Obama administration

Romney, Ryan, GOP Demand Obama Stop Strengthening Welfare Work Mandate

Leo Gerard — Tue, 18 Sep 2012 10:34:15 -0400

Republicans in two Congressional committees voted last week to press forward with legislation that would deny states the flexibility they requested to help more welfare recipients get jobs.

That’s right.

Not only that, Rep. Paul Ryan, the GOP vice presidential candidate, said last week he is eager to return to Washington this week for a floor vote on the Republican measure prohibiting the Obama administration from, as the Department of Health and Human Services (HHS) described it:

“encouraging states to consider new, more effective ways to meet the goals of TANF (welfare), particularly helping parents successfully prepare for, find and retain employment.”

That’s right.

Republicans don’t want the Obama administration to help states get welfare recipients off the dole and into jobs. In July, Republican presidential candidate Mitt Romney launched an attack on the administration’s offer to meet a demand from states for more flexibility so states could move more people to work instead of pushing more paper around. Now, Republicans in Congress are taking up the cause of thwarting Obama’s plan to grant states’ request for flexibility. Historically, Republicans supported moving welfare recipients off the federal rolls and onto private pay rolls. But they’re not going to let Obama get credit for accomplishing that.

This dispute began with an attempt by the Obama administration to reduce regulatory burdens. Here’s what President Obama wrote Feb. 28, 2011 in the Administrative Flexibility memo:

“I am instructing agencies to work closely with state, local, and tribal governments to identify administrative, regulatory, and legislative barriers in federally funded programs that currently prevent states, localities, and tribes, from efficiently using tax dollars to achieve the best results for their constituents.”

The Department of Health and Human Services (HHS) took the directive seriously and asked states for suggestions. Some state officials complained about burdensome welfare reform paperwork requirements and asked if HHS would provide flexibility. Among them were Utah and Nevada, both of which have Republican governors. Utah also has a Republican supermajority in its legislature.
HHS responded with a memo to states issued on July 12. It offers states a chance to achieve flexibility through waiver of some welfare rules if states conduct HHS-approved pilot programs that move additional welfare recipients to work in measureable ways.

The memo states at least 10 times that the goal is increased employment. For example, there’s this:

“HHS will only consider approving waivers relating to the work participation requirements that make changes intended to lead to more effective means of meeting the work goals of TANF (welfare).

“Moreover, HHS is committed to ensuring that any demonstration projects approved under this authority will be focused on improving employment outcomes and contributing to the evidence base for effective programs; therefore, terms and conditions will require a federally-approved evaluation plan designed to build our knowledge base.”

In a letter that accompanied the memo, HHS repeats incessantly that all proposals must fulfill the goal of increased employment. Of the 21 sentences, at least 10 specify that less welfare and more work is mandated by the law, is important and will be required for waiver. For example, there’s this:

“The (HHS) Secretary is only interested in approving waivers if the state can explain in a compelling fashion why the proposed approach may be a more efficient or effective means to promote employment entry, retention, advancement, or access to jobs that offer opportunities for earnings and advancement that will allow participants to avoid dependence on government benefits.”

Despite all that, Mitt Romney began condemning the waiver offer immediately after it was issued. Congressional Republicans hope this week to bludgeon it to death with legislation forbidding HHS from providing the flexibility requested by governors, including Republicans Gary Herbert of Utah and Brian Sandoval of Nevada. Herbert’s state department of HHS wrote the federal HHS in 2011 seeking flexibility:

“Nevada is very interested in working with your staff to explore program waivers. . .”

Like welfare-to-work, Republicans have long supported “flexibility” for states in implementing federal mandates. For example, in 2005 every Republican governor in the nation – 29 of them – wrote Congress to support a bill that would have allowed waivers to welfare reform law requirements. The governors told Congress they wanted “flexibility to manage their TANF (welfare) programs.” The letter said:

“Increased waiver authority, allowable work activities, availability of partial work credit and the ability to coordinate state programs are all important aspects of moving recipients from welfare to work.”

Mitt Romney signed that letter. He was among the 29 governors seeking flexibility through waivers to manage welfare.

That’s right. The same Mitt Romney who now is denouncing the Obama administration’s effort to provide flexibility.

Now, Romney despises flexibility. Now, he hates waivers. Now, he’s demanding an end to the effort by HHS to give states the ability to experiment with pilot programs to increase the employment of welfare recipients.

It’s yet another Romney flipflop, another Romney Etch-A-Sketch moment. Said it once, erase it now. Romney figures GOP inconsistency doesn’t matter as long as it hurts President Obama somehow.

People Power vs Banker Power: Score One for the People

Richard Eskow — Tue, 24 Jan 2012 14:20:30 -0500

I hate to sound Pollyanna-ish, but sometimes the sunny point of view turns out to be right.

Yes, corporate money has hijacked democracy. And it's true that our two-party system often fails to offer real choices or reflect the will of the majority. Our corporate political system doesn't have a problem. It is the problem.

But we saw yesterday that concerned citizens can make a difference. Yesterday they won a battle against one of democracy's most implacable adversaries: Wall Street. They fought back against a lousy bank deal and stopped it in its tracks.

For the moment.

Bankers' Choice

It wasn't obvious that it could be done. Despite a setback or two – the Consumer Financial Protection Bureau being the primary one - bank executives have scored one victory after another:

They got to keep their jobs after destroying the economy and driving their own institutions into the ground.

They kept on collecting fat bonuses after the American people bailed them out.

They were able to weaken regulatory reform so they could keep their too-big-to-fail status and retain many of their screw-the-customer privileges.

They've settled one lawsuit after another, often for flagrant criminal behavior, by paying relatively puny settlements - and writing the checks with other people's money to do it. They've been able to avoid paying for their misdeeds with their money - or their time.

They've even been able to whine ad nauseum without public anger or ridicule, about the mild reprimands and even milder regulatory changes they've had to face since crashing the world's economy.

One for the People

This week bankers were on the brink of another undeserved victory, capping months of negotiation led by Obama Administration officials and involving most of the states. But hundreds of thousands of concerned citizens signed online petitions from a range of organizations that includes MoveOn, Color of Change, Progressives United, and the Campaign for America's Future.

The President was reportedly eager to promote the deal in tonight's State of the Union message as some sort of victory for the American people. The press was told that his negotiating team, which includes Iowa Attorney General Tom Miller and officials from the Justice, Housing, and Treasury Departments, had finalized a deal which was about to be “presented to the states.'

But presenting 360,000 signatures to the White House had an impact. So do demonstrations like this one, which took place outside the building in Chicago where settlement talks were taking place.

Public statements had an impact, too. Elected officials like Sen. Sherrod Brown, Reps. Keith Ellison and Raul Grijalva (speaking for the entire Progressive Caucus), and Rep. Brad Miller opposed the settlement. So did leaders like Richard Trumka of the AFL-CIO, Justin Ruben of MoveOn, and Bob Borosage of Campaign for America's Future. Their widely-reported words hit the media the same day the deal was announced.

The reaction was immediate. Attorney General Miller immediately released a statement retracting earlier announcement. Miller's statement said that the AGs were “today discussing the details of the progress we have made so far in settlement negotiations, including the terms we must still resolve.” (Emphasis ours.) “We have not yet reached an agreement with the nation’s five largest servicers,” Miller added, “and we won’t reach a settlement any time this week.”

How Bad Was the Deal?

How bad was the deal that was stopped this week? Bankers would have been able to settle civil and criminal charges covering a wide range of mortgage misdeeds for a maximum of $25 billion, to be disbursed under their own supervision.

That's $25 billion after a mortgage meltdown that has left more than 11 million homes underwater. That's $25 billion, while banks continue to demand (and usually receive) mortgage payments for more than $700 billion in housing value that no longer exists.

Payments on this $700 billion continue to serve as an “invisible bank bailout.” Each mortgage check on these underwater homes includes money for an ongoing Wall Street rescue, as millions of struggling homeowners continue to pump billions into Wall Street.

Their money continues to artificially inflate banks' balance sheets and providing bonuses for the very same bankers that screwed them over in the first place.

