Elite tensions with democracy

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Chris Hayes has been the Editor at Large for The Nation magazine for a few years now, among numerous other gigs, and now has his own show on MSNBC on Saturday and Sunday mornings.  It’s a brilliant re-envisioning of the stale weekly public affairs shows dominated by the same rotating cast of characters, in part because of the sheer diversity of the guests Hayes features.  Sunday’s program had 3 women at the table along with Hayes and another male guest, for example.  Try finding that sort of gender-ratio on “Meet the Nation News Sunday.”  Beyond the guests, however, the show strives to offer a diversity of opinions on a multitude of topical stories, and to dig into the details of what’s happening and why in a way the typical news program is simply unable to.  As a perfect example and segway into my point, in the video above, Hayes lays out an argument as to why the Supercommittee’s failure this past week is in fact a good thing for America; his sentiments are ones that I have been mulling over recently myself.  Do watch it.

Hayes mentions the recent ascensions to the top leadership posts of two technocrats in Greece and Italy, noting that their jobs, their mandates upon entering office, are to push through deeply unpopular austerity packages over the will of the majority of their supposed constituents. 

Technocracy has suddenly become all the rage amidst the debt crisis of the eurozone. In Greece, prime minister George Papandreou was ousted in favour of the unelected former central banker Lucas Papademos, after he had the effrontery to call the referendum that never was. In Italy, Mario Monti, the unelected former EU commissioner, has anointed a cabinet of academics, bankers and an admiral, without a single representative of Italy’s political parties. This novel step is designed to reassure international bond markets, which have recently pushed Italy’s yields to perilous levels. (emphasis added)

Key takeaway: the political process is anathema to international finance. 

Consider a few short weeks ago when then-Greek Prime Minister George Papandreou had (shockingly!) called for a national referendum to be held on the terms of an European Union/International Monetary Fund bailout plan that would have included harsh austerity measures to be imposed on the Greek people.  The markets crashed, and the two biggest European economies’ leaders reacted with scorn:

At a bruising meeting in Cannes on Wednesday night, French President Nicolas Sarkozy and German Chancellor Angela Merkel warned [Papandreou] that Athens would not receive a cent more in aid until it met its commitments to the euro zone.

Greece was due to get a vital 8 billion euro installment this month and says it will run out of money in mid-December if it does not get the loan.

Despite the turmoil in Athens and uncertainty over the euro zone, European stock markets and the euro rallied in volatile trading as the likelihood grew that Greece would not hold the highly risky referendum.

Note that opening the decision-making process up to those who will bear the brunt of any economic decisions made by the powers-that-be, the citizenry, is tantamount, in this calculation, to introducing high risk into the equation.  The cold logic of finance, of interest rates and debt-to-GDP ratios, does not comport well with the warm inefficient fuzziness of the electorate, with their myriad voices and parochial/familial concerns.  How are the financiers supposed to get their bailouts when the poor rubes paying for it demand something more than the simple extraction of wealth from their country? 

The power relationships on evidence in the foregoing snippet of the Greek referendum situation are revealing: the larger “creditor” economies of France and Germany here acted as front-line enforcers with the wayward Greek leader Papandreou; the EU, a supra-national body of European nations acted in concert with the IMF, another supra-national body representing the strictly monetary interests of client nations, to craft a bailout package for Greece that brings great pain to the Greek people; meanwhile, the Greek people are demonstrating and rioting in the streets by the tens or hundreds of thousands to show their disapproval, and yet, they are pawns in the grand scheme.  What are the Greek people supposed to do when it seems the entire world (particularly the sanctimonious Germans) is blaming them as a people for being profligate – where are they to turn to voice their opinions democratically when the one opportunity they would have had to do so is brutally snatched away from them by shadowy international forces?

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This sordid and ongoing tale of crisis in Europe reveals the flipside to the ethos of globalization that has dominated international politics since the early days of the “Washington Consensus”.  In order to govern worldwide flows of goods, services and capital, world-bestriding structures of governance must be created.  To the extent that those structures are endowed with the authority to act in crises, those actions are by nature going to be out of the direct control of the citizenry of the nations affected, thus denying the citizens of the world recourse to shape the responses of those supra-national institutions.  The structures of these institutions ensure that their responsiveness will be primarily directed towards the largest stakeholders – the largest economies and the largest private financial institutions – thus making the decisions made representative of the policy prescriptions of an even more rarefied status of elites.  Power is thus concentrated further, with the results trickling down upon the rest of us.  And again, we have effectively no recourse to change much at all. 

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The notion that centralization=efficiency, related to the economic concept of “economies of scale,” has reigned supreme in much of the modern industrialized world.  We see these tenets manifested in the superstores we shop at, the industrially-produced agriculture we purchase, and the (public) school systems we send our children to be educated at, for just a few examples.  Our governmental policies, and indeed, the growth of the federal government itself in the past century, has reflected the notion that centralized governance is necessarily better for all due to greater standardization of outputs and efficiencies gained.

And yet, centralization creates with it a certain culture as well, an elite culture where those well-versed in the human power relationships and bureaucratic operations of the institutions influence the direction of decision-making to their own ends.  Centralization creates, not only an institution’s set of substantive actions with which it operates in society, but an entire class of administrators devoted to the upkeep and promulgation of the institution itself through budgeting, revenue collection, inter-institutional lobbying, and so forth.  Institutions, first and foremost, desire to keep existing, thus creating a tension with their public service functions.

I would argue that much of the Occupy-inspired debate currently ongoing in our society is at least in part related to the discussion of how much the public interest is served by various institutions of government versus how much those institutions merely serve as vehicles for particular interests to enact their wills.  The public wants accountability for the financial sector, but the relevant regulators have shown themselves to be rather more beholden to the interests of Big Finance than the public interest (see my posts on housing for more on that).  The public wants more investment in clean energy, yet there is an institutional structure within our government dedicated to fossil fuels, from the military fighting wars that just happen to be in oil-rich regions, to the massive tax breaks and other indirect subsidies for fossil fuels baked into our tax code.  How do we get the changes the populace wants enacted into law?  We have to rely on elected representatives with a slew of other institutional and professional competing interests to act on our behalf – not an easy thing to do, apparently!

The clear answer to these problems appears to be decentralization – a reduction of the scale of decision-making to a more manageable, democratic, and community-oriented size.  The General Assemblies occurring at the Occupy encampments around the country have represented that trend most vividly, as Chris Hayes highlighted in the clip above.  While some efficiency may certainly be lost along the way, democracy and true representation can be gained, ensuring that the rule of an unaccountable elite, such as we are witnessing today, is significantly more difficult to achieve.  Consider the supra-national institutions I’ve noted above – they are, if anything, abstractions of representative government; meta-representative democracies, if you will.  Who are their constituents but other client states and their assorted national economic interests?  Who are their leaders but those who have been most agreeable to said client states and economic interests?  How have you been personally helped by the IMF lately?

I hope to pick up further threads of this discussion in a future post, as there’s a lot to the topic of decentralization to discuss.  As always, your comments are welcomed and appreciated in the comments area below.

The #Occupy movement and the generations

Just a short note of gratitude and no small amount of incredulity at the cross-generational dialogues that have been fostered through and around the Occupy movement, which I and others view as largely a Millenial generation-driven thing.  I was just reading a well-done post by Charles B. Pierce at Esquire’s Politics Blog and noting his tone lamenting the political fecklessness of many of those from his generation now holding the reins of power:

How hard can this be? How hard is it to tell people to get angry at the people who really are making off with their country's wealth and their personal futures, especially when it's the god's honest truth? How hard is it to tell people that they are not the enemy, that to shoot pepper spray into the eyes of a college student is to spit in the eye of everyone else? Please do not hand me concerns for your "political viability." That makes you cowards. The protesters are doing the hard work. They're the ones living in a dozen tiny Argentinas all around this country. They're the ones getting beaten up and tortured, on TV, with chemical agents. They're the ones going to jail. All I'm asking is that you all have their backs, and all you have to do is get up and give a whole bunch of speeches saying so. Right now, they're pretty much out their on an island while empty charlatans like Newt Gingrich and prissy little shmoes like David Brooks are beating them over the head rhetorically, while the cops are more than happy — indeed, damned near gleeful — to do it in person.

