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Geithner Gets Bashed in New Book

August 1st, 2012 Posted in Uncategorized

Aug, 01 2012

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Much has been written about “Turbo” Tim Geithner since he first became Treasury Secretary on January 26, 2009. In his book, Too Big to Fail, Andrew Ross Sorkin wrote adoringly about Geithner’s athletic expertise. On the other hand, typing “Turbo Tim Geithner” into the space on the upper-right corner of this page and clicking on the little magnifying glass will lead you to no less than 61 essays wherein I saw fit to criticize the Treasury Secretary. I first coined the “Turbo” nickname on February 9, 2009 and on February 16 of that year I began linking “Turbo” to an explanatory article, for those who did not understand the reference.

Geithner has never lacked defenders. The March 10, 2010 issue of The New Yorker ran an article by John Cassidy entitled, “No Credit”. The title was meant to imply that Getithner’s efforts to save America’s financial system were working, although he was not getting any credit for this achievement. From the very outset, the New Yorker piece was obviously an attempt to reconstruct Geithner’s controversial public image – because he had been widely criticized as a tool of Wall Street.

Edward Harrison of Credit Writedowns dismissed the New Yorker article as “an out and out puff piece” that Geithner himself could have written:

Don’t be fooled; this is a clear plant to help bolster public opinion for a bailout and transfer of wealth, which was both unnecessary and politically damaging.

Another article on Geithner, appearing in the April 2010 issue of The Atlantic, was described by Edward Harrison as “fairly even-handed” although worthy of extensive criticism. Nevertheless, after reading the following passage from the first page of the essay, I found it difficult to avoid using the terms “fawning and sycophantic” to describe it:

In the course of many interviews about Geithner, two qualities came up again and again. The first was his extraordinary quickness of mind and talent for elucidating whatever issue was the preoccupying concern of the moment. Second was his athleticism. Unprompted by me, friends and colleagues extolled his skill and grace at windsurfing, tennis, basketball, running, snowboarding, and softball (specifying his prowess at shortstop and in center field, as well as at the plate). He inspires an adolescent awe in male colleagues.

Gawd! Yeech!

In November of 2008, President George W. Bush appointed Neil M. Barofsky to the newly-established position, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Barofsky was responsible for preventing fraud, waste and abuse involving TARP operations and funds. From his first days on that job, Neil Barofsky found Timothy Geithner to be his main opponent. On March 31 of 2009, the Senate Finance Committee held a hearing on the oversight of TARP. The hearing included testimony by Neil Barofsky, who explained how the Treasury Department had been interfering with his efforts to ascertain what was being done with TARP funds which had been distributed to the banks. Matthew Jaffe of ABC News described Barofsky’s frustration in attempting to get past the Treasury Department’s roadblocks.

On the eve of his retirement from the position of Special Inspector General for TARP (SIGTARP), Neil Barofsky wrote an op-ed piece for the March 30, 2011 edition of The New York Times entitled, “Where the Bailout Went Wrong”. Barofsky devoted a good portion of the essay to a discussion of the Obama administration’s failure to make good on its promises of “financial reform”, with a particular focus on the Treasury Department:

Worse, Treasury apparently has chosen to ignore rather than support real efforts at reform, such as those advocated by Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, to simplify or shrink the most complex financial institutions.

In the final analysis, it has been Treasury’s broken promises that have turned TARP — which was instrumental in saving the financial system at a relatively modest cost to taxpayers — into a program commonly viewed as little more than a giveaway to Wall Street executives.

It wasn’t meant to be that. Indeed, Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals — whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in — may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises. This avoidable political reality might just be TARP’s most lasting, and unfortunate, legacy.

It should come as no surprise that in Neil Barofsky’s new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, the author pulls no punches in his criticism of Timothy Geithner. Barofsky has been feeding us some morsels of what to expect from the book by way of some recent articles in Bloomberg News. Here is some of what Barofsky wrote for Bloomberg on July 22:

More important, the financial markets continue to bet that the government will once again come to the big banks’ rescue. Creditors still give the largest banks more favorable terms than their smaller counterparts — a direct subsidy to those that are already deemed too big to fail, and an incentive for others to try to join the club. Similarly, the major banks are given better credit ratings based on the assumption that they will be bailed out.

* * *

The missteps by Treasury have produced a valuable byproduct: the widespread anger that may contain the only hope for meaningful reform. Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.

In his review of Barofsky’s new book, Darrell Delamaide of MarketWatch discussed the smackdown Geithner received from Barofsky:

Barofsky may have an axe to grind, but he grinds it well, portraying Geithner as a dissembling bureaucrat in thrall to the banks and reminding us all that President Barack Obama’s selection of Geithner as his top economic official may have been one of his biggest mistakes, and a major reason the White House incumbent has to fight so hard for re-election.

From his willingness to bail out the banks with virtually no accountability, to his failure to make holders of credit default swaps on AIG take a haircut, to his inability to mount any effective program for mortgage relief, Geithner systematically favored Wall Street over Main Street and created much of the public’s malaise in the aftermath of the crisis.

* * *

Barofsky, a former prosecutor, relates that he rooted for Geithner to get the Treasury appointment and was initially willing to give him the benefit of the doubt when it emerged that he had misreported his taxes while he worked at the International Monetary Fund.

But as more details on those unpaid taxes came out and Geithner’s explanations seemed increasingly disingenuous, Barofsky had his first doubts about the secretary-designate.

Barofsky, of course, was not alone in his skepticism, and Geithner’s credibility was damaged from the very beginning by the disclosures about his unpaid taxes.

* * *

Barofsky concludes his scathing condemnation of Geithner’s “bank-centric policies” by finding some silver lining in the cloud – that the very scale of the government’s failure will make people angry enough to demand reform.

Once Geithner steps down from his position at the end of the year, we may find that his legacy is defined by Neil Barofsky’s book, rather than any claimed rescue of the financial system.

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Get Ready for the Next Financial Crisis

May 21st, 2012 Posted in Uncategorized

May, 21 2012

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It was almost one year ago when Bloomberg News reported on these remarks by Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group:

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan inTokyotoday in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

I have frequently complained about the failed attempt at financial reform, known as the Dodd-Frank Act. Two years ago, I wrote a piece entitled, “Financial Reform Bill Exposed As Hoax” wherein I expressed my outrage that the financial reform effort had become a charade. The final product resulting from all of the grandstanding and backroom deals – the Dodd–Frank Act – had become nothing more than a hoax on the American public. My essay included the reactions of five commentators, who were similarly dismayed. I concluded the posting with this remark:

The bill that is supposed to save us from another financial crisis does nothing to accomplish that objective. Once this 2,000-page farce is signed into law, watch for the reactions. It will be interesting to sort out the clear-thinkers from the Kool-Aid drinkers.

During the past few days, there has been a chorus of commentary calling for a renewed effort toward financial reform. We have seen a torrent of reports on the misadventures of The London Whale at JP Morgan Chase, whose outrageous derivatives wager has cost the firm uncounted billions. By the time this deal is unwound, the originally-reported loss of $2 billion will likely be dwarfed.

Former Secretary of Labor, Robert Reich, has made a hobby of writing blog postings about “what President Obama needs to do”. Of course, President Obama never follows Professor Reich’s recommendations, which might explain why Mitt Romney has been overtaking Obama in the opinion polls. On May 16, Professor Reich was downright critical of the President, comparing him to the dog in a short story by Sir Arthur Conan Doyle involving Sherlock Holmes, Silver Blaze. The President’s feeble remarks about JPMorgan’s latest derivatives fiasco overlooked the responsibility of Jamie Dimon – obviously annoying Professor Reich, who shared this reaction:

Not a word about Jamie Dimon’s tireless campaign to eviscerate the Dodd-Frank financial reform bill; his loud and repeated charge that the Street’s near meltdown in 2008 didn’t warrant more financial regulation; his leadership of Wall Street’s brazen lobbying campaign to delay the Volcker Rule under Dodd-Frank, which is still delayed; and his efforts to make that rule meaningless by widening a loophole allowing banks to use commercial deposits to “hedge” (that is, make offsetting bets) their derivative trades.