Other People's Money

And speaking of bonuses: The House Progressive Caucus rightly noted today that “the six biggest banks could pay the proposed $25 billion settlement five times over with last year’s bonuses and compensation alone.”

What's more, the $25 billion would have been largely paid by pension funds and other institutional investors who were deceived by the very same bankers collecting those rich payouts. And in return, the deal could have shut down ongoing civil and criminal investigations of those bankers.

(There's more on the deal here, including a radio interview.)

The President's Role

The Obama Administration's usually been on the wrong side of this struggle. It has declined to investigate or prosecute bad bankers, even when the evidence appeared to be overwhelming. (See here, here, and here, for starters.) The President has continued to insist, as recently as last month's 60 Minutes interview, that bankers did nothing illegal – even as it was working behind the scenes to make sure that investigators wouldn't be able to discover what they had or hadn't done.

And yet I'll say this for the Administration: They bowed to public pressure. A Republican Administration would have been less likely to do that. And the citizens who made that happen didn't just send a message to the President. They also saved him. This bank deal would have been a political disaster for him.

The President's most loyal supporters should take note of the political benefits he reaps from this kind of outside pressure. Then they, too, should join in the effort to get a fair settlement deal and investigate bank fraud.

Hopefully the President will use tonight's State of the Union to announce a full-scale investigation of bank fraud. He heard the voice of the people on the settlement issue, but that's only one side of the bank-fraud coin. The other half involves law enforcement, and proving to the nation that bankers operate under the same system of justice as the rest of us.

Next

We've won one battle, and even that victory could be undone if the deal is revived in its present form. And the Administration hasn't committed to doing what's really necessary, which is to support courageous Attorneys General like New York's Eric Schneiderman by conducting a full-scale investigation of bank fraud. So there's more work to be done.

What should people do? Be prepared to mobilize again. As the saying goes, “Watch this space” - and others like it at MoveOn and other progressive organizations.

Patti Smith wasn't wrong when she sang that “People have the power.” We do have the power to win a battle or two, even against those guys on Wall Street. We have more power than we realize – but only if we're willing to use it, and to keep using it until the battles have ended and the war for fair play has been won.
_____________

(There's a website for people who want to send an e-mail to President Obama in the next few hours: No sweetheart deals for big banks in the State of the Union.)

Myths, Scares, Lies, and Deadly Innocent Frauds, Updated: Part Two

Joseph M. Firestone — Thu, 22 Dec 2011 11:24:25 -0500

(Author's Note: This post updates Part Two of a series reviewing Warren Mosler's book: The 7 Deadly Innocent Frauds of Economic Policy. The updating is prompted by a post by Hannah at DailyKos offering a “. . . a Review Sort of” of Warren's book.

Hannah's post begins by stating Warren's “7 deadly innocent frauds” (DIFs), and then goes on to point out that they are not innocent and to make a number of claims about Warren's beliefs which clearly indicate that she neither read his book, nor researched his actual positions stated frequently on his web site, nor bothered to note Warren's economic truths that his book counterposes to his DIFs. So, in this series, and because of the importance of his easily accessible book, I'm presenting a more detailed discussion of the frauds and the corresponding truths.)

In Part One of the series I covered the first dif: the idea that in order to spend money, the Government must first raise it through taxation, or borrow it. and the first truth:

“Government Spending is NOT operationally limited or in any way constrained by taxing or borrowing.”

In this installment, I'll discuss Warren's next three difs.

What About Our Children and Grandchildren

Mosler's second dif is:

“With Government Deficits we are leaving our debt burden to our children.”

This, of course, has been a scary common sense belief that those who don't want to solve social problems have used forever to persuade people not to implement progressive solutions to their problems. The problem is that in fiat money systems the meaning of deficits is entirely different than in commodity money systems.

The deficit is just the annual difference between Government revenue, including income from transactions with non-Governmental entities, and income from coin seigniorage; and Government spending in the non-Government sector. Most Government income comes from tax collections, so generally speaking there is no deficit when tax collections match Government spending. But even when the two don't match, if revenue from other sources, such as fees, property sales, seigniorage, and Federal Reserve profits repatriated to the Treasury close the gap between tax revenues and spending there still may be no deficit, and if seigniorage profits are great enough, there might even be a surplus. But unlike one which comes from tax revenues, such a surplus could be used to repay debt, or spend appropriations without destroying net financial assets in the private sector.

In commodity money systems, when income falls short of expenditures, we have a deficit tied to a commodity, and when the deficit accumulates year after year we have a national debt also tied to a commodity. To finance the debt, Governments in such systems must raise taxes to increase income, or borrow money to finance expenditures through debt. If they borrow money, however, the debt can only be paid back through increased revenue collections at some future time, or by more borrowing to pay debt obligations.

But, in fiat monetary systems, the situation is different. When Government expenditures exceed revenues in those systems, a deficit doesn't have to be reduced by increased tax revenues, or other transactional income, nor does it have to financed by borrowing. Instead, since money isn't limited by its relationship to a material commodity, the money necessary to make Government expenditures can just be created at will by the Government. It need not be the product of either increased taxes or debt financing, as it must be in commodity systems.

The significance of this idea, which is just the counterpoint to the first dif, that “Government Spending is NOT operationally limited or in any way constrained by taxing or borrowing,” is that whatever Government deficits we leave to our children also need not be repaid by them through either further borrowing, or increased taxation. These deficits, just like our own can be negated by our children and grandchildren by creating whatever seigniorage profits or electronic money they need to negate them.

Of course, if they want to reduce their well-being, they can raise taxes or borrow money to handle those deficits. But what they do, and the precise size of the burden they choose to assume is up to them and has nothing to do with us, so long as they retain our fiat monetary system.

Warren Mosler expresses the counterpoint to the second dif in this way:

"Collectively, in real terms, there is no such burden. Debt or no debt, our children get to consume whatever they can produce."

That is, unless they choose not to produce it, because they raise taxes and cripple economic productivity, in a vain and misguided attempt to pay down a fiat money debt by destroying net financial assets in the private sector that might otherwise be used in more productive ways.

As Mosler points out: it is impossible for our children and Grandchildren to send any of the goods and services they produce back into the past to pay down the deficits we incur today. And he also points out that paying off the national debt in a fiat monetary system is merely a matter of accounting. As he says:

"Even briefer - to pay off the national debt the government changes two entries in its own spreadsheet - a number that says how many securities are owned by the private sector is changed down, and another number that says how many $US are being kept at the Fed is changed up. . . ."

Now, even though they should be, and could be, things aren't quite as simple as this in the US. It does work this way when a particular debt instrument is redeemed. But if the Treasury wanted to lower the level of the national debt, it cannot do this if the present pattern of laws, customs, policies, and practices related to dealing with debt instruments don't change. These amount to the "requirement" that the Government pay down debt by collecting more tax revenue than it spends. But if this "requirement" is followed, it will be impossible to pay down the debt, if that's what people want to do.

On the other hand, one of the implications of the 7 difs, is that whether or not the Government repays the debt subject to the limit doesn't matter for solvency. The Government has an equal capacity to deficit spend whether or not it pays off its debt. It's just a matter of Congressional Appropriations and continuing debt issuance to satisfy the current "requirement." There's no question of affordability either way, even though there are political and psychological issues involved in debt issuance, one of them being paying interest primarily to rich people and foreign nations, when there is no real need to do so.

In addition, even though the present pattern of laws, customs, policies, and practices related to dealing with debt instruments won't allow paying off the debt unless there is change. The good news is that the laws and the Constitution allow the debt subject to the limit to be paid, if we want to do that. This can be done by using Proof Platinum Coin Seigniorage (PPCS) to create the revenues needed to pay down debt without tanking the economy. The details are here, here, here, and in related posts.

In short, folks, there is no debt burden for our children and grandchildren. That there is, is a myth, a fairy tale, a dif, as Mosler terms it. It is not reality, and we ought not to make it reality by believing it and acting accordingly.

What About Our Savings?

The third Mosler dif is: “Government budget deficits take away savings.” And the counterpoint to it is: “Government budget deficits ADD to savings.” Warren points out that this is just Economics 101, when the Government spends dollars it transfers dollar credits to non-governmental sector entities. That is the nature of such transactions.

