Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. 'New Haiti'; Same Corporate InterestsTerrific article by Isabel MacDonald, at the Nation.By Isabel MacDonald | January 29, 2010 In the wake of the earthquake that has killed more than 100,000 people in Haiti, the foreign ministers of several countries calling themselves the "Friends of Haiti" met on Monday in Montreal to discuss plans for "building a new Haiti." Participants in the Ministerial Preparatory Conference on Haiti, who included Secretary of State Hillary Clinton; representatives of international financial institutions including the World Bank and the International Monetary Fund; and Haitian Prime Minister Jean-Max Bellerive came to what Canadian Foreign Affairs Minister Lawrence Cannon, the conference chair, referred to as a "road map towards Haiti's reconstruction and development." However, the Latin American countries of ALBA--the Bolivarian Alliance for the Americas--who held a counter-conference, and several grassroots Haiti solidarity organizations, who organized protests outside the conference, expressed skepticism that the "Friends of Haiti" and the international financial institutions would work to further the interests of ordinary Haitians. One of the groups protesting the conference, Haiti Action Montreal, issued a statement warning that "There is a danger that these major powers will try to exploit the earthquake to further narrow pro-corporate ends, if reconstruction of New Orleans after Katrina and in Asia following the tsunami are any indication." As Naomi Klein has observed, this process is already underway. The Heritage Foundation think tank's initial response to the earthquake clearly followed the pattern she documented in her book The Shock Doctrine, by which neoliberal reformers seek to impose an agenda of privatization in times of crisis. It was less than twenty-four hours after Haiti was hit by an earthquake of 7.0 magnitude that the Heritage Foundation issued a release recommending that "In addition to providing immediate humanitarian assistance, the U.S. response to the tragic earthquake in Haiti earthquake offers opportunities to re-shape Haiti's long-dysfunctional government and economy as well as to improve the public image of the United States in the region." That sentiment was echoed by James Dobbins, former special envoy to Haiti under President Bill Clinton and director of the International Security and Defense Policy Center at the RAND Corporation, who stated in a recent op-ed in the New York Times, "This disaster is an opportunity to accelerate oft-delayed reforms," including "breaking up or at least reorganizing the government-controlled telephone monopoly" and restructuring the ports, which also represent two of Haiti's few remaining state enterprises. The World Bank also observed an upside to the catastrophe in Haiti; in a January 18 blog post titled "Haiti earthquake: Out of great disasters comes great opportunity," a World Bank disaster management analyst recently stated that "there is a silver lining to this great tragedy. Looking back in history, great natural disasters are often a catalyst for huge, positive change." Even calls for the expansion of Haiti's sweatshop industry are being made in the media. Read the rest of the article. Labels: Disaster Capitalism, earthquake, Haiti, IMF, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). 4Q GDP Up 5.7%, Wages/Benes At Record LowBrad DeLong thinks that the GDP reading suggests that next week's productivity numbers will be around 7%, adding yet another astonishing number to that series. This is not good news for employment; it suggests that workers can continue to be squeezed, notwithstanding all the sweat and tears of the last year.On the GDP numbers, here's Calculated Risk: Any analysis of the Q4 GDP report has to start with the change in private inventories. This change contributed a majority of the increase in GDP, and annualized Q4 GDP growth would have been 2.3% without the transitory increase from inventory changes. Unfortunately - although expected - the two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), both slowed in Q4. PCE slowed from 2.8% annualized growth in Q3 to 2.0% in Q4. RI slowed from 18.9% in Q3 to just 5.7% in Q4. Note: for more on leading and lagging sectors, see Business Cycle: Temporal Order and Q1 GDP Report: The Good News. It is not a surprise that both key leading sectors are struggling. The personal saving rate increased slightly to 4.6% in Q4, and I expect the saving rate to increase over the next year or two to around 8% - as households repair their balance sheets - and that will be a constant drag on PCE. And there is no reason to expect a sustained increase in RI until the excess housing inventory is absorbed. In fact, based on recent reports of housing starts and new home sales, there is a good chance that residential investment will be a slight drag on GDP in Q1 2010. Read the rest of the post The Wages/benefits story is from the Wall Street Journal JANUARY 29, 2010, 4:16 P.M. ET Wage and Benefit Growth Hits Historic Low Staff Reporter of The Wall Street Journal Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking data in 1982, as double-digit unemployment weakened workers' ability to command higher pay. In the past 12 months, the cost of wages and benefits received by workers other than those employed by the federal government rose 1.5%, according to the Labor Department's employment cost index. In the same period, consumer prices rose 2.7%. Adjusted for inflation, wages and benefits fell 1.3%, after rising by 2.8% in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said. The Employment Cost Index measures the cost of labor independent of the influence of changes in compensation caused when high-wage sectors grow more or less rapidly than low-wage sectors. Unlike widely cited data on wages, the index includes the cost of benefits, which account for about 30% of total compensation costs. Before adjusting for inflation, the index