As a person who does not almost ever side with the idea that those with large pools of money should get greater political benefits than those without, and as a person who almost never believes that corporations should be able to run our political system, I am extremely dismayed by the Supreme Court's recent backpeddling on a campaign finance decision: whether or not corporations can fund ads in the days before an election.
Attorney John Bonifaz of Voter Action comments on the recent activity and "says that in granting corporations the First Amendment rights of individuals, the Supreme Court is undermining the election process". He also explains why saying that money is equal to free speech is a farce of an idea.
"The Supreme Court has dealt a blow to campaign finance reform by throwing out part of the McCain-Feingold campaign finance law that placed restrictions on corporations and unions from buying television ads close to elections."
"The court continues to equate money with speech in the political process. But beyond that, it gives First Amendment rights to corporations. And these artificial entities don’t have the same, obviously, qualities as you and I do as breathing human beings, and they should not be given those kind of First Amendment protections.
The fact is, is that we need to protect the electoral process and to protect our democracy. And we should not have big money corporate interests drown out the voices of ordinary citizens. The court does not weigh in any way whatsoever the First Amendment rights and the equal protection rights of voters, of people who do not have access to wealth, but yet under our Constitution and our promise of democracy have an equal right to participate. And that continues to be a problem with the court’s jurisprudence in this area....
the whole equation of money equaling speech is skewed, number one. And number two, there’s no balancing. Even if one assumes that there are political speech rights on the side of corporations, there’s no balancing whatsoever of the political speech and equal protection rights of those who do not have access to wealth, who do not own corporations, who do not have unlimited general treasuries."
Danny Schechter of MediaChannel.org and NewsDissector gives a succinct response to Obama's remark during his speech on Wednesday night that the economy is back from the brink. The two people I was in the room with said "uh.." and "not if you talked to the man I talked to today" when Obama said that. It seemed probable that many people felt that way at the same moment all across the country. Danny is also making a movie and writing a book about the financial industry and crisis called "Plunder". We can't wait for it to come out.
"Are we back from the brink? And what brink is that? On Labor Day night, HBO featured a powerful documentary about a GM Plant in Ohio that was shutting down. It showed the workers, teary eyed and forlorn, making the last truck on “their” assembly line. Their faces told the rest of the story as they asked themselves and each other, ‘what do I do now? What happens to my family and my life?”
They had no answers, and neither, alas, does Barack Obama.
A “jobless recovery” will not give these workers the money to buy into even the cheapest health care option, public option or not.
Look around Mr. Obama: the unemployment rate in real terms is over 16%. The consumer economy is shattered. The commercial real estate market is imploding, and, yes, more foreclosures are on the way according to the Washington Post:
“A new report foresees another wave of foreclosures, as option adjustable-rate mortgages—an entire class of specialized home loans—will soon reset to higher payments. Estimated to jump by 63 percent on average, the higher rates will likely push many of the already-strained loan recipients over the brink. The loans, also called pick-a-pay loans, are a prime example of the risky lending techniques that created the housing crisis: Borrowers were allowed to pay back the loan with as little as they wanted each month, though that meant many paid less than the interest due…the report says the fallout from the loans could be felt for years, especially in states already hit hard by foreclosures.
Just who is back from the brink?"
WSJ: "Banks Face Loss of Debt Guarantee" reports the FDIC started an emergency debt guarantee program during the height of the crisis to help unfreeze the credit markets. The FDIC is certainly not credited enough for all their great work. The program "allowed banks, for a fee, to issue new debt with government backing that protects investors in the event of a collapse." The thing about Bair is that she helps to get the market going without favoring the banks, like any good citizen who gave a damn about society would do. She therefore is planning to allow the program to expire as it is supposed to because the FDIC's purpose is not to make the government the main engine for lending or the main vehicle for bank profits. If this were the Fed, they'd run the program until half of all of our middle class were gone.
