Krugman Tries to Defend Himself

 

Paul Krugman has fretted a lot about the likelihood that the Obama administration would undertake government action which was insufficient and half-assed but which at the same time could be represented by the Republicans as massively obtrusive. Then, when the measures inevitably failed, government action in itself, rather than Obama’s incompetence, would be discredited.

 

So far this looks to be the likely outcome. The stimulus was way too small and not rationally planned, so it couldn’t accomplish much beyond phony palliatives like Cash for Clunkers. 

 

(It was also a case study in Democrats’ monumental political incompetence. Most of the top beneficiaries were Republican districts! These idiots can’t even get to-the-victors-go-the-spoils right!)

 

But already, at least in Obama’s mind, the very word stimulus is mud. A second, bigger stimulus? No – “deficit reduction”. The utter pusillanimity, and apparent stupidity, of this “president” is manifest. (Of course the MSM, criminally antisocial as always, has happily taken up the deficit terrorist cheer.)

 

[That's also clearly the plan with health care. By passing with great fanfare something called a "public option" which is really not a public plan at all, they intend to discredit government involvement in health care once and for all. It's a Republican bill.]

 

So Krugman is dead on about Obama’s fiscal policy.

 

But he has a problem in that he also supported the bailouts. As the absolute failure of these even according to their original premise becomes clear, Krugman has to scramble to somehow reframe the truth along the same lines as the rest of government policy.

 

So he has to argue, paraphrasing some Germans of some decades back, that there was a “good” bailout concept which was hijacked and distorted toward bad ends.

 

Somehow, in ways that seem too subtle for many of us to comprehend, the bailout was in principle a virtuous policy. It could have and should have been something far more than just a gift of stolen public money to some rich thieves. But through a combination of bad faith, weakness, and incompetence the good bailout was overcome by the bad bailout, and now we’re stuck with it.

 

To maintain his position of eminent dissenter within the system, Krugman has to acknowledge that Goldman Sachs is “bad for America”, yet still claim that the bailout was the right thing to do, and that we must now simply submit to living under their thumb.

 

He sees this as the key to maintaining any kind of credibility at all for the government, as well as the credibility of his own place in history.

 

While I take it no one cares much about the latter, we have to look for signs that he may be right about the government. It’s unfortunate, but it looks like the opportunity for constructive fiscal policy is lost. Not because of Republican bleating, but because of Obama’s cowardice. (While he may be a corporatist at heart, he’s also a politician who wants reelection. It’s very clear by now that his best hope is real populism. But that he can’t see this, or seeing it is too timid to go ahead with it, is simply a bedrock character flaw. He’s a decadent coward.) 

 

So the people’s best hope is that the people reject the corporatist government. To the extent that we see signs of this, these may be our own green shoots.

 

The new SIGTARP revelations about the corruption and fecklessness of how the bailout was conducted are having salutary effects. A week ago it looked like Ron Paul’s Audit the Fed bill was dead for another year. But the expose of the Fed’s criminal actions in the AIG money laundering scheme has given it new life.

 

This had to be passed out of committee over the resistance of head banker waterboy Barney Frank, and it may still be defeated one way or another, but I’d call its progress so far a green shoot.

 

This is what scares Krugman, and what animates today’s jeremiad:

 

Earlier this week, the inspector general for the Troubled Asset Relief Program, a k a, the bank bailout fund, released his report on the 2008 rescue of the American International Group, the insurer. The gist of the report is that government officials made no serious attempt to extract concessions from bankers, even though these bankers received huge benefits from the rescue. And more than money was lost. By making what was in effect a multibillion-dollar gift to Wall Street, policy makers undermined their own credibility — and put the broader economy at risk.

For the A.I.G. rescue was part of a pattern: Throughout the financial crisis key officials — most notably Timothy Geithner, who was president of the New York Fed in 2008 and is now Treasury secretary — have shied away from doing anything that might rattle Wall Street. And the bitter paradox is that this play-it-safe approach has ended up undermining prospects for economic recovery. For the job of fixing the broken economy is far from done — yet finishing the job has become nearly impossible now that the public has lost faith in the government’s efforts, viewing them as little more than handouts to the people who got us into this mess.

 

(My emphasis.)

 

He explains, with some hesitancy, why the whole mess was “probably” necessary.

 

So why protect bankers from the consequences of their errors? Well, by the time A.I.G.’s hollowness became apparent, the world financial system was on the edge of collapse and officials judged — probably correctly — that letting A.I.G. go bankrupt would push the financial system over that edge. So A.I.G. was effectively nationalized; its promises became taxpayer liabilities.

 

He goes on to explain how the negotiation should have been conducted. But I agree with the critics who have pointed out that once the administration and the Fed were committed to shoveling as much taxpayer money as possible as quickly as possible to these crooks, it would have been to say the least inconsistent for the Fed to have played the hardass on any particular point. Goldman’s refusal to make any concession was in the spirit of the thing. They correctly calculated that Geithner’s haircut request was a joke.

 

Of course, this is what Krugman and other “dissenting supporters” of the bailout have to deny. They have to stick with the lie that bailing out AIG in the first place made sense and wasn’t a plunder excursion, but that it only went bad in the details.

 

So officials could have called on bankers to offer a better deal, for their own sake, and simultaneously threatened to name and shame those who balked. It was their choice not to do that, just as it was their choice not to push for more control over bailed-out banks in early 2009.

And, as I said, these seemingly safe choices have now placed the economy in grave danger.

For the economy is still in deep trouble and needs much more government help. Unemployment is in double-digits; we desperately need more government spending on job creation. Banks are still weak, and credit is still tight; we desperately need more government aid to the financial sector. But try to talk to an ordinary voter about this, and the response you’re likely to get is: “No way. All they’ll do is hand out more money to Wall Street.”

So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.

 

Yes, these benighted “ordinary voters” keep getting it wrong, don’t they?

 

Like I said, I agree with him on the stimulus. But the prospects for stimulus are among the victims of the bailout in itself, not of some illegitimate hijacking of what was originally a legitimate policy. (And certainly not of public misconceptions of the matter. Here, as in more and more instances, the public was way out ahead of the establishment elites. On the bailout, the public was right and guys like Krugman were wrong.)

 

The bailout was never legitimate. It was never anything other than disaster capitalism. If Krugman ever believed the lies Paulson was peddling, or if on account of his acculturation he simply forces himself to believe in the basic soundness of the policy, that’s his misconception, not the public’s.

Bank Roundup 11/18

 

1. So how have things been on the regulation front? Any signs of life?

 

Ed Yingling of the American Bankers Association says he hates it, so that’s one good thing we can say about Christopher Dodd’s bank reform proposal.

 

In most ways it looks in theory to be a moderate improvement over Barney Frank’s corrupt mess in the House. It would have a passable CFPA, derivatives clearinghouses, would try to drag some of the shadow banking into the regulatory light (like hedge funds with $100 million or more in assets).

 

Its most disruptive departure would be to strip the Fed and FDIC of resolution authority and repose all such authority in a new agency which would also subsume the OCC and OTS. This would have separate divisions for big and small banks.

 

But it still wouldn’t break up the Too Big To Fail entities. Since that’s an absolute necessity, and a baseline measure for whether we have real reform or not, the proposal fails right there. It would still leave us under the thumb of gangsters.

 

There’s no reason to believe any “resolution authority” would ever be responsibly exercised anyway. In the crisis, under political and disaster capitalist pressure, if it’s possible for resolvers to throw the plan out the window and just repeat the bailout, that’s what they’ll do.

 

The very fact that the systemic risk entities are being allowed to continue to exist at all proves that this government will always do everything it can for their benefit. It proves that all regulation proposals are lies.

 

The same goes for all the lesser measures Dodd proposes. Just as in the House, these will be chipped away in committee, and predatory amendments will be added. In the end an anti-reform pro-racketeer bill will be passed.

 

If you doubt that, then why do you think even as we speak they’re rolling back existing regulation? (See below for more on accounting standards.)

 

There is the Kanjorski proposal to reinstate a version of Glass-Steagall floating around. This at least purports to wind down TBTF.

 

But in itself it too misses the real problem of systemic protection rackets, which is not just size but the interconnections of their socially worthless but very destructive bets. (There’s lately been some controversy over the term Too Big to Fail. I always recognized that ”Big” encompasses not just size but interconnection, and that interconnection can be a clear and present systemic danger even where the firms are not-so-big, like Bear. So that’s how I’ve always used the term and will continue to use it. As for any alleged political risk that somehow the people won’t “get it” in the case of an entity not quite as big as, say, BofA, I’m not worried about it. These are all pretty damned big by any common sense measure.)

 

As Yves Smith put it:

 

So that is why the Kanjorski approach, despite the tough talk and possible disruption, is actually a win for the industry, even if a somewhat extreme version (remarkably) were to pass. It means no one is on the trail of the draconian measures needed to contain the risks the industry poses to the public at large.

The only viable solution to the misbranded TBTF problem is to require systemically important firms (one in the OTC debt businesses, which thanks to the development of “market based credit” is now essential to modern capitalism) to exit all activities that are not socially essential and therefore deserving of government support (pure fee businesses that pose no risk to the taxpayer would be allowed). The permitted activities are regulated intrusively, with tough rules on capital requirements, and product scope (new products would be subject to approval to make sure they were socially productive, that the regulators understood them, and they did not result in increased risk to taxpayers). In other words, an effective solution requires more extensive dismemberment than anyone plans right now, and still requires heavy regulation of the crucial bits that will inevitably be taxpayer backstopped.

 

For a more typical example of how this “regulation” is supposed to work, let’s look at the proposed Perlmutter amendment to the House reform bill. “Strongly supported by banks”, this amendment would give the proposed systemic risk council the power to order the FASB and SEC to suspend or change accounting rules. You know it’s got to be bad when even the US Chamber of Commerce opposes it.

