OurFuture.org Blogs: Robert Borosage

Miller Harkin Act to Save Direct Lending

Robert Borosage — Fri, 12 Mar 2010 02:42:12 -0800

______________________

With word that Six Senators were expressing opposition to putting direct lending in the budget bill reconciliation -- which only requires sixty votes to pass the Senate -- Rep George Miller, Chair of the House Education and Labor Committee, and Tom Harkin, Chair of the Senate Education Committe, got to work. Miller pointed out that adding direct lending in the bill made reconciliation more, not less likely to pass in the House -- where every vote is needed to get the health care fix done.

The House pledged to adjust its measure to insure that direct lending would save money, even after increasing funding for Pell grants and guaranteeing that Pell grants would be adjusted annually for inflation.

If this holds, it is a terrific victory for students.

New York Times Story here http://www.nytimes.com/2010/03/12/us/politics/12loans.html?hp

Miller's press release on the program below.
__________________
EDUCATION & LABOR COMMITTEE
Congressman George Miller, Chairman
________________________________________
Thursday, March 11, 2010
Press Office, 202-226-0853

Chairman Miller: Student Loan Reform Boosts Support for Health Reform Bill
Members of Black and Hispanic Caucuses Also Show Strong Support

WASHINGTON, D.C. – Including student loan reforms in a reconciliation package will help pass health insurance reform in Congress because it is a once-in-a generation opportunity to make historic investments in college students and families, instead of banks – and at no cost to taxpayers, said U.S. Rep. George Miller (D-CA), the chairman of the House education committee, at a press conference on Capitol Hill today.

Miller was joined by U.S. Senator Tom Harkin (D-IA), the chair of the Senate education committee, House Majority Whip James E. Clyburn (D-SC) and Democratic Caucus Vice Chairman Xavier Becerra (D-CA), who underscored the importance of the bill for the Congressional Black Caucus and the Congressional Hispanic Caucus, because it invests billions of dollars to help low-income and minority students pay for college and graduate.

“Senators have a clear choice here: they can either continue to send tens of billions of dollars in wasteful subsidies to banks – or they can start to invest that money directly in students,” said Miller, who is the author of the student aid bill in the House. “This choice speaks to what our priorities will be for the next generation. We have a remarkable opportunity to change Washington and do the right thing, the fair thing, and the fiscally responsible thing for hard-working families. This is very important to the members of the House Democratic Caucus.”

The 2009 budget resolution provided reconciliation instructions for Congress to use for both health insurance reform and student loan reform. To comply with the reconciliation instructions, the student loan reforms have to be budget neutral and reduce the deficit by $1 billion over five years. Budget rules require that both bills would move together as one reconciliation measure – they cannot be moved separately.

The House passed the legislation, the Student Aid and Fiscal Responsibility Act, in September with bipartisan support. The bill, which was first proposed by President Obama, would eliminate wasteful taxpayer subsidies to banks in the federal student loan programs and invest the savings in students, families and taxpayers. The reliable and cost-efficient federal Direct Loan program, which many schools already use, would provide students with the same loans as banks – but at a cheaper price for taxpayers.

At the press conference today, Miller cleared up several key points of confusion:

• First, any student loan bill that would be included under reconciliation would have to be deficit neutral and return $1 billion in savings to pay down the deficit. Contrary to media reports that the bill could increase the deficit, any investments included under the bill would be entirely paid for.
• Second, the legislation will preserve jobs. For months banks have claimed that switching to Direct Loans would eliminate jobs. They are wrong. The student aid bill would maintain a servicing role for lenders, which will preserve jobs and, unlike in the current system, keep banks from shipping these jobs overseas. Last year, Sallie Mae, one of four private companies that currently services Direct Loans, had to bring 2,000 outsourced jobs back to the U.S. in order to be eligible for the servicing contract.
• Third, it has always been known that student loan reform would move as part of a reconciliation measure. Last year’s House Budget Resolution for Fiscal Year 2010 included instructions for the House Education and Labor Committee to enact student loan reforms that produce $1 billion in savings to help reduce the deficit over the next five years. In order to meet these reconciliation requirements, any student loan reform will have to help reduce the deficit.
• Fourth, these subsidies to lenders have been identified as wasteful by both Democratic and Republican presidents. In addition to President Bill Clinton and President Barack Obama, who both identified these subsidies as wasteful, President George W. Bush’s 2005, 2006 and 2008 budget proposals called for reducing these federal subsidies to private banks.
• Finally, this is the only opportunity to enact these reforms. As the lawmakers said today, student loan reform must move under these reconciliation instructions – or it won’t happen.

Senators to Prez: Make Fed Accountable

Robert Borosage — Thu, 11 Mar 2010 19:51:34 -0800

Senators Webb and Sanders have signed letter urging President Obama to fill empty seats on Federal Reserve Board with nominees who will help balance the Institution. Notably they urge the Pres to find nominees who would break up the big banks, ban usurious interest rates, enforce consumer protections, allow an audit of the fed's bailout operations, put a lid on executive compenstaion. A sensible idea after the crash which has cost Americans trillions.

Here's the report from Ryan Grim of HuffingtonPost with letter attached.

http://www.huffingtonpost.com/2010/03/11/webb-sanders-pressure-oba_n_495...