Because we support people who do good work and fight to take away power from those who do bad work, we have a petition called "No new powers for the Fed". Because the Federal Reserve have not responsibly worked in the public's interest in the past 80 years, evidence of which came out during the economic crisis, we've been looking at how they have overwhelmingly colluded with the banks over the safety and soundness of the American taxpayer. Our conclusion is that the Fed should not get more of the kind of power they have already abused, period. Sign on to tell the Fed and the world that the Fed did a bad job and they need to make up for it. Recently dubbed "No Fed", see the petition and sign on here.
Our position is that the Fed should be audited as Ron Paul has pushed for and that there needs to be a regulator of the economy that is completely independent of the banks. We have enough academic and practicing economists outside of Wall St that we can reliably work with.
The Nation has an article from the Institute for Policy Studies -- we've had contact with them when their Boston effort, Common Security Clubs helped us with our forum organizing. This article gives an extremely good lay of the land on the economic crisis from last year until next year.
"For Americans eager to know whom to blame, we have some suggestions: Vikram Pandit, Lloyd Blankfein, Kenneth Chenault and James Dimon. Pandit is the CEO of Citigroup, where he received a compensation package worth $38 million in 2008, while slashing 75,000 workers and taking $50 billion of taxpayer bailout funds. The other three executives, CEOs of Goldman Sachs, American Express and JPMorgan Chase, respectively, all made at least $35 million in 2008 while accepting billions from taxpayers and cutting thousands of jobs. "
Here are some really exciting developments:
"A number of groups are working collaboratively to develop innovative proposals for change. Americans for Financial Reform has garnered the support of dozens of groups to press for a strong Consumer Financial Protection Agency and other important protections against future crises. The New Economy Working Group, to which IPS belongs, is charting a transformational agenda that would break up large banks like Citigroup and ban the casinolike financial instruments that sparked the crisis. Jobs with Justice and its grassroots allies like Right to the City are creating momentum behind a National Investment Bank."
On the same note, look at the CEED Program - their director just got in touch. They are starting a non-profit bank that will give out loans to local green businesses. They're excited to offer this opportunity for change while Congress is busy being Congress.
Chuck Collins, who has been really helpful to the ANWF fight helped to produce IPS' recent report on "Executive Excess". I am more and more in love with IPS' work.
Not sure if economist James Galbraith is answering these questions directly, but I think he makes an important point about where we are with the economy - have we rebounded as Obama said last night? The answer is we're not seeing it on the housing end. From the Economist.
"Q: Some economists fear a double dip back into recession next year and sluggish growth for years to come. Are we looking at a 'Lost Decade' similar to Japan in the 1990s?
A: "There's no way we're going to tolerate a Lost Decade in this country. It's a fantasy, because the House of Representatives has elections every two years. The country is not going to tolerate 10 percent unemployment indefinitely. People (in power in Washington) need to be aware of that. If they don't take the opportunities now . . . someone else will."
Q: There are economists who think the recession may already be over. When will it start to feel like recovery?
A: "This one it's very hard to see, in part because it is so rooted in the collapse of (fast-rising) credit and home values. It's hard to see a similarly rapid end and turnaround. That's the challenge for policymakers, whose time horizons are probably focused on next year's election.""
A woman made a video about her plan to protest a recent, ridiculously high credit card rate hike. She sits in front of the camera and explains why she is not going to pay a dime to Bank of America until they put her rate back where it was. She says that because they raised her rates, she can't keep up. If they kept her rates where they were, she would be able to pay every month. It's pretty convincing. She wants to know who is with her and who will join her to change the system.
I'm embedding the video here because I really want to hear what people think about her call for change. I think it would be really great to see more of these kinds of videos of people talking about their credit card problems, etc. I want to make one about how I am not going to use my credit or debit card as one way to stop feeding the bailed-out banks. Every time you use your card, you're sending money to some of the companies that you think should be stopped from gambling your money away but aren't stopped by their own regulators. If people are interested, we can set up a channel and join this woman. Please add thoughtful comments you see fit. See here:
The Lehman collapse was shocking but politically necesary -- people were already suspicious of bailing out the financial industry in billions. I remember working in Missouri for Obama's campaign when I heard the news -- it was a big deal. A year later, we're trillions of dollars in and we're gathering the lessons we've learned from the collapse then.
