Fill In the Blanks

A New Yorker story published online this morning describes yet another example of a financial debacle abetted by government corruption. As I read the first paragraph, it struck me that the basic plot is always the same – all you need to do is fill in the blanks:

In the spring of _______, as the reelection campaign of ______ was gathering momentum, a group of prominent _____ businessmen met for breakfast at the ________ to see the candidate. Among them was _____, the chief executive officer of _____, a fast and freewheeling financial institution that had brought together some of the most colorful and politically well-connected _____ in the country….

Last week’s final report of the Financial Crisis Inquiry Commission explains in intricate detail why and how the U.S. economy imploded in 2008, but isolates no single, primary cause of the crisis. The Commission says that the crisis was “avoidable” and notes that “widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets,” but this is just one Commission conclusion of many. As Joe Nocera points out, the report never gets to the bottom line.

Our report, “Sold Out: How Wall Street and Washington Betrayed America,” published in March 2009, got right to the bottom line in its title. We didn't need subpoena power or a large staff to figure out what happened, just the willingness to say what everybody in the Wall Street/Washington axis of power already knew. Between 1998 and 2008, Wall Street invested $5 billion in Washington, a combination of money for lobbying and campaign contributions that won deregulation and other policy decisions that enabled the financial industry to do as it pleased. The ensuing orgy of unbridled speculation, based on "derivatives" and other financial schemes that even the CEOs themselves didn't understand, came to a halt when the housing bubble burst and Wall Street couldn't even figure out the value of the investments it held. The financial industry panicked, threatened to shut down the system, and got the government to undertake the mother of all bailouts - trillions of dollars in loans, tax breaks and other goodies.

In short: the power of money poisoned our policies and our politics, with dire consequences for all of us who don't enjoy the special favors that only vast quantities of money can buy.

The Commission, created and appointed by Congress and composed of members of the political elite, could not possibly issue that indictment. Which is why the discussion of the bailout – the most obvious example of the special status of the privileged in our country – is a measly five pages out of 410.

The American public deserves better. In other man-made national disasters, like the explosion of the Challenger space shuttle 25 years ago, experts in the field – astrophysicists, geologists, academics – were asked to undertake an independent investigation. Their reports secured the confidence of the public, and led to remedial actions. NASA was not allowed to investigate itself, and lo and behold, it turned out that the culture at NASA was ultimately responsible for a design defect in the rocket.

Because it retreats from the fundamental truths, the Commission's report does nothing to help us come to grips with the root cause of the financial crisis: the corruption of our democracy by special interest money.  I know from more than thirty years of fighting for consumer rights – particularly in the insurance marketplace – that industry lobbyists and unlimited money to politicians almost inevitably kill  legislation that would help average people. Even the feeble, loophole-ridden campaign laws that limited how much big corporations could spend in elections are in jeopardy, thanks to the United States Supreme Court’s decision last year in the Citizens United case, which decreed that corporations have the same First Amendment rights as human beings. Here in California, the voters have the ability to go around a paralyzed legislature and put matters on the ballot for a direct vote of the people, but even this populist process is increasingly abused by special interests that want to block consumers from having their day in court, or by a single company like Mercury Insurance, who thought it could fool the voters into permitting auto insurance overcharging.

Naming a thing for what it is aids understanding, which leads to action and ultimately recovery. Absent the cleansing force of honesty, we remain rooted in fear for our kids, for America’s future. Indeed, there is something deeply foreboding about the country’s degraded democracy and disabled economy. Some of the old clichés are becoming a sickening reality. We used to idly wonder, are we Rome, a corrupt empire in the process of collapse? A thoughtful, almost poetic book by that name, written by Cullen Murphy, suggests we are.

The term “third world” was once a sneer, connoting abject poverty, corruption, gross disparities between rich and poor, the absence of government services, a state controlled by a cabal of self-perpetuating leaders. Now consider the statistics on post-collapse America, which Arianna Huffington marshals in her latest book, "Third World America."

This would be a good point to fill in the blanks in the piece I excerpted above from the New Yorker story. The missing words are: 2009, President Hamid Karzai, Afghan, presidential palace, Khalil Ferozi, Kabul Bank, Afghans. Yesterday’s New York Times reported that fraud and mismanagement at the largest bank in Afghanistan has resulted in $900 million in losses, potentially triggering a financial debacle. Kabul Bank is “too big to fail,” according to Western diplomats quoted by the Times. It's the same story everywhere, and thus it would hardly come as a surprise if U.S. taxpayers ended up funding the bailout of Kabul Bank.

