Volatility

April 22, 2010

Racket Wars and Reform Policy

 

As we’re driven out into the arena for the next circus, we see that the next bloodbath on the list is “finance reform”.
 
As always, what we need to do here is clear:
 
1. Break up the rackets completely. This can include a restoration of something like Glass-Steagall.
 
2. Ban speculative derivatives.
 
3. Real leverage limits and reserve requirements.
 
4. A Tobin tax.
 
5. A strong, independent CFPA.
 
This isn’t an exhaustive list, but #s 1-3 constitute the core necessity.
 
In particular, smashing the rackets is the first necessity, the measure which enables all the others. Break up the TBTF banks and everything else becomes possible. Leave them intact and everything else, even if sincerely attempted, is doomed to failure.
 
Therefore, under today’s polity this list is a fantasy, since all system cadres reject breaking up the rackets.
 
Where the rackets exist we can never have real regulation. We can smash them completely, or submit to their tyranny. Their corrupted government and its hacks want to lie and pretend we can “regulate” (while “progressives”, in thrall to Obama and the Democrats, are desperate to believe this so they believe it).
 
That’s where reform scams come in. These are meant to play a bait and switch role. They’re meant to at least temporarily give the semblance of reform, to provide a seemingly acceptable alternative to real reform proposals, to divert the more gullible reformers away from these proposals, which are then discarded. And then once the bait has worked, it’s switched out. The phony “reform” is either gutted or thrown out completely. By then hopefully the Kool Aid has worked well enough that most of the brainwashed victims of the scam will remain in thrall, and will simply follow down whatever reactionary path the fraudulent watchword “reform” leads them.
 
The classical Obama example was fraudulent health insurance “reform” and the “public option”. This was meant to misdirect progressives away from the demand for single-payer, and therefore to strangle the real reform in the cradle. Then once the liberal rubes had been strung along enough the PO would be either tossed out or kept in an nominal but eviscerated form. So with the PO they were temporarily forced to pretend. They even conjured up a second bait and switch, the “progressive block” scam. Eventually the House passed a gutted thing they called a “public option” but which had none of the characteristics of a real PO. Then in subsequent wrangling even the husk was thrown out. The Kool Aid held, and to this day a large mass of liberal teabaggers thinks a real reform bill was passed.
 
So here’s the basic pattern, which can be applied to most, perhaps almost all, issues which are forced into the “reform” arena. We can say there’s A, the real reform, and C, the complete gutting and betrayal of reform. Republicans where they have the power leap right to C, while the Democrats’ preferred bridge from A to C is via B, the scam bait-and-switch “reform”. With health insurance, Obama’s scam was to use B, the public option, to dump A, single payer, and get to C, a grossly reactionary health racket bailout to be enforced by IRS goons. (So in a nutshell: A = real reform, B = scam “reform”, the bait and switch, C = complete gutting which is still called “reform”.)
 
Here’s some other examples.
 
On climate change: A = a combination of a carbon tax and EPA regulation, while cap-and-trade is a combination of B and C. (The idea of it is meant to scuttle real reform, while in practice it’s meant to serve as a Wall Street profiteering mechanism, to blow up a carbon bubble.)
 
On net neutrality: A = a clear prohibition on all classes of access discrimination, and rigorous enforcement thereof. B = the FCC’s proposed “net neutrality” regs, with their many loopholes. Non-enforcement will bring this to the C stage.
 
And the issue of the day, finance reform.
 
We have A, starting with breaking up the bank rackets and real derivative reform, moving on to the program I described above.
 
We have C, the shared goal of Republicans and Democrats, the absence of any reform even as they claim the mantle of being reformers. This is definitely Obama’s ideal.
 
Then we have B, several baits to be switched out. The CFPA is a clear example. The concept was broached with such fanfare. Then somewhat more quietly the Obama white paper proposed to Congress a version far weaker than the public hype had suggested. Then Barney Frank orchestrated its further gutting in the House bill. All this was done in the expectation that the Senate would gut it further or dump it completely.
 
Sure enough, Dodd’s preference was to expel it. Failing that, he wants to house it in the Fed. People have been comparing that to the fox guarding the henhouse. I’d say it’s more like chucking the chicken down the foxhole.
 
