tagged w/ Great Recession
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In keeping with the spirit of the Halloween season-I would like to share my deepest fears with the 1Lovejoy nation. These are just a few thoughts that frighten and keep me up in the middle of the night. Without further adieu here are a few scary scenarios.In keeping with the spirit of the Halloween season-I would like to share my deepest... more
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During the death throes of Herbert Hoover’s presidency in June 1932, desperate bands of men traveled to Washington and set up camp within view of the Capitol. The first contingent journeyed all the way from Portland, Oregon, but others soon converged from all over—alone, in groups, with families—until their main Hooverville on the Anacostia River’s fetid mudflats swelled to a population as high as 20,000. The men, World War I veterans who could not find jobs, became known as the Bonus Army...
The echoes of our own Great Recession do not end there. Both parties were alarmed by this motley assemblage and its political rallies; the Secret Service infiltrated its ranks to root out radicals. But a good Communist was hard to find. The men were mostly middle-class, patriotic Americans. They kept their improvised hovels clean and maintained small gardens. Even so, good behavior by the Bonus Army did not prevent the U.S. Army’s hotheaded chief of staff, General Douglas MacArthur, from summoning an overwhelming force to evict it from Pennsylvania Avenue late that July
What’s as intriguing as Occupy Wall Street itself is that once again our Establishment, left, right, and center, did not see the wave coming or understand what it meant as it broke. Maybe it’s just human nature and the power of denial, or maybe it’s a stubborn strain of all-American optimism, but at each aftershock since the fall of Lehman Brothers, those at the top have preferred not to see what they didn’t want to see. And so for the first three weeks, the protests were alternately ignored, patronized, dismissed, and insulted by politicians and the mainstream news media as a neo-Woodstock for wannabe collegiate rebels without a cause—and not just in Fox-land.
Read the rest of this great Frank Rich piece at the above linkDuring the death throes of Herbert Hoover’s presidency in June 1932, desperate... more
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kvb1
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7 months ago
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http://1lovejoy.wordpress.com/2011/01/31/the-republican-partythe-party-of-big-government/
Ever since I could remember, the Republican Party always accused the Democratic Party of being a bunch of ‘tax and spend liberals’. This strategy continues to serve the Republican Party well to this day. However, those in the know can rebuke this agreement to its core. If you are a conservative, you may want to take a seat before you continue to read this blog.
Since the advent of the twentieth century, almost all Republican administrations’ have expanded the role of government. By expanding the role of government, they raise the national debt to unparalleled proportions. Most people are under the illusion that Republicans reduce the role of government in our lives. However, I beg to differ because I have history and economics on my side.
First, The Reagan Administration ran the deficit up to it highest level. The reason is that he put all the money into defense spending and cutting taxes for wealthy Americans and Corporations. He called this theory “Trickle Down Economics”. This theory states that the very rich will benefit the most which will then give the economy a boost to provide for the rest of us poor souls. Needless to say that history proved this theory a disaster. In 1980 when George H.W. Bush (41st) was running as a Presidential Candidate for the Republican Party (he later became Ronald Reagan’s Vice President) he said that “Trickle Down Economics” was “Voodoo Economics”. How prophetic those words had become because on October 19th 1987, the stock market crashed (the day was soon to be called “Black Monday”). It took two years for the economy to recover. Consequently, George H.W. Bush became the 41st President of the United States and followed the same “Voodoo Economics” his predecessor had created. However, it was those same principles that cost him the 1992 Presidential Election.
In 2000, President Clinton’s Administration cleaned up all the damage that the Reagan-Bush Administration did to the American economy. The Clinton Administration used common sense and cut wasteful spending in all government departments. This truly was the age of a meaner, leaner government that the Republicans always preached about but was carried out by a Democrat. The U.S economy hadn’t had a surplus since President Andrew Jackson (the seventh President of the United States, a Democrat).
The economic future looked bright until the flawed election of George W. Bush (43rd). He inherited a surplus and he spent it just as fast as he could on two wars, expansion of more government agencies, tax cuts, and a bunch of tireless wasteful spending. And before you knew it, we had another record deficit that exceeded the Reagan-Bush Administration combined. Moreover, Bush 43rd Administration failed to do what was necessary to stop the “Great Recession”. In addition, Bush 43rd administration enjoyed a majority Republican Congress that approved all of his budgets with no questions asked.
