Pete Paycheck

History and Economics, Tea Party Style

2010-11-18T00:49:00.000-08:00

A recent profile of Utah Tea Party leader David Kirkham in the New York Times (“D.I.Y. Populism, Left and Right”, by Matt Bai, October 31, 2010) offers a telling detail of how Kirkham came by his worldview.

In the mid-90s, Bai writes, Kirkham visited Poland. He was deeply affected when “the government laid off 20,000 workers, and Mr. Kirkham watched the men file out the door robotically, their faces ashen, their lives in shards. This is what happens, Mr. Kirkham thought, when the state controls the economy.”

Now the Soviet-bloc economies had many grave and well-known faults, but mass layoffs were rarely one of them. On the contrary, many Western economists and politicians criticized Communist governments for their guarantee of lifetime employment and refusal to embrace the efficiencies of a “flexible” labor market, where employers could hire and fire at will.

That changed in 1989 when the anti-communist organization Solidarity defeated the Communist Party in democratic elections. Economies in Poland and soon across Eastern Europe morphed abruptly into free-wheeling capitalist ones. In the early 90s, the new Polish government began a course of economic “shock therapy” designed by conservative Finance Minister Leszek Balcerowicz and hewing to policies proposed by the Reagan and first Bush administrations and the International Monetary Fund. Many industries were privatized and forced to compete on global markets, while formerly controlled prices were allowed to rise. As a result, many Polish workers lost their jobs and suffered serious economic hardship.

This is the backstory behind those ashen faces Kirkham saw if he was in Poland in the mid-90s.

The Tea Party leader comes off as a committed and talented man. But as a wealthy businessman who builds $100,000 Shelby Cobras at his factory in Provo, he’s a bit of a stretch as a champion of oppressed workers there or here. And it’s clear that his conception of socialism and attribution of it to President Obama are based on multi-layered confusion that leaves him 180 degrees off course.

Today, there is no such thing as pure capitalism or socialism: the interplay between corporate power and public control of economies has led to a wide range of hybrids. If Kirkham had talked to ordinary people around other parts of Europe, Asia, Africa or Latin America (and let’s not forget Canada), he would have heard many permutations of what they call socialism being advocated. And if he made the effort to actually understand what they were talking about, he might have realized that President Obama’s policies, along with our whole economic system, are far towards the market end of the global spectrum.

Globalizing Financial Follies and Reforms

2010-02-12T01:55:00.000-08:00

"Facing mounting criticism from the public and the media, Goldman Sachs announced today that they would cancel plans to dance around a bonfire of thousand-dollar bills." Perhaps Andy Borowitz was exaggerating a tad. But the comedian and political analyst caught the essence of what drives people crazy about "Goldman Calf" and the rest of the surviving financial oligopolies.

In recent weeks, President Obama's increasingly combative tone and the elevated visibility of Paul Volcker, chairman of his of his Economic Recovery Advisory Board and former Fed chairman under Carter and Reagan, seem to signal a serious effort to harness this resentment towards Wall Street smoldering on both the right and the left into financial reform legislation. A Democratic proposal has passed the House, but Senate approval looks problematic.

However justified, though, outrage at the banks' excesses may miss some root causes of the crisis, cautions economic analyst Doug Henwood. "There is no way to separate neatly the monetary from the real. The social problem emanating from the securitization of mortgages isn't only the increasingly baroque development of financial assets but also the commodification of the house and its transformation into a speculative asset. Which is why populist financial reforms can't take you very far: they address symptoms, not pathogens."

My February 9 analysis for Inter Press Service, FINANCE: Fighting Off Looters in the Ruins, goes into more details of financial reform proposals. The piece also discusses the renaissance of Keynesian economics as an explanation of the crisis and guide to recovery.

Democratic plans, while advancing some important reforms, have so far failed to take on one key enabler of the crash: the bond-rating agencies, such as Standard & Poors, Moody and Fitch. Investment banks still routinely pay these private firms to rate their own securities, an obvious conflict of interest that has led to calls for increased regulation and even for nationalization.

Congressional Republicans seem to have few counter-proposals except for more tax cuts and letting financial markets work. Listening to the debate, you could easily forget that a meltdown of the global financial system was averted only by government action.

Bipartisan deficit hawks are circling again, ready to swoop down on re-regulation and stimulus initiatives. Wall Street insider and Nixon's Commerce Secretary Pete Peterson and his Concord Coalition are leading a bipartisan charge to slash government spending, even as unemployment remains near 10 percent and inflation is missing in action.