Congress / Financial Crisis Inquiry Commission / Harvey Column / Too Big To Fail - 01/31/2011

Rearranging the Deck Chairs Tonight

U.S. Senator Mark Udall, Democrat of Colorado, thinks Republican and Democratic members of Congress should sit with each other, rather than separately by party, when President Obama makes his State of the Union speech tonight in the Capitol. In a letter to the leadership of the House and the Senate that has gotten a lot of attention in D.C., Udall said that “partisan seating arrangements at State of the Union addresses serve to symbolize division instead of the common challenges we face in securing a strong future for the United States…. The choreographed standing and clapping of one side of the room – while the other side sits – is unbecoming of a serious institution.  And the message that it sends is that even on a night when the President is addressing the entire nation, we in Congress cannot sit as one, but must be divided as two.”

Udall is right about the symbolism of the tradition, which dates back two centuries, but his proposal is just more symbolism.

This isn’t one of those dinner parties where the hosts break up the married couples to inspire more lively conversation. Sitting next to each other isn’t going to stop the Democrats from applauding, or the Republicans from sitting on their hands or worse, like when a congressman from South Carolina screamed “you lie” during a health care speech by Obama to a joint session of Congress in 2009, or when at last year's State of the Union, Supreme Court Justice Samuel Alito visibly disagreed when the President criticized one of the Roberts court’s more extreme examples of judicial activism. With differences so deep, putting congresspeople within reach of each other may not be a good idea at all.

So what exactly is the attraction of Udall’s proposal? As in every mass tragedy in recent years – from JFK’s assassination to 9/11 to the carnage in Arizona – there is a brief period in which people want to reach out, beyond politics, for reassurance that we are all, or at least most of us, still human beings. We’re still within that gauzy penumbra. Speaking in Tucson, Professor Obama got high marks from the opinionators and the public for pointing out that incivility cannot explain insanity – and thus smothering the debate over the name-calling and extreme partisan politics of our era. But is that really the problem in America today?

True, the majority of Americans probably are uncomfortable with the current decibel level. We remember wistfully an America when things were better all around – or perhaps merely seemed so. But there is, without any question, plenty of reason to be angry right now. Not since the Depression have so many people suffered while so few prosper. Our American spirit has been shaken, maybe shattered. We have been betrayed by those we entrusted to protect us.

I don’t agree with many of the loudest, angriest people, but I don’t blame them for being loud or angry.

Sometimes that’s the only way you get things done.

Addressing another exercise in symbolism – a new non-profit political organization called “No Labels” dedicated to “bipartisanship” – New York Times columnist Frank Rich recently made the point: “The notion that civility and nominal bipartisanship would accomplish any of the heavy lifting required to rebuild America is childish magical thinking, and, worse, a mindless distraction from the real work before the nation.”

When you look at what has happened to this country, the dire conditions at home and the dangers we face abroad, and what we have to do to make sure our kids have some measure of the security and prosperity we enjoyed, talking about where members of Congress sit is like rearranging the deck chairs on the Titanic.

Congress / Harvey Column / Outrage / President Barack Obama / Uncategorized - 01/25/2011

Death by a Thousand "Buts"

After two years in office, President Obama has decided it's time to fix one of the colossal mistakes of his predecessor: too much federal regulation.

I don't remember George W. Bush as a consumer advocate who, in his zeal to regulate corporations, got carried away. But last week President Obama announced a new priority for his administration. Federal regulations “sometimes have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs,” the President explained, implying that it was in fact the government that crippled our economy, just like pro-corporate conservatives have been saying.

Faced with this threat to our national security, there was only one thing to do, and Obama stepped up. He commanded the entire federal government to review every regulation on the books and get rid of “outdated” rules and “unnecessary paperwork.” In a rousing call to arms, the President concluded: “This is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary.”

