Category: Economy

House progressives blast Obama

Originally posted at AMERICAblog.

The relationships between progressive House Democrats and the administration seems somewhat strained. Jim McGovern (MA-3):

“We need to get the focus back on jobs,” said McGovern. “Here we are at the end of August, and Congress hasn’t done anything about jobs.”McGovern voted “no” on the debt ceiling compromise, calling is “a catastrophe” that disagreed with both President Obama and the American people’s stance on revenues.

“I didn’t run for Congress to dismantle the New Deal,” said McGovern.

The Massachusetts Rep is a loyal supporter of the president, but feels that the current political climate in the country calls for bolder leadership.

Oregon Rep. Peter DeFazio (OR-4)is only slightly less pointed in his criticism of President Obama.

“I believe Oregon is very much in play. I mean we are one of the harder hit states in the union, particularly my part of the state. I’ve just done six town hall meetings, have seven to go but people are shaking their heads and saying ‘I don’t know if I’d vote for him again.’” Defazio said.Asked if he was surprised, the congressman shrugged.

“Not at all,” DeFazio said. “One guy asked me, ‘Give me 25 words what he’s about and what he’s done for me.’ I’m like, ‘It could have been worse.’”

Burn.

George W. Obama?

David Bromwich of TomDispatch has a long, thoughtful piece about the many disturbing places where the Obama administration has either directly continued or expanded upon policies with regard to war, surveillance, and government fealty to private corporations that were once considered unspeakably bad unto evil or unAmerican. While they policies have not improved with age under a Democratic President, it’s important that people pay attention to these things. What was outrageous eight or even three years ago is now unremarkable and accepted. This is a terrifying development and one which speaks to how truly damaging the Obama presidency has been.

The Bromwich piece is very long and worth a read, but I’ll highlight a passage that Glenn Greenwald has also highlighted:

The usual turn from unsatisfying wars abroad to happier domestic conditions, however, no longer seems tenable. In these August days, Americans are rubbing their eyes, still wondering what has befallen us with the president’s “debt deal” — a shifting of tectonic plates beneath the economy of a sort Dick Cheney might have dreamed of, but which Barack Obama and the House Republicans together brought to fruition. A redistribution of wealth and power more than three decades in the making has now been carved into the system and given the stamp of permanence. Only a Democratic president, and only one associated in the public mind (however wrongly) with the fortunes of the poor, could have accomplished such a reversal with such sickening completeness.

Greenwald responds:

Economic suffering and anxiety — and anger over it and the flamboyant prosperity of the elites who caused it — is only going to worsen. So, too, will the refusal of the Western citizenry to meekly accept their predicament. As that happens, who it is who controls the Internet and the flow of information and communications takes on greater importance. Those who are devoted to preserving the current system of prerogatives certainly know that, and that is what explains this obsession with expanding the Surveillance State and secrecy powers, maintaining control over the dissemination of information, and harshly punishing those who threaten it. That’s also why there are few conflicts, if there are any, of greater import than this one.

I think this is spot-on. There is a confluence of activism happening – from historically oppressed people or communities joining with young people and workers, all joining with and being aided by highly informed and capable technological activists like Anonymous and WikiLeaks. The continuity of policies from Bush to Obama has meant that things which could have gotten better are either staying the same or being made drastically worse. There’s no way to say that all of this is happening in a vacuum, with a sanguine and approving public. Instead, people are informed and they’re angry. What that means will be seen, but I certainly wouldn’t presume that the US will escape the sort of public protests that we’ve seen throughout Europe, especially if the administration, Congress, and the elites they serve continue to preserve or enhance Bush-era policies.

Taibbi: The SEC is covering up Wall St crime

Matt Taibbi of Rolling Stone has an explosive look at how the SEC has been routinely destroying evidence of financial crimes by Wall Street.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The SEC hasn’t just done this a handful of times, Taibbi finds that over 18,000 separate MUIs were destroyed.

The Taibbi piece also provides an in-depth look at the revolving door between the SEC and top Wall Street banks and law firms. To make matters worse, the biggest participants in the revolving door come from the SEC’s Enforcement Division – the people whose day to day job is investigating Wall Street and stopping criminal behavior.

The whole story is absolutely a must-read. But here’s where this gets really important for the average American:

Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm’s executives were suspected of insider trading in September 2008?

Taibbi points out that the answers to these questions are essentially unknowable. But there’s no doubt that the information that the SEC destroyed was important. Hell, there’s no doubt that the failure of a regulatory agency to actually investigate and conduct oversight of the industry it is tasked to oversee is a huge problem. The story of the financial collapse is largely a story of the ignorance of regulators, risk management officers and bank executives. Much of this ignorance was deliberate. Refusing to investigate complaints of bad behavior is a pretty clear example of how this willful ignorance was maintained.

