Capital Punishment by Corporate Proxy

There are two kinds of death penalty in this country. One of them I bet you’ve never really thought about.

First there’s the death penalty imposed by the state for particularly heinous crimes. This one’s been churning for decades – we all know about it, and many of us have strong feelings about it. In 1978, for example, California voters passed an initiative authorizing capital punishment for an expanded list of crimes. A few days ago, a coalition of organizations announced they had collected enough signatures to put a measure on the November ballot that would ban the death penalty in California.  Make no mistake: this is one of those social issues that inspire passions of biblical proportions. Whichever way voters go on this, it’ll be an intense, high visibility campaign... over the fate of 719 people on California's Death Row. In 2011, California executed two people; three in 2010.

Then there’s the death penalty almost nobody ever mentions, but claims many more victims – all of them innocent.

I’m talking about the one carried out on a daily basis by corporations that put profits over people’s lives. Consider the death toll that results when insurance companies refuse to sell a health insurance policy at a reasonable price. A study by Harvard researchers concludes that nearly 45,000 Americans die each year because they lack health insurance and go without the care they need. About 5,300 of those are in California – more than the number of homicides and suicides in the state combined.

Deaths due to malpractice by medical personnel in hospitals alone are estimated at 195,000 annually.

Water, air and soil pollution is reported to be responsible for forty percent of all deaths worldwide.

Most of the corporate policies reflected in these statistics on fatalities are based on a simple financial calculus of profit v. loss. The prototypical example is the decision by Ford executives in the 1970s to manufacture a car with a known fatal defect: a gas tank that could explode in the event of a moderate car accident. The company’s engineers were aware of the flaw, but the cost of the repair – $11 per vehicle – was deemed too expensive. Ford decided it’d be cheaper to pay the medical and court costs of the victims and their next of kin. You can read Ford’s cost/benefit analysis here.

Who knows how many Americans have died an early death after losing their jobs, their homes and their life savings in the financial collapse engineered by Wall Street speculators four years ago?

Why isn't there more discussion of this form of capital punishment? As I explained in a book on medical malpractice years ago, mayhem perpetrated behind closed doors in the suites isn’t as accessible, nor as easily translated into graphic videos and television news stories, as is crime in the streets.

“Corporations are people,” Mitt Romney candidly explained to an angry American last year. The U.S. Supreme Court’s 2010 decision in Citizens United indisputably granted these inanimate creatures the freedom of speech that once belonged to humans only. Abetted by government incompetence or deliberate inaction, some corporations have gained even greater power: the power to make life or death decisions for many Americans.

I don’t mean to diminish the importance of the debate over the death penalty here in California; the point made by the supporters of the new initiative to ban capital punishment is that a relatively small number of prisoners are costing everyone else a ridiculous amount of money. But we citizens ought to pay at least the same amount of attention to the de facto death penalty that corporate greed can impose.

The 4th of Awry

When I grew up in a suburb south of Boston in the Sixties, the Fourth of July was distinctly the greatest day of summer. Preparations would begin well in advance. First, a trip to Chinatown where we’d pay ten times the fair price for a brick of firecrackers and as many cherry bombs or M-80s as we could afford. The night before, one of our gang’s parents would drive us down to the shore to watch the magnificent fireworks displays, while AM car radios would play patriotic tunes like the Star Spangled Banner. I can still smell the gunpowder that would waft in clouds around us. The next night, we’d conjure up our own smaller version in our backyards, occasionally evading the police when our displays raised the neighbors’ ire.

The times were contentious – the Vietnam War had engendered a national divide – but at the peak of our youth the future seemed limitless. We were about to land a man on the moon! The red glare of the Saturn V rocket as it heaved its gargantuan frame into space symbolized to us kids all that was great about America. Freedom was such a powerful force that it could break the bonds of gravity. As a nation, we would not be restrained.

That all seems like dim myth now. Savaged by the financial collapse and the cost of endless wars on the other side of our planet, there is no budget for fireworks here in Southern California, though some towns have lifted the ban on private sales of firecrackers to grab a little extra tax revenue. Our dreams of pressing the boundaries of space have likewise been downsized. Next Friday, the space shuttle will make its last journey, and “after that, there is little glory to look forward to,” the New York Times notes this morning. The universe has receded from our grasp.

Something has gone profoundly awry in America. Our Supreme Court has defined freedom to mean the ability of big corporations to spend unlimited amounts of money in behalf of their private political agendas, while the rest of us wield our personal freedom in obscurity and servitude.  Awash in money from the powerful and wealthy, our elected officials have abandoned the majority of us. We are left to contend with rising health insurance premiums, disappearing jobs, $4.00 a gallon gasoline, a collapse of social services, and the deeply disturbing prospect that we are leaving our kids with fewer options and worse prospects than we enjoyed.

