Identity Theft in the Matrix

Something weird occurred on my TV when I happened to catch a few minutes of the Madrid Tennis Open on Sunday. Whatever technology these stadiums use to provide constantly changing television advertisements along the sides of the court wasn’t working too well. Some of the furniture on the clay itself seemed to be dissociating on an atomic level. A chair looked as if it was disappearing in a shimmering blue cloud. It was like that moment in the movie The Matrix when the reality of the unreality becomes apparent to Neo – a house cat vanishes for a split second, then reappears.

The technical snafu made the match pretty hard to watch, so I reverted to the New York Times, where columnist Thomas Friedman happened to be expressing astonishment at the profound influence of corporate marketing values on American society. Few have written more enthusiastically about the spread of capitalism worldwide than Friedman, so it was surprising to hear him say he “had no idea” that famous authors, revered sports players and even public institutions have all bartered their identities for corporate cash.

Just then, Roger Federer won the match. “Watch this,” my wife said in a moment.  “He’s going to reach into his gym bag and pull out an expensive watch, so he’s wearing it when he gets the award.” Sure enough, with a bemused grin – I took it to be a guilty “ok, I have to do this” sort of look – Federer theatrically slipped his sweaty hand into the bag and slowly pulled out a gleaming Rolex, which he then slid onto his wrist.

I’m no slouch when it comes to tracking the commodification of our culture – a Ralph Nader spin-off, Commercial Alert, has been quietly raising the issue for years – but I’d never witnessed someone of Federer’s stature actually engage in a corporate sponsorship ritual, one which happens to be well known to tennis fans.

The impact of celebrity endorsements and the promotion of products in TV shows and films is more than just an idle curiosity. For many years, Americans were urged to close the gap between the lifestyle they aspired to – as displayed in the entertainment media – and the economic reality of their lives by borrowing on their homes and credit cards. This masked a gaping and painfully growing chasm that is now the topic of conversation only because Wall Street flushed the toilet on our economy a few years back.  Where once you too might have been able to pull a beautiful watch out of your duffel courtesy of a JP Morgan Chase credit card, that’s no longer possible for many.

Even more insidious than dictating our personal dreams and values is the corporate capture of our political identities. In that sense, the United States Supreme Court’s infamous decision in Citizens United symbolically acknowledges what had long ago become the Golden Rule of American democracy: those who have the gold, rule. By bestowing human rights upon corporate entities, and equating spending money to buy elections with freedom of speech, Citizens United locked in a system of legalized bribery that locks most Americans out of the electoral process that is our birthright.

Sure, we still have the right to vote. But the choices we are offered are usually determined by a political establishment mostly dominated by corporate money and a vast apparatus of election consultants, public relations hacks and lobbyists.

Every corporate dollar spent on candidates and elections pays an enormous return on the investment.  The Money Industry gave $5 billion to federal officials in the ten years leading up to the 2008 financial debacle, as we documentedin 2009 (PDF). The result: “bipartisan” decisions by lawmakers and the executive branch stripping away decades of legislation designed to protect America against lunatic speculation. Liberated, Wall Street gambled till it lost everything. Cost to American taxpayers: hundreds of trillions of dollars in bailouts, lost jobs, battered businesses, devastated communities – a Depression. Heads they win, tales you lose.

A recent study by academics at the University of Kansas examined how a particular federal tax break for multinational corporations became law, and what happened after that. They calculated that for every $1 spent on lobbying in favor of the tax break, the companies were spared $220 in taxes – a return of 22,000%.

Last week’s revelation that JP Morgan Chase had lost $2 billion through trading practices that are supposed to be illegal under the financial reform law passed by Congress in 2010 begged the question: how did they get away with it? Answer: JP Morgan Chase spent millions on lobbyists whose job was to weaken the law, and delay its implementation. The current draft of the federal regulations required to enforce a key provision of the law is a 298-page monstrosity; thanks to JP Morgan’s lawyers, it’s loaded with political booby traps and sabotaging IEDs that will utterly neuter the law, if it ever takes effect.

Mission accomplished.

With staggering results like these, it’s no wonder that the corruption of American politics is now an industry itself. The Times estimates its size at $6 billion a year, and reports that a series of mergers and acquisitions is creating a corporate lobbying conglomerate where the best and brightest – including retiring members of Congress – alight.

This is the Invisible Government that used to be the topic of novelists and conspiracy theorists. In the celebrity-driven entertainment Matrix, it’s easy to miss if you aren’t looking around and wondering what’s going on.