This Bloomberg article goes through an expanded explanation on how these too big to fail institutions might still fail. It's a long one, but worth reading. An important excerpt: "“Designating certain institutions as too big to fail, and not having a thorough regulatory process to match, practically invites another catastrophe,” Bernstein said... Rescue efforts exposed a financial system with so many moving parts that U.S. regulators and the world’s top bankers couldn’t keep track of them all. A reconstruction of the meetings at the New York Fed that preceded Lehman’s bankruptcy, drawn from more than a dozen interviews with participants, reveals a failure to understand the importance of commercial paper and how that market would be affected by the collapse of the New York investment bank. "
"1. “A strong and well-regulated financial system should be the first line of defense against financial shocks …. [T]he more free-market oriented we want our economies to be, the more we need official supervision and oversight of our financial institutions and markets. That’s because truly free-market economies involve a high risk of business failure, and corresponding high risks to the financial institutions and investors that lend to and invest in those businesses. A key lesson from this crisis is that competition among lenders breeds innovation, but also instability.”
2. “Aggressive and persistent policy responses are the second line of defense … [F]rom past crises like Japan’s lost decade, we learned that the persistence of policy support is also critical to facilitate balance-sheet cleanup, offset the drag on the economy, and prevent deflation … For market participants, understanding just how persistent policy support will be is important; they want central bankers to make a clear distinction between the end of easing, which is now underway, and exit strategies or the beginning of tightening, which lie ahead.”
3. “Macroprudential supervision and asset prices should both play bigger roles in monetary policy …. There is broad agreement that a global focus on systemic risk is needed. There is less agreement on exactly how to define and implement it. ”
4. “Flexible exchange rates enhance the ability of monetary policy to respond to shocks.”
5. “Global imbalances contributed to the crisis by allowing internal imbalances to grow. … [R]ecession is helping to rebalance the US and global economies and markets. The question now: Will this rebalancing process be benign and sustainable for economies and markets, or will it be disruptive? I worry about the latter because current US policies are expanding rather than reducing imbalances, and officials elsewhere are limiting exchange-rate adjustment.”"
Public Citizen has been working on protecting our political system by fighting against "corporate dollars equal votes". Tomorrow is their campaign, "Don't Get Rolled" - a day to protest against an upcoming Supreme Court decision that would make corporations the most powerful policy influencers.
"Corporations already have outsized influence over our political process. Corporations are not voters and should not be allowed to roll over the public interest with their economic interests! In fact, this is settled law. But, the Supreme Court is going out of its way -- holding a special session tomorrow -- to revisit the rights of corporations to spend from their treasuries to influence our elections.
That's why we need you to protest and help us show that Americans want less corporate influence -- not more!
Please visit www.DontGetRolled.org to sign our protest petition and learn more about what others have pledged to do tomorrow."
Public Citizen is planning a "Pledge to Protest":
"The Supreme Court on September 9 hears a case, Citizens United v. Federal Election Commission, that reopens the question of unlimited corporate money in our elections. In a stunning move, the Court will reach back and reconsider two other pivotal campaign finance cases settled long ago. The potential result? A century-old pillar of campaign finance doctrine could be swept away.
Sound like a good idea? Sounds so very last, last century — except this time it wouldn’t be the robber barons — it would be the giant, multinational corporations buying our politicians outright."
Join them by pledging to protest in any form that speaks to you on 9/9 -- soem groups are even organizing protests and rallies around the country. Some simple ideas that I really like are just putting up a sign in your window and using 9/9 as a day to sit down and write a letter about corporate-run governance. In a tangential kind of activity, you can agree to sign a a petition that hones in on another root cause of corporate dominance beyond campaign finance issues: the regulators are in the pockets of the corporations. Here's the petition to tease out the problem of the Fed relaxing regulation for the largest banks without any real oversight or accountability to the taxpayer. We'll be going bigger with the petition pretty soon.
