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.
Two key lawmakers on the House Financial Services Committee, Reps. Alan Grayson (D-FL) and Ron Paul (R-TX), are pushing to authorize a full, comprehensive audit of the Federal Reserve. The plan has sparked fury from both the Fed and the corporate banking industry, but the proposal is so appealing that the controversy is almost laughable.
The Federal Reserve is one of the most powerful economic institutions in the world, but most of its operations are conducted in total secrecy. The Fed's rescue activities have dwarfed the $700 billion Troubled Asset Relief Program, but without any public accounting. Some of these efforts may have been entirely appropriate, but we don't even know who the Fed is helping. That fact is a major barrier to establishing effective and fair economic policy.
"The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose."
Under the Grayson-Paul plan, which is offered as an amendment to the Financial Stability Improvement Act of 2009, the Government Accountability Office would be given the authority to audit all of the Federal Reserve's activities, just as it can audit other public programs and institutions.
Last week, the House Financial Services Committee approved the audit-the-fed bill, despite opposition from panel Chairman Barney Frank (D-MA), who tried to gut the plan. Even on the Financial Services Committee, where the banks concentrate their campaign contributions, Grayson was able to convince 14 other Democrats to stand up to the financial establishment.
The vote of approval scarcely registered on mainstream media's radar, and even then, the Grayson-Paul legislation was portrayed as an assault on the Fed's "political independence." As Dean Baker notes for Talking Points Memo, it's hard to see how a simple, public accounting can be construed as a political hit on the Fed's policy-making.
By setting interest rates, the Fed has enormous power to do almost anything under the economic sun, from fueling quick growth to destroying jobs. All of these powers have useful functions under the right circumstances, and we really don't want Congress to make decisions about the economy based on the interests of powerful lobby groups. The Grayson-Paul bill wouldn't do anything of the sort. As John Nichols explains for The Nation, audits of sensitive economic policy decisions would be subject to a six-month lag before they could be publicly released. If the Fed needs to act fast, Congress won't be able to get in its way. The public will eventually know how its own money is being spent, however, and learn how a public institution is conducting itself.
"In other words, this is about simple transparency, which everyone should favor," Nichols writes.
The White House and the Congressional Democratic leadership need to support a full and comprehensive audit of the Federal Reserve. It's an issue of basic democratic accountability. There is no good reason why economic policy should be conducted in secret.
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.
Unemployment figures in the U.S. are staggering: The official rate stands at 10.2%, the highest in 26 years. A broader measure that includes people who are involuntarily working part-time or who have given up looking for work is at 17.5%. That's a full-blown economic emergency.
But, as Joshua Holland explains for AlterNet, President Barack Obama's response to the unemployment crisis has not matched the urgency of his response to the crisis on Wall Street. This isn't just unfair, it's bad economics.
"It's important to understand that the economic crisis in which we find ourselves is not just a function of a shaky financial system but of a crash in consumption that's come along with the evaporation of $14 trillion worth of the wealth of American families," Holland writes.
Widespread joblessness can be every bit as damaging to the economic structure as a financial crisis. When people are out of work, they buckle down on household expenses. When several million people cut back at the same time, the economic machine grinds to a halt. If people are not buying and selling stuff, the economy isn't working.
As Mary Kane explains for The Washington Independent, about 40% of families don't have enough money to cover expenses through a three-month stretch of unemployment-even if one member of the household is receiving unemployment benefits. Kane highlights a Brandeis University study that reveals the haggard state of the American household and the unfair distribution of wealth along racial lines. A full 66% of African-American and Latino families can't afford three months without work. At a time when 5.6 million workers have been jobless for at least six months, the study highlights just how dire finances have become for many households.
GRITtv's Laura Flanders discusses potential labor market remedies with economist Dean Baker and The Nation's John Nichols. Baker suggests a work-share arrangement, in which employers cut back on their workers' hours to allow more people to work. To prevent losses for households, the government would step in and pay for the shortfall in hours. Employers would have more part-time jobs available, but the government would make sure everyone was paid as if they were working full-time. Baker also endorses a public jobs program, which he says could be especially useful in cities like Detroit and Cleveland that have been hit particularly hard by the economic downturn.
Nichols highlights the political consequences of failing to fix the unemployment mess. Unemployment directly affects the lives of voters. If widespread joblessness persists through November 2010, Democrats will net huge Congressional losses. If Obama thinks it's hard to garner bipartisan support for his legislative priorities now, imagine a few dozen more Republican obstructionists.
It's not that Obama failed to respond to the unemployment crisis. He did. That's what the stimulus package was all about. Today's 10.2% unemployment is a catastrophe, but it would be more like 12% without the stimulus package. But, given the seriousness of the issue, Obama is not giving unemployment enough attention.
In fact, Obama's economic priorities are a mirror-image of his campaign promises, as Robert Scheer argues in both a column for TruthDig and an interview with Amy Goodman on Democracy Now! After talking tough about reining in recklessness on Wall Street and making the financial system more accountable, Obama has hired many of the very policy makers who pushed through the deregulatory agenda back in the 1990s. Top Obama administration officials like Larry Summers, Timothy Geithner, Gary Gensler and Neal Wolin helped make this mess in the first place.
