The
end of 2018 marks the demise of Donald Trump’s “rubber stamp” Congress. To the
surprise of many, the Democratic Party managed to regain control of the House
of Representatives during the midterm elections. With the Democrats controlling
the House, Trump might decide that the Presidency is no longer any fun – with
too many obligations and duties, demanding such loathsome tasks as reading and
listening to other people.
Meanwhile, the Democrats are scrambling to present a united front behind whomever might be their 2020 presidential nominee. The party’s establishment seems terrified that a new generation of progressives – exemplified by Alexandria Ocasio-Cortez – might scare away the deep pockets of K Street lobbyists. On the other hand, progressive-minded voters have been conditioned to view Centrists as corporatists in the tradition of Hillary Clinton. Will a unifying candidate, with the backbone to advance a forward-looking agenda, gain enough traction to rise above a large pack of ambitious contenders?
January 2019 brings us the long-awaited release of American Cosmic, a book by Professor Diana Walsh Pasulka from the University of North Carolina at Wilmington. I discussed American Cosmic in my last posting. Although the book was originally scheduled for release in April of 2018, the publisher (Oxford University Press) found it necessary to “dumb-down” the book so that it would be accessible to a mainstream audience. (Oxford University Press is primarily involved in the production of academic textbooks.)
American Cosmic will offer information about the involvement of Silicon Valley entrepreneurs in the reverse-engineering of UFO technology and the assimilation of that technology into products manufactured by aerospace industry giants. This book could have a significant impact on the acceptability of the taboo subject of UFOs. (They are now referred to as unidentified aerial phenomena or UAPs to avoid the stigma of lunacy associated with UFOs.) A significant amount of rumbling from the rumor mill suggests that the Pentagon is poised to release some “dramatic” UAP videos in January or February.
Beyond the damage inflicted upon the environment by Donald Trump’s deliberate efforts to sabotage the measures and mechanisms of environmental protection, 2018 brought us more bad news about the outlook for climate change. A rather bleak National Climate Assessment (NCA) report was released on Black Friday (the day after Thanksgiving). The NCA is a United States government interagency effort focused on climate change science. At the website for the Union of Concerned Scientists, senior climate scientist Rachel Licker discussed the sleazy handling of the report by the Trump Administration:
The Trump Administration tried to bury the report, which they were legally mandated to issue, over a holiday weekend. When that failed and the report drew wide coverage, President Trump, his press secretary, and two cabinet secretaries tried to discredit the assessment and disparage the work of more than 300 scientists and experts from federal, state, and local governments, tribes and Indigenous communities, national laboratories, universities, and the private sector who contributed to the report, many on a purely voluntary basis.
Hopes
run high that 2019 might be the year when decisive action is taken by special counsel
Robert Mueller and Congress to end the destructive, scandal-plagued Trump
presidency.
Much has changed since the inception of the Occupy Wall Street movement. When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever. When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s. When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate: The participants were called everything from “socialists” to “anti-Semites”. Obviously, some of this prattle continues to emanate from unimaginative bloviators. Nevertheless, it didn’t take long for respectable news sources to give serious consideration to the OWS effort.
One month after the occupation of Zuccotti Park began, The Economist explained why the movement had so much appeal to a broad spectrum of the population:
So the big banks’ apologies for their role in messing up the world economy have been grudging and late, and Joe Taxpayer has yet to hear a heartfelt “thank you” for bailing them out. Summoned before Congress, Wall Street bosses have made lawyerised statements that make them sound arrogant, greedy and unrepentant. A grand gesture or two – such as slashing bonuses or giving away a tonne of money – might have gone some way towards restoring public faith in the industry. But we will never know because it didn’t happen.
Reports eventually began to surface, revealing that many “Wall Street insiders” actually supported the occupiers. Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes have been aligned with those of the OWS movement.