Nor any mention Dimon’s outrageous flaunting of Dodd-Frank and of the Volcker Rule by setting up a special division in the bank to make huge (and hugely profitable, when the bets paid off) derivative trades disguised as hedges.

Nor Dimon’s dual role as both chairman and CEO of JPMorgan (frowned on my experts in corporate governance) for which he collected a whopping $23 million this year, and $23 million in 2010 and 2011 in addition to a $17 million bonus.

Even if Obama didn’t want to criticize Dimon, at the very least he could have used the occasion to come out squarely in favor of tougher financial regulation. It’s the perfect time for him to call for resurrecting the Glass-Steagall Act, of which the Volcker Rule – with its giant loophole for hedges – is a pale and inadequate substitute.

And for breaking up the biggest banks and setting a cap on their size, as the Dallas branch of the Federal Reserve recommended several weeks ago.

This was Professor Reich’s second consecutive reference within a week to The Dallas Fed’s Annual Report, which featured an essay by Harvey Rosenblum, the head of the Dallas Fed’s Research Department and the former president of the National Association for Business Economics. Rosenblum’s essay provided an historical analysis of the events leading up to the 2008 financial crisis and the regulatory efforts which resulted from that catastrophe – particularly the Dodd-Frank Act. Beyond that, Rosenblum emphasized why those “too-big-to-fail” (TBTF) banks have actually grown since the enactment of Dodd-Frank:

The TBTF survivors of the financial crisis look a lot like they did in 2008. They maintain corporate cultures based on the short-term incentives of fees and bonuses derived from increased oligopoly power. They remain difficult to control because they have the lawyers and the money to resist the pressures of federal regulation. Just as important, their significant presence in dozens of states confers enormous political clout in their quest to refocus banking statutes and regulatory enforcement to their advantage.

Last year, former Kansas City Fed-head, Thomas Hoenig discussed the problems created by the TBTFs, which he characterized as “systemically important financial institutions” – or “SIFIs”:

… I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

Although the huge derivatives loss by JPMorgan Chase has motivated a number of commentators to issue warnings about the risk of another financial crisis, there had been plenty of admonitions emphasizing the risks of the next financial meltdown, which were published long before the London Whale was beached. Back in January, G. Timothy Haight wrote an inspiring piece for the pro-Republican Orange County Register, criticizing the failure of our government to address the systemic risk which brought about the catastrophe of 2008:

In response to widespread criticism associated with the financial collapse, Congress has enacted a number of reforms aimed at curbing abuses at financial institutions. Legislation, such as the Dodd-Frank and Consumer Protection Act, was trumpeted as ensuring that another financial meltdown would be avoided. Such reactionary regulation was certain to pacify U.S. taxpayers.

Unfortunately, legislation enacted does not solve the fundamental problem. It simply provides cover for those who were asleep at the wheel, while ignoring the underlying cause of the crisis.

More than three years after the calamity, have we solved the dilemma we found ourselves in late 2008? Can we rest assured that a future bailout will not occur? Are financial institutions no longer “too big to fail?”

Regrettably, the answer, in each case, is a resounding no.

Last month, Michael T. Snyder of The Economic Collapse blog wrote an essay for the Seeking Alpha website, enumerating the 22 Red Flags Indicating Serious Doom Is Coming for Global Financial Markets. Of particular interest was red flag #22:

The 9 largest U.S. banks have a total of 228.72 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy. It is a financial bubble so immense in size that it is nearly impossible to fully comprehend how large it is.

The multi-billion dollar derivatives loss by JPMorgan Chase demonstrates that the sham “financial reform” cannot prevent another financial crisis. The banks assume that there will be more taxpayer-funded bailouts available, when the inevitable train wreck occurs. The Federal Reserve will be expected to provide another round of quantitative easing to keep everyone happy. As a result, nothing will be done to strengthen financial reform as a result of this episode. The megabanks were able to survive the storm of indignation in the wake of the 2008 crisis and they will be able ride-out the current wave of public outrage.

As Election Day approaches, Team Obama is afraid that the voters will wake up to the fact that the administration itself is to blame for sabotaging financial reform. They are hoping that the public won’t be reminded that two years ago, Simon Johnson (former chief economist of the IMF) wrote an essay entitled, “Creating the Next Crisis” in which he provided this warning:

On the critical dimension of excessive bank size and what it implies for systemic risk, there was a concerted effort by Senators Ted Kaufman and Sherrod Brown to impose a size cap on the largest banks – very much in accordance with the spirit of the original “Volcker Rule” proposed in January 2010 by Obama himself.

In an almost unbelievable volte face, for reasons that remain somewhat mysterious, Obama’s administration itself shot down this approach. “If enacted, Brown-Kaufman would have broken up the six biggest banks inAmerica,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

Whether the world economy grows now at 4% or 5% matters, but it does not much affect our medium-term prospects. The US financial sector received an unconditional bailout – and is not now facing any kind of meaningful re-regulation. We are setting ourselves up, without question, for another boom based on excessive and reckless risk-taking at the heart of the world’s financial system. This can end only one way: badly.

The public can forget a good deal of information in two years. They need to be reminded about those early reactions to the Obama administration’s subversion of financial reform. At her Naked Capitalism website, Yves Smith served up some negative opinions concerning the bill, along with her own cutting commentary in June of 2010:

I want the word “reform” back. Between health care “reform” and financial services “reform,” Obama, his operatives, and media cheerleaders are trying to depict both initiatives as being far more salutary and far-reaching than they are. This abuse of language is yet another case of the Obama Administration using branding to cover up substantive shortcomings. In the short run it might fool quite a few people, just as BP’s efforts to position itself as an environmentally responsible company did.

* * *

So what does the bill accomplish? It inconveniences banks around the margin while failing to reduce the odds of a recurrence of a major financial crisis.

On May 17, Noam Scheiber explained why the White House is ”sweating” the JPMorgan controversy:

In particular, the transaction appears to have been a type of proprietary trade – which is to say, a trade that a bank undertakes to make money for itself, not its clients. And these trades were supposed to have been outlawed by the “Volcker Rule” provision of Obama’s financial reform law, at least at federally-backed banks like JP Morgan. The administration is naturally worried that, having touted the law as an end to the financial shenanigans that brought us the 2008 crisis, it will look feckless instead.

* * *

But it turns out that there’s an additional twist here. The concern for the White House isn’t just that the law could look weak, making it a less than compelling selling point for Obama’s re-election campaign. It’s that the administration could be blamed for the weakness. It’s one thing if you fought for a tough law and didn’t entirely succeed. It’s quite another thing if it starts to look like you undermined the law behind the scenes. In that case, the administration could look duplicitous, not merely ineffectual. And that’s the narrative you see the administration trying to preempt . . .

When the next financial crisis begins, be sure to credit President Obama as the Facilitator-In-Chief.

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Christina Romer Was Right

May 5th, 2012 Posted in Uncategorized

May, 05 2012

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Now it’s official. Christina Romer was right. The signs that she was about to be proven correct had been turning up everywhere. When Charles Kaldec of Forbes reminded us – yet again – of President Obama’s willful refusal to seriously consider the advice of the former Chair of his Council of Economic Advisers, it became apparent that something was about to happen . . .