 

The FASB has already been a political whipping boy this year, as the same Kanjorski bullied it into dropping the imperfect but closer-to-reality-based mark-to-market accounting standard. But now even Paul Volcker, also an enemy of mark-to-market, but a proponent of international accounting standards, is an outspoken opponent of the Perlmutter amendment, which would bring chaos as it tosses standards formally and completely into the bloody arena.

 

A basic element of ugly harmony throughout the crisis, from both banks and politicians, has been hostility toward reality-based accounting. The reason for this is clear. The banks are all insolvent, and the only way they can pretend to be capitalistically viable rather than corporatist parasites is through massive accounting fraud. This massive fraud is now enshrined government policy, and on every front the corrupt political lackeys of Wall Street are seeking to extend it.

 

 

2. One place where the accounting wilderness has crept back is in the realm of commercial real estate.

 

The banks have perhaps around $1.8 trillion in CRE loans on their books, but since this hasn’t been marked to market no one has any idea what it could really be worth. The potemkin stress tests didn’t even pretend to deal with this.

 

Over the next several years $500 billion in loans per year are set to mature. These loans are likely to be under extreme pressure from debt deflation. Declining property cash flows, construction depressed on account of the credit crunch, depreciation in the value of the collateral underpinning these loans, all portend defaults, perhaps enough to trigger the next crash.

 

Through the TALF the Fed is backstopping many of these loans, and meanwhile the order of the day is extend and pretend: give extensions on loans you think or know will default. More phony accounting, hoping to play for time while praying for a miracle.

 

So what this means is the Fed is propping up the simulacrum of a continuing CRE loan market. But when the Fed withdraws this support, or when it’s just not enough, lending will stop, everyone will then value all this paper at zero, and again the banks will be forced into insolvency check.

 

We are in end game. The government will certainly keep trying to help its bank king escape check, but it can’t do it forever. One day, inevitably, it will be checkmate.

 

 

3. Meanwhile, there seems never to be any lack of just plain bad behavior. These people are not only evil, they are petty and mean.

 

*Obama’s ”good people” have certainly shown their good will in rushing to jack up credit card rates before a new regulatory restriction prevails next year. (Dodd has also proposed legislation to move up this date.) The most notorious is Citi slamming some of its best customers with a 29.99% rate. But according to a Fed survey 50% of banks are raising rates and lowering credit lines for good customers. It’s a combination of squeezing the cash cow and punishment for the Congress daring to pass a mildly reformist bill.

 

(Citi issued a statement blaming the people and regulators.)

 

According to the Pew Charitable Trusts the twelve largest banks, who issue 80% of credit cards, are still using “unfair or deceptive”, and often illegal, lending tactics.

 

All of this is going on while their bank vaults are full of free Fed money.

 

[For anyone who still has questions about the health care rackets, how they'll confront legislation, and therefore how legitimate the bill there is going to be, see the same behavior on the part of Big Drug.]

 

*The Jefferson County scam has given us some insight into the character of JPMorgan. JPM, with the connivance of the standard corrupt local yahoos, swindled the county into bonding a $3.2 billion sewer project with a package of interest rate swaps which are now worthless. (Sewage indeed.)

 

(This was such an all-day sucker that other sharks were circling, and JPM paid them off to go away: $3 million to Goldman, 1.4 to Rice Financial.)

 

The county is now suing JPM, which says the claims are “meritless”. But they already settled a federal suit for $700 million. Under that deal they paid the county $50 million and wrote off $650 million in “fees”. But the county still says it can’t service the debt JPM’s scam saddled them with, and they’re demanding more support.

 

*We may learn more this week about the BofA/Merrill deal as two board members and a former executive are scheduled to testify before the House Oversight Committee.

 

Former general counsel Timothy Mayopoulos claims he was summarily fired in 12/08 when he informed BofA brass that there existed no material adverse change which would legally justify BofA’s pulling out of the Merrill deal. Meanwhile, one of the board members, Charles Gifford, is caught trashing the deal in an email: “Unfortunately it’s screw the shareholders!!”

 

It’s not yet clear what all of this means, but the picture which has been emerging is of a rotten deal pushed by the Bush administration, agreed to by the incompetent BofA “leadership” (especially the moronic Ken Lewis), who then got cold feet, especially when they realized what a garbage barge Merrill really was (they couldn’t be bothered to do due diligence earlier; Paulson stampeded them, but they were stupid enough to be stampeded).

 

They were especially upset to see how Merrill went happily whistling along handing out billions in bonuses. They wanted out of the deal, and what happened…..? That’s what we’re eventually going to find out. Supposedly Paulson used a combination of threats and rewards to rope Lewis back in.

 

We are already 100% sure of one thing. Whatever went down, it was massive theft from the taxpayers.

 

*We can’t finish without some news from the incorrigible pricks at AIG. In his latest antic, placeholder dreg CEO Robert Benmosche (last seen beginning his tenure with a vacation), frustrated at how he doesn’t get to go parading around as king of the world like Lloyd Blankfein, and how everyone doesn’t just hate him and his company but considers him a contemptible little worm, and AIG a smelly little rathole, has been threatening to quit if the government doesn’t stop dissing him.

 

Apparently the last straw was Feinberg’s decree on executive pay for his special children who haven’t paid back the TARP, remedial dunces like AIG and its head dunce Benmosche. (What kind of loser is this guy that he can’t get a better job than that? Clearly he’s not very high on the “talent” list. He quits here and he might as well go hang out with Dick Fuld.)

 

Well, there’s no point in much analysis here. AIG is the dreg of dregs (maybe along with GMAC). I wouldn’t pay the whole lot of them a plug nickel, let alone the hundreds of billions which two administrations have looted from us on their behalf.

Regulation: Fed Up

 

As Congress debates an alleged attempt* at renewed regulation of the finance sector, one of the main issues is the proper scope of Fed authority.

 

[*Let's never forget, short of breaking up the Too Big To Fails it's all kabuki. All the debate over resolution authority is moonshine at best, disaster capitalism at worst, since none of the on-the-table proposals contemplate anything more than "resolving" TBTF entities when they again start to collapse. None seek to break them all up preemptively.

 

For that proposal we have to go to Bernie Sanders.]

 

It’s quite a fracas, with the Fed wanting to preserve and expand its powers; the administration and Frank dithering on distributing power between the Fed, the FDIC, some new “council”, and a newly merged OCC and OTS, but always wanting to maintain broad Fed power; and Dodd actually wanting to strip some Fed power and repose it in the OCC/OTS entity.

 

But in assessing all this we should always remain crystal clear that the Fed is not a regulator and does not see itself as one. It seeks regulatory authority only to put that range of authority on ice and open up a free fire zone for the banks, with whom it culturally identifies, and with whose personnel its personnel personally identify.

 

It’s a quasi-public entity only for legal and constitutional arbitrage purposes. Thus it argues its “public” status when convenient to shield it from various kinds of lawsuits and other accountability. But in its own mind it’s a private bank and the orchestrator of anti-public bank feudalism.

 

For a case study in all this, we have the new SIGTARP report (linked here) on the AIG swap contract resolutions.

 

This is the notorious incident where the Bush administration, having already bailed out the banks in numerous ways, laundered yet another bailout through AIG via the mechanism of paying off AIG-written CDSs at par.

 

The gamblers not only had their losses covered but here their losing bets were actually paid off as winners.

 

We’ve always known this was a corrupt act of theft from the people, organized by Tim Geithner at Goldman Sach’s behest, but thanks to the excellent Neil Barofsky and his investigation we have new details and analysis.

 

Geithner was supposed to conduct a negotiation with the AIG swapholders on behalf of the taxpayers whose money had bailed out AIG as well as many of those same counterparties. Barofsky found that the Swiss UBS volunteered to accept 98 cents on the dollar. But when Goldman and the French dug in and demanded a full payout, Geithner caved in. GS, acting as ringleader, was confident after the first AIG bailout that the government (it’s taxpayer money so I’m using “Fed” and “government” as synonyms) would bail everybody out across the board, and this was the line they followed.

 

Barofsky found that the Fed “refused to use its considerable leverage”. (He also correctly gets to the heart of the fact that actions are everything, conscious motive nothing: Geithner and the Fed cadres may deny it, but “irrespective of their  stated intent…tens of billions of government money was funneled inexorably and directly to AIG’s counterparties”. That’s a capital crime by its existential fact, and nothing can mitigate it.)

 

The report lays out the Fed’s attitudes as being these:

 

1. It saw itself not as a regulator, but as an AIG creditor. (And a creditor which didn’t care about its “own”, i.e. the taxpayers’, interests.) So it never talked in terms of “we bailed you out, now you need to make concession”, but rather of “AIG owes us all money, and I’m voluntarily not caring about what it owes me, so let’s see if anyone else is willing to make a voluntary concession”.

 

So even when UBS was willing to concede, when GS refused, the game was over from Geithner’s point of view. All he could do was ask them, and they said No.

 

2. The Fed decided it couldn’t treat foreign banks differently from domestic ones, so it coordinated with French regulator Commission Bancaire in handling the disposition of two French banks involved in the deal.

 

The French simply joined Goldman in putting up a solid front vs. anything short of a complete laundry delivery. Altogether 7 of the 8 banks involved refused concessions.

 

If Geithner had been negotiating on behalf of the people, he would’ve seized the opportunity for divide and conquer. Once UBS went first, they should’ve become the belle of the ball, implicitly first in line, which would’ve put pressure on the others to concede as well. (Needless to say, 98 on the dollar was absurdly high as well and should’ve been just the start of one heckuva massive haircut for these hippies.)

 

But this wasn’t possible, since:

 

3. Geithner believed on ideological grounds that his responsibility was to the “sanctity of contracts”. Never mind that (1) CDS as written by AIG were basically a scam, and the government has no responsibility to make whole the rich victims of scams, (2) in this case the “victims” were really co-conspirators, since CDS was a key part of the big bubble they were all blowing as hard as they could, (3) Geithner and the Fed’s first responsibility, their first contract overriding all others, was with the American people.