"This is not a minor criticism," Scheer says. "I think the guy is betraying his own presidency."
Obama's timid efforts to rein in Wall Street and heal the ailing job market are setting the stage for a political disaster. If Obama and Congressional Democrats can't take strong action to fix the economy, they will find themselves with much narrower majorities next November. The economy, and the public institutions that support it, are supposed to work for everyone, not just the financial elite.
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.
Weekly Pulse: The Rocky Road to Reform
by Lindsay Beyerstein, TMC MediaWire Blogger
Healthcare is dominating domestic politics this week, as Congress and President Obama outline their visions for reform. The president is pushing Congress to pass a bill that keeps healthcare costs in check before the August deadline. Obama must have been disappointed when the non-partisan Congressional Budget Office (CBO) announced last week that the Dem's healthcare bills won't cut spending. The president won't sign a bill that doesn't contain cost cuts, so legislators know they'll have to tweak the bill.
Obama's strenuous efforts to pass healthcare reform have invited comparisons to Franklin Roosevelt and his New Deal, which created the American social safety net. In Salon, Michael Lind argues that Obama's insistence on tying health insurance to employment actually betrays the legacy of the New Deal:
We decided that when it came to benefits our guiding principle should be a "citizen-based social contract." We chose this phrase, not to discriminate against non-citizens, but to express two ideas: first, that benefits like healthcare ought to be not a privilege but rather an entitlement of all citizens in our democratic republic, and second, that all benefits should be detached from employers and follow individuals through their lives. In thinking about healthcare, we rejected various options that would not move us toward a citizen-based social insurance system. Unfortunately, the health plan being promoted by Obama and Congress is based on one of those bad options.
Special interests are sparing no expense in their final campaign to influence healthcare reform. Senate Finance Committee Chair Max Baucus, D-Mont., was charged with crafting a public plan for a bipartisan seal of approval, but raked in more than $3 million from healthcare lobbyists and industry groups between 2003 and 2008, according to Mike Lillis of the Washington Independent. Baucus announced that he was swearing off healthcare bucks after June 1 in order to avoid the "appearance" of conflict of interest.
Aides for Baucus told The Post that the Finance chairman stopped accepting contributions from healthcare PACs after June 1 to eliminate the appearance of conflicts of interest. But he's not doing a very good job following through. On June 15, according to the Federal Election Commission, Baucus accepted $5,000 from the Schering Plough Corporate Better Government Fund.
Baucus's staff say the Schering Plough money has since been returned. No word on whether the money got sent back before or after the story hit the media.
Advocates of single payer did score a victory last week. Rep. Dennis Kucinich (D-Ohio) managed to pass an amendment to the House bill that gives states the option of creating their own single payer healthcare systems. John Nichols of The Nation explains that the Kucinich amendment opened the door to single payer. As Nichols points out, Canada didn't start with a national single payer system. The province of Saskatchewan created its own healthcare program that became the model for Canada's celebrated Medical Services Plan.
Josh Holland of AlterNet says the Kucinich amendment may salvage healthcare reform. That sounds a bit hyperbolic, but it's definitely a step forward. For additional background, check out Truthdig's interview with Kucinich.
Abortion was back in the news this week. The Prospect's Dana Goldstein notes that the White House appears to be vacillating as to whether abortions will be covered by national healthcare. Health and budget guru Peter Orzag danced around the issue on the last Meet the Press. This kind of equivocation is part of a pattern: Back in March, senior Obama domestic policy adviser Melody Barnes, a former Planned Parenthood board member, insulted the intelligence of viewers of the Christian Broadcasting Network by claiming that she hadn't even discussed the issue with Obama.
Should the anti-abortionist zealot accused of gunning down Dr. George Tiller be charged as a domestic terrorist? I weigh the pros and cons in my new piece at RH Reality Check.
Finally, Laura Miller of Salon favorably reviews Ryan Grim's new book, This is Your Country on Drugs, an offbeat social history of America's twin love affairs with drugs and moral panics over drugs.
With the August deadline looming, legislators will be scrambling to get their respective bills in shape in time to pass healthcare reform through the budget reconciliation process. Odds are that the bills will be further scaled back and watered down in the process.
This post features links to the best independent, progressive reporting about health care. Visit Healthcare.newsladder.net for a complete list of articles on healthcare affordability, healthcare laws, and healthcare controversy. For the best progressive reporting on the Economy, and Immigration, check out Economy.Newsladder.net and Immigration.Newsladder.net.
This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.
She said it! I never thought this day would come. Change has truly arrived in America, even before the Presidential Inauguration. Today, on Fox News, Nancy Pelosi, Speaker of the House, the only person who could, the woman who for so long would not, stated, she is Open to the Prosecution of Bush Administration Officials. Oh joy! Oh, bliss. Never did I imagine this moment might become a reality. Even the idea that this could be a possibility eluded me. Today, on January 18, 2009, finally, I have hope. I believe in the future, as Michelle Obama expressed, "For the first time in my adult lifetime, I am really proud of my country, or I will be when I see an actionable censure.
John Nichols, writing for "The Nation", has just written a kind of intellectual "call to arms" regarding, what is quite possibly, the most important issue facing the United States right now: Iran.
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