Barney Frank wonders where the Occupiers were during the elections of 2010? Give them a politics worthy of their courage and they'll show up. This does not seem to me to be a difficult problem, but it does appear possibly to be the last chance for progressive politics for an awfully long time. You don't need an $850,000 contract to see that.

That second bolded sentence “Give them a politics worthy of their courage and they’ll show up” sounds like one of the best lines I’ve heard this year, for both its succinct razor-edge of truth, to its political astuteness.  This generation out protesting, my generation, is the one that greatly helped President Obama get elected.  We came out of the Bush era scarred (as I’ve noted previously) and looking for a change that Obama appeared to represent.  But more than that, he represented prudent judgment in correctly sizing up many of the true threats to our country (the undercutting of civil liberties domestically and human rights abroad, being cogent for me in particular) and, yes, a courage in his opposition to the Iraq War that was greatly lacking in the politics of those days, and even moreso today.  The reality of President Obama has been drastically different from the representation of Candidate Obama, but at the time, he showed a side of politics that people yearned for.  Show us courageous politicians taking stands that put them on the right side of popular sentiment, particularly in the face of a potential loss of big money campaign donors, and I bet my generation will show up.

So it is with that background in mind that I have been considering the amount of support I see and hear from older generations for the movement now sweeping America.  A close family member informed me that on her recent trip to New York she happened upon an Occupy Wall Street group at a public park (not Zuccotti, mind you) and was very impressed with the “human microphone” and the positive, steadfast energy the group displayed, despite it being an awful, rainy NYC November day.  The Facebook posts I see from Gen-Xers, Baby Boomers, and on up regarding the Occupy Movement evince a strong bond between the generations that I don’t think I’ve ever seen as clearly in my life. 

I had always feared that the elites’ plan to divide the entitlement program pie, and to set those of us in younger generations on a different retirement plan than our parents, threatened to separate the generations (which is probably the point!) and why you still hear many GOP candidates discussing giving young people the “option” of purchasing health savings accounts and the like.  The fact that we’re all working and saving towards a common fund, a common vision, means we’re all in it together, to some extent, despite the fact that the powers-that-be want all that locked-up Social Security and Medicare money to be released to the predations and speculations of Wall Street. 

But now, the elites have played their hand too far.  They’ve effectively united a strong bloc of people across the generations because, let’s face it, we’ve all been looted in some way or another.  We recognize a common enemy: the collusion between big business and big government that works to undercut our rights and to separate an already economically-stratified society into one where you have vastly different justice systems, depending on your standing and net worth (witness this egregious hit-and-run case from Colorado last year involving a “wealth manager” and a cyclist for a great/horrifying example).  There’s no justice for those on the top, but a harsh and exacting justice for those of us not at the top.  Witness the UC Davis pepper-spraying last Friday:

Glenn Greenwald’s take on the UC Davis situation adroitly points towards the larger issue at play in our society:

The UC-Davis Chancellor responsible for the pepper-spraying of her students, Linda Katehi, today went on Good Morning America and explained why she should not resign or otherwise be held accountable: “we really need to start the healing process and move forward.” On a radio program in the afternoon, she expanded on this view by saying: “We need to move on.” So apparently — yet again — the only way everyone can begin to “heal” and “move forward” is if everyone agrees that those in power with the greatest responsibility be fully shielded from any consequences and that their bad acts be simply forgotten. I wonder where she learned that justifying rationale?

We yearn for justice as a society.  The concept of justice embedded in the Constitution argues that those at the top and those at the bottom ought to be equal in the eyes of the law, and yet, the past decade has clearly shown how far our society has gotten from those founding principles.  Occupy, for all of its media-unfriendliness and potential to turn off the “median voter,” is a nascent attempt at reclaiming that original concept of justice.  Justice is anathema to the powers-that-be, as their gains are largely ill-gotten and their positions in society often depend on their being the the best operators within a system of legalized corruption.  The moment their hold on power slips, and they no longer control the levers of power and the judiciary, they will be subject to the comeuppance that has been long in coming, and much delayed. 

Greenwald quotes Rosa Luxemburg’s epic comment to wonderful effect:

“Those who do not move, do not notice their chains.”

If you look askance at the Occupy movement, and you see nothing but a bunch of rowdy young people lacking drive and ambition, ask yourself how you’re constrained in your own life.  What cutbacks have you had to make to your hopes and dreams, let alone your financial position?  How many of those setbacks are due entirely to your own poor judgment or over-extension, rather than being at least in part the shock wave from a system of willfully-created asset bubbles and legislatively-endorsed corruption imploding upon itself?  If you trace the origins of your own problems back to their logical starting points, do they solely originate from your decisions?  That is the line of thinking the powers-that-be hope you’ll take away.  Heaven forbid you should look up the food chain to discover how usury has been made legal and how student loans are no longer discharged in bankruptcy; how insolvent banks are allowed to claim the full face value of toxic assets to bolster their bottom lines, and yet how lying to get food stamps to feed one’s two children can net you 3 years in federal prison.  “Justice,” these days, comes at the expense of the rest of us.  We can see this fact in all its harsh reality and find a unity in it, or we can deny deny deny that the mirror the Occupy movement is holding up to our society reflects far more of our collective life experiences of brokenness and unnecessary misery than we’d care to admit. 

Thank you to those of the older generations who see the Occupy movement not as a threat, but as the opportunity for a rebirth.  We need you, and you need us.  We ARE in this together.

Even the Super Committee gets a bailout

A headline from today’s Los Angeles Times:

Congressional leaders jump in to save 'super committee'

In an effort to end the deadlock on deficit reductions, party leaders, especially on the Republican side, are meeting behind closed doors with members of the panel.

Okay, so perhaps we’re talking more about a legislative bailout of sorts, but is it not a perfect microcosm of the depravity of American politics that a panel convened due to the failure in leadership on the part of our “leaders” to figure out “responsible” ways to rein in fiscal deficits over the summer (“responsible” in Washington-speak meaning “measures that maximally shift any deficit-reduction burden onto the backs of the coddled lower and middle classes so as to spare the overburdened upper classes from having to pony up anything further in the way of taxes”) and which is now faced with “failure” (here meaning an automatic triggering of across-the-board cuts to the sacred cows of both left and right, in this case the entitlement and defense spending, respectively) due to fundamental disagreements on how much and how best to stick it to the lower and middle classes, is now being furiously “saved” by leadership so as to continue its “noble” work of further impoverishing millions who are already struggling.  Note the journalist’s framing of the issue at stake here:

Failure to reach a compromise by Thanksgiving to slash $1.5 trillion from the nation's deficits over the next decade could send shock waves through the fragile economy, as happened during the summer debt ceiling standoff. Failure would also trigger automatic budget cuts that both parties want to avoid. (emphasis added)

The implicit assumption in the highlighted sentence is that the economy could be roiled by the “failure” of the Super Committee to reach agreement on deficit reduction measures other than those mandated in the trigger agreement.  To be more specific, in this framing, the markets will react negatively if deficit reduction agreements of sufficient size and scope are not reached by the Super Committee.  Indeed, I agree with this analysis, but for reasons other than those the journalist implies.

