How Mitt Could Win

Why doesn’t Republican presidential contender Mitt Romney’s free-market gospel include a ringing call to break up the too big to fail banks?

Over at the conservative American Enterprise Institute blog, James Pethokoukis suggests Romney could benefit if he did just that.

After all, this is no longer a position favored only by Occupy Wall Street.

All kinds of establishment figures now acknowledge that breaking up the big banks is needed to heal our financial system, and that as long as we don’t, taxpayers could be on the hook for another bailout.

The most recent public official to reach this conclusion is none other than Richard Fisher, the president of the Dallas branch of the Federal Reserve, who last week issued a report in which he concluded: “The too big to fail institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism.”

This should be catnip for Romney, who professes to be all about ending government interference in the free market.

What the Dallas Fed’s report makes clear is that the Dodd-Frank financial reform legislation and the policies of the Obama administration haven’t lessened the power of the too big to fail banks, or made them healthier – it’s helped them gain market share while doing little to force them to reduce the same risky business practices that led to the 2008 financial collapse.

While Dodd-Frank theoretically sets up a process to deal with too big to fail institutions when they get in trouble, our politicians and regulators by their actions have signaled to the big banks that they don’t have the guts to break them up or get them to change how they do business.

For a politician in Romney’s position, staking out a position against the big banks would give him the high ground against the president, who claims to be reining in the banks’ bad behavior but isn’t.

It would help him with the Tea Party activists, who rail against the bank bailouts and crony capitalism. Promising tough action on the banks would also help him with independents who understandably don’t trust all the political double-talk they hear.

But Romney doesn’t have the  guts to do it. His free market rhetoric stops right at the bankers’ door, where he must appear meekly with hat in hand, asking for donations, just like the president of the United States, from bankers who continue to prosper only because of the trillions of dollars worth of favors done for them by politicians using taxpayers’ money.

The top 5 donors to Romney’s campaign are people associated with bailed out banks, according to the Center For Responsive Politics. The president raised an unprecedented $15.8 million from the financial sector in 2008, while his administration was in the midst of bailing them out. Though Romney has the edge in Wall Street fundraising now, the president has vowed to fight back ­– including a pledge not to demonize Wall Street.

The big media and the politicians all talk about these policies as though they’re great intellectual debates about clashing views of the role of government. But when it comes to the too big to fail banks, all Romney’s free market preaching is just so much hot air.

This is the dishonest heart of our politics. What neither Romney nor the president, nor apparently the American Enterprise Institute, can acknowledge is that it’s all about the money.

 

Martin Column / Mitt Romney / President Barack Obama / Too Big To Fail - 03/30/2012

Purchasing power, One-Percent style

There’s been a good deal of talk about how the Occupy movement “changed the debate in this country” to focus on income inequality.

But while members of Occupy Wall Street skirmished  with police over a patch of ground in lower Manhattan, the members of the country’s top 1 percent bypassed the political debate and have gone back to work wielding their influence in the corridors of power.

It’s been a particularly wrenching patch for the 99 percent, who are excluded from those corridors.

First, Congress this week, with President Obama’s blessing, passed something Republicans misleadingly labeled a JOBS Act, which basically gives a green light for fraud by removing important investor protections under the guise of promoting startups.

Second, Congress has been pushing financial regulators to weaken even further a mild piece of sensible financial regulation that would prevent banks from making risky gambles with their own accounts – the ones guaranteed by you and me as taxpayers. It’s the final coup de grace marginalizing the views of one-time Federal Reserve chair Paul Volcker, for whom the rule is named. Volcker has been a lonely voice among the president’s financial advisers, advocating stronger action to rein in the behavior of the too big to fail banks. Largely ignored by the president, Volcker’s views are getting stomped by Congress and financial regulators.

