(Waiting on Democratic strategists to figure out what to do is simply a passive way of committing suicide. Nuts to that. - promoted by Paul Rosenberg)
The following is the culmination of something I've been working on for several weeks. I've put a great deal of my time into this so whatever you do please make sure you watch the video.
Congress returns from its April recess this week with financial reform at the top of its to-do list. With millions of Americans still bearing the brunt of the worst recession in 80 years, Congress needs to start protecting our economy from Wall Street excess, and repair the shredded social safety net that has allowed the Great Recession to exact a devastating human cost.
Big banks are an economic parasite
In an excellent multi-part interview with Paul Jay of The Real News, former bank regulator William Black explains how the financial industry has transformed itself into an economic parasite. Black explains that banks are supposed to serve as a sort of economic catalyst-financing productive businesses and fueling economic growth. This was largely how banks operated for several decades after the Great Depression, because regulations had ensured that banks had incentives to do useful things, and barred them from taking crazy risks.
The deregulatory movement of the past thirty years destroyed those incentives, allowing banks to book big profits by essentially devouring other parts of the economy. Instead of fueling productive growth, banks were actively assaulting the broader economy for profit. None of that subprime lending served any economic purpose. Neither do the absurd credit card fees banks charge, or the deceptive overdraft fees they continue to implement.
As Matt Taibbi explains in an interview with Amy Goodman and Juan Gonzales of Democracy Now!, banks didn't just cannibalize consumers. They also went directly after local governments, bribing public officials to ink debt deals that worked wonderfully for the banks, and terribly for communities. In Jefferson County, Ala., J.P. Morgan Chase helped turn a $250 million sewer project into a $5 billion burden for taxpayers. The deal generated nothing of value for either citizens or the economy, but J.P. Morgan Chase was still able to line the pockets of its shareholders and executives. This kind of behavior was illegal, but the transactions involved were complex financial derivatives, which are not currently subject to regulation. To this day, nobody at J.P. Morgan Chase has been prosecuted for bribery or corruption.
Congress set to avoid tough regulations
There is a clear need for Congress to enact some firm restrictions against risky and predatory bank activities. But at the behest of Treasury Secretary Timothy Geithner, Congress is doing its best to avoid inserting any hard terms in legislative language, instead leaving the specifics to federal regulators to work out. As Tim Fernholz emphasizes for The American Prospect, this is an exercise in futility. Regulators already have the power to impose more stringent rules on nearly every arena of Wall Street business that matters (derivatives are a very noteworthy exception). If they wanted to fix things, they could do it without Congressional help. The trouble is, the financial sector has polluted most of the regulatory agencies, so that many regulators now act more like lobbyists for the banks they regulate, rather than law enforcers. Indeed, as I note for AlterNet, the top bank regulator in the U.S. spent over a decade lobbying for the nation's largest banks before taking up his current job. If Congress doesn't establish firm rules, regulators under future administrations would be free to simply undo any measures that the current agencies actually implement.
Megabanks equal mega risks
As Stacy Mitchell illustrates for Yes! Magazine, most of the problems in the financial sector are connected to the size of our banking behemoths. Big banks have enormous power-if they fail, the economy goes off a cliff. As a result, any responsible government wouldn't allow any of our megabanks to actually fail. But knowing that the government will protect them from any true catastrophes, big banks take bigger risks-if the risk pays off, they get rich, if it backfires, taxpayers will suck it up. That puts the interests of big banks at odds with the public interest, and creates an economy where bankers don't try to finance useful projects with a safe and steady return, but instead back crazy bets that just might pay off.
You can't fix that problem with regulations or idle threats of taking down a big bank when it gets itself in trouble-the markets won't believe it, and the banks will still take risks. The only solution, Mitchell notes, is to break up the banks into smaller institutions that can fail without wreaking havoc on the economy.
Economic inequality weakening the economy
All of this ties into rampant economic inequality in the United States. Since the 1970s, conservatives have waged a constant battle on the social safety net, shredding protections for ordinary people, while empowering corporate executives to take advantage of them. In an illuminating blog post for Mother Jones, Kevin Drum highlights the fact that average income has only rose from about $20 an hour in 1972 to $23 an hour today. This isn't because workers were slacking off-productivity has increased at roughly five times that rate. In other words, nearly all of the economic gains since the Nixon era have accrued to the wealthy.
When people don't have access to strong and improving income, they finance things with credit. But if wages never actually improve, that debt becomes a significant burden. When an entire society finds itself overly indebted, people stop buying things, and the economy tanks. The predation in the American financial sector makes this problem even worse.
But political theatrics are even trumping efforts to provide relief to those hit hardest by the recession. Sens. Jim Bunning (R-KY) and Tom Coburn (R-NE) have blocked the extension of unemployment benefits twice in the past month. As Kai Wright emphasizes for ColorLines, that recklessness puts up to 400,000 Americans at risk of losing their unemployment checks. That's a human tragedy-hundreds of thousands of people will have no way to pay the bills. It's also bad for business, since those people won't have any money to buy things that businesses produce. It is, in short, short-sighted economic insanity.