One encouraging development of the past year, though, has been the broadening international recognition that the global financial system has deep structural flaws and requires global approaches to repair them.

In December, Prime Minister Gordon Brown of the U.K. and President Nicolas Sarkozy published a joint opinion piece in the Wall Street Journal recognizing that "the way the way global financial institutions have operated raises fundamental questions that we must – and can only - address globally." They called for "a long term global compact that will encapsulate both the responsibilities of the banking system and the risk they pose to the economy as a whole." Measures such as resolution funds, insurance premiums, financial transaction levies and a tax on bonuses, they said, should be considered as part of the macroeconomic strategies of the IMF and the G20.

Beneath the political eruptions, as well, some major tectonic plates of economic ideology appear to be thrusting up and subducting.

The Washington Consensus, which the International Monetary Fund once invoked to impose draconian austerity plans on developing countries, is now being questioned more openly in Washington, New York and London, as it long has been in many capitals of Asia, Africa and Latin America. Perhaps the idea of having to slash social spending in the face of a deep recession doesn't look quite as attractive when your own government has to take the political hit.

And there have been some significant defections from the neo-classical orthodoxy that has dominated economics and politics for the past 30 years. And the ideas of British economist John Maynard Keynes, which provided the theoretical underpinnings of the New Deal and post-World War II prosperity, are waxing in influence.

Keynesian prescriptions on the need to create aggregate demand and the key role of government in correcting market failures now seem to make sense to more governments.

The headquarters of academic opposition to Keynes since the 1940's has been the University of Chicago, where Milton Friedman and his successors developed the laissez-faire doctrines that President Ronald Reagan and his revitalized Republican party popularized.

In a piece in The New Yorker magazine, John Cassidy found that the Great Recession has left the Chicago School of economics divided.
The most prominent dissenter, Cassidy reported, is Richard Posner, an influential Reagan judicial appointee and economic thinker who has applied free-market economics to law.

In a recent article, Posner called Keynes's 1936 opus, The General Theory of Employment, Interest, and Money, a "masterpiece" that provides "the best guide we have to the crisis." "Rational expectations and strong views of efficient markets have taken a terrific hit," Posner told Cassidy. "Keynes is back, and behavioral finance is on the march."

Another University of Chicago economist, Raghuram Rajan, told Cassidy that the failure of middle-class purchasing power to keep up with the cost of living stoked a growing demand for credit. Yet to the surprise of much of the economics profession, the side effects of the outpouring of home and auto loans in response ended up being devastating.

Economists could afford to ignore the financial plumbing as long as it didn't back up, said Rajan, who was formerly chief economist for the International Monetary Fund. "Now that the plumbing backed up, you find that loans aren't really made in a pure, pristine market. Things can break down."

Other prominent economic observers as well have set forth kindred Keynesian-tinged explanations of the underlying economic imbalances that led to the housing bubble.

Robert Reich, Secretary of Labor in the Clinton administration, blogged: "In truth, most Americans did not spend too much in recent years, relative to the increasing size of the overall American economy. They spent too much only in relation to their declining portion of its gains." Had their share kept up with that of corporate executives, he argued, they would not have needed to borrow so much.

"As long as income and wealth keep concentrating at the top and the great divide between America's have-mores and have-lesses continues to widen," Reich predicted, "the Great Recession won't end – at least not in the real economy."

One of the most high-profile of the New Keynesians, Nobel Prize-winner Joseph Stiglitz, brings an internationalist perspective to the debate as former chief economist of the World Bank.

Calling for a larger global stimulus package to confront an international crisis, Stiglitz has proposed building stronger automatic stabilizers, such as better unemployment insurance and more progressive tax structures, back into the social safety nets of the U.S. and other countries.

"Markets are at the core of a well-functioning economy, but, by themselves, they are not enough," he wrote. "There needs to be a balance between the role of the market and the role of the government."

"The United States should go and study what good central banks do, in India and elsewhere," Stiglitz wrote recently in the review of the International Labor Organization, "because they actually did avoid the excesses that marred American financial markets. When American banks wanted to sell complex, risky derivatives, one of the central bankers in South-East Asia said, 'Can you explain that?' They said, 'No, we can’t.' She responded, 'Well, if you can’t explain it, you can’t sell it.' Thus, they were protected against the ravages of the derivatives which have had such a negative effect on the United States and Western Europe."