Webb, Sanders Pressure Obama On Fed

Two senators on opposite ends of the Democratic caucus spectrum are circulating a letter pressuring President Obama to appoint governors to the Federal Reserve who reflect the interests of the middle class and small businesses rather than Wall Street.
Sen. Bernie Sanders (I-Vt.), a self-described democratic socialist, has been intensely critical of the Fed's failure to reduce unemployment and its failure to regulate the financial services industry leading up to the crisis. He's joined by Sen. Jim Webb (D-Va.), a conservative Democrat who voted to back Chairman Ben Bernanke's most recent confirmation to a second term.
The letter is being circulated through the Senate in search of additional signatures and was provided to HuffPost by an aide in a third office.
Obama has an opportunity to fill a vice-chair position and two governor spots on the Federal Open Market Committee. All three positions are powerful ones and could help shape the Fed in a new mold.
Specifically, the senators are calling on Obama to appoint people who would put a cap on usurious interest rates charged by credit card companies, want to reduce the size of banks, focus on unemployment and extend credit to small businesses.
The letter, along with one from Sen. Sherrod Brown (D-Ohio) Wednesday, puts Obama on notice that a bank-friendly appointee will face a tough time getting confirmed.
Read the full letter:
March __, 2010

The Honorable Barack Obama
President of the United States
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear President Obama:
As you know, you will soon have the historic opportunity to nominate three candidates to the Federal Reserve Board of Governors. At this moment of great economic pain for millions of working families, we strongly urge you to appoint candidates to these positions who will fight to protect the interests of the American middle class and small businesses.
American families are currently living through the worst economic crisis since the Great Depression. Millions of workers have lost their jobs, homes, life savings, and their ability to send their kids to college. While the $700 billion Troubled Asset Relief Program (TARP) and the extraordinary actions taking by the Federal Reserve have greatly benefitted [sic] executives on Wall Street, much more needs to be done to rebuild the middle class and small businesses living on Main Street.
Decisions by the Federal Reserve can have a major impact on whether the unemployment rate goes up or down; whether small businesses thrive or go out of business; whether the foreclosure rate goes up or down; and whether big banks charge reasonable or usurious interest rates and fees for credit cards and other financial products.
The Federal Reserve has been given broad authority by Congress to protect consumers against unfair and deceptive financial products; to promote maximum employment; to maintain the safety and soundness of financial institutions; and to guard against systemic risk in financial markets.
Therefore, we believe that the nominees you choose to fill these important positions should be prepared to support the American people in the following areas:
1) Prohibiting usurious interest rates and fees. Right now, the Federal Reserve has the authority to ban unfair and deceptive financial products. This can and should include a prohibition on usurious credit card interest rates and fees. Millions of American consumers and small businesses are paying interest rates as high as 35 percent on their credit cards. At the same time, financial institutions are able to borrow money from the Federal Reserve with virtually no interest at all. This is extremely unfair. We hope that you will pick nominees for these positions who will do everything within their authority to end the outrageously high interest rates that Americans are currently forced to pay.
2) Increasing lending to small businesses to create jobs. The Federal Reserve has the responsibility to conduct monetary policy in a manner that leads to full employment. The Federal Reserve can and should use this authority to provide direct loans to credit worthy small businesses at affordable interest rates and to provide community banks with the financing they need to offer affordable small business loans. We hope that your nominees to the Federal Reserve are committed to fulfilling the Fed's full employment mandate.
3) Reducing the size and risk-taking of large financial institutions so that they are no longer too-big-to-fail. The Federal Reserve has the authority and the responsibility to protect the safety and soundness of financial institutions and to guard against systemic risk in financial markets. We hope the nominees you choose for the Federal Reserve share the views of Paul Volker [sic] and other experts who believe that we need to "keep [banks] small, so that any failure won't have systematic importance."
4) Increasing transparency at the Federal Reserve. It is important that whoever is nominated to the Federal Reserve is committed to making the central bank more transparent. Since the start of the financial crisis, the Federal Reserve has provided over $2 trillion in virtually zero interest loans to the financial sector and large corporations, but has not disclosed the names of the recipients or the exact terms of this assistance. That is unacceptable. We need people at the central bank who understand that this money does not belong to the Federal Reserve. It belongs to the American people, and the American people have the right to know how that money is being spent.
5) Lowering the foreclosure rate. The foreclosure rate is still the highest on record, turning the American dream of homeownership into the nightmare of foreclosure for too many American families. The Federal Reserve has the ability to reduce the foreclosure rate and keep people in their homes. We hope your nominees will be committed to supporting policies at the central bank that will significantly reduce the number of foreclosures in this country.
6) Prohibiting excessive compensation packages at financial institutions. Last year, big banks and Wall Street firms that are now regulated by the Federal Reserve provided tens of billions in bonuses to CEOs and other executives. This is an insult to the American people who bailed them out and who continue to suffer economically as a result of their greed and recklessness. We need a Federal Reserve committed to ending the "heads banks win; tails taxpayers lose" compensation system. Rather, we should be moving toward a system that discourages compensation practices that reward excessive risk taking.
Thank you in advance for your consideration to this request. We look forward to working with you on this important issue.
Sincerely,
____________________
Bernard Sanders
United States Senator
____________________
Jim Webb
United States Senator

The Last Obscenity: Will the Bank Lobby Succeed in Screwing Poor Kids?