 

But as George Washington puts it:

 

Apparently, while Geithner was concerned with the sanctity of the CDS contracts (which – I would argue – were all based on fraudulent representations concerning how safe an investment they were), he didn’t care very much about the sanctity of the agreement of a government to do what is best for its people.

But actually, the New York Fed isn’t a government agency. The Fed itself maintains that:

While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.
So really Geithner – as head of the private bank-owned and managed New York Fed – was simply serving his constituency: the giant New York money center banks. Geithner’s constituency never was the American public.

The giant banks were the creditors of the giant banks. Like two sock puppets putting on a big show of good cop / bad cop show, the New York Fed pretended that it was negotiating hard, but ended up making sure that the boys got their full cut.

 

After having been bailed out once already, Goldman turned around and said it would be illegal for the government to expect them not to demand a full bailout on their CDS position. It would be illegal for the Fed to say in effect ”You should make concessions outside of bankruptcy court, because otherwise we’re not going to do anything, you’ll have to go into court with a bankrupt AIG and end up with little or nothing”.

 

(Of course, we never should’ve bailed out AIG in the first place. I would’ve let them collapse and blamed any reverberations on Goldman. Legally and politically.)

 

The Goldman argument was the argument Geithner wanted to hear anyway. As GS correctly assessed, Geithner and the Fed were absolutely committed to the bailout, every cent they could loot.

 

They really come off like the Keystone Kops:

 

The report also shed new light on the effect the rating agencies had on the way the Fed handled the A.I.G. emergency. The company’s run-on-the-bank disaster began with a major credit downgrade in September; the Fed quickly responded with an $85 billion loan.

But because the Fed moved so quickly, it recycled a set of lending terms that had previously been devised for A.I.G. by lenders in the private sector. The interest rate was too high, given A.I.G.’s distress, and so the loan that was supposed to rescue the insurer ended up putting it at risk of a second credit downgrade. That, in turn, could have set off a second run-on-the-bank episode.

The Fed got caught in a no-win situation, the report said. While it might have been able to win concessions by threatening to withdraw support from A.I.G., it also ran the risk that the credit agencies would take the threat too seriously and impose another catastrophic downgrade.

 

So the lesson of this sorry mess of a tale is something we should apply to our current situation. Barosky draws the right conclusion:

 

Mr. Barofsky said the facts also undermined the Fed’s arguments that banking secrecy was an essential part of bank stability.

“The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds,” he said.

 

The Fed is not a regulator and it never can be. By its very nature it wants to maximize finance sector private profit, and sees America simply as a cash cow. As Barofsky says, the Fed hates democracy, hates transparency, hates accountability. It is simply a rogue organization.

 

So whenever we assess any reform proposal, in addition to the minimum criterion that it breaks up the Too Big To Fails, we should also measure it according to the measure:

 

*Does it consider the Fed to be a viable regulator?

 

*Does it maintain existing Fed “authority”?

 

*Does it seek to add to that authority?

 

If the answers to these are Yes (and only Dodd’s proposal even gingerly suggests maybe the answer should be No), then it’s not real reform, but just another lie in the same tired good cop bad cop routine George referred to above.   

Extortion

 

“It would be a shame if any unintended consequences should befall you.”

 

The NYT’s op-ed page has a short piece by BusinessInsider’s John Carney once again laying out the standard threats and explaining how the people’s attempts to defend themselves against these gangsters are being punished. (I guess the Times thought it would be unseemly for their own editors to carry the water the way their business page regularly does, so they outsourced the blackmailing.)

 

Throughout Carney uses the term “unintended consequences” to describe the kneecapping tactics of the banksters.

 

He refers to Christopher Dodd’s proposal to move up the effective date for the credit card reform legislation enacted earlier this year.

 

Let’s start with the credit card rate freeze. The rising rates charged by issuing banks that inspired Mr. Dodd’s legislation are themselves the unintended consequence of an earlier attempt to assist the consumer. Back in May, Congress passed a law requiring banks to give customers a 45-day notification before raising rates. To give banks time to adjust to the new rules, Congress decided not to put that provision into effect until February.

So what happened next? Banks rushed to raise rates before the law takes effect. Many customers who may not have had their rates raised until 2010 — or perhaps not at all, if the economy continues to improve — found themselves paying higher rates even though they had not missed any payments. How could Mr. Dodd and his fellow lawmakers not realize that banks would pre-emptively raise rates?

 

So this wasn’t simple greed rushing to gobble up whatever crumbs it could before the floor got mopped. No, Congress forced them to do it. They had no choice.

 

So I guess if I tell a thief I’m going to have him arrested and he kills me, it’s my own fault. I made him do it.

 

And then here’s what’s always the underlying threat.

 

Mr. Dodd’s new proposal may also wind up dealing a serious blow to consumers — and the economy. If banks find themselves unable to raise rates, many will limit their risk by severely restricting consumer credit. Many people will find their credit cards canceled, and new customers will be turned away. This will come on top of an already tight consumer credit market: banks sent out 2.1 billion direct-mail credit card solicitations in the third quarter of 2006, according to the research firm Mintel; this year in the same quarter, they sent out 391 million. A further contraction in consumer credit could devastate our nascent recovery.

 

We know we don’t need these big banks for any real function, but as long as they’ve corrupted the government they’re going to get policy based on the ideology that we do need them. For as long as that condition holds they’ll be able to make these threats, and government and the media will cringe.

 

It’s just like when the infinitely obnoxious AIG (with an assist from the NYT’s Sorkin) threatened that unless its thugs got their bonuses, they’d refuse to clean up their CDS mess, and even take their knowledge of explosives elsewhere to use it as a weapon against the people.

 

Nice recovery you got going there. Shame if anything happened to it.

 

(Sometimes when I say I’d make a clean sweep of all these criminals people ask me what I’d charge them with. Well, they’re all guilty of extortion, fraud, and insider trading, for starters. So those would be my fallback equivalent of disorderly persons offenses while we got the real testimony.

 

Of course, as the Bear Stearns prosecutorial fumble shows, the law isn’t well set up to deal with crimes of these magnitude. Of course, that’s in large part because the law itself has long since been hijacked. So if the people really want their country back they’re going to have to be willing to be more intrepid than that kind of prosecution. At Nuremburg they had to create a new way.)

 

 

 

[I do agree with Carney on the housebuyer tax credit, though not for the same reasons. While we need stimulus, lots of it, and the right tax credits can be part of the mix, the whole package should be rationally planned, toward general socioeconomic reform.

 

But what are Obama's two signature policies? Cash for Clunkers and this housing tax credit. Neither serves a rational or constructive purpose. Both are economically regressive (driving up prices for renters and used car buyers). Both are intended only to reflate the bubble and prop up zombie structures.

 

More broadly, since it's the social engineering project of suburban sprawl and rendering the whole socioeconomy car-centric and enslaved to the car which got us into this whole energy and economic mess, it's that model we need to move away from. So both of these policies are deeply reactionary.] 

Morality Play

 

The Nation’s Katrina Vanden Heuvel recently took part in a formal debate arguing against the resolution, “Good Riddance to the Mainstream Media”.

 

Her opening statement (part of a winning effort) describes the much-tarnished but still needed qualifications of the MSM; how it is the only vehicle for consistent investigative reportage, for confronting power, exposing corruption, filing transparency lawsuits, and how the collapse of regional newspapers correlates with signs of civic degradation like lower voter turnouts. While the MSM is fatally flawed and economically unsustainable, it’s still the only thing partially fulfilling those roles. So until we can develop a replacement, we have to lament the financial decline of the MSM just as much as we deplore its ideological sellout.

 

The economic deterioration of the business is certainly dire. According to reports, as of September weekday sales of print newspapers were down 10% over the previous year’s already depleted number. Ad revenue was down 28% percent from 2008, which was itself down 16.6% from the previous year. Beleaguered papers like the San Francisco Chronicle, Dallas Morning news, NY Post, Boston Globe, and USA Today were down as much as 25.8%. The NYT’s weekday circulation went below one million for the first time since the 80s. Truly, ”the two-decade erosion in newspaper circulation is looking more like an avalanche”.

 

In a vicious circle, as they cut back on content to save money, they lose more readers. (I can offer the personal anecdote that I stopped getting the Newark Star-Ledger (down 22.7%) for that reason. The old regional and local news value wasn’t there anymore. It was becoming more like an AP wire with a few New Jersey stories tacked on. Not to mention more and more frequent delivery SNAFUs.)

 

Vanden Heuvel mentions this in her statement:

 

[W]e’ve chronicled the msm’s corporate consolidation which –through the gutting of newsrooms in quest for ever higher profit margins–contributed to the journalistic crisis we confront today.

 

I would go further and say that the ideological capture I mentioned above is not only driven by this consolidation but contributes to the erosion of the audience, as the people increasingly realize how the MSM is only the flunkey of the power elites and tells only the story according to those elites.

 

Today’s (11/11) NYT business page has a bizarre specimen: “Under attack, Fed chairman studies politics”, by Edmund Andrews (of personal financial disaster fame). 

 

You have to see the fun in something like this to leaven the rage.

 

For months, he had warned — without anyone on Capitol Hill appearing to listen — that a seemingly innocuous bill to let Congress “audit” the Fed would gravely threaten the central bank’s independence.

 

Uh oh, there’s ominous foreshadowing. “Seemingly innocuous”; if only they’d listen to our brave, lonely hero’s warnings…

 

Voters had become suspicious and unnerved by the Fed because of its trillion-dollar efforts to bail out the financial system, Mr. Frank warned. If the Fed really wanted to survive the disgruntlement in both parties, he continued, Mr. Bernanke would have to step back and let him devise a compromise.

Reluctantly, the Fed chairman agreed to reduce his own visibility on the issue and let Mr. Frank take the lead.