The economy is supposed to work for everybody, not just the rich, not just bankers. For that to happen, politicians have to establish meaningful regulations to make sure finance works for the greater good-- and safety nets to make sure that anyone who falls through the cracks doesn't see her life prospects permanently diminished.
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.
While the report focuses attention on the current sorry state of the airline industry, and its underlying structural problems that lie behind the recent rash of airline crashes and near-misses such as the crash of the Continental/Colgan flight to Buffalo, it traces current conditions back to the decision, 30 years ago, to deregulate the airline industry.
How's this for an astonishing fact: Since 2000, U.S. airlines have reported net losses of more than $33 billion--almost twice their accumulated profits from 1938 to 1999!
Of course, the trump card for the deregulators is the claim of low fares, and broad affordability, but the executive summary notes:
[Economist Alfred] Kahn [the "father of airline deregulation"] and others have taken refuge in the argument that deregulation has produced lower airfares and wider access to air travel. The Demos report concludes that even this benefit is widely overstated. "While the price of flying has come down over the past thirty years," the report notes, "it decreased at a comparable rate from the 1940s through the 1960s. In any event, low airfares are as much a problem as an achievement if they leave an industry without the resources to maintain service standards and make crucial investments in equipment, technology, and human capital."
If anything this understates the case. If deregulation has resulted in net industry losses, those fare reductions were paid for by the airlines creditors! What kind of a business model is that? Considering the amount of technological innovation, and the increased traffic volume, it seems altogether possible that fares would have fallen more without deregulation! Heck, the food might even have been edible!
This is only one industry, but the story's the same everywhere you look: the deregulation mania has been a disaster for America. Sure, stupid regulations can be a pain in the ass. But that's about stupidity, not regulation per se.
This is an excellent report, but we need to build on this and other detailed reporting on specific failures of de-regulation to develop a new narrative stressing the positive value of smart, far-sighted regulation in crafting systems that work for everyone. If freedom means anything, it's not just freedom from arbitrary restraints, it's freedom to do things of one's own choosing, and the capacity to do things depends in part on soundly-functioning systems, from cars that won't blow up to government that won't get you killed for reasons they lie to you about. That's why smart regulations expand our freedom, rather than restricting it.
A few juicy tidbits from the report on the flip--along with some broader thoughts on history, transportation and freedom.
by Zach Carter, Media Consortium MediaWire Blogger
With workers all over the globe trudging through a catastrophic recession, it's almost a given that governments will be battling the economic slide for a long time. Part of the effort to rebuild must involve new rules and regulations, but meaningful systems for economic accountability will be just as essential. If we do not hold the reckless executives who caused this crisis accountable for their actions, we risk regressing into similar turmoil in the near future.
The United States Department of Transportation says there is no federal requirement for airlines to compensate passengers who have been stranded because of a delayed or canceled flight.
That was a spooky post holiday truth I learned first hand in Milwaukee Wisconsin this past December 27 during an Air Tran airlines connection point on the way from Atlanta to New York City. The hours-long incident was a reminder that there is little, if any government oversight of some of our most basic but important consumer activities, like commercial airline travel.
Some might say, with the exception of safety, United States airline passengers are basically at the mercy of a profit driven business where passengers are basically left to their own devices to get from point A to B, almost like fighting your way onto the subway or buying a burger at a busy Manhattan McDonalds.
In most cases, if a flight is canceled, an airline will re-book you on the first available flight to your destination at no additional charge. But, as was the case in my experience, finding extra seats could prove difficult, especially if you're out and about over the holidays. In a nutshell, this led to a couple of hours of travel trauma as my fellow passengers and I tried to make it back to New York City.
That night, flight, #514 from Milwaukee to New York, was the last leg of a long itinerary that had been delayed earlier because of mechanical problems in Tampa. Originally scheduled to depart Milwaukee at just after 5, the plane was eventually boarded at around 8:00 pm instead. Once all the passengers were seated, stowed, etc., the pilot unexpectedly came on the plane's intercom and made an announcement saying we would all have to leave the plane. Apparently, there was a legal issue that involved the number of hours the onboard flight crew had worked.
These were problems beyond the airline's control, but it was what happened after we had de-planed some might call questionable. And to us on that plane, the next few hours were a sign that America's airports are temples of chaos and abuse. If that night in Milwaukee is any indication of a greater picture, airlines are allowed to operate with no clear rules of consumer protection or mandated guidelines guaranteed by government oversight.
Back in Milwaukee, at around 9:00 pm after all the passengers had left the Air Tran flight confused and irritated, we watched as uniformed Milwaukee law enforcement officers slowly strolled up to the gate and perched against the podium as the agents on duty filled us in. Obviously, the arrival of "the law" signaled that the news passengers were about to get, would probably spark tempers among the passengers, some who were already barking at agents. Clearly, the agents had been through this sort of thing before.
But repeat performance or not, traveler anger was understandable. The agents told us there was nothing they could really do. Instead, passengers were told to call 1866-airtran and reschedule another flight to New York. It was then that the truly frightening moments of the evening arrived.
Most of us assumed that "rescheduling" meant we'd be booked on a flight that following day. But alas, ignorance is bliss.
