Obama’s pick for Fed Chief ain’t a matter

On March 16, 2010, in The Public, by Tiffiniy Cheng

Obama is most likely going to nominate Yellen. She’s the wife of Nobel economist George Akerlof, whom I like. The have written extensively about unemployment together. Then, I read this from Economist’s View:

Many in the markets … will be interested in only one question: How will the nomination affect monetary policy decisions, specifically the timing of exit from the current near-zero rate? Janet Yellen is today, certainly, among the doves on the Committee. I will be posting a commentary soon … where I explain what makes one a hawk or a dove … and whether it matters. The conclusion is that it does not matter… The reason is, as said to me by a member of the Board: “The Chairman owns the room.” When the Chairman wants to move away from the near-zero funds rate, the Committee will do so. Until that time, he will always enter the room with at least eight votes in his pocket and with assurance that there will be several more each time. As Vice Chair, Janet can never vote against the Chairman. She can never take a substantially different view than the Chairman around the table. This is the etiquette of being a Vice Chair… It goes with the territory. You don’t take this position if you cannot abide by this rule. Fortunately, this won’t be a problem for Janet. First, she holds views that are not very different than the Chairman’s. Second, she has utmost confidence in his judgment, and the feeling is mutual. She will, almost alone on the FOMC, continue to have the opportunity to help shape that judgment. Janet surely appreciates … that the only way she can affect the policy decision is to convince the Chairman to alter his recommendation to the Committee is to reach him before the meeting. What we can say for sure is that Janet will surely help the Chairman make the best decision, even in those occasions when he ends up disagreeing with her.

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A way HAMP can improve

On February 24, 2010, in Background and Research, by Tiffiniy Cheng

From <;a href="http://www.tnr.com/article/unhampered">The New Republic.

It’s not so much that HAMP, the home foreclosure rescue plan let loose by Obama, is a failure but more that to get serious about fixing the foreclosure problem, this is what you do:

What can the Obama administration do to alleviate this suffering? Turns out, it doesn’t need a new plan to modify mortgages, since there’s a very good old plan on the shelf.

The Great Depression did not begin with predatory mortgage lending, but economic conditions predictably led to a foreclosure crisis. More than 250,000 families lost their homes to foreclosure in 1932. And every day brought a thousand new foreclosures in the early months of 1933.

As part of its initial legislative barrage on the economic crisis, the Roosevelt administration created the Home Owners’ Loan Corporation (“HOLC”) in June of 1933, just three months after entering office. The HOLC purchased distressed mortgages from banks, and then negotiated new, more affordable mortgages with the homeowner. Before it ran out of capital in 1935, the HOLC purchased a little more than one million mortgages, or about one in six of the urban home mortgages. (There was a similar program for farm mortgages).

Homeowners applied to the HOLC to buy their mortgage, so the HOLC was able to pick and choose salvageable mortgages. HOLC mortgages required less equity than banks required (20 percent instead of 35 percent) and had lower interest rates (five percent instead of eight percent). The HOLC was indulgent of late or missed payments, and patiently worked with struggling borrowers to prevent default. Still, times were hard and almost 20 percent of HOLC’s mortgages ended in foreclosure.

When the last mortgage was paid off in 1951, the HOLC had turned a slight profit. Arthur M. Schlesinger, Jr., wrote that the HOLC “averted the threatened collapse of the real estate market and enabled financial institutions to return to the mortgage-lending business. … Most important of all, by enabling thousands of Americans to save their homes, it strengthened their stake both in the existing order and in the New Deal. Probably no single measure consolidated so much middle-class support for the Administration.”

Instead of dealing directly with foreclosures, government is helping to do what Matt Taibbi explains below. The banks look good on paper, but jumpstarting the stock market in this way is not as effective as taking on the middle class and poor economy directly.

The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. “Summarizing our views,” the bank wrote, “we expect robust flows . . . to dominate fundamentals.” In other words: This stuff is crap, but everyone’s buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.

To sum up, this is what Lloyd Blankfein meant by “performance”: Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices – and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit – who wouldn’t deserve billions in bonuses for doing all that?

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Deficit Commission by Executive Order

On February 18, 2010, in The Public, by Tiffiniy Cheng

I hate when politics is about re-election. Presidents always do something when it comes to unemployment because it is one of the biggest reasons someone doesn’t get re-elected.But, that truthfully is a minor point.