rose 0.5% in the fourth quarter, slightly higher than the 0.4% increase in third quarter. "The weak labor market will help keep inflationary pressures benign," said economist Anika Khan of Wells Fargo Securities. "As such, the Federal Reserve continues to have the flexibility to keep short-term interest rates at the current level." State and local government workers' compensation in 2009 grew 2.4%, twice the pace of the 1.2% increases in the private sector. State and local government employees' compensation has outpaced private-sector increases for the past several years. Private employers' health-insurance costs rose 4.4% in 2009, after increasing 3.5% the year before. The 2009 increase, though, was the second-lowest rate of increase in more than a decade, according to the survey. The Labor Department noted that this reflects, in part, employers' reducing their contributions to employees' health insurance or switching to lower-cost health plans. It added that the data in this part of its quarterly survey weren't as reliable as the rest of the report. Labels: Brad DeLong, Calculated Risk, economic indicators, employment cost index, GDP, health insurance, productivity, wages and benefits Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Root Canals, Rhetoric, or Real Reform?This is from Bankster; hat-tip to comrade Steve S. of United for a Fair Economy. We are glad someone else noticed BHO's root-canal metaphor; it reminded us of the guiding metaphor Arthur MacEwan used in this Ask Dr. Dollar column from our Nov/Dec 2008 issue. Steve pointed us to Simon Johnson's metaphor of Bernanke as an airline pilot who pulls off a miraculous landing, but didn't (and won't) do his safety checks. Perfect.This Week in Banking: Root Canals, Rhetoric or Real Reform? Submitted by Mary Bottari on January 29, 2010 - 08:54 The debate over banks and banking came front and center this week. In his toughest language yet, President Barack Obama vowed to veto financial reform legislation that is not tough enough on Wall Street. "The lobbyists are already trying to kill it," Obama told Congress in his State of the Union address. "Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back." The President's rhetoric offers an important measure of progress. Now we can be assured that the political elite are paying attention to the poll numbers showing an unprecedented anger at the big banks and the Wall Street bailouts. Democrats are starting to figure out if they don't take up this populist message and run with it in November, the Republicans will. But the rest of the President's speech and the other dramatic developments in the banking world this week indicate that Democratic actions are falling far short of their rhetoric, a pattern that voters are sure to notice. First, the speech. Many had anticipated a big announcement on jobs. With jobless rates in the double digits and a projected 5-10 year haul to get employment back to normal levels, workers were hoping for something big and bold. Instead, Obama proposed $30 billion in TARP funds to get credit flowing to small businesses. $30 billion to put 16 million Americans back to work? $30 billion when the Wall Street bonus pool for a few thousand bankers was $140 billion this month? Democrats will live to regret this missed opportunity. Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called on the carpet once again by irate members of the House for his mishandling of the AIG bailout. To their credit, several Democrats asked the toughest questions. But Geithner bobbed and weaved and no knock-out punches were landed. This is a problem for the Democrats. The whole incident paints an ugly picture of the federal response to the financial meltdown, best described by Representative Edolphus Towns (D-NY): "The taxpayers were propping up the hollow shell of AIG by stuffing it with money and the rest of Wall Street came by and looted the corpse." On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed by the Senate for another four year term. His nomination had been in trouble and a record number of senators voted no, but Obama stood by his man and pushed him through. The problem with Bernanke is best summarized by economist Simon Johnson: "Bernanke is an airline pilot who pulled off a miraculous landing, but didn't do his preflight checks and doesn't show any sign of being more careful in the future – thank him if you want, but why would you fly with him again (or the airline that keeps him on)?" While Bernanke may have saved Wall Street, he has shown little interest in using his power as Fed Chairman to aggressively aid Main Street. He is not the man for the job in these tough economic times and that will soon be apparent to the detriment of the Democrats who secured his confirmation. Ultimately, however, the most important developments of the week were played out behind closed doors in the Senate. Senate Banking Chairman, Chris Dodd, made the decision some time ago to try to devise a bipartisan financial reform package. His package of reforms was then handed over to four bipartisan working groups. With thousands of bank lobbyists swarming the hill, it is no surprise that these groups are busily making the Dodd bill worse. The derivatives language is being weakened and bankruptcy is emerging as the preferred method of unwinding financial institutions, which could leave taxpayers to foot the bill for this expensive procedure. To truly end the "too big to fail" problem and crack down on the reckless behavior of the biggest banks, we need strong, specific preventative measures such as leverage limits, capital and margin requirements, limits on counterparty exposures, a ban on proprietary trading and limits on bank size through a low cap on total liabilities. Even Obama's signature reform, an independent consumer agency is in danger of being whittled down to a corner desk in a failed federal agency. The President understands that the Wall Street bailout was "about as popular as a root canal." But if Democrats continue