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?

#OccupyWallStreet: The precursors to the occupations?

I was just reading Christina Romer’s very well-done piece in Sunday’s New York Times, making the case that announcing nominal GDP targeting should be the Federal Reserve’s next policy move (I encourage you to read the article for the details).  Here’s the key section I’d like to highlight:

HOW would this help to heal the economy? Like the Volcker money target, it would be a powerful communication tool. By pledging to do whatever it takes to return nominal G.D.P. to its pre-crisis trajectory, the Fed could improve confidence and expectations of future growth.

Such expectations could increase spending and growth today: Consumers who are more certain that they’ll have a job next year would be less hesitant to spend, and companies that believe sales will be rising would be more likely to invest.

--

Though announcing the new framework would help, it probably wouldn’t be enough to close the nominal G.D.P. gap anytime soon. The Fed would need to take additional steps. These might include further quantitative easing, more forceful promises about short-term interest rates, and perhaps moves to lower the exchange rate. Such actions wouldn’t just affect expectations; they would also be directly helpful. For example, a weaker dollar would stimulate exports.

How many of you reading this article feel that our government is “willing to do whatever it takes” to get us out of this persistent unemployment crisis, with all of its attendant suffering and economic misery?  I’d bet not a one of you – I certainly don’t think our government is trying its best to fix things.  Of course, it depends on how one defines “government” I suppose, but if you initially think of our elected branches, since we voters have the most direct control over the executive and the legislative, then no, the “government” in that sense is definitely not working on our behalf! 

And really, how ridiculous is it that the government of the wealthiest country that has ever existed can’t even act in a coordinated manner to stem the suffering of a massive segment of its population?  Or perhaps even more sinister, it appears that the government won’t act to stem the suffering.  Our elected officials have abdicated virtually any and all responsibility until after November 2012 in order to best position themselves politically and rhetorically for the electoral battles to come.  Sure the President is still hammering away on his newfound populist message, his “jobs proposal,” and is taking actions on behalf of homeowners, student loan borrowers, and prescription drug patients, among others, but let’s be honest folks, his track record on the “following-through-on-populist-sentiments” score ain’t that great…(see option, public for an example).

So now we face the absurd reality that the Federal Reserve, the quasi-governmental entity that is perhaps the least-democratic, most-opaque, and most removed from the basic economic reality of most Americans is being pushed to solve our jobs crisis through pure monetary policy.  The Federal Reserve has a dual mandate of preserving price stability as well as maintaining full employment, and the main critique of the Fed for many years has been that it has focused virtually exclusively on the former (in the form of interest rate targeting) while wholly neglecting the latter.  Despite the fact that it has been broadly apparent that allowing interest rates to rise somewhat would facilitate the creation of more jobs, the interest rate hawks within the Fed have consistently put a stop to any of those practices, warning of mythical “bond vigilantes” who will decide that US Treasuries are no longer worth investing in if the interest rate rises even a smidge, despite massive evidence to the contrary.  (The counterpoint, of course, is that investing in Treasuries represents the safest investment one can make in the troubled and volatile world markets, as while the state of the US debt and economy overall might cause debt holders concern if the rest of the world were in better shape, the relative position and strength of the US economy in the current world economy makes it a better investment vis a vis other sovereign bonds.)  But I digress.

Why are people occupying so many public spaces in so many cities across the United States and abroad?  I think it is precisely as a response to the massive systemic failure we’ve witnessed at all levels of our government to actually make a positive impact on the vast majority of Americans’ lives.  This is not to say that Americans en masse are waiting for government aid or action or anything like that, rather that the silliness we are witnessing playing out on Capitol Hill and in the White House, the constant tit-for-tat, is leading Americans to see their government as willfully sitting on its perfectly-capable hands, rather than deigning to lift a finger to tilt the scales of justice even minutely back on their side. 

A significant portion of these Occupiers likely played a large role in electing President Obama in 2008 – the sense of triumph in that election was not simply due to the historical nature of electing the first African-American president, but because Obama appeared to represent a turn of the page, or perhaps, a close of the book, from the utter depredation of the Bush Administration, hollowed out to a shell of itself in the end due to its sheer lack of competence.  Post-Katrina America had scars, deep scars affecting the national sense of whether the government was truly acting in our interests or not if it could bungle emergency management so completely. 

Obama represented a shift towards competence, towards smart folks who looked at the data to get things done and make decisions…and yet, after the health care debate, the pyrrhic victory of an apparent giveaway to the health insurance industry, combined with the Wall Street-friendly nature of the new Administration, and the declaration that many of the high-level prosecutions that many desired for actors both inside and outside of government were to be strictly off-limits by Obama and Attorney General Holder marked a certain continuity between the Bush and Obama Administrations: elites are coddled, bailed out, and constantly regaled, no matter their transgressions.  The little people, the 99%, have no place in this insular Washington-Wall Street-Pentagon calculus.