Well, the commission should focus on real quality of improvement and real jobs and not fake jobs based on a debt bubble and aid to large corporations.

“President Barack Obama signed an order Thursday unilaterally creating a bipartisan commission to rein in unruly deficits after Congress rejected a similar body with considerably more enforcement power…. [AP Business Feed]”

Here’s the real problem: “Wholesale prices spiked in January, and the pace of job cuts rose last week, according to new data released Thursday that paint a gloomy picture of the economy’s performance this winter.”

[Washington Post U.S. Economy]

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Obama Won’t Let Our States Be Middle Class

On February 6, 2010, in Background and Research, by Tiffiniy Cheng

David Sirota points out how our Democratic Corporatism is bringing back Reagan’s still-alive corpse. I discussed limousine liberals with John Nichols of the Nation the other day and you know, there’s a real way to have a free market and then there’s a way to let government prop up a few in a dangerous kind of free market.

The video on HuffPo is worth a look:

I’ll let you read the column to see how I believe the Massachusetts Senate race really proves that 21st Century Democratic corporatism is now fueling the revival of Reagan’s most pernicious anti-tax and anti-government messages. But make no mistake about it: That revival is not due to Republican brilliance but to Democrats conflating government with the most hated corporations in the land. Indeed, if President Bush made government synonymous with Halliburton, Democrats have made government synonymous with Goldman Sachs.

Sirota also points out in another column that our states have to cut “life” as budgets are slashed (The Case for Choosing Life):

The phrase “choose life” may be conservatives’ abortion shibboleth, but, as my new newspaper column today shows, it better sums up the economic decision communities all over America must now face when it comes to taxes, spending and budget deficits.

For the last week or so, I’ve been reporting on the state of the tax debate in places like Oregon, Colorado Springs and Pennsylvania (among others). Voters there – and soon, everywhere – are being asked to choose between tax hikes on the ultra-wealthy and massive spending cuts for basic social services. That is, they are being asked to choose between economic life and economic death.

It’s the same choice Congress will be forced to make quite soon, thanks to President Obama’s solid proposal to end George W. Bush’s high-income tax cuts – but also thanks to his awful proposals to potentially ram Social Security/Medicare cuts through a commission and freeze non-defense domestic spending.

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More Lies from Obama? by ANWF member, Nate Powell

Last week, Obama announced a surprise head turner: had the sane voices of reason represented by Paul Volcker prevailed over the loot-the-riches Robber Baron Larry Summers and his crackpot team from Chicago? Or, could this possibly be too good to be true given Obama’s proven knack for saying what we want to hear, then going in a completely opposite direction. This has been true in the past, so, for our protection, let us vet his proposal before giving it consideration. Obama needs to be pushed in the right direction since he seems so prone to manipulation by the wrong crowd… so it is imperative that it is we the people that do the pushing.

As the recent Scott Brown electoral victory shows, Americans are sick and tired of Wall Street giveaways as the national priority. Geithner himself gave approval for the 100% payout on collateralized debt obligations (CDOs) and credit default swaps (CDSs) to Goldman Sachs, and the personal OK to hide it from the public reports, as the latest press reports indicate. Independents and liberals voted Republican to send a message to the Democratic “leadership” that we’re tired of betrayal.

The problem

The leadership is unfortunately blind to reality and is suicidally pressing forward with more irresponsible schemes. Take for example the recent agreement reached where Obama will create, by executive order, a panel whose duty will be to make cutbacks to our standard of living. I’m not making this up. Recommendations will then be voted on as an entire package, with an up or down vote, and will be impossible to amend. Sniff, sniff, do you smell that? Smells like our constitution is burning away. So, instead of cutting off the bailouts and taking the money back, President Obama is going to propose that we continue feeding the vampires on Wall Street. Talk about going off the deep end.

The answer is not draconian austerity; the answer is to leverage the power of our (still) sovereign currency and create loans for improvements to the physical economy, instead of the near zero interest loans given to large banks specifically to buy the near worthless “toxic assets” called derivatives.

