for bondholders, they're supposed to take losses."
And, most tellingly, she was clear in her displeasure that the government, by acting as if it was no one's fault, placed no responsibility where it should have been placed. For the many of us who have been wondering the same thing, what a breath of fresh air.
She has a stalwart fighter for mortgage modifications that would truly help homeowners. As Nocera explains that "what particularly galls her is that the Treasury under both Paulson and Geithner has been willing to take all sorts of criticism to help the banks. But it has been utterly unwilling to take any political heat to help homeowners."
All the while the Dodd-Frank Bill meant to prevent the too big to fail syndrome from ever rearing its head again, thereby making the largest banks accountable for their actions, is being lobbied into impotence by the financial brotherhood.
Here we have Sheila Bair, Kansas transplant to Washington, taking on the behemoths of the financial world, dogged in her defiance, "We always saw ourselves as the champion of the little guy. The other regulators never saw a bank closure, because that was our role. We were the ones that saw people losing their jobs when we had to shut down a little bank. They never understood the unfairness of the way little banks were treated versus the big banks...I've always thought that it was really important for everybody to have to play by the same set of rules."
Given the financial crisis in which our nation finds itself -- given the access and the power of the financial intuitions' hold, enabling them to play events to come to their own advantage -- would it not be better to have one of our own in the White House who understands the game? Who is on our side, and by virtue of her position and knowledge can stare down all the entreaties for special treatment because she inherently understands that this nation cannot flourish, nor overcome the obstacles that lie ahead and maintain its dignity if we do not all together play by the same set of rules?
Sheila Bair may not know it yet, but we need not only her kind, we need her to become our president. Her persona, her values, her experience would be a rare and welcome gift to the nation!

14 May 2011

The Deficit Chart Republicans Hate 11MAI11

JUST a friendly reminder that the federal deficit was brought to us by george w bush & co, his tax cuts, his wars in Iraq and Afghanistan, and the cost of the financial crisis created by his masters on wall street. From Mother Jones.....
I get a little bored repeating over and over that our short-term deficit is almost entirely not Barack Obama's fault. It's mostly the fault of the Bush tax cuts, the Bush wars, and the financial collapse that happened during the Bush presidency. At this point, though, this is more in the nature of a religious debate than a factual one, and conservatives are going to keep repeating the same tired disinformation about the deficit regardless of any evidence one way or the other.
Still, just on the off chance that a few people are still persuadable on this, it's nice of CBPP to update its chart showing the source of the deficit over the next decade. (Farther out than that, Medicare is largely responsible for most deficit projections.) As you can see, by 2013 or so, virtually the entire deficit is due to Bush-era policies/disasters. So cut this out and post it on your refrigerator.

12 February 2011

AIG: Corporate Welfare King Mouths Off from BANKSTER 9FEB11

AIG, AMERICAN INTERNATIONAL GROUP, still owes the American tax payers $31 billion of the $183 billion they got from the bailout fund, but their CEO, robert benmosche, is cocky enough to be running his mouth about his "business" strategy in red vs blue states. This corporate welfare queen is disgusting, and it is a disgrace criminal charges haven't been brought against him. This from Bankster..

PR Watch Op-Ed -- Most Americans know American International Group (AIG) as the global insurance behemoth that was so criminally and recklessly managed it had an outsized role in tanking the global economy.
Rather than feeling a bit humble for wreaking havoc on the lives of millions, AIG’s new management is feeling rather cocky. Apparently AIG CEO Robert Benmosche has figured out the magic formula for selling insurance. Benmosche told Bloomberg News that he likes to do business in “red states” where the firm signs up more reliable customers than those in “more liberal” areas.



“All of the states where we’re a leader, where we’re the No. 1 insurer, are red states, all of the states where we’re at the bottom are blue states,” says Benmosche. “Part of what we found out is that our model is about culture and it’s about the attitude in the public. And what we find is where there’s more of a tendency for people to be more liberal, more that the government is responsible for what happens to me.”
Talk about the pot calling the kettle black. In 2008, AIG was taken over by the federal government, propped up with a $183 billion taxpayer bailout and it remains so weak that the American taxpayer still has a large stake in this firm.  If there is a "welfare king" on Wall Street his name is Bob Benmosche. 

It’s time for AIG to shut up and pay up the $31 billion it still owes U.S. taxpayers, with interest. And remember America -- red, white and blue -- don’t do business with AIG's mortgage guarantor, United Guaranty, or other subsidiaries like Chartis property-casualty insurer and the SunAmerica Financial Group.