There is no mystery why we have suffered these setbacks: our political system has been overwhelmed by the power of money. The bankers lobby has swarmed the Capitol to drown any opposition to its views. The bankers have also come with their checkbooks in an election year, and they’re looking to buy whoever is for sale, of whatever party. According to a new report by Public Citizen, politicians who advocated for a weaker Volcker rule got an average of $388,010 in contributions from the financial sector – more than four times as much as politicians advocating to strengthen the rule, who still managed to haul in an average of $96,897 apiece.

Our politicians, insulated by a celebrity-obsessed media and swaddled in Super PAC cash, could care less about the consent of the governed. Republicans have only to wave around their magic wand that makes all problems the fault of government regulation in order to hypnotize their followers, while the Democrats only have to remind their followers how scary the Republicans are to keep them in line.

Meanwhile, the Occupy movement, which started with such promise in galvanizing public support against corporate domination of our politics, has splintered into a thousand pieces, wasting precious energy and time in confrontations with police rather than building a broad-shouldered coalition working on many different social and political fronts.

The challenge for Occupy remains the same: building a force that actually includes the members of the 99 percent who have not yet gotten active, who may be still stuck in apathy, cynicism or hopelessness or who may simply not have a perspective that includes social and political action.

The next opportunity is a series of protests planned nationwide for May 1, which has traditionally been a time of action around the immigration rights issue. This year occupiers, labor allies and a variety of community organizations are planning to join their issues. Can we forge a message strong enough and the numbers large enough to rock the corridors of power?

Congress / Martin Column / Occupy / Paul Volcker - 03/28/2012

The Health Care Games

Like the Hunger Games, in which leaders of the 1% connive to rig a contest so that a charismatic representative of the 99% is defeated, there’s lots of intrigue behind the US Supreme Court hearings on the federal health care law that begin today.

The ostensible issue before the high court is whether the universal health care system established by Congress in 2010 is constitutional. Like the systems in most other developed nations, that law requires all Americans to be covered – whether through their employer or by purchasing it directly. Now this is just plain arithmetic: you can’t have a solvent universal care program if participation is voluntary, because the young and healthy won’t bother to pitch in until they get sick, leaving the older and less healthy to cover most of the cost. Universal means everyone has to be part of it – both getting the medical benefits and paying for its cost.  Today, taxpayers end up bailing out people who don’t buy insurance and then get sick or in an accident.

But the corporate funded US Chamber of Commerce and other right wing entities, plus anti-government foes (including most of the Republicans candidates who want to run the government), argue it was unconstitutional for Congress to order everyone to pay for health insurance. My problem with that part of the law – known as the "individual mandate" – is that you have to buy the insurance from private insurance companies, and there is no limit on what they can charge you. That’s gotta be fixed, and a campaign is underway to do that in California. As everyone knows, however, Obama lifted his health care proposal from the law that Mitt Romney, then Governor of Massachusetts, enacted there in 2006. So its obvious that a big part of why the corporate Republican establishment opposes the law is that it was backed by a Democrat – Obama – and they don’t want him or any other elected Democrat to be able to claim any political victories.

There’s much more to the Supreme Court case than crass party politics, in any case. Many on the corporate right are hoping the US Supreme Court will issue a sweeping decision like they did in Citizens United, this time ratcheting back Congress’s regulatory authority across the board and therefore bolstering the power of big corporations – just as Citizens United did, in the guise of granting corporations a new right to corrupt elections under the First Amendment.

A decision limiting Congress’s power to regulate pollution would be a huge win for chemical manufacturers; drug and tobacco companies want to escape the Food and Drug Administration’s safety requirements; Wall Street wants taxpayer bailouts with no strings attached.  As I wrote a few weeks ago, the powerful elites in this nation think that the health care case is the Supreme Court’s best opportunity in decades to roll back constitutional rights to the deregulated era of excess that led to the First Great Depression eighty years ago. This will be done in the name of protecting Americans against the intrusion of government in their lives.