The markets may well face turmoil whatever the outcome of the Super Committee, because whether the Super Committee is “successful” or not, the vast majority of Americans lose in some way or another, facing elite-imposed austerity for what is a manifestly elite-generated economic crisis.  Austerity, as has been witnessed in Europe the past few years, may work to reduce budget deficits in the short run, but in the longer term, as government spending is reduced, that compounds with reduced recessionary spending by consumers as well as businesses, thus leading to less consumer demand, hence more layoffs, hence lower tax revenues, which leads to calls for further austerity…the cycle is virtually endless.  You then may get calls for a government to sell off or privatize public assets in order to create revenue, which ultimately reduces public wealth and resources in the long run.  Counter-cyclical government spending is designed to stimulate demand in the short-term, in order to create positive spillover effects for the private sector and to avoid demand slackening to the point that you have a wave of business closures with the attendant layoffs and structural deformations of local/regional/national economies.  The counter-cyclical government spending notion is the linchpin of Keynesian economic theory, and despite their professed love of free markets, many Republicans tend to like the Keynesian view of government spending policies as a remedy for a sick economy, at least when it comes to defense spending 

Representative Chris Van Hollen, Democrat of Maryland and a member of the panel, said the attempt to undo the triggers “reflects a total lack of seriousness.” Adding that such efforts would not be successful, he said they were “the result of people trying to escape the fundamental choices before us, and one of those choices is whether or not we are willing to end special interest tax breaks to pay for defense.” The White House is also highly unlikely to approve such actions. The president is averse to the military cuts, but saw the threat of them as a way to pressure Republicans to reach a deal. “There is more fear this time,” Representative Mo Brooks, Republican of Alabama, said about the anxiety being expressed by military contractors in his district. Mr. Brooks said he voted against the debt-ceiling legislation because of the possibility of deep Pentagon cuts.

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Republicans have expressed more alarm about possible across-the-board cuts in Pentagon spending than Democrats have voiced about cuts in domestic programs that would also occur. Many safety-net programs for low-income people, like Medicaid and food stamps, would be exempt from automatic cuts. And Medicare payments to health care providers could not be reduced by more than 2 percent.  (emphases added)

Yes yes, make sure to protect the all-important “job creating,” “100% private-sector” defense contractors, and pay no attention to the mewling from the general public about the austerity they must contend with.  We must ensure the revenue stream for government to the contractors is uninterrupted, lest their fraudulent schemes for bilking taxpayers out of their hard-earned money are subjected to closer public scrutiny!

At least 91 contractors holding contracts worth $270 billion were the subjects of civil fraud judgments -- and in some cases criminal fraud convictions as well, many of which resulted in fines, suspensions or debarments. Even so, Defense Department contracting officers still assigned $4.9 billion worth of work with these companies after the fraud was uncovered, the report said.

The contractors identified in the report include such blue-chip entities as Boeing, Lockheed Martin, General Dynamics, Pratt & Whitney, IBM and even the Yale medical school.

All this to say that the markets will likely react poorly to any austerity measures in the US beyond what has already been enacted, because corporations and the markets recognize that consumer demand is the weak link in the American economy at this time, not the impending threat of governmental default due to an overly burdensome public debt load (unless it is a default threat created out of Congressional dysfunction, as it was this past summer).

“You’ve got to stimulate demand growth,” said Indra Nooyi, CEO of Purchase, New York-based PepsiCo, in an interview. “Until we stimulate primary consumption, the cash will continue to sit on the sidelines.”

The companies’ warnings follow a cut to the U.S. credit rating on Aug. 5 and a two-week rout in global equity markets as investors dumped stocks in favor of gold and Treasuries. With three European countries having required bailouts, concern over weakening demand and rising unemployment is spreading. A report yesterday said confidence among small businesses fell in July for the fifth consecutive month as the sales outlook dimmed.

The quotations above are from August, but we find ourselves in virtually the same situation today (check the report headlines for the past number of months) with weak consumer confidence and corollary spending levels. 

So here we witness a massive effort by our top elected officials to save a budget-cutting process that will likely impoverish our nation and citizens still further in order to spare from cuts one of the more fraudulent, yet highly-entrenched sectors of the national economy, while managing to simultaneously increase future budget deficits due to reduced tax revenues (driven by weak consumer spending, once again).  These are the priorities and policy solutions of our elected officials these days.  Tell me that isn’t a chilling thought.  Once again, on whose behalf do they truly work?

Is the GOP purposely sabotaging economic recovery for political gain?

What do you think?

A Suffolk University poll was released today that polled registered voters in Florida and asked a key question:

Do you think the Republicans are intentionally stalling efforts to jumpstart the economy to insure that Barack Obama is not reelected?

Now, I have been telling many of my friends and relatives (much to their collective chagrin, I’m sure) that the political and economic situation in the country – continued high unemployment, political stalemate in Congress, a disillusioned citizenry – means that, politically, the Republicans would have the most to gain electorally if the economy remains stagnant.  As Bill Clinton’s pollster James Carville famously quipped in 1992, “it’s the economy, stupid.”  Conventional political wisdom (and a fair amount of political science research) points to the notion that, electorally, the president generally bears the most responsibility for the state of the economy in voters’ eyes, rightfully deserved or not. 

The corollary to this situation we face today is that, in a cynical political calculus, the Republicans can increase their chances of taking the White House in 2012 if they actively work against economic recovery.  It sounds sinister to even suggest such a thing, doesn’t it?  Well, what do you think the popular view of the situation is among Florida voters?

Do you think the Republicans are intentionally stalling efforts to jumpstart the economy to insure that Barack Obama is not reelected?

Yes 49

No 39

Undecided 12

49%…that’s something, ain’t it?  Meanwhile, the partisan split on the polling is quite fascinating as well:

As expected, most registered Democrats (70 percent) agreed that Republicans are intentionally hindering the economy and hurting Obama, but independents (52 percent) and even some Republicans (24 percent) also agreed. (emphasis added)

Independents are often regarded as the lily-white souls who just can’t bear partisan conflict in politics, so the fact that 52% are siding with Obama on this question might reflect a majority view among that crucial demographic that the obstruction is coming from only one party.  The 24% of Republicans who agree with the question could reflect a small group of Republican voters who are willing to acknowledge such scorched-earth tactics from the GOP, and they may even approve of such tactics in order to defeat President Obama.  There is at least one big caveat to drawing too much out of these poll numbers; it’s not a national poll, it’s only Florida voters, so the applicability to other voter groups is negligible.

All that being said, however, this poll represents something new for this election cycle: acknowledgment that the political calculus for Republicans favors maintaining and/or increasing the economic misery for the American populace.  Left-leaning writers and bloggers have been discussing this issue for months, but the fact that such a notion has penetrated into the rarefied air of a respected polling organization’s survey questions is something entirely new. 

As Steve Benen notes, this single poll cries out for verification and/or contradiction, but that can only be done by further polling – polling that will have its results reported by the media, which will be forced to actually acknowledge the nature of the “sabotage” question asked, thus potentially raising the question in the minds of the viewing American public.  Such a situation does not bode well for the GOP, as their strategy of getting away with massive legislative obstruction (as seen in Sen. Mitch McConnell’s blocking of a vote on the President’s infrastructure bill in the Senate today) relies upon the median voter not grasping the nuances of parliamentary procedure in Congress to directly link such obstruction to the GOP’s actions.  Hiding in plain sight, as it were, with plausible deniability built-in.

For a long while, such actions appear to have worked, in a Pyrrhic sense, what with President Obama’s approval rating steadily dropping since mid-June. And yet, Congress has not been immune from blowback. Congress’ collective approval rating is now averaging 12.7%, according to RealClearPolitics.  Congressional approval ratings are historically virtually always lower than those of the President, but with a CBS News/NY Times poll recently showing Congress to only have a 9% approval rating (the lowest ever recorded since the poll was first launched) Americans are increasingly angry at their elected representatives these days.  The flipside of President Obama’s dropping poll numbers from the summer, as seen in the link above, are that his positives are now increasing again as he has honed his message on jobs and the economy.  All the GOP has had to offer are a bunch of blockades of legislative procedure and empty “jobs proposals” full of the same sorts of ideas they’ve been promulgating since Reagan’s presidency. 

