Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. The Quiet Coup (Simon Johnson)This article, which hypothesizes that an "American financial oligarchy" has (re)emerged and is turning the United States into a Banana Republic, is getting a lot of attention. (See our Jan/Feb 2009 cover story for a related argument, though the meat of this one is the financial elite part.) Krugman mentioned it in his March 29th column. And Brad DeLong has a post about it on his blog, with many comments, some of them interesting. The excerpt I'm giving below is not from the beginning of the article, fyi.The Quiet Coup By Simon Johnson | The Atlantic | May 2009 ... Becoming a Banana Republic In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn't be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn't roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people. But there's a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them. Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a "buck stops somewhere else" sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for "safety and soundness" were fast asleep at the wheel. But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector's profits—such as Brooksley Born's now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside. The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry's ascent. Paul Volcker's monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services. Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007. The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent. Read the full article. Labels: Brad DeLong, financial crisis, oligopoly, Paul Krugman, recession, Simon Johnson Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). State-Owned Bank in ND Doing Just FineFrom Mother Jones. The comment section is worth reading; some debate about whether this is the only state-owned bank in the United States. (Doesn't the FDIC own many banks at any given time?) I weighed in, even though I am not so big on commenting on articles, just to contradict some guy who claimed that hedge funds never fail (he was arguing, preposterously, that over-regulation caused the banking crisis).How the Nation's Only State-Owned Bank Became the Envy of Wall Street By Josh Harkinson | Fri March 27, 2009 6:33 PM PST The Bank of North Dakota is the only state-owned bank in America—what Republicans might call an idiosyncratic bastion of socialism. It also earned a record profit last year even as its private-sector corollaries lost billions. To be sure, it owes some of its unusual success to North Dakota's well-insulated economy, which is heavy on agricultural staples and light on housing speculation. But that hasn't stopped out-of-state politicos from beating a path to chilly Bismarck in search of advice. Could opening state-owned banks across America get us out of the financial crisis? It certainly might help, says Ellen Brown, author of the book, Web of Debt, who writes that the Bank of North Dakota, with its $4 billion under management, has avoided the credit freeze by "creating its own credit, leading the nation in establishing state economic sovereignty." Mother Jones spoke with the Bank of North Dakota's president, Eric Hardmeyer. Mother Jones: How was the bank formed? Eric Hardmeyer: It was created 90 years ago, in 1919, as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets, the money markets maybe in Minneapolis, New York, deciding who got credit and how to market their goods. So it swept the northern plains. In North Dakota the movement was called the Nonpartisan League, and they actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer. And we're both in existence today doing exactly what we were created for 90 years ago. Only we've morphed a little bit and found other niches and ways to promote the state of North Dakota. MJ: What makes your bank unique today? EH: Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer. And I would bet that that would be one of the most difficult things to wrestle away from the private sector—those opportunities to bid on public funds. But that's only one portion of it. We take those funds and then, really what separates us is that we plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities. We grow our state through that mechanism. MJ: Clearly other banks also invest their deposits. Is the difference that you are investing a larger portion of that money into the state's own economy? EH: Yeah, absolutely. But we have specifically designed programs to spur certain elements of the economy. Whether it's agriculture or economic development programs that are deemed necessary in the state or energy, which now seems to be a huge play in the state. And education—we do a lot of student loan financing. So that's our model. We have a specific mission that was given to us when we were created 90 years ago and it guides us throughout our history. MJ: Are there areas that you invest in that other banks avoid? EH: We made the first federally-insured student loan in the country back in 1967. So that's been a big part of what we do. It's become almost a mission-critical thing. I don't know if you have been following the student loan industry lately, but it's been very, very interesting as many have decided to leave. We will not though. MJ: So you are able to invest in certain areas because they provide a public good. EH: Yeah, or a direction, whether it's energy or primary sector type of businesses. We have specific loan programs that are designed at very low interest rates to encourage activity along certain lines. Here's another thing: We're gearing up for a significant flood in one of the communities here in North Dakota called Fargo. We've experienced one of those in another community about 12 years ago which prior to Katrina was the largest single evacuation of any community in the United States. And so the Bank of North Dakota, once the flood had receded and there were business needs, we developed a disaster loan program to assist businesses. So we can move quite quickly to aid with different types of scenarios. Whether it's encouraging different economies to grow or dealing with a disaster. MJ: What do private banks think of you? EH: The interesting thing about the bank is we understand that we walk a fine line between competing and partnering with the private sector. We were designed and set up to partner with them and not compete with them. So most of the lending that we do is participatory in nature. It's originated by a local bank and we come in and participate in the loan and use some of our programs to share risk, buy down the interest rate. We even provide guarantees similar to SBA to encourage certain activity for entrepreneurial startups. Aside from that, we also act as a bankers' bank or a wholesale bank. So we provide services to banks, whether it's check clearing, liquidity, or bond accounting safekeeping. There's probably 20 other bankers' banks across the country. So we act in that capacity as kind of a little mini-fed actually. And so we service 104 banks and provide liquidity to them and clear their checks and also we buy loans from them when they have a need to overline, whether it's beyond their legal lending limit or they just want to share risk, we'll do that. We're a secondary market for residential loans, so we have a portfolio of $500 to $600 million of residential loans that we buy. MJ: So what's the advantage of a publicly owned "bankers' bank" instead of a privately owned one? EH: Our model is we use our deposit base to help [other banks] with funding their loans, even providing fed funds lines with our excess liquidity—we buy and sell fed funds and act as a clearinghouse