By late December, it became obvious that the counter-insurgency effort had expanded. At The eXiledblog, Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement. In January, New York Mayor Michael Bloomberg lashed out against the OWS protesters by parroting what has become The Big Lie of our time. In response to a question about Occupy Wall Street, Mayor Bloomberg said this:
“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”
The counterpunch to Mayor Bloomberg’s remark was swift and effective. Barry Ritholtz wrote a piece for The Washington Post entitled “What caused the financial crisis? The Big Lie goes viral”. After The Washington Post published the Ritholtz piece, a good deal of supportive commentary emerged – as observed by Ritholtz himself:
Since then, both Bloomberg.com and Reuters each have picked up the Big Lie theme. (Columbia Journalism Review as well). In today’s NYT, Joe Nocera does too, once again calling out those who are pushing the false narrative for political or ideological reasons in a column simply called “The Big Lie“.
Once the new year began, the Occupy Oakland situation quickly deteriorated. Chris Hedges of Truthdig took a hard look at the faction responsible for the “feral” behavior, raising the question of whether provocateurs could have been inciting the ugly antics:
The presence of Black Bloc anarchists – so named because they dress in black, obscure their faces, move as a unified mass, seek physical confrontations with police and destroy property – is a gift from heaven to the security and surveillance state.
Chris Hedges gave further consideration to the involvement of provocateurs in the Black Bloc faction on February 13:
Occupy’s most powerful asset is that it articulates this truth. And this truth is understood by the mainstream, the 99 percent. If the movement is severed from the mainstream, which I expect is the primary goal of the Department of Homeland Security and the FBI, it will be crippled and easily contained. Other, more militant groups may rise and even flourish, but if the Occupy movement is to retain the majority it will have to fight within self-imposed limitations of nonviolence.
Despite the negative publicity generated by the puerile pranks of the Black Bloc, the Occupy movement turned a corner on February 13, when Occupy the SEC released its 325-page comment letter concerning the Securities and Exchange Commission’s draft “Volcker Rule”. (The Volcker Rule contains the provisions in the Dodd-Frank financial reform act which restrict the ability of banks to make risky bets with their own money). Occupy the SEC took advantage of the “open comment period” which is notoriously exploited by lobbyists and industry groups whenever an administrative agency introduces a new rule. The K Street payola artists usually see this as their last chance to “un-write” regulations.
The most enthusiastic response to Occupy the SEC’s comment letter came from Felix Salmon of Reuters:
Occupy the SEC is the wonky finreg arm of Occupy Wall Street, and its main authors are worth naming and celebrating: Akshat Tewary, Alexis Goldstein, Corley Miller, George Bailey, Caitlin Kline, Elizabeth Friedrich, and Eric Taylor. If you can’t read the whole thing, at least read the introductory comments, on pages 3-6, both for their substance and for the panache of their delivery. A taster:
During the legislative process, the Volcker Rule was woefully enfeebled by the addition of numerous loopholes and exceptions. The banking lobby exerted inordinate influence on Congress and succeeded in diluting the statute, despite the catastrophic failures that bank policies have produced and continue to produce…
The Proposed Rule also evinces a remarkable solicitude for the interests of banking corporations over those of investors, consumers, taxpayers and other human beings.
* * *
There’s lots more where that comes from, including the indelible vision of how “the Volcker Rule simply removes the government’s all-too-visible hand from underneath the pampered haunches of banking conglomerates”. But the real substance is in the following hundreds of pages, where the authors go through the Volcker Rule line by line, explaining where it’s useless and where it can and should be improved.
John Knefel of Salon emphasized how this comment letter exploded the myth that the Occupy movement is simply a group of cynical hippies:
The working group’s detailed policy position gives lie to the common claim that the Occupy Wall Street movement is “well intentioned but misinformed.” It shows there’s room in the movement both for policy wonks and those chanting “anti-capitalista.”
Even Mayor Bloomberg’s BusinessWeek spoke highly of Occupy the SEC’s efforts. Karen Weise interviewed Occupy’s Alexis Goldstein, who had previously worked at such Wall Street institutions as Deutsche Bank, where she built IT systems for traders:
Like Goldstein, several members have experience in finance. Kline says she used to be a derivatives trader. Tewary is a lawyer who worked on securitization cases at the firm Kaye Scholer, according to his bio on the website of his current firm, Kamlesh Tewary. Mother Jones, which reported on the group in December, says O’Neil is a former Wall Street quant.