Our politics is beyond broken these days, it is now actively heartless too.  Our representatives seem not to have much of an inkling of what “representing” Americans means, given the widespread and massive suffering amongst and all around us.  Witness Rep. Buck McKeon (R-CA), Chair of the Armed Services Committee, writing to the New York Times to argue contra Paul Krugman that he is anything but a closet defense Keynesian:

Congress is charged by the Constitution with providing for the common defense by raising and supporting our armed forces. We don’t spend tax dollars to protect American jobs, but to protect American lives. As such, it is accurate to point out that cuts in defense spending will cripple a critical industry, result in huge job losses and erode our ability to provide for the common defense. (h/t Kevin Drum)

I don’t know, is it just me, or does it not seem that “protecting American jobs” seems like exactly what we ought to be spending our precious and vanishing tax dollars on in the interest of “common defense”?  Have you seen our defense budget lately?  Methinks the Pentagon is doing just fine, thank you.  Why not use some Congressional intervention on behalf of the American people, rather than defense contractors, who have had bonanzas yearly since the “War on Terror” began?

Would that we had representatives working on our behalf…perhaps Congress ought to be the next venue for some Occupy-flavored civil disobedience?

Don’t think it’s not bipartisan, it is

A Washington Post headline today that speaks volumes: Obama still flush with cash from financial sector despite frosty relations:

…Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all the other GOP candidates combined, according to a Washington Post analysis of contribution data.

…Obama’s ties to Wall Street donors could complicate Democratic plans to paint Republicans as puppets of the financial industry, particularly in light of the Occupy Wall Street protests that have gone global over the past week. In response to the protests, the Obama campaign and other Democrats have stepped up their attacks on Romney and other Republicans for their opposition to Wall Street regulations.

One top banking executive who raises money for Obama and who requested anonymity to discuss fundraising efforts said reports of disaffection with the president “are exaggerated and overblown.” He said a strong contingent of financiers in New York, Chicago and California remain supportive of Obama and his economic policies, even as some have turned on him.

Now, all is not as it seems, as the Democratic National Committee has the ability to raise $30,800 per donor per year, whereas direct contributions to candidates’ campaign funds are capped at $5,000 per donor for the entire campaign cycle.  Because Obama is the Democratic nominee for president in 2012, he is able to coordinate fundraising with the DNC, whereas because the Republican primary is still underway, the RNC is not yet coordinating with a specific candidate.

That all being said, we’re still talking about vast sums of money here, with the election over a year away.  Is there not something troubling about that?

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So yesterday I gave a bit of grief to Mitt Romney for being cold and calculating (or at least giving every impression that he is when it comes to the plight of homeowners) and I feel the need to point out that President Obama himself is certainly no stranger to financial industry largesse.  Wall Street gave more money to President Obama in 2008 than they did John McCain, and finance has remained a key part of the President’s fundraising arsenal since. 

Obama’s done an intricate dance with Big Finance since his inauguration, calling them “fat-cat bankers” and warning that his administration was “the only thing between you and the pitchforks” while appointing a very Wall Street-friendly Treasury Secretary in Tim Geithner, as well as a former VP of JP Morgan Chase as his latest Chief of Staff, Bill Daley, among other key players. 

It is true, on the other hand, that President Obama helped shepherd the Dodd-Frank financial regulations through to passage in Congress.  But the implementation process of such a complex bill has been met with delays in regulation writing and an apparent lack of gumption on the Administration’s part to support nominees to key oversight positions.  Why is Elizabeth Warren running for the US Senate in Massachusetts and not running the Consumer Financial Protection Bureau, which she effectively created whole cloth?  It’s due in major part to the Obama Administration’s not weighing in with more support for Warren against predictable Senate Republican intransigence in blocking her nomination.  The fight over securing Warren’s nomination would have been a titanic one, as the financial industry was as opposed to the creation of the CFPB as anything else in Dodd-Frank, and 44 Senate Republicans promised to block any nominee to the CFPB’s Directorship, not just Warren.  And yet, President Obama, despite what could have been a prime opportunity to highlight Republican tactics that negatively affect consumers, didn’t seem to have the fight in him on this one, for reasons still unknown.

A further area of concern has been the ongoing “50-state” Attorneys General housing settlement negotiations, which have sought to release the big banks from any liabilities for their criminal ways during the housing boom of the 00s in exchange for a paltry $20 billion or so in fines.  See the video below with Delaware Attorney General Beau Biden (son of Joe) giving a great overview of the major issues:

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Despite the appearance of massive fraud by every major bank, the Obama Administration has been pushing rather hard to have all 50 AGs sign on to the agreement, which is ostensibly narrowly related to the robosigning fraud unearthed last year, however the negotiated terms of the agreement attempt to release the banks from all sorts of liabilities unrelated to robosigning.  That a number of upright state AGs have stood up against such attempts to sweep illegal activities under the rug may not be terribly surprising, but that the Obama Administration would be aligning itself with the criminals in this case so blatantly certainly gives one pause.  Does Obama think promoting a less bank-friendly investigation might hurt his fundraising opportunities with Wall Street?  Such a consideration can’t be far from the top of his mind…When Obama’s reelection is going to be fought against a GOP that still considers wholesale deregulation to be a viable job creation strategy despite all evidence to the contrary, he has to give Big Finance some carrots to keep their contributions flowing to his coffers, no?

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And that’s the crux of the problem.  That’s what Occupy Wall Street is about – the failure of institutions to offer any alternative to the rampant corruption that is right before all of our eyes.  There is no alternative to the current system, and no viable way to use “democracy” to achieve the real change that people appear to seek, as the votes are rigged in favor of the winners.  Justice itself is being undercut systematically so that those who have won historically can keep right on winning, consequences be damned.  It’s no way to run a country.

For his part, Obama has presided over a time that has been marked by major investigations and public exposures of unbelievably bad behavior and rampant greed among the elites who run the economy; a time where an average citizen can find any number of things to be unspeakably outraged about.  Obama’s time in office has coincided with a loss of trust in institutions that would have happened with or without his being President.  And yet, it behooves me to ask how much he himself has contributed to the loss of trust Americans feel in their government?  Sure he inherited a bad situation from his predecessor, but where has he exacerbated the structural problems in our society with his choices?  I’ve been attempting to map out some of the terrain where I feel there has been a governmental failure on this blog for some time now; not because I am opposed to our President, far from it.  It is because so much of the government’s response to issues of structural criminality have been to mask those issues, to sweep them under the rug, to choose not to act in the face of injustice in the hopes that the average low-information voter will not pick up on that act of collusion.  Obama or no, I won’t stand for that.

I believe in a better, stronger, more just and more free America – I have to believe in it; I’m a member of the generation that will be picking up the pieces when those in power today have long departed from the scorched earth they are rapidly creating in their wake.  I believe that we can have a government that works on behalf of the people, and I intend to do my part to make that happen.  But when the government is itself an impediment to the realization of those goals, when it uses its might and state secrets privileges and its power to regulate (or not) in the service of those who would bend government to their own nefarious ends, I feel the need to call attention to those acts as a lowly scribe/blogger. 

I have a proposal in the works that will present a more positive vision for the future, that will present some concrete actions individuals can take to change their own lives as well as their communities for the better, and I sincerely hope to present it on this blog soon.  This blog, in the attempt at chronicling so much wrongdoing, has taken on a terribly negative tone, and I hope to change that in the very near future.

Thanks for reading, as always, and stay tuned.

P.S. – Here’s a great read from Charles P. Pierce of Esquire, taking on Romney’s callous discussion of foreclosures and the curveball that the Supreme Judicial Court of Massachusetts threw his way today.  Great fun, or not.