So that’s been a scam all the way. Another, more for the better-informed but still gullible, is the “resolution authority” scam. Here the lie is that they’ll enact a resolution plan somehow guaranteed to be used in the next crisis (and not to be paid for by the taxpayers). There’s two lies here. One, we already have such resolution authority, the Prompt Corrective Action law. Two, as the fate of the PCA law demonstrates, in the crisis they’ll never actually use such authority. The disaster capitalist predators of Wall Street and government will demand that we go right for the Bailout “or else by Monday we won’t have an economy”, and everyone else will panic and stampede whichever way Paulson and Bernanke, or Geithner and Bernanke, or whoever, wants to stampede them.
 
(As an example of rigging the system just to make sure, the vaunted Kanjorski amendment setting up a resolution mechanism for big banks includes a provision allowing bankrupt banks to sue to prevent their being resolved. So in the crisis, even if the government somehow wanted to use the resolution authority, this poison pill would enable the rackets to use stalling tactics at the same moment they and their flunkies are screaming “STAMPEDE!” Does anyone really think that under those circumstances the would-be “resolvers” wouldn’t cave in?
 
So this “Trojan Horse” not only doesn’t enact a real resolution reform but would weaken existing FDIC power.)
 
I’ll also mention Krugman’s original touting of Swedish-style nationalization for insolvent rackets. This too was meant to be a scam. The idea was that if the original Bailout plan was failing, the banks were still collapsing, and the political heat made the administration desperate enough, they’d pretend to take the banks into public-interest receivership. It would be sold as a responsible crisis measure which would eventually turn a profit for the taxpayers like it had in Sweden. In practice, it would’ve been just another mechanism for the government to steal from the taxpayer to buy the toxic crap from the banks at the banks’ own valuation.
 
As it turned out, they ended up not having to go that route. Endless free money, GSE guarantees, and Fed MBS buys have so far been sufficient robbery methods to prop up the zombie banks.
 
So there’s our A, B, and C. Note how in every case B always further entrenches corporatism and racketeering while A is always either anti-corporatist or neutral with regard to it.
 
So here’s the political conclusion from all this. B is never worth supporting. The laws of the corporate war upon the people dictate that the rackets will always take all they can. So for them ever to accept a strong version of B would be such a defeat for them as to indicate that the forces for reform were in fact strong enough to achieve A. Conversely, if you’re not strong enough to get A you’re also not strong enough to get a real version of B. So in either case it’s never tactically sound to fight for or accept B. B will always be just an ornamented version of C.
 
So the course of action is clear. Once we’ve identified the A and the B (as I said, the most common clue is that B is pro-corporatist), there’s no decision to be made in any particular case. If you’re entering the reform arena, always demand A and fight as hard as you can for it. But once A is gone, reform is gutted. So don’t prostitute and discredit yourself lending aid and comfort to criminals by settling for C, either directly or in the sham B version. 
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14 Comments

  1. Over on streetratcrazysaloon, I have stuck down a review of Roman Polanski’s current opus, “The Ghost Writer”.
    I have no intention of debating or discussing WHO Roman Polanski is, that’s not the point.
    The point is… in that film EVERY AGENT is a flesh and blood human being and NOT a caricature.
    And the powerful are LESS motivated by money, and profit (that’s our childish.. prejudice on this question…) than by their beliefs.
    We talk about scams out of intellectual shallowness and cowardice because the world is much more complicated than we would like to believe, for better and for worse.
    While there are certainly dishonest people involved in all you’ve mentioned, there are also people who are doing what they are doing because they believe that they are RIGHT to be doing so. That in this crisis they are doing THE RIGHT THING.
    You have NOT dealt with the fact that usurpation of power in the American political system is possible largely because… the American people no longer want to be free.
    Maybe YOU do, but the majority do NOT want to be free. They want to be… taken care of.
    And the rampant abuse that you are detailing is in part the result of this desire to be taken care of.
    I said HERE, I think that in the last election, THE PEOPLE did NOT elect a president they.. CHOSE A KING. It is NOT because “democratic” institutions are in place that WE use them as democratic institutions, now, is it ? That would be.. too easy.
    So… how can you LEGITIMATELY fustigate the rich and powerful for giving THE PEOPLE what they want ?
    Comments ?

    Comment by Debra — April 22, 2010 @ 11:03 am

    • By definition the people are those who want to be free.

      That’s who I care about.

      Comment by Russ — April 22, 2010 @ 2:05 pm

  2. Perceptive as always, Russ. You really put your finger on how the entire process works.

    Comment by jimmy james — April 22, 2010 @ 12:51 pm

    • Thanks, Jimmy.