07 January 2011

The Great Middle Class Swindle 7JAN11

IF you're like me then you are more than a little disgusted over the increasing wealth of the already very rich and the stagnation and even decreasing income of the poor, the working class, and the middle class in this country.....and you are frustrated because you aren't quite sure who is responsible. In my opinion start first by looking in a mirror.....too many lower and middle class Americans are ignorant by choice about the real motives of the politicians they elect to their local, state and federal governments. They choose to believe the propaganda of these people playing on individual fears, prejudice and greed, hiding the fact that their real loyalty is not to the electorate but to the greedy wealthy and corporate interest who pay for their campaigns and who own them in office. Once elected they continue their manipulation and propaganda campaigns, doing their best to keep the American people divided, fearful of their neighbors or those other people who don't really want to work to get what they have but want it handed to them....you know, those other people who don't look like most of us, who don't speak like most of us, who don't worship like most of us.......And while running these propaganda campaigns, spreading the fear and anger against those other people who want to take away the hard earned gains of the working class and middle class, these politicians have and are attacking and destroying  the labor laws and pay scales as well as the government regulations that created, nurtured and protected the once growing (now shrinking) middle class and gave hope to the poor and working class in our nation. This will continue as long as people continue their self destructive voluntary ignorance and continue to elect politicians bought and paid for by the wealthy and corporate America. From Mother Jones....
Matt Yglesias isn't buying my story that skyrocketing Wall Street earnings—and the skyrocketing incomes of the super-rich in general—are basically coming out of the pockets of the working and middle classes:
I think what Kevin’s story keeps missing is a plausible causal account of how a tiny number of financiers have been able to hoover up money from the median wage earner....I can tell you a story about how a tiny number of financiers have been able to hoover up money from the broad class of rich people in the 80th-99th percentile who own the bulk of the financial assets in the country by swindling them. I can tell you a story about how a tiny number of financiers have been able to hoover up money from the broad class of rich people via the income tax and “bailouts.” But the median wage earner seems harder to me.
....Here’s another story. A lot of the median wage earner’s money has been hoovered up by the health care system. If we had single payer health insurance in the United States then increases in per capita health care spending would exhibit themselves as higher taxes....The last part of my story is monetary policy. It used to be the case that monetary policy errors were two-sided. Sometimes wages grew too fast (inflation) and sometimes they grew too slowly (recession), but since 1980 we’ve only ever erred in one direction and experienced three labor market recessions and zero outbursts of inflation.
As it happens, swelling health care benefits aren't enough to account for more than a small amount of middle class income stagnation over the past three decades. The arithmetic just doesn't work out. But Matt is right that the weakest part of my story is coming up with a good causal account of how the top 1% sucked up so much money from the middle classes. But I think it's a mistake to get overly wonky and look for some kind of geometric proof of how this happened. You're just never going to get that. You're never going to be able to point to a specific policy at time X that caused a specific transfer of income share at time Y.
As another blogger put it, "It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw." Except it's not just the banks. It's their super-rich clients, too.
Still, I don't think that a plausible story of causation is really all that hard. First, take a look at middle class income stagnation. What caused that? Matt already pointed to one cause: monetary policy since the late 70s that's kept inflation low at the cost of keeping labor markets persistently loose. To that, I'd add several other trends that have marked the past three decades: trade policies that accelerated the decline of U.S. manufacturing; domestic deregulation policies that squeezed workers; stagnation in the minimum wage; immigration policies that reduced wages at the low end; and a 30-year war against labor that devastated unions and reduced the bargaining power of the working class.
On the merits, you can argue for or against any of these individual policies. But there's very little question that collectively they are (a) policies strongly promoted by business interests and the rich, and (b) they suppressed middle class wages. Note that a few of these policies are global in nature, which explains why some other advanced countries also saw a certain amount of middle-class wage stagnation, but that all of them were promoted very aggressively in America, which explains why we saw more of it than most countries.
Now, if these policies hadn't been in place, middle class wages would likely have grown at about the same rate as the overall economy—just as they did in the postwar era. But they didn't, and that meant that every year the money that would have gone to middle class wage increases instead went somewhere else. It was a vast and steadily growing pool of money, and the chart on the right gives you an idea of its size by 2005. It comes from Jacob Hacker and Paul Pierson, and it shows how much income would have gone to different groups if their income had grown at the same rate as the broad economy. The bottom 80% lost $743 billion by growing more slowly. The top 1% gained $673 billion by growing more quickly. That's a pretty close match. And the upper middle class, in the 80th-99th percentile? They did OK but not great, posting a net gain of $126 billion. In other words, the well off mostly don't seem to have suffered at the hands of the super rich. Instead, the money gained by the top 1% seems to have come largely from the bottom 80%.
But what's the mechanism? What are the policies that allowed this pool of money to flow into their hands? Again, you can point to several things. Just to name a few: reduced high-end marginal tax rates on income and capital gains; relentless financial deregulation; weak antitrust enforcement leading to industry consolidation; the emergence of high-speed trading profits available only to well-connected financial firms; crippling of the IRS's ability to audit high earners; and the ability of the rich to make big financial bets backstopped by government bailouts. All of these are policies promoted largely by business interests and the rich.
There's no indisputable smoking gun here. As I said, you're just never going to get that. What we have, however, is still very, very suggestive. The argument goes like this. (1) For three decades we've had wage suppression in the middle classes, largely as a result of policies promoted by the rich. (2) Conversely, the well off in the 80th-99th percentile have mostly kept up. Their incomes haven't skyrocketed, but they've done fine. (3) The aggregate pool of money lost by the middle class is suggestively similar to the amount gained by the super-rich. (4) A wide variety of policies have coalesced that have allowed the super-rich to funnel this money in their own direction. As Tyler Cowen put it, "It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw." Except it's not just the banks. It's the banks and all their super-rich clients.
 

30 December 2010

Wall Street's Ten Biggest Lies for 2010 29DEZ10

BROUGHT TO YOU BY THE GOP, TEA-BAGGERS AND THE GREEDY PIGS OF REPUBLICORP AND THE MILITARY-INDUSTRIAL COMPLEX....
What a great year for Wall Street: profits up, bonuses up and, best of all, criticism down, especially from Washington. Somehow Wall Street has much of America believing its lies and rationalizations. We're even beginning to forget that Wall Street is largely responsible for the economic mess we're in.
So before we're completely overtaken by financial Alzheimer's, let's revisit Wall Street's greatest fabrications for 2010. (For the full story, please see The Looting of America.)