ANWF San Francisco met with Senator Boxer's aide yesterday to talk about the Financial Protection Agency. They are really doing an amazing job representing the public's interest on this issue. Here's their report from the meeting:
"Yesterday, Frank, Marc, Mike, and I met with Megan Miller, a legislative aide to Senator Boxer, about financial industry (FI) reform and in particular asking Boxer to support, strengthen, and co-sponsor S.566 “Financial Product Safety Commission,” which is the Senate version of Barney Frank's HR.3126 "Consumer Financial Protection Agency" bill.
We thought that the meeting went well. Megan wasn't sure what Boxer's position on S.566 was, but that in general Boxer did support new FI regulation. She asked us to put our talking points into a letter that she would give to the Senator.
Megan told us that the only other constituent group that has contacted Boxer's San Francisco office regarding FI reform was an organization of mortgage brokers who, obviously, had opinions somewhat different from ours. We took that to indicate that other than hired FI lobbyists, members of Congress are not hearing very much about FI reform. Given that significant sectors of government and the economy /are /in favor of at least some FI reform (e.g. the Attorneys General of a number of states), it may well be that citizen lobbying on this issue might have a positive effective on the outcome.
Megan suggested that our national organization send letters to all Senators on these issues, a suggestion that we think is a good idea."
The site is ready for sending those letters now. Thoughts?
David Swanson, of After Downing St, has a new book out called "Daybreak: Undoing the Imperial Presidency and Forming a More Perfect Union" reached the top of the charts on Amazon yesterday because people all around the net helped to get the word out. It's an important book for understanding how presidential power can rise by allowing different rules to recede and how and why centralizing more and more power in the seat of the president is a bad way to run a country. David als spells out how we can move towards a more perfect union and make the most of the hope that Obama brought with his election. Help keep him up there on the charts - the book is number 8 right now. It's nice and cheap and easy to buy.
Book club anyone?
EPI is holding a forum on the specific topic of Too-Big-To-Fail on September 9. We're really glad the Economic Policy Institute is taking up this topic and examining how we should deal with banks that are so big the government plans on bailing them out whenever they fail.
Here are the details:
John H. Boyd, Kappel Chair in Business and Government, Carlson School, University of Minnesota, and consultant for the Federal Reserve Bank of Minneapolis
Albert A. Foer, President, American Antitrust Institute
Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship at MIT's Sloan School of Management and former IMF director of research
Moderator:
Nancy Cleeland, Director, EPI Bailout Analysis Project
Registration will begin and coffee and light breakfast will be available at 9:30 a.m.
Nancy Cleeland and Simon Johnson were panelists on ANWF's educational panel in June and did an amazing job then.
Also, to listen to an interesting podcast on the economy, subscribe to NPR's Planet Money. Here's one with Barney Frank.
Barney Frank and Bob Corker are members of Congress that are working on regulatory reform and who may open up their ears to us. We can hold them accountable to us. Bob Corker is really dealing with the financial crisis head-on.
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New laws should be put in place that minimize the risk of companies becoming “too big to fail.”
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1)Lawrence Goodwyn’s “The Populist Moment: A Short History of the Agrarian Revolt in America,” one of the truly great works of American history and how to build a foundation for 20th century American political economy.
2)William Greider’s “Secrets of the Temple: How the Federal Reserve Runs the Country,” picks up where Goodwyn’s left off. An essential read in understanding money, banking and finance in the 20th century.
3)Kevin Phillips’ “Bad
Money: Reckless Finance, Failed Politics, and the Global Crisis of
American Capitalism,”
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MELTDOWN CAUSES: Articles and Interviews 1. Finger of blame points to shadow banking’s implosion -Financial Times "FINANCIAL INNOVATIONS" 1. Genesis of the Debt Disaster -Financial Times WHAT TO DO ABOUT THE BIG BANKS THAT FAIL? 1. Willem Buiter -FT ANTITRUST 1. Breaking up the Banks -Zephyr Teachout REGULATION 1. Regulatory Capture -Thomas Frank WHAT'S IT MEAN FOR THE ECONOMY? 1. Evolution or Revolution -Bill Gross Blogs |
By Michael McKee and Scott Lanman
Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.
“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work.
“I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.”
‘Really Arbitrarily’
The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