On Friday morning, the highly-anticipated non-farm payrolls report for April was released by the Department of Labor’s Bureau of Labor Statistics (BLS). Although economists had been anticipating an increase of 165,000 jobs during the past month, the report disclosed that only 115,000 jobs were added. In other words, the headline number was 50,000 less than the anticipated figure, missing economists’ expectations by a whopping 31 percent. The weak 115,000 total failed to match the 120,000 jobs added in March. Worse yet, even if payrolls were expanding at twice that rate, it would take more than five years to significantly reduce the jobs backlog and create new jobs to replace the 5.3 million lost during the recession.

Because this is an election year, Republicans are highlighting the ongoing unemployment crisis as a failure of the Obama Presidency. On Friday evening’s CNN program, Anderson Cooper 360, economist Paul Krugman insisted that this crisis has resulted from Republican intransigence. Bohemian Grove delegate David Gergen rebutted Krugman’s claim by emphasizing that Obama’s 2009 economic stimulus program was inadequate to address the task of bringing unemployment back to pre-crisis levels. What annoyed me about Gergen’s response was his dishonest implication that President Obama’s semi-stimulus was Christina Romer’s brainchild. Nothing could be further from the truth. The stimulus program proposed by Romer would have involved a more significant, $1.8 trillion investment. Beyond that, the fact that unemployment continues for so many millions of people who lost their jobs during the recession is precisely because of Barack Obama’s decision to ignore Christina Romer. I have been groaning about that decision for a long time, as I discussed here and here.

My February 13 discussion of Noam Scheiber’s book, The Escape Artists, demonstrated how abso-fucking-lutely wrong David Gergen was when he tried to align Christina Romer with Obama’s stimulus:

The book tells the tale of a President in a struggle to create a centrist persona, with no roadmap of his own. In fact, it was Obama’s decision to follow the advice of Peter Orszag, to the exclusion of the opinions offered by Christina Romer and Larry Summers – which prolonged the unemployment crisis.

* * *

The Escape Artists takes us back to the pivotal year of 2009 – Obama’s first year in the White House. Noam Scheiber provided us with a taste of his new book by way of an article published in The New Republic entitled, “Obama’s Worst Year”. Scheiber gave the reader an insider’s look at Obama’s clueless indecision at the fork in the road between deficit hawkishness vs. economic stimulus. Ultimately, Obama decided to maintain the illusion of centrism by following the austerity program suggested by Peter Orszag:

BACK IN THE SUMMER of 2009, David Axelrod, the president’s top political aide, was peppering White House economist Christina Romer with questions in preparation for a talk-show appearance. With unemployment nearing 10 percent, many commentators on the left were second-guessing the size of the original stimulus, and so Axelrod asked if it had been big enough. “Abso-fucking-lutely not,” Romer responded. She said it half-jokingly, but the joke was that she would use the line on television. She was dead serious about the sentiment. Axelrod did not seem amused.

For Romer, the crusade was a lonely one. While she believed the economy needed another boost in order to recover, many in the administration were insisting on cuts. The chief proponent of this view was budget director Peter Orszag. Worried that the deficit was undermining the confidence of businessmen, Orszag lobbied to pare down the budget in August, six months ahead of the usual budget schedule. . . .

The debate was not only a question of policy. It was also about governing style – and, in a sense, about the very nature of the Obama presidency. Pitching a deficit-reduction plan would be a concession to critics on the right, who argued that the original stimulus and the health care bill amounted to liberal overreach. It would be premised on the notion that bipartisan compromise on a major issue was still possible. A play for more stimulus, on the other hand, would be a defiant action, and Obama clearly recognized this. When Romer later urged him to double-down, he groused, “The American people don’t think it worked, so I can’t do it.”

Ron Suskind’s book, Confidence Men is another source which contradicts David Gergen’s attempt to characterize Obama’s stimulus as Romer’s baby. Last fall, Berkeley economics professor, Brad DeLong had been posting and discussing excerpts from the book at his own website, Grasping Reality With Both Hands. On September 19, Professor DeLong posted a passage from Suskind’s book, which revealed Obama’s expressed belief (in November of 2009) that high unemployment was a result of productivity gains in the economy. Both Larry Summers (Chair of the National Economic Council) and Christina Romer (Chair of the Council of Economic Advisers) were shocked and puzzled by Obama’s ignorance on this subject:

“What was driving unemployment was clearly deficient aggregate demand,” Romer said. “We wondered where this could be coming from. We both tried to convince him otherwise. He wouldn’t budge.”

Obama’s willful refusal to heed the advice of Cristina Romer has facilitated the persistence of our nation’s unemployment problem. As Ron Suskind remarked in the previously-quoted passage:

The implications were significant. If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise.

There you have it. Despite the efforts of Obama’s apologists to blame Larry Summers or others on the President’s economic team for persistent unemployment, it wasn’t simply a matter of “the buck stopping” on the President’s desk. Obama himself has been the villain, hypocritically advocating a strategy of “trickle-down economics” – in breach of his campaign promise to do the exact opposite.

As Election Day approaches, it becomes increasingly obvious that the unemployment situation will persist through autumn – and it could get worse. This is not Christina Romer’s fault. It is President Obama’s legacy. Christina Romer was right and President Obama was wrong.

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Seeing Through Obama

April 30th, 2012 Posted in Uncategorized

Apr, 30 2012

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Now that Mitt Romney has secured the Republican presidential nomination, commentators are focusing on the question of whether the candidate can motivate the conservative Republican base to vote for the “Massachusetts moderate” in November.

Meanwhile, it is becoming obvious that after three years in the White House, Barack Obama has managed to alienate the liberal base of the Democratic Party. The Firedog Lake website has been among the most vocal, left-leaning blogs to regularly criticize the President. The site’s publisher, Jane Hamsher, has picked up on Public Citizen’s campaign against the Trans-Pacific Partnership, which Obama is attempting to sneak past the public before November. On April 27, Ms. Hamsher provided us with this warning:

The White House wants to fast track the Trans-Pacific Partnership (TPP) “free trade” agreement with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Japan is waiting in the wings, Canada and Mexico want in, Taiwan has announced its intention to meet membership requirements and China says it will “earnestly study” whether to seek entry into the agreement.

Basically, the TPP is NAFTA on steroids. The White House wants to reach a deal prior to the election because they know all the apparatchiks feeding on the $1 billion in Obama campaign money flowing through the system will launch tribalistic attacks on anyone organizing against it (activists, labor unions, workers) for “helping Mitt Romney win” – thus facilitating its easy passage.

* * *

At an April 4 press conference in the Rose Garden, President Obama said that TPP “could be a real model for the world.” Earlier this month the US limited the ability of public interest groups to have input into the process. So much for the “most transparent administration ever.”

At her Naked Capitalism blog, Yves Smith introduced a video clip of Matt Stoller’s appearance on Cenk Uygur’s television program with the following anecdote:

Matt Stoller, in this video clip from an interview last week with Cenk Uygur (hat tip Doug Smith), sets forth what should be widely accepted truths about Obama: that he’s an aggressive proponent of policies that favor the 1%. Yet soi disant progressives continue to regard him as an advocate of their interests, when at best, all he does is pander to them.

It reminds me of a conversation I had with a black woman after an Occupy Wall Street Alternative Banking Group meeting. She was clearly active in New York City housing politics and knowledgeable about policy generally. I started criticizing Obama’s role in the mortgage settlement. She said:

I have trouble with members of my community. I think Obama needs not to be President. I think he needs to be impeached. But no one in my community wants to hear that. I tell them it’s like when your mother sees you going out with someone who is no good for you.

“Why don’t you leave him? What does he do for you?”