for check clearing activity. That would be the benefit or different model. We're a depository bank and can bring that to bear. MJ: If other states had a bank like yours, do you think they would have been more insulated from the credit crisis? EH: It all gets down the management and management philosophy. We're a fairly conservative lot up here in the upper Midwest and we didn't do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don't understand it, we're not going to jump into it. And so we've avoided all those pitfalls. That's not to say that we're completely immune to everything, certainly we've bought some mortgage-backed securities and we're working through some of those issues, but nothing that would cause us to be concerned. Read the rest of the interview. Labels: bailout, bank nationalization, financial crisis, North Dakota Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Companies Suspending 401(k) ContributionsFrom the Financial Times, March 11 (hat-tip to The Automatic Earth). The article notes that the median size of a 401(k) account at the end of 2007 was $19,000--probably a lot lower now!A wave of US companies are suspending payments to their staff 401(k) retirement plans in a bid to cut costs amid the economic downturn.Read the rest here. Labels: 401(k), AARP, Financial Times, pensions, The Automatic Earth blog Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Foreclosure Crisis Far from OverHat-tip to The Automatic Earth blog for this tidbit, from a recent investment fund memo. Although a majority of subprime mortgages have already seen their rates reset, there are a slew of other adjustable rate mortgages that are not technically subprime but that are likely to produce a huge new wave of foreclosures when their interest rates reset in 2010 and 2011.A broader profile of mortgage resets is presented below (though even this chart does not include the full range of adjustable mortgage products).The whole memo is well worth reading. Labels: ARMs, foreclosures, Hussman Funds, subprime crisis, The Automatic Earth blog Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). WE20--The People's G20A press release; hat-tip to Abby S.WE20 - THE PEOPLE'S G20 we20, the people's answer to the G20 group of nations, today announces the launch of its website at we20.org, enabling individual people and groups anywhere in the world to host their own G20 summits and formulate plans for economic recovery. In the run-up to the London G20 summit - and amid fears of street violence as protestors vent their feelings on the global economy - we20 offers a refreshing alternative: large-scale community involvement in planning the world's economic revival. People visiting we20.org can organise their own meetings, in their own communities, to draw up action plans - local, national or international - to fix economies. We20 plans are voted on at we20.org and the top we20 plans have the chance of appearing on the official G20 London Summit website. Lord Malloch-Brown, the UK's Foreign Office G20 Minister, has given his encouragement and advice to we20 meetings through a YouTube video. we20's twitter, Facebook and LinkedIn Communities are growing fast, plans have already been submitted to we20.org from the UK and Sweden, and we20 meetings are pledged in USA, Australia, Sweden, Belgium, Germany, Sudan, Thailand, Nigeria and the UK, representing communities in the media industry, local government, students and healthcare workers. As the we20 movement grows, it's expected that thousands of we20 meetings will take place around the world through 2009, with a goal of the first thousand to take place by the end of April 09. The website at we20.org acts as a facilitator and hub for these meetings. Visitors to the site can find an existing meeting or set one up to discuss and agree on a local, national or global challenge, or to read and vote on plans from other we20 meetings. Each we20 user gets 20 votes to award to the best recovery plans. The organisers of we20 hope to help favourite we20 plans become future realities as we20 develops. The we20 concept was hatched on January 6 this year by a group of volunteers in London who want to help people through the recession. The site was then developed entirely by voluntary contributions to become the start of a resource which its organisers hope will grow to be a public engagement platform alongside the G20. As a body, we20 is independent and neutral. The plans proposed on the site belong to the groups which propose them. Paul Massey, an internet lawyer from London and one of the volunteers organising we20 in his spare time, says: "The we20 initiative is a neat idea to help people organise their own G20 meetings of up to 20 people. There is speculation about what the London G20 Summit will achieve but we've already seen we20 meetings produce some great action plans to fix the economy. we20 sees the G20 Summit as a rallying call for everyone to work together to pull ourselves out of this economic mess." He continues: "There's no restriction on the challenges addressed and the plans formulated by people's we20 meetings. They may be directed towards, local, national or global issues, from the IMF, World Bank or climate change to local economic issues such as redundancies, plans for local shops, sports teams or growers' initiatives. we20 is driven by volunteers and word of mouth, and we are constantly amazed by the support we are receiving from across the board." Part of the inspiration for we20 arose from Barack Obama's use of the internet, demonstrating how ordinary people can make change happen by connecting on the internet and then meeting face to face. Massey concludes: "After the G20 Summit, we20 will assess its impact in consultation with members, continue to encourage the implementation of we20 plans and work towards future goals including the Copenhagen Climate Change Summit. we20 hopes to strengthen the policies produced by the G20, ensure transparency and encourage good governance. Whatever comes out of the London G20 Summit, we20 looks set to stay as a force of community empowerment for the longer term." Labels: bailout, Barack Obama, financial crisis, G20, G20 summit, WE20 Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Latin America's Reaction to the CrisisThe Council on Hemispheric Affairs (COHA) has put out a nice summary of the various responses by Latin American governments to the global economic meltdown.As the G-20 meeting is about to begin in London, the outlook for Latin American growth in 2009 is grim, as the tempo of foreign direct investment (FDI) and loans stand-by credits and development funds plummet, the demand for commodities diminish, and foreign remittances plunge.The World Bank vice president for Latin America and the Caribbean, Pamela Cox, is forecasting 0.3 percent growth for Latin America this year, down from the originally 2.7 percent predicted in January. Cox anticipates that countries most closely linked with the U.S. economy will be hit the hardest. Thus, NAFTA, CAFTA and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA) may prove particularly harmful for Mexico, Central America, and the Caribbean in the foreseeable future. Click here for COHA's country-by-country analysis. Labels: COHA, Latin America, trade policy Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Two Items on Guadeloupe General StrikeTwo items on the recent massive general strike in Guadeloupe. First, from Friday's Democracy Now!:Labor Victory in Guadeloupe After Six-Week Strike Reverberates Across French Caribbean and France Hear it or read it here. Second, an article on the general strike by Immanuel Wallerstein: Guadeloupe: Obscure Key to World Crisis Read the rest of the article. Labels: activism, Democracy Now, financial crisis, general strike, global downturn, Guadeloupe, Immanuel Wallerstein Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Mike Davis on Socialism on Bill MoyersFrom the folks at SolidarityEconomy.net. Video is probably available somewhere, too.Bill Moyers Talks with Mike Davis on the Economic Crisis March 20, 2009 BILL MOYERS: For all the talk on the cable channels and in the blogosphere, you would think Washington has been invaded and conquered. Remember that scary movie from the 1950's, INVASION OF THE BODY SNATCHERS? MALE VOICE: Everyone! They're here already! You're next! You're next! Many film scholars believe the movie is a paranoid parable, warning of a Communist takeover of America. But today, the body snatchers are you ready for this? Socialists! That's right. Socialists, reportedly swarming over the city and making off with the means of production, namely the Federal budget. I'm not making this up. Newsweek was the first to spot the aliens a month ago and it was us. Here's the headline of a recent article on Salon.com. Newt Gingrich, reincarnated once again as himself, sounds as if Obama ate his Contract with America for lunch and coughed it up as "European Socialism."
BILL MOYERS: But the ghosts being conjured in the corridors of power aren't those great American radicals Eugene V. Debs or Norman Thomas. No, Stalin, Marx and Lenin have risen from the grave, stalking our highest officials. Just listen to CNBC's Jim Cramer:
BILL MOYERS: And others followed suit: RUSH LIMBAUGH: Liberal democrats and the drive-by media are speeding down the highway, implementing Socialism as fast as they can. BILL MOYERS: So what does a real live Socialist think about all this? We consulted the Endangered Species Act and actually found one, way out to the People's Republic of Southern California. That state's economy has tanked with one of the country's highest number foreclosures and unemployment above 10% and climbing. California is a financial earthquake off the Richter scale. All of this is grist for the socialist writer and historian who is sitting with me now. Once a meat cutter and a long haul truck driver, nowadays, Mike Davis teaches creative writing at the University of California, Riverside. This recipient of a MacArthur Foundation "genius grant" has written so many books we can barely get them on the screen for you. Two of his histories of Los Angeles and Southern California, CITY OF QUARTZ and ECOLOGY OF FEAR were best-sellers. His latest: IN PRAISE OF BARBARIANS: ESSAYS AGAINST EMPIRE. Mike Davis, welcome to the JOURNAL. MIKE DAVIS: My pleasure, Bill. BILL MOYERS: Did you ever in your life imagine that America's financial system would become insolvent or that our way of life would be in such a sudden freefall? MIKE DAVIS: No. And I found myself in the position of, say, a Jehovah's Witness, who, of course, believes the end is nigh but then one morning wakes up, looks out the window, and the stars are falling from heaven. It's actually happened. Of course, people a lot like myself are famous for I think the phrase is we predicted eleven out of the last three depressions. So, no. BILL MOYERS: But I do think this time most everyone would agree with what you how you've described what we're going through as the mother of all fiscal crisis. Do you have a sense of the people you know being frightened right now? MIKE DAVIS: Oh, people are terrified, particularly where I teach in Riverside County. People have no idea you know, where to turn. UC Riverside is the largest percentage of working-class students in the UC system. And their families have scrimped and saved. And they've worked hard to get into courses that pointed toward stable careers and jobs. And now those futures are incinerated. What kind of choice do you make? You know, what do you study? BILL MOYERS: You wrote an essay on one of my favorite websites, TomDispatch.com, in which you asked this question. "Can Obama see the Grand Canyon?" Now, help us understand the use of that metaphor. MIKE DAVIS: Well, the first explorers to visit the Grand Canyon, simply were overwhelmed. They couldn't visualize the Grand Canyon because they had no concept for it. That is, there was no analogue in their cultural experience, no comparable landscape that would allow them to make sense of what they were seeing. It actually took ten years of heroic scientific effort by John Wesley Powell and these great geologists, Clarence Sutton, before he was truly able to see the Grand Canyon in the sense that we see it now as a deep slice in Earth history. Before you just had confused images and, you know, feelings of vertigo. And so the reason I raised this is that do we really have an analogy? Do we have the concepts to understand the nature of the current crisis other than to step back shaking from the brink and say this is profound? Because, you know, we're in this situation where not only do we seem to be having a second depression, but this is occurring in the context of epochal climate change. It's occurring at a time when the two major benchmarks that survived for global social progress, the United Nations millennial goals for relieving poverty and child mortality, on one hand, and the Kyoto goals for reducing greenhouse admissions, both of those sets of goals are clearly not going to be achieved. They slowly failed. This would be a time of fierce urgency in any sense. And now we face a meltdown of a world economy in a way that no one anticipated, truly anticipated the possibility of another recession, even a financial crisis, but no one counted on the ability of this to happen in such a synchronized, almost simultaneous way across the world. Read the rest of the transcript. Labels: Bill Moyers, financial crisis, Mike Davis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The G20 Summit and UnionsFrom a blog I think I hadn't seen before (hat-tip to LF), Labor Is Not a Commodity. I will add it to our blogroll.The G20 Summit and Unions Tim Newman, Campaigns Assistant, International Labor Rights Forum Next week, representatives of G-20 governments will be meeting in London to discuss strategies for addressing the global economic crisis. As working people around the world are facing the LondonSummit-resized consequences of this crisis, unions are responding with their own proposals for the G-20. This Monday, the International Trade Union Confederation (ITUC) released a "London Declaration" that focuses on five key policy recommendations for the G-20:
You can read the full document online here. The introduction to the declaration states, Workers around the world, who are losing their jobs and their homes, are the innocent victims of this crisis: a crisis precipitated by greed and incompetence in the financial sector, but which is underpinned by the policies of privatisation, liberalisation and labour market deregulation of recent decades. The effects of these policies—stagnating wages, cuts in social protection, erosion of workers' rights, increased precarious work, and financialisation—have combined to increase inequality and vulnerability... While all of ITUC's policy recommendations are very important, the third recommendation definitely requires attention. As the full declaration explains, wage deflation and increasing inequality can be reversed in part "by extending the coverage of collective bargaining and strengthening wage setting institutions so as to establish a decent floor in labour markets." Here in the US, a report released this week by Government Accountability Office [we blogged on this NYT article here; it's the article that quotes Kim Bobo. —D&S] showed that the Department of Labor's Wage and Hour Division is failing in its role of protecting workers from wage theft, child labor and other abuses. With a new Secretary of Labor, it is vital that the government strictly enforce the labor laws we already have on the books. We also need to take additional steps to ensure that workers can use collective bargaining agreements to improve wages and working conditions. That means passing the Employee Free Choice Act (EFCA) as a first step. EFCA is an important part of ensuring that US workers are able to exercise the freedom of association and the right to collective bargaining. At the G20 summit in London, it is also essential that world leaders support alternative systems and Egg_a_Politician policies that can improve the lives of the workers facing poverty. Divine Chocolate, a pioneering Fair Trade chocolate company co-owned by cocoa farmers in Ghana, has shown that paying a fair price to farmers does more than create a sustainable future for a few farmers -- it is a model that can be replicated on a mass scale. Divine set up a new website where you can "Egg a Politician" -- meaning that you can toss a chocolate egg at one of the G20 leaders and then send them a message telling them to keep fair trade on the agenda. Unfortunately, I fear that the representatives at the G-20 will not be promoting policies focused on reducing inequality, protecting workers' rights and promoting fair trade. Labor rights advocates globally will have to keep the pressure on governments to support better policies and work together to raise standards for workers everywhere. As one example, workers all across the Americas are participating in an upcoming Continental Day of Action against the Crisis. How do you think unions and worker organizations around the world can work together to address the impact of the global economic crisis on workers? [This is the full post, though I didn't reproduce all the hyperlinks; to see them click here.] Labels: financial crisis, G20, labor, labor organizing, recession, unions Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Trust Your Guts (Greider)Joe Nocera likes Geithner's new plan. William Greider, not so much. Here is an excerpt from his recent article in The Nation. Hat-tip to LF.Some points I recommend people consider: Read the full article. Labels: bailout, financial crisis, Joe Nocera, The Fed, William Greider Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama vs. Cuomo on Bank InvestigationsFrom Bloomberg:Obama Backs Banks, Seeks to Block Fair-Lending Probe By Greg Stohr March 26 (Bloomberg) -- The Obama administration's call for greater financial regulation may have its limits. The administration late yesterday urged the U.S. Supreme Court to bar New York and other states from enforcing their fair-lending and other consumer-protection laws against federally chartered banks including JPMorgan Chase & Co. and Wells Fargo & Co. The legal brief, which adopts the Bush administration's position, is a setback for consumer and civil-rights groups that had urged President Barack Obama's team to switch positions. The filing puts the administration at odds with New York Attorney General Andrew Cuomo over the respective roles of state and federal regulators. The high court will hear arguments April 28. "National banks are created by the government to serve federal purposes," argued Solicitor General Elena Kagan, the Obama administration's top courtroom lawyer. "Oversight of the banks is therefore principally entrusted to the United States." The court filing coincides with this week's proposal by the administration to put large hedge funds, private-equity firms and derivatives under federal supervision for the first time. Reviving Investigation Cuomo is seeking to revive an investigation, begun by predecessor Eliot Spitzer, into the real-estate lending practices of units of JPMorgan, Wells Fargo and HSBC Holdings Plc. A lower court barred the probe, saying a regulation issued by the U.S. Comptroller of the Currency blocks state scrutiny of national banks. The case will determine whether federal regulators have exclusive governmental authority to press fair-lending and other types of complaints against national banks. More broadly, the case will shape how much ability agencies have to shield companies from state-level scrutiny. Kagan filed the brief on behalf of the OCC, an independent Treasury Department bureau still being run by Republican appointee John Dugan, whose term expires in 2010. Obama has decided to retain Dugan, two people familiar with the decision said last month. "We're disappointed to see it," said Gail Hillebrand, a San Francisco-based Consumers Union attorney who had sent a letter urging the administration to switch sides in the case. "We hope they just haven't gotten around to getting rid of those regulations. It's certainly a missed opportunity." Read the rest of the article (it's short). Labels: Andrew Cuomo, banking regulation, Barack Obama, Eliot Sptizer, financial crisis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Single-Payer UpdatesFirst, we noticed this excellent webpage, with links and resources on single-payer, from Physicians for a National Health Care Program.Second, our friend Dr. Christine Adams, who is statewide secretary of Health Care for All Texas, sent us her response to an article in Wednesday's WSJ by Laura Meckler. It's an excellent summary of reasons in favor of single-payer. Here it is: Dear Ms. Meckler, I am a supporter of single payer national health care as proposed by HR 676 (John Conyers, D-Michigan). All other health care reform proposals involve some type of subsidy to private for-profit health plans via low to moderate income households. It makes no sense to subsidize private, for-profit health plans just for us to have the privilege of having private companies continue to play a central role in health care financing. Medicare Advantage is a perfect example of that model. For the privilege of continuing to include for-profit private health plans, the U.S. taxpayer gets to pay 14%-20% more per Medicare recipient than for those in traditional Medicare (a single payer model, albeit imperfect). For the privilege, we do not get any value for our extra tax dollars. Medicare Advantage members do not have better medical outcomes and frequently they have worse medical outcomes - even though Medicare Advantage programs cherry-pick the healthiest in the Medicare pool. And where do we find our best medical outcomes at the best price? Our socialized medicine Veterans Administration Medical System. No other nation that is controlling health care costs while maintaining quality has for-profit health insurance companies playing a central role in health care financing because it cannot be done. Other nations that include private health plans have placed heavy regulations on them so that they cannot make profits, must offer standard, comprehensive benefits, cannot exclude anyone or restrict treatment and must go to the government (the citizenry) to get permission to raise premiums. Nations that still include private plans, still spend more than nations that have either adopted single payer or straight-forward socialized medical systems (England, Spain). Economically, it will cost you more to include private health plans even if they are regulated. At any rate, I doubt our American for-profit health plans would ever agree to the level of regulation it would take to control costs, even without making health care universal. Frankly, I don't understand why conservatives in Congress, such as Sen. Grassley, would even consider subsidizing or