 

Maybe it wasn’t literally a smoke-filled room (they’re all quite PC about that nowadays). But it’s still the age-old struggle of the wise mandarins against the stupid, insolent poltroons. The people get especially obnoxious when they become “voters” in a “democracy”. Kissinger would sympathize.

 

On one front, the Fed faces populist anger from both left-wing Democrats and right-wing Republicans about its power and secrecy.

 

Right. None of the criticism of the unaccountable, reckless, scofflaw Fed (from the Left, at least) is based on policy and democracy concerns. Gosh darn that soiled rag-wearing “populism”.

 

Mindful that Democrats now control the White House and Congress, Mr. Bernanke put up virtually no opposition to President Obama’s proposal for a new consumer agency that would take over the Fed’s authority over consumer lending issues. Similarly, he avoided a bruising turf battle by agreeing that the Fed would share responsibility with other regulators to monitor systemic financial risk.

 

This is a lie. The Fed has aggressively sought to protect and extend its turf throughout.

 

And if Bernanke didn’t know all along that Obama and Frank had his back on gutting the CFPA, so that he should just keep his mouth shut and let them handle the politics, he really is a political idiot in need of guidance.

 

Andrews goes on to describe how Bernanke protested against the Audit the Fed bill in “apocalyptic terms”, how critical Fed secrecy and autocracy are to the continued existence of civilization. It’s all the same terrorist language which has become all too familiar to us.

 

Directly contradicting what he said in the previous paragraph, Andrews also writes about how the “steely” Fed fought fiercely for its “role as undisputed overseer of financial institutions deemed ‘too big to fail’”.

 

In other words, in spite of himself Bernanke confirmed the need for the auditing bill. And for Frank to take him under his political tutelage.

 

What Mr. Bernanke insisted on, and what Mr. Frank vowed to prevent, was Congressional interference in Fed deliberations over monetary policy.

But whenever discussion got more specific, Fed officials insisted that monetary policy extended to many if not most of the Fed’s emergency credit programs.

Mr. Frank said he would “wall off” deliberations on basic monetary policy, and delay the release of information about the Fed’s financial operations to prevent traders from capitalizing on its moves.

Exactly what that means in practice remains unclear. Mr. Paul says he is delighted that his bill has gotten so far. But details matter, and Fed officials say they are quietly confident details will break their way.

 

It’s very clear what this means. They’re going to keep the Fed/Wall Street casino party going. With this puff piece Andrews is doing his part in the eternal struggle against the people’s rights and well-being.

 

Even where they weren’t self-selected ideologues in the first place, most business journalists are by now, pretty much of necessity, cheerleaders for the growth ideology, market fundamentalism, corporatist politics. The coverage becomes ever more corporate friendly, told from the point of view of the rich, right down to the most petty details and annoyances of their lives. The economy is represented as a bundle of metrics, leading indicators like “growth” and the various exchanges, which mostly measure how well antisocial parasites are collecting rents. Everyone in government, business, and MSM agrees, this is “the” economy.

 

Meanwhile the real economic measures which don’t look good (and have not since the 90s) are relegated to the ghetto of “lagging indicators”. This term still reflects the thousand-times-refuted-but-never-relinquished trickle down ideology.

 

When the lagging jobs indicator becomes too disastrous to dismiss, as it now has, with real unemployment at 17.5% and even the rigged anodyne U3 number over 10% (both of these at their highest in close to thirty years), the nabobs of positivity are left helpless. They can only gawk and stutter about how somehow the administration and Wall Street will figure out something.

 

So the MSM has been doing its best with the increasingly crappy material corporate fundamentalism hands them, and does the gratitude at least come through in the advertising rates? As I mentioned earlier, these continue to decline. Even where advertising volume is creeping back up, it’s mostly according to a cheaper ad run strategy, so MSM ad revenues are still moribund. How’s that “trickling down” for ya?

 

So all the MSM’s prostitution has availed them little. As they say, “the revolution devours its own children”.

 

What went wrong? Weren’t they serviceable villains enough?

 

Perhaps it’s not just the advertising model. Perhaps there’s a hopeful sign here. Perhaps the people are finally starting to see through this charade. Perhaps they’re coming to realize that the MSM is not telling our story, but the story of those who affilict us, and for those who afflict us, and telling it against us, in order to further hurt us.

 

Recently the NYT’s David Carr, one of Vanden Heuvel’s teammates at the debate, wrote of the malaise of the business press.

 

He discusses how, with the green shoots allegedly sprouting all over the place, the attitudes are getting bullish again. But what does this mean for the business press itself?

 

So you might expect the business press to be striking up the band and restocking the cigar cabinet. Instead, Forbes, a magazine that sells a beau idéal of capitalism, announced last week that it was cutting a quarter of its already decimated staff. The Wall Street Journal’s Boston bureau — historically a hothouse of game-changing business coverage — is being closed.

Fortune magazine had already cut back to 18 issues a year from 25 and this week will be whacking anew at staff along with other Time Inc. magazines. BusinessWeek was sold for parts to Bloomberg a few weeks ago.

So, while the business of business may be back, the business of covering it with heroic narratives and upbeat glossy spreads most certainly is not. And probably never will be.

 

Carr mentions the usual suspects, advertising, the shrinking pains of cost cutting and so on. But he ponders whether the fundamental premise has lost its mojo.

 

But it isn’t just that Cadillacs aren’t selling like they used to. It’s also that the people who made them, bought them and drove them seem far more mortal and less interesting than they did just a few years ago.

Business magazines used to relish explaining all the complex new financial instruments that Wall Street was using to pile up profits. But now it has become clear that the titans who were wielding those obscure tools had no idea what they were doing — even less an idea than the journalists in some cases.

And the fact that they needed billions and billions in taxpayer money to bail them out has left the former Masters of the Universe with all the social cachet of welfare recipients. In fact, people on welfare seem more deserving now that some of the rescued have come roaring back just in time for year-end bonuses.

 

They don’t make ‘em like they used to. If this media too has to be star-driven, like all American media, they’re facing a real problem now that Americans are finally starting to wise up.

 

It was always stupid to idolize businessmen as if they were celebrity entertainers, but as long as Americans believed they were all getting richer, and believed in the Randian myth of the rugged, self-reliant capitalist, such idolatry could provide the basis for a wide press circulation. If that readership is now evaporating as fast as it should be, this most corporate of media may be in trouble.

 

It’s not that the public has lost its appetite for stories about handsome men in three-piece suits who clink whiskey glasses at the end of a long, not-so-hard day while talking smack about their female co-workers. But “Mad Men” pretty much sates that need. The businessman as Colossus is by now a nostalgic impulse…

But if the consequences are removed from the equation and the feds are there to cushion any downside, riding the upside seems less magical. Writers and editors who cover business now know that the jig is up, that those bespoke suits are put on one leg at a time by men that seem far less Olympian than they once did….

Business coverage has been, at its heart, aspirational, a brand promise that suggests that if you clip the right articles, internalize the right rhetoric, then you too will end up as one of the shiny, happy people striding boldly across the pages of magazines with names like Fortune, Money, Fast Company and Wired. But nobody is going to read, let alone aspire to, magazines called Middled, Outsourced, Left Behind and Clobbered. It’s as if American business has lost custody of its own story….

But people could be forgiven for not believing in business, or business news, the way they used to.

If a recovery is under way, most Average Joes are not buying in or benefiting so far. On Friday, the Commerce Department said consumer spending actually dropped in September, the first time it had gone down in five months, and the Dow buckled 2.5 percent at the end of trading last week. Consumers clearly lack confidence in the recovery, and, by extension, the people who are supposed to make it happen. And doubt doesn’t sell magazines.

 

In The Joyful Science Nietzsche made an interesting remark on the rise of socialism. He knew little about economics or politics (and cared less) but thought he could descry a spiritual and aesthetic factor.

 

Soldiers and leaders still have far better relationships with each other than workers and employers. So far at least, culture that rests on a military basis still towers above all so-called industrial culture: the latter in its present shape is altogether the most vulgar form of existence yet. Here one is at the mercy of brute need; one has to live and has to sell oneself, but one despises those who exploit this need and buy the worker. Oddly, submission to powerful, frightening, even terrible persons, like tyrants and generals, is not experienced as nearly so painful as is this submission to unknown and uninteresting persons, which is what all the luminaries of industry are.

What the workers see in the employer is usually only a cunning, bloodsucking dog of a man who speculates on all misery; and the employer’s name, shape, manner, and reputation are a matter of complete indifference to them. The manufacturers and entrepreneurs of business have been too deficient in all those forms and signs of nobility that alone make a person interesting. If the nobility of birth showed in their eyes and gestures, there might not be any socialism of the masses. For at bottom the masses are willing to submit to slavery of any kind, if only the higher-ups constantly legitimize themselves as higher, as born to command – by having noble manners. The most common man feels that nobility cannot be improvised and that one has to honor in it the fruit of long periods of time.

But the lack of higher manners and the notorious vulgarity of manufacturers with their ruddy, fat hands give him the idea that it is only accident and luck that have elevated one person above another. Well then, he reasons: let us try accident and luck! Let us throw the dice! And thus socialism is born.

 

While that may fall short of Marxian rigor, I think there is some truth to it. The people have always sought to find ways to idolize and romanticize their socioeconomic “betters”, if only to rationalize their own failure to rise up and assert themselves. But if the faltering business press is a different kind of leading indicator, perhaps this idolatry is no longer tenable, and a different sort of rational process is commencing.

 

Arendt, in Origins of Totalitarianism, described an interesting historical moment similar to our own.

 

The historian is in most such cases confronted with a very complex historical situation where he is almost at liberty, and that means at a loss, to isolate one factor as “the spirit of the time”. There are, however, a few helpful general rules. Foremost among them for our purpose is Tocqueville’s great discovery (in L’Ancien Regime et la Revolution) of the motives for the violent hatred felt by the French masses for the aristocracy at the outbreak of the Revolution – an outbreak which stimulated Burke to remark that the revolution was more concerned with “the condition of a gentleman” than with the institution of a king.