to peddle this type of rhetoric while neglecting meaningful reform as they have done this week, the Republicans will run away with the anti-bailout message and with the election in November. Labels: Bankster, Barack Obama, Ben Bernanke, root canal, Simon Johnson, Steve Schnapp Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Labor Needs a New Survival Plan (Steve Early)From today's Boston Globe, by frequent D&S contributor Steve Early:REPUBLICAN SCOTT Brown's Senate victory last week deprived President Obama and the Democrats of their filibuster-proof super-majority in the Senate and made Obama's health care plan a high-profile casualty. There was also collateral damage for already-frustrated union backers of the president. The White House staffers and congressional leaders who've been assuring them that labor law reform was next on Obama's agenda now can't prevent a filibuster of the Employee Free Choice Act. The act was designed to boost aid worker organizing and bargaining in the private sector, where union membership dropped 10 percent last year, the largest decline in 25 years. But employee free choice set off a firestorm of business opposition, long before Obama backed the legislation as a candidate last year. Corporate America does not want to risk heavier penalties for committing unfair labor practices, like firing union supporters. And management is particularly incensed about the bill's "card check" provision. It would trigger collective bargaining wherever a majority of workers signed cards demonstrating their support for unionization. During the health care reform process, some industry groups ended up allying themselves with the administration, in return for lucrative concessions. Even prior to last week's election, an informal Capitol Hill committee was cooking up a compromise on labor law reform to appease wavering Democrats. In this "EFCA-lite" version of the bill, employer recognition based on card check would remain voluntary. But the National Labor Relations Board—now one of the slowest moving federal agencies—would be directed to hold expedited elections, thereby reducing opportunities for unlawful tactics designed to thwart union representation. This watering-down of proposed workers' rights protections and Obama's now fatal delay in bringing the Employee Free Choice Act to a vote late last year follows a familiar historical pattern. A version of the same thing happened under Jimmy Carter and then, in worse fashion, with Bill Clinton. In 1977-'78, President Carter first pressured unions to go along with weaker amendments to the National Labor Relations Board than they originally wanted. Then, after being weakened itself during a Senate battle over the Panama Canal treaty, the White House failed to expend any remaining political capital on marshaling what was then a much larger pro-labor majority to overcome a GOP filibuster. Fifteen years later, Bill Clinton didn't even introduce NLRA changes. Instead, he placated labor by appointing a presidential commission to study the topic. The panel frittered away the only two years during Clinton's presidency when Democrats controlled Congress. Its reform proposals were dead on arrival by 1994, after voters swept the GOP back into power in midterm elections. Last June, top union leaders met with Obama and were told that health care legislation would come first and then the Free Choice Act. Since then, the administration has repeatedly dangled the carrot of labor law reform whenever labor made common cause with other critics of "ObamaCare." Unions were even pressured to accept things like a future tax on negotiated medical coverage because defeat of the president's plan would be a victory for the Republicans and, thus, the death-knell of the Act. Now, in a true case of déjà vu all over again, Americans are seeing the latest opportunity to strengthen their workplace rights, as promised by the Democrats, simply vanish. In the president's State of the Union address Wednesday, the state of unions—and employee free choice—wasn't even mentioned. In the wake of this latest rebuff, labor activists must return to the drawing board and quickly develop a fall-back strategy—for defending and extending collective bargaining—that doesn't hinge on amending federal law. It won't be easy. Steve Early, a labor journalist and lawyer, is author of "Embedded With Organized Labor." Read the original op-ed (though I actually don't recommend visiting the Boston Globe website—it has grotesquely intrusive pop-up ads, including one I just had to cope with, for Mass. gubernatorial candidate Charlie Baker). Labels: Embedded with Organized Labor, Employee Free Choice Act, labor, Scott Brown, Steve Early Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Tony Blair To Face Iraq Inquiry TomorrowFormer British PM Tony Blair is set to face a House of Commons inquiry tomorrow concerning the legality of the war in Iraq. The Chilcot committee has already heard from the likes of Lord Goldsmith, the attorney general at the time, who famously "changed his mind" on the war's legality in a manner that would make St. Paul (of Damascene conversion fame) proud, this week. But Blair goes up tomorrow, so he's sure to steal the show.Needless to say, this raises questions for us on this side of the pond. Why is there no similar interest in Congress by way of examining senior members of the Bush administration on the war's legality? True, we have a different legal system here, and, in the UK, the Labour party, which contains an active anti-war rump, has been in power for years, whereas the Republicans ruled with a mighty pro-war majority (in both parties) for years, but, where the UN charter is concerned, the war was clearly illegal under any system. It also disconcerting that the press coverage of this event (yes, the committee is toothless) has been so inadequate, even in the UK: The Financial Times has not had a story about the proceedings all week. Anyway, here are links to some articles on the committee. First, on