1."Honest, we didn't do it!"
Two years ago Wall Street's colossal greed crashed our economy. Our financial elites created and spewed highly leveraged toxic assets around the globe. These poisonous "innovations" pumped up the housing bubble and Wall Street grew insanely rich in the process. When it all burst, we learned that the big Wall Street institutions that had caused the crash were far too big to fail -- and too connected. High government officials came to their rescue with trillions in cash and guarantees -- underwritten, of course, by we taxpayers. Everyone knew this at the time. But if you asked just about anyone on "The Street" they denied all culpability and pointed the finger everywhere else: Fannie, Freddie, the Fed, the Community Reinvestment Act, tax deductions for home buying, bad regulations, not enough regulations, too many regulations, too much consumer debt, the rating agencies, the Chinese -- and on and on. Sadly, their blame-shifting strategy worked, bamboozling the media and people across the political spectrum. The GOP members of the Financial Crisis Commission are so drunk with this Kool-Aid that in their minority report, they refuse even to use the words "Wall Street" or "speculation" in assessing the causes of the crash. Hypocrites? Crooks? Morons? Take your pick.
2."The overall costs will be incredibly small in comparison to almost any experience we can look at in the United States or around the world."
Ever since Treasury Secretary Timothy Geithner screwed up his tax returns we knew he was numerically challenged. But his statement to Congress on December 16, 2010, on the cost of the bailout shows a willful inability to count. Yes, Wall Street has paid back most of our bailout funds. Whoopee! Our economy is in shambles, and millions of people are suffering. With his offensive "no big deal" analysis, Geithner glosses over all this human misery, and sidesteps the hidden costs of the bailout, including the financial insurance we taxpayers provided to every giant financial company in the country via the Fed. On the open market, that insurance -- which guarantees trillions of dollars in toxic assets -- would come at a very steep price. We coughed it up for free. But that's still chump change compared to the human costs of the worst employment crisis since the Great Depression -- the lost income, the depleted savings, the ravaged neighborhoods. Then there's the capsized state and local budgets, the public service reductions, the laid off teachers, firefighters and police officers -- all resulting from a plunge in public revenues caused by Wall Street's crash. Why aren't these costs on Geithner's balance sheet? A cynic might think Tim was priming us to accept the latest round of Wall Street bonuses. Hey -- they paid us back, so why should we care how much they earn?
3. "It's a war. It's like when Hitler invaded Poland in 1939."
Steven Schwarzman is supposed to be brilliant. After all, he made billions as head of the Blackstone Group, a private equity company and hedge fund. But last August, as some members of Congress mulled about eliminating a very lucrative tax loophole, he suffered a mental meltdown and saw an impending Nazi invasion. But the awful attack never happened. Schwartzman and his fellow hedge fund honchos all held onto their unbelievable tax break: Hedge fund and private equity income is still only taxed at 15 percent rather than at the top income tax rate of 35 percent. (That's because, inexplicably, it's considered "capital gains," not income.) Taxing Schwartzman's income as income would cost him hundreds of millions of dollars -- and the prospect of this apparently triggered a shock spasm that catapulted his foot into his mouth. I'm sure my IQ isn't high enough to keep up with the genius logic behind Steve's analogy. But just who is Hitler and who is Poland in his scenario? Maybe in his grandiose conceit, his firm is as big as Poland? Or it would require a Blitzkrieg to wipe out his tax loophole? In reality, even if Schwarzman had to pay a 90 percent tax rate (as he would have under Eisenhower), it would hardly have been a hardship -- let alone World War 3. He'd still have more money than he could ever spend in his lifetime. Schwarzman should be proud though: He gets 2010's Dumbest Wall Street Quote of the Year Award. Bravo! (In 2009 the honor went to Lloyd Blankfein, CEO of Goldman Sachs, who claimed he was "doing God's work."
4. "The hard truth is that getting this deficit under control is going to require some broad sacrifice, and that sacrifice must be shared by employees of the federal government."
But not by Wall Street. President Obama words of November 29th came only days before he "compromised" with the Republicans to continue the Bush tax cuts for the super-rich and to bestow an enormous estate tax gift to the 6,600 richest families in America. Mr. President, the "hard truth" is that you're slapping around public sector workers because you don't have the nerve to take on Wall Street. If you had the guts, you could raise real money by going to war with Steven Schwartzman and eliminating the hedge fund tax loophole. By the way, closing that loophole for just the top 25 hedge fund managers would raise twice the revenue than you'll get by freezing the wages of all two million federal workers! (See "The Wall Street Tax Debate that Never Was" )
5. "25 hedge fund managers are worth 658,000 teachers."
Nearly everyone on Wall Street sincerely believes that they are "worth" the enormous sums they "earn." You see, their pay is determined by the market, and markets don't lie. They reflect the high value our skilled elites bring to the economy. So we shouldn't be shocked that the top 25 hedge fund managers together "earn" $25 billion a year, even at a moment when more than 29 million Americans can't find full-time work. The outrageous economic logic of Wall Street compensation has those 25 moguls taking home as much as 658,000 entry level teachers (they earn about $38,000 per year). How can that be justified? It can't. These obscene "earnings" are the product of 30 years of financial deregulation, as well as the tax cuts and tax loopholes that our government has just extended. The hedge fund honchos get most of their money by siphoning off wealth from the rest of us, not by creating new value. I dare Wall Street to prove otherwise.
6. "To bolster the economy we need .... an improvement in the relationship between business and government (the current antagonism, even if not the primary explanation for slow hiring and sluggish investment, does seem to be affecting hiring and other business behavior)."
In this op-ed, Peter Orszag, Obama's former budget director, parrots the Wall Street line that employers aren't hiring because of "regulatory uncertainty." Mother of God, how much more certainty do they want? The Republicans and Blue Dog Democrats aren't about to let Obama seriously regulate Wall Street, even if he wanted to, which he doesn't. The truth is that employers aren't hiring because there's insufficient consumer demand for goods and services. But at least Peter Orszag is a man of his word. He personally plans to "improve the relationship between business and government" by tapping his government contacts at his new fat job at Citigroup, the nearly failed mega-bank that he helped to save at taxpayer expense. Orszag could have landed a coveted professorship at just about any university in the world. But apparently the 42-year-old wiz kid prefers Citigroup's multi-million dollar compensation package. Any bets on how long it takes for Larry Summers to cash in?
7. "Lengthened availability of jobless benefits has raised the unemployment rate by 1.5 percentage points."
You see, the unemployed cause their own unemployment, at least if you believe this assessment from a March 17th research note from JP Morgan Chase. (Next, Wall Street will call for a return of the Poor Houses.) The theory is simple -- you give people money not to work and they won't look for jobs. Still, it takes chutzpah for JP Morgan Chase, the beneficiary of billions of dollars in taxpayer largess, to criticize the unemployed for not finding jobs that aren't there, precisely because JP Morgan Chase helped to destroy them! Dear JP Morgan research staff: Five to six workers are now competing for every available job. If that's too complicated for you quants to grasp, maybe you should try a game of musical chairs in the trading room.
8. "Private employers, led by our revitalized financial sector, will create the jobs we need -- that is, if the government would just stay out of the way."
We now need 22 million new jobs to get us back to full employment (5 percent unemployment). In addition, each month the economy must generate another 105,000 jobs just to keep up with new entrants into the workforce. To get to full employment, the private sector would have to create about 630 firms the size of Apple (35,000 employees each). These numbers don't lie. Does anyone on Wall Street really believe that the private sector alone can pull off this miracle? But really, why should they care? They've got theirs, thank you very much. The painful truth that both Wall Street and Washington refuse to face is that if the big, bad government doesn't fund or create millions of new jobs, we'll face crippling unemployment for decades to come.
9. "Tim Geithner extolled 'the benefits of financial innovation' to the American economy." (Wall Street Journal, August 4, 2010)
Sorry to beat up on Tim again, but it's sometimes hard to tell who he's working for. Whenever you hear the phrase "financial innovation" put your hand on your wallet. That's the phrase Wall Street uses to justify its casinos and its outlandish profits and bonuses. People who talk about "financial innovation" are either getting big bucks on Wall Street, want more bucks on Wall Street, or hope to get a job on Wall Street the nano-second their public service ends. My question for Tim is: If Apple creates iPhones, what does Wall Street create? Warren Buffett says it creates "financial weapons of mass destruction." Paul Volcker, Reagan's Fed Chair, said there is not a "shred of evidence" that "financial innovation" is beneficial. Volcker also believes that the economy "was quite good in the 1980s without credit-default swaps and without securitization and without CDOs." Volcker gets the Smartest Wall Street Quote of the Year Award: "The most important financial innovation I've seen in the last 25 years is the automatic teller machine." How could Tim get it so wrong?
10. "I'm shocked, shocked to find that gambling is going on in here." Okay, okay, Claude Raines said that in Casablanca, not on Wall Street. But Wall Street and its defenders say exactly the same thing about their opaque derivatives games. Louise Story's excellent piece in The New York Times shows how a handful of banks have cornered the market clearinghouses for derivatives - entities that are supposed to make derivatives less risky. The big banks are limiting competition, according to Story, because they "want to preserve their profit margins, and they are the ones who helped write the membership rules." Meanwhile, Wall Street is quietly pushing to exempt its most profitable derivatives from even these rigged exchanges. So don't be "shocked, shocked" when Wall Street crashes again and we're asked to foot the bill. And that's when, not if.
*****
Dear Readers, here's to a Happy New Year and a more just 2011. Many thanks for all your support.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the New Class War, (hopefully to be published in 2011).