So it is just an accounting identity, true by definition, that an increase in the Government deficit, increases the dollars in the non-governmental accounts that have received the Government transfer. So, “Government deficits = increased 'monetary savings' for the rest of us. To the penny. This is accounting fact, not theory. . . .” It's also equally true, that Government surpluses = decreased monetary savings for the rest of us. This too, is accounting fact, and not theory.

The relationships between increased deficits and increased savings, and increased surpluses and decreased savings, are important because misunderstanding them, and accepting this third dif, is widespread, and very harmful. Because people believe that Government deficits take away from non-governmental savings and also investment, they also believe that Government deficits must be avoided and that Government surpluses are good.

So, this dif reinforces the doctrine that Government programs should be revenue neutral or even produce Governmental savings, a doctrine that if implemented will actually, in the absence of a positive balance of trade, which the US hasn't had in many years, immediately result in reduced non-governmental savings and investment, a deadly effect in recessionary times, when non-governmental savings that may be used for investment are sorely needed. Surpluses, because they detract from nongovernmental savings and investment, often cause recessions. Our most recent experience of this is with the Clinton surpluses which were followed by the recession in the waning days of the Clinton Administration that greeted George W. Bush when he took office.

Will Social Security Go Broke?

Mosler's fourth dif is one that is much in the News right now. It is that “Social Security is broken” and will, one day in the foreseeable future, run out of funding. This claim is used to persuade people to consider the idea that Social Security must be reformed, before the “trust fund” runs out of money. However, the truth is that there is no trust fund in the sense of a bank account at the Federal Reserve Bank containing SS funds. There are only social security accounts and entitlements accompanying these accounts guaranteed by the Federal Government.

Whether, or not the “trust fund” runs out of money or not, the Federal Government will still have to make payments to those entitled to receive Social Security payments or default on its legal obligations to pay SS retirees, a prospect in conflict with the 14th Amendment of the Constitution. And since Government money is, at bottom, “fiat money,” the counterpoint to this dif is that “Government checks don't bounce,” and that includes Social Security checks.

So, why is everyone so excited about the plight of Social Security? Why are they so sure that we need Social Security and, more broadly, entitlement reform? I think the answer, for people of good will, is their failure to understand the fiat monetary system, how it works, and what really makes money more or less valuable in such a system.

The source of value is not money itself. It is the valuable goods and services that are produced by the economy. As long as the economy keeps producing valued goods and services, the fiat money used for paying taxes, and as the medium of exchange will have value. And as long as it has value, the Government can keep making and spending it to increase economic activity when it flags, and using its taxing power and control over interest rates to dampen activity in case demand outstrips supply, and inflation occurs.

The function of Government in an economy with a fiat money system is to maintain economic activity at a level sufficient to produce the valued goods and services citizens want. When the Government doesn't spend enough to do that, it is failing to prevent or end economic downturns. When it spends so much that its spending exceeds the productive capacity of the economy, it is failing to prevent or end inflation.

Social Security and other safety net entitlements are one way of ensuring that demand will be high enough to maintain productive capacity. In recession and depression, they have a counter-cyclical function. They benefit the economy much more than they cost it. Entitlement reform that undermines the function of the safety net in keeping demand at a high level, for the sake of cutting Government spending, on the assumption that Government money is somehow limited, is dangerous to the health of the economy.

It is a fool's path! Or a path for those looking to re-institute serfdom! It undermines the very mechanisms that help to protect us against depressions. And it does so based on a misunderstanding of our fiat monetary system, and the false belief that the Government can run out of money, if we don't reform social security and other entitlements.

The ideas that Government deficits create a debt burden for future generations, take away non-governmental sector saving, and that Social Security is broken, are all “deadly innocent frauds,” supporting the idea that deficits must be avoided, even if we have to suffer through extreme economic downturns to avoid them. These frauds, like the conclusion that Government spending is operationally limited by the need to tax and borrow, all serve to reinforce the idea that Government can't do anything about a bad economy without doing more harm than good.

The contrapuntal ideas that: Government can create money, and is not operationally limited by the need to tax and borrow, there is no debt burden on future generations that limits production or consumption, deficits don't subtract from, but add to non-governmental savings, and Government checks including Social Security checks don't bounce, all reinforce the idea that Government deficit spending is not to be avoided, but, on the contrary is something we can and need to do to avoid the economic and human waste of unnecessary economic recessions and depressions.

Some years ago now, during the post-WWII period, Democrats tried to make the Government the guarantor of full employment. But the drive to do this was blunted by the decline of Keynesian macroeconomics, the new ascendancy of neoliberal free market ideology, and the call for deficit neutrality, the idea that we must “pay for” everything the Government spends with tax revenue. We now see however, that at least four of the arguments against deficit spending are based on deadly innocent frauds whose application is damaging to our economy, to our children, to our grandchildren and to all of our futures. In Part Three of this series, I'll continue the discussion of Warren Mosler's 7 difs and their implications.

By Not Challenging the Tea Party, the White House Makes It Stronger

Richard Eskow — Fri, 17 Jun 2011 00:00:20 -0400

There's reason to believe that the White House held back on helping struggling homeowners because it was afraid of a Tea Party backlash. That was exactly the wrong response, politically as well as economically. Bolder and more effective action would have weakened the anxiety and frustration driving that movement. By fearing the Tea Party, the Administration has only made it stronger.

Home Alone

There have been more than three million foreclosures since 2008, a figure that may soon reach six million. Real estate has lost nearly $7 trillion in value since 2006. Homeowners owe their banks nearly $1 trillion for real estate value that no longer exists. More than 16 million homes, or 28% of all those with mortgages, are underwater.

And home values keep on falling. As real estate analysis group Case Shiller reports, "National home prices hit a new low" in the first quarter of this year. Housing values are now down to their 2002 levels, which is probably bad news for anyone who's bought their home in the last nine years.

A well-organized relief program for these homeowners could generate billions of dollars in consumer spending -- spending that's desperately needed to create jobs and economic growth. It would also slow down the plunge in real estate values that's holding down wages, aggravating the unemployment crisis, and destroying communities across the country.

Yet the White House has done almost nothing to help the millions of households who are struggling with excessive debt for evaporated real estate values. After Wall Street received a trillion-dollar rescue from Treasury and the Fed, they were left alone to fend for themselves. Why?

Fear of a Tea Party Planet

A recent blog post by economist Jared Bernstein, former economic advisor to Vice President Biden, may hold a clue. Wrote Bernstein:

It's ... congenitally hard for politicians to get behind "a serious program of mortgage modification." Those who advocate for this ... are right, but they're also downplaying a very binding constraint ... People forget, but it was precisely this action -- giving mortgage relief to someone at risk of default and not to someone who was struggling to keep up their payments -- that birthed the Tea Party.

Yes, it's true that leaders must stand up to such views and do what's right for the economy... damn the torpedoes and all that. But those of us espousing such actions must respect, or at least acknowledge, that those torpedoes are not pointed at us.

It's important to understand that Jared Bernstein's one of the good guys. He understands the need to help homeowners, and he undoubtedly fought for better programs while he was serving in the Administration. He's echoing the White House view of the world when he says that people who propose better policies don't understand the limits of the politically possible.

That's precisely where the Administration has gone seriously wrong: in its assessment of the politically possible. The White House's fear of the Tea Party seems to have prevented it from taking the home-saving and job-creating actions that would have prevented the Tea Party from growing in numbers and influence. That's a tragic political miscalculation that could wind up damaging President Obama's legacy forever.

Culture Clash

No matters how many polls say otherwise, the Administration can't let go of the idea that the right policies are politically difficult, if not unachievable. From the outside it looks like the White House's organizational culture has adopted the belief that the right thing to do is never the politically effective thing. Maybe that's an artifact from time past, a time when "hippies" dreamed of impossible policies. Perhaps it's a holdover from the "Boomers-versus-Generation X" war that should have ended a decade ago.