Derivatives are instruments that derive their value from other things, such as mortgages, as in the famous “mortgage backed security,” or commitments from institutions, such as CDOs and CDSs. They are basically valueless in and of themselves, but were used by banks to claim as assets upon which they used as collateral to make other leveraged financial “investments” like when the speculators drove the price of gas up. See, the banks have really bankrupt all along, but they have used derivatives to hide it. When the house of cards came falling down, they ran to the taxpayer to bailout their little scheme, so they could start all over again… Now instead of rebuilding the nation and the world, they continue to trade derivatives. Talk about a waste of time and money. Rome is figuratively burning while the bankers trade worthless “assets” on the public dime.

Meanwhile, the still somehow prevailing delusion is that the speculators must be protected! Why do we even need to protect them at all? The Federal Reserve Board, Inc. created trillions of dollars in loans to trade for these financial instruments at nearly 0% interest. Their measures have allowed the big banks to “earn” so much profit at taxpayer expense under the various bailout programs. Let’s instead use the awesome power of money creation to create trillions of dollars in loans for fantastic new technology and infrastructure for the nation and the world. We can eventually wipe poverty, hunger, and disease out of existence if we can make this decision. We’ll build a real recovery so we don’t need to make austerity cuts like those that were forced upon Haiti, for example, by the IMF.

The Four Disingenuous parts of the Obama/Volcker Proposal

Smokescreen #1, More gambling with your money in tow: An article in the Financial Times explains why Obama’s putative “war on Wall Street” is no threat to the Casino Economy. As concerns “proprietary trading,” banks will be able to continue proprietary trading related to their customers’ business (i.e., on behalf of their customers). “Glass-Steagall [Act] largely banned proprietary trading with certain exemptions for safety and soundness concerns. The trading, in which a bank buys and sells stocks and other securities from its own account, led to big profits at institutions after Gramm-Leach-Blilely allowed the transactions…. But implementation of Obama’s plan for proprietary trading could be messy since banks often conduct trading on behalf of clients from their own account.”

The Economist says, “Commercial banks may be unfazed by curbs on trading. Most have already pared their prop-trading desks. JPMorgan Chase derives a mere 1% of its revenues (and 3-5% of its investment bank’s) from such business. But having to divest Highbridge, a big hedge-fund firm, would be “horrible”, says a JPMorgan insider. The bank thinks that may not be necessary since its capital is not invested directly in Highbridge’s funds. But no one is sure.”

Smokescreen #2, Risky bets will continue: While banks would be forced to spin off or close proprietary trading desks, they could continue to take risky bets on their own account as part of market-making activities, as counterparties to derivative and structured credit products demanded by clients, and in securitization activities. As the Economist goes on, “Enforcement could be tricky, too. Regulators will struggle to differentiate between proprietary trades and those for clients (someone is on the other side of every trade) or hedging. Getting it wrong would be counter-productive: preventing banks from hedging their risks would make them less stable.”

Smokescreen #3, Cover-up for investing in hedge funds: Prohibiting banks from investing in hedge funds means nothing: banks would still be able to lend to hedge funds and private equity funds — and could structure these loans in ways that mimicked equity participation, in much the same way as shariah-compliant securities provide debt-like exposure without violating Islamic prohibitions on interest. The Economist says, “Nor would they be able to engage in “proprietary” trading—punting their own capital—though they could continue to offer investment banking for clients, such as underwriting securities, making markets and advising on mergers.”

Smokescreen #4 No real break up plans: According to Simon Johnson,

“The White House background briefing is that their proposals would freeze biggest bank size “as is” — this makes no sense at all. The Bush and Obama administration’s solutions to banking failure was to federally subsidize the already behemoth banks, and encourage them to eat their competition.

Twenty years of reckless expansion, a massive crisis, and the most generous bailout in human history are not a recipe for “right” sized banks. There is a lot of work the administration hasn’t done on the details — this is a classic policy scramble, in which ducks have not been lined up. But we should treat this as the public comment phase for potentially sensible principles — and an opportunity to propose workable details. The banks are already hard at work, pushing in the other direction.

It’s a big potential policy change, and my litmus test is simple – does it, at the end of the day, imply breaking Goldman Sachs up into 4 or 5 independent pieces?