      Comment by Russ — April 22, 2010 @ 2:06 pm

  3. Well, if I didn’t hate the word “reality” so much, I’d say that it was time to do a little “reality” check…
    And I intensely dislike statistics too, or I would ask you to give me an idea of what percentage of the American population you consider to be… the “people” ?
    I maintain that there are not as many crooks as we think there are. That this is a real problem because punishing the hell out of the crooks for our own satisfaction will not solve the problem either.
    And I have already told Edwardo to be careful throwing the word “revolution” around… it might give people.. ideas…
    Lots of people got the axe in the French Revolution.
    Lots of… good, passionate people LIKE YOU, as a matter of fact.
    The social order serves a purpose, even if I hate the expression “law and order” too.
    What happens when there is NO social order, and particularly NO TRUST OR FAITH can get very out of hand.
    I don’t know how old you are. Even if you are old enough to remember Kent State, you are NOT old enough to remember what the French Revolution looked like. Me neither as a matter of fact, but I have a pretty good imagination, and I’m living on the soil that soaked up a lot of that human blood. It creates a sobering effect.
    I wouldn’t want that kind of revolution. For me OR for my children. Even for my neighbor, come to think of it.
    And you ?

    Comment by Debra — April 22, 2010 @ 3:34 pm

  4. I wouldn’t need to see that soil soaking up blood. I can see the Iraqi soil doing so on Wikileaks.

    And I hear the Afghan version will be out soon.

    Nothing in any previous revolution compares to the blood the corporate empire is shedding right now.

    And if they have their way that bloodshed’s coming home.

    So I’m willing to run whatever risk to try to prevent that fate.

    Comment by Russ — April 22, 2010 @ 4:24 pm

  5. I think that Debra brings up an interesting concern, namely, an apparent suspicion on her part that a large segment of the American public thinks like and/or is sympathetic with the claims by Wall St ‘masters of the universe’ who have effectively used the MSM to promote their self-serving claim to be ‘doing God’s work’ as they rape and pillage the economic foundations of the US today and of the world tomorrow (if all the impoverished citizens resign to assume the status of G Orwell’s proles). I suspect that Debra’s concerns regarding revolution represent overstatement unless she is unaware of the control currently exercised by the US government’s release of public information and/or monitoring of information concerning communications among every citizen (not to mention the unannounced activities of the military, of various agencies of the Executive branch, police regulation of local communities, etc. On the other hand, there are legitimate routes for appeal. Interesting among the latter are a recent effort initiated by L Lessig to initiate a Constitutional convention:

    CallaConvention.org

    http://convention.ideascale.com/a/ideafactory.do

    and, another by Tom Cox, who proposes and initially funds GOOOH to try to initiate a more democratically representative group in Congress:

    http://goooh.com/Home.aspx

    Several others have proposed approaches which seem to a non-lawyer to be somewhat justifiable, though, perhaps a bit naive.

    For those who may be interested in the Pete Peterson (think Blackstone Invest) backed conference scheduled in Washington DC on April 27-28 related to management of retirement funds, social security and/or other financial matters, there is another conference which has been assembled in that same city on April 28 which is designed to focus on ‘Modern Money management Theory’ in an effort to try to explain why all of the fear-mongering of the ‘financial terrorist-types’ is actually irrelevant for the US government control of money in this country which has been using fiat currency since we went off of the ‘gold standard’ approach during R Nixon’s administration. The tentative

    Fiscal Sustainability Counter-Conference Schedule (as of Tue, 2010-04-20) features several economists who understand the discipline and who are not affiliated with President B Obama’s economic team.

    http://www.fiscalsustainability.org/node/20

    The tentative program schedule, topics and presenters as of 04/20/10. Venue: The George Washington University’s Marvin Center, Room 310, The Elliot Room.

    Comment by William Wilson — April 22, 2010 @ 6:19 pm

    • Thanks for getting this out there, William (not that this blog has a huge audience, but every bit helps).

      Comment by Russ — April 23, 2010 @ 5:57 am

  6. “And the powerful are LESS motivated by money, and profit (that’s our childish.. prejudice on this question…) than by their beliefs.”