Obama didn’t invent the cost/benefit approach to regulation. That was concocted by big business-funded think tanks and adopted by President Ronald Reagan, who issued Executive Order 12291 immediately after taking office in 1981. Its preface is eerily similar to Obama’s, proposing “to reduce the burdens of existing and future regulations, increase accountability for regulatory actions, provide for presidential oversight of the regulatory process, minimize duplication and conflict of regulations…”

Reagan demanded that any regulation that imposed costs on businesses that exceeded its "benefits" be eliminated. The problem is that cost/benefit analysis doesn’t always take into account certain intangible considerations or values that are difficult to quantify in dollars, such as the benefits of unpolluted water or the worth of a human being. In an infamous internal memo (PDF) uncovered in litigation over the now extinct Ford Pinto’s exploding gas tank, company executives compared the cost of fixing the vehicles ($137 million) versus what it would have to pay for expected deaths and injuries ($49.5 million) and decided that the cost of repairing each car - $11 dollars – exceeded the benefits.

Government is supposed to protect us against such reasoning, not use it as a guiding principle.

I was working at Public Citizen Congress Watch in Washington, D.C. at the time, and Reagan’s disdain for government regulation  became the centerpiece of his Administration agenda. James Watt, Reagan’s controversial appointee to the Interior Department, sacked the agency, turning it into a mouthpiece for oil, mining and other industries supposedly regulated by the agency. The Reagan Administration’s deregulation of savings banks led to reckless investments, fraud and corruption, necessitating a bailout – sound familiar? – that ultimately cost taxpayers about $124 billion.

Is history repeating itself? In a nod to those who supported him as a candidate because of his forceful speeches against special interests and corporate abuses, President Obama was careful to acknowledge the importance of “child labor laws,” “the Clean Air Act” and federal rules against “hidden fees and penalties by credit card companies.” In a nod to the elephant in a pink dress sitting on the divan in our living rooms, the President noted that “a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.” “Where necessary, we won't shy away from addressing obvious gaps” in federal rules, Obama insisted.

It's painfully obvious that the President hoped his foray into Reagan-style anti-regulation rhetoric would curry favor with Wall Street, its wholly-owned subsidiary, the U.S. Chamber of Commerce, and their toadies in Congress. They’ve been very, very mad at the President ever since he had the temerity to sign a toothless financial reform bill that left the financial industry free to revert to its pre-bailout speculative ways, not to mention the hopelessly compromised health care law that requires every American to buy health insurance from private insurance companies starting in 2014, but does not effectively regulate how much we have to pay them.

Obama went so far as to announce his new regulatory policy in a guest column for the Wall Street Journal's editorial page, where at least one attack on Obama is on the menu every day.

This latest gesture of appeasement didn’t work out as the President hoped, though. "Yes, but" was the nearly universal response from the intended recipients of the President’s largesse, as Associated Press reporter Tom Raum reported. For your convenience, I’ve highlighted the “but factor”:

“Obama’s action is ‘a positive first step,’ said Thomas J. Donohue, president of the U.S. Chamber of Commerce, the nation’s biggest business organization. But, Donohue added, ‘a robust and globally competitive economy requires fundamental reform of our broken regulatory system.’ He called on Congress to 'reclaim some of the authority it has delegated to agencies.’"

“The National Association of Manufacturers said it ‘appreciated’ Obama’s call for a regulatory review, but called for Obama to demonstrate results by ‘delaying poorly thought-out proposals that are costing jobs,’ listing the EPA’s proposals to regulate greenhouse gases as a prime example."

A “spokesman for House Speaker John Boehner, called Obama’s review a welcome acknowledgment that government regulations have economic consequences. But he said the president should take bolder steps immediately.”

"David Walker, former U.S. comptroller general, said in an interview that it was ‘fully appropriate to engage in a baseline review of existing federal regulations.’ But Walker, head of a balanced-budget advocacy group called Comeback America Initiative, questioned having the agencies themselves hunt for harmful regulations. ‘We need to have an independent review process that has transparency,” he said. Walker said many of today’s regulations date back to the 1950s and need to be revamped.”

For a little conjunctional variety, here's the response of House Majority Leader Eric Cantor:

“Obama’s executive order ‘shows that he heard the same message I did in the last election - that Americans are sick and tired of Washington’s excessive overreach and overspending.’ ‘While I applaud his efforts, we must go further,’ Kantor added. He proposed more aggressive steps to strike down ‘needless and burdensome’ regulations that plague businesses and stifle job growth.”

President Obama still doesn’t understand that his political opponents will never voluntarily support anything he does, short of a complete capitulation (and perhaps not even then). This is not just a matter of interest to the political class. If the White House spends the next two years trying to placate the implacable, the rules, regulations and legislation needed to restore the economy and protect the public health and safety are never going to see daylight.

