Volatility

December 4, 2009

The Gods Must Be Crazy

 

“How much should Goldman Sachs pay Lloyd C. Blankfein?” This question kicks off an earnest analysis of one of corporatism’s pressing issues. How much should a temporarily legalized robber get to openly steal? The piece takes this very seriously. They’re clear that they consider this purely a tactical question, a PR issue. There’s no morality or justice involved, of course.
 
It’s silly to be so serious about such an absurd question. How much?
 
1. He “should”, by the standards of himself, the government, and the NYT, take all he can get, just as Goldman Sachs does. By that standard he is indeed the most “talented” of them all.
 
2. The real answer, which any human being would give when asked “What does he deserve?”, is a noose around his neck. (Or a prison term if you’re a pacifist, I guess.)
 
“Let each man be paid in full.”
 
So the question is rather incoherent when they pretend it’s not a class war question. But like I said they’re offering PR advice. How do you least rile up the peasants?
 
Their advice: Throw out the “bubble year” 2007 where Blankfein extracted $68 million. By the percentage of income measure he’d get $64 million this time around. Too much. Those populists will go nuts. And yet proven losers like Richard Fuld and Jimmy Cayne got a higher percentage in 2007 than he did. (Blankfein’s $68 million was only .6% of GS’s net income, whereas Fuld got 1.2 and Cayne a whopping 1.9% for running their banks into the ground.) So yes, Lloyd, life’s not fair sometimes.
 
The piece does concede that GS as well is a ward of the state. Blankfein should therefore do the noble thing and take far less than his dazzling talent deserves. Would $9 million be good, the nice symbolism of a single digit?
 
“But critics of Wall Street and executive pay probably would oppose a $9 million payout almost as much as one that was twice as large.*” That’s true, some of us would. Nine cents is too much for these villains. But the higher it goes, the more obvious it is to more people.
 
Blankfein has to be worth more than Benmosche at AIG at $9 million. The logic is irrefutable. Even the NYT thinks Benmosche’s worthless.
 
“The right number for Mr. Blankfein may be around $20 million.” Ninety percent in stock, vs. 60% in 2007; .2% in profits.
 
So that’s expert advice from professional journalists who wish “Mr. Blankfein” well.
 
It looks like there’ll be a lot more executive freedom to ponder pay once Bank of America pays back the TARP. Citi as well is looking for a way out.
 
It’s simply insane that this is where we still are after all that’s happened. In every case every banker’s sole concern regarding the TARP, which was supposed to help recapitalize these things, is “How will it affect my pay”.
 
As Yves Smith said today, this is pure looting.
 

The Bank of America stock offering, which will be used to repay the TARP, went off well, so surely this means the Charlotte bank is on the mend and its finances are sound, right?

Chris Whalen, who is an expert on the banking industry and has a proprietary database that measures the risk of individual banks, doesn’t buy it:

We are reaffirming our “negative” outlook on operating results for BAC….

We…look at the specific transaction proposed by BAC, we see the repayment of government TARP equity and a $20 billion reduction in the overall capital of BAC at precisely the time when the Fed is withdrawing many forms of subsidies for the largest banks. Assuming that BAC can place $18.8 billion in new securities and sell $4 billion in assets at valuations that do not generate capital losses, the consolidated entity ends up with $20 billion less capital on a consolidated basis than today.

Ahem, the point of this exercise was to make sure the banks came out sounder, and did not weaken themselves by paying back the TARP funding. Instead, the reverse is happening. A company that threw a fit to get funding from Uncle Sam early this year is now depleting its capital….so it can pay executives better than if it was on the government short leash.

Scrimping on capital to show better returns to allow for bigger bonuses is looting, and it’s what got us in this mess in the first place. But here the authorities are now enabling this process, because “paying back the TARP,” no matter what the true costs and risks are, validates Obama’s economic programs.

 
According to the TARP principle, and the propaganda of the bailout in general, the only measure should be the health of the balance sheet. But just as with the phony “stress tests”, so here the government and the media are going along with systematic looting fraud.
 