The same Economist article says, “Moreover, the plan is unlikely to help much in solving the too-big-to-fail problem. Even shorn of prop-trading, the biggest firms will still be huge (though also less prone to the conflicts of interest that come with the ability to trade against clients). As for the new limits on non-deposit funding, officials admit that these are designed to prevent further growth rather than to force firms to shrink.”

John Carney notes “The banks are hesitant to speak out in any official capacity, although Goldman Sachs did say they thought less than 10% of their business would be affected. How is this going to really going to break up the banks?

This caused one executive at a competitor to scoff: “Goldman thinks it can still be Goldman, huh? Well, if they’re right, nothing changes. But I’m not sure Obama really can get away with leaving Goldman untouched,” the person scoffed.”

What actually needs to be done

Banks that we deposit our money into should be commercial banks, and do things that commercial banks do, you know, like lend commercially to the community. I don’t see any need for banks larger than community and regionally sized banks. The big national/international banks don’t know how to address the needs of the community. Roosevelt’s Glass-Steagall Act was banking modernization. The 1999 “Banking Modernization Act” was demodernization.

In order to achieve this, first, the scoundrels surrounding the President must be removed. This includes Summers, whose removal along with Geithner, Bernanke, Orszag, and the Emanuel brothers will probably be the first step away from careening over the edge of a pit of no return. This is essential because they will vehemently oppose what reforms that must be done. The President is apparently not capable of thinking for himself. We must therefore remove all corrupting influences whispering into his ears. We must completely split commercial banks from investment banks so banks will return to traditional banking activities, such as making investments in the community, in the physical economy. They may presently make more profit risking our deposits as leverage to speculate rather than produce. This is why we must separate them– in order to remove the temptation and turn them yet again into good servants of our communities.

Wealth is in production, not paper. Speculation produces no true wealth. Yet, strangely, investment banking functions are valued over commercial lending. This activity actually threatens us all because it dries up credit for the real economy– the place where we all live and work. This is why we need a true return to Glass-Steagall, because it will largely eliminate the derivative trade which is toxic to growth of the real economy.

Most of the credit in the world is now controlled by the big banks, thanks to the Bush-Obama bailout. This credit is being tied up by these toxic investment banking activities, like derivative trading that is actually counterintuitive to the health of the real economy, and there is little leftover for any traditional banking functions. Either we force Obama to implement the true Glass-Steagall and really break up the banks, or it’s the austerity panels for all of us.

State of the Union Leaked?

On January 27, 2010, in Current Leadership, by Tiffiniy Cheng

State of the Union Draft Leaked To Mediachannel.org. Could You Imagine? The State of The State Of The Union: Our “Leaked” Speech?

Washington Post Today:“The state of the union is obstreperous. Dyspepsia is the new equilibrium. All the passion in American politics is oppositional. The American people know what they don’t like, which is: everything.”

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This article is written by our guest blogger and ANWF member, Robert Roth

The Three Stooges – Moe, Larry and Curly Joe – gave a comic definition to the term “stooge.”  But one of the dictionary definitions of “stooge” is “one who plays a subordinate or compliant role to a principal” – “principal” meaning one who calls the shots.  “Puppet” is said to mean the same thing.  The dictionary I’m looking at even gives, to illustrate the definition of “stooging,” “congressmen who stooge for the oil and mineral interests.”  So how apt is the use of the term for Ben, Larry and Curly Tim – Federal Reserve Chair Ben Bernanke, Larry Summers, director of the National Economic Council, the White House office that coördinates economic policy in the Obama Administration, and Treasury Secretary Tim Geithner?

In a general way, all three are stooges for Wall Street, in that their reaction to the near-collapse of the financial system that nearly brought us a Second Great Depression – and still could, in my view – has been to try to revive the institutions and practices that gave rise to the problem in the first place.  In short, they have been representing financial interests, rather than Main Street.  More specifically, Ben Bernanke supported and now continues the low-interest policies that helped inflate the Bubble Economy, enabled widespread fraud by failing to exercise the Fed’s regulatory powers while the Bubble was inflating, and has arranged trillions in backing for the credit markets, making more billions for Wall Street at the expense of the rest of us.  And it seems entirely fair to give Larry Summers, as the chief advisor to the White House on economic policy, an ample helping of blame for Obama’s failure to fight for a more substantial jobs program.  And there is evidence Tim Geithner arranged for a secret bailout of AIG when he was chairman of the New York Fed.  Others have made the case in more detail – see, for example, Chris Hedges, “Wall Street Will Be Back For More” and the other sources cited below – but I think it’s clear the terms are apt, and a useful way to draw attention to the need for President Obama not only to do an about-face on the subject of financial regulatory reform, but to clean the White House of the influence of those who have until now served as stooges for Wall Street while occupying positions of public authority and trust.  And a good start would be firing Ben, Larry and Curly Tim.

