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Left Out

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Support for President Obama’s re-election bid is in disarray.  His sinking poll numbers have left many Democrats hoping for a miracle (i.e. some degree of economic recovery before November of 2012).  A significant component of the party’s progressive bloc is looking for a challenger to step forward – as can be seen at the StopHoping.org website.  One of the bloggers at Corrente – Hugh – recently had a good laugh at those who were anticipating a possible Primary challenge to Obama from former Wisconsin Senator Russ Feingold.  Here is some of what Hugh had to say:

The point is that Feingold could have been, and should have been, if he were legit, a focus for progressive organizing.  But he wasn’t.  . . . Feingold could have been the voice of opposition to Bush and his policies, but the silence from the Wisconsin Senator’s office was deafening.  He could have played the same role opposing Obama’s right wing corporatist agenda.  He did not.  Indeed he lost his Senate seat largely because of his failure to distance himself from Obama.

There are other reasons to dislike Feingold and question his progressive credentials.  He voted for John Roberts as Chief Justice of the Supreme Court. He voted for Obamacare.  And he is a deficit hawk.

Many left-leaning commentators have been offering suggestions to the President as to what actions he should be taking – as well as what message he should be delivering.  Experience has demonstrated that Obama never pays attention to well-intentioned, sensible advice.  How many times has Robert Reich written a roadmap for the President to use toward saving the economy as well as Obama’s own Presidency – only to be ignored?  As the campaign drags on, try to keep count of how many commentaries are written under the theme:  “What Obama Needs to Say and Do Right Now”.  Rest assured that he won’t say or do any of it.

Meanwhile, Republican voters are currently flocking to the standard-bearer du jour, Texas Governor Rick Perry.  Alexander Cockburn of CounterPunch wrote a great essay about Perry’s unmatched political instincts and the challenges ahead for both parties in the upcoming Presidential race:

The obvious question is whether Perry, having won the right, can clamber back along the kook branch towards something vaguely resembling the solid timber of sanity, to capture the necessary independents and disillusioned folk who bet on Obama in 2008.  Hard to say.  Perry is pretty far out on the limb.  Reagan, with the strenuous help of the press, managed the crawl back in 1980, amid widespread disappointment and disgust with Jimmy Carter.  Disappointment and disgust with Barack Obama?  The president has slithered down in the most recent polls, and now is just above the 50 per cent disapproval rating.  There are still around 30 million Americans without work, or enough work. There’s the endlessly cited observation that no president presiding over more than a 7 per cent jobless rate can hope for a second term.

The progressive sector is already rallying the Obama vote by pounding out the unsurprising message that Perry is a shil and errand boy for corporate America, Amazing! Imagine that a conservative Texas Republican would end up in that corner, arm in arm with Barack Obama, messenger of hope and change, also shil and errand boy for corporate America, starting with the nuclear industry, the arms sector, the ag/pesticide complex and moving on through Wall Street and the Fed, and equipped with truly noxious beliefs about fiscal discipline, the merits of compromise.  He’s a far more dangerous man to have in the Oval Office than Perry.  We need a polarizer to awaken the left from its unending, unbreakable infatuation with our current president, despite all the horrors he has perpetrated and presided over, most significantly the impending onslaught on Social Security and Medicare.

Any Republican who wants to maintain a viable candidacy will be forced to start taking some hard swings at Rick Perry.  Jon Huntsman has already started to do so.  Michele Bachmann might not, if she wants a shot at becoming Perry’s running mate.  It won’t matter what Ron Paul says … because the mainstream media are pretending as though he doesn’t exist.  If you haven’t seen it yet, Jon Stewart ran a superb piece, exhibiting how all of the major news outlets – including Fox – were apparently reading from the same script after Congressman Paul came within 100 votes of beating Michele Bachmann in the Iowa Straw Poll.  Watching those reports could have led one to believe that Ron Paul had dropped out of the race.  On August 17, Tara Sartor of the Pew Research Center’s Project for Excellence in Journalism provided this analysis of how the television news organizations squelched Ron Paul’s near-victory in Iowa:

In a further attempt to gauge the post-straw poll attention to Paul’s campaign, PEJ also used the Snapstream server’s closed captioning capability to assess the candidates’ television coverage in the first few days after that balloting.