BofA is clearly weakening its financial state in order to facilitate looting by its executives and cadres. Citi is looking for a way to do the same thing. Otherwise its traders are said to be gearing up for an “exodus” next year if this year’s bonuses are too insulting to their “talent”.
 
We get the standard lies about how paying the TARP will render Citi free and clear, and never mind the continuing $300 billion in government guarantees plus god knows what Fed support.
 
Once they succeed the way Goldman did we’ll be able to read analyses on how much Pandit and whoever succeeds Lewis should go ahead and plunder, based on the political cosmetics.
 
The MSM already can’t wait, judging by the tone of these articles, which are both opinion pieces masquerading as journalism. Even at this late date they’re still solemnly using the Orwellian term “talent” with nary a quotation mark in sight. The very headline of the BofA piece decrees that it will now “shed its stigma”, and the celebration continues from there.
 
“Its recovery, while many ordinary Americans are still struggling, is an important milestone in the government’s yearlong effort to stabilize the nation’s financial industry.” How many lies in that sentence? BofA recovery, milestone, effort to stabilize….The sentence does, I imagine inadvertently, starkly juxtapose the struggling of real Americans with the fact that the government does not care about Americans, only big banks.
 
We’re treated to the opinion that Citi has “a clear strategic direction”. This is, to say the least, highly disputed. Many commentors have said that Pandit’s proclaimed strategy is just as incoherent and senseless as this assemblage of this Frankenstein’s monster in the first place.
 
And then there’s the bizarre ongoing spectacle of the MSM openly admitting, as if it’s a matter of course, that the whole bailout premise of “getting the banks lending again” was a fraud.
 
“Citi’s fortunes have slipped recently as rising consumer losses overshadow gains from its trading activity”. I thought the point of bailing Citi out in the first place was to improve the fortunes of Main Street, of the “consumer”. If the bailout was ever anything other than a lie, then what possible meaning could it have to even talk about “Citi’s fortunes” other than from the point of view of its consumer lending? Yet here we are right back to casino business as usual, trading activity shows gains, everything’s great except for that stupid bank lending stuff…
 
Same here:
 

Indeed, Merrill’s businesses have improved this year as Wall Street’s traditional business of trading and deal making picked up. At the same time, Bank of America’s core consumer lending units suffered greater losses as the economy weakened.

 
How many lies in there?
 
Why is the casino still open AT ALL? There’s only one answer: our government is irremediably corrupt.
 
“Core consumer units” – you mean the one and only thing the bailout was supposed to be about? They got the bailout, they were supposed to lend. PERIOD. What’s this garbage about “losses”?
Again we know the answer. The bailout was a LIE.
 
“Suffered greater losses as the economy weakened”. Yeah – it’s a force of nature, and it’s all impersonal.
 
Try this way of phrasing it: Criminal robbers continue to rob  and to party with the loot while the real Americans who actually create 100% of the wealth freeze and starve.
 
It’s like when 9/11 was supposed to mean the end of all frivolity and stupidity in the media. America in general and the media in particular were finally going to grow up. Strike One!
 
And now the financial crisis and the alleged “need” for the bailouts were supposed to accomplish the same thing. Strike Two!
 
I don’t know about you, but I don’t think I need to wait for the next pitch.
 
After all that, it shouldn’t be surprising to see Ben Bernanke compare himself to a bank robber. I didn’t know he had such a lively sense of irony, although it could mean that political tutorial isn’t coming along so well.
 
At his reconfirmation hearings, which are getting a little bumpy what with holds by Sanders and Bunning, as well as the Paul/Grayson Audit the Fed amendment and Dodd’s plan to strip the Fed of much of its regulatory authority looming in the background.
 
How does Bernanke defend his atrocious record? He uses the stupidity defense: “I did not anticipate a crisis of this magnitude.”
 
Then there’s the old I’ve-learned-my-lesson. Subprimes and reserve requirements? “That is a mistake we won’t make again.”
 
Then you claim things would’ve been much worse. You claim credit for “significant improvements”.
 
Apparently no one asked him, worse for whom? Improvement for whom?
 
We don’t have to ask him, since even in his political discomfort he got to his real agenda: the great call for cutbacks in the hated Social Security and Medicare.
 