 

Harvey Column / Paul Volcker / Supreme Court / Too Big To Fail - 05/15/2012

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

What the President SHOULD Say

Republicans may have driven the car into the ditch. But voters know the difference between a sales job and reality.

That’s why they didn’t trust President Obama and the Democrats’ pitch that they had gotten the car out of the ditch and gotten it running again.

It didn’t ring true because far too many Americans are still stuck in the ditch.

And all of the presidents’ talk about how much worse off we’d be without his team’s hard work fell on deaf ears.

From the time he took office through the election, the president and his team failed to adequately acknowledge how deep the ditch was. By all accounts, the president is a brilliant man, and he’s hardly the first president to suffer a midterm “shellacking.” And his opponents haven’t exactly been overflowing with creative ideas for how to get the economy going again for those of us who aren’t bankers.

I also realize it’s not just up to the president – we all have a responsibility. So here’s my humble contribution to help the president make a mid-course correction: some suggestions for what the president might say.

My fellow Americans:

You sent me a strong message on November 2. I have to admit it stung. It’s taken a while to sink in, but I get it now.

I haven’t taken the economic pain that many of you are feeling seriously enough. The range of solutions I’ve chosen have been far too narrow and not nearly ambitious or imaginative enough. I’ve paid too much attention to not riling the markets and not enough attention to getting you back to work and keeping you in your houses. For that I owe you an apology. I have also belittled your concerns that our government has fostered a system that favors the wealthy and connected over other Americans. I’m sorry for that too.

I know that words without action ring hollow. So I’m replacing my entire economic team with men and women who are more attuned to the economic crisis that many of you find yourselves in. We’re fortunate that we have such a distinguished group to choose from – Paul Volcker, Robert Reich, Bill Black and Brooksley Born among them.

I have previously attributed the lack of popularity of some of my administration’s policies to my inability to sell them properly. But in retrospect, I see that the problem wasn’t the message. It was my previous unwillingness to fight, and fight hard, for stronger policies, stronger solutions to the country’s economic problems. I should have done so earlier.

But I will do so now.

Make no mistake. These solutions will cost money. Putting people back to work will cost money. But that money is an investment in a future that we can all live with, not just the well-to-do, and that will pay dividends later. I know that my opponents have raised concerns about the federal deficit, and I share some of those concerns. But my top priority for the next two years will be putting Americans back to work and making sure that we have a recovery that works for everybody. If my opponents want to have a debate on the deficit, I welcome that. If they want to have a debate on whether the government can truly help people or whether the government itself is the problem, then I welcome that too. Let’s have it on television.

But mostly I welcome my opponents’ ideas about how to put Americans back to work. Because the American people don’t just want an endless debate. You want action.

We’ll have a debate and then we’ll get to it. I know that you’re impatient. You also don’t want excuses. You won’t get any from me. What you will get is a plan to reduce unemployment, stabilize housing and reduce the widespread economic misery. I promise you that will be my number one priority.

Thank you for the great trust you have placed in me.

Can I guarantee success if my opponents decide to stand in the way rather than cooperate? Probably not. But I promise you that for the next two years all of my energy, intellect and passion will be harnessed to this effort, whatever the obstacles or political costs.

Martin Column / Outrage / Paul Volcker / President Barack Obama - 11/05/2010

Elizabeth Warren's Inside Move

So President Obama did not appoint bailout critic and middle-class champion Elizabeth Warren to head the new Consumer Financial Protection Agency.

He did appoint her to an important-sounding post as a White House adviser with responsibility to set up the agency, which after all was her idea in the first place.

Is the president actually marginalizing her with the window dressing of a fancy title? Or will she have a meaningful role in setting up the agency and shaping policy?

The punditocracy has gone into overdrive analyzing the president’s handling of Warren.

The positive spin is that it’s a savvy political move on Obama’s part to get her to work right away creating the agency and avoid a Republican filibuster, and that the president will finally be hearing from an insider not under Wall Street’s spell.

The more skeptical interpretation sees it as the latest example of the president’s failure to push back against Wall Street on issues that Wall Street cares about. As he has in the past, rather than picking a principled fight with Wall Street (and Republicans) Obama found a way around it.

The third spin, from Barney Frank, is that Warren actually didn’t  want a permanent appointment now, keeping her options open to either exit the administration or accept the job later.

Writing on WheresOurMoney.org earlier, Harvey Rosenfield, eloquently described why Warren is the best person to lead the new agency.