Recently the American people elected a Democrat (President Barack Obama) to get us out of the mess that we allowed another Republican Administration to get away with. When will the American electorate learn that the real party of tax and spend is the G.O.P. and not the Democrats? As history as a guide, it does not look good for the Republican Party. And I didn’t even mention the S&L bailout involving the Bush Family when Bush 41 was President.
The current Republican Party is good on several issues; fighting the culture wars, starting wars, lowering taxes for the very wealthy and corporations, misinformation of facts, and raising the national debt. In a nut shell, that is the Republican Party. And we, the American Public are to be blamed. When things are good we elect a Republican but when things go shitty we elect a Democrat to get us out of our economic fix. We demand more from Democrats than from the other party in a shorter time. This is totally unfair at every level.
Haven’t we learned anything about the Republicans/Conservatives? They care about their bottom line. They will use whatever tactics they deem necessary to control power and get over on the little guy. Republican/Conservatives believe in the “Free Market”. They do not care if you suffer or get hurt. Wake up America and realized that Republicans/Conservatives think that you are “Suckers”.http://1lovejoy.wordpress.com/2011/01/31/the-republican-partythe-party-of-big-governmen... more
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David Talbot has seen Salon go through several iterations since founding the site in 1995. He was Salon’s editor-in-chief for a decade and served a couple of stints as CEO. In July, Talbot returned as interim CEO -- a position he’s now decided to keep indefinitely as Salon relaunches with a populist mission.
“Salon is initiating a call for an American spring,” Talbot said, “a national conversation to profoundly renew this country in the same spirit as people in Europe in the streets and throughout the Arab World.”
In an interview with The Huffington Post, Talbot said he wants Salon to be a populist voice that can "help initiate a conversation about what the country needs to do.” He said he plans on putting more resources into reporting around the country, likening Salon's mission in covering the Great Recession to writers and photographers during the Great Depression. He said Salon will also increase original video and plans to have “a series of public events around the country to engage a broad selection of Americans in this conversation.”
That all sounds good. But given that Salon is operating at about a $1.5 million annual loss, has laid off staffers in recent years, and was being shopped around in early 2011 due to long-term financial struggles, it's surprising the company can beef up its editorial presence right now.
http://www.huffingtonpost.com/2011/09/27/salon-ceo-site-relaunch_n_981992.htmlDavid Talbot has seen Salon go through several iterations since founding the site in... more
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mab001
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8 months ago
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CNN...
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The Blood and Sweat Behind Labor Day
By Kenneth Davis, Special to CNN
updated 10:56 AM EST, Fri September 2, 2011
PHOTO:
Scores of boys worked at the Breaker Pennsylvania Co. coal mine before child labor was finally outlawed in 1938.
STORY HIGHLIGHTS
Ken Davis: Today, labor under fire. But war for workers' rights was long, deadly struggle
There was child labor, 12-hour days, 6-day weeks, low wages, no sick days, holidays
Soldiers, militias, private armies used deadly force to break 19th-century strikes
Labor Day born in 1894, he says, but reform didn't come till FDR's fair labor laws
Editor's note: Kenneth C. Davis is the author of "Don't Know Much About History: Anniversary Edition" and "A Nation Rising." His website is www.dontknowmuch.com.
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(CNN) -- A small boy, perched on an open catwalk in a candy factory, falls to his death. No, it is not a macabre moment out of "Willy Wonka and the Chocolate Factory." It is a true story told by social reformer Jane Addams, who founded Chicago's Hull House in 1889.
Addams also described little girls who refused sweets as Christmas gifts that year. "They could not bear the sight of it," Addams wrote. "We discovered that that they had worked from 7 in the morning until 9 at night, and they were exhausted."
These Dickensian scenes lasted in America from the late 19th century until 1938, when child labor was outlawed under the Fair Labor Standards Act. They are a sobering reminder of why the nation marks Labor Day.