09 October 2010

Good TARP News Doesn't Fit; Media Are Flummoxed 4OKT10

HERE'S an update on TARP, actually the end of the TARP program, and the facts about what it did and how much it actually cost. Too bad the gop and the tea-baggers continue to deceive the American electorate about who brought about the need for the TARP program, who voted for the program and who benefited from it. 
Sept. 10, 2009: A protester holds a sign as Treasury Secretary Timothy Geithner testifies about TARP
Mark Wilson/Getty Images A year ago, TARP was a clear villain -- as when this protester appeared on Capitol Hill when Treasury Secretary Timothy Geithner was preparing to testify. Many in the news media haven't caught up with the more recent better news about the program.
What do we do with the end of TARP?
And what do we do with the news that TARP will not have cost anything like the $700 billion we thought it would? What if it really cost $50 billion, or less?
What if, in the end, the Troubled Asset Relief Program so controversial at birth and vilified throughout its two years of life turns out to have turned a profit for the government and the taxpayer?
We — most of the news media this is — simply don't know what to do with this news.
  The suggestion that TARP did not blow a hole in the federal budget potentially blows a hole in some other presumptions as well. Economists will argue for years over the necessity of TARP, and the rest of us can argue over the bonuses investment bankers still got (and continue to get).
But we won't argue about whether the government could or should have done more to prevent the collapse of the credit markets and the mass failure of banks in 2008. Because the government did do TARP, and those other things did not happen. We did not go back to 1929 or worse. And, unlovely as it may be, TARP remains the closest thing we have to an explanation for that.
Still, the expiration of the program as Sunday turned to Monday passed largely unremarked. And insofar as the media have noticed the story of TARP's apparently much-reduced cost, that tale has been anything but ballyhooed.
(For an exception, see the package offered Sunday evening by Guy Raz and the crew at Weekend All Things Considered.)
On the last business day before TARP expired, The New York Times and The Washington Post did report the much-reduced cost figures — mentioning the potential for the program to actually make money for taxpayers in the final accounting.  But the Times put the story in the Business Section, and the Post played it on the Federal Page.
Their judgment may well have been affected by the fact that the numbers available were coming from the White House, which is obviously interested in defending a program President Obama voted to create and administered once in office.
But it's also apparent that the TARP-as-hero story does not fit well with the TARP-as-Beelzebub narrative that has been so strong throughout this election year.
And narratives matter. Nothing is more central to journalistic practice than the telling of stories. Stories are how we capture, comprehend, explain and deliver the news. Without stories, we would be wandering lost across the landscape of events and sensations. We need a narrative, or we have no organizing idea.
This imperative applies not only to each day's events, but to the broader sweep of occurrences in succession. We need a narrative for each week, each month and each fiscal year. We need a narrative for every electoral cycle.
And once we have established such a narrative, everything is under control.  Everything, that is, except whatever fails to fit the narrative.
And in 2010, there's been no clearer story line than the toxicity of the Toxic Asset Relief Program. It's a burden for many a Democrat, of course, but its weight is being borne by many Republicans as well.
Lifelong conservatives with careers of faithful adherence to free market principles have seen those careers wrecked this year, and no issue looms larger in their downfall than TARP. We are not just talking about moderate Republicans like Rep. Mike Castle in Delaware, or moderate-to-conservatives such as Sen. Lisa Murkowski in Alaska. We are talking orthodox conservatives such as Sen. Robert Bennett of Utah and South Carolina Reps. Bob Inglis and J. Gresham Barrett.
Thus we are confronted with a problematic moment just now in the telling of the tale of the 2010 elections. We know we have a firm grasp on our narrative, which has been fixed for months: The Democrats are in deep, deep trouble because of high unemployment and a perception of government overreach and government interventionism — symbolized by the health care law and the bailouts. And it all started with TARP.
Part and parcel of this overarching narrative is the anger of the populace at the persistent effects of the recession. Even if economic growth has resumed — at least in a stingy and stubborn sort of way — the recovery is not sprouting jobs the way a good recovery should. And while Ronald Reagan held down his party's losses in the 1982 midterms by blaming that year's persistent unemployment on his predecessor, Barack Obama and his majority Democrats have not been nearly so effective in pushing the same message.
Right now, the narrative is running so strong that when a coalition of unionists and other activists on the left marches in Washington — as happened this weekend — the media characterize the gathering largely by comparing its size and tone to Glenn Beck’s Tea-flavored rally of a month earlier. "Marchers say we're angry too," shouted one headline.
There you have it.  In the year of the Tea Party you must be angry or be forgotten. That's how you make yourself part of the narrative.