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Congress / Financial Crisis / Financial Reform Legislation / Harvey Column / President Barack Obama - 01/24/2011

Thank You vs F*** You

I’m as angry as anybody about the bailouts, but I don’t agree with the people who are perturbed about the TV commercial General Motors ran over the Thanksgiving holiday.

The ad has no narrator, just a gentle piano rendition of the Seventies Hollies hit “He Ain’t Heavy, He’s My Brother” in the background. It begins with images of memorable failures – NASA rockets that crashed on the launch pad, motorcycle daredevil Evil Knievel injuring himself, the  fraternity members in Animal House after Dean Wormer has informed them that he is shutting down their frat.  But then John Belushi rallies the Delta House brothers, a rocket soars into the sky, a boxer down for the count gets back on his feet. “We all fall down,” reads a sentence on the screen. “Thank you for helping us get back up.”

I loved the ad - and was shocked to see it. After all, the Wall Street bankers, hedge fund operators and financial speculators who drove our economy and the globe into a ditch two years ago had to be dragged before Congress and the media before they would so much as admit that “mistakes were made,” to use Richard Nixon’s passive diction. Most of the companies that were rescued with no-strings-attached taxpayer dollars were quick to pay them back (on easy terms) and now behave as if they had never run into trouble in the first place. The newly resuscitated financial industry used its political might (and taxpayer money) in a massive lobbying campaign to kill any congressional legislation that might have prevented them from earning billions more on useless speculation. Bonuses are once again breaking records.

GM, at least, has some sense of obligation or appreciation for what we  taxpayers did for the company, its employees and investors. It doesn't make our lives any better, but I, for one, find that refreshing.

Not so for everyone. A good deal of the commentary online about the ad portrays it as a cynical move by a stupid company, directed at cretins and Democrats.

There was a lot of similar hostility in evidence when GM executives went to DC to beg for a bailout back in 2009. Members of Congress  criticized them for flying to Washington on corporate jets. The White House fired GM’s CEO as part of the bailout. Compared to that, the Wall Street titans were treated like royalty. No one demanded that they take the bus from New York, nor have the CEOs of Goldman, Citibank, Bank of America, etc. lost their jobs – much less been prosecuted – for their conduct.

The difference was striking at the time, and it remains so today, a reflection of the degree to which money is worshiped and wealth revered in this country, long past time when average Americans should know better. After all, GM employs people to produce things that people in this country actually use: cars. As a pointed piece in last week's New Yorker points out, "much of what investment bankers do is socially worthless." “The most profitable industry in America” – the financial industry – “doesn’t design, build, or sell a single tangible thing.”

Try driving a Collateralized Debt Obligation down the street sometime.

Harvey Column - 12/01/2010

Happy Thanksgiving to You from California First LLC, the New Owner of Your State

This isn’t a tale about turkeys. It’s about pigs.

With America’s economy smashed, and American consumers no longer consuming, these are tough times for everybody, and that includes Wall Street investors and hedge funds. What are they supposed to do with the billions of dollars they have amassed courtesy of the US taxpayers?  Wouldn’t it be great if they could figure out a way to help us while helping themselves?

Harvey Column / Outrage / Uncategorized - 11/23/2010

A Yes Vote for a National Ballot Initiative

While the long-predicted tsunami of voter anger is about to break across the national political landscape, oddly enough this may just be one cataclysmic event that California won’t experience. Yesterday the New York Times has pronounced the House of Representatives all but lost to the Democrats, but today’s Los Angeles Times reports that Jerry Brown’s lead over Meg Whitman doubled over the last month.

That might have something to do with Whitman’s obscene spending for the post – Californians have a tradition of rejecting the candidacies of people who treat high office as a new found hobby – and it couldn’t have helped that Whitman hired (and then cruelly fired) an undocumented housekeeper.

But wait. The Times’ polling also showed that in California, “Democrats have gained strength and GOP motivation has ebbed slightly in the last month.”

So what’s up with California voters? People elsewhere might attribute it to the weather, or our mythical blessed out state. But that’s not it: 81% of Californians told the pollsters that the state is “seriously off on the wrong track.”

I have a theory to explain why California voters aren’t reflecting the national trend, and it’s based on a political safety-valve unique to California: our often-maligned ballot initiative process.

This year, as in most elections, California voters will not only fill over a dozen federal, state and local elective offices. They will get to decide some major public policy issues, including legalization of marijuana, reapportionment, climate change, and majority rule in the state Legislature – a total of nine ballot propositions.