Blair's appearance tomorrow, from The Guardian; second, "The Case against Blair" from the New Statesman; and third, George Monbiot is offering a reward to capture the fugitive! Labels: Chilcot Committee, george bush, George Monbiot, iraq war, Peter Goldsmith, Tony Blair Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Scurrilous Videos Besmirch Davos ForumFrom the hilarious Yes Men. Coincidence: the last time I saw Howard Zinn was at a screening of their film The Yes Men Change the World. He was a fan.FOR IMMEDIATE RELEASE January 28, 2010 Scurrilous Videos Besmirch, Enrage Forum, Leaders, World Videos threaten very existence of WEF * Close examination of fake website reveals outrageous, elaborate subterfuge * Videos may be viewed here or downloaded * Lefty filmmakers mainly to blame * Contacts: scurrilous@theyesmen.org, 310-780-4008 In a series of diabolically stupid video manipulations, a cabal of anti-poverty filmmakers have performed an elaborate slander of the World Economic Forum, showing its "leading lights" taking a dramatic departure from the litany of meaningless pledges they usually make at the annual gathering in the Swiss resort town. In response, WEF spokesperson Adrian Monck could barely contain himself. "The only defense to satire is common sense!" he sputtered, before racing back into the WEF war room to deal with the burgeoning crisis. Fortunately for the WEF, few media outlets picked up on the WEF's fantastic but fictional approach to world poverty ("World Leaders Pledge Strategy to End Poverty Now"). Instead, the media was dominated by coverage of a real WEF press release warning of "Over Regulation of the Financial Sector" (sic). The forged videos showed eight of "leading lights of Davos" outlining a few clear strategies to end poverty. The CEO of Archer Daniels Midland, the world's largest agribusiness conglomerate, spoke of "agriculture's role in today's economic savagery, and the broader long-term issues of robbing whole groups for the greed of the food industry," before calling for "universal justice and agriculture's reform" via Food Sovereignty. "We want to undo the injuries of global capitalism," added a much-improved "Klaus Schwab," founder and executive chairman of the World Economic Forum. "The source of our financial treasure was violence towards the colonies of the global South," admitted "Queen Elizabeth II" most refreshingly, before pledging to sell her lands and use the proceeds to improve the lot of the world's poor. "We have caused this disaster," added "Prince Harry" with a stalwart giggle. "Nobody wants a catastrophe," Canadian Prime Minister "Stephen Harper" chimed in most helpfully. "Haiti was a house of cards that we built through a history of exploitative economic policies," said a tired-looking "Bill Clinton." Now we have a chance to rebuild a more independent society by ending exploitation, forgiving their debt and bringing back real sustainability." The perpetrators included a prominent film director, several Hollywood voice actors, at least one disaffected member of the World Economic Forum itself, and thirty-four of the Yes Men. "Yes, these are real talking heads," explained Robert Diaz Leroy, a Hollywood film producer who was one of those behind the action. Another co-conspirator, film director Philippe Diaz, went into greater detail. "We did this out of frustration with the fact that each year in Davos, the wealthy and powerful figure out ways the global economy can continue to benefit them," said Diaz, who directed The End of Poverty?, which opens this Friday in New York. "Even this year, they're still talking about economic growth and de-regulation as the solution to poverty. That's especially obscene in light of this year's economic crisis, which resulted from those exact policies and has disproportionately affected the poor." Despite the WEF's annual posturing, neoliberal policies have proven to be a massive failure for the vast majority of the poor, said Diaz. "When a disaster strikes a poor country like Haiti, our culpability becomes graphically clear." Diaz explained that growth has by and large benefited only the wealthiest fraction of the population. "Our economic system depends on the resources of the global South that we have plundered since 1492. Only the tools have changed: nowadays we rarely use guns or armies, we mainly use economic instruments. But the damage is just as real." (See the fake press release for some real statistics to that effect.) "What you won't hear in Davos is anything about the structural factors at the root of global poverty," said Beth Portello, who produced The End of Poverty?. "Poverty is created: it's the byproduct of centuries of exploitation of human and natural resources maintained into modern times by unfair trade, tax and land policies, and odious debt." "Unlike the lip-service solutions from Davos, the proposals on our fake WEF site would actually end poverty," said Diaz. "We're going to do everything we can to make them happen. The film is just the beginning." "Poverty isn't an accident, and it won't end by accident, either," added Portello. In a dramatic bit of irony, it was revealed that the fake Queen Elizabeth II was played by boy actor James O'Keefe, who was recently arrested for feloniously attempting to tamper with the phone line of U.S. Senator Mary Landrieu, not long after being honored by House Republicans for his "ACORN pimp" role last year. "Oh that queen," said Andy Bichlbaum of the Yes Men. "Who knows what trouble she'll get into next." Labels: Davos, Elizabeth Windsor, Howard Zinn, The Yes Men, World Economic Forum Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Howard ZinnIt is a sad day. As you have probably heard, left historian Howard Zinn, author of A People's History of the United States, died yesterday of a heart attack. He will be sorely missed.We just celebrated our 35th anniversary year. Back in 2004, in our 30th anniversary issue, we asked prominent leftists to "describe their vision of a more