Related NPR Stories

02 September 2010

The Cry for Democratic Moral Leadership and Effective Communication 2SEP10 & What Created the Populist Explosion and How Democrats Can Avoid the Shrapnel in November 31AUG10

If you have not read Drew Westen's outstanding piece, "What Created the Populist Explosion and How Democrats Can Avoid the Shrapnel in November" (SEE BELOW), on the Huffington Post, Alternet, and other venues, read it immediately. Westen states as eloquently and forcefully as anyone what he, I, and other progressives have been saying from the beginning of the Obama administration. I agree fully with everything he says. But ...
Westen's piece is incomplete in crucial ways. His piece can be read as saying that this election is about kitchen table economics (right) and only kitchen table economics (wrong).
This election is about more than just jobs, mortgages, and adequate health care. All politics is moral. All political leaders say to do what they propose because it is right. No political leaders say to do what they say because it is wrong. Morality is behind everything in politics -- and progressives and conservatives have different moral systems.
In the conservative moral system, the highest value is preserving and extending the moral system itself. That is why they keep saying no to Obama's proposals, even voting against their own ideas when Obama accepts them. To give Obama any victory at all would be a blow to their moral system. Their moral system requires non-cooperation. That is a major thing the Obama administration has not understood.
The conservatives understand the centrality of morality. They attacked the Obama health care plan as immoral for violating the moral principles of freedom ("government takeover") and reverence for life ("death panels.") The Obama administration made a policy case, not a moral case. The conservatives have characterized the bailouts as thievery and Obama's ties to Wall St. as immoral -- as being in bed with the thieves. The attacks on government are seen as moral attacks, with government seen as taking money out of working people's pockets and giving it to people who don't deserve it. Whether it is the birthers, or the anti-Muslims, or the anti-immigrants, of the pro-lifers, the attack is a moral attack. The Tea Party cry is moral -- for "freedom" (see my book Whose Freedom?), for God, for patriotism. Even jobless benefits are seen as giving money to people who are not working and don't deserve it. Even social security that workers have earned, that are deferred payments for work, are seen as undeserving people "sucking on the tits of the government."
The moral case is not answered just by good policy that will help people who need help -- as Westen proposed. The good policies -- extending unemployment benefits, help to small businesses, help for teachers and firemen, limits on credit card rates, restrictions on rate increases and service reductions by HMO's -- in themselves fit a progressive moral system, but don't in themselves make a case for progressive moral leadership.
Why are so many people about to vote against their interests? The Republicans are not offering kitchen-table benefits. When people are voting against their interests, more interest-based arguments don't help.
Westen's discussion of "the center" and of populism in general, misses what is crucial in this election. There is no one "center." Instead, a considerable number of Americans (perhaps as many as 15 to 20 percent) are conservative in some respects and progressive in other respects. The have both moral systems and apply them to different issues -- in all kinds of ways. You can be conservative on economics and progressive on social issues, or conservative on foreign policy and progressive on domestic issues, and so on -- in all sorts of combinations.
Neuroscience 101, which Westen correctly invokes, tells us that in the brains of such voters, the two incompatible systems inhibit each other, that strengthening one weakens the other, and that the stronger one can have its influence spread to other issues. The "swing voters" are really "swing thinkers." And it is language -- moral language, not policy language, heard over and over -- that strengthens one political moral system over the other and determines how people vote. The Democrats need to reach the swing thinkers -- the people who are moral conservatives on some issues and moral progressives on others -- and strengthen their progressive moral views. The kitchen table arguments must become moral arguments as well -- arguments about freedom, life, fairness, and the most central of American values.
What are those values? They are the values that won the 2008 election for Barack Obama -- and they were not just hope and change. Candidate Obama made the case that American is, and has always been, fundamentally about Americans caring about each other and acting responsibly on that care. Empathy, which he proclaimed over and over was the most important thing his mother taught him, and is the basis of our form of government. Responsibility is both personal and social. "I am my brother's keeper," as he said over and over in the campaign. And thirdly, excellence -- doing everything as well as we can, individually and as a nation. That is why we have life, freedom, fairness, equality -- and quality -- as fundamental values.
We haven't heard that kind of moral leadership since the inauguration. Americans are longing for it. And those moral values really do motivate every kitchen table policy!
It is morality, not just the right policy, that excites voters, that moves them to action -- that creates movements. Legislative action must come from a moral center, with moral language repeated over and over.
What should be avoided, besides policy-wonk and pure-policy discourse? Again, the answer comes from Neuroscience 101. Offense not defense. Argue for your values. Frame all issues in terms of your values. Avoid their language, even in arguing against them. There is a reason that I wrote a book called, Don't Think of an Elephant! Don't list their arguments and argue against them using their language. It just activates their arguments in the brains of listeners.
Don't move to the right in your discourse or action. That will just strengthen the conservative moral system in the brains of swing thinkers. Frame your arguments from your moral position.
In addition, beware of the same pollsters and focus-group-dialers who missed Scott Brown's moral message to the swing-thinkers in Massachusetts and claimed that Martha Coakley would win so handily that she could go on vacation. Just because a message plays well in focus-group-dialing doesn't mean it will win elections.
Finally, Democrats need a truly effective communication system. They need unified, morally-based framing of issues. They need to train spokespeople all over the country in using such framing and avoiding mistakes. They need to organize those spokespeople. And they need to book them, as conservatives do, on radio, TV, in civic and religious groups, in schools and universities. This is doable, but this late, it will take resolve from the top.
Winning this election will require the right policies and actions, but it will also require moral leadership with honest, morally-based messaging and a communications that will not just blog and knock on doors, but will be there in the districts with the crucial swing-thinkers 24/7 day and night.
The Democrats cannot take their base for granted. Only moral leadership backed by actions and communicated effectively can excite the Obama base once more. Without that excitement, the Democrats will lose big.