Whatever the reason for it, this bias is disproved in one poll after another. Polling has repeatedly shown that voters across the political spectrum think the government should do more to create jobs and help the middle class. But the White House, locked in its obsolete paradigm, seems unable to distinguish between political symptoms like the rise of the Tea Party movement, and the political causes for them -- like the feelings of powerlessness and resentment toward big banks and big government that motivates most Tea Partiers.

Political moods are often contradictory. Tea Party followers may express outrage at government spending, for example, but more than 75% of them told pollsters last November that they're against cutting Social Security to balance the budget. What they're really angry about isn't government spending, but the sense that they have no say in their own financial future.

By mistaking political symptoms for political causes, the White House seems to keep digging itself into an ever-deepening hole.

Words against music

The Tea Party was originally an elitist movement, not a populist one. It began on the floor of the Chicago Mercantile Exchange when an arrogant and self-entitled CNBC announcer named Rick Santelli expressed outrage over a proposal to help underwater homeowners. Santelli, a former futures trader, had been a vice president with Drexel Burnham Lambert. That's the old Michael Millken firm, known for its sharklike culture, which went bankrupt after pleading "nolo contendre" to multiple felonies. Santelli embodies the greedy and narcissistic ethos that shattered the economy and is a typical member of the rich-banker class most Tea Partiers despise.

In a rage Santelli led mercantile traders, fellow members of his morally challenged tribe, in a televised chant against letting the government help "losers" save their mortgages. That body of "losers" was made up of millions of taxpayers who had already paid billions to rescue the big banks -- saving Santelli, those traders, and their six figure in the process. It took slick Republican salesmanship and Koch Brothers-funded PR to turn this elitist tantrum into anything resembling a populist movement. The White House seems to have believed that any real action to save homeowners would enrage Tea Partiers so much that the damage would be irreparable.

But is that a smart reading of the political mood, then or now? Like Walt Whitman, each Tea Partier contains multitudes. He or she is at once a populist, an elitist, a rebel, a government hater, an entitlements lover ... Would the average Tea Partier really embrace Santelli and his moneyed minions? A recent poll, conducted for the National Association of Home Builders, offers a glimpse into how the public might react to a stronger aid program for struggling homeowners. The poll, by Lake Research Partners, showed that 73% of likely voters support tax deductions for home ownership. That includes 71% of Republicans and 68% of independents.

While that's not an perfect proxy for voter reaction to a strong homeowner rescue program, it provides some sense of how voters (including Republicans) feel about having the Federal government help homeowners financially: They like it. Add to that the fact that millions of voters are also underwater homeowners -- 16 million homes hold a lot of them -- and a program like that begins to look like a political winner.

This country is discouraged, angry, and frightened. That's the mood that the Tea Party has successfully tapped. The words of the Tea Party song were written by millionaires, but the frustrations behind it comes from millions of frightened households.

Calling the Tune

Administration insiders are fond of reminding people that the right economic programs -- mortgage relief, jobs programs, stronger financial reform -- can't get through Congress right now. But they've drawn the wrong conclusion from that. Voters from left to right told the Lake pollsters that they were less likely to vote for candidates who want to eliminate the mortgage interest deductions, by a margin of more than two to one (57%/26%). It's more important than ever that they propose these programs, even if they're eventually rejected in Congress, so that the public can see who's fighting for them -- and who's fighting against them.

As the songwriter and guitarist Bobby Womack once said, "Sometimes you gotta lose to win." By staying on the sidelines, the White House is letting the other side win the messaging war. And by holding back on actions that could lead to economic relief -- tangible relief that millions of voters can see and feel -- the Administration is deepening the economic gloom that could doom its chances next November. They've been responding to the literal content of the Tea Party message, rather than the mood behind it, and that's a huge tactical mistake.

In another post, Mr. Bernstein quotes singer/satirist Tom Lehrer while discussing the difficulty of pushing a jobs program: "Though (they) may have won all the battles, we had all the good songs." But sometimes the best way to win a battle is to start with a good song. By staying silent for too long, the White House has let pampered and privileged people like Rick Santelli and the Koch Brothers define the agenda.

It's time to stop paying attention to the words and start listening to the music. It's time to pick your own song instead of letting others choose it for you. And in the debate over the housing crisis, it's time the Tea Party's wealthy backers stopped calling the tune.

By the Time You Read This: Why the Mortgage Crisis Dwarfs Almost Everything

Richard Eskow — Thu, 31 Mar 2011 01:52:29 -0400

The mortgage crisis in this country doesn't get much attention in Washington these days, but it's huge. It's so huge, in fact, that it dwarfs most of the economic issues that have Washington in their grip. It's so huge that it's dragging down our entire economy. It's so huge that the numbers can be difficult to picture.

The scale of the crisis is, in a word, staggering.

Here are seven charts (and another that was borrowed from the Wall Street Journal) along with some facts and figures that will help sketch out the scope of the problem. The numbers that follow are most likely understated, if anything, because we've left out some forms of reduced spending (like that which takes place when homeowners who have paid off their mortgages lose home value.)

The budget cutters push the idea that there's a dichotomy between the heart and the brain, and that they're on the "brain" side. But the numbers don't lie: Ignoring the foreclosure crisis is both heartless and brainless.

See for yourself.

By the time you read this ...

How big is the mortgage crisis? Pick an adjective: astronomic, colossal, enormous, gigantic, ginormous, humongous, jumbo, mammoth, massive, monstrous, mastadonic, monumental, prodigious, tremendous, vast, very big, very large, whopping. Here's how big it is. Let's assume that you're reading these words one day after I wrote them. That means that:

By the time you read this, there will have been approximately 8,500 foreclosure actions in this country [1] - more than one thousand every hour during the working day.

By the time you read this, homes in the United States will have lost more than $13 million dollars in value. [2] During a 24-hour day, this figure comes out to more than $500,000 an hour.

By the time you read this, homeowners will have paid $750 million in mortgage payments for non-existent housing value- that is, the amount on their mortgages that disappeared when the bubble burst - according to our estimate. [3]

By the time you read this, the nation's bankers will have earned nearly $400 million, of which $56 million will be bonus money. [4] Bankers like to say they work 24/7. (They don't, but let's say they did.) That means they will have collectively earned more than $16 million in salary and more than $2 million in bonuses during each and every one of the 24 hours hours before you read these words - morning, noon, and night.

And all of these figures for the last 24 hours will be reached again during the next 24.

Federal Spending vs. the Mortgage Crisis

How do the deficit and the mortgage crisis compare economically?

Here's a fact for you: The amount of wealth American homeowners have lost over the least three years is much larger than this year's entire Federal budget.

Even our conservative estimate shows that the debt that homeowners are paying off to the banks for no-longer-existing home value - "money for nothing" - is greater than the entire projected Federal deficit for 2011.

[5]

Those figures could be a little misleading, since they compare a multi-year problem with a single year's Federal budget. So let's look at the mortgage crisis and its impact on 2011. This year's estimated "money for nothing" payments dwarf the annual spending cuts that Washington's fighting over right now:

They're greater than this year's projected savings from the President's spending freeze, and much greater than the $30 billion in additional spending cuts which House Republicans initially demanded (and which they're likely to get.)

What is the "Homeowner Bank Bailout"?

The first column represents my quite rough (but very conservative) estimate of the payments that consumers will make to banks in 2011 for home value that's evaporated. That's money to repay loans which banks often knew were likely to go bad when they issued. (If they didn't know, they should have.) After their generous bailout (which was must costlier than has been acknowledged), the banks are still collecting payments for that portion of the loan that covers assets which no longer "exist."

That amounts to an additional, invisible annual bailout every year for the US banking industry, funded by some of the people who can least afford it: struggling homeowners. [6] (This figure doesn't even include people who've been foreclosed upon, which means the bank got to keep everything they'd paid into the house - and got the house, too.)

The "homeowner deficit" is strangling the country as the financial sector drains money from the overall economy for its own non-productive coffers. This chart illustrates that by showing that banks are once again grabbing an unhealthy share of our national wealth:

Source: Kathleen Madigan, Wall Street Journal

Without this drain, homeowners would be pumping hundreds of billions of dollars into the economy every year. Now that would be a stimulus.