The election of Obama, in this narrative, represents not the shift, the hope, the change that people were hoping for, but the continuation of the perpetual insult to the nation’s sense of values and fairness – an insult that, prior to the rise of the Occupy movement was largely undefined and nameless for many Americans.  Guantanamo, Abu Ghraib, bank bailouts, auto bailouts, the death of the public option, no Wall Street prosecutions, no torture prosecutions, warrantless wiretapping, unmanned drone strikes on countries and civilians we aren’t at war with, wars that are declared against enemies that are largely undefined…whose heads roll for any of these awful decisions? 

The failure of our institutions, and the growing widespread understanding of that fact, as I alluded to a few weeks ago, and more obliquely, in the title of my last blog post “Don’t think it’s not bipartisan, it is,” is profoundly bipartisan.  It had to be to manifest itself so clearly to so many at just this point in time.  Just as you would likely not have a Tea Party had John McCain won, the nature of the Occupy movement, if it were to exist in an alternate world under a McCain Administration, would be very different to what we see today.  It took the failure of Obama, the landslide-elected change agent to bring justice, to bring accountability to the corrupt elites of this country, for the Occupy movement to spring up.  In this case, perhaps the Change that is thus far unrealized will be the catalyst for the realization of the true Change, whatever that may be. 

The bipartisan failure is a wholesale indictment of the entire construct of democracy in this country, and has likely soured many in the Millenial generation on the act of voting itself.  Perhaps democracy, as it is now constructed, is not in fact the method for enacting the change we wish to see in the world?  Could it be that the leverage points upon which the entrenched interests and powers can bring their influence to bear on candidates and nominating parties in our democratic system are simply too numerous and too porous?  The vast constellation of special interests funding candidates these days ensures the ascendance of a certain type of candidate: one who must be conversant in the ways of money, though preferably not “of” money (they’re easier to control with the promise of high-paying post public service jobs, you see) and who have hewn lines that conform to the dominant economic and social memes of the day, thus ensuring the continued preservation of the entrenched classes.  Any “change” will thus be marginal, minimal, the scraps thrown to those too poor to afford their own public affairs divisions or hired-gun lobbyists to press their case in the halls of power. 

Ultimately, though, it doesn’t matter whether Obama speaks the right words, or even whether he follows through on his newly populistic leanings with actual substantive legislative victories; the narrative is no longer his to drive, nor is it the GOP’s or the Tea Party’s.  They are reacting, all of them.  Consider:

Occupy Wall Street has already achieved a stunning victory – a victory that is easy to overlook, but impossible to overstate. In just one month, the protesters have shifted the national dialogue from a relentless focus on the deficit to a discussion of the real issues facing Main Street: the lack of jobs -- and especially jobs with decent benefits -- spiraling inequality, cash-strapped American families' debt-loads, and the pernicious influence of money in politics that led us to this point.

To borrow the loosely defined terms that define the Occupy movement, these ordinary citizens have shifted the conversation away from what the “1 percent” -- the corporate right and its dedicated media, network of think-tanks and PR shops -- want to talk about and, notably, paid good money to get us to talk about.

What were you reading about daily in the newspapers as recently as 6 weeks ago?  Austerity austerity austerity.  What did the Occupy movement bring to the table?  Non-manufactured talking points that actually speak to people.  Something you can bring home to your family and discuss at your kitchen table as a concept that everyone understands, intuitively.  Fair wages, decent jobs, non-criminal banks, supporting your neighbors and your community.  These are American values, no matter what the cable news pundits say who myopically search for the “demands” of the Occupy movement despite the hundreds and thousands of protest signs shouting demands right at them. 

People want a fair shake, for themselves, their children, their coworkers, their neighbors, their fellow churchgoers.  That’s pretty much all I’ve come up with, at the end of the day, and it’s pretty simple.  How we get to the fair shake for all is the more complicated problem.

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?

---

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:

Visit msnbc.com for breaking news, world news, and news about the economy

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?

---

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.

Mitt Romney and the apparent triumph of big business Republicans

Take a look at the first 1:30 of the video above and consider what you hear (or read the transcript of the conversation below):

“As to what to do for the housing industry specifically — and are there things that you can do to encourage housing? One is, don’t try and stop the foreclosure process,” said Romney. “Let it run its course, and hit the bottom, allow investors to buy up homes, put renters in them, fix the homes up, and let it turn around and come back up.

“The Obama administration has slow-walked the foreclosure process that long existed, and as a result we still have a foreclosure overhang.