According to Tocqueville, the French people hated aristocrats about to lose their power more than it had ever hated them before, precisely because their rapid loss of real power was not accompanied by any appreciable decline in their fortunes. As long as the aristocracy held vast powers of jurisdiction, they were not only tolerated but respected. When noblemen lost their privileges, among others the privilege to exploit and oppress, the people felt them to be parasites, without any real function in the rule of the country. In other words, neither oppression nor exploitation as such is ever the main cause for resentment; wealth without visible function is much more intolerable because nobody can understand why it should be tolerated.

 

Substitute the lost belief in the economic and social function of Wall Street and the rackets, which we now know to be 100% fraudulent, destructive, and parasitic, for the lost political prerogatives of the Ancien Regime, and we have the same dynamic. Tremendous, and utterly worthless, and purely malevolent, wealth concentration.

 

Lucretius felt the change of the world in his time, the great republic riding to the height

Whence every road leads downward; Plato in his time watched Athens

Dance the down path. The future is a misted landscape, no man sees clearly, but at cyclic turns

There is a change felt in the rhythm of events, as when an exhausted horse

Falters and recovers, then the rhythm of the running hoofbeats is changed: he will run miles yet,

But he must fall….

 

Robinson Jeffers, Prescription of Painful Ends

Bank Roundup 11/9

1. The week’s most important story was every week’s most important story, the jobs front. The new federal report was devastating:

 

With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.

 

The failure of the banks and the bailouts is manifest, absolute. No one’s even trying to argue that things could be worse if we hadn’t wasted all our resources, shot our last bolt, to bail out a handful of high-rolling gamblers instead of using that money for direct stimulus at the pyramid’s base, Main Street.

 

We don’t need the big banks. We never did. We didn’t need to bail them out. We’d be vastly better off if we hadn’t. 

 

Think of what $24 trillion worth of direct investment in America could have accomplished, instead of throwing it away to prop up the insolvent rackets. No greater crime has ever been committed in American history.

 

Meanwhile, in Europe they’re coming to realize that we don’t “need” these big bank structures for anything. RBS, Lloyd’s, and Northern Rock are all being forced to divest chunks of themselves as the price of their bailouts.

 

It’s not anywhere near perfect, but it’s a meaningful start. It shows governments which aren’t completely corrupt, and an ability to learn from experience. Both are clearly dead in America.

 

2. Instead, America continues to burn itself alive. After all we’ve been through, what’s the overriding impetus in Congress? Not to enact reform, but to gut what little regulation does exist.

 

The target this week was the Sarbanes-Oxley accounting reform law.

 

Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration.

The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well.

 

By today’s standards the enactment of S-B sounds nothing short of miraculous. Passed by a large bipartisan majority just five weeks after the Worldcom scandal broke, today it sounds like the Simpsons episode where Lisa’s letter of disillusionment ends up getting her corrupt Congressman stung, arrested, indicted, and expelled from Congress all on the same day.

 

They’re going to exempt all companies worth less than $75 million and mandate a “study” to justify exempting those under $250 million. The fraudulent pretext is that reality-based accounting is too onerous for “smaller” firms, when in fact by now everyone is used to it and has no problem with it other than that it forbids them to lie.

 

The hostility of Congressional Dems to responsible accounting standards is epidemic. These are the same criminals who forced the FASB to gut mark-to-market and replace it with the so-called “mark-to-management” fantasy-based measure.

 

 

Another failure of the rule of law was reported by the NYT’s Gretchen Morgenson on Sunday, as she described how the holders of auction-rate securities have been left unable to redeem them as the vaunted “auctions” failed early in 2008.

 

Towns, student loan racketeers, tax-exempt structures like hospitals, and others issued these securities, whose interest rates were supposed to be set by weekly auctions, where the securities would be bought and sold.

 

Now that the music stopped, the auctions failed, and the end holders were left stuck with garbage paper, they’ve been trying to sue the brokers. But except in a few states who take regulation seriously, they’ve gotten nowhere.

 

This is because of the Private Securities Litigation Reform Act of 1995 (a gift of the Clinton/Emanuel NAFTA policy). This “law” sets up a Catch-22 whereby in order to have standing to sue certain kinds of finance sector con-men, you have to demonstrate a priori the specific information you can usually obtain only during discovery at trial. It’s a legal trick to place certain crimes beyond the reach of the law. Worthy of Kafka.

 

The law is working the way the Republicans and Democrats intend it to work. So far 23 class action suits over these auction rate securities have been dismissed. In fact, complainants are having better success in the privatized arbitration system set up by the industry itself.

 

 

Finally, as another contrast between the semi-serious Europeans and the childish/psychotic Americans, at the recent G-20 conference in Scotland Gordon Brown suggested some kind of Tobin tax to insure against systemic crashes. Geithner at first strongly objected, eventually grumbling that he wanted to wait for the IMF’s recommendations due next Spring.

 

Hey, don’t be too hasty. No hurry.

 

3. Floyd Norris called it “the worst idea of 2009.” Indeed, it was so bad an idea that even the Treasury Dept rejected it. But it was typical for the bank rackets.

 

This typical idea was that Goldman Sachs would buy tax credits from Fannie Mae at a discount. Because FNM is an utter ward of the state, it doesn’t have even the potemkin profits which could enable it to use a tax credit.

 

But Goldman does have these phony profits (all of it from speculation and manipulation using free Fed money), so it wanted to screw its taxpayer benefactor again by buying the credits. The obnoxious justification from the taxpayer point of view was supposed to be that this would help Fannie’s balance sheet.

 

But since they’d pay a discount and then redeem the full value of the credit, the transaction would constitute a loss to the taxpayer. That’s typical bank gratitude for you. As I said, even Treasury was too embarrassed to allow this. (BTW, cuddly supposed non-bad guy Warren Buffett also wanted in on this scam.)

 

(As Norris points out, the existence of this tax credit is also an example of how alleged capitalist “efficiency” is really corporatist looting and political cowardice. The point is to stimulate investment in low-income mortgages. It would be much cheaper for the government to directly subsidize this goal. But using rentier middlemen allows some loot to be stripped and absolves the government of having to make an “expenditure”, thereby avoiding some of the political hassle from the anti-spending shriekers, who are really only concerned about conveying the loot. The leaseback scheme I wrote about last week, which is now blowing up, is another example.

 

Here you see examples of how structurally based policy and reform is not only morally sound but pragmatically less expensive and more effective. The same principle applies at every level, especially the biggest and broadest.)

 

Goldman cut quite a figure in the media this week. The McClatchy stories detailed how Goldman systematically sold securities it was betting against at the same time.

 

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws…….

McClatchy’s inquiry found that Goldman Sachs:

Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.

Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

 

They bought the mortgages from predatory lenders, securitized them, moved them around to evade the law, aggressively foreclosed on the hapless victim borrowers, got a customized bailout (Lehman allowed to fail; cushy all-upside bank holding company status (where they were never held to the restrictions); a direct $12.9 billion giveaway laundered through AIG), $23 billion altogether in bailouts, heading past $50 billion in 09 revenue, $20 billion for ”bonuses”, and God is specifically on their side. Pretty good.

 

No wonder they lost money only one day in Q3, and only twice in Q2. (God must’ve been having a bad day.)

 

The McClatchy piece includes plenty of debate on the legalities of Goldman’s securitization scam. It just goes to show how corrupt the law is. Any normal person would look at this and immediately agree with economist Laurence Kotlikoff, “This is fraud and should be prosecuted.”

 

4. As always, there were plenty of antics that transcended normal rent-seeking and reached the level of derangement, as these criminals lose all sense of restraint even for the sake of political show. I already discussed some of them here.

 

One new outrage was how Goldman, JPM, Citi and others were blessed with allotments of the scarce H1N1 vaccine.

 

As Naked Capitalism’s Yves Smith put it:

 

It should come as no surprise that those at the top of the food chain get preferential treatment on all levels. But this still stinks to high heaven. Employees of the Goldman, the Fed, Citigroup, and other banks are getting H1N1 vaccine allotments out of proportion to what can be justified from a public health standpoint. In particular, Goldman has gotten more than Lenox HIll hospital, which needs it not just for the sick but more important, for workers (not only does the public need to keep front-line health care workers in as good shape as possible, but if they get the infection, they become disease vectors fast, given the number of people they see).

 

Healthcare workers are supposed to dispense these only according to CDC guidelines for high-risk groups. But it’s absurd on its face to think these rentiers won’t, if they think it helpful, expropriate these allotments the same way they do every other resource. That’s what they do, period. You cannot regulate them.

 

Of course, private corporations should never be dispensation nodes for a vaccine. Even now there are plenty of public nodes available. So clearly the only reason to do this was to politically satisfy the likes of Goldman.

 

(Besides, if you were really going to use a company in good faith, wouldn’t you repose the allotments at a factory or some other place where real American workers could benefit from it, rather than the utterly worthless, utterly expendable parasites at Goldman?)

 

5. Is there any there there for the real economy regarding the stock market’s rally? Not according to a new post by George Washington. He comments on a Daniel Gross Slate piece which finds that the domestic fundamentals don’t justify the stock surge. Domestic consumption and revenues are down.

 

Instead, multinationals headquartered in America are collecting the bulk of their profit overseas. The Dow, the NASDAQ, the SP 500, are weighted toward big globalized corporations, not Main Street. They’ve saturated the domestic market; in recent years ”growth” has been overseas. So the stock market could be a good Main St indicator only via trickle-down.

 

Gross: “It could be that the notion the stock market is an accurate gauge of the domestic economy’s temperature is outdated”.

 

Yes – the market rally is a Big Lie. The discrepancy is yet more proof for the already-proven fact that globalization does not benefit America.