I really can’t improve on Bernanke’s own larcenous frankness here, so I’ll let him speak for himself:
 

Ben Bernanke has overseen the greatest expansion of the Federal Reserve’s balance sheet in its history, pouring trillions of dollars into Wall Street firms at roughly zero interest rates.

His generosity, however, has a limit.

In testimony before the Senate Banking Committee today, where he’s seeking re-appointment as the Fed’s chairman, Bernanke called for cutbacks in Medicare and Social Security even as unemployment rises and the middle class is endangered.

Citing legendary bank robber Willie Sutton, Bernanke said of the retirement and health care funds that are the legacy of the New Deal: “That’s where the money is.”…

“Well, Senator, I was about to address entitlements,” Bernanke replied. “I think you can’t tackle the problem in the medium term without doing something about getting entitlements under control and reducing the costs, particularly of health care.”

Bernanke reminded Congress that it has the power to repeal Social Security and Medicare.

“It’s only mandatory until Congress says it’s not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation,” said Bernanke…..

“Willie Sutton robbed banks because that’s where the money is, as he put it,” Bernanke said. “The money in this case is in entitlements.”

 
And what about the Fed’s vaunted political “independence”? It’s non-politicality? Well, Bernanke is very clear on how much he hates civilian entitlements, and how much he loves bankster entitlements.
 
Yet when he’s asked about instead taxing the rich for their fair share? “These decisions are up to Congress.” But what about Greenspan’s advocacy of tax cuts in 2000? “I have not done that. I’ve done my best to leave that authority where it belongs, with the Congress.”
 
So with the political advocacy of Ben Bernanke and his highly politicized Fed, disaster capitalism seeks its next big scalp: entitlements. This assault is coordinated in the Senate with a right-wing “bipartisan” goon squad led by Kent Conrad, where they’re demanding an extra-legal, unconstitutional Star Chamber empowered to gut Social Security and Medicare.
 
With this assist from Bernanke and the Senate, Obama hopes to succeed where Bush failed, to destroy these programs completely.
 
This is class war at its most vicious short of actual violence. Bernanke is a cadre. Bernanke’s mission in life, as a mercenary and as an ideologue, is to steal as much as possible from the Americans who create America and convey it to rich parasites. If we always keep that fact in mind, and apply it to every last thing he says and does, we’ll always understand him perfectly.
 
The same goes for a guy who, as the Greatest Depression sets in, as millions of jobs continue to be destroyed, with a $27 trillion bankster bailout as the centerpiece of his entire policy, can convene a “jobs summit”, look America in the eye, and say: “It’s important to face the fact that our resources are limited”.
 
It’s a flat out LIE. The bailouts prove he has infinite resources for anything he wants to do. So anywhere he starts crying poverty, that means nothing other than he DOESN’T CARE.
 
Well, Obama does care about one thing here. No matter what comes out of this job summit, the first priority is corporate profit. He likes “cash for caulkers” because big box stores like Walmart and Lowes can be “contracted” to “advertise” it.
 
More generally, he emphasized that he wants the corporatized private sector to rule. “Ultimately true economic recovery is only going to come from the private sector.”
 
Would that be the same corporatist private sector that destroyed it? Who have done all they can to destroy as many jobs as possible for nearly forty years now? Who are only gearing up to destroy more jobs now?
 

“I want to be clear: While I believe the government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector,” he told his audience, which included critics as well as executives from American Airlines, Nucor Corp., Google Inc., Walt Disney Co. and Fed-Ex.

Mr. Obama told the chief executives that he wanted to know: “What’s holding back business investment and how we can increase confidence and spur hiring? And if there are things that we’re doing here in Washington that are inhibiting you, then we want to know about it.”

 
WTF is this, Bush?
 
Since we’re doing the flunkey round, how about the elaborations on Obama’s war speech the other night? Gates has gone before Congress and assured everyone nothing Obama said about timelines has any real meaning. 2011 is an “inflection point”. Actions will be determined by “conditions on the ground”. “Gradual”. Zero timetable.
 