To most Americans, the first Monday in September means a three-day weekend and the last hurrah of summer, a final outing at the shore before school begins, a family picnic.
But Labor Day was born in a time when work was no picnic. As America was moving from farms to factories in the Industrial Age, there was a long, violent, often-deadly struggle for fundamental workers' rights, a struggle that in many ways was America's "other civil war."
It was a war fought when 12-hour days and six-day weeks were routine. Wages were low; there were no sick days, pensions or holidays. There was certainly no unemployment insurance. Any attempts at organizing were met by the combined wrath of business and government. The business of America was business.
That conflict, a period in which thousands of workers died in America's unsafe and unsanitary factories and mines, and hundreds more died in riots and pitched battles over workers' rights, is the little-noted history behind this holiday.
The first American Labor Day is dated to a parade organized by unions in New York on September 5, 1882, as a celebration of "the strength and spirit of the American worker." Their goals were simple: decent wages, an eight-hour workday and the right to organize. The September date was selected to provide a respite for workers and their families midway between July Fourth and Thanksgiving Day. By all accounts, the first Labor Day was a peaceful affair that drew tens of thousands of workers and their families to the city's Union Square Park.
But the path to a national Labor Day holiday was no walk in the park. The federal Labor Day was created 12 years later, signed into law by President Grover Cleveland during his second term in 1894. It's not that Cleveland was a great friend of labor. In fact, he had just sent out troops to break a strike.
During the economic depression known as the Panic of 1893, workers for the Pullman Car Co., one of the country's largest manufacturers, walked off their jobs when Pullman tried to cut wages, fire workers and evict them from their company-owned homes. They were joined by hundreds of thousands of workers in a nationwide walkout. Facing a strike that would shut down America's railroads, Cleveland dispatched 12,000 federal troops on the premise that the strike interfered with the U.S. Mail. In the ensuing violence, at least 13 strikers were killed.
This was not the first time troops had been used against American workers. Federal soldiers, state militias and private armies, often from the Pinkerton Detective Agency, had used deadly force to break many 19th-century strikes. Some of these strikes had become pitched battles, like the Homestead strike of 1892 in Pennsylvania. There, men on both sides armed with rifles and cannons died fighting over keeping a union at a steel mill, a union that owner Andrew Carnegie and manager Henry Frick were determined to break.
After crushing the Pullman strike, Cleveland thought that granting workers a Labor Day holiday was a sop that would appease them as he sought a third term. (It didn't work; he was denied the Democratic nomination in 1896.) Politicians and labor leaders were content to keep the holiday in September, far from the growing popularity of May Day as a commemoration of the "Martyrs of Haymarket Square," a group of union leaders executed -- unjustly, it was later proved -- after Chicago's deadly Haymarket Square Riots in May 1884.
For unions, Labor Day proved a hollow victory. Most of the reforms they sought did not come about for nearly half a century. The Depression-era fair labor laws that were passed under Franklin D. Roosevelt finally set standards like the eight-hour day and an end to child labor.
This history is worth remembering on Labor Day. But at a moment when American workers are battered by high unemployment, the Great Recession, a technology revolution in the workplace and globalization, there seems to be little to celebrate.
And these economic forces are only part of the relentless pressures faced by America's work force. There is also a renewed war over labor in this country. It is being fought in battleground states including, most notably, Wisconsin, Ohio, New Jersey and Florida, where mostly Republican governors are wrangling with public employees over pay, pensions and more fundamental issues including the right of collective bargaining.
Their sharp anti-union rhetoric has increasingly found receptive listeners who have been convinced that "spoiled" unions and public employees -- the people who fight our fires, teach our children and pick up our garbage -- are at fault for our budgetary woes and the sorry state of the economy. The fight has been vitriolic but well short of the violence of America's "other civil war."
With that in mind, it is worth recalling President Abraham Lincoln's words during the dark early days of the real Civil War. "Capital is only the fruit of labor, and could never have existed if labor had not first existed," he told Congress in December 1861. "Labor is the superior of capital and deserves much the higher consideration,"
Today, the first Republican president's words would count as heresy in the GOP. But they are a sharp reminder that working men and women built this country and fought its wars. And their labors are worth more than a Monday holiday or the mean-spirited contempt they now face. They deserve, as Lincoln said, "the higher consideration."