Entitlement Cuts: Misguided Missiles

Instead of addressing the mortgage crisis, politicians (and the journalists who love them) are fixated on entitlement programs. How much sense does that make in dollars-and-cents terms?

The Best Stimulus: Homeowners or Corporations?

What's the best way to stimulate the economy: By giving corporations tax breaks and regulatory relief, or by fixing the housing crisis? Both political parties are turning themselves inside out trying to please corporations - partly, they say, because reports say those corporations are sitting on nearly $2 trillion in cash. If we make the CEO's of those corporations "feel better," the argument goes, they'll cut some of that cash loose for hiring and investment and the economy will pick up.

Let's look at that $2 trillion in comparison to lost housing value, and to our estimate of the mortgages being paid on lost housing value:

Those corporations won't really cut that cash loose until they know there are customers waiting to buy their products. There's a great way to make that happen: by helping consumers (more than 20 million households altogether) escape the burden of all this underwater debt.

Less Is Less

The Administration's response to this crisis has been woefully inadequate ... and the Republicans are much worse than that. The GOP's hard at work trying to end any assistance for underwater homeowners.

Administration programs were insufficient by design and then failed to meet even their own, overly modest goals. The HAMP program, for example, was never intended to help all of the homeowners who are still paying underwater mortgages. It should have been. Here's how limited its goals were, when compared to the problem:

But even when compared to the number of homeowners facing foreclosure, it's been a failure:

It hasn't even spent more than a tiny fraction the money allocated to it!

And yet, incredibly, Republicans want to cut it. And the GOP's Congressional leaders also want to kill several other programs for struggling homeowners, including a principal relief program that might help some of the 14 million underwater homeowners who haven't yet missed a payment.

Source: New York Times

Small Talk

Despite the magnitude of the mortgage crisis, all we've been hearing out of Washington is endless chatter about "deficit emergencies," the need for so-called "entitlement reform" (aka cuts), and the supposed "financial Armageddon" that faces us. [7] We've heard almost nothing about the crisis that is ruining millions of lives, costing us millions of jobs, and strangling the economy.

And by the time you read this, that won't have changed.

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FOOTNOTES:

[1] Based on February's rate of foreclosures, rounded down to be make the estimate conservative. Foreclosure actions are defined as foreclosure filings and the sale of foreclosed homes.

[2] Based on January's price decline of 2.5% in total value, divided by a 30-day month, using an estimated total residential real estate value of $16.3 trillion that was derived from Federal Reserve data.

[3] A very rough estimate. Assumes that roughly half of the total housing value lost in the bubble is included in mortgage principal that's still being paid off (as opposed to foreclosures, etc.) This figure was derived from that amount, plus a rough calculation of the interest being paid and some assumptions about the remaining lifetime of the loan.

[4] Based on reported 2010 figures.

[5] It's a critical battle, of course - especially to the people who are counting on the government to serve its function in time of need. This piece addresses our warped financial perspective, not the very vital role government plays in our lives. That should not be in question (although it is).

[6] But wait, as the ads say: There's more. These homeowners can't refinance, either, because they don't have collateral (the houses aren't worth as much as the new loan). Alll the "quantitative easing" in the world won't touch them. So the banks are borrowing money cheaply and collecting it from these struggling borrowers at higher rates. [6]

[7] Nobody disagrees that it will be important to address the the Federal deficit over the long term, and Social Security's funding issues will need to be addressed before 2037, when the program will only be able to fund 75% of its planned benefits. (Any plan that cuts those benefits below that amount, or cuts them by that amount even before 2037, is a hoax designed to raid the money that working Americans set aside for that program.)

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This post was produced as part of the Curbing Wall Street project and the Strengthen Social Security campaign.

Wisconsin Subterfuge Violates American Democratic Values

Leo Gerard — Fri, 11 Mar 2011 09:19:33 -0500

Wisconsin Gov. Scott Walker and his crew of country club conservatives this week brutalized the nation’s democratic traditions to secure legislation demanded by big corporations and billionaire conservative financiers like the Koch brothers – legislation stripping workers of collective bargaining rights.

Walker & Crew succeeded in terminating workers’ rights – but they achieved that only by violating traditional American democratic values. They positioned themselves with dictators who act against the will of the people, deny free speech rights and suppress protests.

They violated the state’s open meetings law, breached the right of Wisconsin residents to rally in their own state capitol building, and contravened conventional standards of fairness by voting to deny workers their rights without assembling a quorum of senators.

Free speech and free access to government protect America’s democracy. Walker & Crew disregarded First Amendment rights repeatedly.

Just this week, Walker & Crew locked protesters out of their own capitol building in Madison. They locked the few protesters already in the building out of the meeting rooms where senate and house members voted. They denied access even to progressive Wisconsin Assembly members, one of whom climbed through a colleague’s window to gain access to his workplace.

In the weeks since Wisconsin’s 14 progressive senators fled to Illinois to prevent the chamber from achieving the quorum needed to vote on a measure spending the people’s money, Walker & Crew also shut down access from the capitol to a web site posted by protesters. And they severely restricted protesters’ access to the capitol where a sit-in and sleep-in began in mid-February.

Protesters, who peacefully gathered in Madison in the tens of thousands, began chanting, “Whose house is it?” referring to the capitol. “It’s our house,” they responded.

That’s not the way Walker & Crew saw it. They said voters gave them control of the people’s house in last fall’s elections. That, apparently, means to them that they don’t have to listen to the will of the people anymore. Polls show a large majority – more than 60 percent – of Wisconsinites oppose stripping workers of collective bargaining rights.

Walker & Crew didn’t listen to the people. And they repeatedly attempted to shut the people up. The First Amendment was written and adopted to protect the people from that kind of oppression by political leaders.

In addition to shutting the people up, Walker & Crew attempted to shut them out. On Wednesday, without providing proper notice, the state’s conservative senators conducted a meeting to consider a newly-written measure to strip workers of their collective bargaining rights. Notice is required by states’ open meetings laws, sometimes called sunshine acts. These guarantee citizens access to government meetings and documents. They’re intended to prevent governments from conducting the people’s business in secret. These laws also require notice of meetings so that citizens can exercise their access rights.

Walker & Crew ignored the notice requirements so that they could ram through their legislation terminating workers’ rights before citizens could comment on or protest the new measure. The conservatives deliberately disregarded citizens’ right in a democracy to participate in the political process that directly affects their lives.

In addition, by clandestinely arranging the vote to be conducted without a quorum of senators, Walker & Crew asserted that although state law prohibits spending the people’s money without a quorum, they feel it is fine to strip citizens of their rights without a quorum. This is the stuff of oligarchy.

Throughout the first two years of the Obama administration, conservatives in the U.S. Senate repeatedly used the filibuster maneuver to prevent votes on legislation that would otherwise have been approved by a majority. The progressives in Wisconsin essentially performed a filibuster with their feet – by going to another state to prevent a vote. What Walker & Co. did this week was exploit a loophole to circumvent the filibuster-by-foot. They damaged the democratic process in a way the progressives in the U.S. Senate never even considered when thwarted repeatedly by filibusters.

Walker & Crew got what they wanted. They commandeered from workers the right to collectively bargain for a better life. They did it with nefarious methods that disrespect the Constitution, disrespect democracy and disrespect workers. They did it in a way that heaps dishonor on them.

The Proposed Foreclosure Fraud Bank Settlement, Part 1: Journalistic Failures

Richard Eskow — Wed, 02 Mar 2011 12:55:10 -0500

There's been a lot of confusion over the last few days about a possible deal with US banks to settle a fifty-state lawsuit over widespread and massive foreclosure fraud. Attorneys general from all the states have been working together, and the latest word is that the Obama Administration has proposed its own framework for a agreement.

Will that agreement be a fair one for the American people? The signs don't look good. Not that it should be a surprise. Weak and misleading reporting has set the stage for a lousy deal - one that could let bankers off the hook for criminal behavior and even let them to keep their ill-gotten gains.

Time for a quick review of the facts: The banks' mortgage fraud cost the economy many billions of dollars - trillions, if you include their speculation on housing values - and has left millions of homeowners in severe financial distress. This fraud was deliberate, widespread, and systematic, expedited by a program called "MERS" - a combined database and shadow corporation - designed to evade property law,. To date there have been no criminal prosecutions of bank executives for hiring teams of people who knowingly falsified documents and committed perjury on a widespread scale.