“But Momma, I love him.”

“He knocked you down the stairs, took your keys, drove your car to Florida, ran up big bills on your credit card, and Lord only knows what else he did when he was hiding from you.”

“But Momma, I still love him.”

Her story applies equally well to the oxymoron of the Establishment Left in America. Obama is not only not their friend, but he abuses them, yet they manage to forgive all and come back for more.

In an article published by The Nation, Naomi Klein pulled the rose-colored glasses off the faces of many Obama fans with this review of the President’s performance so far:

After nine months in office, Obama has a clear track record as a global player. Again and again, US negotiators have chosen not to strengthen international laws and protocols but rather to weaken them, often leading other rich countries in a race to the bottom.

After discussing Obama’s failure to take a leading role to promote global efforts to combat pollution, or to promote human rights, Ms. Klein moved on to highlight Obama’s subservience to the financial oligarchy:

And then there are the G-20 summits, Obama’s highest-profile multilateral engagements. When one was held in London in April, it seemed for a moment that there might be some kind of coordinated attempt to rein in transnational financial speculators and tax dodgers. Sarkozy even pledged to walk out of the summit if it failed to produce serious regulatory commitments. But the Obama administration had no interest in genuine multilateralism, advocating instead for countries to come up with their own plans (or not) and hope for the best – much like its reckless climate-change plan. Sarkozy, needless to say, did not walk anywhere but to the photo session to have his picture taken with Obama.

Of course, Obama has made some good moves on the world stage – not siding with the coup government in Honduras, supporting a UN Women’s Agency… But a clear pattern has emerged: in areas where other wealthy nations were teetering between principled action and negligence, US interventions have tilted them toward negligence. If this is the new era of multilateralism, it is no prize.

While watching Saturday evening’s White House Correspondents’ Dinner, I was particularly impressed by Jimmy Kimmel’s face-to-face confrontation with President Obama concerning the administration’s crackdown on medical marijuana clinics. One of Obama’s most outspoken critics from the left – Constitutional lawyer Glenn Greenwald – pulled no punches while upbraiding the President for yet another broken campaign promise:

President Obama gave an interview to Rolling Stone‘s Jann Wenner this week and was asked about his administration’s aggressive crackdown on medical marijuana dispensaries, including ones located in states where medical marijuana is legal and which are licensed by the state; this policy is directly contrary to Obama’s campaign pledge to not “use Justice Department resources to try and circumvent state laws about medical marijuana.” Here’s part of the President’s answer:

I never made a commitment that somehow we were going to give carte blanche to large-scale producers and operators of marijuana – and the reason is, because it’s against federal law. I can’t nullify congressional law. I can’t ask the Justice Department to say, “Ignore completely a federal law that’s on the books” . . . .

The only tension that’s come up – and this gets hyped up a lot – is a murky area where you have large-scale, commercial operations that may supply medical marijuana users, but in some cases may also be supplying recreational users. In that situation, we put the Justice Department in a very difficult place if we’re telling them, “This is supposed to be against the law, but we want you to turn the other way.” That’s not something we’re going to do.

Aside from the fact that Obama’s claim about the law is outright false – as Jon Walker conclusively documents, the law vests the Executive Branch with precisely the discretion he falsely claims he does not have to decide how drugs are classified – it’s just extraordinary that Obama is affirming the “principle” that he can’t have the DOJ “turn the other way” in the face of lawbreaking.

* * *

The same person who directed the DOJ to shield torturers and illegal government eavesdroppers from criminal investigation, and who voted to retroactively immunize the nation’s largest telecom giants when they got caught enabling criminal spying on Americans, and whose DOJ has failed to indict a single Wall Street executive in connection with the 2008 financial crisis or mortgage fraud scandal, suddenly discovers the imperatives of The Rule of Law when it comes to those, in accordance with state law, providing medical marijuana to sick people with a prescription.

It’s becoming obvious that Mitt Romney is not the only candidate who will have to worry about whether his party’s “base” will bother to stand in line at the polls in November, to vote for a candidate who does not find it necessary to accommodate the will of the voters who elect him.

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Struggles of a Passive Centrist

February 13th, 2012 Posted in Uncategorized

Feb, 13 2012

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In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”. It began with this statement: “One could write an 800-page book on this subject.” Noam Scheiber has just written that book in only 368 pages. It’s called The Escape Artists and it is scheduled for release at the end of this month. The book tells the tale of a President in a struggle to create a centrist persona, with no roadmap of his own. In fact, it was Obama’s decision to follow the advice of Peter Orszag, to the exclusion of the opinions offered by Christina Romer and Larry Summers – which prolonged the unemployment crisis.

The following graph from The Economic Populist website depicts the persistence of unemployment in America:

Noam Scheiber’s new book piqued my interest because, back in July of 2009, I wrote a piece entitled “The Second Stimulus”, which began with this thought:

It’s a subject that many people are talking about, but not many politicians want to discuss. It appears as though a second economic stimulus package will be necessary to save our sinking economy and get people back to work. Because of the huge deficits already incurred in responding to the financial meltdown, along with the $787 billion price tag for the first stimulus package and because of the President’s promise to get healthcare reform enacted, there aren’t many in Congress who are willing to touch this subject right now, although some are.

The Escape Artists takes us back to the pivotal year of 2009 – Obama’s first year in the White House. Noam Scheiber provided us with a taste of his new book by way of an article published in The New Republic entitled, “Obama’s Worst Year”. Scheiber gave the reader an insider’s look at Obama’s clueless indecision at the fork in the road between deficit hawkishness vs. economic stimulus. Ultimately Obama decided to maintain the illusion of centrism by following the austerity program suggested by Peter Orszag:

BACK IN THE SUMMER of 2009, David Axelrod, the president’s top political aide, was peppering White House economist Christina Romer with questions in preparation for a talk-show appearance. With unemployment nearing 10 percent, many commentators on the left were second-guessing the size of the original stimulus, and so Axelrod asked if it had been big enough. “Abso-fucking-lutely not,” Romer responded. She said it half-jokingly, but the joke was that she would use the line on television. She was dead serious about the sentiment. Axelrod did not seem amused.

For Romer, the crusade was a lonely one. While she believed the economy needed another boost in order to recover, many in the administration were insisting on cuts. The chief proponent of this view was budget director Peter Orszag. Worried that the deficit was undermining the confidence of businessmen, Orszag lobbied to pare down the budget in August, six months ahead of the usual budget schedule. . . .

The debate was not only a question of policy. It was also about governing style – and, in a sense, about the very nature of the Obama presidency. Pitching a deficit-reduction plan would be a concession to critics on the right, who argued that the original stimulus and the health care bill amounted to liberal overreach. It would be premised on the notion that bipartisan compromise on a major issue was still possible. A play for more stimulus, on the other hand, would be a defiant action, and Obama clearly recognized this. When Romer later urged him to double-down, he groused, “The American people don’t think it worked, so I can’t do it.”

That’s a fine example of great leadership – isn’t it? “The American people don’t think it worked, so I can’t do it.” In 2009, the fierce urgency of the unemployment and economic crises demanded a leader who would not feel intimidated by the sheeple’s erroneous belief that the Economic Recovery Act had not “worked”. Obama could have educated the American people by directing their attention to a June 3, 2009 essay by Keith Hennessey (former director of the National Economic Council under President George W. Bush) which described the Recovery Act as “effective”.