The economist has also broached the idea of a global tax on financial transactions, expanding on the old idea of a so-called "Tobin tax", a tiny levy of a fraction of a percent on foreign exchange transactions. Last October, he told the British paper The Telegraph that "any new tax should be levied on all asset classes – not merely foreign exchange – and would be based on the gross value of the assets, thereby helping to discourage the creation of asset bubbles." British Financial Services Authority Lord Tucker, among others, has also floated the idea of a Tobin tax as a way to damp down international financial speculation.

Stiglitz chairs the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System. The panel's 2009 report calls for understanding and responding to the financial crisis as part of a series of related crises afflicting the earth and its people, bound together by threads of aggressive market fundamentalism. Broadening and democratizing world economic governance, the study suggests, are essential to resolving the crisis.

An extended excerpt from the report follows.

Our global economy is broken. This much is widely accepted. But what it is precisely that is broken and needs to be fixed has become a subject of enormous controversy.

In the view adopted by the Commission, and broadly endorsed in the UN Outcome, the crisis we confront is systemic in the deepest sense and has many facets. On this view, the financial crisis that erupted in the United States in September 2009 is the latest and most impactful of several concurrent crises – of food, of water, of energy, and of sustainability – that are tightly interrelated, connected in important ways by an imperious economic perspective that has been implemented, often under duress, across the globe during the last 35 years.

In this perspective, market logic solves nearly all social, economic and political problems. The well-known staples of economic policy complexity such as the need to address economic and non-economic sources of economic instability (“market failure”), the need to account for costs imposed on others and to redress the unfair appropriation of social benefits (“externalities”), the need for public intervention to provide for the conditions and values of sustainable life (“public goods” and “social equity”) are all regarded as incidental rather than fundamental issues of economic management.

As the Commission stresses with considerable frequency, the present crisis demonstrates failure at many levels – of theory and philosophy, of institutions, policies and practices, and, less overtly, of ethics and accountability. The essential insight of the report is that our multiple crises are not the result of a failure or failures of the system. Rather, the system itself – its organization and principles, and its distorted and flawed institutional mechanisms – is the cause of many these failures.

It is a habit of contemporary speech to refer to the global economy that we have today as “the economy” and, more insidiously, to present it as a natural phenomenon whose putative laws must be regarded with the same deference as the laws of physics. But, as the enclosed report argues cogently, our global economy is but one of many possible economies, and, unlike the laws of physics, we have a political choice to determine when, where, and to what degree the so-called laws of economic behavior should be allowed to hold sway.

An economy is a man-made ecology, or rather the man-made part of our larger ecology of interaction between the man-made and natural worlds. Together the man-made ecology and the natural ecology sustain – or destroy – the conditions of life. It is essential today, as the UN Outcome and this Report both recognize, to view economic and ecological issues as tightly interrelated, and recognize that our global economic system must be adjusted to the requirements of an era in which the risks engendered by centuries of neglect have reached a point of extreme danger and the costs of adjustment must be borne by the present and succeeding generations. The Commission’s Report is forceful on this point: “The conjunction of huge unmet global needs, including responding to global warming and the eradication of poverty, in a world with excess capacity and mass unemployment, is unacceptable.”

As the greatest economic philosophers – whose number surely includes Aquinas, Smith, Marx, and Keynes – have all recognized, homo oeconomicus, the acquisitive, emotionally cardboard, and socially atomistic construct of academic economics is a reductio ad absurdum. They did not merely assume that the ethical vocation of human beings should inform their economic decisions and institutions; they insisted on it, and in ways that today are far out of fashion but are also therefore far more necessary today. It is difficult to read this Report and not come to the conclusion that the Commission members share this perspective.

Fictionomics

2009-11-11T22:09:00.000-08:00

It's a little odd that Harvard economics professor N. Gregory Mankiw, in a recent column in the New York Times ("Supply-Side Ideas, Turned Upside Down", Oct. 31), would cite an anecdote from President Ronald Reagan as evidence that "high marginal tax rates discourage people from working to their full potential."

Professor Mankiw recounts that the President told his staff he used to alter his work schedule as an actor to avoid falling into the top marginal income tax bracket: he and his fellow stars "quit working after four pictures and went off to the country."