Perhaps in desperation after the Democrats’ loss in Massachusetts, President Obama has finally come out swinging at Wall Street.  Previous “reform” efforts were a smokescreen, but there is potential for real change in the latest proposals.  Those should be evaluated against our own program for fundamental restructuring of the financial system and the economy, and as their impact is complex and they will surely change, I don’t propose to evaluate them fully here.  Suffice it to say that in adopting the proposals of former Fed Chief Paul Volcker, Obama may have taken a page directly out of the playbook outlined by Simon Johnson a few days previous.  But as the dust flies and may not settle for some time, there are some things we can and should do to impact the situation.  This article outlines some of those first steps and provides a toolkit of information resources for following the action.

First, Obama should conduct a clean sweep, and divest his administration of those who produced the near collapse of the financial system and the economy and have thus far been working to preserve the pre-crisis status quo.  That means dumping the Three Stooges who laid so much of the groundwork for the recent near collapse of the economy and have worked ever since to preserve in its current form the financial system that caused it:  Amid the talk of possibly replacing Bernanke at the Fed, Summers’ name has been floated as an alternative.  That would be a change we could believe in – from the frying pan to the fire, or vice versa, take your pick.  Instead, progressive forces should mobilize behind figures like FDIC Chair Sheila Bair or economists like Joseph Steiglitz or James K. Galbraith.  And the few Senators who have thus far announced opposition to Bernanke’s reappointment – Oregon’s Jeff Merkley, Wisconsin’s Russ Feingold, and California’s Barbara Boxer – should hear from us in support, and the rest should hear from us in protest until they change their tune.

Second, something constructive should come out of the hearings of the Financial Crisis Inquiry Commission.  Thus far, we’ve seen softball questions lobbed at the giants of the finance industry on heavily reported Day One, while the media all but ignored the second day, at which Sheila Bair and Illinois Attorney General Lisa Madigan, among others, systematically described the ways in which the Fed helped enable the rampant fraud that led to the crisis and proposed serious steps to avoid a repetition.

Third, we should understand generally Wall Street’s program at this point – so we can oppose it – and devise and promote specific steps toward genuine and effective reform.  Ms. Bair’s testimony before the Commission is a wonderful resource for this purpose, and in reviewing it, we should also recognize that the People have a genuine champion in Sheila Bair.  Ms. Bair deserves our thanks, praise and support for taking on the – literally – Old Boys network who have empowered Wall Street’s fraud machine and are working to preserve it.

I published last May a comprehensive assessment of the financial and economic crisis, and a set of proposals for restructuring the economy.  Nothing in my assessment has changed, and I suggest it to your attention as a starting point if you want one.  Fast-forwarding to the present, possibly the best short resource I’m aware of on the background to the current situation and how it is evolving is Michael Hudson’s “The Revelations of Sheila Bair: Wall Street’s Power Grab (CounterPunch, January 19, 2010).

There are some straightforward proposals, already on our table if not Wall Street’s, that we should keep sight of and continue to mobilize behind.  Wall Street’s program provides a sort of mirror image of what they are and ought to be.  First, the Old Boys want to be allowed to continue to gamble with other people’s money and the financial system as a whole, and they want the financial sector to stay as it is even though it is already too big a part of the overall economy and is full of institutions whose practices continue to pose systemic risk.  Second, they want the proposed new Consumer Financial Protection Agency to be dumped.  Third, they want to avoid any structural reforms like reenactment of Glass-Steagall.  And of course, they want their own Three Stooges – Ben, Larry and Curly Tim – to remain in charge at the Fed, the Treasury, and the White House.  So if they lost Bernanke at the Fed, for example, they’d want to replace him with Larry Summers.  Flip those coins and we have the beginnings of our own program.