In the Hunger Games, the hundred thousand wealthiest people in “Panem” gather in their Capitol to watch as twenty-four randomly selected citizens fight each other to death. This is a yearly penance, we are told, imposed by the wealthy in response to an earlier, unsuccessful revolt by the 99%. The Games provide an excuse for a non-stop party for the powerful – like Mardi Gras only with unimaginable excess.  The citizens – known as “Tributes” – come two each from all twelve “Districts” in the country. Those Districts looked a lot like many parts of the United States. People trudge to poor-paying jobs and live in flimsy structures one step up from homelessness. They shop at flea markets where barter is common. They catch their own food. They help each other out because the Capitol has long since abandoned them.

There are other eerie similarities and ironies. In the Hunger Games, the entire game area is wired with cameras and the contest is continuously broadcast to the nation on enormous screens. This quickly turns to the disadvantage of the 1% in the Capitol, because the 99% become inspired by watching the heroine’s courage and humanity and start to rebel anew.  This is a lesson our Supreme Court has already learned: you can forget about seeing any of its hearings on the health care law on a screen of any size. Watching the Justices and corporate lawyers rework the Constitution into a weapon of the mighty might anger some Americans. So the Supreme Court has banned any video… but says it will release audio at the end of each day’s hearing.

It’s clear from the movie that the elites have powerful medicines that can instantly eliminate infections and heal wounds, but residents of the Districts have never seen that kind of health care. I guess the Panem Chamber of Commerce would argue that these citizens are fortunate to be “free from government interference in their lives.”

Citizens United / Congress / Harvey Column / Supreme Court - 03/25/2012

Etch-a-Sketch Politicians in a PAC Man world

Every once in a while a jaded political operative utters a profound truth, cutting through all the baloney and phony punditry.

That’s what Mitt Romney’s adviser did when he suggested that his boss could just hit “reset” and adopt more moderate positions once he locked up the Republican nomination and didn’t have to cater to the far right of his party. “It’s almost like an Etch-a-Sketch,” the aide, Eric Fehrnstrom, said. “You can kind of shake it up, and we start all over again.”

Sure, all of Romney’s foes will now clobber him with his aide’s comments and try to score political points off the “gaffe.”

But Fehrnstrom was offering a truth that rarely gets told in big media about how our politicians operate.

Romney and his fellow candidates count on voters not to pay attention, to leave them plenty of room to gloss over earlier statements.

Politicians count on the media’s cynicism and its craven need for access to power to blunt any remaining watchdog instincts. The media ignore commitments the candidates make and contradictions between what they do and what they said, shrugging it off because “everybody does it.”

Romney has had to shake the Etch-a-Sketch hard to erase the image of himself as the moderate Republican governor of Massachusetts whose own health care plan provided the template for President Obama’s health care plan, while candidate Romney now falls over himself to oppose the plan.

But the president has his own image shifts to answer for.

For example, candidate Obama portrayed himself as a strong advocate for the 99 percent, promising to change bankruptcy laws to help homeowners facing foreclosure keep their homes.

That shift, known as “judicial cram-downs,” would have provided a powerful incentive for banks to work out loan modifications with homeowners.

But when bankers fought cram-downs, President Obama quietly folded and judicial cram-downs died in Congress. Since then, the president and his administration have offered a series of limp anti-foreclosure measures that rely on voluntary bank cooperation, with paltry results.

But the Etch-a-Sketch is a pretty old toy. The current political season reminds me more of a slightly less retro game that gripped the public imagination – Pacman. In this wildly popular video game, a pizza-shaped icon gobbles up everything else on the screen.

The Supreme Court’s Citizens United ruling unleashes unlimited, anonymous contributions to political action committees, or PACs, aligned, but not formally tied, to specific candidates.

Unfortunately, when it comes to using the PACs to bolster their campaigns, the Republicans and Democrats are on the same page.