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The opinions expressed in this commentary are solely those of Kenneth Davis.
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The Blood and Sweat Behind Labor Day
By Kenneth Davis, Special to... more
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What a year. Rage in London, Egypt, Athens, Damascus. All real. Just a metaphor in the new “Planet of the Apes” film? No, much more. Warning: More rage is dead ahead. Across our planet a new generation is filled with rage. High unemployment. Raging inflation. Dreams lost. Hope gone. While the super -rich get richer and richer.
Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.
Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at “the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,” writes Rana Foroohar, an economics editor at Time magazine.
“There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.” And in each case, “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.”
But the rich “got richer, by lending, and looked for more places to invest, bidding up securities that eventually exploded in everyone’s face. In both eras, financial deregulation and loose monetary policies played roles in creating the bubble. But inequality itself — and the political pressure not to reverse it, but to hide it — was a crucial factor in the meltdown. The shrinking middle isn’t a symptom of the downturn. It’s the source of it.” Today the consequences of the meltdown still haunt us — there’s more to come.
(much more at link)What a year. Rage in London, Egypt, Athens, Damascus. All real. Just a metaphor in the... more
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In a one-line film remark as surprisingly concise as it is political and timely, a American blue collar woman explains to her son why they've permanently moved to China.
"There's nothing left for us in Detroit," she tells her son (played by Jaden Smith, the main character). The film is not Stephen Gaghan's 2005 film Syriana, it's Harald Zwart's 2010 remake of The Karate Kid.
Robert Kuttner (more to come)In a one-line film remark as surprisingly concise as it is political and timely, a... more
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With deficit hawks poised in the US, we watch with great interest UK economic policy. It's not looking an enviable example so far
by Dean Baker
Three months ago, I noted that the United States might benefit from the pain being suffered by the citizens of the United Kingdom. The reason was the new coalition government's commitment to prosperity through austerity. As predicted, this looks very much like a path to pain and stagnation, not healthy growth.
That's bad news for the citizens of the United Kingdom. They will be forced to suffer through years of unnecessarily high unemployment. They will also have to endure cutbacks in support for important public services like healthcare and education.
But the pain for the people in England could provide a useful example for the United States. After failing to see the $8tn housing bubble that wrecked the US economy, the austerity crew in the United States has been newly emboldened by the hugely partisan media that desperately want to eviscerate the country's bedrock social programmes: social security and Medicare.
The elite media and the politicians whom they promote would love to see the United States follow the austerity path of the UK's new government. However, if this path takes the UK into dangerous economic waters, it could provide a powerful warning to the public in the United States before we make the same mistake.
The British economy looks like it is doing its part. The fourth-quarter GDP report showing that the economy went into reverse and shrank at a 2.0% annual rate is exactly the sort of warning that many of us here were expecting. Weather-related factors may have slowed growth some, but you would have to do some serious violence to the data to paint a positive picture. Of course, the austerity in the UK is just beginning. There will likely be much worse pain to come, with a real possibility that the country will experience a double-dip recession, or at least a prolonged period of stagnation.
While the UK seems to be doing its part, the key question is whether anyone in the United States is prepared to take the lesson. Prior to this episode, there was already a solid economic case that large public deficits were necessary to support the economy in the period following the collapse of an asset bubble. The point is simply that the private sector is not prepared to make up the demand gap, at least in the short term. Both short-term and long-term interest rates are pretty much as low as they can be.
Furthermore, even if weaker demand did manage to push interest rates down from current levels, it is unlikely that they would have much effect on private spending. Businesses that didn't want to invest when the 10-year treasury bond rate was 3.4% are unlikely to start expanding if the rate fell to 2.4%, especially if the lower rate is coupled with higher unemployment and weaker demand.
The same story applies to consumers. This sort of drop in interest rates is not about to kick off a consumption binge. Consumers remain heavily indebted as a result of the collapse of the housing bubble. Lower interest rates will change this picture little. Furthermore, a consumption splurge is even less likely if government cutbacks mean that more workers are unemployed or worried about losing their jobs.
