Doug Henwood on Teddy Kennedy

by Dollars and Sense

From Doug Henwood's blog, LBO News.

De mortuis: Teddy Kennedy and deregulation

According to just about everybody, Teddy Kennedy represented the "soul” of the Democratic party, which presumably refers to his long-professed concern the poor and the weak. Now that that soul is safely buried, the Dems can move on to the important stuff, like preserving Wall Street power and escalating the war in Afghanistan.

Let’s inspect that soul a little more closely though. I’ve never been inclined to hold my tongue about the recently departed. Well, yes, in personal life, but certainly not public life—especially in the midst of one of these orchestrated rituals of national morning that have become so damned compuslory since Ronald Reagan went on to his reward.

Sure, Teddy had his virtues, especially in contrast to his older brother John, who could wage imperialist war with the best of them, and who’s revered by supply siders as their political ancestor. (Since we’re talking politics, not personality, let’s bracket that little incident where Teddy drunkenly drove a woman to her death, left the scene of the crime, and then dispatched a family laywer to get to the Kopechne family before the press did. One can only imagine what went on at that meeting.) Let’s just look at Teddy’s role in one of the greatest assaults on working class living standards of the modern neoliberal era, transport deregulation.

Once upon a time, working for an airline or driving a truck was a pretty good way to make a living without an advanced degree: union jobs with high pay and decent benefits. A major reason for that is that both industries were federally regulated, with competition kept to a minimum. Starting in the early 1970s, an odd coalition of right-wingers, mainstream economists, liberals, and consumer advocates (including Ralph Nader) began agitating for the deregulation of these industries. All agreed that competition would bring down prices and improve service.

Among the leading agitators was Teddy Kennedy. The right has been noting this in their memorials for "The Lion,” but not the weepy left.

Why was Kennedy such a passionate deregulator? Greg Tarpinian, former director of the Labor Research Association who went on to work for Baby Jimmy Hoffa, once speculated to me that it was because merchant capital always wants to reduce transport costs—the merchant in question being Teddy’s father, Bootlegger Joe. Maybe.

In any case, Kennedy surrounded himself with aides who worked on drafting the deregulatory legislation. Many of them subsequently went on to work for Frank Lorenzo, the ghoulish executive who busted unions at Continental and Eastern airlines in the early 1980s. (Kennedy’s long-time ad agency also did PR work for Lorenzo.)

And what was the result of all this deregulation? Massive downward mobility for workers. The Bureau of Labor Statistics doesn’t provide earnings data for the airline sector, and its data on trucking only begins in 1990. (Start search for data here.) So for a longer-term view, we have to look at the entire "transportation and warehousing” sector (which is mostly transportation). The graph of that sector’s hourly earnings compared to the entire private sector average is below.

Read the rest of the post.

Labels: deregulation, Doug Henwood, Teddy Kennedy

 

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8/31/2009 03:47:00 PM 1 comments

 

Two Views of the Crisis

by Dollars and Sense

A brief, clear comparison from Simon Johnson on the Baseline Scenario blog:

There are two views of the global financial crisis and—more importantly—of what comes next. The first is shared by almost all officials and underpins government thinking in the United States, the remainder of the G7, Western Europe, and beyond. The second is quite unofficial—no government official has yet been found anywhere near this position. Yet versions of this unofficial view have a great deal of support and may even be gaining traction over time as events unfold.

The official view is that a rare and unfortunate accident occurred in the fall of 2008. The heart of the world’s financial system, in and around the United States, suddenly became unstable. Presumably this instability had a cause—and most official statements begin with “the crisis had many causes”—but this is less important than the need for immediate and overwhelming macroeconomic policy action.

The official strategy, for example as stated clearly by Larry Summers is to support the banking system with all the financial means at the disposal of the official sector. This includes large amounts of cash, courtesy of Federal Reserve credits; repeated attempts to remove “bad assets” in some form or other, and—the apparent masterstroke—regulatory forbearance, as signaled through the recent stress tests.

But most important, it includes a massive fiscal stimulus implying, when all is said and done, that debt/GDP in the United States will roughly double (from 41% of GDP initially, up towards 80% of GDP).

Not surprisingly, funneling unlimited and essentially unconditional resources into the financial sector has buoyed confidence in both that sector and at least temporarily helped shore up confidence in financial markets more broadly.

And now, in striking contrast to the dramatic action they call for on the macroeconomic/bailout front, the official consensus claims relatively small adjustments to our regulatory system will be enough to close the case—and presumably prevent further recurrence of problems on this scale. If the exact causes and presumed redress are lost in mind-numbingly long list of adjustments, so much the better.