The sample included the three network Sunday morning panel shows on August 14, the morning and evening network news programs on August 15 and four hours of prime-time cable and one hour of daytime from each of the three major cable news networks on August 15.

According to that analysis, Paul was mentioned just 29 times. By comparison, Perry was mentioned 371 times, Bachmann was mentioned 274 times, and Romney was mentioned 183 times.

I hope that the anti-Paul conspiracy helps to energize those voters who had been ambivalent about supporting the “other Texan” in the race.

At some point, the progressive Democrats are going to be faced with the ugly reality that they don’t have a candidate in the 2012 Presidential campaign.  As has been the case with Ron Paul and his supporters – the Left will be left out.


 

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Federal Reserve Bailout Records Provoke Limited Outrage

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On December 3, 2009 I wrote a piece entitled, “The Legacy of Mark Pittman”.  Mark Pittman was the reporter at Bloomberg News whose work was responsible for the lawsuit, brought under the Freedom of Information Act, against the Federal Reserve, seeking disclosure of the identities of those financial firms benefiting from the Fed’s eleven emergency lending programs.

The suit, Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, (U.S. District Court, Southern District of New York) resulted in a ruling in August of 2009 by Judge Loretta Preska, who rejected the Fed’s defense that disclosure would adversely affect the ability of those institutions (which sought loans at the Fed’s discount window) to compete for business.  The suit also sought disclosure of the amounts loaned to those institutions as well as the assets put up as collateral under the Fed’s eleven lending programs, created in response to the financial crisis.  The Federal Reserve appealed Judge Preska’s decision, taking the matter before the United States Court of Appeals for the Second Circuit.  The Fed’s appeal was based on Exemption 4 of the Freedom of Information Act, which exempts trade secrets and confidential business information from mandatory disclosure.  The Second Circuit affirmed Judge Preska’s decision on the basis that the records sought were neither trade secrets nor confidential business information because Bloomberg requested only records generated by the Fed concerning loans that were actually made, rather than applications or confidential information provided by persons, firms or other organizations in attempt to obtain loans.  Although the Fed did not attempt to appeal the Second Circuit’s decision to the United States Supreme Court, a petition was filed with the Supreme Court by Clearing House Association LLC, a coalition of banks that received bailout funds.  The petition was denied by the Supreme Court on March 21.

Bob Ivry of Bloomberg News had this to say about the documents produced by the Fed as a result of the suit:

The 29,000 pages of documents, which the Fed released in pdf format on a CD-ROM, revealed that foreign banks accounted for at least 70 percent of the Fed’s lending at its October, 2008 peak of $110.7 billion.  Arab Banking Corp., a lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the window in the 18 months after Lehman Brothers Holdings Inc. collapsed.

As government officials and news reporters continue to review the documents, a restrained degree of outrage is developing.  Ron Paul is the Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy.  He is also a longtime adversary of the Federal Reserve, and author of the book, End The Fed.  A recent report by Peter Barnes of FoxBusiness.com said this about Congressman Paul:

.   .   .   he plans to hold hearings in May on disclosures that the Fed made billions — perhaps trillions — in secret emergency loans to almost every major bank in the U.S. and overseas during the financial crisis.

*   *   *

“I am, even with all my cynicism, still shocked at the amount this is and of course shocked, but not completely surprised, [that] much [of] this money went to help foreign banks,” said Rep. Ron Paul (R-TX),   .   .   .  “I don’t have [any] plan [for] legislation …  It will take awhile to dissect that out, to find out exactly who benefitted and why.”

In light of the fact that Congressman Paul is considering another run for the Presidency, we can expect some exciting hearings starring Ben Bernanke.