There might be more hope from an increase in net exports following a turn to austerity, but this would depend on a decline in the value of the dollar and healthy growth in US trading partners. Neither of these seems like good bets at the moment.
This means that the predictable result of austerity is slower growth and higher unemployment. The UK has volunteered to be our guinea pig and test this proposition. For now, it looks like things are going just as standard economic theory predicts: the economy is slowing and unemployment is likely to rise.
Hopefully, citizens of the UK will tire of the rhetoric of austerity as a way to make politicians feel good about tightening other peoples' belts. Maybe the Liberal Democrats will break away from the coalition and force new elections.
From this side of the pond, though, the goal is simply to encourage people to pay attention. The UK might be home to 60 million people, but from the standpoint of US economic policy, it is simply exhibit A: it is the country that did what our deficit hawks want to do in the US.
The takeaway lesson should be "austerity does not work; don't go there." Unfortunately, in the land of faith-based economics, evidence does not count for much. The UK may pursue a disastrous austerity path and those of us in the United States may still have to follow the same road anyhow. But we opponents of that course all appreciate the willingness of the UK to demonstrate the foolishness of this action.
http://www.commondreams.org/view/2011/02/02-0
http://www.countywatchers.com/?m=200812With deficit hawks poised in the US, we watch with great interest UK economic policy.... more
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William Black: Regulations were deliberately weakened to create conditions for systemic fraud.
*We need politicians that will stop defending deregulation and start criminal investigations against the corporations that deliberately robbed America into the Great Recession.*William Black: Regulations were deliberately weakened to create conditions for... more
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In case it's not crystal clear, this isn't the "Great Recession".
It's really the Great Bank Robbery.
First, there was the threat of martial law if the $700 Billion Tarp bailout wasn't passed. Specifically, Treasury Secretary Hank Paulson warned Congress that there would be martial law unless the Tarp bailouts were approved.
As I pointed out last October:
The New York Times wrote on July 16th:
In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.
READ MORE: http://globalpoliticalawakening.blogspot.com/2010/11/its-not-great-recession-its-great-bank.htmlIn case it's not crystal clear, this isn't the "Great Recession".... more
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When virtually all the gains from growth go to a small minority at the top, the result is deep-seated anxiety and frustration.
July 13, 2010
Missing from almost all discussion of America's dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June's decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.
In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.
Meanwhile, a much smaller group of Americans' earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.
We're back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground. And as long as this trend continues, we can't get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing.
America's median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn't pay their bills, and banks couldn't collect.
Each of America's two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928 -- with 23.5 percent of the total.
We all know what happened in the years immediately following these twin peaks -- in 1929 and 2008.
Yes, China, Germany and Japan have contributed to America's demand-side problem by failing to buy as much from us as we buy from them. But to believe that our continuing economic crisis stems mainly from the trade imbalance -- we buy too much and save too little, while they do the reverse -- is to miss the biggest imbalance of all. The problem isn't that typical Americans have spent beyond their means. It's that their means haven't kept up with what the growing economy could and should have been able to provide them.When virtually all the gains from growth go to a small minority at the top, the result... more
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28 June 2010 In this RSA Animate, radical sociologist David Harvey asks if it is time to look beyond capitalism towards a new social order that would allow us to live within a system that really could be responsible, just, and humane? This is based on a lecture at the RSA
http://therealnews.com/t2/latest-news/best-of-web?task=videodirectlink&id=682728 June 2010 In this RSA Animate, radical sociologist David Harvey asks if it is time... more
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by Zach Carter, Media Consortium blogger
Last week, the U.S. Senate rejected a plan that would have broken up the nation’s six largest banks firms into firms that could fail without wreaking havoc on the economy. Even though the defeat reinforces Wall Street’s political dominance, there is still room for a handful of other useful reforms, like banning banks from gambling with taxpayer money and protecting consumers from banker abuses. After looting our houses, banks are now pushing for the ability to bet on movie box-office receipts, and will keep trying to financialize anything they can unless Congress acts.