Hillary, same thing. No timetable, and everything depends upon “requests for logistical support” from the corrupt client. If that’s true, forget about it. We’d still be in Vietnam today propping up the South if Nixon and Kissinger hadn’t lied to Thieu about that.
 
Also, “civilian commitment must continue” indefinitely, which of course will require military protection, which won’t be included in the “withdrawal” schedule, and so on. She even patronizes Jim Webb, one of the handful in Congress who actually know something about this stuff. He asked her a “profoundly important question”, according to her. Another Fuck You from a chickenhawk. (I hope it’s not just my own pet peeve when somebody replies “that’s a good question!” There’s no way that’s not patronizing, since the question usually wasn’t any good at all, but rather stupid or pedestrian. Or if it really is a good question then you’re basically saying, “That really is a good question. I never expected that from a moron like you.”)
 
Admiral Mullen of the JCS also said “conditions on the ground” will decide. So we have confirmation that whatever they really intend, whatever happens, the notion of a firm 2011 timetable is simply feathers thrown into the wind.
 
So there’s a rundown on what Bernanke, Obama, and some lesser flunkies have been up to as their masters work out the details of how to get their bonus mojo back.
 
One last thread of the constricting ropes. At the Dallas Morning News they’ll be reporting more directly to their masters.
 

In an interview, Bob Mong, the editor of The Morning News, stressed that no other parts of the paper would report to people outside the newsroom, though advertising managers had been assigned to work with several other areas, like health, education, travel and real estate. Asked if there were plans to apply the structure in sports and entertainment to other parts of the paper, he said, “not at this time.”

 
It looks like a wedge. Soon the ad department, really just in-house corporate lobbyists, will have to directly vet editorials. And then on to all the newspapers.
 
I guess it cuts down on some of the farce. 
 
[*The kind of lesson “progressives” absolutely refuse to learn.]

November 11, 2009

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

March 24, 2009

The Bailout War II: Too Big To Fail

 

(See also the rest of the five-part series)
 
https://attempter.wordpress.com/2009/03/24/the-bailout-war-part-i-aig/ 
 
https://attempter.wordpress.com/2009/03/25/the-bailout-war-iii-corporatism-and-finance/
 
https://attempter.wordpress.com/2009/03/26/the-bailout-war-part-iv-toxic-bank-assets-and-the-bailouts/
 
https://attempter.wordpress.com/2009/03/27/the-bailout-war-v-nationalization-and-relocalization/

 

In the classic Mel Brooks comedy-western Blazing Saddles, the new sheriff arrives in town only to find the townsfolk ready to lynch him. He puts a gun to his own head and, talking about himself in the third person, threatens to shoot himself if they don’t let him as kidnapper/hostage go. They townspeople believe him: “I don’t think he’s bluffing!” He escapes to marvel over how gullible they were.
 
Today we have a whole industry making the same threat, except they threaten not only to destroy themselves but the whole American economy. The response of America’s public elites has been the same as in the movie. “I don’t think he’s bluffing.” But this is no comedy.
 
Since this crisis began we’ve been living in fear. The specter which looms over us is called “Too Big To Fail”. This concept is seldom treated as a concept, and almost never questioned. It is accepted on faith and in fear. It was peddled by the same administration whose only idea, ever, was to monger fear. Even though the media and the cognoscenti had been burned so many times by the Bush administration’s lies, and even though this latest threat followed the exact patterns which stampeded us into the Patriot Act and Iraq, and even though the same interests as before stood to profit here, they were still as gullible as ever and have been first the Bush and now Obama administrations’ water carriers right on down the line.
 
I believe TBTF is a classical Big Lie. Even if it were true, could any of the proposed solutions really solve such a problem? And if it is true, why does there seem to be so little will to solve it in a way which would ensure we are never so vulnerable again? Surely any good-faith plan to temporarily prop up the TBTF banks would include a plan to carefully and with all deliberate speed dismantle these entities such that we would never again be in this position.
 