Robert Borosage — Thu, 11 Mar 2010 07:30:31 -0800

It is, as President Obama stated, a "no-brainer." Cut the $90 billion in subsides that go to banks to make risk-free student loans that are GUARANTEED BY THE GOVERNMENT, go to direct lending, and use the money saved to increase Pell grants and tuition tax credits for working families so more poor kids can afford college. $90 billion over 10 years isn't bubkas.

The banks, of course, mobilized to save their subsidy. Republicans, led by Sarah Palin, denounced the "government takeover." But shoveling out an extra $90 billion to private banks to make risk free loans that the government guarantees isn't exactly the free market. This is the most egregious form of crony predatory capitalism that Adam Smith would condemn.

So the bill passed the House easily. And it was put in reconciliation instructions in the Senate—so it only needs 50 votes. Piece of cake.

So the banks enlisted big-time Democratic lobbyists and spent millions. They mobilized employees to pressure senators, arguing that they would lose their jobs. (Actually most of the jobs would still be there as the loans would continue. It is just the subsidies to bank profits that would eliminated.)

Now six senators—WHO SHOULD HEAR FROM YOU—have announced their opposition to voting on the student loan package in the reconciliation bill:

Blanche Lincoln of Arkansas (no surprise there)
Ben Nelson of Nebraska
Bill Nelson of Florida
Thomas Carper of Delaware
Mark Warner of Virginia (so much for New Dems)
Jim Webb of Virginia

What do six senators matter when we only need 50 votes? Because health care needs every vote it can get to pass the "fix" in reconciliation. If a couple of these folks say they won't vote for reconciliation if student loans are in the bill, the leadership, desperate to get health care done, will drop student loans.

This will be the final obscenity: The bank lobby so strong and the Democrats so weak that even a "no-brainer" taking unearned subsidies from banks and giving them to poor kids can't pass.

Despair for the Republic. This, folks, is simply ugly.

Sen. Brown to Geithner: Make the Fed Accountable

Robert Borosage — Thu, 11 Mar 2010 06:38:02 -0800

Sen. Sherrod Brown, head of the subcommittee in charge of overseeing the Federal Reserve, has written President Obama urging him to use the THREE vacancies on the Federal Reserve Board of Governors to make the Fed more accountable. Letter and Huff Post report below.

These appointments are like Supreme Court appointments; they can shape the Federal Reserve -- whose extraordinary powers were exposed during the financial collapse -- for years to come.

Brown sets the bar clearly, urging appointees who were independent enough to see and warn about the housing bubble and the catastrophic financial collapse ahead of time; who are concerned about consumer protection and full employment, elements of the Federal Reserve's mandate that have been woefully neglected; and who are committed to transparency, including revealing the full details of the AIG transactions that shipped billions of dollars to private financial institutions here and abroad.

Other criteria would be usefully added to these:

Saw the housing bubble and warned about its dangers ahead of time
Saw the dangers of bailing out the banks without reforming them, and warned about the dangers during the bailout.
Urged the Fed to use its regulatory powers to curb rampant fraud and predatory lending that were pervasive in the bubble years,
Have urged the Fed to fulfill its dual mandate about price stability and full employment
Agree to an audit of the Fed, particularly the details of its transactions during the bailout that provided literally trillions of dollars to private financial institutions without a vote of Congress

Imagine if the President appointed Elizabeth Warren, head of the Congressional Oversight Panel and leading advocate of the Consumer Financial Protection Agency, which is likely to be lodged in the Fed

Rob Johnson, former partner of Soros, current director of the Institute for a New Economic Thinking, who warned about the coming crisis as Bernanke was assuring Congress that the problems of the subprime mortgage market were minor;

Jamie Galbraith, Texas Professor, former chief economist of Joint Economic Committee, who has written widely about the importance of focusing on full employment in guiding the economy

The Federal Reserve -- so long controlled by the large banks -- would gain far greater balance. Given the trouble financial reform is having, these appointments are increasingly vital if we are to have any chance of avoiding the next bubble and bust. The President may not be able to convince Congress to change the regulations, but he can change the regulators.

Leading Senator Wants New Fed Governors Committed To Full Transparency, Consumer Protection (LETTER)

THE HUFFINGTON POST | First Posted: 03-10-10 02:00 PM

The chair of a Senate panel overseeing the Federal Reserve wants the Obama administration to appoint Fed officials committed to transparency, consumer protection and lowering the unemployment rate -- three critical areas that the Fed needs to beef up.

In a Wednesday letter to Treasury Secretary Timothy Geithner and top White House economic adviser Lawrence Summers, Sen. Sherrod Brown (D-Ohio) expresses his concern about the two current vacancies on the Fed's seven-member Board of Governors and the impending vacancy to be created with the June departure of vice chairman Donald L. Kohn.

With the three vacancies, President Obama can shape the direction of the Fed for years to come. Brown, acutely aware of the opportunity -- he refers to the openings as the equivalent of openings on the U.S. Supreme Court -- is pushing for nominees who will fill gaps in areas he feels have been ignored.

"The evidence presented to the Committee about the role that Fed policy decisions played in the financial crisis and the economic downturn has led me to conclude that the Fed's monetary policy has focused almost entirely on controlling inflation rather than maximizing employment," Brown, the chairman of the Senate Banking Committee's Subcommittee on Economic Policy, writes. "And that the Fed has too often put banks' soundness ahead of its other responsibilities."