There are parts of the rule that Occupy the SEC would like to see toughened. For example, Goldstein sees a “big loophole” in the proposed rule that allows banks to make proprietary trades using so-called repurchase agreements, by which one party sells securities to another with the promise to buy back the securities later. The group wants to make sure other parts aren’t eroded.
From the perspective of someone who’s spent a lot of time in working groups of Occupy Boston, what I love about this story is that it’s early evidence of what Occupy can and will do, beyond “changing the discourse,” which is the best that sympathetic people who haven’t been involved seem to be able to say about Occupy, or just going away and dying off, which is what non-sympathizers think has happened to Occupy. Many of us have been quietly working away over the winter, and the results will start to be seen in the coming months.
If Chris Sturr’s expectation ultimately proves correct, it will be nice to watch the pro-Wall Street, teevee pundits get challenged by some worthy opponents.
Comments Off on An Army Of Lobbyists For The Middle Class
Federal Reserve Chairman, Ben Bernanke appeared before the Senate Banking Committee this week to testify about the Fed’s monetary policy. Scot Kersgaard of The American Independent focused our attention on a five-minute exchange between Colorado Senator Michael Bennett and The Ben Bernank, with an embedded video clip. Senator Bennett asked Bernanke to share his opinions concerning the recommendations made by President Obama’s bipartisan deficit commission. Bernanke initially attempted to dodge the question with the disclaimer that the Fed’s authority extends to only monetary policy rather than fiscal policy – such as the work conducted by the deficit commission. If Congressman Ron Paul had been watching the hearing take place, I’m sure he had a good, hard laugh at that statement. Nevertheless, Bernanke couldn’t restrain himself from concurring with the effort to place the cost of Wall Street’s larceny on the backs of middle-class taxpayers.
The chant for “entitlement reform” continues to reverberate throughout the mainstream media as it has for the past year. Last May, economist Dean Baker exposed this latest effort toward upward wealth redistribution:
Emboldened by the fact that none of them have gone to jail for their role in the financial crisis, the Wall Street gang is now gunning for Social Security and Medicare, the country’s most important safety net programs. Led by investment banker Pete Peterson, this crew is spending more than a billion dollars to convince the public that slashing these programs is the only way to protect our children and grandchildren from poverty.
A key propaganda tactic used by the “entitlement reform” crusaders is to characterize Social Security as an “entitlement” even though it is not (as I discussed here). Phil Davis, avowed capitalist and self-described “serial entrepreneur”, wrote a great essay, which refuted the claim that Social Security is “broken” while explaining why it is not an “entitlement”. Unfortunately, there are very few politicians who are willing to step forward to provide the simple explanation that Social Security is not an entitlement. Senator Richard Blumenthal (D-Conn.) recently made a statement to that effect before a senior citizens’ group in East Haven, Connecticut – without really providing an explanation why it is not an entitlement. Susan Feiner wrote a great commentary on the subject last fall for womensenews.org. Here is some of what she said:
Moreover, Social Security is not an entitlement program as it’s paid for entirely by payroll taxes. It is an insurance program, not an entitlement. Not one penny of anyone’s Social Security comes out of the federal government’s general fund.
Social Security is, by law, wholly self-financing. It has no legal authority to borrow, so it never has.
If this incredibly successful and direly needed program hasn’t ever borrowed a dime, why is the president and his hand-picked commissioners putting Social Security cuts (and/or increases in the retirement age) in the same sentence as deficit reduction?
The attempt to mischaracterize Social Security as an “entitlement” is not a “Right vs. Left” dispute — It’s a class warfare issue. There have been commentaries from across the political spectrum emphasizing the same fact: Social Security is not an “entitlement”. The assertion has appeared on the conservative patriotsteaparty.netwebsite, the DailyKos on the Left and in a piece by independent commentator, Marti Oakley.