Californians rightly complain about the initiative process – that it’s increasingly invoked by the powerful special interests, that we shouldn’t have to do the politicians’ jobs for them – but the fact is, we love initiatives. Ballot measures empower Californians, giving us the opportunity – for better or worse – to shape our own destiny.

For many Californians, politicians are already a lost cause. What excites and inspires people to pay attention to politics here is the dynamic, creative and often chaotic opportunity to sidestep the political establishment and take matters into their own hands.

“For all the problems ballot initiative politics present today, the ballot measure offers the best part of modern politics,” says California citizen leader Jamie Court in his new book, “Raising Hell.” That’s “the ability to directly change injustice, without the main problem with politics today, politicians who are too corrupt or inept to make changes.”

In most states, angry voters can only vent their frustration by choosing from an often deeply unsatisfying list of candidates, a  desperate exercise in the “lesser of two evils.” When politicians are the only available target, the electorate’s outrage is by necessity narrowly focused. And it also gets amplified, like when you pump water through a fire hose. So it’s “throw the bums out” – as is likely to happen next week throughout the nation, whether or not they deserve it. Then the voters get to welcome a whole new bunch of bums.

Ballot initiatives offer a much more precise weapon: for example, an initiative to roll back auto insurance premiums, like I wrote in 1988, in the middle of public indignation over skyrocketing insurance premiums, when California lawmakers were too afraid of their industry patrons to do anything about it.

I’m as angry as everyone else these days about how Washington and Wall Street got together and betrayed us. If we had a national initiative process, I’d propose a cap on the interest rates banks and credit card companies can charge us for borrowing our own money from them.

Harvey Column - 10/25/2010

In this “Bust Bowl,” It’s Every Person for Themselves

During the 1930s, drought and dust storms combined to devastate farms in the heartland of the United States, already decimated by the Great Depression. One quarter of the population of the “Dust Bowl” lost their farms and ranches when the banks foreclosed on them. Millions left the Great Plains for California or elsewhere.

Today, the entire nation is trapped in a “Bust Bowl,” laid low from coast to coast by the collapse of an economy based largely on finance and speculation. The “official” unemployment rate, which has been above 9.5% for the last fourteen months, understates the true devastation wrought by the Wall Street debacle. Vast numbers of our citizens have descended into poverty: 42 million Americans – one in seven – are considered poor.  Just an hour or two outside LA, 15 to 20% of residents in towns like Bakersfield and Riverside are below the poverty line.

Back in the Thirties, farmers joined together to protect each other against foreclosures: trying to block authorities from seizing the farms, moving furniture back into the homes of the evicted, and refusing to bid on properties that were foreclosed. But there’s little sympathy for our neighbors evident these days.

To the contrary, speculation has ingrained itself so deeply in the American psyche that people view foreclosures as an opportunity to snatch up a home at distressed prices. And now that some banks are pulling homes off the market because they can’t prove they hold the mortgages, as my colleague Martin Berg has described, would-be purchasers are unhappy. The New York Times quoted a Florida mother who was supposed to move into a foreclosed “three bedroom steal” when Fannie Mae took the house off the market. “Now I’m sharing a room with my son,” she complained. “What the hell is up with that?”

It’s hard to feel sorry for someone who is trying to reap some kind of a windfall from someone else’s tragedy.

I know, everyone’s just trying to get by. The Times noted that one man who had lost his own home to foreclosure after falling behind on his payments had made a successful bid on another foreclosed home – his “dream house” – only to have the deal frozen by the bank.

But is the solution to beggar thy neighbor?

Consider the debt collector profiled in the New Yorker this week. A former drug dealer who did some time, “Jimmy” now runs a small operation in Buffalo, New York. He buys bad debts from businesses like banks and credit card companies for a few cents on the dollar, and then does what he can to collect from the people who owe the money. Anything he can get, he keeps. With so many Americans out of work and deeply in debt, the collection business is booming these days. Buffalo’s home to quite a few such firms these days, because, as Jimmy explains, “Buffalo is broke!” Jimmy’s got five kids and he’s trying to make a living and meet the payroll for his staff, whose job is to nag and cajole people into paying something on what they owe. Plus he’s up against some bigger firms that are willing to break the law in order to collect. But it’s not a pretty picture, especially because it soon becomes clear that Jimmy’s company is in trouble, and he may soon find himself among the debtors of Buffalo.

The average American is not going to be able to leverage himself out of this economic nightmare.