Both are eager to gobble up the gazillions of dollars available through the PACs, thoroughly undermining the spirit and practice of democracy, in which the majority, not the super-rich minority, are supposed to win.

The best way for us to shake up the political establishment, and the billionaires and big corporations who control it, is to fight for a constitutional amendment to overturn Citizens United.

Here’s our version of such an amendment, written in language that’s easy to understand and will withstand any legal challenge.

 

 

 

 

 

 

 

Citizens United / Martin Column / President Barack Obama - 03/23/2012

Bipartisanship for dummies

Ever notice how all the dysfunctional wrangling in D.C. stops the minute our politicians need to do the 1 percent’s bidding?

When it comes to taking away your rights as an investor, consumer or citizen, politicians who can’t seem to agree on anything else seem to work together fine.

The latest proof that “bipartisanship” is a cynical gimmick is the so-called JOBS act, passed by the House with bipartisan support and now under consideration by the Senate, with the blessing of President Obama.

In this case, the bill’s original Republican sponsors came up with the idea of packaging a collection of measures that would weaken investor and consumer protections by the acronym JOBS, which stands for Jumpstart Our Business Startups.

After all, who could be against JOBS? Most Democrats in the House were happy to sign on – only 23 voted against it. Even Democratic representatives Nancy Pelosi and Maxine Waters voted for it.

Maybe these politicians thought the JOBS branding and the bipartisan marketing would conceal what the bill really was – the latest of several disastrous bills dismantling sensible financial regulation.

The JOBS act is the ugly stepchild of the 1999 Gramm-Leach-Billey Act repealing the Depression-era Glass-Steagall Act, which kept banks from mingling federally-guaranteed banking activities from riskier activities, and the 2000 Commodities Futures Modernization Act, a Frankenstein bill that kept credit default swaps deregulated and led to the Enron scandal in 2001.

Both pieces of legislation contributed directly to the 2008 financial collapse.

In the case of the JOBS act, it would gut many of the accounting reforms contained in the Sarbanes-Oxley Act, which was passed in the wake of the Enron debacle. The JOBS act would exempt emerging companies worth up to $1 billion from disclosure, reporting and governance rules. It would allow such companies to operate for 5 years without regulatory oversight.

John Coffee, securities law professor at Columbia University Law School, says it could be more accurately described as the “boiler room legalization act” because it would allow companies to raise money from small investors on the Internet, without any regulatory supervision, evoking the small operations that sold dubious investments over the phone using high-pressure tactics.

Arthur Levitt, former head of the SEC, told San Francisco Chronicle columnist Kathleen Pender the bill was “a disgrace.”

In a scathingly sarcastic column in the New York Times, Pro Publica’s Jessie Eisenger wrote: “Nigeria shouldn’t be the only country to benefit from the Web. Right here in America, the elderly are increasingly attractive to a variety of entrepreneurial spirits. If JOBS becomes the law, such innovators could flourish.”

Barbara Roper, the Consumer Federation of America’s director of investment protection suggested that “Republicans cannot believe they have suckered the Democrats into taking up their idea that deregulation is the way to promote job growth.”

I don’t think the Democrats got suckered. I think they know exactly what they’re doing. President Obama has been struggling in his fundraising because Wall Street and the big-money donors have lost their enthusiasm for him this electoral cycle.

But he’s showing signs of bouncing back, after his campaign manager, Jim Messina, issued a pledge that the president would stop demonizing Wall Street. In February, the president went on a fundraising blitz, raising $45 million, up from $29 million the previous month.

But it’s still far less than the $56 million he raised during the same month in 2008, when he was fighting Hilary Clinton in a bruising primary campaign. The president and his party have to deliver for their funders, and the JOBS act is a perfect gift to show the big donors what they can expect for their generosity.

But they all must take us for a bunch of clods if they think we can’t tell the difference between a nasty attack on our rights and real jobs promotion.

Call your senator today and remind them you can’t be fooled by an acronym.  Suggest you know how to spell jobs, and this awful piece of legislation doesn’t.