protecting for-profit health plans from a public competitor. If a public health plan could deliver good care for less money, why wouldn't we want that system? Why would we want to use tax dollars to subsidize a for-profit health plan? I already pay for-profit health plans plenty of money for not much back in the way of health benefits. I don't want to direct more of my tax dollars to them just to keep them in business. They are not an industry vital to our national security. In fact, they suck up so much in the way of resources without adding value back, they are a drain on our economy and our health. They are detrimental to our well being in the same way that companies that pollute are detrimental to our well being. Two Nobel prize winners in economics, Drs. Joseph Stiglitz and Paul Krugman, have publicly stated that single payer makes the most sense for health care reform. They don't strike me as socialists or anti-business. To support a health reform measure that props up a private business when a public entity could do as good a job for less money seems opposite to what a conservative would support. When the data from so many forms of national health insurance, none of which include for-profit private health plans, are so clearly providing as good or better medical outcomes as we have here in the U.S. but with half the money and for all their people, I can only conclude that this resistance by a minority to single payer comes from irrational fears based on myths and outdated ideas in the same way that anti women's suffrage and anti integration are now seen as wrongheaded. Unfortunately, this minority position of pro for-profit, subsidized private health plans appears to have the ear of the Obama Administration—at least for the time being. Dr. Christine Adams Statewide Secretary, Health Care for All Texas Member, Physicians for a National Health Program Labels: health care, Health Care for All Texas, single-payer Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). New Home Sales Fell In February, Not RoseFrom Barry Ritholtz in the RGE Monitor:WSJ: Sales of new homes rose in February for the first time in seven months, the Commerce Department reported Wednesday, another sign that the housing market is thawing Bloomberg: Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers. Sales increased 4.7 percent to an annual pace of 337,000 . . . Marketwatch: The U.S. housing sector continues to see signs of improvement. The latest government data showed new home sales climbed in February for the first time in seven months, sending shares of home-building companies soaring. The parade of the mathematically innumerate business writers continue to misread data. The latest evidence? New Home Sales. After incorrectly reporting the Existing Home Sales, the mainstream media misread the Census department report of New Homes. No, New Home Sales data did not improve. In fact, they were not only not positive, they were actually horrific. The year over year number was a terrible down 41%. Sales from this same period a year ago have nearly been halved. Why did the media report this as positive? If you only read the headline number, you saw a positive datapoint: February was plus 4.7% over January. To get the the facts, you need to read below the headline. In the present case, it wasn't the seasonality factor that was confusing, it was the "90-percent confidence intervals"—or as it is more commonly known, the margin of error. From the Census Bureau: Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (+/-18.3%)* above the revised January rate of 322,000, but is 41.1 percent (+/-7.9%) below the February 2008 estimate of 572,000. The median sales price of new houses sold in February 2009 was $200,900; the average sales price was $251,000. The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate. Note that the month over month data at 4.7% - plus or minus 18.3% - is statistically insignificant. (i.e., meaningless). The reported data does not inform us if sales improved month-over-month or not. It is a range, from down -13.6% to plus 23%. Since "zero" is part of that range, we can draw no conclusion. As the Census Department itself notes, "the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease." The data does however, tell us that the year-over-year sales fell 41.1% plus or minus 7.9% gives us a range of -49% to -33.2%. The entire range is negative, therefore we can conclude sales fell year-over-year. These are facts. This is data. This is how you interpret it. Most of the MSM reports (WSJ, Marketwatch, Bloomberg) were simply wrong. Not nuanced, not shaded, but 2+2=5 wrong. Let me remind that many of these folks incorrectly misinformed you that Housing wasn't getting worse in 2006, 2007 and 2008 - just as Home sales and prices went into an historic freefall. Now, these same folks are misinforming you that Housing has turned around and is improving. That is simply unsupported by the data. (And don't even ask about television - they simply read the wrong news. Here is a life lesson for you: Never believe news people who read teleprompters. They have no idea what they are doing, they are reading what someone else wrote. When it comes to data interpretation, they are quite literally clueless. Rely on news readers to your personal financial detriment). The bottom line: Learn to interpret data correctly. Avoid using the people who cannot do so as primary news sources. Labels: Barry Ritholtz, home sales, housing market, RGE Monitor Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Official Unemployment Numbers GrimThe latest official unemployment numbers from the Labor Department show continuing deterioration in the job market, setting a record for the ninth straight week.Seasonally adjusted first time claims for unemployment insurance rose by 8,000 to 652,000, compared to 367,000 a year ago. The total number of people claiming benefits for more than a week increased by 122,000 to 5.56 million, the highest total since record-keeping began in 1967. This number a year ago was 2.8 million. Adding in the people that are receiving extended unemployment benefits under a special program approved by Congress brings the total to 7.03 million. The official unemployment rate is now at 8.1%, the highest in 25 years. Long-term jobless claims have jumped by over 100,000 four times in the past five weeks, indicating that companies continue to shed workers at a rapid rate. Again, these are the official numbers. As grim as they are, a more accurate assessment would give us an unemployment rate of 14.8% for February. This is from the Bureau of Labor Statistics' "U6" category that includes "Total unemployed, plus all marginally attached workers,* plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." *Marginally attached workers are "people who are neither working nor currently looking for work but indicate that they want and are available for a job and have looked for work at some time in the recent past," according to Steve Haugen, an economist at the Bureau of Labor Statistics. One out of every eight workers. Labels: unemployment, unemployment benefits, unemployment insurance Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Wage Theft (NYT, ABC News!)Kim Bobo, director of Interfaith Worker Justice and author of Wage Theft in America (which we excerpted here and here), appeared on Good Morning America yesterday:Plus, Tuesday's New York Times had a great article by Steven Greenhouse on nonenforcement of labor regulations by the Labor Department. The GAO report that is the focus of the article actually uses the term "wage theft": Labor Agency Is Failing Workers, Report Says Read the rest of the article. Labels: ABC News, Department of Labor, GAO, Interfaith Worker Justice, Kim Bobo, New York Times, Steven Greenhouse, wage theft Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Why Georgists Correctly Predicted the CrisisFor more on the Georgists, Henry George, and the idea of a land tax, see this excellent sidebar D&S co-editor Amy Gluckman wrote to Mason Gaffney's excellent article about how a land tax helped rebuild San Francisco in 1906, and could be used to rebuild New Orleans after Katrina.Why Georgists Correctly Predicted the Crisis, and Why Conventional Economists Couldn't Land bubbles of varying severity and universality recur roughly every eighteen to twenty years. Like Henry George, modern Georgists attribute recessions and depressions to these bubbles. A huge real estate bubble of the 1920's preceded the Depression of the 1930's. That bubble actually began to burst in 1926, three years before the stock market crash of 1929. So when "house values" exploded around the world during the last decade and then began to decline in 2006, many of us predicted the worst. I even convinced my husband it was time to sell our property--but alas, too late. A few prominent economists recognized the bubble's threat, notably Karl Case and Robert Shiller of the Case-Shiller Home Price Index. But most economists didn't see the crisis coming until it ran them over. Why couldn't they see what Georgists saw? (Non-economists can skip to the last paragraph.) 1. Like Adam Smith and other classical economists, Georgists assume a three-factor world: land, labor and capital, earning economic rent, wages and interest respectively. But starting in the early 20th century, conventional economics merged land into capital. Land disappeared so completely that Robert Solow could joke in 1955 that "...if God had meant there to be more than two factors of production, He would have made it easier for us to draw three dimensional diagrams." 2. Conventional economics airbrushes out economic rent. The National Income and Product Accounts omit or conceal rent. They exclude even realized capital gains, let alone unrealized gains. They lump rent received by business into profits. When I teach micro I have to explain to students that those cute little triangles we label "consumer surplus" and "producer surplus" are really economic rent. 3. Conventional microeconomics is static. Textbooks incorporate discounted present value poorly, or omit it altogether. In teaching micro, I've had to write a special section on discounting--after all, someday, students will buy houses and take out mortgages. Bubbles are just unrealistic projections of rent, capitalized into the present. Without discounting, how can we understand them? (Mind you, many Georgists don't understand discounting either; they explain bubbles as the work of "speculators." But at least they know bubbles are destructive.) 4. Conventional macroeconomics tosses out the good part of micro, namely, marginal analysis. So in conventional macro, all taxes are alike, all consumer spending is alike, all saving and investment is alike. Economists can truly believe that it's good for the economy now to borrow money (from whom?) and spend it on roads and bridges. How can they understand that overspending on infrastructure stimulates bubbles? 5. Conventional economics disregards a central Georgist assumption: distribution of wealth matters. Moreover, the tax and subsidy system is rigged to drive rent to the top of the heap. This very rigging of the system also encourages bubbles. So the Georgist cure is to reverse the rigging, capture the rent and redistribute it to society either in the form of public goods, or directly as tax credits or grants. That's a dangerously radical idea. One hundred years ago, Georgists allied with Progressives to form a powerful movement for political and fiscal reform. In The Corruption of Economics, Mason Gaffney argues that neoclassical economics assumed its blinkers precisely to thwart that movement--leaving modern economists helpless. Labels: economic crisis, financial crisis, Georgists, Henry George, housing bubble, land tax, Polly Cleveland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Common Security Clubs An exciting new project spearheaded by Chuck Collins, D&S Associate, and of the Institute for Policy Studies. 'Common Security Club' as an Organizing Form for the Solidarity Economy By Chuck Collins The common security club model was born out of work done in the last few years by people struggling with overwhelming indebtedness. Participants spend some time discussing the root causes of the economic crisis, drawing on readings and materials provided by the network. But they mostly focus on what they can do together to increase their economic security and press for policy changes. "What becomes clear to participants is we are facing some major economic and ecological changes," said Andree Zaleska from the Boston office of Institute for Policy Studies, who is coordinating clubs in the Northeast. "We are not going back to some golden age of economic growth based on empire, unfettered capitalism, and cheap energy—nor do we want to! We have to prepare ourselves and our communities for transformation." As theologian Walter Brueggemann writes we need to shift from "autonomy to covenantal existence, from anxiety to divine abundance, and from acquisitive greed to neighborly generosity." Common security club participants are experimenting with ways to make the practical, political, and spiritual changes this entails. The three main functions of the clubs are: 1) Learn and reflect Through popular education tools, videos, Bible study, and shared readings, participants increase their understanding of the larger economic forces on our lives. Why is the economy in distress? How did these changes happen? What are the historical factors? How does this connect to the global economy? What are the ecological factors contributing to the changes? What is our vision for a healthy, sustainable economy? What are the sources of real security in my life? 2) Mutual aid and local action Through stories, examples, Web-based resources, a workbook, and mutual support, participants reflect on what makes them secure. What can we do together to increase our economic security at the local level? What would it mean to respond to my economic challenges in community? How can I reduce my economic vulnerability in conjunction with others? How can I get out of debt? How can I help my neighbor facing foreclosure or economic insecurity? Can I downscale and reduce my consumption and ecological footprint and save money? 