We don’t need a redistribution of wealth, we need a redistribution of speech (#OccupyWallStreet)

 

Bank Consolidation; h/t Angry Black Lady

As noted in last night’s post, Occupy Wall Street is an inchoate (I haven’t seen that word used as often in the popular press as I have these past two weeks) movement that drives the mainstream media kind of nuts with its inchoateness.  What are they protesting?  Why are they occupying?  What are their demands?  WHICH SIDE OF THE POLITICAL SPECTRUM CAN WE CLAIM THEY INHABIT???

Last night I wrote that:

This protest, the fact that people from all walks of life feel that the most effective method of expressing their outrage is a purposely undefined and undirected occupation of a public space, reflects the profound disillusionment in and failure of institutions in our society.

I think I dropped the thread of that argument a little bit prematurely, forgive me.  Why would so many people feel such a disillusionment with the institutions of our society?  My claim is that many of the institutions of which Americans at one time felt themselves to be a part of, both public institutions (as voters, taxpayers, and citizens) as well as private (as mortgage-holders, investors, or lessees) have systematically become more and more invested in conducting business for each others’ good, rather than for the common good.  The collusion between government and private institutions, to the detriment of the voter/consumer, has been rampant in the past decade.  From government officials leaving their posts to immediately go work as lobbyists, to government “regulators” proving their total capture to the interests they are supposedly regulating, and actively covering up negative information on behalf of their industry friends, there appears to be no separation between those who theoretically represent taxpayers and the industries they oversee.  Everybody is bought off.

While I would never claim to speak for the OWS movement, I think that the inchoate anger expressed in this movement is at least in part fueled by such resentments.  Who does government actually work for, anyways?  I have focused a lot of attention on this blog to the housing market, but allow me to address a timely blog post by financial analyst Barry Ritholtz:

This is no accident. Indeed, it was by design that execs in the banking sector, and their outside accountants, hatched a scheme in 2008 to hide their balance sheets from public view. The bankers had been lobbying the Financial Accounting Standards Board to change the rules that governed “Fair Value Measurements” also known as FAS157 (September 2006).

You may recall during 2008 this was referred to as “Mark-to-market” accounting.

Banks loved m2m during a boom period. M2M made the more unusual balance sheet holdings  — derivatives, the mortgage-backed securities (MBS), exotic liabilities, and other assets — look fantastic. The fair value measurements of these items — essentially, yesterday’s closing price — allowed the accounts to show enormous profits. Those were the underlying basis for huge bonuses, stock option grants and of course, company share prices.

The reality was quite a bit different. These were not equities or treasuries or corporate bonds — they were thinly traded items whose prices were ramping upwards on a sea of delusional optimism. As soon as the credit bubble ended and housing began to retreat, these assets would free fall like an Acme anvil in a Roadrunner cartoon — and the bankers were the Coyote.

Uh-oh, this was gonna be a problem. So the bankers began to lobby FASB to change the rules governing Fair Value Accounting. Sure, it was hugely helpful on the way up, but now, reporting actual holdings — previously marked at all time highs — was becoming problematic.

I had referenced this little-noticed, but highly significant accounting standards change in a posting from last year, which provides a fascinating segue into the point of this post:

As Eskow said above, the bankers just want to make it seem that they’ve actually produced some semblance of profits for their shareholders so they can continue to collect their exorbitant bonuses.  That greed leads the bankers to convince regulators to help them avoid realizing the losses they should rightfully incur for such terrible investments.  That dynamic then leads to continued uncertainty in the market, which causes the banks not to lend to businesses, individuals, or even to each other. Greed has never run so rampant in the streets, and it is now manifestly clear that it is the greed of the privileged few that is genuinely handcuffing any sort of economic recovery for the rest of us.  Government regulators have bought into this system for years – when Eliot Spitzer began to make a stink, he was publicly disgraced and muzzled quickly, lest his accusations about the rotting core of the financial system lead people to look too closely so that the house of cards fell. 

Government has been complicit in this scheme since day one, which is the real reason none of the fraudsters have been put in prison yet – the circle would likely extend too widely and might ensnare some of those who are supposed to be on the “good” team.  We can’t have change in this country until we have an honest accounting of the mistakes of the past, and I surely hope that the state Attorneys General are allowed to run their investigations as they see fit, with no White House interference.  The President’s actions in confronting this crisis, including the actions of his deputies, will show just how committed to change he really is.  (emphases mine)

Okay, well the incredibly flawed 50-state Attorneys General settlement deal appears to be fatally wounded, despite the Obama Administration’s best efforts to protect the precious constituents banks from having to own up to the rampant fraud they perpetuated throughout the mortgage market in the 2000s.  My hope last year was misplaced, truly.  Ritholtz on mark-to-market again:

The bottom line is this: Investors do not really have a clear idea of how healthy any of these banks truly are. We do not know the state of their balance sheets. We do not know what their exposures are to mortgages, to Europe, to Greece, etc. They could all be technically insolvent, as far as any investor can tell.

And that is exactly how the bankers wanted it.

But given the trouble in Europe, and the likely problems in housing if the US goes into a recession, Investors have decided they cannot take the risk of a holding an opaque, possibly under-capitalized probably over-leveraged financial firm blindly. They are telling the banks no thanks, we are not interested, we are going to be prudent and we have to assume the worst. Hence, for the second half of 2011, they have been selling off their holdings in these opaque, potentially insolvent too big to succeed entities.

Bankers, enjoy your beds. You made them, now lay in them . . .(emphasis mine)

And not to put too fine a point on it, but in the same post from last year I had quoted at length economics blogger Steve Waldman about a meeting he attended with Treasury officials and other prominent bloggers in Washington, which touched on the Home Affordable Mortgage Program, or HAMP, the mortgage-modification program:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. (emphases mine)

Sad to say, we know VERY WELL now that the patient has not even begun to “heal” – as noted in Ritholtz’ quotation from above.  Well-functioning markets require some measure of transparency in order to facilitate price discovery; the banking and housing sectors are far from transparency, even to this day.

---

And yet, it was quite distinctly government actions, government interventions, which have helped prop up the zombie banks, despite the very real possibility that a number of them may be effectively insolvent.  Those banks have rewarded their executives with exorbitant bonuses and have lobbied hard against any regulations to rein in their excessive risk-taking, despite all of the government help they have willingly received (and asked for!) 

That our government, which supposedly is voted into power by us and represents us, is actively working against the interests of a broad range of Americans in perpetually siding with the banks is, I believe, a strong part of the Occupy Wall Street movement’s anger.  The people have no voice any longer in this schema – the “change agent” we voted into power in 2008 is perhaps as captive, if not even more so (and more subtly, I might add) to the moneyed interests of the country than was his predecessor.  And that’s saying something; something deeply unsettling. 

The conversation in this country between the institutions and the masses has been one-way for far too long, and I believe therein lies the power of Occupy Wall Street; they do not seek to add to the cacophony of voices that fill up the perpetually dead air of cable news, but rather simply, to be.  That is their protest, the being en masse, as I referenced last night.  It is to reclaim public spaces, and through their continued and determined presence, public discourse. 