    -Deb, that is unmitigated horse shit-of the smelliest sort- that flies directly in the face of what we have had confirmed by evolutionary biology. I’m going to keep this short and sweet, the “beliefs” of the powerful are little more than a cover for the drive to acquire and hold power. Sometimes that power, once acquired, does not do irreperable harm, but can have salubrious effects, but that is hardly the norm as attested to by the effects of true believers such as Hitler, Mao, Stalin, Bonaparte, Torquemada and Mather.

    “We talk about scams out of intellectual shallowness and cowardice because the world is much more complicated than we would like to believe, for better and for worse.”

    -Hiding behind complexity, and that is what you are doing, is all the rage. But sometimes the “complexity defense” does nothing but obfuscate the matter. I submit that is all that putting forth complexity is doing in this case.

    “While there are certainly dishonest people involved in all you’ve mentioned, there are also people who are doing what they are doing because they believe that they are RIGHT to be doing so. That in this crisis they are doing THE RIGHT THING.”

    -Yes, indeed, there are Kool-Aid drinkers at the scene of every great crime. Bad software is endemic to our culture and it’s not just found in computers. Joe Bageant discusses this in his latest essay. But Deb, calling these jokers dishonest is like calling a mass murderer an angry person. It doesn’t begin to do justice to what you are dealing with.

    “You have NOT dealt with the fact that usurpation of power in the American political system is possible largely because… the American people no longer want to be free.”

    -You make an excellent point. Our scared, cowardly, confused and exhausted, and enervated populace make it easier, perhaps possible, maybe even likely-“The price of Liberty is, (in fact) vigilance” that all the wickedness under discussion occurs.

    “Maybe YOU do, but the majority do NOT want to be free. They want to be… taken care of.”

    -There’s something you are overlooking, they may believe that they are free, or at least free enough.
    They can say whatever they like, eat what they choose and watch cable. I submit to you we have an impoverished notion of what freedom is.

    And the rampant abuse that you are detailing is in part the result of this desire to be taken care of.
    I said HERE, I think that in the last election, THE PEOPLE did NOT elect a president they.. CHOSE A KING. It is NOT because “democratic” institutions are in place that WE use them as democratic institutions, now, is it ? That would be.. too easy.
    So… how can you LEGITIMATELY fustigate the rich and powerful for giving THE PEOPLE what they want

    Which people chose the king? How many of them were there? Obama won the election by a small percentage. It was a thrashing in the electoral college which is hardly the stuff of coronations despite what some segment of the MSM (and the Obama Administration) would have us believe.

    My point: A lot of people don’t want either/or, I know I didn’t, but they really don’t have a clue about how to change the game. They not only don’t want a king they don’t even want a President at least not with the present lease agreement.

    Comment by Edwardo — April 22, 2010 @ 11:43 pm

    • I have recently seen a few celedon shoots springing up in the hinterland. When the Kelo decision came down (or slithered down), states and municipalities quickly passed counter-legislation, essentially telling SCOTUS to shove it. Similarly ,fourteen States’ Attys General sued the Feds over the health care bill, standing on the 10th Amendment. Although the 10th has repeatedly been sacrificed at the altar of the god of the “commerce clause,” at least it represents a move in the direction of restoring the Constitution. I get the feeling that, despite the MSM’s demonization of anyone with a contrary opinion, I see more people willing to risk the tongue lashing. In fact, the fools in the MSM “created” Sarah Palin in their attempts to destroy her. Same with the Tea Party.
      I think there are more and more regular blokes who are willing to brave “the tempestuous sea of liberty.”-Thomas Jefferson

      Comment by Jessica — April 23, 2010 @ 12:49 am

      • The parallel between Kelo and the health racket bill is clear.

        In both cases the government acts not in the public interest but as a hired goon to steal from the non-rich and hand over the loot to rich private interests.

        Comment by Russ — April 23, 2010 @ 6:02 am

  7. I have to agree with Jimmy James, Russ. Perceptive indeed.

    Edwardo, thanks for taking the time to deconstruct Deb’s post.

    Comment by Bloodgroove — April 23, 2010 @ 6:13 am

  8. My pleasure, but I think the terms dismantle or refute are more appropriate than deconstruct.

    Comment by Edwardo — April 23, 2010 @ 8:10 am

    • I considered “dismantle” but it seemed harsh to me.

      Besides, I’m not any great wordsmith. I’m just me. I prefer a campfire with a log to sit on. But yer part of making me smarter, Edwardo – and it is appreciated.

      Comment by Bloodgroove — April 23, 2010 @ 11:21 am


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