What Created the Populist Explosion and How Democrats Can Avoid the Shrapnel in November

 http://www.huffingtonpost.com/drew-westen/what-created-the-populist_b_699960.html

To say that the American people are angry is an understatement. The political brain of Americans today reflects a volatile mixture of fear and fury, and when you mix those together, you get an explosion. The only question at this point is how to mitigate the damage when the bomb detonates in November.
The bad news is that it's too late for Democrats to do what would have been both good policy and good politics (and what the House actually did do), namely to pass a major jobs bill when it was clear that the private sector couldn't keep Americans employed. The "Obama Doctrine" should have been that Americans who want to work and have the ability to contribute to our productivity as a nation should have the right to work, and that if the private sector can't meet the demand for jobs, we have plenty of roads and bridges to fix, new energy sources to develop and manufacture, and schools to build and renovate so our kids and workers returning for training can compete in the 21st century global economy. From having spent much of the last four years testing messages on a range of issues, from immigration to taxes and deficits, I can say with some certainty that nothing John Boehner or Eric Cantor could say could come within 30 points of generating the enthusiasm -- particularly among swing voters -- of a message that began, "We don't have a shortage of work ethic in this country, we have a shortage of work." That message resonates across the political spectrum. And it isn't even the strongest message we've tested in the last weeks or months that beats back the toughest deficit-cutting language the other side can muster.
But it's too late for that. The administration opted for an alternative doctrine, which Larry Summers enunciated on This Week several months ago: that unemployment is going to remain high for the foreseeable future and eventually come down -- as if there's nothing we can do about it -- and that they will push here and there for small symbolic measures whose symbolism tends to escape people who are out of work. It's hard to be excited by symbolism when your children are hungry or the bank is repossessing your home -- although you didn't do anything to deserve it -- while the people who did are once again making out like bandits.
Although the situation looks bleak for Democrats in November, it ain't over 'til it's over. Republicans are shooting themselves in the foot all over the country, running Tea Party candidates who are so far to the right you can't see Middle America from their porch. And some endangered Democrats will likely see victory in November from theirs if they understand the public mood and speak to it. 
What is that public mood? It can be characterized by a single phrase -- populist anger -- and it cuts across partisan lines. On the right, it is alloyed with racial anxiety and prejudice. On the left, it is alloyed with tremendous disappointment at what could have been if we had the kind of bold leadership for which times like these cry out. And among people in the vast political center, populist anger is alloyed with anxiety and uncertainty -- about their jobs, their homes, and their children's future.
How to Create a Populist Explosion: A Tragedy in Two Acts
So how did we get here? The story can be told as a tragedy in two acts.
Act I: The GOP Sets the Country on a Course of Economic Destruction and the President Calls for Truth and Reconciliation without the Truth Part
  • A strong economic downturn devolves into a Great Recession, as the stock market crashes and major banks fail. By October 2008, upper middle class moderate Republicans in the suburbs are so frightened by what's happening to their assets that they're willing to give Democrats a chance.
  • A Republican administration that believes in neither government nor regulation creates a 700 billion bank bailout with no accountability. Unlike Republicans, who would say "no" in a situation like this and let a Great Recession turn into a Great Depression, Democrats do the right thing, but they don't make it clear from the start that these are Bush Bailouts and remind Americans, over and over, that the cause of all the bankruptcies is the bankruptcy of Republican ideology.
  • A charismatic young president raises people's hopes and expectations, as he uniquely can. Americans are frightened, but they are willing and waiting to hear an alternative narrative to "government is the problem, not the solution" and a path back to economic recovery and security.
  • The White House refuses to tell the American people three stories they desperately need to hear.
  • The first is why the economy has gone into the ditch, and who did it. The president is steadfast in his position that we should "look forward, not backward," even as the GOP is blocking his every initiative to clean up its mess. As conservative attacks on him and Democrats increase, he refuses to indict the Republicans in Congress or President Bush for having destroyed our economy and putting one in eight Americans out of work and one in five either behind on their mortgage or in the process of having their homes foreclosed by the same bankers who gambled them away. Why did he need to tell the American people who was responsible for their misery -- and to repeat it again and again? Because otherwise, if the worst economic crisis since the Great Depression didn't subside within a year and half, voters would start to associate it with him and his party. This is Neuroscience 101 -- it's how mental associations are formed. But the president never even uttered George W. Bush's name in his first year in office, and the first time he did mention Bush was to appoint him, along with former President Clinton, to co-lead American relief efforts in Haiti. The president doesn't like putting antagonists in any of his stories, but if forced to, he would cite unnamed "naysayers," "Washington politics as usual," or "Congress," which was counterproductive given that Congress was held by his party. The guiding belief at the White House implicit in this messaging strategy was that Americans have a good grasp on economics and good memories.
  • The second story the American people needed to hear from the president was why deficit spending is essential when the economy is spiraling downward. It's not a hard story to tell, even in a sound bite. But one of the best educators to occupy the Oval Office in decades chose not to educate -- he actually did it once, with prodding, but never repeated what was a superb explanation --- nor did he remind voters every time his opponents attacked him for deficit spending that they had left him with a 1.2 trillion dollar deficit on the day he walked into office because of their unpaid-for tax cuts to millionaires and unpaid-for war on Iraq that called on no one to sacrifice except our soldiers and their families (and our kids and grandkids, who will be paying off this war for generations). A year later, with Democrats on the ropes, the president started to tell that story. It was the right move, but appeared defensive because it hadn't been part of his guiding narrative from the start.
  • The third story the president needed to offer was an alternative narrative on government. The president and his party were about to offer effective government as a solution to multiple problems after 30 years of solid branding by conservatives since Ronald Reagan about how government is the problem. But the narrative never came.
  • The White House and Democratic Congress pass what virtually all economists outside the Goldman Sachs-to-Washington pipeline consider a half-stimulus that they predict will likely produce half-results. It fulfilled its promise. But the equally predictable political result was a discrediting of the concept of government intervention to stimulate the economy in the eyes of the public -- enough to scare off Democratic lawmakers from doing what they learned about Keynesian economics in intro economics for the indefinite future. Instead of blasting the Republicans for having hurled the country toward an abyss that would now take drastic measures to avert and warning the American people that this could easily be the first of two or three trillion-dollar packages that might be needed to get Americans back to work and to get the gears of the economy grinding again before we could start returning to the kinds of surpluses Bill Clinton had left the last time a Democrat was in the White House, the president chose to compromise with a party that was so unpopular when he took office that only 20 percent of voters at that point would even admit to a pollster that they considered themselves Republicans -- the lowest point for the GOP since the rise of public opinion polling 50 years earlier.