 

Congress / Derivatives / Jobs crisis / Martin Column / President Barack Obama - 03/20/2012

Muppets v. Goldman

It’s been a rough couple of months for the Muppets. First Fox News anchor Eric Bolling denounces their new movie as dangerous left-wing propaganda because it portrays a villainous oil company executive.

Then Goldman Sachs executive Greg Smith quits his job and discloses in a scathing hatchet job of the firm’s culture that his fellow bailed-out bankers refer to their clients in a derogatory way as Muppets.

And what do they mean by that?

Hmmm. Maybe they think Muppets are puppets that are manipulated by their handlers. Maybe Goldman Sachs bankers imagine us to be lifeless sacks of cloth and yarn without spirit and voice, but we’re not.

And no self-respecting Muppet would put up with the shenanigans of Goldman Sachs (though I suppose their corporate owners, the Walt Disney Co., might).

The Muppets have always had a strong populist streak – they articulate sharp critiques of the Greed-is-Good Wall Street culture that Goldman appears proud to embody.

Check out the song “Money,” co-written by comedian Stan Freberg and Ruby Raskin. Performed by Dr. Teeth, it ridicules the rampant desire for more, more, more money at the expense of everything and everyone else.

At the end of the song, Dr. Teeth yanks a slot-machine handle on the side of his piano – which pays off.

If you have any doubt about whether the Muppets would side with the 1 percent or the 99 percent, check out their version of a “A Christmas Carol.”

In his farewell exposé—beyond his Muppet revelation— Smith merely confirms what we’ve already known: Goldman Sachs and the other powerful too-big-fail institutions believe they can get away with screwing their clients by protecting themselves with high-level political clout, bought with political contributions and cemented with interlocking relationships between the government and the firms.

As Robert Scheer points out, it was just a day before Smith unloaded on Goldman that a former top aide to Treasury Secretary Timothy Geithner, Jake Siewert, became the managing director and global head of Goldman’s corporate communications. Siewert is just the latest of a long line of public officials to cash in at the big banks.

How perfect that a high-level member of the Obama administration, which has chosen to align itself with the interests of the big banks time and time again, will now be the one to design Goldman’s defense against the bad publicity stemming from Smith’s oped.

Scheer, along with Matt Taibbi—another astute reporter/commentator on the financial collapse and its aftermath—are full of praise for Smith’s stepping out so publicly.

For myself, I wish that Smith had been willing to step up and connect Goldman’s policies to the financial collapse, not to mention the role Goldman has continued to play in rigging our political system to escape the consequences of its devastating greed and fraud.

That may be too much to ask of somebody on his first day out of the protective Goldman bubble. Make no mistake, it’s not just clients the firm has manipulated for its own gain.

Goldman and the other to-big-to-fail banks have turned us all into puppets, holding over our heads the specter of fear, and pulling the strings to secure a hefty back-door bailout for themselves.

As for the Muppets, I’m sure they’ll weather their current troubles with aplomb. Hopefully their creators are busy at work on a scheme for revenge.

I’ve never seen a Muppet either shut up or stand still while someone ties her hands behind her back. It’s the rest of us I’m worried about.

Goldman-Sachs / Martin Column / Too Big To Fail - 03/17/2012

No-fault settlement fuels never-ending bailout

Two striking details reveal the true nature of the highly touted national foreclosure settlement.

The first is that the banks admit no wrongdoing.