Noam Scheiber’s New Republic article detailed Obama’s evolution from inexperienced negotiator to President with “newfound boldness”:

FOR TWO AND A HALF YEARS, Obama had been hatching proposals with an eye toward winning over the opposition. In most cases, all it had gotten him was more extreme demands from Republicans and not even a pretense of bipartisan support. Now, after the searing experience of the deficit deal, he still wanted reasonable, centrist policies. But he was done trying to fit them to the ever-shifting conservative zeitgeist. When he finally turned back to jobs in August, he told his aides not to “self-edit” proposals to improve their chances of passing the Republican House. “He pushed us to make sure this was not simply a predesigned legislative compromise,” one recalls.

Many readers will be surprised to learn that Larry Summers had aligned himself with Christina Romer by advocating for additional fiscal stimulus during the summer of 2009. In fact, Ms. Romer herself has already confirmed this. The Romer-Summers alliance for stimulus was also discussed in Ron Suskind’s book, Confidence Men.

As for the stimulus program itself, a new book by Mike Grabell of ProPublica entitled, Money Well Spent? provided the most even-handed analysis of what the stimulus did – and did not – accomplish. Mike Grabell gave us a glimpse of his new book with an article which appeared in The New York Times. The piece was cross-posted to the ProPublica website. Keith Hennesssey’s prescient observations about the shortcomings of that program, which he discussed in June of 2009, were somewhat consistent with those discussed by Mike Grabell, particularly on the subject of “shovel-ready” programs. Here is what Keith Hennessey said, while supporting his argument with the observations of Congressional Budget Office Director Doug Elmendorf:

In fact, the infrastructure spending in the stimulus law will peak in fiscal year 2011, which goes from October 1, 2010 to September 30, 2011. That’s too late from a macro perspective.

The Director further points out that the 2009 stimulus law created many new programs. This slows spend-out, as it takes time to create and ramp up the new programs.

The Administration has made much of working with federal and state bureaucracies to find “shovel-ready” projects to accelerate infrastructure spending. All of my conversations with budget analysts suggest this claim is tremendously overblown, and Director Elmendorf asks, “Is this practical on a large scale?”

On February 11, 2012, Mike Grabell said this:

But the stimulus ultimately failed to bring about a strong, sustainable recovery. Money was spread far and wide rather than dedicated to programs with the most bang for the buck. “Shovel-ready” projects, those that would put people to work right away, took too long to break ground. Investments in worthwhile long-term projects, on the other hand, were often rushed to meet arbitrary deadlines, and the resulting shoddy outcomes tarnished the projects’ image.

The Economic Recovery Act of 2009 will surely become a central subject of debate during the current Presidential election campaign. Regardless of what you hear from partisan bloviators, Messrs. Hennessey and Garbell have provided you with reliable guides to the unvarnished truth on this subject.

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Government Should Listen To These Wealth Managers

February 9th, 2012 Posted in Uncategorized

Feb, 09 2012

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A good deal of Mitt Romney’s appeal as a Presidential candidate is based on his experience as a private equity fund manager – despite the “vulture capitalist” moniker, favored by some of his critics. Many voters believe that America needs someone with more “business sense” in the White House. Listening to Mitt Romney would lead one to believe that America’s economic and unemployment problems will not be solved until “government gets out of the way”, allowing those sanctified “job creators” to bring salvation to the unemployed masses. Those who complained about how the system has been rigged against the American middle class during the past few decades have found themselves accused of waging “class warfare”. We are supposed to believe that Romney speaks on behalf of “business” when he lashes out against “troublesome” government regulations which hurt the corporate bottom line and therefore – all of America.

Nevertheless, the real world happens to be the home of many wealth managers – entrusted with enormous amounts of money by a good number of rich people and institutional investors – who envision quite a different role of government than the mere nuisance described by Romney and like-minded individuals. If only our elected officials – and more of the voting public – would pay close attention to the sage advice offered by these wealth managers, we might be able to solve our nation’s economic and unemployment problems.

Last summer, bond guru Bill Gross of PIMCO lamented the Obama administration’s obliviousness to the need for government involvement in short-term job creation:

Additionally and immediately, however, government must take a leading role in job creation. Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed. The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today’s marketplace.

* * *

In the near term, then, we should not rely solely on job or corporate-directed payroll tax credits because corporations may not take enough of that bait, and they’re sitting pretty as it is. Government must step up to the plate, as it should have in early 2009.

In my last posting, I discussed a February 2 Washington Post commentary by Mohamed El-Erian (co-CEO of PIMCO). El-Erian emphasized that – despite the slight progress achieved in reducing unemployment – the situation remains at a crisis level, demanding immediate efforts toward resolution:

Have no doubt, this is a complex, multiyear effort that involves several government agencies acting in a delicate, coordinated effort. It will not happen unless our political leaders come together to address what constitutes America’s biggest national challenge. And sustained implementation will not be possible nor effective without much clearer personal accountability.

One would think that, given all this, it has become more than paramount for Washington to elevate – not just in rhetoric but, critically, through sustained actions – the urgency of today’s unemployment crisis to the same level that it placed the financial crisis three years ago. But watching the actions in the nation’s capital, I and many others are worried that our politicians will wait at least until the November elections before dealing more seriously with the unemployment crisis.

On October 31, I focused on the propaganda war waged against the Occupy Wall Street movement, concluding the piece with my expectation that Jeremy Grantham’s upcoming third quarter newsletter would provide some sorely-needed, astute commentary on the situation. Jeremy Grantham, rated by Bloomberg BusinessWeek as one of the Fifty Most Influential Money Managers, released an abbreviated edition of that newsletter one month later than usual, due to a busy schedule. In addition to expressing some supportive comments about the OWS movement, Grantham noted that he would provide a special supplement, based specifically on that subject. Finally, on February 5, Mr. Grantham made good on his promise with an opinion piece in the Financial Times entitled, “People now see it as a system for the rich only”:

For the time being, in the US our corporate and governmental system backed surprisingly by the Supreme Court has become a plutocracy, designed to prolong, protect and intensify the wealth and influence of those who already have the wealth and influence. What the Occupy movement indicates is that a growing number of people have begun to recognise this in spite of the efficiency of capital’s propaganda machines. Forty years of no pay increase in the US after inflation for the average hour worked should, after all, have that effect. The propaganda is good but not that good.

* * *

In 50 years economic mobility in the US has gone from the best to one of the worst. The benefits of the past 40 years of quite normal productivity have been abnormally divided between the very rich (and corporations) and the workers.

Indeed “divide” is not the right word, for, remarkably, the workers received no benefit at all, while the top 0.1 per cent has increased its share nearly fourfold in 35 years to a record equal to 1929 and the gilded age.

But the best propaganda of all is that the richest 400 people now have assets equal to the poorest 140m. If that doesn’t disturb you, you have a wallet for a heart. The Occupiers’ theme should be simple: “More sensible assistance for the working poor, more taxes for the rich.”

I’ve complained many times about President Obama’s decision to scoff at using the so-called “Swedish solution” of putting the zombie banks through temporary receivership. Back in November of 2010, economist John Hussman of the Hussman Funds discussed the consequences of the administration’s failure to do what was necessary:

If our policy makers had made proper decisions over the past two years to clean up banks, restructure debt, and allow irresponsible lenders to take losses on bad loans, there is no doubt in my mind that we would be quickly on the course to a sustained recovery, regardless of the extent of the downturn we have experienced. Unfortunately, we have built our house on a ledge of ice.

* * *

As I’ve frequently noted, even if a bank “fails,” it doesn’t mean that depositors lose money. It means that the stockholders and bondholders do. So if it turns out, after all is said and done, that the bank is insolvent, the government should get its money back and the remaining entity should be taken into receivership, cut away from the stockholder liabilities, restructured as to bondholder liabilities, recapitalized, and reissued. We did this with GM, and we can do it with banks. I suspect that these issues will again become relevant within the next few years.