First, the big banks should be broken up.  Too big to fail means too big to be allowed to exist.  However, the financial system has evolved so that there are now institutions other than banks whose failure can pose systemic threats.  That’s one reason Obama’s proposals are more complex than the old Glass-Steagall firewall between commercial and investment banking.  There should be limits on the size of financial institutions.  But just as importantly, any institution engaged in financial activity should be required to hold sufficient reserves to cover its deposits if it takes them, and its bets if it makes them.  Simon Johnson recommends tripling capital requirements so banks hold at least 20-25 percent of their assets in core capital.  Peter Boone and Simon Johnson, “A bank levy will not stop the doomsday cycle,” Financial Times, January 19, 2010.  If implemented, such a requirement would make it more expensive for financial entities to expand beyond their usefulness or to pose systemic risk by making bets they couldn’t cover.  Of course, such a rule would have to be vigorously enforced, and that would require a regulator with integrity as well as authority.

Another key proposal is creation of a Consumer Financial Protection Agency.  On the need for it, see “Elizabeth Warren: Pass A Consumer Protection Agency Or Forget Regulatory Reform,” and Michael Hudson’s article including his report of Sheila Bair’s testimony.  In the meantime, Connecticut Senator Chris Dodd, who has floated the idea of dumping such an entity or burying it in another agency in order to obtain, excuse the expression, bipartisan support, should hear from his constituents by all available means.

And the financial sector itself should be reduced in size to the point where it can serve the needs of the economy without putting it at risk.  As Ms. Bair pointed out, “our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total US corporate profits in the 1950s and 1960s…to 25 percent in the 199s and 34 percent in the most recent decade through 2008.”  While financial services are “essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”  In other words, what is spent on financial services is not available for investment in plant, equipment, research and development, training, or the production of goods, services and jobs outside the financial sector.

As the battles that have now been joined proceed, I’d suggest, among many excellent resources, those listed below, and the ongoing commentary of Simon Johnson, Michael Hudson, Mike Whitney (often posted on the website of CounterPunch, and others whose work appears here and on the home page of Progressive Democrats of America).

Robert Roth is a retired public interest lawyer who prosecuted marketplace fraud for the Attorneys General of New York and Oregon.

Other valuable reads from Robert:

Dan Geldon, http://baselinescenario.com/2010/01/20/how-supposed-free-market-theorists-destroyed-free-market-theory/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29″>“How Supposed Free-Market Theorists Destroyed Free-Market Theory”

Robert Roth, “Fixing the Economy: For Starters, Fed Chief Ben Bernanke Should Not Be Re-Appointed”

Scaring Democrats

On January 25, 2010, in The Public, by Joe Costello

Scaring Democrats

Over time, as the Democratic party lost

all moorings, it became, as tends to happen under such circumstances, the party of fear. The only way you could tell what Democrats where going to do was how fearful they were, and only way to get them to do anything was to scare them. So, in that best tradition, the Post has a house of horrors piece for the Democrats, warning them not to get too carried away with banging the bankers and by all means don’t do anything or the stock market will go down. One interesting thing about the piece is it doesn’t use any of the big banks or Wall Street firms. The great quivering economic intellect at the White House replies in the best empty political rhetoric:

“The policies that work out best over time are those that strengthen economic fundamentals, not try to influence day-to-day market movements,” said Lawrence H. Summers, the president’s top economic adviser. “The experience of the past 60 years is that not only working families but also businesses and markets have performed better during periods of progressive governance and sound financial regulation.”

Larry’s been in DC way too long.

Meanwhile the FT, shows they still don’t quite get the colonies and how the game is currently played. The title is good “Nightmare persists for White House” and they do provide the money quote:

“Obama has to decide whether he wants to be a transformational president, which looks optimistic at this stage, or merely an effective president,” says Bruce Josten, head of government affairs at the US Chamber of Commerce, which has spent tens of millions of dollars opposing healthcare. “My advice would be that he pick up the phone and ask for Bill Clinton’s advice on how to recover from a situation like this.”

Ho, Ho, Ho, we couldn’t possibly ask Mr. Clinton to do more to, I mean for, this nation than he already has. But, the Brits don’t quite get the game and the rest of the article is “stiff upper lip” advise. Sack Geithner, sack Summers, and just as importantly get rid of Rahm. The FT is the first place I’ve seen lay the health care debacle squarely on Rahm, and the size of the blunder of the move fits. Rahm got to his position in DC by collecting money, he’s a political knucklehead. If you’re relying on Rahm for anything but making the trains run on time, you’re in serious trouble.