Here’s a sample of the illegality and the misconduct with which the federal authorities and the 49 state attorneys general charged the banks. It goes way beyond robo-signing, the banks’ widespread practice of using forged or unverified documents in the foreclosure process:

▪                Providing false or misleading information to borrowers,

▪                Overcharging borrowers and investors for services of dubious value,

▪                Denying relief to eligible borrowers,

▪                Foreclosing on borrowers who were pursuing loan modifications,

▪                Submitting forged or fraudulent documents and making false statements in foreclosure and bankruptcy proceedings

▪                Losing or destroying promissory notes and deeds of trust,

▪                Lying to borrowers about the reasons for denying their loan modifications,

▪                Signing affidavits without personal knowledge and under false identities,

▪                Improperly charging excessive fees related to foreclosures

▪                Foreclosing on service members on active duty

▪                Making false claims to the government for insurance coverage

But the feds and the state attorneys general want to let the banks off the hook without having to admit to any of it.

This is the kind of no-fault settlement for which the Securities and Exchange Commission has increasingly come under fire, [but which companies agree to as a cost of doing business. For example, the national foreclosure settlement only costs the banks about $5 billion in real money, a drop in the bucket compared to their profits. It’s not enough to actually deter the banks from future bad conduct.

The rest of its estimated $25 billion value is supposed to be determined by a complex series of credits that the bankers get for what they should be doing anyway – modifying mortgage loans and offering principal reductions to underwater homeowners.

The authorities still have to get a judge in Washington, D.C. to sign off on it.

Too bad the settlement wasn’t presented to U.S. District Judge Jed Rakoff in New York, who’s been adamant in questioning no-fault settlements and refusing to rubber stamp them.

His comments, though directed at the SEC, are relevant to the national foreclosure settlement.

Rejecting an SEC no-fault settlement with Citigroup last November, Judge Rakoff said that such settlements are “hallowed by history, but not by reason” and create the potential for abuse because they ask “the court to employ its power and assert its authority when it does not know the facts.”

Rakoff questioned what government officials would get from the settlement “other than a quick headline.”

Though he was talking about an SEC settlement with Citigroup, he could have been describing the national foreclosure settlement, which exacts too little a price from banks for their wrongdoing and offers too little to homeowners.

The settlement provides that banks will spend $17 billion on principal reductions and another $3 billion on refinancings. But according to an analysis by the Brooking Institute’s Ted Gayer, less than 5 percent of the nation’s 11.1 million homeowners will qualify for help under the settlement.

It also presents the general laundry list of wrongdoing without any specificity – it names no names or specific facts. One of the big criticisms of the foreclosure settlement is that the authorities didn’t do a real law-enforcement style investigation to assemble a case before sitting down to “negotiate” the settlement, weakening their hand with the banks.

The second aspect of the foreclosure settlement that reveals its weakness is how the authorities are suggesting they’re going to monitor whether the banks will comply. Just exactly how are we going to make sure that the big banks deliver even the relatively small number of loan modifications and principal reductions they’ve promised?

According to the settlement, the banks themselves are going to self-report on their progress.

Then an “independent” monitoring committee is going to check these reports, and then levy fines if the banks aren’t hitting certain targets. But the monitors consist of the same regulators who have already facilitated the banks’ earlier failed foreclosure mitigation efforts, and have touted this current settlement as a “landmark.” Having already proved their reluctance to get tough on the banks so far, how much incentive do they have to get tough with banks later on?

It sounds flaky to me.

The whole robo-signing scandal stems from banks use of forged, false or unverified documents, poor recordkeeping and the inability of anybody in the courts or government to get the banks to follow the law or hold them accountable.

On top of that, when it comes to keeping their previous commitments to deliver loan modifications in earlier attempts to address the foreclosure crisis, the banks have failed miserably.  The investigative journalism outfit Pro Publica has assembled reams of data about the shortcomings of previous government-sponsored loan modification efforts.

So now we think it’s a good idea for them to police themselves?

The entire settlement looks more like the government’s latest efforts to prop up the nation’s floundering too big to fail banks than a real attempt at either law enforcement or robust help for homeowners and the housing market.

Where is Judge Rakoff when we really need him?