President Reagan was a wonderful story teller. Many of his narratives had a troubled relationship with reality — recall the Cadillac-driving welfare queen and the freedom-fighting Nicaraguan contras — but they played expertly on the prejudices and fears of many Americans.

His cautionary tax tale sounds a bit too much like it was ghost-written by Ayn Rand. But even if we buy it, it's not self-evident that the actor's potential was stunted; you could as easily argue that by avoiding overexposure he might have raised his drawing power.

Another consequence might have been that other less well-heeled actors got the roles that Dutch and his pals spurned, spreading the bounty of Hollywood around more widely and giving the studios fresh blood at a lower price.

In the non-fiction world, in any case, only a small part of the workforce gets jobs in discrete chunks like movie contracts. Most of us work in ongoing jobs for continuous paychecks (if we're lucky), and few of us who do work on contract have the matinee-idol option of taking or leaving the next offer. It's a bit of a stretch, for example, to imagine a software executive taking a leave in November because her yearly income is about to put her into the top bracket.

On the macroeconomic side, the 50 percent and higher top marginal tax rates in force from the end of World War II to the beginning of the Reagan era apparently didn't damage the overall economy, either. Average growth rates were higher and prosperity more widely shared in that period than in the following three decades.

Professor Mankiw will need to pump harder if he hopes to resuscitate the cold, rigid corpse of supply-side economics.

This is going to hurt me more than it hurts you

2009-04-30T13:42:00.000-07:00

Hugo Chávez's comment on President George W. Bush at the U.N. in 2006, "The devil came here yesterday and it smells of sulfur still today," was a gratuitous and mean-spirited insult.

But not to President Bush – to the Devil. Even though the President of Venezuela is not known for his diplomatic finesse, being compared to such a lightweight must have wounded Luciferian pride.

The least Chávez could have done was to accurately target his politico-theological barbs. Perhaps the only one in the Bush administration with the gravitas to stand up to the comparison was then Vice President and current Marketing Director for the Spanish Inquisition, Dick Cheney.

Despite his reputation as a heavy, however, even Cheney's spoon wasn't long enough to sup with His Satanic Majesty.

If we can believe Dante, the Prince of Darkness is a connoisseur of torture. The nine rings of Hell are full of testimonies to the ingenuity of his cruelty, each torment elegantly calibrated to a specific sin. For example, those guilty of violence against humans are thrown into a river of boiling blood in the Seventh Circle; below them in the Eighth Circle, corrupt politicians wallow in a lake of burning pitch, and fraudulent advisers are consumed by flames.

The best the Veep's people could come up with was shopworn tactics from Torquemada and ham-handed stunts like slamming heads into walls that could have been licensed from the World Wrestling Federation. To add insult to injury, they called them "enhanced interrogation techniques," which makes them sound like some kind of focus group. Satan would no doubt be deeply offended at being mentioned in the same breath.

Outside of Hades, torture may be good at persuading people to sign false professions of faith or confessions of crime. But any information gained from abuse is inherently unreliable, which is one reason why courts won't accept it.

Many of the people with real operational knowledge of the interrogations of Al Qaeda suspects do not believe the torture detailed in the Justice Department memos provided useful information. Ali Soufan, an FBI agent who earlier had interrogated Abu Zubaydah with traditional [non-torture] techniques, wrote in the New York Times that months before being tortured Zubaydah had been cooperative and provided "important actionable intelligence".

"There was no actionable intelligence gained from using enhanced interrogation techniques [torture] on Abu Zubaydah that wasn’t, or couldn’t have been, gained from regular tactics," he wrote. "In addition, I saw that using these alternative methods on other terrorists backfired on more than a few occasions — all of which are still classified."

Even Stephen G. Bradbury of the Justice Department, who authored some of the memos, acknowledged in one: "It is difficult to quantify with confidence and precision the effectiveness of the program" that tortured the prisoners.

In effect, the whole debate over whether or not torture "worked" to help prevent acts of terrorism is a diversion, because by its nature the effectiveness of torture is not knowable with any confidence.

In the unlikely case that usable information was obtained from a prisoner who had been tortured, how could anyone know if it was the torture that caused the prisoner to provide the information? They would have to be able to get inside the prisoner's head and review the entire experience in captivity to understand motivations. It's not as though they can run double-blind studies or animal tests. Torture is an art, not a science.