Warren has been a long-time critic of predatory lending practices and the American way of debt. In her role as congressional monitor of the federal bank bailout she’s been a fearless straight shooter and a down-to-earth demystifier of the complexities and foibles of high finance.

But Obama’s handling of her appointment reinforces the impression that he’s weak in the face of Wall Street’s power. Why in the world, with a high-stakes election less than 2 months away, would the president want to avoid a fight with Wall Street and Republicans on behalf of the undisputed champion of the middle-class and consumers? If the president does intend to appoint Warren to head the agency later, does he seriously think it will be easier later?

Unlike most of the president’s other top economic advisers, Warren has never been cozy with Wall Street. But it’s simply not realistic to expect the president is about to get more aggressive in reining in the big banks with Warren on the inside.

The president has shown that he is capable of ignoring perfectly good advice from well-respected advisers with impressive job titles within his administration. Remember Paul Volcker? The former Fed adviser has been a lonely voice within the Obama administration warning about the continuing dangers of the too big to fail banks and too much risky business in the financial system. But the president used Volcker as little more than a populist prop, preferring the more conciliatory approach championed by his other top economic adviser, Larry Summers, Treasury Secretary Tim Geithner and Fed president Ben Bernanke. These three effectively fought off the tougher aspects of financial regulation at the same they time touted themselves as real reformers. While the president made clear Warren will work directly for him, will she be able to match Summers, Geithner and Bernanke, all seasoned bureaucratic infighters? She’s done little to endear herself to them and has publicly tangled with Geithner.

There’s no question that Warren, a Harvard bankruptcy law professor, has already played an extraordinary and important role in helping understand the financial collapse and its fallout. She’s never been anything but forthright, no-nonsense, principled, unafraid to speak truth to financial power and to demand accountability. She will need all those qualities as well as thick skin and nerves of steel for her new job. The stakes are high. I wish her well.

Consumer Financial Protection Agency / Martin Column / Paul Volcker / President Barack Obama - 09/17/2010

Around the Web: Volcker Rules - Not!

Until the morning of January 21, 82-year-old former Federal Reserve president Paul Volcker had been a lonely and largely ignored figure among President Obama’s economic advisers.

Volcker seemed to be the only one of Obama’s advisers not under the spell of the “too big to fail banks” and their highly touted innovations.

Volcker was especially vocal about protecting the public from the financial world’s riskier innovations. As he told a financial conference last year, “Riskier financial activities should be limited to hedge funds to whom society could say: ‘If you fail, fail. I'm not going to help you. Your stock is gone, creditors are at risk, but no one else is affected.’ ”

It was Volcker who had said that the only financial innovation to benefit consumers in the last 20 years was the ATM card.

But he wasn’t getting much traction with the president and his advisers.

Then the Democrats lost Ted Kennedy’s Senate seat.

In a lurch back toward the populism he had embraced during his campaign, President Obama hastily reached out for Volcker.

During a press conference, the president endorsed something he called the Volcker rule as an essential plank of his financial reform plan. That rule would restrict banks from risky proprietary trades with their own (borrowed) money.

Here’s what the president said:

“Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers.  If financial firms want to trade for profit, that's something they're free to do.  Indeed, doing so –- responsibly –- is a good thing for the markets and the economy.  But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.”

For more on proprietary trading and the Volcker rule, read this from Rortybomb’s Mike Konczal and the NYT. For more about why the Volcker rule was a good idea, see this from WSJ’s Dealbreaker.

Obama mentioned the Volcker Rule a couple more times, as did the man who was marshaling financial reform through the House, Rep. Barney Frank.

But neither the president nor anybody else in the Democratic leadership ever mounted a public campaign to make it an essential part of reform. In fact, within a month, the president was already backing off his support of the Volcker rule.

And now, like many other parts of the reform that would have protected consumers and inconvenienced banks, it has been largely gutted.

Bloomberg reports “lobbying by banks and congressmen sympathetic to Wall Street’s views, as well as some administration members in the banks’ defense, trampled the views of Volcker and others who favored a stronger proposal.”

The weaker provisions won’t even go into effect for as many as 12 years.

It would have been one thing for Obama and the Democrats to go down swinging on the Volcker Rule. But they didn’t even put up much of a fight.

If you’re as disappointed as I am with the president’s lack of leadership on this, after he made such a big deal about it, why not let him know?

Around the Web / Financial Reform Legislation / Martin Column / Paul Volcker / President Barack Obama - 06/30/2010