The battle for “entitlement reform” is just one front in the larger war being waged by Wall Street against the middle class. Kevin Drum discussed this conflict in a recent posting at his Plutocracy Now blog for Mother Jones:
It’s about the loss of a countervailing power robust enough to stand up to the influence of business interests and the rich on equal terms. With that gone, the response to every new crisis and every new change in the economic landscape has inevitably pointed in the same direction. And after three decades, the cumulative effect of all those individual responses is an economy focused almost exclusively on the demands of business and finance. In theory, that’s supposed to produce rapid economic growth that serves us all, and 30 years of free-market evangelism have convinced nearly everyone — even middle-class voters who keep getting the short end of the economic stick — that the policy preferences of the business community are good for everyone. But in practice, the benefits have gone almost entirely to the very wealthy.
Wall Street’s corrupt banks have lost their moral compass … their insatiable greed has become a deadly virus destroying its host nation … their campaign billions buy senate votes, stop regulators’ actions, manipulate presidential decisions. Wall Street money controls voters, runs America, both parties. Yes, Wall Street is bankrupting America.
Wake up America, listen:
“Our country is bankrupt. It’s not bankrupt in 30 years or five years,” warns economist Larry Kotlikoff, “it’s bankrupt today.”
Economist Peter Morici: “Capitalism is broken, America’s government is two bankrupt political parties bankrupting the country.”
David Stockman, Reagan’s budget director: “If there were such a thing as Chapter 11 for politicians” the “tax cuts would amount to a bankruptcy filing.”
BusinessWeek recently asked analyst Mary Meeker to run the numbers. How bad is it? America really is bankrupt, with a “net worth of a negative $44 trillion.” Bankrupt.
And it will get worse. Unfortunately, nothing can stop America’s self-destructive Wall Street bankers. They simply do not care that their “doomsday capitalism” is destroying themselves from within, and is bankrupting America too.
On February 21, I quoted a statement made by bond guru Bill Gross of PIMCO, which included this thought:
America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system. It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola.
To redeem Wall Street’s soul, radical solutions are clearly needed, but advocating the eradication of profit-based markets that have served humanity well on balance without a viable replacement is fanciful. Gross deserves an “A” for intent — but something more practical than a “heart transplant” is required to restore trust and efficacy to our banking system.
* * *
But an economy based on something other than profit risks misery and injustice of another sort. The antibodies now needed aren’t those that negate profitability. Rather, they are the ones that bind financial engineering to value creation and advancement of society.
Perhaps the most constructive solution to the problem is my suggestion from February 10: Recruit and employ an army of lobbyists to represent and advance the interests of the middle class on Capitol Hill. Some type of non-partisan, “citizens’ lobby” could be created as an online community. Once its lobbying goals are developed and articulated, an online funding drive would begin. The basic mission would be to defend middle-class taxpayers from the tyranny of the plutocracy that is destroying not just the middle class – but the entire nation. Fight lobbyists with lobbyists!
There seems to be a consensus that bond traders are smarter than stock traders. Consider this thought from Investopedia’s Financial Edge website:
Many investors believe bond traders understand the economy better than equity traders. Bond traders pay very close attention to any economic factor that might affect interest rates. Equity traders recognize that changes in bond prices provide a good indication of what bond traders think of the economy.
Widespread belief that Ben Bernanke’s Zero Interest Rate Policy (ZIRP) has created a stock market “bubble” has led to fear that the bubble may soon pop and cause the market to crash. It was strange to see that subject discussed by John Melloy at CNBC, given the news outlet’s reputation for stock market cheerleading. Nevertheless, Mr. Melloy recently presented us with some ominous information:
The Yale School of Management since 1989 has asked wealthy individual investors monthly to give the “probability of a catastrophic stock market crash in the U.S. in the next six months.”
In the latest survey in December, almost 75 percent of respondents gave it at least a 10 percent chance of happening. That’s up from 68 percent who gave it a 10 percent probability last April, just before the events of May 6, 2010.
* * *
The Flash Crash Commission – containing members of the CFTC and SEC – made a series of recommendations for improving market structure Friday, including single stock circuit breakers, a more reliable audit trail on trades, and curbing the use of cancelled trades by high-frequency traders. They still don’t know what actually caused the nearly 1,000-point drop in the Dow Jones Industrial Average in a matter of minutes.