“Number two, the credit that was given to first-time homebuyers was insufficient and inadequate to turn around the housing market. I think it was an ineffective idea, it was a little bit like the Cash For Clunkers program — throwing government money at something, which was not market-oriented, did not staunch the decline in home values any more than it encouraged the auto industry to take off.” (Emphasis added).

The first thing to note is that Romney is here speaking with the editorial board of the Las Vegas Review-Journal, in Las Vegas, the foreclosure capital of the nation.  How’s that for the straight talk express, Romney Style? 

There’s been a lot of commentary today on Romney’s argument against stopping the foreclosure process, and while it is worthy of a blog post itself, I’d rather focus on the statements that follow that one.  The piece I’d like to point out here is quite simply how strange Romney’s comments are, given what’s happened in the housing market these past few years.  Romney is speaking here as a savvy investor might, one who has a wider view of the economic world and feels confident that his prescriptions are the right ones (as you’d expect a presidential candidate to do.)

The first bolded statement above denotes Romney’s appraisal of the housing situation as being a problem of pricing.  Investors would be happy to buy these foreclosed properties, in Romney’s mind, but the aftereffects of massively bubble-inflated prices combined with the HAMP program and others to support homeowners (despite the fact that they were never designed to “work” properly) mean that prices still have a ways to come down before they’ll be bargains. 

There is no mention of the suffering such aggressive inaction by the government would cause for homeowners struggling in this economy, rather there is a rather academic appraisal of the most efficient method for flipping homes.  There is no mention of the suffering because Romney’s default position is to see the world from the perspective of someone with capital to invest (leaving aside the obvious fact that he was a co-founder of a little firm called Bain Capital).  I mean, it must be difficult for someone with hundreds of millions of dollars in accumulated wealth to see the world differently, just as it is difficult for anybody to see the world through another’s eyes.  But one might at least hope for a bit of empathy from a presidential candidate; to hope that at least he/she understands the plight of others, no matter how alien the other’s experience might be to him/herself.  That is, I would think, a virtual prerequisite for being the leader of a nation that is as diverse and vast as America is – the ability to empathize.

Now for the second bolded piece above: ““The Obama administration has slow-walked the foreclosure process that long existed, and as a result we still have a foreclosure overhang.”  I read a lot of writing about economics on a regular basis from a broad range of thinkers, and a fair amount of writing on finance, and I believe that is the first time I’ve ever seen the term “foreclosure overhang” used, by anyone.  A quick Google search reveals that perhaps I just haven’t noticed the term before, or haven’t read any articles specifically referencing foreclosure overhang, because in any case, there’s quite a bit of literature out there on it! 

A useful definition of foreclosure overhang:

The term refers to the number of foreclosed properties that will wind up on the for-sale market. In the worst case, millions of foreclosed homes offered at fire-sale prices will cause an excess supply that will dampen prices for years to come.

The banks who made the loans, however, will not allow their entire stock of housing to sell at fire-sale pricing, so they are holding much of their stock in reserve until housing prices appreciate.  As well, each sale of a foreclosed home by a bank requires the bank to write down the face value of the original mortgage (that had been, until the resale, held as an (overinflated) capital asset) thus reducing the capital reserve ratio the bank must preserve to satisfy the regulators.  Refinancing mortgages en masse would similarly require writing down the value of the original mortgage, which clearly the banks are loath to do, so good luck getting any relief for homeowners.  Of course, there is the fact that it may make some sense for banks to allow homeowners to continue to occupy their homes, even if they are foreclosed upon:

Overgrown lawns are the least of the problems. It’s not uncommon for vacant homes to be stripped of copper and appliances. That’s why it isn’t nuts to keep homeowners in place even when they are severely delinquent if the local property market is so backed up that a home won’t be sold quickly (the Times says that average time to foreclosure is 400 days and another 176 days to sell it). The homeowner is still liable for property taxes if the home has not been seized by the lender and will maintain the property at a better level than the bank would.

But of course, as usual the banks are just dancing around the rampant fraud that plagued their activities (as I’ve documented fairly extensively on this blog) and it is interesting that Romney says nothing about that fraud.  Again, his concern is for the macro-effects of widely depressed housing prices and how that may or may not affect investment conditions and bank balance sheets, with no mention of what resolving the “foreclosure overhang” will do to families all across America.

This is more “invisible hand of the market” mumbo-jumbo, more laissez-faire, more Randian nonsense.  The market imbalance that caused this mess, the housing bubble, was caused by a combination of Alan Greenspan’s cheap money polices and a deregulatory regime started by Clinton and perfected under Bush.  Leaving the market to its own devices got us into this, and Romney’s solution is to once again leave the market to its own devices.  He is, truly, a creature of Wall Street; do we truly want such a creature in the White House?  It seems more and more likely he’ll be the Republican nominee, what does that mean for those of us in the 99%?

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.