Senator Bernie Sanders of Vermont became an unlikely ally of Ron Paul in their battle to include an “Audit the Fed” provision in the financial reform bill.  Senator Sanders was among the many Americans who were stunned to learn that Arab Banking Corporation used a New York branch to get 73 loans from the Fed during the 18 months after the collapse of Lehman Brothers.  The infuriating factoid in this scenario is apparent in the following passage from the Bloomberg report by Bob Ivry and Donal Griffin:

The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion — while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday.  In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.

Ivry and Griffin provided this reaction from Bernie Sanders:

“It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” Senator Bernard Sanders of Vermont, an independent who caucuses with Democrats, wrote in a letter to Fed and U.S. officials.

The best critique of the Fed’s bailout antics came from Rolling Stone’s Matt Taibbi.  He began his report this way:

After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds.  And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size – a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.

As Matt Taibbi began discussing what the documents produced by the Fed revealed, he shared this reaction from a staffer, tasked to review the records for Senator Sanders:

“Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont.  “Every one of these transactions is outrageous.”

In case you are wondering just how “outrageous” these transactions were, Mr. Taibbi provided an outrageously entertaining chronicle of a venture named “Waterfall TALF Opportunity”, whose principal investors were Christy Mack and Susan Karches.  Susan Karches is the widow of Peter Karches, former president of Morgan Stanley’s investment banking operations.  Christy Mack is the wife of John Mack, the chairman of Morgan Stanley.  Matt Taibbi described Christy Mack as “thin, blond and rich – a sort of still-awake Sunny von Bulow with hobbies”.  Here is how he described Waterfall TALF:

The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility.  But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called “giving already stinking rich people gobs of money for no fucking reason at all.”  If you want to learn how the shadow budget works, follow along.  This is what welfare for the rich looks like.

The venture would have been more aptly-named, “TALF Exploitation Windfall Opportunity”.  Think about it:  the Mack-Karches entity was contrived for the specific purpose of cashing-in on a bailout program, which was ostensibly created for the purpose of preventing a consumer credit freeze.

I was anticipating that the documents withheld by the Federal Reserve were being suppressed because – if the public ever saw them – they would provoke an uncontrollable degree of public outrage.  So far, the amount of attention these revelations have received from the mainstream media has been surprisingly minimal.  When one compares the massive amounts squandered by the Fed on Crony Corporate Welfare Queens such as Christy Mack and Susan Karches ($220 million loaned at a fraction of a percentage point) along with the multibillion-dollar giveaways (e.g. $13 billion to Goldman Sachs by way of Maiden Lane III) the fighting over items in the 2012 budget seems trivial.

The Fed’s defense of its lending to foreign banks was explained on the New York Fed’s spiffy new Liberty Street blog:

Discount window lending to U.S. branches of foreign banks and dollar funding by branches to parent banks helped to mitigate the economic impact of the crisis in the United States and abroad by containing financial market disruptions, supporting loan availability for companies, and maintaining foreign investment flows into U.S. companies and assets.

Without the backstop liquidity provided by the discount window, foreign banks that faced large and fluctuating demand for dollar funding would have further driven up the level and volatility of money market interest rates, including the critical federal funds rate, the Eurodollar rate, and Libor (the London interbank offered rate).  Higher rates and volatility would have increased distress for U.S. financial firms and U.S. businesses that depend on money market funding.  These pressures would have been reflected in higher interest rates and reduced bank lending, bank credit lines, and commercial paper in the United States.  Moreover, further volatility in dollar funding markets could have disrupted the Federal Reserve’s ability to implement monetary policy, which requires stabilizing the federal funds rate at the policy target set by the Federal Open Market Committee.

In other words:  Failure by the Fed to provide loans to foreign banks would have made quantitative easing impossible.  There would have been no POMO auctions.  As a result, there would have been no supply of freshly printed-up money to be used by the proprietary trading desks of the primary dealers to ramp-up the stock market for those “late-day rallies”.  This process was described as the “POMO effect” in a 2009 paper by Precision Capital Management entitled, “A Grand Unified Theory of Market Manipulation”.

Thanks for the explanation, Mr. Dudley.


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