3) Social action The economic crisis is in part the result of an unengaged citizenry and government. What can we do together to build an economy based on building healthy communities rather than shoring up the casino economy? What public policies would make our communities more secure? Through discussion and education, participants might find ways to engage in a larger program of change around the financial system, economic development, tax policy, and other elements of our shared economic life. Clubs can be autonomous or affiliated with an existing institution, secular or religious. The ideal size is 10 to 20 adults who make a commitment to an initial five meetings with a facilitator. Clubs then decide whether to continue meeting and self-manage. Starter sessions have been developed and include "The Roots of the Economic Crisis," "Personal Re sponses to Economic and Ecological Change," "Things We Can Do Together," and "Actions to Transform the Economy." Among the things "we can do together," the clubs examine stories and examples of various economic and mutual aid activities. These have included teaming up to help each other weatherize their homes, helping each other rework their personal budgets and reduce debt, and forming food-buying clubs. Faith-based groups weave together reflection, prayer, and action. "We can't be a bank for each other," said club participant Paul Monroe of Boston. "But there are so many things we can do to support one another and increase our economic security." One group, convened by a group of Haitian women in the Boston neighborhood of Dorchester, decided to push back against their credit card companies. "Everyone was paying really high fees," observed Charlotte Desire, who coordinated the group. "One of our best moments was when everyone in our group called their credit card company and threatened to cut up their cards unless fees were waived and interest rates were cut." Almost everyone in the group was able to save hundreds of dollars in interest payments and fees. Gerald Taylor, a veteran congregation-based organizer in Charlotte, North Carolina, has led discussions with several groups about what a healthy and democratic debt system would require. "All our religious traditions have prohibitions on usury for a reason," said Taylor. "So what would a fair and transparent credit system look like?" "We are piloting about a dozen common security clubs in different places and with very different groups," said Zaleska, describing the efforts in her region. "We're testing out several different curricula. Some clubs are pressing members of Congress to reform the casino economy, stop foreclosures, and pass an economic stimulus package." Whatever shape or focus members choose to take, common security clubs are pushing against the social isolation that may accompany a recession or depression. "I see the hurt and anxiety in my congregation—and how people privatize their pain," says Cecilia Kingman. "This is a chance for us to be real with each other." These clubs are also one of many building blocks that can move us toward a "solidarity economy" that affirms our true interconnection with one another. Coming together is a way to remind ourselves of the abundance we have, the wealth of our relationships and networks, and the mutuality of our economic security. Chuck Collins is an On the Commons Fellow and senior scholar at the Institute for Policy Studies, where he directs the Program on Inequality and the Common Good. He is co-author with Mary Wright of The Moral Measure of the Economy (Orbis, 2007). This is an excerpt of an article that originally appeared in Sojourners magazine, February 2009. For information on how to start or join a common security club, click here. Labels: Chuck Collins, Common Security Clubs, financial crisis, recession Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Pensions In PerilThose with their retirements in 401(k) plans have taken a huge hit. Those with defined pension plans aren't free of the carnage.From the Boston Globe:
Full article here. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Successful bank rescue still far away (Martin Wolf)Interesting piece by Martin Wolf of the Financial Times.By Martin Wolf | March 24 2009 19:24 I am becoming ever more worried. I never expected much from the Europeans or the Japanese. But I did expect the US, under a popular new president, to be more decisive than it has been. Instead, the Congress is indulging in a populist frenzy; and the administration is hoping for the best. If anybody doubts the dangers, they need only read the latest analysis from the International Monetary Fund. It expects world output to shrink by between 0.5 per cent and 1 per cent this year and the economies of the advanced countries to shrink by between 3 and 3.5 per cent. This is unquestionably the worst global economic crisis since the 1930s. One must judge plans for stimulating demand and rescuing banking systems against this grim background. Inevitably, the focus is on the US, epicentre of the crisis and the world's largest economy. But here explosive hostility to the financial sector has emerged. Congress is discussing penal retrospective taxation of bonuses not just for the sinking insurance giant, AIG, but for all recipients of government money under the troubled assets relief programme (Tarp) and Andrew Cuomo, New York State attorney-general, seeks to name recipients of bonuses at assisted companies. This, of course, is an invitation to a lynching. Yet it is clear why this is happening: the crisis has broken the American social contract: people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists. This is also the background for the "public/private partnership investment programme" announced on Monday by the US Treasury secretary, Tim Geithner. In the Treasury's words, "using $75bn to $100bn in Tarp capital and capital from private investors, the public/private investment programme will generate $500bn in purchasing power to buy legacy assets—with the potential to expand to $1 trillion over time". Under the scheme, the government provides virtually all the finance and bears almost all the risk, but it uses the private sector to price the assets. In return, private investors obtain rewards—perhaps generous rewards—based on their performance, via equity participation, alongside the Treasury. I think of this as the "vulture fund relief scheme". But will it work? That depends on what one means by "work". This is not a true market mechanism, because the government is subsidising the risk-bearing. Prices may not prove low enough to entice buyers or high enough to satisfy sellers. Yet the scheme may improve the dire state of banks' trading books. This cannot be a bad thing, can it? Well, yes, it can, if it gets in the way of more fundamental solutions, because almost nobody—certainly not the Treasury—thinks this scheme will end the chronic under-capitalisation of US finance. Indeed, it might make clearer how much further the assets held on longer-term banking books need to be written down. Read the rest of the article. Labels: bailout, financial crisis, Martin Wolf, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Hey Paul Krugman (A Song, A Plea)Catchy tune from YouTube. Hat-tip to Bryan S.Labels: bailout, financial crisis, Paul Krugman, Timothy Geithner, YouTube Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Stiglitz On the Fiscal Crisis Of the StateFrom Common Dreams:Fiscal Plan Fails both Markets and Taxpayers Labels: fiscal policy, fiscal stimulus, Joseph Stiglitz Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). U.S. Seeks Expanded Power to Seize FirmsFrom the Washington Post. The plot thickens. Sure sounds to me like they're thinking Geithner's plan won't work and they'll have to nationalize after all. The "we've got to move quickly" line (2nd-to-last paragraph) is getting a little old.U.S. Seeks Expanded Power to Seize Firms Goal Is to Limit Risk to Broader Economy By Binyamin Appelbaum and David Cho Washington Post Staff Writers Tuesday, March 24, 2009; A01 The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document. The government at present has the authority to seize only banks. Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document. The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux. Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers. The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy. The government also would assume the authority to seize such firms if they totter toward failure. Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit. The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan. Geithner plans to lay out the administration's broader strategy for overhauling financial regulation at another hearing on Thursday. The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG. "We're very late in doing this, but we've got to move quickly to try and do this because, again, it's a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they're systemic," Geithner said last night at a forum held by the Wall Street Journal. The powers would parallel the government's existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government's plans. Labels: bailout, banking system, financial crisis, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Down the dark path (Delasantellis on Geithner)Hat-tip to Larry P. for this; he says "it's by far the best thing I've read on this travesty."I am in absolutely no possession of any historical evidence that 16th-century English jailers employed modern stand-up comedians to bring a bit of levity to their inheritantly bleak workspaces, but what if they had? What if, as the clock ticked down in the Tower of London before the execution of Sir Thomas More ordered by King Henry VIII in July 1535, a comic, in the style of the late Rodney Dangerfield, was brought in to do stand-up? "Hey, everybody looks great here. Anybody here Papists? Don't worry, your secret's safe with me—I haven't even paid the withholding tax on my foodtaster yet. I just flew in from the Isle of Man, and boy, are my arms tired—you know what I mean? Hey, prison guards! I never knew why they called you guys Beefeaters until I saw your wives outside the gates!" Turning to the condemned man. "Hey, Tommy, I got good news for you. You're not going to be drawn and quartered tomorrow." "Pray tell sir, do not jest!" "I'm serious. Big H's gonna cut your head off instead!" That's a little bit like the situation with the newly revealed, final US Treasury Secretary Timothy Geithner toxic asset recovery bank program. It may work. It may not. Whatever happens with its effectiveness, one thing is certain. US taxpayers are definitely going to be getting the chop, maybe you could even say they're getting it in the chops, as a result of its implementation and administration. Read the rest of the article. Labels: bailout, financial crisis, Henry VIII, Julian delasantellis, Rodney Dangerfield, Sir Thomas More, Timothy Geithner, toxic assets Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Economics of WarWe get deluged with press releases, most of which we ignore (since the senders usually assume that we are a mainstream business or personal finance magazine). Recently we received some press releases from the site Antiwar.com, which humbly describes itself as "the oldest and most important antiwar Website." (It turns out that there is also an Antiwar.org, but it redirects to Antiwar.com.) The press releases were about the 6th anniversary of the beginning of the Iraq War (March 19th). I thought about re-posting an op-ed by their executive director, Alexia Gilmore, in the San Jose Mercury News, but I thought it might be better to find out whether they had some economic analysis of the war that we could share with our blog readers. What their communications guy sent me was this article by a David R. Henderson of the Hoover Institution. The gist of the article is that what Ludwig von Mises and Friedrich Hayek showed about how command economies are doomed to failure can also be applied to centrally planned foreign policy; the article makes the analogy between "acentrally planning an economy and centrally deciding to intervene in another country's affairs."Now, Antiwar.com makes a big deal about being a "big tent" organization; one press release says, "The site includes content from well-known authors around the world and across the political spectrum, from Daniel Ellsberg to Pat Buchanan," while Antiwar Radio features "interesting and noted guests such as Rep. Ron Paul, Noam Chomsky, and many more." And that's fine. I don't even mind reading about von Mises and Hayek on occasion. But the several articles by this Hoover Institution guy on Antiwar.com have impressive graphics granting him the title of "THE WARTIME ECONOMIST," and one gets the impression that he is almost the official economist of Antiwar.com. And there is not much sign of any left economic critiques of militarism on the site.  Anyhow, this inspired me to finally do what I've been intending to do for a while, which is to put together a special web page with the articles we've run in Dollars & Sense on war and militarism in recent years. I even made a nifty "guns and butter" graphic to go with it. We have a couple of new articles on militarism in the works—stay tuned. Labels: costs of war, iraq war, militarism, military spending, war Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Wealth Gap Gets WiderFrom Meizhu Lui, former executive director of United for a Fair Economy (our next-door neighbors and partners in various projects, including publishing The Wealth Inequality Reader), in Monday's Washington Post:The chips are in.Read the rest here. Labels: Meizhu Lui, race, racial wealth divide, racism, Survey of Consumer Finances, Washington Post, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Market Up Krugman DownThe Dow Jones Industrials soared nearly 500 points today (about 6%) on news of the Geithner plan to buy up toxic bank assets. The stocks of troubled banks did particularly well, Citibank up 17%, Bank of America 18%, JPMorgan Chase up 18%, and Wells Fargo up 17%.As usual, if Wall Street is happy about a bailout plan, taxpayers should be worried. From Krugman: Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy - specifically, the "cash for trash" plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson. Read the rest of the column here. In short, it won't work, it will enrich private investors at public expense, and it will close the door to other solutions that could work. Labels: bailout, Dow Jones Industrial Average, financial crisis bailout, Paul Krugman, Timothy Geithner, toxic assets Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Foreign Firms Want Piece of Stimulus PieWith Congress doling out $787 billion in stimulus money, foreign firms figure that no one will mind if they get some of it. And they'll probably only take 40% or so out of the country. All you need to win is a U.S. subsidiary, some well-placed lobbyists, and a dream.From the Washington Post: Spain's Prince Felipe and his wife, Princess Letizia, visited New York and Washington last week on an unusual mission for one of Europe's most glamorous celebrity couples: to drum up business for Spanish companies from the U.S. economic stimulus package. Labels: economic stimulus, fiscal stimulus, stimulus package Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). US Still #1 In Military Spending According to the Stockholm International Peace Research Institute as reported in the Economist, the U.S. spent more in 2007 on its military than the 14 largest countries combined. The U.S.'s $1.2 trillion in 2007 (hey, that could buy a bank bailout or two!) accounted for 45% of all global military spending. And this doesn't even account for the future expenses that will be incurred as a result of the wars in Iraq and Afghanistan. Labels: military spending Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Regulators Despair Of 'Ponzimonium'Is it Ponzimonium or Ponzapalooza?From Reuters: Hundreds of people in the United States are under investigation for financial scams, many involving Ponzi schemes, a U.S. regulator said on Friday, calling the phenomenon "rampant Ponzimonium." More here. Labels: banking regulation, Corporate Fraud, Corporate Swindles, financial regulation, ponzi, SEC Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