JW Mason spoke to this dynamic movingly yesterday:

Most of us very seldom experience ourselves as political agents, in the sense of being active participants in the collective decision-making of our community. For better or worse, most of the time we delegate collective decision-making to specialists who represent us more or less faithfully, as the case may be. The only reason for protest -- for any kind of mass politics -- is that this system has broken down. The message of any protest is: There is a political subject, a We, that is not being represented. This, in the broadest possible way, is what the "99%" rhetoric is saying, and why it resonates. At some point, if a when movements like this are successful, some new more legitimate form of representation will be established, as people form new collective identities and new norms of collective action. But it's foolish to criticize an assertion of the failure of representation for not itself being an effective representative, with a specific set of demands and a strategy to carry them out. (emphasis mine)

The 99% want justice, we want rules to govern fair play, and we want to regain the sense that the odds are not stacked against us, as they have been for so long.  We cannot rely on elected officials to do our bidding, as their competing interests (primarily the overriding interest in re-election) will guarantee that the peoples’ interests are not fully represented.  The interests of the few tend to run counter to the interests of the many; how much more is this dynamic amplified when we are talking about the interests of the 1% in relation to the interests of the 99%?  “Policy” as currently constructed, is not working in favor of the polis, as one might hope, and the failure is so widespread, so systemic, that it is difficult to put the diagnosis into one coherent message. 

The inchoateness of the Occupy Wall Street “message” stems from that sheer magnitude of failure in our society, at all levels.  If we are going to vote and be taxed to pay for “representation” we better damn well get some adequate representation.  Alas, that is most definitely not happening at this stage in history. 

I plan on going to the local Occupy LA gathering tomorrow evening; I will share my thoughts afterwards on what I hope will be an inspiring event. 

We are here (#OccupyWallStreet)

Apologies for the extended radio silence (almost a full year since the last post, in fact.)  Blame finishing up graduate school, getting married this summer, and starting a new job recently.  All wonderful, joyous life-events; I am blessed.

So what’s changed in our world since November 2, 2010?  Anything much?

h/t Mike Konczal

Chances are you may have heard about the Occupy Wall Street protests currently going on in New York.  At the risk of opening myself to later ridicule if suddenly the occupation falls apart and nothing more comes of it, I believe that these protests happening all over the country are the start of something new (and yet quite certainly old) in our political/social/economic discourse.  The Occupation is, in the very broadest sense of the term, a great showing of people power. 

What have these protesters done?  They have reclaimed, at least in miniature, a part of the commons: those public spaces that are free and open for all to use.  They have reclaimed Zuccotti Park (renamed Liberty Park by the occupiers) and are holding it, occupying it by the simple act of gathering together en masse, in an ad hoc community of equals.  In the midst of the most powerful globalizing force in this world, the colossus that bestrides the world through its use and abuse of capital in pursuit of more capital, Wall Street, the occupiers have recreated a locality, a community of human persons, rather than corporate persons.  The physical act of being is, perhaps, the means and the end of their protest; the thumb in the eye of those who would subjugate others to modern debt peonage by a systematic deindustrialization, de-unionization, debasement of those who were at one point hopeful and perhaps even comfortable in their lives. 

h/t JW Mason

This protest, the fact that people from all walks of life feel that the most effective method of expressing their outrage is a purposely undefined and undirected occupation of a public space, reflects the profound disillusionment in and failure of institutions in our society.  Business, government, the media, various levels of education, healthcare…somehow all of these institutions have conspired to make Americans’ lives collectively far worse than they have been at any time in recent memory. 

For some elucidation of this point, at least in part, witness the media’s sudden interest in Occupy Wall Street, despite the ostensible lack of media savviness in the occupiers’ ranks.  Much of the media coverage has focused on the lack of a coherent message from the occupiers, or attempts to fit OWS into accepted “protest paradigms;” witness this sad example of both at once:

A question was asked of me yesterday about the Occupy Wall Street movement that has been a presence in lower Manhattan since Sept. 17. Are there any parallels between it and the Tea Party movement? Yes. But if it doesn’t do four things — 1.) broaden its base of support to include those who share its values or goals; 2.) get specific about what the goals are; 3.) bring the protests to Washington; and 4.) get support from members of Congress — it could squander its momentum.

I have problems with all four of the author’s points he makes, but I’d like to draw out what I see as the overall tone of this response – bring it to Washington or it doesn’t exist.  Present the powers-that-be with a specific set of legislative goals you’d like to achieve and let them VOTE on them; that’s how you define and achieve success.

This movement does not fit into the left-right paradigm that is necessary for the media to comprehend it, except to the extent that in many of the occupiers’ state opinions, re-establishing some semblance of justice in this country tends to require what are considered “liberal” policy responses.  BOTH parties in this country are bought off by the money machine, enabled by our Supreme arbiters of justice, for whom speech and money are equivalent in the political sphere (thus ensuring that those with more money by definition have more “speech”).  Washington is a morass of corruption, legalized.  When politicians say that Washington is “broken,” they simply mean that their political donors are not able to extract as much legislated wealth as before due to the gridlock that is currently wracking our nation’s political process.  What OWS is saying with their physical presence is that yes, Washington is broken, and it’s time to clean house and re-establish the norms so that they work for all, not just those at the top.  The failure is bipartisan in nature:

Occupy Wall Street and its spin-offs have found little support so far among Democrats, outside of a few lawmakers on the left of the party.
“The message of Occupy Wall Street is we think both political parties are owned by the same guys,” said David Graeber, a former professor of anthropology at Yale who joined in the protests. “If democracy is to mean anything, it means that everybody has to weigh in on this process of how money is created and promises are renegotiated.”

Democratic politicians don’t want to upset their precious campaign donors, so they stay studiously away from the most authentic outpouring of the populism that their party claims to represent in years.  That fact exemplifies the outsized role of money in our politics – if you hew to the party line, you get campaign bucks; if you deviate, we take it away and give it to your opponent, simple as that.

What will this Occupation come to in the end?  Who knows?  I am thankful it is occurring though, and I will have more to say about this topic in coming days.  Where do you stand?  Support or oppose?

The foreclosure fraud mess – a day of reckoning at last?

The foreclosure fraud case is one of the BIG stories I’ve been trying my best to follow lately.  We learned today that all 50 state Attorneys General have opened an investigation into mortgage industry practices:

The state attorneys general are looking at allegations some banks did not properly review files or submitted false statements to evict delinquent borrowers from their homes during a foreclosure crisis that is one of the most visible wounds of the 2007-2009 recession.

"We are in the fourth year of a housing and economic crisis that was brought on by lax practices of the mortgage lending industry," Minnesota Attorney General Lori Swanson said in a statement.

"The latest allegations of corner-cutting and slipshod paperwork are troubling, but perhaps not surprising."

--

The states are investigating the use of "robo-signers" -- people who sign hundreds of affidavits a day -- by banks and companies that collect monthly mortgage payments. It is alleged they did not properly review the documents they were signing.

"What we have seen are not mere technicalities, as some suggest," Ohio Attorney General Richard Cordray said.

So if there was systematic fraud perpetrated throughout the mortgage lending industry, one would hope we’d finally see some of these scoundrels locked up for awhile. 

Incidentally, one of the last times that all 50 state Attorneys General agreed to pursue a coordinated investigation, guess what the alleged crime was?  Predatory lending.  And guess who took the lead in making the public case for the investigation – then-Governor of New York Eliot Spitzer.  Spitzer came out swinging against the mortgage lending industry and the banks at large in a February 14, 2008 Washington Post piece that is worth excerpting from at length (but well worth a read in its entirety):

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

--

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. (emphasis mine)

The Bush Administration intervened to stop the states from investigating and enforcing their own predatory lending laws, which I think just might qualify as an egregious breach of the sacredness of “states’ rights” in GOP doctrine, eh?

But as we all now know, hubris brought Spitzer’s gubernatorial reign down (but he’s not out, have you seen him on CNN recently?) with the high-priced call girl scandal he was ensnared in just a few weeks after he wrote his Valentine’s Day article.  Let me make a quick aside at this point and say in no uncertain terms that I am not arguing that what Spitzer did was by any means acceptable.  Now, that being said, could there be any coincidence between his article broadcasting the Bush Administration’s outrageous actions on behalf of predatory lenders and his being outed as a john?  Let’s look a bit further:

Spitzer's fall was all the more stunning because he had been elected in November 2006 with 69 percent of the vote, the most ever in a New York gubernatorial race, and some Democrats even said he could possibly become the country's first Jewish president.