  • The economy continues its free-fall, shedding 700,000 jobs a month. Meanwhile, Democrats don't take the kind of dramatic steps necessary to stop the bleeding. Americans are becoming desperate, but they remain hopeful that this new president will turn things around, and that perhaps the jobs provisions of the new "stimulus" act will do cauterize the wound. Meanwhile, the stimulus is being portrayed by Republicans as a mixture of pork and fat, and no one is effectively answering the charges, creating increasingly negative associations to an act that was never adequately crafted or sold.
  • The logical follow-up to a bill designed to pull the economy out of a ditch is to make such a bill unnecessary in the future, by attacking Wall Street for having thrown us into crisis and passing strong legislation to rein in the excesses that created the economic meltdown. This would have sealed the American people's loyalty to the new president and Congress. (Heading into November, this is, in fact, the most popular piece of legislation the Democrats have passed, but it took them nearly a year and a half to get there, and by then, neither the president nor the Democratic Congress enjoyed the good will of the average American.) Instead, the same banks that received bailouts are foreclosing in record rates on the homeowners whose payroll taxes funded the bailouts but don't seem to get the same kind of attention to their needs from the federal government. Adding insult to injury, the banks double and triple credit card interest rates to as high as 30 percent, including on people's existing credit card debt -- while continuing to receive no-interest loans from the federal government.
  • Despite talk of accountability, no one is fired (except one auto executive), virtually no one is prosecuted or even investigated as far as anyone knows, and banks that received bailouts flaunt record bonuses.
Act II: An Anemic Economy Meets an Anemic Health Care Plan
  • The public has been clamoring for health care reform. Over 40 million people don't have health insurance at all, and the 85 percent of voters who do have health care have seen their costs double during the Bush years at the same time as real income has declined. Effective narratives on health care are widely available that win by a 2:1 margin against the toughest Harry-and-Louise anti-reform language from the other side. The opposition knows it, as evident in a leaked memo by Republican wordsmith Frank Luntz, who warns that this will be an uphill climb for opponents of reform, who would do well to accept some major elements of it.
  • But instead of using any of the well-tested narratives that were highly effective during the campaign or devising any new ones of its own, the administration decides to try to "sell" health care without a narrative. (I wrote about this in detail a year ago and will not repeat that history here, except in telegraphic form.) The president refuses to state where he stands on any of the substantive debates about health reform for a year, such as whether we should have a "public option" (a term so ill-conceived it's hard to believe the public supported it anyway; imagine the support it might have received if it had been called instead "the one health care plan the health insurance companies don't get to control"). Instead, the White House uses phrases such as "bending the cost curve" while conservatives flood the airwaves with evocative phrases such as "government takeover," "a bureaucrat between you and your doctor," and "death panels."
  • Instead of using Big Pharma and the health insurance industry as the villains of the health care story, which would explain why we need an overhaul rather than a Band-Aid, the White House once again offers a story without protagonists or antagonists, and cuts secret deals with both industries that become public.
  • Over interminable months of trying to get the votes of the same Republicans who fought against Medicare for seniors for 30 years until the program was just too popular to keep attacking it and who are still trying to gut Social Security despite its popularity, the public then watches what George Will describes as the "serial bribery" of Republican and Democratic Senators alike, as each gets to take his or her turn as the 60th vote.
  • At the 11th hour, as a compromise plan is finally going to pass, the president nixes the idea of a Medicare-like alternative Americans can choose over a health-insurance industry plan if they so desire, despite 60 percent of even swing voters wanting it included in the bill.
  • Instead of being the signature bill that demonstrates both that Democrats can govern effectively and that government can be a force for good for working and middle class Americans (who have just been told that the better plans they've negotiated or been offered for years by their employers are "Cadillacs" that are going to be taxed out of existence), the entire process proves to the average American that government can't do anything right and scares moderate Democrats away from voting for any other bill that would ever put them on the record supporting government or spending.
  • "Government" hits an all-time low in the polls, matching the popularity of big corporations, CEOs, and bailouts.
  • Populist anger emerges as the primary emotion across the political spectrum, and the president's job approval with swing voters drops into the high thirties.
  • Following the conventional wisdom, Democrats return to their all-too-familiar defensive crouch, and conclude that when in trouble, tack right. On health care, the president and his Cabinet fan out all over television to "reassure" the public on health care that abortion won't be covered (thanks for the reassurance, but most of us didn't find that reassuring), that domestic partners won't be covered, and that immigrants won't be covered. None of these issues needed to be conceded. (I know this because I tested messages on them, and well- messaged progressive positions on them would have boosted the popularity of the bill with swing voters.)
  • The White House starts adopting failed conservative policies and talking points that leave the public utterly confused about where the president, and by extension, his party, stands on the central issues of the day. The president talks about cutting deficits and increasing spending in the same breath, using the metaphor of families tightening their belt in tough times, which only strengthens resolve against stimulating a faltering economy; pledges support for massively expanding offshore drilling and "clean coal" (which doesn't exist, by the way) in a speech on climate change; and sends in 1200 additional National Guards to Arizona as an apparent reward for passing "No Latino Left Behind," while publicly objecting to the legislation.
  • The underlying psychological assumption of these moves is that if you mix policies from the right and left in equal parts, you win the center. In fact, no one has ever won the center that way. It appears weak, opportunistic, and incoherent to the average swing voter, which is particularly problematic at a time when people in the center desperately want to know that their leaders have a vision and a coherent plan for what to do (which is why both FDR and Ronald Reagan were so effective in moving voters in the center). It doesn't win any votes on the right. But it does have one predictable effect: It sucks the motivation out of your base, who feel demoralized and betrayed (if they're part of the "professional left") or less likely to vote (if they're average voters who don't follow politics carefully but just don't feel very enthusiastic anymore, even if they don't really know why).