economically just world 30 years hence, and to outline what they consider the most important steps to take today to move toward that vision." Here's what Howard Zinn contributed to the resulting Visions of Economic Justice: Where the United States has declared an end to military intervention, has eliminated its intelligence agencies, has dismantled its overseas military bases, has reduced its armed forces to a small peace-keeping contingent ready to heed the call of the U.N. General Assembly for emergencies, and where the resultant saving of half a trillion dollars is then added to another half trillion dollars that comes from a wealth tax and a truly progressive income tax, the trillion dollars then to be used in the following ways: Here are two other items—a video of Zinn talking about his experience as a bombardier in WWII, and an obituary by left sports writer Dave Zirin, from the Nation website. Howard Zinn: The Historian Who Made History Labels: Dave Zirin, Howard Zinn, People's History of the United States Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). AIG and the Hindered HaircutTimothy Geithner, Ben Bernanke, and Henry Paulson (remember him?) are being grilled today on Capitol Hill as part of investigations of the AIG bailout by the House Committee on Oversight and Government Reform, headed by Edolphus Towns. (I thought we'd done a post a while back that included a good quote from Towns--something about bankers and corruption. But all I could find was this post, with a quote from Towns about BoA's awesome pecans. But I like how he is dogging the bankers and their government backers.)Here's the NYTimes's latest article on the hearings. For background on the AIG bailout, please see the article by Marty Wolfson in our Sept/Oct issue, The AIG Bailout Revisited. There's also a really good article in the Financial Times called The Hindered Haircut; hat-tip to erstwhile D&S megablogger Larry P. (we still get the occasional post, but not like the old days, alas...). The authors ask: why haircuts for Security Capital Insurance counterparties, but not for AIG counterparties? Could it be that AIG's main counterparty was Goldman Sachs? Finance: The hindered haircut Read the rest of the article (it's long-ish, but worth it for the basic background info). Labels: AIG, Ben Bernanke, Goldman Sachs, haircuts, Henry Paulson, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Our Wars Are Killing Us (Tom Engelhardt)The latest from TomDispatch is about military spending--quite timely given the spending freeze--except "security-related" spending--that B.O. will announce tonight. Here is Tom's intro to the piece:From TomDispatch this afternoon, a piece that couldn't be more timely given today's news that the president will announce a freeze on domestic, but not national security, spending; an exploration of why, when Americans are so angry and impatient about bailouts and easy rides, they continue to give the Pentagon such a blank check -- Tom Engelhardt, Pentagon Time, Tick... Tick... Tick. As the media have been telling us lately, as the Senate upset in Massachusetts indicated, Americans are on a short fuse about many subjects, including an economy that has rebounded for bankers but not for regular people, soaring deficits, staggering foreclosure rates, mega-banking bonuses, the Obama administration's bailout of those same bankers, and its coziness with Wall Street. But, as I write in my latest post, "It's worth noting that they're not angry about everything... The good citizens of Massachusetts may be against free rides and bailouts for many types, but not for everybody. I'm speaking, of course, about the Pentagon, for which Congress has just passed a record new budget of $708 billion (with an Afghan war-fighting supplemental request of $33 billion, essentially a bail-out payment, still pending but sure to pass). This happened without real debate, much public notice, or even a touch of anger in Washington or Massachusetts." The fact is: The tea-party crews don't rail against Pentagon giveaways, nor do Massachusetts voters grumble about them, nor, for that matter, do liberal economists who write columns on the woes of our country. Because of that and because the mainstream media in its coverage pays so little attention to the Pentagon's planning time horizons and planned expenses, the rest of this post explores "Pentagon time" -- that is, the Pentagon's free ride. It offers a series of examples of the kind of long-range planning the U.S. military is doing in Afghanistan (and elsewhere) without much regard to Washington or American debates on the war, its expense or timing. I conclude that, when it comes to American politics and the economy, the U.S. military is our church, “national security” our Bible, and nothing done in the name of either can be wrong. "Until the Pentagon is forced into our financial universe, the angry, impatient one where most Americans now live, we're in trouble... It's time for Americans to stop saluting and end the Pentagon's free ride before America's wars kill us." This piece offers news about the Pentagon hard to find in normal press coverage. Check it out. Labels: Barack Obama, budget, deficit, militarism, military spending, spending freeze Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama's Freeze: Barack Herbert Hoover Obama? (Brad DeLong)As reported on the front page of today's Times, Obama is now proposing a freeze on government spending, except "security-related" budgets (aka the military, homeland security, etc.).It's not quite clear to me what exactly the freeze amounts to. On his blog, Brad DeLong posted these updates to his post (which I'll quote from shortly) arguing that this is a very bad idea in a stalled recovery: UPDATE II: It seems that it is not a freeze in non-security discretionary outlays, but rather an overall cap on non-security discretionary--which is a diffrent animal. And it seems that it is not an overall cap on non-security discretionary outlays, but instead an overall cap on