In the Thirties, the federal government ultimately came to the rescue: prodded by Roosevelt, Congress authorized the courts to reduce a farm mortgage to its diminished market value, and to suspend a farm foreclosure for three years. (A conservative US Supreme Court initially struck the law down as an improper intrusion of the government in the banking business, but it was later upheld.) Farmers were also allowed to borrow money through the federal government to pay off their old mortgages. This was the New Deal.

This time around, Wall Street firms have been given access to trillions of dollars of federal money at rates approaching zero interest, but with no requirement that they lend this taxpayer money back to taxpayers at all, much less at fair interest rates. Thus the banks, credit card companies and investment firms are back in business and in fact, most are rolling in dough. The rest of us have to pay exorbitant interest to borrow our money, if it is offered at all. And at the behest of Wall Street, the US Senate rejected a proposal to allow federal bankruptcy courts to modify mortgages so people could stay in their homes. A few days ago, the Obama administration rejected a nationwide moratorium on foreclosures. "While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse," according to the Federal Housing Administration.

I'd call this a "Raw Deal."

Foreclosures / Harvey Column / Outrage - 10/10/2010

Money Never Sleeps

Oliver Stone’s sequel to his 1984 hit "Wall Street" opens as the Bubble is about to burst on a culture of material excess that makes Gordon Gekko’s 1980s cell phone – then a symbol of extravagance available only to the mega-rich – ridiculously quaint. Stone’s Wall Street circa 2008 is set in a New York constructed of light, with ubiquitous flat screens providing instantaneous, 24/7 updates on the status of global power and wealth. When the results of decades of speculation first hit the housing market and then the stock markets, the great titans of Wall Street start eating their own. But that was only an appetizer for the main course: the American taxpayer.

I really couldn’t enjoy the love story between Shia LaBeouf and money, much less the one between Shia and his girlfriend, who happens to be Gekko’s estranged daughter and thus presents a trading opportunity for the ambitious young man. As the movie traced the collapse of Bear Stearns and then the stock market into a pile of scrap paper, I got more and more angry.

In one scene, the silver-haired heads of the giant firms that run Wall Street – surrogates for Goldman Sachs, JP Morgan, Citigroup, etc. – cloaked in bespoke suits, are gathered around an ornate table in a wood-paneled conference room with one of their former colleagues, who is now the Secretary of Treasury (aka Hank Paulson), to discuss how much taxpayer money they need in order to stay afloat. Hundreds of billions of dollars are referred to in single digits. The consensus, quickly obtained, was “seven.” It was like the Godfather movies, when the heads of the Families would convene to handle some event that threatened their criminal way of life.

I found myself remembering the scene, in the third Godfather, when small-time hood Joey Zasa locked the conference room doors from the outside, trapping the heads of the Families inside so they could be slaughtered by his assasins.

The nation hardly needs Oliver Stone’s portrayal of the markets as organized crime to stoke people’s recollection of what the debacle did to our economy and our kids’ futures. Our anger has reached a white hot point that, like the sun in a magnifying glass, is now being directed against public officials all over the country. “Money never sleeps” is Gordon Gekko’s new mantra, and vast sums of money are flowing into the political process to influence the November elections - largely an attack on incumbent Democrats in Congress.

But where was all this money back in the third week of September, 2008, when the Bush Administration’s three page proposal to bail out Wall Street with billions in taxpayer money was presented to Congress along with the threat that the United States would collapse if it wasn’t approved on the spot?

In what I must acknowledge was a serious overestimation of the impact one citizen could have at such a moment, I flew to Washington, D.C. on Tuesday, September 23, 2008, thinking I might be able to draw someone’s attention to the sheer lunacy of what was being proposed. Joan Claybrook, the President of Public Citizen, and I held a news conference just outside the House Banking Committee hearing room, where the plan was being presented by the Bush Administration. We were like two voices whispering in a hurricane. Later, I met with members of the California congressional delegation who were in shock and ready to do the bailout deed forthwith. Ok, I said, at least require disclosure of how our money was spent and a quid pro quo: that the companies receiving taxpayer dollars could not loan them back to us for more than a few percentage points profit. The legislators responded to the interest rate cap as if I had proposed that they resign from Congress.