Remember Democrats, as the fellow in the wheel-chair said, “The only thing to fear is fear itself.”

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1. Supreme Court kills public discourse, 2. lobbying money of the biggest banks, 3. Goldman Sachs bonuses, 4. Obama decides to try out breaking up the banks in a few ways.

1. Public discourse getting crushed: “A divided Supreme Court on Thursday swept away decades of legislative efforts to restrict the role of corporations in election campaigns, ruling that severe restrictions on corporate spending are inconsistent with the First Amendment’s protection of political speech. ”

2. The HIll: “Eight of the nation’s largest banks spent nearly $26 million lobbying federal lawmakers in 2009, during one of the most tumultuous periods in financial history… The banks spent nearly 6 percent more on federal lobbying last year compared with 2008, according to a review of congressional lobbying records. The banks spent $25.8 million on lobbying in 2009 and $24.4 million in 2008, the two years at the heart of the worst financial crisis since the Great Depression.”

3. Goldman Sachs bonuses announced today. In a year or two, we will forget what caused the crisis. But for now, GS has heard the public outcry a little bit and lowered their bonuses. From some public interest groups: “This reveals more than simply hubris. It shows that Wall Street believes that nothing has changed. The terrible truth is that so far, thanks to their own continued success in lobbying for their narrow interests, even as they have benefited from trillions in public support, they are right. Income disparity between executives and ordinary workers. While Wall Street paid record bonuses and compensation in 2009 to its top executives and traders,[6] rank and file workers continued to get squeezed.  Like other hard-working Americans, thousands of front line bank workers were laid off or had their pay cut last year.  In fact, average real hourly wages for nonsupervisory workers in financial services increased only one cent between January and September of 2009,[7] even though total compensation at the top six banks last year was up 17% from a year earlier.[8] The record bonuses did not trickle down to ordinary bank workers. This had also been true in the boom years before the collapse.  Between 2001 and 2007, average compensation overall at the top six banks and their predecessors did not even keep up with inflation, increasing only 15%.  But at the same time, the top five executives at each of the six banks saw their average compensation more than double from $9.8 million in 2001 to $22.5 million in 2007.”

4. WE have been leading on the fight for breaking up the banks – Obama hears us now that Brown won the Senate seat. Bloomberg: “President Barack Obama today will propose limiting the size and trading activities of financial institutions as a way to reduce risk-taking, an administration official said.” AP: “But his announcement Thursday will broaden those measures, particularly by endorsing Volcker’s proposal to restrict proprietary trading by commercial banks. Such a limit would separate commercial banks from investment banks, a line that was blurred a decade ago by the repeal of the Depression-era Glass-Steagall Act. That restriction would affect some of the nation’s biggest banks, including banking giants Bank of America, Goldman Sachs and Citigroup.”

Crisis Fee is A Small Concession

On January 14, 2010, in The Public, by Tiffiniy Cheng

If you were wondering about Obama’s crisis fee, here’s a good analysis from Dean Baker and Center for Economic Policy Research. Summary: it’s not great, but it’s a concession to people who are angry about at the administration for doing very little for the real economy. What would be better is a real recoupment tax, something like a financial transactions tax. Capping the size of the biggest banks from too-big-to-fail size will also create opportunities for medium to small banks, create more money flow in the system for more people, and more jobs everywhere.

From a mailing from CEPR:

…This means that Fannie and Freddie were losing money effectively doing exactly what the TARP program was originally intended for, buying up bad mortgages from banks. It would be reasonable to insist that the banks cover these losses as well.

The FCRF will also do little, if anything, to shrink the bloat in the financial sector. The financial sector has quadruped as a share of private sector GDP in the last three decades. In contrast to the FCRF, a financial transactions tax (FTT), along the lines recently introduced by representative Peter DeFazio in the House and Tom Harkin in the Senate, would go far towards reducing the volume of transactions that serve little or no productive purpose. Such a tax could also raise more than $100 billion annually, which would go far towards repairing the damage caused by this downturn.

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