In fact, when some passengers made the call to Air Tran's customer service line, they were told the earliest they could fly would be the following Thursday, better known as New Years Day. The reason being that earlier Air Air Tran flights from Milwaukee to New York were booked solid.
I called right away, and was initially told Tuesday would be the earliest I could get home, but while speaking on the phone begging the agent for something earlier, she paused, then casually told me, oh well, 'now that flight's full,' which then put me at Thursday as well.
The problem was, I had to work that following Monday. I felt the tears knocking on the door in this room full of strangers as a sense of helpless rage infected my soul. As I began to boil over, one of the uniformed Milwaukee deputies eyed me and after I exclaimed a loud "Oh No!" he told me to grow up and act like a man.
Truth be told, Air Tran agents on the scene and phone were clearly ill prepared for the questions they were being peppered with and that included: could other airlines accommodate us, what about a hotel room and others, instead the agents on duty ducked heads and typed furiously into the screens in front of them as they told the furious interrogators they were 'checking on it.'
But then, after an hour or so of more tears, chaos and childlike confusion, one of the agents took a microphone and shouted to the stranded group that events were developing fast, that in fact, we might be leaving Milwaukee at 5 am that following morning. But, by then, a cloud of suspicion hung over the airport leading most in the room to not watch and question every move, not trusting anything they were hearing.
In fact, once the group fully understood the problem was due to over worked flight attendants, a few passengers decided to take things into their own hands and began begging and offering money to arriving flight attendants deplaning other planes, begging them to accompany us on the New York flight.
In the end, cash tips from passengers weren't necessary.
Behind the scenes, a new plan was taking shape. Flight 514's pilot was busy making phone calls to other planes. Along the way, he apparently secured another flight crew to fly with us to New York. Now, we wouldn't have to wait a few days or until 5:00 am, but instead, it looked as if we would fly to La Guradia as soon as the new replacement crew landed in Milwaukee, scheduled for around midnight that same evening.
By the time the new crew arrived, the on edge passengers had bonded thanks to the shared trauma of it all. Some said they were shocked at America's apparent lack of control over the beasts it had apparently created through full deregulation.
There were sweet moments in the night that included meeting several interesting individuals, including a New York Social worker who worked with elderly clients, a teacher and a former neighbor from the East Village. And, we all enjoyed an assortment of snacks and free soft drinks, provided by Air Tran. In addition to the snacks, we were compensated with a free round trip ticket any place that Air Tran flies, including Cancun, Puerto Rico or Alaska.
We arrived in Queens at around 430 am, around seven hours late.
In the end, nothing excuses the fact that many of us were almost stranded in an unfamiliar city for what could have been days. What if some of us had placed our employment in jeopardy by missing work? And, while it may seem petty, what about our holiday plans?
The truth is, if it hadn't been for caring and diligent pilots along with the flight attendants who took our flight some of the passengers on Air Tran-Flight 514 might still be eating Wisconsin Cheese.
Perhaps its time for consumers to demand that government take cooperative steps with airlines in establishing some form of reasonable passenger rights legislation. Perhaps then, not only will Americans feel safer about flying, they might have time to relax as well and still enjoy hopefully reasonable air fares in the future.
Sarah Palin apparently has a limited understanding of the troubled mortgage finance industry, as she told voters in Colorado Springs (9/6) that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers." She promised that "The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help." Perhaps Gov. Palin may be forgiven for her shallow knowledge of the secondary mortgage market. Andrew Leonard of Salon.com noted (9/8) that Fannie and Freddie have been private entities and haven't cost the taxpayer a dime-so far. Ironically, the lack of regulation of mortgage bankers brought on the abuses that forced the government takeover. But taxpayers likely will end up picking up a substantial tab.
In a diary yesterday, Digby highlighted this passage from Obama's acceptance speech:
For over two decades, he's subscribed to that old, discredited Republican philosophy - give more and more to those with the most and hope that prosperity trickles down to everyone else. In Washington, they call this the Ownership Society, but what it really means is - you're on your own. Out of work? Tough luck. No health care? The market will fix it. Born into poverty? Pull yourself up by your own bootstraps - even if you don't have boots. You're on your own.
Well it's time for them to own their failure.
After which, Digby commented:
I think this is the key to the case and when I heard it, I stood up and cheered.
I know that point is not very hopeful or very uplifting and it won't be the biggest selling point among swing voters. But there were plenty of those things in the speech. This is the case against conservatism that people need to hear in this country if we hope to move ahead. (Remind me to relate my convention story of trying to convince the 19 year old "independent" that his tax burden wasn't the reason he couldn't afford college. People have been brainwashed.)
Boy howdy on the brainwashing front! How many different times and different ways has deregulation wrecked havoc on our country? The S& L crisis. Enron & the manufactured energy crisis of the early 2000s. The sub-prime mortgage meltdown-just to name a few of the greatest hits our economy has taken from the deregulation delusion. And yet, no many how many disasters it causes, somehow deregulation itself is never to blame!
I too, was particularly thrilled to hear Obama speak this line. And yet, I wondered to myself, what will it take to really make it happen?
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