The plutocratic tools in control of our government would never allow the stockholders and bondholders of those “too-big-to-fail” banks to suffer losses as do normal people after making bad investments. It’s hard to imagine that Mitt Romney would take a tougher stance against those zombie banks than what we have seen from the Obama administration.

Our government officials – from across the political spectrum – would be wise to follow the advice offered by these fund managers. A political hack whose livelihood is based entirely on passive income has little to offer in the way of “business sense” when compared to a handful of fund managers, entrusted to use their business and financial acumen to preserve so many billions of dollars. Who speaks for business? It should be those business leaders who demonstrate concern for the welfare of all human beings in America.

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Instead Of Solving a Problem – Form a Committee

January 26th, 2012 Posted in Uncategorized

Jan, 26 2012

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It’s become a stale joke about the Obama administration. Every time a demand is made for the White House to take decisive action on an important issue . . . the President’s solution is always the same: Form a committee to study the matter.

In my last posting, I discussed the January 20 article written by Scot Paltrow for Reuters, which revealed that Attorney General Eric Hold-harmless and Lanny Breuer, head of the Justice Department’s criminal division, had been partners in the Washington law firm, Covington & Burling. As Scot Paltrow pointed out, during the years while Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co.

Less than a week after publication of Paltrow’s report, which raised “conflict of interest” questions concerning Holder’s reluctance to prosecute banks or mortgage servicers for fraudulent foreclosure practices, President Obama delivered his State of the Union address. With Paltrow’s revelations still fresh in my mind, I was particularly surprised to hear President Obama make the following statement:

And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

If it weren’t bad enough that critics had already been complaining about the Attorney General’s failure to prosecute mortgage fraud cases, Obama has most recently appointed Holder to supervise “investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis”. It’s hard to avoid the assumption that those “investigations” will lead to nowhere. By Wednesday, I found that I was not alone in my cynicism concerning what is now called the Office of Mortgage Origination and Securitization Abuses.

Wednesday morning brought an essay by Yves Smith of Naked Capitalism, in which she expressed dread about the possibility that New York Attorney General Eric Schneiderman may have been seduced by Team Obama to join the effort exerting pressure on each Attorney General from every state to consent to a settlement of any and all claims against the banksters arising from their fraudulent foreclosure practices. Each state is being asked to release the banks from criminal and civil liability in return for a share of the $25 billion settlement package. Ms. Smith compared that initiative with Obama’s most recent announcement about the Office of Mortgage Origination and Securitization Abuses:

So get this: this is a committee that will “investigate.” . . . Neil Barofsky, former prosecutor and head of SIGTARP, doesn’t buy the logic of this committee either:

Neil Barofsky @neilbarofsky

If task force created either b/c DOJ hasn’t done an investigation, or b/c 3-yr investigation a failure, how does Holder keep his job?

A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox). Let’s get real. The wee problem is that this committee looks like yet another bit of theater for the Administration to pretend, yet again, that it is Doing Something, while scoring a twofer by getting Schneiderman, who has been a pretty effective opponent, hobbled.

If you wanted a real investigation, you get a real independent investigator, with a real budget and staffing, and turn him loose. We had the FCIC which had a lot of hearings and produced a readable book that said everyone was responsible for the mortgage crisis, which was tantamount to saying no one was responsible. We even had an eleven-regulator Foreclosure Task Force that looked at 2800 loan files (and a mere 100 foreclosures) and found nothing very much wrong.

Neil Barofsky’s question deserves repetition: Why does Attorney General Eric Hold-harmless still have his job if – after three years – the Justice Department has taken no action against those responsible for originating and securitizing the risky mortgages which led to the housing crisis?

David Dayen of Firedoglake weighed-in with his own skeptical take on Obama’s purported crakdown on mortgage origination and securitization abuses:

First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests. So that’s the context of this investigative panel, part of the same entity that has spun its wheels. Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners. . . .

Given the fact that this is an election year, President Obama knows that mere lip service toward a populist cause will not be enough to win back those disgruntled former supporters, who have now learned – the hard way – that talk is cheap. Obama is now going the extra mile – he’s forming a committee! Trouble is – those disgruntled former supporters have already learned that committee formation is simply the disingenuous “follow-through” on a false campaign promise. Nice try, Mr. President!

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Too Cool To Fool

January 16th, 2012 Posted in Uncategorized

Jan, 16 2012

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It’s always reassuring to see that there are a good number of people among us who aren’t easily manipulated by “the powers that be”. Let’s take a look at some examples:

Glen Ford is the executive editor of the Black Agenda Report. On January 11, Mr. Ford discussed how – up until now – the Occupy Wall Street movement has managed to avoid being co-opted by the Democratic Party and MoveOn.org. Unfortunately, the Obama regime may have succeeded in establishing a grip on OWS. Glen Ford offered this explanation:

The Democratic Party may have entered the Occupy Wall Street movement through the “Black door,” in the form of Occupy The Dream, the Black ministers’ group led by former NAACP chief and Million Man March national director Dr. Benjamin Chavis and Baltimore mega-church pastor Rev. Jamal Bryant. Both are fervent supporters of President Obama.

*   *   *

It appears that Occupy Wall Street’s new Black affiliate is also in “lock-step” with the corporate Democrat in the White House, whose administration has funneled trillions of dollars to Wall Street and greatly expanded U.S. theaters of war.

*   *   *

Black ministers in campaign mode routinely depict Obama’s political troubles as indistinguishable from threats to “The Dream,” whose embodiment is ensconced in the White House. That’s simply common currency among Black preachers pushing for Obama.

*   *   *

It is highly unlikely – damn near inconceivable – that Occupy The Dream will do anything that might embarrass this president. Its ministers can be expected to electioneer for Obama at every opportunity. Their January 16 actions are directed at the Federal Reserve, which is technically independent from the executive branch of government – although, in practice, the Fed has been Obama’s principal mechanism for bailing out the banks. Will the ministers pretend, next Monday, that the president is somehow removed from the Fed’s massive transfers of the people’s credit and cash to Wall Street over the past three years?

*   * *

At this late stage, there is no antidote to the potential cooptation, except to rev up the movement’s confrontation with the oligarchic powers-that-be – including Wall Street’s guy in the White House. Let’s see what happens if OWS demonstrators join with Occupy The Dream at Federal Reserve sites on January 16 carrying placards unequivocally implicating Obama in the Fed’s bailouts of the banksters, as Occupy demonstrators have done so often in the past. Will the Dream’s leadership be in “lock-step” with that? Maybe so – I’ve heard that miracles sometimes do happen.

Anyone who challenges the Obama administration’s symbiotic relationship with the Wall Street banksters invites accusations of advancing the Republican agenda for regaining control of the White House. This problem will be solved once a populist third-party or Independent candidate rises to pose a serious challenge to the incumbent. Beyond that, an African-American commentator who dares to expose Obama as a tool of Wall Street is likely to face harsh criticism. Glen Ford has demonstrated more courage than most Americans by taking a stand against this venal administration.

Another exemplary individual, whose opinions were never compromised to justify or rationalize the current administration’s tactics, has been economist Joseph Stiglitz – the Nobel laureate who found himself ignored and shut out by the Obama administration ab initio. Professor Stiglitz recently wrote a commentary entitled, “The Perils of 2012” in which he dared to predict an election year fraught with economic despair. Such conditions make for an incumbent President’s worst nightmare. As a result, non-Republican economists are expected to avoid such prognostication. Nevertheless, Professor Stiglitz proceeded to paint an ugly picture of what we can expect in the near term, after first reminding us that there has been no sound policy advanced for mitigating the devastation experienced by the middle class as a result of the 2008 financial crisis:

The year 2011 will be remembered as the time when many ever-optimistic Americans began to give up hope. President John F. Kennedy once said that a rising tide lifts all boats. But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.