Wall Street calls the shots
Writing for The Nation, John Nichols details last week’s Capitol Hill damage. Today’s financial oligarchy, in which a handful of bigwig bankers and their lobbyists are able to write regulations and evade rules they don’t like, will still be in place after the Wall Street reform bill is passed. The lesson is clear, as Nichols notes:
Whatever the final form of federal financial services reform legislation, one thing is now certain: The biggest of the big banks will still be calling the shots.
Still worth fighting for
As I emphasize for AlterNet, Congress has made a terrible mistake here, but there is still room for reform. It took President Franklin Delano Roosevelt seven years to enact his New Deal banking laws. It took even longer to reshape public opinion of monopolies when President Theodore Roosevelt took on Corporate America in the early 1900s.
What’s still worth fighting for? We have to curb the derivatives market—the multi-trillion-dollar casino that destroyed AIG. We have to impose a strong version of the Volcker Rule, which would ban banks from engaging in speculative trading for their own accounts. We have to change the way the Federal Reserve does business and force the government’s most secretive bailout engine to operate in the open. And we have to establish a strong, independent Consumer Financial Protection Agency to ensure that the horrific subprime mortgage abuses are not repeated.
As Nomi Prins details for The American Prospect, the current reform bill will not effectively deal with the dangers posed by hedge funds and private equity firms—companies that partnered with banks to blow up the economy through investments in subprime mortgages. That means that whatever happens with the current bill, Congress must again take action next year to rein in other financial sector excesses.
The derivatives casino at the movies
As Nick Baumann demonstrates for Mother Jones, banks are doing everything they can to gobble up other productive elements of the economy. The economy crashed in 2008 in large part because banks had used the derivatives market to place trillions of dollars in speculative bets on the housing market. This wasn’t lending, it was pure gambling: Instead of using poker chips, bankers placed their bets with derivatives. But, as Baumann emphasizes, banks are now looking to expand the sort of thing they can make derivatives gambles with. The latest proposal is to allow banks to bet on the box office success of movies. That’s right, banks would be gambling on movies.
Hollywood may be shallow, but it isn’t stupid. It doesn’t want to see the banking industry repeat its destructive looting of the housing industry on the movie business, and is pushing hard to ban banks from betting on movies. But we can’t count on every industry having a powerful lobby group to counter every assault from the banking system.
Taking stock in schools
Consider the unsettling report by Juan Gonzales of Democracy Now!. Gonzales details how big banks gamed the charter school system to score huge profits while simultaneously saddling taxpayers with massive debts that make teaching kids supremely difficult. By exploiting multiple federal tax credits, banks that invest in charter schools have been able to double their money in seven years—no small feat in the investing world—while schools have seen their rents skyrocket. One school in Albany, N.Y. saw its rent jump from $170,000 to $500,000 in a single year.
About that unemployment rate…
It’s not like public schools are flush with cash right now. The $330,000 increase in rent could pay the salaries of more than a few teachers. As the recession sparked by big bank excess grinds on, even the good news is pretty hard to swallow. As David Moberg emphasizes for Working In These Times, the economy added 290,000 jobs in April, but the unemployment rate actually climbed from 9.7 percent to 9.9 percent in March. That’s because the unemployment rate only counts workers who are actively seeking a job—if you want a job but haven’t found one for so long that you give up, you’re not technically “unemployed.” All of those “new” workers are driving the official figures up.
In other words, it’s still rough out there. And likely to stay rough as state governments try to deal with the lost tax revenue from plunging home values and mass layoffs. Nearly half of all unemployed people in the U.S. have been out of a job for six months or more. And while we’d be much worse off without Obama’s economic stimulus package, that percentage is likely to grow this year, Moberg notes.
This is what unrestrained banking behemoths do. They book big profits and bonuses for themselves, regardless of the consequences for the rest of the economy. Congress absolutely must impose serious financial reform this year. After the November election, breaking up the banks must once again be on the agenda when Congress considers the future fate of hedge funds, private equity firms, Fannie Mae and Freddie Mac. If we don’t rein in Wall Street, banks will continue to wreak havoc on our homes, our jobs and even our schools. Congress must act.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.by Zach Carter, Media Consortium blogger
Last week, the U.S. Senate rejected a plan... more
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The financial reform bills moving through Congress offer some hope for a more stable financial system. While there is still much up for grabs, it is likely that whatever gets through Congress will improve regulation of derivatives, increase regulators' ability to restrict leverage and establish a consumer financial products protection agency. It could also lead to a separation of trading from commercial banking. This will decrease the risk of taxpayers subsidizing risky deals.