Most damningly, even if it appears to the torturers that torture was successful in extracting intelligence, it is inherently impossible to determine whether the same information could have been elicited by legal interrogation methods. They can never step in that same river again to retry different tactics. While the interrogators may have become frustrated with their lack of progress and felt that they needed to use harsher means, that does not necessarily make their perceptions accurate or mean that different non-torture means would not have worked just as well.

Both torturer and victim have ample and contradictory reasons to misrepresent causality to anyone trying to investigate. On the inflicting side, for example, any interrogator who admitted torturing would have a strong incentive to inflate the importance of the results obtained.

Even if the efficacy of torture could be evaluated, however, and even if it turned out to be effective at wringing information out of terrorist suspects, it would still be a crime against humanity and a reckless endangerment of national security.

The Geneva Conventions and laws of war were not made up by bleeding-heart liberals who wanted to hamstring Jack Bauer of "24". They evolved from experience over the past 150 years. The Third Convention on prisoners of war was adopted because most nations and their militaries recognized that they could reduce the likelihood of torture of their own captured soldiers by the enemy by agreeing not to torture enemy prisoners.

Civilization, such as it is, depends on such webs of trust: they are painstakingly woven and painfully easy to tear apart. When Al Qaeda killed thousands of innocent civilians on September 11, they blasted a small hole in those webs, but strengthened the United States while discrediting themselves. Most of the world reacted with an outpouring of sympathy and support for the victims and revulsion with the terrorists.

One of the most serious of the Bush administration's sins against the security of this country was to convert that solidarity into widespread condemnation of a neo-imperial war launched with contemptuous lies, and accompanied by serial attacks on the international social and legal fabric.

The Justice Department memos and other evidence now reveal that that the torture of prisoners was partly an effort to fabricate a justification for that war. "High Bush officials put heavy pressure on Pentagon interrogators to get Mohammed and Zubaydah to reveal a link between Saddam Hussein and the 9/11 hijackers," wrote Marjorie Cohn, professor at the Thomas Jefferson School of Law.

The Bush administration, most notably Cheney and Rumsfeld, wanted "to find evidence of cooperation between al-Qaeda and the late Iraqi dictator Saddam Hussein's regime," according to McClatchy News, citing a former senior US intelligence official and a former Army psychiatrist.

Well before the Justice Department memos, President Bush had issued a determination that "Common Article 3 of the Geneva Conventions, which would have afforded minimum standards for humane treatment, did not apply to al-Qaeda or Taliban detainees," according to a Senate Armed Services Committee report. One of the Justice Department memos suggested that as commander-in-chief, the President could override the federal anti-torture statute.

In the Bush administration's Hobbesian worldview, only a stealth Leviathan unrestrained by puny laws could save us from the "warre of each against each". Beyond any tactical purposes, a major strategic goal of torturing captives and invading Iraq, along with many of the Bush administration's other initiatives, appears to have been to establish the unchallengeable power of a Unitary Executive above constitutional checks and balances, national and international law, treaties and human rights.

What is emerging into daylight looks like an effort to roll history back to before Watergate and breathe new life into Nixon's circular self-justification: "When the president does it that means that it is not illegal." Or as the DOJ's Bradley put it to the Washington Post in 2006: "The president is always right."

It would be a welcome and fitting act of international censure for Spanish judge Baltasar Garzón to indict the perpetrators for war crimes and request extradition. On April 29, according to the Spanish daily El País, he opened an investigation of what he called "an authorized and systematic plan of torture and abuse of persons deprived of liberty without charges and without the elementary rights of all detainees required by the applicable international conventions" in Guantánamo and other prisons, including Bagram (my translation).

There's a certain poetic justice in the idea of a nueva Inquisición secular making the modern torturers squirm through legal means (even if rivers of boiling blood or lakes of burning pitch might have more deterrent value).

But only our own government, under pressure from its citizens, can investigate and punish the hijacking of our Constitution, our national security apparatus, and our moral stature.

If the leaders of the richest and most powerful empire in history can claim that its defense requires them to torture prisoners, what government or armed group can and will not make the same claim?

When millions around the world see those acts of barbarity as an attack on our common humanity and the very idea of the rule of law, only a forceful demonstration that this country rejects torture, is punishing the transgressors, and has restored respect for international norms to our policies and actions can begin to restore confidence and remedy the damage.