In that brief moment when the rising tide was indeed rising, millions of people believed that they might have a fair chance of realizing the “American Dream.” Now those dreams, too, are receding. By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labor force – meant little to the 50 year olds with little hope of ever holding a job again.

Indeed, middle-aged people who thought that they would be unemployed for a few months have now realized that they were, in fact, forcibly retired. Young people who graduated from college with tens of thousands of dollars of education debt cannot find any jobs at all. People who moved in with friends and relatives have become homeless. Houses bought during the property boom are still on the market or have been sold at a loss. More than seven million American families have lost their homes.

* * *

The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to reflect a commitment not to grow.

As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions. With all of the problems confronting the global economy, we will be lucky if these strains do not begin to manifest themselves within the next twelve months.

Another commentator who has been “too cool to fool” is equities market analyst, Barry Ritholtz. One of his recent blog postings documented how Ritholtz never accepted the propagandistic pronouncements of the National Retailers Association about Christmas season retail sales. Once the hype began on Black Friday, Ritholtz began his own campaign of debunking the questionable data, touted to boost unjustified confidence about the direction of our economy. Ritholtz concluded the piece with this statement:

Those of you who may have downplayed the potential for a recession to start over the next 12-18 months way want to revisit your views on this. It is far from the low possibility many economists have it pegged at.

Fortunately, not everyone has been as imperceptive as those on the Obama administration’s economic team who admitted that as late as 2009, they underestimated the extent of economic contraction resulting from the 2008 crisis. It’s time for the voting public to dis-employ the political hacks who have allowed this condition to fester. One effective path toward this goal involves voting against incumbents in primary elections. Keep in mind that America’s Congressional districts have been gerrymandered to protect incumbents. As a result, any plan to defeat those officeholders in a general election could be an exercise in futility. Voting against current members of Congress during the primary process can open the door for more capable candidates during the general election. Peter Schweizer’s cause – as expressed in his book, Throw Them All Out, should be on everyone’s front burner during the 2012 primary season.

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Cairo In America

December 26th, 2011 Posted in Uncategorized

Dec, 26 2011

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We have seen quite a bit of hand-wringing by those in the mainstream news media about the repression against protests in Cairo during the past few weeks. What we don’t see on television are the oppressive tactics used against protesters and journalists here in the United States. Never mind the fact that the Obama administration refuses to prosecute any of the crimes which led to the financial crisis. Simply protesting against the refusal of Attorney General Eric Hold-harmless to do his job can result in arrests and beatings administered by police. At The eXiled blog,Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement:

Remember how in November, Bloomberg and the NYPD got a lot of heat from the city’s media establishment for the arrest rampage they unleashed on journalists covering the eviction raid on Liberty Plaza? Cops arrested more than two dozen accredited journalists from major news outlets, including the New York Post, NPR, AFP and The Associated Press. Hell, cops even clubbed a couple of reporters for the baggertarian rag The Daily Caller. As a result, New York’s police commissioner made a big show of issuing an order that instructed police officers not to interfere with journalists covering OWS.

But clearly that was just for show.

Because this month the NYPD has gone out of its way to harass and arrest journalists covering OWS, especially targeting live streamers and indie journalists who can’t be counted on for propaganda support like the mainstream folks. According to Free Press’ Josh Stearns, who has been maintaining a list of journalists arrested while covering the Occupy Movement across the country, at least five journalists and seven live streamers were arrested by the NYPD in the first half of December.

* * *

The NYPD continued harassing indie journalists five days later during the D17 protests. Some were bashed with batons, others were threatened with having their official press passes revoked. By the end of the day, at least two journalists were arrested, including photojournalist Zach Roberts and Jennifer Dworkin, an independent filmmaker who had worked for PBS.

It will be interesting to see whether a new piece of technology, called the “Occucopter” will enable those reporters to obtain valuable images of abusive police tactics – without getting their own skulls crushed in the process. The Guardian provided this report:

This week in New York, Occupy Wall Street protesters have a new toy to help them expose potentially dubious actions of the New York police department. In response to constant police surveillance, police violence and thousands of arrests, Occupy Wall Street protesters and legal observers have been turning their cameras back on the police. But police have sometimes made filming difficult through physical obstruction and “frozen zones”. This occurred most notably during the eviction of protesters from Zuccotti Park in lower Manhattan, where police prevented even credentialed journalists from entering.

Now the protesters are fighting back with their own surveillance drone. Tim Pool, an Occupy Wall Street protester, has acquired a Parrot AR drone he amusingly calls the “occucopter”. It is a lightweight four-rotor helicopter that you can buy cheaply on Amazon and control with your iPhone. It has an onboard camera so that you can view everything on your phone that it points at. Pool has modified the software to stream live video to the internet so that we can watch the action as it unfolds. You can see video clips of his first experiments here. He told us that the reason he is doing this “comes back to giving ordinary people the same tools that these multimillion-dollar news corporations have. It provides a clever loophole around certain restrictions such as when the police block press from taking shots of an incident.”

The American public is no longer content to sit back and do nothing while the Obama administration sits back and does nothing to prosecute those criminals whose fraudulent conduct devastated the American economy. In my last posting, I discussed the intensifying wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. Since that time, Scot Paltrow wrote a great piece for Reuters, concerning the Justice Department’s failure to intervene against improper foreclosure procedures. Paltrow’s widely-acclaimed essay inspired several commentators to express their disgust about government permissiveness toward such egregious conduct. At The Big Picture, Barry Ritholtz shared his reaction to the Reuters article:

The fraud is rampant, self-evident, easy to prosecute. The only reason it hasn’t been done so far is that this nation is led by corrupt cowards and suffers from a ruinous two-party system.

We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant. That is no more, as we have become a corrupt plutocracy. Why our prosecutors cower in front of the almighty banking industry is beyond my limited ability to comprehend.

Without any sort of legal denouement, we should expect an angry electorate and an unhappy nation.

Is there any hope for America or will we continue on our course of devolution toward becoming a banana republic? At his Pragmatic Capitalism blog, Cullen Roche brought a glimmer of hope to some of us when he published Saxo Bank’s list of 10 outrageous predictions for 2012. I was particularly encouraged by the third item on the list:

3. A yet unannounced candidate takes the White House

In 1992, Texas billionaire Ross Perot managed to take advantage of a recessionary economy and popular disgust with US politics and reap 18.9 per cent of the popular vote. Three years of Obama has brought too little change and only additional widespread disillusionment with the entire US political system, and conditions for a third party candidate have never been riper. Someone with a strong programme for real change throws his or her hat in the ring early in 2012 and snatches the presidency in November in one of the most pivotal elections in US history, taking 38 per cent of the popular vote.

I’m keeping my fingers crossed.