But his life and career began unraveling last week, when federal agents, acting on wiretaps, busted a high-class New Jersey-based prostitution ring, called Emperors Club VIP, and arrested four people. The criminal complaint listed an anonymous "Client 9," who was heard calling the escort service to arrange for a call girl named "Kristen" to meet him for a Feb. 13 tryst at Washington's Mayflower Hotel.

The client allegedly paid for the woman's train fare from New York to Washington and $4,300 for a two-hour session. Law enforcement sources confirmed this week that Client 9 was Spitzer.

--

There are also questions about the identities of the other wealthy clients of the Emperors Club VIP. The criminal complaint unsealed last week made reference to 10 clients without naming them; only Spitzer has been identified as Client 9. (all emphases mine)

Interesting that Spitzer was the only client whose name was leaked identified to the press, especially because he was later cleared of all charges:

The details of Mr. Spitzer’s financial transactions — how he took money from his personal accounts and sent it to the prostitution ring’s front company, QAT International — were always the crucial questions in the case. Prosecutors, from the start, were trying to determine whether there was ample evidence to charge Mr. Spitzer with a crime called structuring, which makes it illegal to conduct financial transactions in a way intended to conceal their source and purpose.

Michael Horowitz, another former chief of the public corruption unit in Manhattan, said that it was rare for prosecutors to pursue a structuring charge without a substantive underlying crime like money laundering or drug trafficking. He suggested that a prostitution case, which the government was unlikely to prosecute anyway, was not enough to undergird a structuring charge. (emphasis mine)

So the government knew that Spitzer’s crimes were not going to lead him to prison, and yet it is uncommon for sitting politicians involved in sex scandals to be forced out of office, look at South Carolina Governor Mark Sanford, US Senator from Nevada John Ensign, and US Senator from Louisiana David Vitter (who was also caught in a prostitution scandal – the DC Madam case).  None of them were forced out of their jobs; do the rules bend when Republicans are involved, or was Spitzer more the exception to the rule in being forced out?  And why does it appear that some people in high places decided to drop the axe on Spitzer to muzzle him just after he publicly charged that the Bush Administration aided and abetted predatory lenders?

That line of questioning leads us back to the now-unfolding foreclosure fraud situation, explained in great detail here by Mike Konczal of the Roosevelt Institute.  The banks, as we all are well aware, benefited from a massive infusion of taxpayer largess in the form of the bailout (TARP) of October 2008 (remember it was Bush’s bailout folks, no matter what the Tea Party may wrongly claim) and that the bailouts served to rehabilitate a good chunk of the banks’ balance sheets.  But the banks still were forced to contend with the problem of widespread despair in the housing markets, and with the fact that many of the houses that they owned were, in fact, overvalued assets due to the nationwide plunge in home values. 

Because the banks have gotten “too-big-to-fail” (which is what necessitated the bailouts in the first place) as I’ve discussed in a previous posting at length, the government has continued to help prop the banks up, lest the entire financial apparatus collapse entirely.  Programs such as the Home Affordable Modification Program (HAMP) that are ostensibly designed to incentivize banks to help homeowners renegotiate their mortgages on more favorable terms, have been shown to serve the banks’ interests entirely.  From a report by Steve Waldman on a meeting Geithner and other top Treasury officials had with financial bloggers over the summer:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those. (all emphases mine)

There you go, policymakers playing kabuki with taxpayers in order to help keep the banks who got us into this mess alive…what a grotesque situation!

And yet, after all of this has happened, some are saying, like former financial executive RJ Eskow, that the foreclosure fraud scandal may just show that the emperor (the banks in this case) has no clothes:

The foreclosure fraud scandal is a big deal (or a big "effin'" deal, as Joe Biden might say). But its real significance is an even bigger deal. Foreclosure fraud is one domino, and if it falls others will follow. The result could be an end to the "invisible bailout" -- the one you never hear about, the one that forces millions of people to subsidize bad lending practices in order to prop up Wall Street.

The invisible bailout is the reason why the government isn't pushing to freeze foreclosures. If the foreclosure process is halted and lending practices are thoroughly investigated, it might eventually force bankers to own up to their own lawlessness -- and write down billions of dollars in artificially inflated assets. How are they going to pay themselves record bonuses if that happens?

This is where it gets really ugly – our somewhat/perhaps/maybe/kinda recovering economy could well be plunged into another, perhaps deeper financial downturn if widespread fraud is in fact found among the banks’ mortgages.  If nobody knows who rightfully holds the title to a home, how could they possibly know its market value?  The entire financial system has been rebuilt (if one could even call it that) after the 2008 financial crisis on a foundation of nearly worthless and potentially fraudulent mortgages, and “irresponsible homeowners” have been to blame for not only their own troubles, but those of the entire financial system.  Eskow continues:

Nobel prizewinner Joseph Stiglitz, who also bears the distinction of having been correct about the housing bubble, thinks it's time for the banks to write down the excess value of these loans. As Stiglitz observes, that will be painful for the banks in the short term, although it would be "nothing in comparison to the suffering they have inflicted on people throughout the rest of the global economy."

But the administration's reluctant to do that. That's why we heard such tepid remarks from the White House about the foreclosure fraud scandal over the weekend. If the foreclosure fraud issue is pursued too aggressively, it throws 41% of all expected housing sales into question. It raises even more questions about the ownership of millions of loans in good standing, potentially giving homeowners leverage to renegotiate based on the actual market value of their homes. And it reopens the issue of "writedowns."

Illegal submission of foreclosure documents was part of a larger cover-up. People need to be arrested for it -- but that, of course, would open up a larger can of worms. The legal process could very well reveal the extent of the title problem, as well as other potentially widespread criminal practices.

So there you have it folks, the states are now going after the big Wall Street fish again, perhaps following up on the forestalled investigations they were set to launch back in 2003 when all of this mortgage madness could have been nipped in the bud.  In case you are in any doubt about just what was produced by the collusion between government and Wall Street, Ezra Klein interviewed financial analyst Janet Tavakoli last week, and here’s her response when being asked what this all means for the banks (after calling this crisis “the biggest fraud in the history of the capital markets”):

When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one. (emphases mine)

As Eskow said above, the bankers just want to make it seem that they’ve actually produced some semblance of profits for their shareholders so they can continue to collect their exorbitant bonuses.  That greed leads the bankers to convince regulators to help them avoid realizing the losses they should rightfully incur for such terrible investments.  That dynamic then leads to continued uncertainty in the market, which causes the banks not to lend to businesses, individuals, or even to each other. Greed has never run so rampant in the streets, and it is now manifestly clear that it is the greed of the privileged few that is genuinely handcuffing any sort of economic recovery for the rest of us.  Government regulators have bought into this system for years – when Eliot Spitzer began to make a stink, he was publicly disgraced and muzzled quickly, lest his accusations about the rotting core of the financial system lead people to look too closely so that the house of cards fell. 

Government has been complicit in this scheme since day one, which is the real reason none of the fraudsters have been put in prison yet – the circle would likely extend too widely and might ensnare some of those who are supposed to be on the “good” team.  We can’t have change in this country until we have an honest accounting of the mistakes of the past, and I surely hope that the state Attorneys General are allowed to run their investigations as they see fit, with no White House interference.  The President’s actions in confronting this crisis, including the actions of his deputies, will show just how committed to change he really is. 

Why all the fuss about social justice?

Above is an infamous clip from earlier this year of Glenn Beck arguing that “social justice” should not be a part of a church’s mission, and that if his listeners found that their churches promote “social justice” then they should leave that church:

"I'm begging you, your right to religion and freedom to exercise religion and read all of the passages of the Bible as you want to read them and as your church wants to preach them ... are going to come under the ropes in the next year. If it lasts that long it will be the next year. I beg you, look for the words 'social justice' or 'economic justice' on your church Web site. If you find it, run as fast as you can. Social justice and economic justice, they are code words.