* * *
Overall volume has been very light in the market though, as the individual investor put more money into bonds last year than stocks in spite of the gains. Strategists said this has been one of the longer bull markets (starting in March 2009) with barely any retail participation. Flows into equity mutual funds did turn positive in January and have continued this month however, according to ICI and TrimTabs.com. Yet the fear of a crash persists.
Whether or not one is concerned about the possibility of a market crash, consensual ambivalence toward equities is on the rise. Felix Salmon recently wrote an article for The New York Times entitled, “Wall Street’s Dead End”, which began with the observation that the number of companies listed on the major domestic exchanges peaked in 1997 and has been declining ever since. Mr. Salmon discussed the recent trend toward private financing of corporations, as opposed to the tradition of raising capital by offering shares for sale on the stock exchanges:
Only the biggest and oldest companies are happy being listed on public markets today. As a result, the stock market as a whole increasingly fails to reflect the vibrancy and heterogeneity of the broader economy. To invest in younger, smaller companies, you increasingly need to be a member of the ultra-rich elite.
At risk, then, is the shareholder democracy that America forged, slowly, over the past 50 years. Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check. With America Inc. owned by its citizens, the success of American business translated into large gains in the stock portfolios of anybody who put his savings in the market over most of the postwar period.
Today, however, stock markets, once the bedrock of American capitalism, are slowly becoming a noisy sideshow that churns out increasingly meager returns. The show still gets lots of attention, but the real business of the global economy is inexorably leaving the stock market — and the vast majority of us — behind.
His latest investment letter identifies four scenarios in which bondholders would get burned. Basically these are sovereign default, currency devaluation, inflation, and poor returns relative to other asset classes.
In other words, you can’t win. Gross compares Ben Bernanke to the devil and calls ZIRP a devil’s haircut: “This is not God’s work – it has the unmistakable odor of Mammon.”
Gross recommends putting money in foreign bonds and other assets that yield more than Treasuries.
I was particularly impressed with what Bill Gross had to say about the necessary steps for making America more competitive in the global marketplace:
We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again. We must have a President whose idea of “centrist” policy is not to hand out presents to the right and the left and then altruistically proclaim the benefits of bipartisanship. We need a President who does more than propose “Win The Future” at annual State of the Union addresses without policy follow-up. America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system. It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola. Are record corporate profits a fair price for America’s soul? A devil’s bargain more than likely.
You can’t discuss bond fund managers these days, without mentioning Jeffrey Gundlach, who recently founded DoubleLine Capital. Jonathan Laing of Barron’s wrote a great article about Gundlach entitled “The King of Bonds”. When I reached the third paragraph of that piece, I had to re-read this startling fact:
His DoubleLine Total Return Bond Fund (DBLTX), with $4.5 billion of assets as of Jan. 31, outperformed every one of the 91 bond funds in the Morningstar intermediate-bond-fund universe in 2010, despite launching only in April. It notched a total return of 16.6%, compared with returns of 8.36% for the giant Pimco Total Return Fund (PTTAX), run by the redoubtable Bill Gross . . .
The essay described how Gundlach’s former employer, TCW, feared that Gundlach was planning to leave the firm. Accordingly, TCW made a pre-emptive strike and fired Gundlach. From there, the story gets more interesting:
Five weeks after Gundlach’s dismissal, TCW sued the manager, four subordinates and DoubleLine for allegedly stealing trade secrets, including client lists, transaction information and proprietary security-valuation systems. The suit also charged that a search of Gundlach’s offices had turned up a trove of porn magazines, X-rated DVDs and sexual devices, as well as marijuana.
* * *
He charges TCW with employing “smear tactics … to destroy our business.” As for “the sex tapes and such,” he says, they represented “a closed chapter in my life.”
That’s certainly easy to understand. Porn just hasn’t been the same since Ginger Lynn retired.
Jeff Gundlach’s December webcast entitled, “Independence Day” can be found here. Take a good look at the graph on page 16: “Top 0.1% Income Earners Share of Total Income”. It’s just one of many reminders that our country is headed in the wrong direction.
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.