Yet it is clear no one in the power structure has such a thought. The very personnel who express such fear and loathing over our helpless predicament are the same who seem content with the TBTF institutional model, and more often they seem intent on further consolidating and aggravating it. For that reason we must consider the possibility that out of ideology and greed they want America in the grip of TBTF. If that’s the case, we must also ask if TBTF is simply an ideologically motivated lie. Beyond this we should ask, what kind of world do we want to live in? What are we trying to preserve, that it’s worth living as a slave, paying protection to boardroom thugs, all for the sake of what? Cheap junk from China?
 
The basic notion of TBTF is that if the likes of AIG, Citi, BofA and others were allowed to go bankrupt, as they certainly would if they hadn’t been propped up with prodigious sums of taxpayer money, the effects of this would reverberate to other giant institutions, weakening or collapsing them as well, and out through other big corporations, and down through smaller banks, pension funds, consumer lending, etc. to hit every individual, while the failure of savings institutions would bankrupt the FDIC. The government’s only option would be to run the printing presses or default on monumental guarantees, either way destroying the dollar. It would be the end of civilization as we know it. (Of course much of this is happening anyway in spite of the bailouts.)
 
It’s a harrowing picture. Is it true? If this really is what will happen when this massive inverted pyramid built on bubbles and debt finally comes crashing down, then shouldn’t our priority be to build firewalls against it? Instead of obsessing on the status of all this toxic paper, talking of good banks and bad banks, shouldn’t we instead be bolstering local and regional lenders, providing them with “facilities”, helping them unwind their entanglements with the Wall Street monstrosity? Shouldn’t we be dismantling these radioactive structures as quickly as we can do with any level of reasonable care? Since the government evidently has $trillions available, shouldn’t this be used to start brand new local and regional education networks to train a new workforce of relocalized small farmers, small craftsmen, small factory workers, small distributors? Perhaps even help launch regional and local currencies? Shouldn’t the stimulus be directed toward all these endeavors, which clearly look ahead to a future in a world where exponential debt, suburban sprawl, consumerism and profligate fossil fuel use can no longer serve as the basis for an economy or a civilization? That no one among the powers that be sees things in any way other than the opposite is strong evidence of their bad faith.
 
To properly judge the motivation of the bailout policy, we must go back to how this came about. We must consider how the same cadres who preach TBTF are those who constructed the system in the first place. The financialization of the economy goes back to the 70s. Since the dollar was detached from gold and set loose as the free-floating reserve currency of globalization and petrodollar recycling, while the manufacturing economy of America was hollowed out and the production offshored to an ever more exploited third world work force, the elite level of the American economy has mostly engaged in rent-seeking. It wove a fantastic web of interconnections, games of chance, tricks and cons, cash flows, inflating bubbles here, preying on the aftermath of burst bubbles or otherwise gutted economies there. All the while it encouraged a massive accumulation of addiction to debt, to the point that all of America’s alleged growth over the past decade has been the result of debt and bubbles. Take those away, and America has been in recession throughout this century. As the final ingredient in this witches’ brew, we had deregulation to the point of anarchy.
 
While the whole process may not have been planned out step by step, the basic goal was always the same: maximum size, concentration, interdependence, and efficiency. It was the most precariously perched, least robust system imaginable. Even the slightest thing going wrong would crash it. So as delusional as many of the participants became, it’s not credible that they gave no thought to the crash contingency. “TBTF” was a planned campaign.
 
When the financial crisis reached critical mass with the imminent fall of AIG the TBTF machine went into action. Paulson and Bernanke sounded the cry, “Stampede!” Fear seared it in. They told a Congressional delegation if Paulson wasn’t made a literal financial dictator “by Monday you won’t have an economy”. Although the people were more skeptical, elites everywhere, panicked further by the terrorism of the stock market, leapt on board the bailout train. Since then no one has seen an alternative to shovelling hundreds of $billions, and now $trillions, and soon tens of $trillions, into an ever more hellish, more gaping crematorium, and no one sees an end to it.
 