non-security discretionary authority--which is a different animal. And it seems that it is not a binding cap on overall non-security discretionary: that ARRA extensions and other job-boosting deficit-spending measures, plus other "emergencies", are exempt... So we might have to wait until the dust settles to see exactly what this freeze would amount to. But the fact that Obama is even talking about it is disturbing. Here's what DeLong has to say: Barack Herbert Hoover Obama? Read the Times article. Read DeLong's post. Labels: Barack Obama, Brad DeLong, deficit, Herbert Hoover, spending freeze, state budget shortfalls Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Underwater, But Will They Leave the Pool?Some remarkable honesty about the class (although of course without using that term) dynamics of capitalism showed up in Saturday’s NY Times, in a piece by Richard Thaler about mortgage defaults:Much has been said about the high rate of home foreclosures, but the most interesting question may be this: Why is the mortgage default rate so low?Read the rest here. An interesting detail from the piece is that in a number of states mortgages are “nonrecourse” by law, meaning the lender is entitled to the house but nothing else in case a borrower defaults. So borrowers in those states basically have the right to walk away, a right for which they pay an estimated $800 extra in closing costs per $100,000 borrowed. Labels: Brent White, foreclosures, mortgage banking, mortgage default, New York Times, Richard Thaler, underwater mortgages Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Questions for Bernanke (Simon Johnson)There is somewhat suddenly some opposition to Ben Bernanke's reconfirmation as Fed chair, as reported at the New York Times, Roll Call, and elsewhere, with Barbara Boxer, Russ Feingold, and Bernie Sanders coming out against reconfirmation. On the economics blogs there's some turmoil regarding Bernanke, too, with Calculated Risk saying "we can do better," Brad DeLong saying "Don't Block Ben!" and Paul Krugman saying he's torn.One comment I liked was from Yves Smith at Naked Capitalism, who took issue with the Times article's references to "populist anger" (Krugman, in his blog, also connected Bernanke's changing fortunes with the Mass. special election): The real issue is that the Fed did a horrid job in the run-up to the crisis (although not Chairman at the time, Fed records show that Bernanke was a major architect of the super-low interest rates earlier in this decade that super-charged the credit bubbles, and has long been manifestly uninterested in regulation). So the issue is competence. The public's anger is warranted, and reflects lack of sufficient action on real, festering problems. Here's an interesting piece by Simon Johnson at HuffPo: Ben Bernanke's reconfirmation as chair of the Federal Reserve is in disarray. With President Obama having launched, on Thursday morning, a major new initiative to rein in the power of—and danger posed by—our leading banks, key Senators rightly begin to wonder: Where does Ben Bernanke stand on the central issue of the day? I can't remember whether I posted this piece by David Leonhardt from earlier this month, which counts against Ben, as does the article we ran back in July by Jerry Friedman, Bernanke's Bad Teachers. It will be interesting to see what happens. Labels: Ben Bernanke, Brad DeLong, Christopher Dodd, Paul Krugman, Simon Johnson, The Fed, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). SCOTUS Guts Campaign Spending LimitsJust noticed this on the New York Times website. Jeesh.Justices Overturn Key Campaign Limits By ADAM LIPTAK Published: January 21, 2010 WASHINGTON—Sweeping aside a century-old understanding and overruling two important precedents, a bitterly divided Supreme Court on Thursday ruled that the government may not ban political spending by corporations in candidate elections. The ruling was a vindication, the majority said, of the First Amendment's most basic free speech principle—that the government has no business regulating political speech. The dissenters said allowing corporate money to flood the political marketplace will corrupt democracy. The 5-to-4 decision was a doctrinal earthquake but also a political and practical one. Specialists in campaign finance law said they expected the decision, which also applies to labor unions and other organizations, to reshape the way elections are conducted. "If the First Amendment has any force," Justice Anthony M. Kennedy wrote for the majority, which included the four members of its conservative wing, "it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." Justice John Paul Stevens read a long dissent from the bench. He said the majority had committed a grave error in treating corporate speech the same as that of human beings. His decision was joined by the other three members of the court's liberal wing. Senator Russ Feingold of Wisconsin, an author of the McCain-Feingold campaign finance law, called the ruling "a terrible mistake." "Ignoring important principles of judicial restraint and respect for precedent, the Court has given corporate money a breathtaking new role in federal campaigns," said Mr. Feingold, a Democrat. Senator Mitch McConnell of Kentucky, the Republican leader and a longtime opponent of that law, praised the Court's decision as "an important step in the direction of restoring the First Amendment rights of these groups by ruling that the Constitution protects their right to express themselves about political candidates and issues up until Election Day." The case had unlikely origins. It involved a documentary called "Hillary: The Movie," a 90-minute stew of caustic political commentary and advocacy journalism. It was produced by Citizens United, a conservative nonprofit corporation, and was released during the Democratic presidential primaries in 2008. Citizens United lost a suit that year against the Federal Election Commission, and scuttled plans to show the film on a cable