Rather, Brown argues, Obama should take the opportunity to appoint economic policy makers who:

"Possess the foresight to identify harmful economic trends, the courage to speak out about the necessity of addressing these practices before they inflict lasting damage to our economy, and the wisdom to listen even if their views are challenged";
"Demonstrate dedication to protecting consumers and maximizing employment" and;
Are committed "to releasing e-mails related to the Fed's involvement in the AIG bailout" because "[f]ocusing on candidates committed to full transparency related to this particular economic event would help to restore the Fed's stature and credibility in the eyes of many Americans."

Installing officials that meet these requirements would send a positive message, Brown writes.
"The American public has lost a great deal of confidence in the Federal Reserve. Selecting a Vice Chair and...members with the above qualifications will send the message that the Federal Reserve has learned from the financial crisis, and that the Fed's weaknesses are being addressed with more than just cosmetic changes."

READ the full letter below:

March 10, 2010

The Honorable Timothy Geithner
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

The Honorable Lawrence Summers
Director
National Economic Council
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear Secretary Geithner and Director Summers,

I write to you today to express my concern about the vacancies at the Federal Reserve, both on the Federal Open Market Committee (FOMC) and soon in the Vice Chairman's office. This is the financial equivalent of leaving open vacancies on the United States Supreme Court, and it is essential that we fill these positions.
As Chairman of the Senate Banking Committee's Subcommittee on Economic Policy, with jurisdiction over the Federal Reserve System's monetary policy functions, I am acutely aware of the importance of monetary policy at the Fed. Both the full Banking Committee and the Economic Policy Subcommittee have examined the causes of the financial crisis and the resulting effects on lending, access to credit, and employment. The evidence presented to the Committee about the role that Fed policy decisions played in the financial crisis and the economic downturn has led me to conclude that the Fed's monetary policy has focused almost entirely on controlling inflation rather than maximizing employment and that the Fed has too often put banks' soundness ahead of its other responsibilities. In light of this experience, there are several other important qualifications that I would urge you to consider in selecting the new Vice Chairman and new members of the FOMC:

1. Recognition of the causes of the financial crisis before it occurred.

Many economic experts, including some at the Federal Reserve, failed to anticipate the impending economic crisis. However, there were exceptional people who sounded alarms about the rapidly inflating housing bubble, the proliferation of subprime lending, and the packaging, selling, and investing in toxic financial products by Wall Street. Unfortunately, regulators, including the Fed, ignored or attempted to discredit many of these courageous individuals, rather than heeding their warnings. We need economic policy makers who possess the foresight to identify harmful economic trends, the courage to speak out about the necessity of addressing these practices before they inflict lasting damage to our economy, and the wisdom to listen even if their views are challenged.

2. Demonstrated dedication to protecting consumers and maximizing employment.

For years, the Federal Reserve's monetary policy has maintained an almost single-minded focus on inflation. This has been detrimental to the Fed's other core missions, particularly maximizing employment and protecting consumers. The results of this fixation speak for themselves. The national unemployment rate is more than double the Fed's statutorily mandated 4 percent unemployment target. The Fed also failed to act on repeated warnings about predatory mortgage lending and credit card abuses. Consumer protection experience is particularly important if the new consumer protection entity were to be housed at the Fed. Our economy will benefit from renewed attention to all of the Fed's priorities.

3. Commitment to releasing e-mails related to the Fed's involvement in the AIG bailout.

A growing number of experts - including economists, academics, and former regulators - have called upon the Federal Reserve to release all e-mails, internal accounting documents, and financial models related to AIG's collapse. The American taxpayers now hold the majority of AIG shares, and they have a right to know how their money is being spent. Providing greater detail about the AIG bailout is particularly important because that episode continues to taint the Fed's reputation. Focusing on candidates committed to full transparency related to this particular economic event would help to restore the Fed's stature and credibility in the eyes of many Americans.

The American public has lost a great deal of confidence in the Federal Reserve. Selecting a Vice Chair and FOMC members with the above qualifications will send the message that the Federal Reserve has learned from the financial crisis, and that the Fed's weaknesses are being addressed with more than just cosmetic changes.
I would be happy to discuss specific candidates with you at your convenience. Thank you for considering my views, and I look forward to working with you to address these vacancies at the Fed.

Sincerely,
Sherrod Brown
United States Senator

All You Really Need to Know About Banking Reform

Robert Borosage — Wed, 10 Mar 2010 13:03:02 -0800

Financial reform, as it is called, shouldn't be all that complicated. Break up the banks deemed "too big to fail," since that offends any possibility of market discipline and puts taxpayers on the hook for future bailouts. Crack down on gambling with other peoples' money in the financial casino. Give consumers a cop on the beat to protect them from the cons and frauds. Tax the big guys to get our money back. Outlaw compensation schemes that give million dollar incentives to make risky bets.

But, of course, finance is its own world, with its own patois, ethos and interests. And banks and regulators have a strong interest in making this stuff complicated. So the debate turns to the intricacies of trading derivatives on an exchange, resolution authority, credit default swaps, policing "systemic risk." For most Americans, the eyes glaze over, and they reach for the remote. That leaves legislators free to deal with the banking lobby and the regulators mobilized to protect their interests and turf. With the White House still focused on passing health care, and Finance Committee Chair Senator Dodd replaying a poor man's version of the bipartisan farce that Max Baucus staged on health care, wasting time in backrooms trying to seduce a couple of reluctant Republicans, it is no surprise that reform isn't going so well.