It would have been nice back then if there had been a hugely funded campaign backed by angry Americans telling Congress not to act hastily or stupidly. But in fact, the big money we are seeing now in American politics is not from the grassroots, but from the same greedy folks who caused the debacle in the first place or who profited from the bailout. According to US News and World Report, business and conservative backed organizations are behind the  “independent expenditure” campaigns that are targeting Democrats and outspending them two to one. A recent article in the New Yorker uncovered two extremist billionaire brothers funneling over $100 million from their family oil business into Tea Party non-profits. Long-time big business Republican operatives like Karl Rove (now running a group called "American Crossroads") and Dick Armey ("FreedomWorks") are supplying more than tea for the new tea party.

The sudden resurgence of interest in politics on Main Street would be cause for great celebration, and the opportunity for real change, as citizen leader Jamie Court writes in his new primer on political activism: “The Progressive’s Guide To Raising Hell.” Instead, it’s just another dismaying example of big money corrupting our political system. If it succeeds, get ready for more speculation, more bubbles, and more pain for the average American.

"Greed is good," Gekko said back in the day, but Wall Street needs to own Washington, and Wall Street is already projecting victory in November.  Commenting on the rise of the Dow in September, an analyst said, "’There is a good chance that the strength we have seen in the market recently is due partly to an expectation about the result of the election... Investors are starting to understand that a likely result of this election is gridlock, and that is good."

Harvey Column / Outrage - 10/03/2010

Hurricane Katrina & Wall Street

Hurricane Katrina, once considered the disaster of the decade, is the subject of a new exhibition at the Newseum, a high tech museum devoted to journalism in Washington, D.C., timed to coincide with the fifth anniversary of our national failure in New Orleans.

NewseumFirst you walk down a hall lined with the front pages of newspapers that chronicle the progress of Katrina from a natural disaster when it hit New Orleans with unprecedented force on Monday, August 29, 2005, to a few days later, when, as the world watched, Katrina became a man-made catastrophe, with the levees collapsed, the city underwater and the vaunted United States government unable to come to the aid of its citizens. The September 3 headlines range from “Unbelievable” to “Is This America?” 1800 Americans died, and the entire city evacuated – more than a million U.S. citizens rendered homeless.

The rest of the exhibit focuses on how journalists covered the story, without electricity and often at great risk. Suffice it to say that the blogosphere will never substitute for professional reporters when it comes to these kinds of events.

It is an infuriating and emotional visit. Boxes of Kleenex are strategically placed through the exhibit, and you’ll need them.

Katrina invites comparison to 9/11, when the failure of U.S. intelligence, military planners and airline security personnel combined to render our nation powerless against a throng of determined fanatics. Congressional investigators said, “If 9/11 was a failure of imagination then Katrina was a failure of initiative.”

A court later held the federal Army Corps of Engineers responsible for the collapse of the levees and thus the destruction of New Orleans once Katrina hit. You can read the congressional report chronicling the government’s failure to prepare for and then manage the disaster here.

Conservatives seized on Katrina as more proof that big government is bad, although it’s hard to fathom how “market forces” could fill the shoes of a national government.

After a viciously hot summer throughout the nation, you wonder whether Katrina was the result of yet another failure of political imagination, at the US and global level: the failure to acknowledge and reverse global warming while there was still time.

Meanwhile, Katrina has been superseded by an even more devastating man-made disaster: the economic collapse in 2008. Like Katrina or 9/11, the initial catastrophe was not government’s doing, it was Wall Street greed and speculation. But, like 9/11 and Katrina, government bears responsibility for allowing it to happen. As I noted in the introduction to our report on the crash, Wall Street paid off Congress to let “market forces” run amok, and when the bubble inevitably burst, Washington quickly rescued the financiers.

But like the residents of New Orleans, many Americans are struggling to stay afloat and some have gone under. In terms of lives ruined, families sundered, pensions lost, people made homeless or left without health care, who knows whether the toll from this disaster will exceed that of Katrina or, for that matter, 9/11.

Harvey Column - 08/29/2010

The Lawyer With the Dragon Tattoo

This year’s most fearsome movie heroine is Lisbeth Sander, the hacker vigilante who outwits corporate and political evildoers with her superior investigatory skills, not to mention some kickboxing and the deft use of a taser. “The Girl With the Dragon Tattoo” smashes and hacks her way through the government officials, business executives and journalists that comprise Sweden’s lazy and corrupt Establishment. They do everything they can to stop her, but – I’m about to give away the ending – Sander ultimately triumphs, exposing decades-long corporate and government conspiracies.