It shouldn't be necessary to repeat those facts, since they're so widely documented. But apparently it is necessary, since we're still seeing misleading headlines like this one in last Friday's Los Angeles Times: "Government, banks wrestle over how to settle case over botched foreclosure paperwork."

"Botched foreclosure paperwork"?? There's evidence - overwhelming evidence - that banks hired unqualified people and order them to falsely claim that they possessed property documents they didn't have. "Botched paperwork"? We're talking about a massive crime wave, not a couple of folders that weren't filed alphabetically.

The problem extends to the body of the article too, which uses phrases like "faulty robo-signed documents." Faulty? Robo-signed documents are a form of mass-produced perjury. Each one is a false statement to a court of law. Calling them "faulty" is like calling the money in the back of John Dillinger's getaway car "misallocated." It's like calling the Bonnano crime family's protection racket an "unjust form of taxation."

With journalism like this, it's no wonder that things are playing out as they are, with a Bloomberg News reporting that "the government originally floated a $25 billion penalty, which banks rejected."

"Which banks rejected"? Since when do accused lawbreakers get to accept or reject the terms of their punishment and restitution? Apparently the Administration has been operating under the misapprehension reflected in this sentence from Business Insider: "To get a far-reaching settlement, the White House needs to get the approval of federal regulators, state attorneys general, and of course, the lenders themselves."

Actually they don't need approval from "the lenders themselves." Here's another approach: Have FBI teams descend on every bank headquarters in the country. Subpoena every single email ever sent or received by Jamie Dimon, Brian Moynihan, and all the other bank CEOs to see what they did and didn't know about the illegal activity taking place in their organizations. Or hit them with massive fines and let them settle for a smaller amount. Apparently these approaches haven't been considered.

Instead the Wall Street Journal told us that "The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns." ("Mortgage servicing breakdowns"? I'm out of metaphors for the crimes that journalists persist in describing as errors - from now on you'll have to make up your own.) The Journal reported that the Administration wanted banks to set aside $20 billion to reduce the loan balances on underwater mortgages, or else be fined the same amount.

The Journal report described its sources only as "people familiar with the matter." People? Who are famiiar with the matter? They don't even say which part of the "matter" these "people are familiar with. They didn't just grant these sources anonymity - they obscured all details of their existence. Were they regulators? Administration officials? Bankers? Robot emissaries from the future sent to to find the mother of some future Wall Street prosecutor? We don't know, and that makes it impossible to decode the possible motivations for this story. (The Society of Professional Journalists has published excellent guidelines regarding sources an anonymity, which include: "Identify sources whenever feasible. The public is entitled to as much information as possible on sources' reliability Always question sources' motives before granting anonymity.")

Within 24 hours of the Wall Street Journal story about the settlement, the Huffington Post's Zach Carter was reporting that there never was a deal, and that the $20 billion settlement number used in that report came from ... well, nowhere. Adding to the confusion, the original Wall Street Journal story said that the Administration had a "proposal" for a deal, and not an actual deal.

We can assume that the $20 billion proposed figure is accurate, given the number of stories that have used it without a public denial. As far as the details are concerned, however, we're now officially becalmed in fog-shrouded waters somewhere between Plausible Denial, Absolute Confusion, and WTF, with no idea which way the currents are drifting. As the outlines of the Administration's proposal begin to coalesce (our response to it will is coming shortly),the media's failure to educate the public has left the public unable to judge it fairly.

When it comes to Wall Street, first the politicians failed. Then the regulators failed. Then the ratings agencies failed. Now apparently it's the media's turn. American journalism has really let us down this time ...

... according to people familiar with the matter.

Three Little Words: How Bill Daley Can Be Your Next Hero

Richard Eskow — Fri, 07 Jan 2011 00:58:08 -0500

Wall Street is widely despised by an American public that lives with the consequences of bank behavior every day. The President and the party were once widely trusted by the public to rein in the banks and save the economy, but that reputation's been tarnished by the fact that they're now seen as overly cozy with the big financial players. And who can forget those visitor logs that showed just how entwined the Administration and big business have always been?

With all the traffic between this Administration and Wall Street, maybe this week's Presidential appointees should be sworn in on a round -trip ticket for the Acela Express.

The choice of a JPMorgan Chase exec to run the White House operation seems like a bad move under the circumstances, and it probably is. But if Bill Daley took three simple words to heart, and had the President's blessing to act on them, it could change everything.

Wall Street White House

If the President had taken a tougher and more populist stand against the banks in his first two years he would have won more independents, his base wouldn't have been as apathetic, and the election results could have been very different. And President Obama squandered a lot of his reputation as a reformer by stacking his White House with Wall Street-friendly advisors, which only compounded the Democrats' difficulties in an unemployment-wracked election year.

Only in Washington, a city whose perceptual and social bubble provides reality-proof insulation, could anyone believe that the solution is to appoint more Presidential advisors from the banking industry.

There's a good argument to be made that the White House officially became a branch office of Wall Street this week. It's not just the appointment of Chase exec Bill Daley as the extremely powerful Chief of Staff. Gene Sperling, the latest is a string of Robert Rubin disciples in the Administration, is about to be appointed to replace Larry Summers. Sperling took $800,000 from Goldman Sachs to run a charity for poor women trying to start businesses in Third World countries, and has accepted as many bloated speaking fees from Wall Street as his predecessor had. (There's the awkward matter of that "$11,000 per op-ed" writing deal with Bloomberg, too. Some of us appreciate Sperling's impact on market valuations for editorial writing.)

Sperling's returning to the job he held under Bill Clinton, which leads Ezra Klein to make the argument that Obama's "running the government like a business," where ""having done the job well before is the best predictor of being able to do it well now." But the Rubin/Summers/Sperling team didn't do the job well. They helped deregulate Wall Street, and that led to disaster. No business on earth would hire people whose past performance had been so weak - much less ones who could hurt the organization's image with its customers (who in this case are the voters.)

And let's not forget one other personnel move this week: Paul Volcker, who valiantly and vainly tried to end rampant speculation by the megabanks, officially left the President's service. (He had un-officially been given the boot almost from the beginning, when Larry Summers began denying him Presidential access.)

All in all, the White House hasn't had a very sterling record of independence from the corrosive influence of big bank money, and this week brought back some bad memories. It reminded many people about Larry Summers, and those fat Wall Street checks. And it brought to mind OMB Director Peter Orszag, who left for a cushy job at Citigroup and was replaced by another Citigroup exec. And Tim Geithner, who to his personal credit has never cashed in on a fat Wall Street job (although he probably will), but was seen as far too close to Wall Street after his stewardship of the New York Fed and his supervision of the Goldman Sachs "backdoor bailout," which funneled taxpayer money to Goldman through AIG.[1]

This week's appointments are shaping up as a public relations disaster for the Administration. Alex Pareene at Salon is probably right: This appointment won't really please anybody but Washington pundits. The left, except for the few leaders who have personal relationships with Daley, is dismayed. The center is increasingly convinced that the White House isn't interested in helping Main Street. And this move plays right into the hands of the right, who'll play it up for all it's worth. (On Twitter, from @michellemalkin: Bill Daley's "centrist"/"business" bio = greasing Fannie Mae patronage factory gears, serving TARP recipient JP Morgan.)

Who's happy? Jamie Dimon, the Chamber of Commerce, and the lobbyist for Patton Boggs - but they'll still make their campaign checks out to Republicans. Mitch McConnell and some other Republicans said nice things, too, but that won't stop them from trying to undermine everything the President tries to do.

That leaves only voters. And whether they're on the the left, the right, or the center, this one's gonna hurt 'em.

Why Daley?

Daley, as everybody now knows, is the son of the late Chicago mayor and the brother of the current mayor. His political perceptions are likely to be an even bigger liability than his resume. He's a Board member of Third Way, which is one of many signs that he thinks "centrism" represents what wealthy and powerful people in Washington agree on, rather than what people in the country agree. Most people in both parties (and the Tea Party) want to protect Social Security and Medicare, tax the rich, and crack down on the banks.