 

It was always a bald lie that it would benefit American workers, and as we’ve seen in recent years its alleged benefit to “consumers” was also illusory. The American consumer was a construct of debt. Now that exponential debt has collapsed, this consumer has blown away in the wind.

 

(Walmartization was always conceptually incoherent when it claimed you could smash the worker yet still keep the same person as a healthy consumer. For some incomprehensible reason a lot of otherwise intelligent people tried to believe this manifest impossibility.)

 

The globalization scam was never anything but another form of the trickle-down scam. Yet even liberal economists mostly blathered about how it was “good for the economy”.

 

But all this ever proved is that there’s no such thing as the economy. Cui bono.

 

6. To wrap up with something stupid from MSMland. This NYT article describes the cultural reaction in the finance and business world to the recent insider trading busts.

 

But instead of taking the tone that if the law is being enforced then criminals better stop committing crimes or at least be more careful, the piece basically depicts them as decent people now caught up in a Kafkaesque labyrinth.

 

For executives in these two worlds, passing along information and gossip is a way of life and a necessity for business. But many executives have begun watching their words in recent weeks. Authorities who sounded an alarm for corporate America now publicize their use of tools like wiretaps and confidential informants once reserved for mob kingpins. That has given even simple conversations a maddening new complexity….

Nathan J. Muyskens, a government enforcement lawyer at Shook, Hardy & Bacon, said that clients had been asking him if they should send companywide e-mail messages reminding people not to say anything questionable, even a joke, on the phone. He said he told them they should…..

“I’ve heard that there have certainly been memos going out: ‘Think of the phone just as you think of your e-mail these days,’ ” he said. “We always say, ‘Think of that e-mail as being on the front page of The New York Times before you hit the send button,’ and now it’s exactly the same for the phone.”…..

Mike Kwatinetz, a former Wall Street technology analyst and now a venture capitalist at Azure Capital Partners, said that when a company recently considered going public, he scheduled sessions with lawyers to train the board and executives about what they could and could not say.

Many venture capitalists have told him that when one of their portfolio companies goes public, they immediately resign from the board because they are worried about the legal ramifications of serving on the board of a public company…..

This newfound caution may continue for some time.

“At least for a few years, when operating executives are having dinner with friends and lovers who work in hedge funds, they’re going to be way more careful about what they say,” Mr. Marks said.

 

No:

 

1. If the law is being enforced at all it’s only because their criminality knows no bounds.

 

2. If they don’t like it, tell them to stop being leeches and get real jobs. 

The Banks vs. Democracy (3 of 3)

 

In theory a corporatist system can still produce value and provide services for the citizenry, albeit at the price of expensive rents extracted by parasite in business and government. A gangster can still provide a real service.

 

But as we look at the America of today, at a bloated finance sector incapable of adding any  value, of producing anything other than distortions, bubbles, collapses, and of doing anything throughout other than looting; when we look at a health care system which only becomes more expensive while providing less service, and expels ever more people from any access to care short of the emergency room; at an agricultural system which provides an ever less nutritious, more toxic diet, and which is rapidly losing even its virtue of inexpensiveness as prices steadily climb, and all this as it becomes economically impossible for anyone other than a handful of industrial rackets to engage in farming, and only through the most fossil fuel intensive, soil depleting, and environmentally destructive monoculture farming methods; when we see how every public service degrades, every amenity is canceled, every space enclosed, privatization and expropriation becoming the order of the day; when we see thieves and thugs closing in from every direction while barbed wire fences are going up along every horizon, and the horizons closing in; at this point we have nothing left of “government” in any real sense of the term, let alone democracy, but just kleptocracy.

 

Kleptocracy, alternatively cleptocracy or kleptarchy, from Greek klepto (theft) and kratos (rule), is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. Political corruption is closely tied to the internal workings of a Kleptocracy. Not an “official” form of government (cf democracy, republic, monarchy, theocracy) the term is a pejorative used to describe governments perceived to be highly corrupt.

Kleptocracies are often dictatorships or some other form of autocratic and nepotist government, or lapsed democracies that have transformed into oligarchies. A kleptocratic ruler typically treats his country’s treasury as though it were his own personal bank account.

 

Lapsed democracies that have transformed into oligarchies. Let’s see.

 

The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the faring of the state’s economy, political affairs and civil rights. Kleptocracy in government often vitiates prospects of foreign investment and drastically weakens the domestic market and cross-border trade. As the kleptocracy normally embezzles money from its citizens by misusing funds derived from tax payments, or money laundering schemes, a kleptocratically structured political system tends to degrade nearly everyone’s quality of life.

 

Adverse to the economy: The crash and bailout leading by design toward the next crash.

 

Adverse to political affairs: Practically no variation, two corporatist parties, corporate media, the acceptable political discourse and policy runs from rightist (i.e. “liberal”, by MSM standards) to hard right (“conservative” or even “centrist”/”moderate”).

 

Adverse to civil rights: The assault on civil liberties; erosion of legal standing and other hurdles against access to the law; the attack on net neutrality (and the whole public space which is growing in the blogosphere); and all the ways in which rights and liberties have been monetized so that they exist in theory only, not in reality, except for the rich.

 

Degrades nearly everyone’s quality of life: All services are being degraded or abolished: infrastructure (a $2.6 trillion maintenance backlog to keep things like bridge collapse from happening), roads, public transportation, public health, public parks, public legal services, libraries, education, renewable energy, environmental protection, policing (the focus is on drug war privateering, SWAT-type militarization, the prison-industrial complex, all primarily profit-seeking, to the detriment of the real safety of the citizenry; general surveillance and ratcheting up terror through media scares, “contempt of cop” brutality, creeping Taser totalitarianism, growing resignation to Nazi tactics).

 

In addition, the money that kleptocrats steal is often taken from funds that were earmarked for public amenities, such as the building of hospitals, schools, roads, parks and the like – which has further adverse effects on the quality of life of the citizens living under a kleptocracy. The quasi-oligarchy that results from a kleptocratic elite also subverts democracy (or any other political format the state is ostensibly under).

 

They seldom have to directly steal this, since the money is usually “legally” voted onto the loot conveyor. Health care funding is systematically funneled to the insurance and Big Drug rackets, student lending money to the banks. Whatever’s left over after the systematic theft is stolen as earmarks.

 

The Republicans are the aggressive ideologues of kleptocracy, while the Democrats are either de facto gangsters or enablers of Republican stealing. It’s not that the Dems are any less consciously malevolent than the Reps, they’re just more cowardly and scatterbrained about it.

 

And then there’s the personal factor, which these days is more and more likely to support the criminal status quo.

 

I quote this at length because I think it captures the larger situation exactly. It identifies the ridgelines. And in doing so, it clearly reveals why Obama is, at bottom, a conservative, notwithstanding some cultural inclinations to the contrary. When all is said and done, he wants to change things as little as possible, his desire for change is driven by a perceived necessity to avoid disaster, and the priorities and parameters of change are dictated by doing as much as possible for those representing existing power, and doing as little as possible for everyone else. This is what classic Burkean conservatives believe in, along with the ideal of unifying the polity, and marginalizing all divisive forces.

Divisive forces, for those not clued in, means you and me, pardners. Every bit as much as Rush Limbaugh and Glenn Beck. For a classic conservative like Obama, it really makes no difference whatsoever if the divisive forces are right or rational. All that matters is that they resist going along. And because of Obama’s essential conservatism, it’s you and I who are the problem in Obama’s eyes. Not Baucus, Nelson, Lieberman & the like. You and I. We are the problem.

 

This is certainly part of the Obama pathology. His personal ideology is clearly right-of-center, but even more deeply he wants to uphold the status quo no matter what it is. So no matter in what kind of society he existed, his main priority would be to say to everyone “don’t rock the boat”.

 

It’s our great misfortune that this innate conservative, this innate apologist for all entrenched crime, is in power at such a time of travail and such an impulse, such a mandate, for revolutionary change.

 

What has been the result in every similar historical situation in recent decades? In Chile, in Bolivia, through much of the rest of Latin America, the same assault led to the betrayal and destruction, often violent, of democracy. In Poland, Solidarity sold out the people. In South Africa the Freedom Charter was trashed. Everywhere democratic political promises were the Big Lie front behind which the shock assault of massive gangsterism stood ready to attack.

 

And now in America the vicious government of George Bush, not even remotely a normal if extreme presidential adminstration but rather a cabal of gangsters, was just the prelude to this Big Lie. Obama and the Democratic party stood for “Change”? Emanuel said “never let a crisis go to waste”?

 

Oh yes, but not at all in the sense they lied into people. The exact opposite. These take their place among the classical totalitarian lies as meaning the exact opposite of what they claimed to mean. The change was an even more radical, more systematic corporatist assault, this time open, brazen, the spear point being the Too Big To Fail bailouts. Meanwhile, even more than under Bush, the Global War on Terror is officially enshrined as the permanent state of Bailout America’s foreign policy. It’s a war policy, now and forever, for as long as this government exists.

 

An excellent piece by Adam Levitan is especially suggestive regarding how it’s not just trillions of our dollars but our democracy itself which has been stolen by the rackets.

 

Everything involved is political. Don’t let them fool you for a minute into thinking that any of this is dictated by economic “necessity”, that the bailouts are unfortunate but necessary, or the GWOT is unfortunate but necessary. These are chosen instruments of aggressive literal and socioeconomic warfare by the rackets and the rich upon democracy and the people of the world.

 

Where politics is hijacked by $24 trillion worth (and that’s just the bailout) of looting expeditions, there’s not much space left for democracy, as we see with the bogus bag of ”reforms” being touted.

 

As for the hijacking of foreign policy by money and militarization, perhaps we were too fast to say Obama did nothing to receive that Nobel. Certainly the Europeans needed him to be completely on board with the bailouts. That’s the only kind of “peace” TPTB all over the West care about nowadays.

 

And we were silly enough to wonder if the “peace” prize should be given to someone who has escalated a war which already looks permanent (and sounds so in his rhetoric).