And fear has set in. Around a third or more of all Americans now fear for the basics: their ability to start a family, buy a home, put their kids through college, and retire.  Through the tyranny of greed, we have lost our liberty to make a better future for ourselves. We have been robbed not merely of our savings, but of our personal and national sense of possibility.

We can recover these – we must. But we cannot do so alone. We can no longer hope to be led. We must, ourselves, lead.

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.

Soldiers Lose Out to Yo-Yos

Here’s a snapshot that puts into sharp focus where we are politically this summer:

In a showdown between the U.S. military and the nation’s car dealers over protecting soldiers from predatory lending, the car dealers won.

Even though the commander-in-chief said he wanted the fighting men and women to be shielded by the proposed new consumer protection agency when they went to get a car loan, congressional Democrats Tuesday sided with the car dealers, who would prefer not to face any additional regulation, thank you very much.

After all, they argue, we didn’t cause the financial meltdown, so leave us alone.  But according to the Better Business Bureau, new car dealers rank fifth in complaints about lending practices.  Used car dealers do a little better; they rank seventh.

The military says its soldiers, focused as they should be on other matters, are particularly vulnerable to predatory lending.

Rosemary Shahan, president of a Sacramento-based nonprofit, Consumers For Auto Reliability and Safety, told the Chicago Tribune that auto dealers pack financing contracts with costly items such as extended warranties and insurance to cover loan payments if the vehicle is wrecked.

One of the more obnoxious forms of predatory lending is something called a yoyo loan. The buyer is told they can drive the car off the lot with a deal they can’t refuse – subject to loan approval. Then the dealer calls back and tells the buyer the initial loan wasn’t approved but they can have the vehicle at a higher interest rate.

The car dealers argue that they’re already subject to other forms of regulation. But they also have other means of persuasion: the National Association of Auto Dealers is among the elite top 20 campaign contributors since 1989, according to the Center For Responsive Politics, with more than $25 million in contributions. During 2009 and the first quarter of 2010, the National Automobile Dealers Association and another group that represents foreign-car franchises, the American International Automobile Dealers Association spent almost $3.5 million to lobby on financial reform and other issues, the Center For Public Integrity reported.

Call President Obama and let him know we need him on the front lines in the battle against predatory lending.

Roll Back Interest Rates Now!

Washington has spent trillions of taxpayer dollars to bail out the Money Industry – not just the $700 billion cash life preserver, but also loans at near zero percent interest. Then the banks and credit card companies turned around and loaned us our own money at ten times the interest rate they paid, forcing us to pay through the nose coming and going.

And there’s no sign of relief. The New York Times reports that interest rates on mortgages, car loans and credit cards are reaching historical records. Credit card rates could climb another three points by the fall, according to one expert.

And that doesn’t include the endless creation of other techniques to fleece beleaguered consumers – ATM charges, minimum balance requirements, and my personal favorite, “billing fees.” That’s a fee you pay the company for the privilege of receiving a bill. To catch a glimpse of where this is all headed, just look at how the airlines are unbundling their services. Last week, Spirit Airlines announced that flyers will be required to pay up to $45 for carry on baggage.

Having abetted the financial collapse with decades of deregulatory coddling of Wall Street (PDF), Washington spared no expense to rescue its patrons. But regular Americans never got any relief.

In fact, now that Washington has declared “mission accomplished” on the economy, it's shutting down programs that were designed to benefit Wall Street but indirectly affected the rest of us. For example, last month the Federal Reserve stopped buying risky mortgage-based securities from banks – a two-year, $1.25 trillion bailout that relieved the banks of the risks of these speculation-driven investments. It was intended to encourage the firms to expand their lending. The end of this federal subsidy is one reason why experts are saying mortgage rates are going to go up.

On the very day in 2008 that the Bush Administration first proposed the $700 billion bailout, I urged that Congress slap a cap on the interest rates that recipients of any bailout would turn around and charge American consumers. And I’ve repeated that call since. But there was no quid pro quo for the public in the deal. Even in the so-called Credit Card Reform Act of 2009, Congress not only placed no cap on credit card rates, it gave the industry months in which to raise interest rates through the roof before the new rules kicked in.

Congress has gone back to work on “financial reform.” The purpose, supposedly, is to pass new laws that would prevent another financial collapse. There’s no reason why Congress can’t include some relief for Americans who are still suffering from the last debacle. My proposal: a rollback of credit card interest rates. Although there’s no reason to do it, lets be generous and let the banks and credit card companies earn three percentage points more from us than they have to pay when they borrow our money from the Federal Reserve. That would knock interest rates down to around 4%. Citibank, which is alive today only because it got $45 billion of taxpayer support, is charging upwards of 15% for its best credit card customers. Most of the other big card companies are doing the same.