How bad is it? The independent Consumer Financial Protection Agency is about to be buried in the Federal Reserve. The only talk of banning naked credit default swaps is in Europe. The market oxymoron -- banks that are too big to fail -- seems about to be embraced in law. I could go on, but again, I can feel the eyes begin to droop.

So how bad is it? All you really need to know was provided by a lead article in Sunday's Washington Post business page, entitled "Financial reform bill likely to lose measure to protect Main Street investors."

Tomoeh Murakami Tse reports that when the new bill's language is released (reportedly sometime this week), it is likely to drop the simple "requirement for stock brokers and insurance agents to act in the best interests of their clients."

This common sense statement passed the House without mention. It was included in Chairman Dodd's original draft language. Then the lobbyists went to work and apparently have convinced the Senators that requiring an agent to act in the best interests of his or her client is, well, complicated. So Tse reports that instead of a requirement, the new draft will direct the Securities and Exchange Commission to study the varying rules that govern brokers and investment advisors.

Consider this a tribute to Goldman Sachs. You remember Lloyd Blankfein told the Financial Crisis Inquiry Commission that it was just business as usual for Goldman to create and peddle packages of mortgage-backed securities, lobby for them to be rated triple AAA, and then make independent bets that the securities would go bust. (Astonished Commission Chair Phil Angelides responded: "It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.")

So at the retail level, your broker -- who usually works for a bank or investment house -- will have the banks' interests in mind, not yours. He or she may be encouraged to recommend that you buy the toxic junk in the basement that the bank is trying to get rid of. So it would be complicated -- worth study, surely -- to require your broker to have your best interests in mind.

Yeah, it's come to that. Reforms prospects are bleak, but not entirely hopeless. One small thing constrains the Senators, outside of their individual own sense of decency (which is a dependent variable).

The public is furious at the bank ripoffs and bailouts. Across the spectrum, from conservative to liberal, Democrat, Independent and Republican, vast majorities want a crack down on the banks. Folks are looking for tumbrels and guillotines, not SEC studies.

So the bank lobby has millions of dollars and legions of high dollar lobbyists, including literally dozens of retired legislators, who can buttonhole their former colleagues, as Rep. Massa reveals, in the showers of the House gym. (Giving new meaning to whole notion of naked credit default swaps).

The reform coalition -- anchored by Americans for Financial Reform -- has 200 organizations, and mobilizes citizens, not money. But even obstructionist Republicans (who provided not one vote for financial reform in the House) and corporate Democrats are nervous about appearing to be too deep in the pocket of the banks.

So, folks, you don't have to have a MBA, or be a sophisticated investor to make a difference. You don't have to learn what a credit default swap is. All you've got to use is your common sense.

If the Senate isn't prepared to give consumers an independent cop on the beat, if it isn't prepared to break up banks that taxpayers will have to bail out, if it isn't even willing to require that your stock broker act in your best interests -- then raise bloody hell. Take down names and mobilize.

Check out Americans for Financial Reform Come to the Campaign for America's Future,. We'll track the debate and provide a chart on who stands with you and who stands with the banks, with links on how to call them.

We're not likely to get sufficient reform this year. But, if a few legislators pay the penalty for taking the bank lobby money and voting the bank lobby program -- things may get a lot simpler next year.

Say It Ain't So, Joe: Joe Biden Talks to Labor about Jobs

Robert Borosage — Wed, 03 Mar 2010 03:09:12 -0800

Vice President Joe Biden defended the administration in a speech to America's labor leaders, gathered at the AFL-CIO Executive Council meetings in Orlando, Florida this week. Mentioning individual union presidents by name -- including some not in the room --he detailed the billions from the recovery act that helped to create jobs in the industries that they organize. Biden is a known friend of labor and he forcefully described the positive effects of the president's recovery spending.

But his speech had a chilling message for union presidents whose members have been ravaged by the loss of jobs in the Great Recession. He stated, sensibly, that there was no way to recover the 8 million jobs lost in one or year or two. It would take time, but he promised, by the spring, this economy would be generating 100,000 new jobs a month.

Whoa. 100,000 jobs a month? Economists tell us that it requires 125,000 jobs a month simply to employ new entrants to the labor market. 100,000 jobs a month is better than nothing, but it isn't good news. Biden is saying even if all goes well, the mass unemployment we now suffer -- with some 25 million unemployed or underemployed -- isn't going to get better soon.

Biden sensibly scorned Jim Bunning and his Republican Senate colleagues for standing in the way of the token $10 billion unemployment insurance and jobs bill before the Senate. But he didn't summon the union presidents to join in pushing for the $260 billion plan the president has put on the table, much less mention the $400-500 billion plan that is actually needed, and that the AFLCIO has championed.

Biden vowed, as the president has promised repeatedly, that the US would "claim our stake in the new world economy," especially the green industrial revolution, new energy, electric cars, fast trains, modern broad band. He detailed the down payment the administration had made in the recovery act for key investments in research and development and procurement of alternative energy, the building of fast trains.

Where is it written," Biden asked, where is it written that the US can't lead in the new industrial revolution? We've got the best workers in the world, the best entrepreneurs, and deep pools of venture capital. "I know we don't have a manufacturing policy, but guess what?" he said with characteristic brio, "I plan on the US making those train sets in the US."