Today, even as the “new” Geithner/retreaded Paulson plan is being batted about, we should ask a few questions about the status of TBTF as an economic concept. A major concern is how to unwind AIG’s CDS boondoggle. But here’s something I don’t understand about this. If these bets were never supposed to pay off, as the dogma of the perpetual bubble held, then shouldn’t that have been factored/priced into the system? Weren’t those who bet on failure more like typical casino gamblers, just having fun, betting on long-shots, while other buyers were buying for the rationalistic purpose of evading reserve requirements? My point is, why should it crash the economy if we just declared all CDS contracts held by bailed-out companies, or contracts that were offshored, void? Granted, the banks were absurdly overleveraged thanks in part to the CDS scam, but we have that problem anyway. Why are the CDSs in themselves a problem? It seems like an ideological lie, peddled in tandem with the tantrums of the stock market, to scare the people into allowing public money to be used to pay off these bets in full.
 
Similarly, as some have commented, this all seemed new last Fall. Perhaps people overreacted to Lehman. But today any reasonable person has been contemplating the destruction of AIG, Citi, BofA and others for over six months. So if the TBTF exposure ever did exist, why should it still exist? Surely most participants could have decoupled by now (while anyone who could have unwound at a reasonable loss but hung on in expectation of a taxpayer bailout should be treated as an asocial element).
 
And, if banks really were on the verge of failure, they would’ve used the bailout money to forestall this. If they aren’t going to lend it as promised, why haven’t they used it to buy the toxic assets from themselves and in that way cleanse their balance sheets? Instead they’ve used it for bonuses, parties, golfing, airplanes, mergers and acquisitions, or just hoarded it. How do any of these keep you from “failing”? How do they help the economy as a whole?
 
So TBTF was used to stampede America into submission to a massive redistribution of wealth from the public to the very same criminal elite who profited so obscenely in the buildup to the crisis and then set it off. It was the classical pattern of disaster capitalism: trigger the disaster; confuse, terrorize and stampede the people; apply the shock treatment; carry out the corporatist coup. Although they sold the first TARP as a stimulus to lending, they moved immediately to their real purpose. While no lending materialized, word got out that Treasury was encouraging the big banks to use the money for acquisitions. TBTF was really about helping the big get bigger, the rich get richer, and to wipe out the smaller and not-so-rich. Is the encouragement of further structural concentration the action of anyone who truly believes and fears that things are “too big to fail”?
 
So we’re embarked upon a program of endless cash injections, sweetheart loans, loan guarantees, every kind of subsidy and direct loot conveyance, as all the while first Paulson/Bush and now Geithner/Obama try to figure out how to fulfill every profit expectation of the banks holding this toxic paper,no matter how much loss has to be socialized. Now Geithner even wants to use the FDIC to leverage a bailout bubble, AIG-style, in his desperate attempt to serve the banks. All of this has been shrouded in as much illegal secrecy as the executive branch can manage. Obama is now continuing with what Naomi Klein called “Bush’s most creative innovation: no risk capitalism”. The goal is a kind of permanent corporatist revolution to complement the permanent imperialist war abroad. The two brand names Too Big To Fail and Global War On Terror are parallel and corollary, and both are intended to be the never-ending Long War.
 
How can we resist this? The first thing is to ask ourselves, are we willing to pay this price? Even if it were possible to salvage the existing system at the price of paying this protection money and having to live permanently under the thumb of these gangsters, would it be worth it? Would a human being desire to live this way? Are we willing to pay this price? Or just like the War on Terror, is it another form of throwing away our freedom for the mirage of “security”?
 
To anyone who doubts any of this, who claims to believe in Too Big To Fail in good faith, the question is simple: What is your plan to dismantle the TBTF structures and ensure that Never Again will any such structure exist to threaten us. These things are a clear and present danger to all economic and social stability. No one can in good faith wish for their propagation, or wish to pay the terrible price of their continued existence.
 
If we can accept the unsustainability of the exponential growth economy and the malevolence of TBTF; if we see how this is a path we cannot take and must not wish to take; we could take another look at the world. We could see ways to rebuild the future and build a new, revitalized America, centered on a relocalized, truly productive, truly fulfilling economy.
 
The financial crash could yet prove to have served a creative purpose if it alerts us to our predicament. These institutions are not our friends and they do not wish us well. They want to condemn us forever to the road of serfdom. If instead the detonation they’ve triggered can cast a light on a different trail where we retake control of ourselves and our futures, it will not have been in vain.