Lowering interest rates would provide needed relief for tens of millions of American families, and would jumpstart the economy by stimulating more spending. No doubt some would say that we should not return to the era of “cheap money” when everybody was encouraged to spend more than they had by putting lifestyle improvements on plastic. I’m not advocating fiscal irresponsibility, but right now that argument sounds more than a little patronizing. True, some Americans got in over their heads, but the financial collapse itself was the fault of greed-driven Money Industry speculators, many of whom walked away with millions of dollars in pay and bonuses. So they’re all set; they got theirs – in fact, are still raking it in – but now average Americans are told they need to scale back at a time when many are struggling to put food on the table and might need to use a credit card to pay for a doctor’s visit? Why should Americans pay exorbitant rates to fatten the coffers of the firms that got us into this mess?

I say, roll ‘em back!

Quotable: Neil Barofsky

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car."

Neil Barofsky, January 2010

What Would Pecora Do?

There have been lots of positive comparisons between Phil Angelides and Ferdinand Pecora, who led an earlier investigation of Wall Street excesses that led to the Great Depression.

Pecora was a no-holds barred former prosecutor who ran his hearings with meticulous preparation and theatrical flair, and his work galvanized public support for widespread reforms.

Some have been impressed by Angelides’ reputation as a reformer from his days as California treasurer, when he tried to use the power of the state’s investments for socially worthy causes and implemented some protections for shareholders. Angelides was widely praised after public hearings earlier this year for his understanding of high finance and his scolding of the head of Goldman-Sachs, Lloyd Blankfein, comparing him to a used –car dealer.

I’ve been less impressed by Angelides, who doesn’t seem to have a grasp on the opportunity he has to marshal support for real financial reform. And he’s too cozy with a Democratic leadership that’s been soft on Wall Street in the wake of the financial meltdown.

I’m also suspicious of Angelides, the politician and former real estate developer who unsuccessfully ran for governor against Arnold Schwarzenegger, because of his close ties to the Democratic Party elite. In addition, I’m wary of the impact of Angelides' main job running a coalition promoting green technologies. That’s certainly a laudable goal, but Angelides and his Apollo Alliance aren’t going to get very far without lobbying the Obama administration and the Democrats, who would not be happy with a hard-hitting report.
Whatever drama Angelides manages to muster at any given moment, I’m concerned that his multiple roles and background will cause him to soft-pedal his investigation. Those concerns were only heightened after Angelides surfaced as part of a curious SEC report last week that cautions firms about “pay to play” in the state investment business.
According to the SEC, when Angelides was running for treasurer in 2002 he hit up a top J.P. Morgan official to co-chair a fundraising event. It wasn’t just an honorary position. The price tag for the co-chairmanship? $10,000.

According to the report, the official didn’t co-chair the event but donated $1,000 to Angelides” campaign personally ­– and helped raise $8,000 more. In asking other J.P. Morgan brass to contribute to Angelides, the official noted that that the state of California was an important client for the firm.

Just how important became clear in the next couple of years, when J.P Morgan received about $37 million in fees from the state on more than 50 bond offerings totaling $15.8 billion – overseen by Angelides as state treasurer.

In the SEC’s curious take on the matter, neither Angelides nor J.P. Morgan is accused of doing anything improper.  Angelides isn’t even mentioned by name. The agency merely uses its report to caution finance officials about not running afoul of SEC regulations.

OK, so the SEC doesn’t think Angelides did anything wrong soliciting funds from J.P. Morgan and then giving them the state's business. But the report serves as a bitter reminder that those who we’re counting on to get to the bottom of the financial meltdown are steeped in the toxic brew of cash and politics that has seeped into the core of our government.

I hope I’m proven wrong about Angelides; that his intimacy with this unseemly world has left him with a sense of sustained outrage and not empathy for it.  But it will take more than a few zingers to convince me. I mean, let’s be serious. Would Ferdinand Pecora have solicited money from J.P Morgan? Not much chance. After Pecora grilled the son of the legendary banker, J.P. Morgan, Jr. described the investigator as having “the manners of an assistant prosecuting attorney who is trying to convict a horse thief.”

From Watchdog to Pussycat

Though President Obama and the Democrats promise a fierce financial watchdog, what they’re delivering looks like a pretty tame pussycat.

There’s a disconnect between the Democrats’ tough rhetoric about the need for financial reform and the legislation that’s actually making its way through Congress.