But absent from the speech was any mention of just how he would keep the jobs here. No mention of countering the aggressive industrial policies that China, Germany, Spain and others are using to capture lead roles in manufacturing alternative energy. No mention of dealing with the mercantilist Asian nations like China that employ a hard-nosed strategy to capture production at home and export markets abroad. The Vice President provided not a hint of what the administration strategy will be in a world that now is half "free trade," as defined by global corporations, and half mercantilist. Thus far, the two have co-existed by shipping jobs abroad, and financing debt so Americans can buy the exports they need or want. As the president says, we can't go back to that world.

Here conservatives in both parties stand in the way. Their mantra - free trade, more tax cuts, more military spending, more deregulation, smaller government and balanced budgets - doesn't add up and doesn't make sense. Old trade policies merely lead back to the imbalances that helped drive us off the cliff. Tax revenues are already down to 14% of GDP, levels not seen since 1950. The military budget is already bloated, spending as much as the rest of the world combined. Conservatives don't dare mention and won't enact the domestic cuts then needed to balance budgets.

Obama understands that the US has to create a new economy out of the ruins of the old. He has called for us to move to balanced trade, and enlisted the G-20 in monitoring progress. He's pushed for government investment in modern infrastructure, in new energy, in education, and research and development. He's stated that we can't go back to an economy where finance makes 40% of the profits. He argues that we need to empower workers once more to ensure that they make a fair share of the increase of productivity and profits they help to create. He's proposed progressive tax hikes to pay for some of this.

But Biden couldn't mention how to get to the new economy because the administration's policies haven't caught up to the president's objectives. Industrial policy is still verboten. A new trade strategy has yet to emerge. The jobs program needed is stalled. And the big banks are bigger, more concentrated and more brazen than ever. Productivity is up in the recession but workers are still being squeezed.

So the union presidents gave Joe a respectful hearing, but they then turned to planning how to move on their own, to mobilize, rally allies and push once more for jobs. Jobs, curbs on the banks, a new trade and industrial strategy, worker empowerment - none of this will happen from today's Washington. It will happen only if workers and progressives organize and make it happen to Washington. The Tea Party folks have the spirit right but the direction wrong. We don't need to weaken government, we need to take it over and get rid of those standing in the way. It is time for progressives to get out of the stands, stop applauding or booing the leaders they elected, and get back on the field.

Bipartisan Blight IV: The Shrinking Jobs Bill

Robert Borosage — Wed, 24 Feb 2010 10:52:21 -0800

"Yesterday, we took a step, a strong first step toward putting Americans back to work, but ... it's a first step. This is the beginning, not the end," Senate Majority Leaded Harry Reid said, hailing the pending passage of a $15 billion jobs bill, as five Republican Senators, led by newly elected Massachusetts Senator Scott Brown, joined to break the reflexive Republican filibuster.

The Christian Science Monitor suggested Reid had discovered "the secret for moving legislation" -- proceed in piecemeal fashion, focusing on measures that have broad popularity. Next up, a thirty day extension of unemployment insurance, and then a second jobs bill focused on "a tourism promotion bill, a series of measures to help small businesses, and a package of popular tax-credit extensions, including an extension of unemployment benefits."

Is this the measure of bipartisan success -- passing legislation that scarcely measures up to a gesture? Next, they'll celebrate bipartisan cooperation in creating jobs by joining together to expand the presidential libraries of Bill Clinton and George Bush (well, maybe not).

Democrats are currently bedeviled. With control of the White House and both houses of Congress, they are expected to produce. And most Americans, the polls suggest, want the parties to work together to solve the country's staggering problems. So every politician -- left, right and center -- pays at least rhetorical tribute to bipartisan cooperation. This week, Washington is awash in bipartisan treacle -- from Evan Bayh's parting complaints, to Thursday's White House Showtime on health care.

But there is a small problem. We're in the midst of a pitched battle about direction.

Republicans -- reduced to an overwhelmingly conservative, largely Southern caucus -- are more ideologically unified than ever, and wedded to tax cuts, domestic spending cuts, and deregulation. Now despite the recession, they proclaim a politically convenient reborn belief in balanced budgets. Their conservative base is aroused. They see the Obama program as a nefarious attempt to transform America into a "socialist" -- read social democratic -- country. Their natural congressional strategy has been one of obstruction: just say no to whatever Obama says, and use the filibuster and the hold and other arcane Senate rules that empower the minority to block progress.

This strategy is enforced by conservative activists and corporate lobbies. Thus, every Republican pre-presidential candidate appearing at the recent Conservative Political Action Conference celebrated the "Party of No" strategy against Obama, while arguing that bipartisan cooperation could take place only on their terms. Want a bipartisan dialogue on health care? Scrap the plans that passed the House and Senate and start over. Want a bipartisan dialogue on financial reform? Torpedo any hint of an independent agency to protect consumers. Want progress on energy? Drill, baby, drill.

This strategy has been surprisingly effective. After Scott Brown's victory in Massachusetts, Republicans are salivating about big gains in the fall. They aren't about to change strategy.

So what are Democrats to do? The latest gambit is to try bite sized legislation, defined largely on conservative terms. The $15 billion "jobs" bill is a perfect example. It won't add much to the deficit and is composed almost entirely of corporate tax cuts.

