September 22, 2008
Exactly one year ago, we saw the release of Naomi Klein’s book, The Shock Doctrine: The Rise of Disaster Capitalism. Klein’s book explained how unpopular laws were enacted in a number of countries around the world, as a result of shock from disasters or upheavals. She went on to suggest that some of these events were deliberately orchestrated with the intent of passing repugnant laws in the wake of crisis. She made an analogy to shock therapy, wherein the patient’s mind is electrically reformatted to become a “blank slate”. Klein described how advocates of “the shock doctrine” seek a cataclysmic destruction of economic order to create their own “blank slate” upon which to create their vision of a “free market economy”. She described the 2003 Iraq war as the most thorough utilization of the shock doctrine in history. Remember that this book was released a year before the crisis we are going through now.
You may recall former Senator Phil Gramm’s recent appearance in the news for calling the United States a “nation of whiners” and positing that the only recession going on in the United States these days is a “mental recession”. Gramm is a longtime buddy and mentor to a certain individual named John McCain. Gramm is the architect of the so called “Enron Loophole” allowing speculators to drive the price of oil to absurd heights. (Gramm’s wife, Wendy, was a former member of Enron’s Board of Directors.) Gramm was most notorious for his successes in the deregulation of Wall Street (with the help of McCain) that facilitated the “mortgage crisis” as well as the current economic meltdown. He sponsored the 1999 bill that repealed the Glass-Steagall Act. The repeal of that law allowed “commercial” and “investment” banks to consolidate. Gramm’s face appears in many campaign videos with McCain, taken earlier this year. As a result of the outrage generated by Gramm’s remarks, McCain formally dismissed Gramm as his campaign’s economic advisor. Despite the fact that Gramm no longer has a formal role in the McCain campaign, many believe that he would be McCain’s choice for Secretary of the Treasury in the event that McCain should win the Presidential election. On September 21, MSNBC’s David Shuster grilled McCain campaign spokesman, Tucker Bounds, about the possibility that McCain is planning to appoint Phil Gramm as his Secretary of the Treasury, should McCain win. Tucker Bounds squirmed all over the place, employing his usual tactic of deflecting the subject of the current economic crisis back to the Obama campaign. Most noticeably, Mr. Bounds never made any attempt to deny that McCain plans to put Gramm in charge of the Treasury.
Our current Treasury Secretary, Henry Paulson, is on the covers of this week’s newsmagazines, pushing for uncritical acceptance of his (and hence, the Bush Administration’s) solution to the current economic crisis. This basically amounts to a three-page “bailout” plan for banks and other financial intuitions holding mortgages of questionable value, at a price to the taxpayers of anywhere from $700 billion to One Trillion Dollars. The Democrats are providing some “pushback” to this plan. Barack Obama was quoted by Carrie Brown of Politico.com as saying that the Bush Administration has “offered a concept with a staggering price tag, not a plan”. Obama went on to insist that the “American people must be assured that the deal reflects the basic principles of transparency, fairness and reform”.
As reported by Stephen Labaton in the September 21 New York Times, House Speaker Nancy Pelosi complained that:
… the administration’s proposal did “not include the necessary safeguards. Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive executive compensation.
Senator Chris Dodd of Connecticut was quoted in that article as saying: “We need to offer some assurance to the American taxpayer that Congress is watching.” Dodd went on to explain:
One of the things that got us into this mess was the lack of accountability and the lack of oversight that was occurring, and I don’t think we want to repeat those mistakes with a program of this magnitude.
The Times article then focused on the point emphasized by Republican Senator Arlen Specter:
I realize there is considerable pressure for the Congress to adjourn by the end of next week . . . But I think we must take the necessary time to conduct hearings, analyze the administration’s proposed legislation, and demonstrate to the American people that any response is thoughtful, thoroughly considered and appropriate.
Nevertheless, Treasury Secretary Paulson made the rounds of the Sunday talk shows to advocate pushing this bailout through quickly, without the safeguards and deliberation suggested by the Democrats and Senator Specter. As Zachary Goldfarb reported in the September 21 Washington Post:
Paulson urged Congress not to load up the legislation with controversial provisions. “We need this to be clean and quick,” he said.
“Clean and quick” . . . Is that anything like “Shock and Awe”? As usual, there is concern about whether Congressional Democrats will have the spine to resist the “full court press” by the Bush Administration to get this plan approved by Congress and on the President’s desk for signature. As Robert Kuttner reported in The Huffington Post:
One senior Congressional Democrat told me, “They have a gun to our heads.” Paulson behaved as if he held all the cards, but in fact the Democrats have a lot of cards, too. The question is whether they have the nerve to challenge major flaws in Paulson’s plan as a condition of enacting it.
Here we go again. Will the Democrats “grow a pair” in time to prevent “the shock doctrine” from being implemented once again? If not, will we eventually see the day when Treasury Secretary Phil Gramm basks in glory, while presiding over his own manifestation of economic utopia?
Offering Solutions
October 22, 2009
Many of us are familiar with the old maxim asserting that “if you’re not part of the solution, you’re part of the problem.” During the past year we’ve been exposed to plenty of hand-wringing by info-tainers from various mainstream media outlets decrying the financial crisis and our current economic predicament. Very few of these people ever seem to offer any significant insight on such interesting topics as: what really caused the meltdown, how to prevent it from happening again, whether any laws were broken that caused this catastrophe, whether any prosecutions might be warranted or how to solve our nation’s continuing economic ills, which seem to be immune to all the attempted cures. The painful thorn in the side of Goldman Sachs, Matt Taibbi, recently raised an important question, reminding people to again scrutinize the vapid media coverage of this pressing crisis:
That quote inspired Yves Smith of Naked Capitalism to write a superb essay about how “access journalism” has created a controlled press. What follows is just a small nugget of the great analysis in that piece:
Fortunately, one television news reporter has broken the silence concerning the impact on America’s middle class, caused by Wall Street’s massive Ponzi scam and our government’s response – which he calls “corporate communism”. I’m talking about MSNBC’s Dylan Ratigan. On Wednesday’s edition of his program, Morning Meeting, he decried the fact that the taxpayers have been forced to subsidize the “parlor game” played by Goldman Sachs and other firms involved in proprietary trading on our coin. Mr. Ratigan then proceeded to offer a number of solutions available to ordinary people, who would like to fight back against those pampered institutions considered “too big to fail”. Some of these measures involve: moving accounts from one of those enshrined banks to a local bank or credit union; paying with cash whenever possible and contacting your lawmakers to insist upon financial reform.
My favorite lawmaker in the battle for financial reform is Congressman Alan Grayson, whose district happens to include Disney World. His fantastic interrogation of Federal Reserve general counsel, Scott Alvarez, about whether the Fed tries to manipulate the stock markets, was a great event. Grayson has now co-sponsored a “Financial Autopsy” amendment to the proposed Consumer Financial Protection Agency bill. This amendment is intended to accomplish the following:
From his website, The Market Ticker, Karl Denninger offered his own contributions to this amendment:
It’s nice to know that bloggers are no longer the only voices insisting on financial reform. Ed Wallace of Business Week recently warned against the consequences of unchecked speculation on oil futures:
Did you think that the “Enron Loophole” was closed by the enactment of the 2008 Farm Bill? It wasn’t. The Farm Bill simply gave more authority to the Commodity Futures Trading Commission to regulate futures contracts that had been exempted by the loophole. In case you’re wondering about the person placed in charge of the Commodity Futures Trading Commission by President Obama — his name is Gary Gensler and he used to work for … You guessed it: Goldman Sachs.