 

Foreclosure / Martin Column / Outrage / Too Big To Fail - 03/14/2012

Citizens United Was Not the First (And May Not Be the Last)

Citizens United is hardly the first time that five justices of the U.S. Supreme Court have granted corporations special rights under the Constitution. In fact, you can chart the twists and turns in the politics of our country by the Supreme Court’s interpretation of the Constitution’s protection of big business.

During the First Gilded Age, when utility and railroad companies accreted enormous political power, the nation’s high court routinely blocked progressive reforms on the ground that they interfered with “freedom of contract.” The era is known by its most controversial decision, Lochner vs. New York, in 1905. The U.S. Supreme Court struck down a state law that barred bakers from being forced to work more than ten hours a day.  The Court relied on a creative interpretation of the Fourteenth Amendment, which commands “No State shall … deprive any person of life, liberty, or property, without due process of law…”

Just as Citizens United equates money with freedom of speech under the First Amendment, the five to four majority of the Supreme Court in Lochner equated “liberty” with the “right” of a company to impose onerous and often dangerous working conditions on men, women and children. This judicial policy of deregulation combined with speculation and greed to produce the Great Depression. But President Roosevelt’s efforts to rescue the nation from the financial abysss were blocked by the Supreme Court, until Roosevelt provoked a constitutional crisis by proposing to add additional justices to the Supreme Court (one for every justice over seventy years old!) to create a majority that would support his legislation. In effect, FDR chose to fight politics on the high court with more politics. Having impaired the Court’s integrity and independence, the pro-big business Justices backed down, permitting New Deal legislation to take effect. Twenty years later, the Supreme Court acknowledged that, “the day is gone when this court uses the Due Process Clause of the Fourteenth Amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought.”

Though the Supreme Court ultimately stopped second-guessing the policies enacted by the Legislative Branch under the guise of interpreting the Constitution, its decision in Citizens United reflects an increasingly politicized Supreme Court. And what goes around, comes around. Even as Citizens United has ignited a grassroots rebellion and calls for a constitutional amendment to undo the Supreme Court's damage to our democracy, scholars and pundits on the corporate-funded right are promoting the resurrection of Lochner.  The legal attack on the 2010 federal health care reform can be seen as one manifestation of a revived challenge to the power of government to regulate industry.  We’ll see how this plays out with the current majority of the Supreme Court when they begin to hear arguments against universal health care later this month.

Citizens United / Harvey Column / Supreme Court - 03/12/2012

Nice recovery, if you can afford it

According to economists and the media, in June 2009 we came out of the deepest recession since the Great Depression and we’ve been on the upswing since. Unemployment’s down, with corporate profits recouping their losses from the recession and hitting new highs along with the stock market.

But it really continues to be a tale of two economies: one that works for the 1 percent and another, in which the 99 percent are increasingly falling behind.

For some striking evidence, look at the recent study by a prominent economist reported in the New York Times.

As the recovery took hold in 2010, UC Berkeley economist Emmanuel Saenz reported, the top 1 percent captured 93 percent of the income gains.

Top incomes grew 11.6 percent in 2010, while the incomes of the 99 percent increased only 0.2 percent. That tiny gain followed a drop of nearly 12 percent over the previous two years – the largest two-year drop since the Depression.

Other signs on the economic landscape also show the wreckage for those not protected by wealth.

Despite a dip in unemployment and the most the most recent more optimistic job creation numbers, the economy isn’t producing enough jobs on a sustained basis to permanently reduce unemployment. And many of the jobs that have been created pay severely reduced wages. Under the two-tiered wage systems increasingly favored by U.S. corporations, new blue-collar jobs pay start at a steeply lower hourly wage than they did in the past – $12 to $19 an hour as opposed to $21 to $32.

One in seven Americans are on food stamps, while high gas prices put the squeeze on low-income and working people alike. Meanwhile, foreclosures are on the rise in the wake of the state attorneys general announcement of a settlement over foreclosure fraud charges with the biggest banks, though the details of the settlement still haven’t been released.