It only suffers from one flaw. It can pass, but it won't matter much. The US now has some 25 million people unemployed or underemployed. Long-term unemployment is at record levels. In urban areas, the level of unemployment among the young reaches towards one in two. States and localities are facing brutal fiscal crises that will require further layoffs of teachers, police, fire fighters and other state workers and contractors. Americans, reeling from the loss of $13 trillion in assets, are reducing debts and tightening their belts. Consumers and companies are paying down debt, not spending or investing. Banks are raking in record profits, but are cutting lending to the real economy. The first Recovery Plan staunched the collapse of the economy, but simply was not sufficient. In response, the House passed a $150 billion jobs bill in December. Obama sought a $250 billion package, largely for corporate tax cuts, infrastructure, and aid to the unemployed. Even that was probably inadequate to the task.

In comparison, the $15 billion "jobs" bill doesn't merit the name. It consists primarily of tax breaks for businesses -- waiving the employers' payroll tax for a year for the hire of someone unemployed over 60 days. If the employee is kept on the payroll for a year, the company can earn a $1000 tax credit.

The CBO generously estimates this might create 250,000 jobs -- not even a dent in the jobs shortage. But the real number is likely to be far less. Even in a recession, some employers are hiring while more are laying off folks. The tax credit will go almost entirely to reward employers who are hiring people that they would hire anyway. And the rest is likely to reward employers who game the system (close down a union plant in Michigan and open a non-union one in Mississippi and collect the tax credit along the way).

If this lands on the president's desk, it will be celebrated as an example of bipartisan cooperation. Senate Majority Leader Harry Reid is committed to holding a series of votes on various bite-sized elements of a jobs program to see if he can gain the handful of Republican votes needed to get by the inevitable Republican filibuster.

But Reid's strategy is likely to be end up with both bad policy and bad politics. Bite sized bills on conservative terms won't begin to address the challenges we face. They aren't likely to be viewed as a success by Americans -- who are far less interested in process than in results. Reid's strategy may well succeed in letting Republicans look cooperative and Democrats look ineffective.

At the end of the day, Americans must be presented with the real choices we face. The crisis is too severe for the argument to be ducked. Democrats would be well advised to force votes on a real jobs program, a serious measure to curb the banks, comprehensive health care. Republicans will obstruct. Democrats should make them filibuster, expose the corporate interests that are behind them, and lay out their alternatives. Then move as much as possible by majority rule, and take the argument to the American people. Mobilize progressives rather than dismaying them. Americans deserve a choice. And Democrats are likely to fare better by making it a clear one.

Montana Initiative Against Pay Day Usury

Robert Borosage — Wed, 24 Feb 2010 08:53:21 -0800

In Oregon, citizens mobilized to pass progressive tax hikes -- on corporations and families making over $250,000 -- to help avoid cuts in children's and health care programs.

Now in Montana, citizens are mobilizing for an initiative to put a cap on the interests pay day lenders can charge -- on simple theory that 400% is too much. Here's the local report:

Groups launch initiative effort to cap payday loans at 36%

By CHARLES S. JOHNSON IR State Bureau | Posted: Wednesday, February 24, 2010 12:00 am | (0) Comments

Stymied at the Legislature, some groups said Tuesday they instead will ask voters to cap at 36 percent the annual interest rates that payday lending businesses can charge, compared with the current 400 percent maximum.

A coalition of groups representing seniors and religious, women’s, economic and union groups filed a proposed initiative with Secretary of State Linda McCulloch. If it clears a state legal review and if the backers obtain enough signatures, the measure would appear on the November 2010 ballot.

Recent legislative sessions have killed bills similar to the initiative so backers are turning now to the initiative process.

“We believe that 400 percent interest is too high,” said former state Rep. Sheila Rice, D-Great Falls, now is executive director of NeighborWorks, an advocacy group, and chairwoman of the Women’s Foundation of Montana Advisory Council.

Bob Bartholomew, state director of AARP Montana, said many elderly and poor Montanans are struggling to make ends meet, especially during the recession.

“Payday lenders have taken advantage of their struggle, providing high-interest loans that are repaid out of the worker’s next paycheck or the retiree’s next Social Security check,” Bartholomew said. “Reasonable short-term loans can be helpful for a worker trying to deal with an emergency, but these payday loans, charging more than 400 percent interest, frequently become a debt trap in which the borrower sinks deeper in debt.”

Tom Jacobson, executive director of Rural Dynamics, a Havre advocacy group, said more than 70 percent of these Montana lenders are owned by out-of-state companies. In 2008, he said, these companies made more than $40 million in loans in Montana and collected more than $9 million in interest and fees, “draining millions of dollars from Montana’s local economy.”

Rebecca Mastee of the Montana Catholic Conference said anyone could need an emergency loan in this economy, but added: “Montana families struggling to make ends meet should not be preyed on by lenders charging over 400 percent interest.”

In response, Bernie Harrington of Billings, who owns six payday loan businesses, defended the industry as serving a legitimate need for Montanans who need to borrow money.

“I think ultimately if the voters of the state understand they are going to hurt the consumers, they aren’t going to vote for it,” said Harrington, representing the Montana Financial Service Centers Association.

He said payday lenders charge a $15 fee on a $100 two-week loan, $25 on a $200 two-week loan.

“They don’t like to say it’s 15 bucks, but that it’s 400 percent APR (annual percentage rate),” he said. “They like to throw that out for shock and awe.”