For a better bailout, call Tony

2009-03-13T12:35:00.000-07:00

The Obama administration is looking for bipartisanship in all the wrong places. The Republican leadership in Congress simply wants to eviscerate any stimulus plan. The goal of the Taliban of Market Fundamentalism is to give the new president a black eye and to “starve the beast” of government.

At the grassroots around the country, however, there’s a rare opportunity in the groundswell of bipartisan fury at the financial industry and its Bush/Paulson bailout.

It’s time to play the blame game with brass knuckles, because it’s blindingly obvious that much of the leadership of this industry and their friends in government truly are at fault for the financial implosion. There’s momentum to hold those who made bad decisions accountable and to restructure the industry so that it can’t bring down our real economy again.

The ultimate goal of a public bailout of banks and investment houses should be to take the Vegas out of Wall Street. We are all suffering now because finance became a perverse casino where small numbers of very rich people used deregulated, superheated markets to multiply their winnings many fold, but now expect the public to cover their losses.

To de-Mammonize this mess, we need less Mother Teresa and more Tony Soprano.

We need some wise guys to take some regulatory two-by-fours, put a serious hurt on the gavoni of the Wall Street brugad, break up their CDS-smoking, leverage-like-there’s-no-tomorrow party, and run them off our turf.

The invisible nose has been snorting designer derivatives, and the invisible hand has been picking the public pocket to supply its habit. It’s time to make them visible and carefully dissect their failures.

For starters, taking stock of an historic catastrophe requires a truth commission, not a new idea but a good one. In the early 30s, for example, Ferdinand Pecora and the Senate Banking and Currency Committee shone a spotlight on the dealings of the "unscrupulous money changers” that the New Deal chased out of the temple.

For the Crash of 2008, the mandate of the straight-shooting Elizabeth Warren of Harvard and her Congressional Oversight Panel investigating TARP could be expanded to go after root causes.

The financial industry is already cosa nostra, our thing. The Paulson/Bush bailout effectively nationalized it, but without taking control of the rudderless ship or getting value for the public in return. It was welfare for the rich and incompetent with no strings attached, the Reagan Revolution ideal of privatizing profits and socializing losses on steroids.

Warren’s panel found that in the 10 largest TARP transactions, “for every $100 spent by Treasury, it received assets worth, on average, only $66”. On the first $254 billion spent, total taxpayer losses were $78 billion.

A “Bad Bank” would further nationalize the financial industry, but only the toxic stuff that's about to go critical. Bad-a-bank, bad-a-boom.

You got a problem with nationalization? Conservatives may get in a lather about the word, but it's funny how often they're the ones who end up tapping toesies with the commie menace in the next toilet stall.

Who was it who temporarily nationalized the banks in Sweden in the early 90s? A conservative government. And who was that who set up the Resolution Trust Corporation in 1989 to nationalize the failing thrifts? Shrub's daddy. And whose FDIC already nationalized IndyMac and other small banks last year? Who but the right would overdosing financial markets prefer to call on to talk them down and dispose of the evidence?

Here’s a conservative idea: we expect our government to invest our money to yield the best return with the lowest risk and the greatest public benefits. When you hire a broker to work for you, you expect this. When a company hires a CFO, it expects this. When the government takes a stake in a failing bank, we expect this.

We don’t want strings attached to public money: we want steel cables. Or as Tony might put it: you work for us, you deliver the vig, or we’ll have to take a little walk.

The careers of those who screw up get a one-way voyage on a cabin cruiser off the Jersey shore. Don’t just cap executive salaries: kneecap the contracts of the top couple of tiers of executives and let them reapply for their positions.

Ice the shareholders and bondholders: they lose their stakes, or at best get no more dividends until the public recoups its investment. Welcome to capitalism.

Avert future bailouts by carving up the zombie mega-banks and financial firms into smaller units that are not “too big to fail”. Rebuild and modernize the Glass-Steagall firewall between commercial and investment banking. Deconsolidation would create the side benefits of more jobs at the lower end and reduced ability of smaller firms to throw their weight around politically.

Recreate the financial industry as a reliable source of credit for real needs, not a criminal conspiracy ripe for a RICO prosecution. Turn it into a boring, safe place to work where you can make a good, steady living, but not a killing.

Whack Gordon Gekko. Make George Bailey from “It’s a Wonderful Life” a capo.

While we’re at it, how about fixing credit-ratings firms like Standard & Poor’s and Moody’s so they can never again take money from the businesses they’re supposed to be rating? Talk about a sweet racket.