This is, after all, a crisis of experts—they deregulated, they ran risk management at major financial firms, they opined at board meetings—and now they have fixed it.

Maybe.

The second view, of course, is rather more skeptical regarding whether we are really out of crisis in any meaningful sense. In this view, the underlying cause of the crisis is much simpler—the economic supersizing of finance in the United States and elsewhere, as manifest particularly in the rise of big banks to positions of extraordinary political and cultural power.

If the size, nature, and clout of finance is the problem, then the official view is nothing close to a solution. At best, pumping resources into the financial sector delays the day of reckoning and likely increases its costs. More likely, the Mother of All Bailouts is storing up serious problems for the near-term future.

We’ll double our national debt (as a percent of GDP), and for what? To further entrench a rent-seeking set of firms that the government determined are “too big to fail,” but will not now take any steps to break up or otherwise limit their size.

We need to disengage from a financial sector that has become unsustainably large (see slides before and after #19; the cross-country data should be handled with care). We can do this in various ways; there is no need to be dogmatic about any potential approach—if it works politically, do it. But the various current proposals for dealing with this issue—both from the administration and the leading committees of Congress—would make essentially zero progress.

As moving in this direction does not seem imminent, the probable consequences or—if you prefer—collateral damage looks horrible. You can see it as higher taxes in the future, lower growth, a bigger drag on our innovative capacity, fewer startups, and less genuinely productive entrepreneurship. Plenty of people will be hurt, and they are starting to figure this out—and to think harder about what needs to be done and by whom.

“Small enough to fail” may well prevail eventually—at least sensible ideas have won through in past US episodes—but it will take a while. The official consensus always seems immutable, right up until the moment it changes completely and forever.

Go to the original blog for links, including the slides he mentions.

Labels: bailout, banking crisis, banking regulation, Baseline Scenario, deregulation, finance sector, financial crisis, financial regulation, fiscal stimulus, larry Summers

 

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6/23/2009 09:57:00 AM 0 comments

 

McCain in Bed with Lobbyists; Taxpayers Get Screwed

by Dollars and Sense

Today's New York Times quotes D&S author Bill Black, in the article critical of Sen. John McCain that is raising such a ruckus among the political commentariat—especially among the right-wing types who had been so down on McCain until recently.

Black was deputy director of the Federal Savings and Loan Insurance Corporation when McCain, along with the rest of the "Keating Five" (Sens. Alan Cranston, Dennis DeConcini, John Glenn, and Don Riegle) tried to influence regulators on behalf of Charles Keating, chairman of the then-failing Lincoln Savings & Loan. Black was one of the regulators the senators tried to influence; Edwin J. Gray, chairman of the Federal Home Loan Bank Board, was another. Keating had donated to all the senators' campaigns, and McCain's wife, Cindy, whom the Times describes as "the heiress to a beer fortune" in Arizona, had "joined Mr. Keating in investing in an Arizona shopping mall."

The collapse of the Lincoln S&L cost taxpayers approximately $3.4 billion; the S&L crisis as a whole cost taxpayers more than $124 billion, according to the General Accounting Office.

(Side note: the scandal did not end the careers of any of the Keating Five; Cranston, DeConcini, and Riegle all served out their terms; Glenn and McCain both stood for re-election and won. Perversely, after his senate term ended, DeConcini was appointed by President Clinton to the the Board of Directors of the Federal Home Loan Mortgage Corporation, aka "Freddie Mac".)

The fuss about the Times article seems to be mostly about the somewhat weakly sourced suggestion that McCain had an affair with a lobbyist named Vicki Iseman. But to our way of thinking, McCain's participation in the Keating Five scandal and the S&L crisis is still the bigger story. Here is what Bill Black told the Times:

Some people involved think Mr. McCain got off too lightly. William Black, one of the banking regulators the senator met with, argued that Mrs. McCain’s investment with Mr. Keating created an obvious conflict of interest for her husband. (Mr. McCain had said a prenuptial agreement divided the couple’s assets.) He should not be able to “put this behind him,” Mr. Black said. “It sullied his integrity.”

Black presents a full history of the S&L crisis in his book The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry. That crisis—much like the current banking crisis—was the result of banking deregulation and the "control fraud" that inevitably follows it, as Black's recent D&S article shows.

Labels: banking regulation, Bill Black, deregulation, john mccain, Keating Five, savings and loan crisis, William Black, William K. Black

 

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2/21/2008 06:08:00 PM 0 comments