video-on-demand service and to broadcast television advertisements for it. But the film was shown in theaters in six cities, and it remains available on DVD and the Internet. The lower court said the Bipartisan Campaign Reform Act of 2002, usually called the McCain-Feingold law, prohibited the planned broadcasts. The law bans the broadcast, cable or satellite transmission of "electioneering communications" paid for by corporations in the 30 days before a presidential primary and in the 60 days before the general election. That leaves out old technologies, like newspapers, and new ones, like YouTube. The law, as narrowed by a 2007 Supreme Court decision, applies to communications "susceptible to no reasonable interpretation other than as an appeal to vote for or against a specific candidate." It also requires spoken and written disclaimers in the film and advertisements for it, along with the disclosure of contributors' names. The lower court said the film was a prohibited electioneering communication with one purpose: "to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world and that viewers should vote against her." The McCain-Feingold law does contain an exception for broadcast news reports, commentaries and editorials. On its central point, Justice Kennedy's majority opinion was joined by Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Samuel A. Alito Jr., and Clarence Thomas. Justice Stevens's dissent was joined by Justices Stephen G. Breyer, Ruth Bader Ginsburg and Sonia Sotomayor. When the case was first argued last March, it seemed a curiosity likely to be decided on narrow grounds. The court could have ruled that Citizens United was not the sort of group to which the McCain-Feingold law was meant to apply, or that the law did not mean to address 90-minute documentaries, or that video-on-demand technologies were not regulated by the law. Thursday's decision rejected those alternatives. Instead of deciding the case in June, the court set down the case for a rare re-argument in September. It now asked the parties to address the much more consequential question of whether the court should overrule a 1990 decision, Austin v. Michigan Chamber of Commerce, which upheld restrictions on corporate spending to support or oppose political candidates, along with part of McConnell v. Federal Election Commission, the 2003 decision that upheld the central provisions of the McCain-Feingold campaign finance law. On Thursday, the court answered its own questions with a resounding yes. Read the original article. Labels: campaign contributions, campaign finance reform, McCain-Feingold, Supreme Court Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Mass Backwards (Jon Stewart)We're a little upset here in Massachusetts. Not because we liked Martha Coakley so much, and not because we like the health-care reform bill so much, but because...well, Jon Stewart will explain:
Labels: health care reform, Jon Stewart, Martha Coakley, Scott Brown, U.S. Senate Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Elizabeth Warren Fights for the CFPAA couple of recent pieces about Elizabeth Warren,chair of the TARP Congressional Oversight Panel, and her efforts to make sure that the Consumer Financial Protection Agency survives Senate efforts to gut or eliminate it.First, from HuffPo:
Read the rest of the article. And this from Reuters: Watchdog's fate in Senate key to financial reform Read the original article. Labels: CFPA, Consumer Financial Protection Agency, Elizabeth Warren, TARP Congressional Oversight Committee Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). More on the FCIC HearingsHere is something from The Nation; it is somewhat in contradiction to what I posted late last week (here), which portrayed the hearings as letting Wall Street off the hook, whereas this piece finds the testimony (and the quesstioning?) pretty damning of Wall Street, regulators, and ratings agencies, but says that the media have stopped covering the hearings. Sheila Bair's testimony was great; click here for a pdf of her full testimony.Financial Crisis Inquiry Commission Turns Up the Heat By Greg Kaufmann | January 15, 2010 Two days of Financial Crisis Inquiry Commission hearings have me rattled about how little has changed about our financial system and how much is still at risk. They also have me wondering this: where the hell are the media? For the first day of panels, reporters were squeezed together in the back rows after filling more reserved seating than I've seen at any prior hearing during this session of Congress. But as I wrote previously, after the banksters had preened for the cameras and recited their testimony like four schoolboys BSing their way through an oral report, the press vanished, missing out on more candid and informative witnesses. Yesterday, day two of the hearings, maybe a dozen reporters attended, fewer than were at for the press conference afterward. What did they miss? For starters, FDIC Chairman Sheila Bair testified that the credit-default swaps (CDS) market still poses a systemic threat and that even she can't access CDS information to accurately assess financial institutions' exposure. Bair and SEC Chairman Mary Schapiro were in agreement with Commission Chair Phil Angelides's assessment that the credit rating agencies were "proved to be worthless and remain so today," given that they are paid by the very Wall Street firms who are profiting from AAA-rated securitized assets. State attorneys general Lisa Madigan of Illinois and John Suthers of Colorado revealed that not only were their warnings about unscrupulous and predatory lending practices ignored but that their investigations were actively thwarted by federal regulators who in turn did nothing--under the guise of pre-emption. Madigan also described how rate sheets reveal that Wall Street paid mortgage brokers and loan officers more for risky mortgages--with low teaser rates, pre-payment penalties, low or no documentation--because the consequent higher interest rate