So why was he chosen? Democratic leaders, including Al Gore and Howard Dean, speak extremely highly of him. His appointment will soothe executive egos - temporarily. And there may be a little bit of Chicago horsetrading involved, too. Think about it: Rahm Emanuel wanted to run for mayor, and suddenly Dick Daley announced he wouldn't seek re-election. I said at the time that Dick's probably going to be rewarded with a cabinet appointment, and I still wouldn't rule that out. And while Dick has said he won't endorse a candidate this year, the third Daley brother will issue an endorsement. It all could've been coincidence, but it seemed choreographed: Rahm says he wants to run, Daley steps aside, Rahm says he's "surprised," etc. etc.)

Then there are those discontented executives we keep hearing about. Although I doubted it at first, I was wrong: There's no question anymore that business leaders genuinely feel slighted by this Administration. My apologies, Fareed Zakaria: I still think those CEOs were playing you for tactical reasons, too, but it's now clear their egos are also bruised. I should've known better: I've known enough highly successful business executives to know how vain, petty, and sensitive they can be. That's one reason for this latest wave of appointments - but it won't placate these execs, and the voter blowback is likely to shock the President's team.

They say that Bill Daley's a likeable, energetic guy who gets things done.He probably is. But his appointment sends a cynical message to the base and independents, and his political instincts could drive the Administration in exactly the wrong direction? But not necessarily: There's still a way to save this thing.

How Bill Daley Can Be Your Next Hero

Here's a suggestion for Bill Daley, three simple words that could turn everything around for the President and his party: Be Joe Kennedy.

Progressives were appalled when FDR appointed that noted stock market manipulator Joe Kennedy to be the first head of the Securities and Exchange Commission. Kennedy had a reputation as a ruthless and unscrupulous master of insider trading. He was a master of the reckless and speculative financial instruments of his day, the early 20th Century equivalents of CDOs and mortage-backed securities. But Kennedy took his job seriously, went after the sharks ferociously, and help stabilize the capitalist system so effectively that it remained sound for another seven decades.

Bill Daley hasn't been personally implicated in JPMorgan Chase's misdeeds, so he certainly doesn't have Joe Kennedy's pre-SEC reputation. By all accounts he's a decent, ethical guy. But his bank's reputation isn't so unsullied. Despite Jamie Dimon's massive PR initiative on behalf of his own reputation, the problems are significant: Sloppy and probably illegal foreclosure management, for which the bank has set aside more than $2 billion for repurchases and litigation costs; millions in cash that got spread around Alabama in pursuit of some deals for municipal bond derivatives ( it cost three-quarters of a billion in fines for the bank to be able to say it "neither admitted nor denied wrongdoing"); and a few other little odds and ends, too (more here.) Daley's certainly heard a lot about these problems, and he can put that knowledge to good use in his new job.

Daley isn't being appointed to SEC, of course. He's been chosen to be the President's gatekeeper and right-hand man. But he can play a Joe Kennedy-like role for the President, in everything from managing his schedule to communicating with senior aides ... and in speaking with the business community. He has business credibility, and when executives come complaining to the White House he'd be the perfect guy to tell them to "cut the sh*t and cooperate." He certainly knows something about tough Irish political dynasties. If Daley's willing to use his industry knowledge and experience to force the White House into a tougher, smarter reform approach, he could wind up becoming everybody's hero.

Do I think that's the likeliest scenario? Frankly, no. The mindset these days seems to be that today's business executives, who can match their Roosevelt-era brethren in greed and vanity, can be cajoled and placated by a few more compromises. But that's not going to happen. The White House and other Democrats will probably continue to backtrack and plead for quite some time, but they'll never be able to outbid Republicans as Wall Street lackeys. So the day may yet come when they realize that compromise isn't going to work.

When that day comes, we can only hope that Bill Daley from Chicago remembers the legacy of Joseph P. Kennedy from Massachusetts.

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[1] Disclosure: I used to work at AIG.

This post was produced as part of the Curbing Wall Street project.

Issa the Inquisitor

Richard Eskow — Wed, 05 Jan 2011 00:12:19 -0500

What's the worst thing about Darrell Issa's debut as Chairman of the House Oversight Committee? It could be his relentless, Gloria Swansonish, "I'm ready for my close up, Mr. DeMille" self promotion. It might be his manic insistence that he'll conduct "hundreds" of investigations,or his letters to lobbyists offering to put his new powers at their disposal. Or maybe it's his "hang 'em first and try 'em later" attitude toward the Administration. It's certainly ironic that his first act as head of the committee that investigates misuse of government funds seems to have been ... to misuse government funds.

Sure, they're all bad. But the worst of all may be this: Issa's making it clear that he'll use his position to cover up Wall Street's role in destroying the economy, and that he'll resist any attempts to rein in the corporate misbehavior that puts us all at risk. That's a shame: Issa once seemed like a fair-minded, independent voice, and he could have made an important contribution in his new position. Instead he's bent on becoming a tinpot Torquemada bent on harrassing and punishing anyone who tries to thwart corporate America's will.

Issa's announced that he intends to investigate Wikileaks, Fannie Mae, Afghanistan, how regulation affects job creation, food and drug recalls, what the last episode of Lost really meant, and whether Yoko broke up the Beatles.

Okay, maybe he didn't mention the last two. But Issa's on record as saying that, while he listed six targets of investigation, he could have listed sixty - "or six hundred, perhaps." In fact, says Issa, "there is so much in government that in the next two years even if we did a hearing every single day on every single sub committee, we couldn't do all the areas of waste, fraud and abuse..."

Nobody can investigate hundreds of topics meaningfully or effectively. But that's not the point. The goal of these investigations will be to help his party and serve his corporate cronies - and, of course, to get his name in the headlines. In fact, Darrell's already gone Hollywood. Videos on his website already have a Committee logo, as if he were a movie star and the mogul who runs the studio:

Issa's also turned the Committee's website into an advertisement for his own party, with a banner across that top that reads "Committee on Oversight and Government Reform: Republicans" and a tab underneath it thar reads "GOP Watchdogs."

The word "Democrat" didn't appear anywhere on the website under the Democratic chairman, as a cached copy of the page shows. And it shouldn't. Issa's abuse of this site would be illegal if this were a mailing, rather than a website, since taxpayer-funding mailings "may not be used to solicit votes or contributions (or) to send mail regarding political campaigns or political parties ..."

Issa's already made it clear that he intends to play the role of Grand Inquisitor toward an Administration he's already described as "one of the most corrupt" in history. That's a stunning statement after the Nixon and Bush Administrations or the scandals of history. (Teapot Dome, anyone?) Issa's letting us know he's getting the frame-up machine ready for more phony Whitewaters and multimillion-dollar fishing expeditions.

"Coming soon to a hearing room near you! The latest Oversight Production ..."

In his new role, Issa's the only member of Congress who can issue subpoenas without asking for committee approval. If that doesn't scare you, it should. That power was originally conferred on the Committee's Chairman by Republicans eager to find abuses of power under Bill Clinton. Issa's Republican predecessor during the Clinton era issued more than 1,000 such imperial subpoenas. As Karen Tumulty reminds us, the Committee took more than 140 hours of sworn testimony while investigating whether the Clinton White House "misused the White House Christmas-card list for political purposes."

What's really troubling about Issa's list isn't the sheer number of targets, or even the publicity-crazed ambition that seems to guide his every move. What's really worriesome are the signs that he intends to be an ideological Grand Inquisitor. Case in point: Politico says that Issa plans to investigate "the failure of the Financial Crisis Inquiry Commission to agree on the causes of the market meltdown."

But the FCIC did reach its conclusions, and the majority report is expected shortly. Issa just wants to provide a platform for four political appointees from the Republican Party who staged a phony walkout from the Commission. Their ginned-up, ideological "complaint" was built around the Commission's refusal to accept their demand that it strike words and phrases like "deregulation" and "Wall Street" from their report. Issa intends to use his Committee as a platform for spreading this sort of deceptive Orwellian doubletalk.