Elizabeth Warren shares none of Sanders’ characteristics – except an exceptional intellect – ­but when it comes to inspiring fear and loathing among the denizens of Washington and Wall Street, she is every inch as frightening, as has been pointed out over the last few days in profiles and posts across the mediascape.

Warren, a bankruptcy professor at Harvard Law, long criticized the practices of America’s banks and credit card companies in law reviews and academic pieces. In 2005, when the financial industry was lobbying Congress to make it harder for the average American to declare bankruptcy, Warren penned a landmark analysis that concluded that most Americans sought bankruptcy protection not because they were freeloaders but because they could no longer afford to pay their medical bills. Long before the current crash, Warren proposed the establishment of a federal agency to protect consumers against credit card tricks and other financial abuses.

In November 2008, in a rare example of a perfect congressional appointment, Senate President Harry Reid put her in charge of the congressional task force monitoring how the $700 billion in taxpayers' bailout money was spent. She has demanded answers to the same question we ask here: “where did the money go?”  The results of her investigations, which can be found here, pull no punches.

Back in 2008, no one could have expected that Congress would create a financial consumer watchdog agency of the kind Warren advocated for years.  But her powerful and outspoken performance as chair of the bailout oversight panel has made her the obvious and only credible candidate to head the new Consumer Financial Protection Bureau created by the otherwise innocuous financial “reform” legislation Congress passed a few weeks ago.

Which, of course, has got Wall Street fired up, members of Congress tied in knots and the White House cornered. Unlike the Byzantine complexities of the financial swindles and the ostensible legislative “solutions,” none of which garnered public attention much less support, the question of whether the President will appoint a skilled lawyer/consumer advocate to protect consumers, or whether he will instead choose a Wall Street insider as he did when he appointed Treasury Secretary Geithner and White House economic advisor Larry Summers, is one the public and press can easily grasp.

The appointment raises the kind of simple and straightforward “whose side is he really on?” question that Obama has so far been able to soft peddle, though he unceremoniously surrendered on the public option in the health care bill and on “too big to fail” banks in the financial reform bill, to name just a few instances of his unilateral disarmament.

Make no mistake: Warren is a highly sophisticated lawyer that knows all the tricks of the financial industry and how to use the powers of government to stop them. This expertise will be essential. I wrote a ballot proposition, approved by California voters in 1988, that regulates the insurance industry. Having spent the last twenty-two years defending it against incessant lawsuits by industry lawyers and not infrequent efforts of elected state officials to hobble it, I can tell you that few decision-makers in the federal government have the technical skills and expertise to go head to head against the battalions of lawyering orcs deployed by big financial firms. Warren does.

Which brings us back to the fascinating spectacle of the hypocritical Washington establishment trying to grapple with her candidacy. She is, literally, made for the job, and a spontaneous grassroots campaign for her appointment is mounting around the country. But the politicians, obeying their paymasters on Wall Street, are trying to figure out a strategy to sabotage her nomination. It’s almost comic to behold. Republicans should be hailing Warren as a savior of beleaguered taxpayers, but one of their Senate leaders said that her tenure as chair of the bailout watchdog was “marked with ‘controversy”” and implied that Warren doesn’t have the necessary qualifications.

It’s the same for some Dems: Senate Finance Committee Chair Chris Dodd, who had never met a financial “innovation” (or industry lobbyist) he didn’t embrace until the whole rotten system collapsed two years ago, damned Warren with faint praise, then suggested she couldn’t be confirmed. He floated the name of FDIC Chair Sheila Bair, but she said no thanks.

Nor has the Obama administrationt been particularly supportive. Two weeks ago, Treasury Secretary Geithner was forced to dispel rumors that he is opposed to Warren by mouthing some platitudes about how “capable” and “effective” she would be in the post. A White House spokesperson told reporters, “We’ve got many good candidates. I know that the president will look at this job and the several other jobs that are created as part of this legislation and make an announcement.”

Warren’s appointment could be one of the few meaningful victories for consumers in the aftermath of the Wall Street deregulation disaster. She is not your typical accommodating political appointee. She does not appear likely to “play ball” with Team Obama or anyone else inside the Beltway when it comes to protecting consumers against the pillaging financial industry. The White House is well aware that once appointed, she would be very hard to fire, especially for doing her job with the zeal it requires. Having never served in such a position, Warren has not yet been tested, so my assessment of her political spine is partly speculation. But if I’m right, she's at least as threatening as Lisbeth Sander.

Harvey Column / President Barack Obama - 08/07/2010