The Occupy movement has put the great divide between the 1 percent and the 99 percent on the political map, forcing President Obama to acknowledge income inequality in his state of the union speech as the “defining issue” of our time, while the Republican’s front-running presidential candidate, Mitt Romney has dismissed such concerns as “envy.”

Obama’s concern about inequality has yet to translate itself into effective action, and it’s unclear, given the strong ties he’s had to the big banks and corporate titans, whether he’s capable of delivering.

Occupy, after delivering a much-needed jolt to the public discourse, likewise, has also yet to show that it can go beyond influencing the debate to actually winning gains for the 99 percent and reducing the widening inequality gap.

It’s no coincidence that income inequality has accelerated as large corporations have grown more influential in our political system through the clout of their cash, encouraging deregulation, tax cuts, trade deals and a host of other policies that benefit the 1 percent and disadvantage the rest of us. The fight against income inequality and for a more fair economy inevitably leads to the fight to rid our government of toxic corporate donations. Find out about WheresOurMoney’s constitutional amendment to undo Citizens United, the U.S. Supreme Court’s terrible decision that unleashes unlimited, anonymous corporate political donations, here.

 

 

 

Income inequality / Jobs crisis / Martin Column / Occupy - 03/09/2012

Freakout in the Bonus Bubble

Did you hear the one about the hedge fund employee complaining that he’s got to scrape by on $350,000 this year because of his lower bonus?

This is not an anti-banker joke, it’s a Bloomberg News story.

In the story, reporter Max Abelson gets finance industry workers to open up about their feelings about their financial sacrifices in the wake of a reduction in bonuses this year.

One hedge fund marketing director acknowledges that he is “freaking out, like a rat in trap on a highway with no way out” because he will be unable to keep up with his kids’ private school tuition, summer rental and the upgrade to his Brooklyn duplex.

Bonuses were down about 14 percent across the financial industry last year in the wake of a second annual plunge in profits of more than 50 percent.

Noting that profits plunged a lot more steeply that the bonuses, the New York Times Dealbook column, which often takes the Wall Street view, couldn’t summon much sympathy. Reporter Kevin Rose sniffed, “It is apparently going to take more than shrinking bank profits to put a big dent in Wall Street bonuses.”

Wall Street bankers remain by any measure well paid, with an average annual compensation, including bonuses, of $361,180 in 2010, the last year for which averages are available. That’s 5 ½ times the average pay for Americans.

So to help put the bankers’ problems in perspective for the rest of us who might be having a hard time working up any empathy, Bloomberg rustles up a high-priced accountant.

“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”

What a load of malarkey.

What the Bloomberg report neglects to mention is that the financial industry actually compensated for the lower bonuses by raising bankers’ salaries.

While some bank defenders claim the brouhaha over bonuses is just envy, a report from New Bottom Line earlier this year puts the bankers’ bonuses into sharp focus. It found that bankers’ total compensation at the six biggest banks amounted to $144 billion last year – second only to the total paid out in 2007 before the meltdown.

Since the 2008 financial collapse, the banks we bailed have paid out a total of half a trillion dollars in compensation.

According to the report, if the bankers let go of just half of their compensation packages, banks could afford to underwrite principal on all the underwater mortgages in the country.

If bankers chose to forgo just 72% of their bonuses, they could fill the nearly $103 billion budget gap plaguing the nation’s city and states.

The bankers aren’t getting this money because they have contributed so much to the well being of the country. They’re getting it because they’ve captured both the political system and their regulators, who continue to do the bankers’ bidding. We can’t expect them, the bankers or the politicians or the regulators, to stop on their own.

We’re going to have to do it.

Check out our constitutional amendment to undo U.S. Supreme Court’s Citizens United ruling, which opened the gates wide for bankers and other corporate titans to influence our government with an unlimited and anonymous tidal wave of cash.

 

Bonuses / Martin Column - 03/06/2012