As long as we're already in the business, think big: try retooling some of the banking capability we’ve been forced to buy into a national infrastructure bank that issues public works bonds, an idea from the Brits. Waste disposal can be a very creative business, as Mr. Soprano has ably demonstrated.

For consiglieri, tap some of the bookies who got the odds right on this crisis, people like Dean Baker of the Center for Economic and Policy Research, Robert Shiller of Yale and Nobel laureates Paul Krugman of Princeton and Joseph Stiglitz of Columbia.

Save Mother Teresa for the people in lower-level jobs in the banks and any other firms the public bails out. Use a good piece of the skim to save their jobs or help them find new ones.

Beyond Mother T, call in the spirit of Mother Jones, the tough old mineworkers’ leader, for the homeowners and renters who have been whipsawed by deceptive lending and deflation of the housing bubble. Keeping as many as possible in their homes would have the side benefit of helping to stabilize some of the mortgages and mortgage-backed securities that continue to stoke the crisis.

It’s not about charity, it’s about solidarity: a public-spirited bailout has to recognize that we’re all in this together and work from the bottom up. But – no disrespect – a little muscle wouldn’t hurt either.

Full disclosure: I grew up in New Jersey as a member of a dis-organized non-crime family.

Joe Nostalgia

2009-03-13T01:19:00.000-07:00

Joe the Plumber sweated the joints of a drab election season with the propane torch of true conservatism, blinding us all with its radiance. So I felt a little betrayed when I read the latest doings of Samuel Joseph Wurzelbacher.
Pajama TV, a conservative Internet site, reported that he is suing Ohio officials for violating his privacy rights (Joe Wurzelbacher Goes to Court, March 9, 2009). He also has his own show on PJTV, Just Joe, from which he reported from Israel on the Gaza War in January.
OMG, trial lawyers and journalists - say it ain't so, Joe. You're becoming the people Rush warned you about.
Sic transit gloria mundi.
Read the original story:
POLITICS-US: Plumbing the Depths of Spin
Analysis by Peter Costantini
October 27, 2008
http://www.ipsnews.net/news.asp?idnews=44457

Shrub Nostalgia

2009-03-13T01:10:00.000-07:00

Are we ready yet for George W. Bush nostalgia, while a generation of comedians is still in deep mourning? Although his father may have been born with a silver foot in his mouth, in Ann Richards words, the son practiced a genre of wordsmithing tailored to the times, somewhere between a badly translated electronics manual and text messaging.
Generous historians will also recognize that he served as lookout for perhaps the highest stakes – and certainly the most innovative – floating crap game in financial history.
Read the full story:
ECONOMY-US: This Sucker Could Go Down
Analysis by Peter Costantini
October 7, 2008
http://www.ipsnews.net/news.asp?idnews=44168

Crash Nostalgia

2009-03-13T00:24:00.000-07:00

Can anyone remember last September, when 700 billion dollars still seemed like a big bill for the financial bailout?
Way back then, just as the credit-default swaps were hitting the fan, I interviewed Dean Baker of the Center for Economic and Policy Research for Inter Press Service. For years, Baker has been one of the most prescient economists in calling attention to the housing bubble and criticizing the handling of it by the Fed and the Bush administration.
In the interview, he pointed to the need to insure that the creators of mortgage-backed securities retain some responsibility for them:

IPS: In the long term, what regulations need to be put in place to fix these markets?
DB: First let's back up a step. The Federal Reserve board allowed the housing bubble to grow. The bubble could have easily been attacked, but [Fed chief] Alan Greenspan made the decision not to. If he had, you wouldn't have had a lot of these problems.
Beyond that, he was totally derelict in enforcing a lot of regulations. Everyone knew that a lot of garbage loans were being made. They could have easily cracked down on that - that was incredible negligence.
As to the deeper structure of the markets, it makes sense to make sure that the issuers of mortgage-backed securities have a stake in them, so that they don't have an incentive just to issue garbage loans and sell them on the secondary market.
As a practical matter, though, I don't know if the regulators will have to do anything, because I don't think anyone's going to buy mortgages from people who don't have a stake in them. Wall Street might actually want the regulation because they want people to believe that they're selling good assets.

Read the full interview:
Q&A: Brother, Can You Spare 700 Billion Dollars?
Peter Costantini interviews DEAN BAKER
September 27, 2008
http://www.ipsnews.net/news.asp?idnews=44041