But there are good grounds for questioning whether the reform proposals will lead to fundamental changes in the financial system and prevent the recurrence of the sort of speculative bubble that wrecked the economy. With the exception of proposals coming out of the Senate Agriculture Committee, which would prohibit commercial banks from being involved in trading derivatives, there is little in the bills before Congress that would change the fundamental structure of the financial industry. The enormous consolidation that has taken place over the last two decades would be left in place with huge "too big to fail" (TBTF) banks still dominating the sector.
This is important for two reasons. First, a TBTF bank enjoys an inherent advantage over its competitors because of its implicit guarantee from the government. If investors believe that the government will ultimately step in and bail out investors because the economic consequences of letting them take a big hit is too great, they will be willing to lend money at a lower cost to TBTF banks than their competitors. I calculated that the size of this implicit government subsidy to TBTF banks could be as much as $34 billion a year.
The bills before Congress include provisions that are supposed to convince investors that the government will not stand behind TBTF banks. The deal is that the government will stand behind insured deposits, but, after that, investors will be on their own. That's a great principle, but will investors believe that the government will let the collapse of a TBTF bank wipe out hundreds of billions of dollars of unsecured debt? If not, then the TBTF subsidy will persist, even with all the politicians' protestations about no more bailouts.
However, the bigger problem with TBTF banks is their political power. The TBTF banks have pushed their tentacles deep within the regulatory structure. They have important contacts at the Fed, the Treasury, the FDIC, and other regulatory agencies. In fact, many of the top officials at these agencies were formerly high-level executives at the TBTF banks. This means that, at the very least, the big banks can count on a full hearing of their position when any issue comes up with the regulators. Of course, in the less generous view, we can expect the regulators to bend the law to help their friends.
This brings up a basic point that cannot possibly be repeated enough. Any regulation is only as good as its enforcement. It will never be easy for regulators to enforce rules against large banks. By definition, regulation means preventing banks from earning higher profits. Banks will, therefore, use whatever political power they have to prevent the enforcement of a rule they view as costly. They will use all their contacts in the regulatory agencies, the White House and Congress to stop a regulator whom they view as an enemy.
Regulators are not generally selected for their courage. This means that it will usually be easiest for them to ignore abuses in the major banks, even if they perceive them as dangerous. Remember, the banks will always have a story as to why their actions are perfectly safe and within the law. The banks pay very smart people lots of money to develop these stories.
For this reason, Ben Bernanke's reappointment as Fed chair was a huge setback for the cause of regulatory reform. Bernanke, in his role as Fed chair and a Fed governor since 2002, was as guilty as anyone could possibly be of ignoring financial abuses. The Fed had all the power necessary to prevent the buildup of a dangerous housing bubble. It looked the other way with disastrous consequences. The Obama administration and Congress then patted Bernanke on the back, said "heckuva of a job, Ben," and gave Bernanke a second term. This move certainly does not give regulators a lot of incentive to incur the wrath of the big banks by clamping down on risky dealings.
There is still hope that the financial industry can be fixed. An amendment put forward by Ohio Sen. Sherrod Brown will cut the biggest banks down to size, although they will still be TBTF by any reasonable measure.
The better route involves a downsizing of the industry as a whole. This can best be accomplished through a modest financial speculation tax (FST) like the 0.5 percent tax on stock trades that the United Kingdom has imposed for decades. Such a tax would quickly eliminate many risky deals by making them unprofitable. It would also reduce the size of the industry, making it less politically powerful. And a FST could easily raise more than $100 billion a year.
Congress is not going to include an FST in this round of reform, but bills for such a tax have been introduced by Peter Defazio in the House and Tom Harkin in the Senate. With Congress becoming obsessed with deficit reduction, the public should insist that an FST be at the center of the agenda.
Dean Baker.The financial reform bills moving through Congress offer some hope for a more stable... more
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