  • Capping it all off, the BP disaster occurs two weeks after the president has adopted the "drill here, drill now," "all of the above" position of the Republican Party and the oil companies. This could have been the perfect opportunity to go on the offensive, contrast what Democrats stand for (common sense, protection of our safety, the land we leave our children, and key American industries and jobs, and sticking up for ordinary Americans against big businesses and their lobbyists) with what Republicans stand for; and connect the dots between what happened on Wall Street (with regulators owned and operated by the companies they were supposed to regulate) and what happened in the Gulf (where precisely the same thing happened). Instead, the administration finds itself on the defensive, increasingly sounding like a subsidiary of BP, allowing BP to call the shots and control information for weeks, defending increasingly hard-to-believe statistics, and issuing press releases that appear indistinguishable from those issued by BP but are inconsistent with assessments of independent scientists.
Where Do We Go from Here? So that is where we find ourselves today: a Democratic Party and Democratic base that is demoralized and unlikely to vote in high numbers in November; a Republican Party that is selling replanted Bushes with tremendous enthusiasm; and a vast political center filled with voters who are utterly confused and unsure who to turn to but certain that things aren't going well.
In January 2009 no one could have predicted that Democrats would be in this predicament today. Perhaps Democrats might lose a few seats lost in an off-year election, but certainly no more than that. We had just seen -- and the American public knew we had just seen -- the most disastrous performance by a president and party in living history, and the American people had elected a tremendously charismatic young president with enormous Democratic majorities in both houses of Congress. They had given the president and Congress a strong mandate for whatever kind of change was necessary to get us out of economic free-fall and to put Americans back to work.
But there were red flags already by the end of Obama's first week in office that led me to offer the following advice to the new administration: Tell the story of how we got in this mess or you'll own it. Tell a coherent story about deficit spending. Re-brand government because there's only one story out there now (Reagan's), and it's not one that supports a progressive agenda. Never let attacks go unanswered, because doing so only emboldens your opposition and leads the public to believe that you have no answers to them. And if you throw a bipartisan party and no one comes, don't throw another one. All of what followed has been as predictable as it has been unfortunate. A year and a half later, the White House hasn't consistently done any of these things, although the President is now intermittently doing some of them, and when he does, he does them well.
The question today is whether Democrats can channel the populist anger we are seeing around the country this late in the game. The answer is that we'd better try. Having recently tested messages on economics and jobs, including how to talk about deficits and taxes -- widely assumed to be Democrats' Achilles Heel, particularly now -- there is little question that if Democrats and progressives from center to left simply say what they believe in ways that are evocative, values-driven, and speak to people's worries and anger, many stand a good chance of surviving November, particularly when their opponents have nothing to say other than warmed-over rhetoric about cutting taxes to millionaires and multinationals and fiscal restraint except where it cuts into profits of their campaign contributors. Even the most evocative boilerplate conservative messages fall flat against honest messages that speak to the need to get Americans working again. And on issue after issue, no message is more resonant right now than one that sides with working and middle class Americans and small business owners against special interests, big business, and their lobbyists.
But actions speak louder than words, and Americans want to see action. It may be too late for the kind of jobs bill we should have seen a year and a half ago, but it isn't too late for Democrats to go on the offensive against the Republicans -- virtually all of them -- who opposed extending unemployment insurance to millions of Americans who were thrown out of work by the Republicans' corporate sponsors. It isn't too late for Democrats to contrast their support for the highly popular aid to state and local governments that just saved the jobs of hundreds of thousands of teachers, firefighters, and police all over the country with Republicans' desire to throw them out onto the street. It isn't too late to make a voting issue out of the bill the Republicans are stalling that would give small businesses a fighting chance in an economy stacked against them, and to make clear that one party stands for small businesses, which create 75 percent of the new jobs in this country, and the other party stands for big businesses that outsource American jobs and offshore their profits to avoid paying their fair share of American taxes. It's not too late to pass a bill that would limit credit card interest rates to a reasonable percent above the rate at which credit is made available to credit card companies. It's not too late to pass the first badly need "fix" to the health care reform act to demonstrate to Americans that Democrats mean it when they say this was just the first step, namely a law that stops insurance companies from increasing their premiums by 40 percent while cutting the size of their networks by 50-75 percent, which violates the principles of affordability and choice that were so essential to efforts to sell health care reform to the public. It's not too late to vow to change the rules of the Senate to prevent the use of the filibuster to give every special interest veto power over every important piece of legislation. It's not too late to introduce legislation that's been on hold in both the House and Senate to guarantee fair elections, so that the voice of everyday Americans is heard over the voice of the special interests that finance political campaigns.
On every one of these issues, a strong populist message trounces anything the other side can say. But Democrats need to play offense. They need to take up-or-down votes on bill after bill, including those they expect the other side to block, knowing that every one of those votes has the leverage of a campaign ad behind it. They need to change the narrative from what sounds to the average American like a whiny and impotent one -- "the Republicans won't let us do it" -- to a narrative of strength in numbers shared with their constituents. And they need to make every election a choice between two well-articulated approaches to governance -- and to offer their articulation of both sides' positions and values.
That leads to a final point. What Democrats have needed to offer the American people is a clear narrative about what and who led our country to the mess in which we find ourselves today and a clear vision of what and who will lead us out. That narrative would have laid a roadmap for our elected officials and voters alike, rather than making each legislative issue a seemingly discrete turn onto a dirt road. That narrative might have included -- and should include today -- some key elements: that if the economy is tumbling, it's the role of leadership and government to stop the free-fall; that if Wall Street is gambling with our financial security, our homes, and our jobs, true leaders do not sit back helplessly and wax eloquent about the free market, they take away the dice; that if the private sector can't create jobs for people who want to work, then we'll put Americans back to work rebuilding our roads, bridges, and schools; that if Big Oil is preventing us from competing with China's wind and solar energy programs, then we'll eliminate the tax breaks that lead to dysfunctional investments in 19th century fuels and have a public-private partnership with companies that will create the clean, safe fuels of the 21st century and the millions of good American jobs that will follow.
That's what Democrats stand for. It's time they said it.