But other financial institutions not covered by the initiative charge far higher annual percentage rates, he said. For instance, a bank that imposes a $27.40 for a $100 bounced checks charges 701 percent APR, while a $37 late fee on a $100 credit card bill amounts to a 965 percent APR.

Passage of the initiative would mean killing the payday lender industry in Montana, throwing at least 800 Montanans out of work, Harrington said. A 36 percent cap would mean a payday lender would make only $1.38 from a two-week $100 loan.

To qualify the measure for the November 2010 ballot, backers need to obtain more than 24,000 signatures of registered Montana voters by June 18, including 5 percent from 34 of the 100 House districts.

Based on what’s happened in other states, supporters said they expect to be outspent by the payday lending industry by at least 5-to-1. Harrington, who first learned of the effort Tuesday, said the industry will mount a campaign to make sure voters hear both sides of the issue.

The groups backing the initiative are: AARP Montana, homeWORD, Montana Catholic Council, Montana Community Foundation, Montana Women Vote, NeighborWorks Montana, Rural Dynamics, SEIU Healthcare Local 775 and the as opposed to launched [sic] a proposed ballot issue campaign Tuesday to limit interest rates charged by payday landing businesses at 36 percent annually.

Liberal Bashing

Robert Borosage — Thu, 18 Feb 2010 05:50:36 -0800

Now is the winter of Democratic discontent. And the knives are out. Liberalism, the Wall Street Journal tells us, has cracked up once more.

Obama, sobered by trying to govern from the left, is said to be tacking to the center, going bipartisan, convening a commission on the deficit, a bipartisan fest on health care.

Funny how liberals get the rap for the failure of policies THAT LIBERALS WARNED WOULD FAIL.

Here's what I posted on Politico's "The Arena" on this question:

What’s the great backlash about? Put aside the racial venom, the right-wing fury, the Palin faux populism. Why are Democrats discouraged, independents angry and conservatives on the march? One central reason: The government ran up trillions in debt, bailed out the banks but not the economy. Wall Street’s “savvy businessmen” are cashing million dollar bonuses, and 25 million Americans are looking for real work.

This was not a liberal failure. It was a failure of the so-called “moderates,” who having driven us into this mess are now making it harder to get out. Moderates forged a recovery plan that was clearly too small. Moderates in the Senate, led by the redoubtable Evan Bayh and Ben Nelson, made it smaller and weaker. Moderates in the administration preferred continuity in the Wall Street bailout, rescuing the big investment houses and banks rather than reorganizing them. And worse, moderates are now turning their attention to deficit reduction – just as the economy desperately needs a new jobs program and more government borrowing to sustain demand.

At present course, moderate policies will lead to the double dip recession just in time for the November elections.

Conservatives look to gain from this failure, pursuing their policy of obstruction. But their stated positions – against government spending, for top end tax cuts, and against any serious banking reorganization – offer no answers to the economic mess.

Perhaps then liberals may have their shot. But for that to happen, Democrats will have to understand just how conservative and moderate policies have created and sustained our crisis.

The irony is that, under Nancy Pelosi, the House Democrats are closer to common sense. If the Senate had just followed the much derided Pelosi’s lead, we would have had a stronger stimulus and a second jobs program, a health care bill with a public option paid for by top end tax hikes, a flawed but completed energy bill, and the first step to banking regulation, with an independent agency in the works to protect consumers from getting fleeced by the predators. I’d sure as hell rather run on that record than the record racked up by the Blue Dogs, New Dems and bipolar bipartisans.

Top 1%: Lower Tax Rate Than Their Secretaries

Robert Borosage — Thu, 18 Feb 2010 05:15:45 -0800

Yes, there is a class war, Warren Buffett once said, and my class is winning. The IRS study of taxes paid in 2007 makes his point. The top 1% of taxpayers averaged about $138 million in income, and paid taxes at a rate of 16.6%.

As Buffett says, their secretaries pay a higher rate. No wonder Republicans and conservaDems like the much regretted Evan Bayh are fighting to lower the estate tax rate as part of a "jobs" bill. These folks will have a lot to put in the estate that's never been taxed as income.

Ah, for the extremist liberal days of Ronald Reagan when capital gains were taxed at the same rate as income.

For a report on the IRS study, here's the WSJ David Wessel on the IRS Study

The top 400 U.S. individual taxpayers got 1.59% of the nation’s household income in 2007, according to their tax returns, three times the slice they got in the 1990s, according to the Internal Revenue Service. They paid 2.05% of all individual income taxes in that year.

In its annual update of the taxes paid by the 400 best-off taxpayers, who aren’t identified, the IRS also said that only 220 of the top 400 were in the top marginal tax bracket. The 400 best-off taxpayers paid an average tax rate of 16.6%, lower than in any year since the IRS began making the reports in 1992.

To make the top 400, a taxpayer had to have income of more than $138.8 million. As a group, the top 400 reported $137.9 billion in income, and paid $22.9 billion in federal income taxes.

About 81.3% of the income of the top 400 households came in the form of capital gains, dividends or interest, the IRS data show. Only 6.5% came in the form of salaries and wages.

Over the past 16 tax years 3,472 different taxpayers showed up in the top 400 at least once. Of these taxpayers, a little more than 27% appear more than once. In any given year, about 40% percent of the top-400 returns were filed by taxpayers who weren’t in that exclusive club in any of the 15 years .

In all, the IRS received nearly 143 million individual tax returns for 2007, the year that ended with the onset of the worst recession in decades.