If you've got an ideological narrative that hides Wall Street's role in ruining the economy, then baby, Darrell Issa's gonna make you a star!

The FCIC's majority is likely to conclude that excessive bank deregulation led to greed-driven speculation and often to criminal behavior, that "shadow banking" by non-financial entities contributed greatly to the problem, that "too big to fail" banks knew they'd be rescued if their gambling bets went bad, and that more is needed to make sure the same thing doesn't happen again.

Virtually all responsible economists agree with those conclusions. Even the guru of banking deregulation, Alan Greenspan, acknowledges that deregulation didn't lead to the kind of rational behavior he had expected. But the banks are eager to continue their reckless and greedy ways, and the Republicans want to keep raking in their contributions.

Politico also reports that Issa will investigate "the roles of Fannie Mae and Freddie Mac in the foreclosure crisis." Fannie and Freddie make handy ideological targets because they're government initiatives (the fact that they help black, brown, and poor people may help subliminally, too.) But the real value of scapegoating Fannie and Freddie is that it distracts attention from the real culprits - the ones writing fat checks to GOP campaigns.

Paul Krugman has shown that the housing bubble which led to the economy's collapse reached its height after Congress had tied Fannie and Freddie's hands. And some of the biggest problems happened outside Fannie and Freddie's reach altogether, in properties such as commercial real estate and luxury housing (leading to headlines like Bloomberg's "Rich Default on Luxury Homes Like Subprime Victims." The delinquency rate for homes worth more than a million dollars has been higher than the overall rate for much of this year.)

The common thread behind all this worthless real estate isn't Fannie or Freddie or government initiatives: It's bankers. They're the problem, and regulation is the solution. End of story. Now we can save the taxpayers the millions Issa's planning to waste on this subject.

He'll do it anyway, of course. Issa's made it clear that he wants to be part of the greatest cover-up in history: the cover-up of Wall Street's role in destroying the economy. That will reduce public pressure to regulate them and prevent future recessions or depressions - which means they'll be more likely to happen.

Not that bankers are his only constituency. Like a waiter with his pad open, Issa's been asking lobbyists all over town for their orders. As Politico reported, Issa sent letters to more than 150 lobbyists asking them what they'd like him to investigate and which laws they'd like to see changed. ""Is there something that we can do to try to ease that [regulatory] burden and stimulate job creation?" he asked. "Is there a consistent practice or regulation that hurts jobs?"

Who got these letters? From Politico: "Duke Energy, the Association of American Railroads, FMC Corp., Toyota and Baye... the American Petroleum Institute, National Association of Manufacturers (NAM), the National Petrochemical & Refiners Association (NPRA) and entities representing health care and telecommunication providers."

These lobbyists are probably drafting subpoenas now for the Chairman's signature. Anybody who gets in their way is likely to spend endless hours and many thousands of dollars enduring meaningless and punitive inquiries. It will be a replay of Chairman Dan Burton's disgraceful tenure during the Clinton years, which brought to mind the words of a sixteenth-century English historian: "A defence in the Inquisition is of little use to the prisoner, for a suspicion only is deemed sufficient cause of condemnation."

We were open-minded about Issa originally, and even cautiously optimistic. For anyone who hasn't been thrilled with everything this Administration's done, an Issa chairmanship originally had promise. He's reached across the aisle for several legislative initiatives. His calls for more disclosure of TARP spending were welcome, as were his meetings with the Federal Reserve to push for greater transparency.

But Darrell Issa's made it clear that he plans to use his office for personal advancement, partisan advantage, and to serve America's corporations at the expense of its people. His "oversight productions" have already become a pathetic spectacle. We know how this movie ends.

China’s Currency Manipulation: Flipping Off America

Leo Gerard — Thu, 16 Sep 2010 11:41:39 -0400

China is disrespecting America.

The Asian giant is an international trade outlaw, and U.S. manufacturers and workers are its crime victims.

China illegally subsidizes its export industries and unlawfully manipulates its currency. That kills U.S. industry and destroys U.S. jobs. Earlier this year, the Obama administration asked China nicely to allow its currency value to float up naturally on international markets. On June 19, China said it would.

And then it didn’t.

That’s flipping the bird at America.

Before China’s June 19 promise, bipartisan groups of lawmakers in the U.S. House and Senate proposed legislation that would force the U.S. Treasury Department to even the score and to call China out for what it is: a currency manipulator. Hearings on the bills are being conducted this week.

Pass the legislation. It’s time for America to flip the bird back.

Negotiation and threats have failed to produce a sustained, substantial currency float by China. Now, the Chinese currency, the renminbi, is undervalued by as much as 40 percent, a figure accepted by conservatives like C. Fred Bergsten of the Peterson Institute for International Economics. Even the International Monetary Fund managing director said the currency is undervalued.

China simply denied it. In March, the Chinese premier, Wen Jiabao, said he did not believe the renminbi was undervalued. That’s flipping off the world.

It works like this: China prints renminbi to buy billions of U.S. dollars, which makes them appear more desired and valuable, and the renminbi, by contrast, less valuable. That undervaluation of the renminbi acts as a subsidy for Chinese exports, artificially making them as much as 40 percent cheaper when sold in the U.S. Conversely, it acts as a tax of as much as 40 percent on American-made goods sold in China.

This dynamic contributed significantly to the rise of manufacturing in China. Earlier this year, China surged past Japan to become the world’s second-largest economy. And it contributes significantly to America’s massive trade deficit. The gap in July was $42.8 billion, more than half of which -- $25.9 billion -- was a result of trade with one country – China.

China’s rapid economic growth has ended poverty for millions of its workers. Here in the United States, however, China’s flouting of international trade law is destroying the lives of millions of workers. The Economic Policy Institute estimates that 2.4 million American jobs have been lost or displaced since 2001 as a result of the trade deficit with China. American workers celebrate their Chinese counterparts’ improved quality of life, but they condemn the government of China for accomplishing that with beggar-thy-neighbor trade practices.

Earlier this year, it briefly looked like threats would prompt China to act. In March, a bipartisan coalition of U.S. Senators introduced legislation specifying the factors necessary to label a country as a currency manipulator and detailing American reprisals. And in April, the Treasury Department delayed its report identifying countries that manipulate currency rates, suggesting that it was ready to take on China.

China appeared to respond to that pressure in June. It announced it would allow the renminbi to float toward its real value on the open market. The Treasury Department backed off, omitting China from its list of currency manipulators in July.

China then permitted the value of the renminbi to rise less than one percent. One percent. When it’s as much as 40 percent undervalued. That’s flipping the bird at America. Big time.

Still, America didn’t react.

On Aug. 25, the Commerce Department announced 14 new measures to crack down on trade violations, such as ending certain exemptions from duties.

It did not, however, mention currency manipulation.

Dan DiMicco, CEO at Nucor Corp., the largest U.S. steelmaker, said the 14 measures are important, but the problem with China won’t be resolved until the United States takes on currency undervaluation. Here’s what he said:

“As long as we continue to let them get away with it, they’ll keep doing it.”

Six days later, in a trade case filed by the U.S. Aluminum Extrusions Fair Trade Committee, a coalition of domestic manufacturers of aluminum extrusions and the USW, the Commerce Department again squirmed out of dealing with currency manipulation.

Commerce imposed import duties on Chinese aluminum companies because China unfairly subsidized $514 million in aluminum exports to the U.S. in 2009. But Commerce refused to investigate the Fair Trade Committee’s evidence that China’s currency manipulation functions as an additional illegal export subsidy.

Sen. Chuck Schumer of New York, a sponsor of currency manipulation legislation, said afterward:

“The Commerce Department made its finding while still managing to ignore the elephant in the room, which is China’s currency manipulation.”

Commerce and Treasury have decided the proper response to China flipping off America is averting their eyes. See no evil.

Yesterday Japan followed China’s lead. It bought dollars and sold yen, decreasing the value of yen and increasing the value of dollars. This, the New York Times explained, was “a bid to protect its export-led economy.” That’s exactly what China is doing.

It’s a very public show of contempt for international regulations and for American citizens.

Normally, Americans don’t respond passively to contempt. Be normal, America.