10 outrageous predictions for 2012, 2012 Presidential election, AFP, Amazon, American protesters, arrest of journalists, Associated Press, Attorney General, banana republic, banking industry, Barry Ritholtz, Cairo protests, crimes caused financial crisis, Cullen Roche, drone, Eric Hold-harmless, financial fraud, Free Press, frozen zones, helicopter, Internet, iPhone, Jennifer Dworkin, John T Burke Jr, Josh Stearns, journalists, Liberty Plaza, live streamers, mainstream news media, Mayor Bloomberg, New York Police Department, New York Post, NPR, NYPD, Obama Administration, Occucopter, Occupy movement, Occupy Wall Street, OWS, Parrot AR drone, PBS, plutocracy, police beatings, police surveillance, political corruption, political system, Pragmatic Capitalism, prosecutors, repression, Reuters, Ross Perot, rule of law, Saxo Bank, Scot Paltrow, The Big Picture, The Daily Caller, The eXiled, The Guardian, third-party candidate, Tim Pool, two-party system, voters, Wall Street, White House, Yasha Levine, Zach Roberts, Zuccotti Park

Tsunami Of Disgust

December 22nd, 2011 Posted in Uncategorized

Dec, 22 2011

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You can count me among those who believe that the non-stop Republican Presidential debates are working to President Obama’s advantage. How many times have you heard some television news commentator remark that “the big winner of last night’s Republican debate was Barack Obama”? As Julianna Goldman reported for Bloomberg BusinessWeek, two recent polls have revealed that Obama is no longer looking quite as bad as he did a few months ago:

Forty-nine percent of Americans approve of how Obama is handling his job, according to an ABC News/Washington Post poll and another conducted for CNN. The rate was the highest in both surveys since a short-lived bump the president got following the killing of al-Qaeda leader Osama bin Laden in May.

Nevertheless, there is an unstoppable wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. In my last posting, I discussed Bill Black’s rebuttal to President Obama’s most recent attempt to claim that no laws were broken by the banksters who caused the 2008 financial crisis.

The wave of disgust at Obama’s exoneration of the financial fraudsters has gained quite a bit of momentum since that outrageous remark appeared on the December 11 broadcast of 60 Minutes. Matt Taibbi of Rolling Stone focused on the consequences of this level of dishonesty:

What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave. There is ample evidence out there that the Obama administration has eased up on prosecutions of Wall Street as part of a conscious strategy to prevent a collapse of confidence in our financial system, with the expected 50-state foreclosure settlement being the landmark effort in the cover-up, intended mainly to bury a generation of fraud.

* * *

In other words, Geithner and Obama are behaving like Lehman executives before the crash of Lehman, not disclosing the full extent of the internal problem in order to keep investors from fleeing and creditors from calling in their chits. It’s worth noting that this kind of behavior – knowingly hiding the derogatory truth from the outside world in order to prevent a run on the bank – is, itself, fraud!

* * *

The problem with companies like Lehman and Enron is that their executives always think they can paper over illegalities by committing more crimes, when in fact all they’re usually doing is snowballing the problem so completely out of control that there’s no longer any chance of fixing things, thereby killing the only chance for survival they ever had.

This is exactly what Obama and Geithner are doing now. By continually lying about the extent of the country’s corruption problems, they’re adding fraud to fraud and raising such a great bonfire of lies that they probably won’t ever be able to fix the underlying mess.

John R. MacArthur, president and publisher of Harper’s Magazine, caused quite a stir on December 14, when an essay he wrote – entitled, “President Obama Richly Deserves to Be Dumped” – was published by the The Providence Journal (Rhode Island). For some reason, this article does not appear at the newspaper’s website. However, you can read it in its entirety here. MacArthur began the piece by highlighting criticism of Obama by his fellow Democrats:

Most prominent among these critics is veteran journalist Bill Moyers, whose October address to a Public Citizen gathering puts the lie to our barely Democratic president’s populist pantomime, acted out last week in a Kansas speech decrying the plight of “innocent, hardworking Americans.” In his talk, Moyers quoted an authentic Kansas populist, Mary Eizabeth Lease, who in 1890 declared, “Wall Street owns the country.. . .Money rules.. . .The [political] parties lie to us and the political speakers mislead us.”

A former aide to Lyndon Johnson who knows politics from the inside, Moyers then delivered the coup de grace: “[Lease] should see us now. John Boehner calls on the bankers, holds out his cup, and offers them total obeisance from the House majority if only they fill it. Barack Obama criticizes bankers as fat cats, then invites them to dine at a pricey New York restaurant where the tasting menu runs to $195 a person.”

* * *

What’s truly breathtaking is the president’s gall, his stunning contempt for political history and contemporary reality. Besides neglecting to mention Democratic complicity in the debacle of 2008, he failed to point out that derivatives trading remains largely unregulated while the Securities and Exchange Commission awaits “public comment on a detailed implementation plan” for future regulation. In other words, until the banking and brokerage lobbies have had their say with John Boehner, Max Baucus, and Secretary of the Treasury Tim Geithner. Meanwhile, the administration steadfastly opposes a restoration of the Glass-Steagall Act, the New Deal law that reduced outlandish speculation by separating commercial and investment banks. In 1999, it was Summers and Geithner, led by Bill Clinton’s Treasury Secretary Robert Rubin (much admired by Obama), who persuaded Congress to repeal this crucial impediment to Wall Street recklessness.

I have frequently discussed the criticism directed at Obama from the political Center as well as the Left (see this and this). I have also expressed my desire to see Democratic challengers to Obama for the 2012 nomination (see this and this). In the December 20 edition of The Chicago Tribune, William Pfaff commented on John R. MacArthur’s above-quoted article, while focusing on the realistic consequences of a Democratic Primary challenge to Obama’s nomination:

John MacArthur’s and Bill Moyers’ call for the replacement of Barack Obama as the Democratic presidential candidate next year is very likely to fail, and any Democratic replacement candidate is likely to lose the presidency. As a veteran Democratic Party activist recently commented, this is the sure way to elect “one of those idiots” running for the Republican nomination. Very likely he is right.

However, the two may have started something with interesting consequences. Nobody thought Sen. McCarthy’s challenge was anything more than a futile gesture. Nobody foresaw the assassinations and military defeat to come, or the ruin of Richard Nixon. Nobody knows today what disasters may lie ahead in American-supervised Iraq, or in the dual war the Pentagon is waging in Afghanistan and Pakistan. The present foreign policy of the Obama government is fraught with risk.

As for the president himself, the objection to him is that his Democratic Party has become a representative of the same interests as the Republican Party. The nation cannot bear two parties representing plutocratic power.

The current battle over the payroll tax cut extension reminded me of a piece I wrote last August, in which I included Nate Silver’s observation that it was President Obama’s decision to leave the issue of a payroll tax cut extension “on the table” during the negotiations on the debt ceiling bill. My thoughts at that time were similar to William Pfaff’s above-quoted lament about the nation’s “two political parties representing plutocratic power”:

As many observers have noted, the plutocracy has been able to accomplish much more with Obama in the White House, than what would have been achievable with a Republican President. This latest example of a bipartisan effort to trample “the little people” has reinforced my belief that the fake “two-party system” is a sideshow – designed to obfuscate the insidious activities of the Republi-Cratic Corporatist Party.

It’s nice to see that the tsunami of disgust continues to flow across the country.

2008 financial crisis, 2012 nomination, 60 Minutes, ABC News, Bill Black William Black, Bill Clinton, Bill Moyers, Bloomberg BusinessWeek, Chicago Tribune, CNN, Congress, debt ceiling bill, Democratic challengers to Obama, Democratic primary, Democrats, derivatives trading, Enron, financial collapse, financial fraudsters, financial system, foreclosure fraud, fraud, Glass-Steagall Act, Harpers Magazine, John Boehner, John R MacArthur, John T Burke Jr, Julianna Goldman, Kansas, killing of bin Laden, Larry Summers, Lehman collapse, Lehman executives, Mary Eizabeth Lease, Matt Taibbi, Max Baucus, Nate Silver, New Deal, no laws were broken, Obama Deserves to be Dumped, payroll tax cut extension, plutocracy, plutocratic power, political parties, President Obama, Presidential approval polls, Providence Journal, Public Citizen, Republi-cratic Corporatist Party, Republican Presidential debates, Robert Rubin, Rolling Stone, Securities and Exchange Commission, Tim Geithner, Timothy Geithner, two-party system, Wall Street, Washington Post, White House, William Pfaff

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