paid by the borrower would bring in more income. Wall Street wasn't the victim of bad underwriting that it claims to be; indeed, it incentivized it. Denise Voigt Crawford, a Texas securities regulator for twenty-eight years, discussed the revolving door between agencies and the industries they regulate, and the "chilling effect [it has] on the zeal with which you regulate." Schapiro, Bair and Madigan argued that Wall Street should have to "skin in the game" when securitizing assets. As things stand now they sell them with a bought and paid for AAA-rating, and then take their profits even if the underlying assets are worthless. Madigan said of mortgage-backed securities, "At the end of the day, the people who had the risk were on the very front end, the borrower, and on the very back end, the investor. All the other market participants were paid along the way, and they didn't hold on to any of that risk." Bair said the agency that could have done something about subprime products early on--when it had a report on problems back in 2000--was the Fed. "I think the only place to tackle that on a system-wide basis for both banks and non-banks was through...the Fed [which had] the authority to apply rules against abusive lending across the board to both banks and non-banks," said Bair. "If we had had some good strong constraints at that time, just simple standards like you've got to document income and make sure they can repay the loan--not just at the start, but at the reset rate as well--we could have avoided a lot of this." So why didn't the Fed and other federal agencies act? "It can be very difficult to take away the punch bowl when, you know, people are making money," said Bair. She also talked about "pushback" from both the industry and the Hill--as late as 2007-- when the FDIC tried to "tighten up" on subprime mortgages and commercial real estate. Reforms discussed included a systemic risk council, a consumer financial protection agency, an industry-funded mechanism so that large firms can be broken up and sold off without taxpayer money, greater disclosure of compensation structures and a single clearinghouse for derivatives like credit-default swaps. But the task of this commission isn't to open its hearings by announcing the necessary reforms. It's to tell the story of what caused this meltdown, which should galvanize public demand for the necessary reforms. In that regard I think the commission is off to a decent start. They are breaking down tough concepts, showing the interconnectedness between Wall Street, legislators and regulators and fishing with dynamite when it comes to exposing bad actors. But time is short--the FCIC's report is due in December of this year. It's going to have to be fearless, and build momentum quickly by bringing in big players and asking them tough questions. That's the only way a bipartisan populist backlash will fight for reform--and it's the only way the media might consider showing up too. Read the original article. Labels: Credit Default Swaps, financial crisis, Financial Crisis Inquiry Commission, Sheila Bair, Wall Street Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). For MLK Day (various)Here's what we recommend for MLK Day:Courtesy of The Real News Network (if you haven't checked it out, you should--they have had unusually good coverage of the economic crisis, with frequent appearances by left economists), we have a recording of MLK's Riverside Church speech on April 4, 1967 against the Vietnam War. And from The Nation website, Dr. Martin Luther King's Economics: Through Jobs, Freedom, by sometime D&S author Mark Engler: Martin Luther King Jr. was working hard to get people to Washington, DC. But when he told an audience, "We are going to bring the tired, the poor, the huddled masses. We are going to bring those who have known long years of hurt and neglect.... We are coming to ask America to be true to the huge promissory note that it signed years ago," the year was not 1963, and his issue was not segregation. Instead, it was 1968, five years after his "I Have a Dream" speech, and now the issue was joblessness and economic deprivation. King was publicizing a new mass mobilization led by the Southern Christian Leadership Conference, a drive known as the Poor People's Campaign. Read the original article. Labels: Mark Engler, Martin Luther King, Poor People's Movement, Vietnam War Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Haiti Suffering: Partly 'Made in the USA'Here is something from Bill Quigley at HuffPo. I like his take on U.S. involvement in Haiti (for a more economics-focused, and satirical, version of some of these same points in connection with the last crisis in Haiti--the 2008 food shortages--see Maurice Dufour's How to Make Mud Cookies from D&S, July/August 2008). But the anarchist in me wants to resist his claim that although the people of Haiti are pulling together to address the crisis, "They are courageous and generous and innovative, but volunteers cannot replace government."For less statist solutions to crises like this, consider donating to the Cooperative Development Fund. Here's info from Melissa Hoover, director of the U.S. Federation of Worker Cooperatives (of which D&S is a member): Dear USFWC Members, Now here's that Bill Quigley article: What the Mainstream Media Will Not Tell You About Haiti: Part of the Suffering of Haiti is "Made in the USA" Read the original article. Labels: Disaster Capitalism, earthquake, Haiti, humanitarian aid, neoliberalism Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Wall Street Off the HookTwo good items on the Financial Crisis Inquiry Commission; hat-tip to LF. The first is from Newsweek Online:Off the Hook Read the rest of the article. And this is from Paul Krugman's column in yesterday's Times: Bankers Without a Clue Read the rest of the column. Labels: bailout, financial crisis, Financial Crisis Inquiry Commission, investment banks, Paul Krugman Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). | ||||||||||||