 

That’s not where peace is at nowadays for the financial power structure. Remember what “Great Moderation” always meant under predatory globalization. Not what it sounds like. 

 

The Orwellian Peace of the Great Moderation and the Global War on Terror. Change for Bailout America.

 

As the enemies of the Constitution often say, “the constitution is not a suicide pact”. They use this ideal to attack civil liberties, jobs, and freedom, to replace them with fear, poverty, and enslavement, all for the sake of gangsters led by the banks. The capture is complete.

 

And they are clearly organizing for physical violence. They already have the professional Nazi structure (the “SS” element) in place in the form of Blackwater and other mercenary structures. Now they’re organizing their Brownshirts in the form of the teabaggers.

 

They clearly intend a bloodbath, and yet everyone sleeps and even laughs. There’s zero will among the people to organize for their economic or even their physical existence. I just can’t get over the blindness.

 

I don’t know how to solve everything at once, but one policy plank is absolutely clear: Smash the Banks.

 

Too Big to Fail is Too Big to Exist. break them up. If I had the wherewithal I’d start a political movement founded on this one policy imperative. Just as all large-scale corporate and political crime now flows from the banks, so Smashing them is the solution from which every other solution would flow.

 

As Nicholas Taleb said:

 

[Interviewer]: Are you saying the U.S. shouldn’t have done all those bailouts? What was the alternative?

NT: Blood, sweat and tears. A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck it up.

 

There’s no other way out. For those who fear, suck it up. This is the only way to break through to the world free of fear, one of FDR’s great Four Freedoms.

 

The complete capture and enclosure of our democracy, our government, our economy, our politics, our land, our hopes and dreams, our future as human beings, our very souls, is before our eyes.

 

Is freedom our ideal or not?

 

Our big banks have demonstrated an unmatched ability to take over regulators and to convince politicians that a dangerous financial structure is good for America. These same people will almost certainly render ineffective whatever new regulations you put in place. More broadly, how can you run a well-functioning political system when a few large banks are so powerful?
The key insight at the heart of breaking up Standard Oil in 1911 was that it was too big to regulate. That breakup may have been good for competition; it was certainly good for democracy.

As Nicolas Trist – secretary to President Andrew Jackson – said about the incredibly powerful privately owned Second Bank of the United States, “Independently of its misdeeds, the mere power, — the bare existence of such a power, — is a thing irreconcilable with the nature and spirit of our institutions.” (Schlesinger, The Age of Jackson, p.102)

 

Break up the banks.

The Banks vs. Democracy (2 of 3)

We’ve been discussing how the banks assault democracy. The system which has been compiling for decades now, and which has reached its fullest development with the bailouts, is corporatism.

 

According to classical economic theory, the feudal stage of development was based on unproductive parasites squatting on land, resources, serfs, and slaves, extracting rents from these, and hoarding the surplus. “Capitalism”, where the property owner was himself a dynamic engine of productivity who would use the surplus he extracted as investment toward further productivity, was supposed to obliterate feudal vestiges as part of his historic mission.

 

Of course, this romantic Randian vision of the capitalist was always a caricature, but in theory it should have contained a grain of truth. Surely a capitalist economy should have been able to keep the capital in circulation among at least quasi-productive enterprises. That’s what their ideologues always claimed it would do.

 

But instead, out of the internal contradictions of capitalism, namely its propensity to overproduce even as it underconsumes (because in exploiting the worker it liquidates its own consumer base), a new feudal class arose in the form of the modern finance sector. It started out claiming to facilitate capital distribution so that money could shift from the overinvested sectors and regions to underinvested ones, and in this way overcome the contradiction.

 

This was inherently a kind of scam or ponzi scheme, since the contradiction was endemic and financial markets could only protract the process, not overcome it. But right from the start the sector went beyond its distributive function and invented casino games to play with the money it was handling. Soon money was flowing in which never had the pretense of seeking a real investment, but was only seeking to spin the Roulette wheel. Soon the banks were disparaging, neglecting, and outright abandoning the original, allegedly “productive” function they had been inaugurated to fulfill.

 

Soon there was a vast casino, flush with capital, squatting on the back of the real economy. Pumping from both veins and arteries, it sucked resources from the country. It prevented rather than facilitated any rational capital distribution. On the contrary it generated monstrous distortions in the economy, encouraging money to flow wherever ponzi schemes could be erected in the form of asset bubbles. These assets could be real but fixed, like land, or phony, like stocks and securities. In no case were they generating new, productive value.

 

Every racketeer buys politicians and regulators, but finance lobbying is perhaps the most pernicious, as it has such an easy cash flow by the nature of its business, and its crimes can more easily be enabled by the government without there being obvious scars in the short run. (In an episode of The Simpsons the crooked pol tells the timber lobbyist, “People are going to notice those trees are gone”. That’s not often immediately the case with the kinds of forests the banks hack down.) Plus the finance sector, as wirepuller for all the money flows, naturally comes to orchestrate many of the crimes of every other sector.

 

(It’s bizarre when somebody like Alan Greenspan affects great surprise over what has happened. By the market fundamentalists’ own ideological premise they should have expected looting, since it is indeed in the financiers’ interest and is therefore “rational” from their point of view. To ignore this they had to have believed their own hype about there being no class war or systemic organized crime, that we instead have a capitalist Volksgemeinschaft. You’re not supposed to snort your own stuff.

 

Still, in the long run there’s really something just absolutely weird and self-defeating about the lobbying ideology. The thing that’s most broken, absolutely beyond repair, is the institutionalized psychopathy of it. That level of greed and selfishness. By now every corporate interest is objectively incapable of looking at anything other than from the point of view of the most deranged short-term selfishness. I say “short term” because they seem oblivious and unconcerned with even their own long term profit prospects and political prospects. Their own refusal to do anything but hunker in the bunker in the face of any reform proposal, anything which could possibly benefit the people, who are after all the consumers these businesses depend upon, is suicidal. The same is true of their resistance to anything which could reform the economy, which could try to find a way toward new productive sectors.

 

In both cases they just want to squeeze the last drops of blood out of a dying man rather than delay gratification for a moment or accept one marginally smaller payday in order to restore him to health, and never mind that his revived labor would over the long run produce far more “profit”. They don’t care. They demand, they shriek, for whatever little bit they can get right now.

 

This can never be fixed. The rackets (and any sector which has reached the level of a powerful lobby is a racket) have to be absolutely destroyed.

 

They’ve come to these conclusions themselves, which is why they’ve bet everything on a feudal terror state, as I describe below.)

 

Perhaps most tragically, as the salaries and “bonuses” paid by the sector have bloated beyond the levels of obscenity, while the absolutely despicable mainstream media has whitewashed this obscenity and presided over the reinvention of the fat, greedy banker as sexy “master of the universe”, a generation of intelligent, potentially very constructive people was lost to crime. Those who could have been creative scientists, engineers, journalists, teachers, professionals working for the public interest, instead herded themselves onto Wall Street. (The equally despicable corporatized universities help to organize this cattle drive).

 

What was the opportunity cost of this decimated potential? All the talent which whored itself out to become “talent”? When the Nazi Einsatzgruppen liquidated the intelligentsia and professional classes of Poland and the occupied regions of the USSR, they were accomplishing a similar, just more violent, cleansing.

 

In the end, corrupting politics, academia, and media/entertainment, that is the propaganda nexus, finance “capitalism”, which was hardly real capitalism in the first place, and has long since solidified into a feudal parasite structure, becomes so meshed with the functioning of the state that they’re a single, symbiotic co-organism.

 

Corporatism is the economic doctrine associated with fascism in the political realm. Where the economics of it comes first, and then runs into political trouble, the politics will follow. Finance monopoly capitalism has become trapped in its own bottleneck. It depends completely upon exponential debt to prop up an otherwise dispossessed zombie middle class, and this debt/growth depends upon cheap, plentiful oil.

 

Now that neither is any longer sustainable through ”ordinary” exploitative policy, policy has to become extraordinary. Therefore, to counter Peak Oil, the corporate government has embarked upon the Global War on Terror. To counter the political backlash from the collapse of the populace into serfdom, the state must become totalitarian. It must use surveillance and database technology and professional terror (provided by the security-industrial complex) to enforce this from the top down, and it must rile up the lumpenproletariat mob as “teabaggers” in order to provide mob terror from below and keep the serf class fighting among itself. (The GWOT is supposed to function dialectically by both securing the oil and the globalization markets while enforcing “patriotic” conformity at home. Thus it does double duty in propping up the system. It’s also the training ground for violence cadres. The real intended deployment front for mercenaries from Blackwater and others is right here in our cities.)

 

So the banks sit atop the pyramid, the corporate state heirarchy, with the rest of the corporate welfare recipients radiating out and down.. They intend to ride a boom-bust roller-coaster as long as they can. They’ll play their own casino games and collect fees from all the other players, and then via the government hand themselves bailouts during the crashes. When this can no longer be sustained politically, they’ll resort to oppression and terror.

 

So we see the dying of democracy. It was first corrupted beyond what had been possible under earlier economic, technological, and communications conditions. By now it has been completely degraded into a mere corporatist pseudo-democracy. Eventually they’ll attempt a final, overt, de jure coup, worthy of the banana republic we’ve already become.

 

(Does anybody really doubt, if the Republicans can ever get the White House back, that next time they will be dead set on hanging onto it no matter what they have to do? Especially if their 2012 candidate is a Man on a Horse like Petraeus? Of course that would really be Wall Street making that decision. The only reason I say “Republican” rather that “Democrat”, given their identical solicitude for the banks, is that on the whole Reps are aggressive, Dems are cowards, so if I were a corporatist coup plotter I’d have confidence in Reps and not Dems.)          

The Banks vs. Democracy (1 of 3)

America was founded in revolution, seeking freedom. The vehicle was supposed to be democracy.