Now, am I advising people to leave their church? Yes!"

Beck’s statement caused quite an uproar among Christian communities of faith around the country, as it is, on many levels, clearly antithetical to the teachings of Jesus, which call on Christians to aid those in need. 

And so we come on Thursday to Sen. Judd Gregg of New Hampshire, arguing against President Obama’s selection of Elizabeth Warren to head the new Consumer Financial Protection Bureau (CFPB) which was originally her idea: (hat tip: Joan McCarter)

Gregg, the ranking member of the Senate Budget Committee and a senior member of the Banking Committee, expressed dismay at President Obama's decision to tap Warren as a key "adviser" to help set up the new Consumer Financial Protection Agency established in the Wall Street reform bill.

"My concern is that she would use the agency for the purpose of promoting social justice," Gregg said on ABC's "Top Line" webcast. The agency, Gregg said, should promote improving access to credit, as well as other financial services.

As McCarter rightfully notes, it seems absurd that a new agency expressly designed to protect consumers from predatory lending and other ills of the financial system should not, in Gregg’s view, work at shielding consumers from unscrupulous lenders, but should rather aid consumers in getting access to more credit, and hence, debt.  It has been widely noted that easy access to credit was one of the primary drivers of the financial and economic crisis we are now in, with banks holding billions in toxic mortgages due to their overly-relaxed lending rules and marketing products such as “liar loans” to those who couldn’t afford them, and yet Gregg thinks consumers need more, not less debt?  Ridiculous.

However, the more interesting point to me is that in Sen. Gregg’s worldview, a government agency created to protect consumers (meaning predominantly middle-class folks who qualify for and use credit) should absolutely NOT “promote social justice.”  Why is it a negative in Gregg’s book that there is finally one solitary agency devoted to protecting consumers in the financial sector?  But furthermore, why is “social justice” assumed to be so clearly negative in the right’s modern political discourse? 

In thinking about this issue, it occurs to me that there is a common thread one can trace from Sarah Palin’s demonization of then-Presidential candidate Obama for working as a community organizer, to Glenn Beck’s call to boycott churches that ascribe to a vision of social justice, to Sen. Gregg’s misplaced concern that the CFPB might (horrors!) do its job and protect the middle and lower classes.  The common thread I see is that in all three instances, you have those who sit at the head of the American social, political and economic hierarchies casting efforts to aid the underclass in gaining its rightful power and generating wealth (or at least not to hemorrhage that power and wealth any further) as illegitimate and “anti-American.”  We are all supposed to be seeking the American Dream, however when groups of people who have been systematically shut out from that dream attempt to reduce their barriers to entry, that becomes a Problem for the powers-that-be, and those groups’ efforts must be marginalized.  For the true aim in ginning up fear of the underclasses fighting for their place at the table in the name of “social justice” is to divert attention from the much greater miscarriage of justice that has been taking place in our wallets for years.  One is allowed to strive for economic power on an individual level, but when a concerted effort is made to point out that the game is rigged against those on the bottom and to change that fact, those on the top scoff at and denigrate that push for equality. 

If you look at the raw CBO figures, they show that a full tenth of the national income has shifted since 1979 to the top 1% of the country. The bottom quintiles have each given up a bit more than two percentage points each, and that adds up to 10% of all earnings. That 10% has flowed almost entirely to very tippy top of the income ladder.

Is the middle class worse off because of this? Of course they are. Income matters even if plasma TVs are cheaper than they used to be or if CPI mismeasures middle class consumption or if average households now contain 2.6 members instead of 2.7. If this massive income shift hadn't happened, middle class earnings would be higher, they'd be able to buy more stuff, and they probably wouldn't be in debt as much. And the top 1% wouldn't have quite so much idle cash lying around to do stupid things with.

This income shift is real. We can debate its effects all day long, but it's real. The super rich have a much bigger piece of the pie than they used to, and that means a smaller piece of the pie for all the rest of us. You can decide for yourself if you think this is something we should just shrug our shoulders and accept. (emphasis mine)

I’ve grown up believing that America roots for the underdog, but the recent turn in rhetoric against those who would organize and advocate on behalf of justice, no matter what kind, speaks of a wide swath of the American public giving in to their meaner side – just as our puppeteers intended.  They keep us all divided on social issues while they sneak their billions out the back door with their carried-interest tax breaks and loopholes for overseas earnings - the better to distract us from the fact that class warfare is alive and well, and the moneyed side always wins.  Meanwhile, those of us in the bottom 90% are fighting the wrong wars against the wrong enemies: ourselves.  Look up the economic ladder for a major source of our country’s troubles – the speculative rich and the rich politicians who make up their constituency (yes, in that order) and don’t denigrate the efforts of the courageous ones on the bottom who strive to help their fellow humans out of their collective misery. 

To return to the theme that started off this post, if you want to see the true roots of social justice in a Western religious context, Jesus gives you all the context you need in the following parable:

"But when the Son of Man comes in his glory, and all the holy angels with him, then he will sit on the throne of his glory. Before him all the nations will be gathered, and he will separate them one from another, as a shepherd separates the sheep from the goats. He will set the sheep on his right hand, but the goats on the left. Then the King will tell those on his right hand, 'Come, blessed of my Father, inherit the Kingdom prepared for you from the foundation of the world; for I was hungry, and you gave me food to eat; I was thirsty, and you gave me drink; I was a stranger, and you took me in; naked, and you clothed me; I was sick, and you visited me; I was in prison, and you came to me.'

"Then the righteous will answer him, saying, 'Lord, when did we see you hungry, and feed you; or thirsty, and give you a drink? When did we see you as a stranger, and take you in; or naked, and clothe you? When did we see you sick, or in prison, and come to you?'

"The King will answer them, 'Most certainly I tell you, inasmuch as you did it to one of the least of these my brothers, you did it to me.' Then he will say also to those on the left hand, 'Depart from me, you cursed, into the eternal fire which is prepared for the devil and his angels; for I was hungry, and you didn't give me food to eat; I was thirsty, and you gave me no drink; I was a stranger, and you didn't take me in; naked, and you didn't clothe me; sick, and in prison, and you didn't visit me.'

"Then they will also answer, saying, 'Lord, when did we see you hungry, or thirsty, or a stranger, or naked, or sick, or in prison, and didn't help you?'

"Then he will answer them, saying, 'Most certainly I tell you, inasmuch as you didn't do it to one of the least of these, you didn't do it to me.' These will go away into eternal punishment, but the righteous into eternal life."

Matthew 25:31-46 (emphases mine).

P.S. – Just to make it clear, politicians’ captivity to moneyed interests is most definitely a bipartisan and self-serving game, evidenced quite clearly when retiring Sen. Evan Bayh of Indiana was interviewed by NBC’s Chuck Todd on Friday (hat-tip again to Joan McCarter):

TODD: Yesterday, the Census came out and said one in seven Americans are living below the poverty line. Do you look at that story today — you know, you open up your USA Today, right, and you see that story — and you see Washington is debating the tax rates for the wealthy, and you sit there and say, isn’t that a disconnect in America right now?

BAYH: It is a disconnect, Chuck. What we need to be focused on is growth, how do we create jobs, how do we expand businesses. That needs to be job one right now. And all these other issues involving, oh, fairness and things like that can wait. (emphasis in the original)

Ain’t gonna miss that guy in the Senate one bit.  He’ll be back soon enough as a lobbyist anyways, so really, his advocacy on behalf of extending the Bush tax cuts for his rich campaign donors and Wall Street buddies is ultimately a nice little deal to try and line his own pockets with more money that could have gone towards his pet  interest of deficit reduction.