 

The organizer, the revolutionist, the activist or call him what you will, who is committed to a free and open society is in that commitment anchored to a complex of high values. These values include the basic morals of all organized religions; their base is the preciousness of human life. These values include freedom, equality, justice, peace, the right to dissent; the values that were the banners of hope and yearning of all revolutions of men, whether the French Revolution’s “Liberty, Fraternity, Equality”, the Russians’ “Bread and Peace”, the brave Spanish people’s “Better to die on your feet than live on your knees”, or our Revolution’s “No Taxation Without Representation”. They include the values in our own Bill of Rights. If a state voted for school segregation or a community organization voted to keep blacks out, and claimed justification by virtue of the “democratic process”, then this violation of the value of equality would have converted democracy into a prostitute. Democracy is not an end; it is the best political means available toward the achievement of these values.

-Saul Alinsky, Rules For Radicals

 

There are many reasons we’ve lost democracy, but lately they all involve entrenched money, and especially that wielded by the banks.

 

The banks are directly anti-democratic in the way they use money to buy politicians, corrupt and capture regulators, weaken pending legislation and twist it to their own ends, and secure the nonenforcement of existing legislation.

 

What has this bought them? First a Hobbesian free-fire business zone where there are almost no limitations on the finance sector’s activities. Speculation, manipulation, predatory lending, blowing up asset bubbles, con-job complexity, fraudulent ”innovation”, enabling and extracting fees from the self-reinforcing calcification of every sector towards monopoly, mining productive economies for ever more extortionate rents, converting this to personal loot via the “bonus” scam, looting their own companies to enhance this personal embezzlement, are all fair in hate and war.

 

Second, when it all blew up, they bought the direct shredding of the Constitution by their Washington brothel. Taxation without representation, to the tune of twenty four trillion dollars in welfare handouts and free risk exposure.

 

A large part of these trillions has come in the form of Federal Reserve largesse. The Fed’s quantitative easing is the favorite mode of loot conveyance because the Fed is completely unaccountable to democracy. One of the few bipartisan initiatives of our time, the bill to establish democracy’s right to audit the Fed, has been quashed by one hired thug, Mel Watt of BofAland North Carolina.

 

Meanwhile the Fed continues to stonewall all demands that it make public the names of the banks who have received all this easing, and how much they got.

 

In itself lack of transparency is the death of democracy. Everywhere we are losing the simple right to demand that sunlight be shone upon all government actions. The natural tendency toward secrecy by presidential administrations was radically escalated and systematized into a core principle by Bush and Cheney. Now Obama has taken full ownership of this autocratic secrecy ideology and sought to extend it.

 

(Where it comes to the banks we talk a lot about zombies, but in its aversion to sunlight and ardent embrace of the darkness, our government appears in the semblance of a vampire. Of course, the bloodsucking goes with this too. And, if government is supposed to be a faithful watchdog, but has instead turned into a predatory wolf, we can also call it a werewolf. I should have written this on Halloween.)

 

And now this lawless, autocratic, irresponsible, unaccountable Fed, which has always refused on principle to perform the regulatory functions it already possesses (it instead claims it’s only supposed to come in afterward to clean up the mess), is seeking to extend its purview over all aspects of resolution authority and other things too.

 

This dovetails nicely with the collective will of the administration and the Congressional establishment to use the call for finance reform as a mere propaganda exercise, just going through the motions of reform, while they increase autocratic bank and government power. Thus even as the already dictatorial Fed is set to enclose even more terrain once trodden by the people and the people’s interest, so Tim Geithner is trying to rectify the errors of last year by making good on Paulson’s attempt to have himself anointed as Treasury Dictator. Under administration proposals Treasury’s powers would become just as unaccountable and unbounded, just as aggressive and beyond the law, as those of the Fed.

 

And that “oversight council” which was supposed to share resolution authority with the Fed, in order to counterbalance the Fed’s anti-democracy, pro-bank agenda? Whether it has any real power in theory or not, it’s going to be chaired by: the Treasury secretary, who is himself in the process of being removed from the oversight of the law.

 

So who is supposed to oversee the overseers? Nobody, apparently. Another phony non-regulatory scam, and another brick in the wall of totalitarianism.

 

This is what bank wealth has bought, this is what bank power has wrought. The lobbyists now work around the clock in a factory producing bad legislation, bad execution, bad jurisprudence. This factory is really a crematoria – for the public good, for democracy, for humanity, for freedom.

 

All of this is done in the interest of class war. We are saddled with a parasitic, bloodsucking oligarchy.

 

That’s the direct bank attack on our democratic existence. Meanwhile the banks have led the way along the more ponderous curve of expropriating America through insidious wealth concentration.

 

From 1945 to 1973 all economic cohorts in America were doing better. Since 1973, the year of peak real wages, this social plenitude has been reversed. The bottom 90% have lost, badly. The 90-99% cohort has still gained but at a decreasing rate. Only the top 1% has increased its rate of accumulation.

 

From the 70s through 1983, the top 1% took in no more than 10% of income, while the bottom 90% earned around 67%. By 2007, the earnings of the bottom 90% had been degraded to 50% of income while the top 1% were extracting 24%.

 

It was the financialization of the real economy which played the pivotal role in this campaign of expropriation, along with globalism, technologization, union-busting, and other attacks, all financed by the banks.

 

(If you’re wondering how under these circumstances the American “consumer” can be revived, fear not. According to Bank of America fantasyland, the endlessly debunked trickle-down lie is finally going to come true.

 

The well-heeled might be able to save the U.S. economy from a long period of dismally weak consumer spending — if only we don’t jack up their taxes.

That’s one conclusion to draw from a new Bank of America Merrill Lynch report this week, “The Myth of the Overlevered Consumer.”

The report hammers home what you might already suspect: The consumer debt problem in the economy really is a debt problem for the middle class. The need to work off a chunk of that debt will sap middle-class families’ spending power for perhaps years to come.

By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

 

That’s what the banks say justifies the wealth monopoly they’ve wrought.

 

Well, that and God being on their side.) 

 

Extreme wealth concentration, just like psychotic government and corporate secrecy, is the death of democracy. It distorts all institutions. The economy sees its finance sector bloated, asset bubbles blown. This in turn destabilizes the entire economy, so that everyone not rich is left insecure, his position deteriorating.

 

All politics becomes corrupted – representatives, agencies, elections. The rich buy the media, which is why the news is no longer reality based but corporatist. Concentrated wealth seeks by its nature to destroy wages, work conditions, the social safety net, the environment, all community life. It forces the monetization of everything, the destruction of all public amenities, spaces, prerogatives.

 

It enforces the complete dispossession and disenfranchisement of anyone who cannot conform to its rat race totalitarianism, and the steady depletion of everyone who can stay on that treadmill, as they have to run faster and faster, with ever more weight piled upon their backs, in order to stay in place.

“It’s Gonna Be A Good Christmas”

And you were worried about Christmas:

 

Now is the time of year when a Wall Streeter’s fancy turns, not so lightly, to thoughts of bonuses.

Inside major financial companies, the annual rite of tallying bonuses is about to begin, with a sense of relief and even elation that would have been unthinkable only a year ago. After all those federal bailouts, many banks are turning handsome profits. Top producers are looking forward to blowout paydays once again.

 

Yes, things are looking good on Wall Street. It may be cold outside in the for real people, but the sun is shining on the Ancien Regime. All the plans of the Fed or the pay czar to regulate this Winter Palace are just throwing sand against the wind.

 

In particular, the good earners, the soldiers, are getting a nice piece of this year’s take:

 

What is most remarkable about the estimate, compiled by Johnson Associates, is how quickly pay is expected to rebound for traders — Wall Street’s current kings and queens of ka-ching.

For people who trade bonds, commodities and currencies, bonuses are expected to soar as much as 60 percent, to around their pre-crisis levels. A typical senior fixed-income trader can expect a total pay package of about $930,000 in cash and stock, compared with a package last year of about $695,000. Paychecks for stock and derivatives traders are likely to jump by half that much. Bonuses for investment bankers, by contrast, are projected to rise 15 to 20 percent. Star performers could see their paychecks surge even higher.

 

As Robert De Niro’s Jimmy Conway says in Goodfellas, “It’s gonna be a good Christmas!”

But what about this?

 

“This is a year of two different worlds,” said Alan Johnson, of Johnson Associates. “It’s not a broad-based recovery.”

 

Surely he’s referring to the abyss between Wall Street and Main Street?

 

Not at all! As the NYT’s Eric Dash concurs:

 

But while the economic fortunes of Wall Street and Main Street have diverged, so too have the fortunes of certain employees within the financial industry. This will be an unusually lopsided year for bonuses. While traders are looking forward to fat bonuses, payouts for people working in asset management, corporate and retail banking and the insurance businesses are expected to be flat or even down, according to the study.

Given the decline in the once-booming mergers and acquisition business, bonuses for certain dealmakers could fall 10 to 15 percent. And the once-gilded paychecks of hedge fund managers are expected to decline 15 to 25 percent. Private equity executives will be among the hardest hit, with their year-end bonuses falling 20 to 25 percent as they struggle to sell many of their investments.

 

Still, it’s good to see that they acknowledge the real suffering in the world as we enter the holiday season.

 

This is nothing but divvying up the stolen loot, every cent of it heisted from the taxpayers.

 

1. None of them would even exist without the bailouts.

 

2. Cash is fungible, and if there’s even one cent of public money or risk exposure outstanding, that’s our cent they’re using for “bonuses”.

 

3. The TARP is just the tip of the iceberg, so paying it back is a minor step on a long road toward self-sufficiency whose end is in fact impossible for these zombies to achieve. There’s the TALF, the other facilities, FDIC guarantees and other backstops. Twenty four trillion dollars outstanding. They owe every cent of that.

 

4. Even if they paid every outstanding cent, there would still be the Too Big To Fail premium.

 

That’s our money. All of it.

 

Yet they think God is their copilot.