Taibbi’s piece discusses how Senator Chuck Grassley’s office has attempted to get answers from the SEC about the destruction of MUIs. Not shockingly, the SEC has basically told him to bugger off. Hopefully a curmudgeon like Grassley will get pissed off enough about the SEC’s disrespect of his office to do something. Clearly there need to be meaningful congressional investigations into the SEC’s destruction of evidence in contravention to the law. In the mean time, I’d hope that Taibbi’s piece opens the eyes of administration officials to the massive problems at the SEC. This behavior cannot be allowed to continue if there’s any hope to rebuilding the US economy in a way that doesn’t put it at the perpetual mercy of banksters deciding to break the law to line their pockets.

Don’t Elevate Warren Buffett

Following his op-ed on Monday in the New York Times, which called for taxing the rich at an undisclosed higher rate than what we currently have, Warren Buffett was held out as a great hero – a traitor to his class and a rare American who actually believed we should tax rich people. While I agree with Buffett that we should tax the rich, there are a couple large and fundamental problems to liberals elevating Buffett’s arguments.

First, as I highlighted on Monday, Buffett is completely non-specific about what the higher tax rate for the wealthy should be. He suggests that there be tax brackets for people making over $1 million and another for people making over $10 million, but doesn’t say what those should be.  Specifics matter because a small hike won’t really do much at all. Instead, the hike should seek to achieve a particular social end. In this case, that goal should be reducing the political clout wealthy elites have through their wealth. If you question this, just ask yourself if you think the Koch Brothers or Rupert Murdoch should have less power in American politics. If you’re reading this blog, I’ll presume that your answer is yes and move along.

Second, and more importantly, in his op-ed, Buffett came out in favor not only of the austerity measures pushed by both Republicans and the White House, but called for the Super Congress to go beyond $1.5 trillion in spending cuts. This has been almost entirely ignored by people elevating Buffett’s op-ed. He wrote:

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.

Coincidentally, the AP reported today that President Obama “will challenge the new “supercommittee” of Congress to go beyond its goal of $1.5 trillion in deficit reduction.” Apparently Buffett and Obama are working from the same playbook on this issue. Anyone following the austerity debate knows that spending cuts of this magnitude require major cuts to Social Security, Medicare and Medicaid to rich that mark.

Third, Buffett frames his call to tax the rich around the idea of shared sacrifice. At first blush, this seems like a pretty good idea, and again, it’s one that we’ve seen from President Obama in recent months. The problem with this is that tax rates which keep millionaires millionaires and multi-millionaires multi-millionaires don’t in any reasonable sense actually constitute sacrifice on the part of the rich. On the other hand, cutting Social Security dramatically reduces the amount of money tens of millions of Americans have to live on, mostly while they’re living on a fixed income. Cutting Medicaid and Medicare likewise require massive cost increases for seniors in nursing homes, again, many of whom can’t afford more cuts. Cutting unemployment benefits or aid to homeowners, well, you get the picture.

The zeitgeist should properly be defined by how much pain and suffering poor, working and middle class families have felt following Wall Street crashing the economy. People who’ve lost their homes, their jobs, their health insurance, and their basic economic security have already sacrificed. They’ve sacrificed far more than they could afford to sacrifice. And what about those lucky poor, working and middle class Americans who have not yet lost their homes, their jobs and their health insurance? Clearly now is not the time to take away their safety net.

Elites pushing for austerity are saying these people should give up even more, because suddenly the deficit is an existential threat to America. And Warren Buffett chimes in, “Well, me and my pals could kick an extra few bucks to the kiddie and it won’t hurt us.” Thanks, pal.

Here’s what would make sense: recognize that poor, working, and middle class Americans have already suffered enough. Recognize that wealthy elites not only caused the calamity everyone else is suffering under, but have yet to be asked to pay to clean it up. Then tax millionaires and multi-millionaires at, say, Reagan-era rates (which in 1986, for the top bracket, were 50%). Then don’t cut any more social spending, let alone the Big Three programs. I don’t know if that would produce equity, but frankly, shared sacrifice is not particularly appealing, especially when it’s a vehicle for destroying our social safety net.

Naturally what I’m describing is not politically possible. The Obama administration,  the Republican Party, and many Democrats in Congress believe that the poor, working, and middle classes of America should make more sacrifices in the form of cutting government spending and cutting the social safety net. There is near-unanimity on this across the aisle, which again is what makes Buffett’s shared sacrifice rhetoric so troubling. During the deficit debate, the Republicans wanted all spending cuts and no tax increases, while the Obama administration wanted about as many dollars of spending cut, while also having small revenue increases through things like taxes on corporate jets. This was a fig leaf. The differences were purely optical and remain so. The shared sacrifice rhetoric of Buffett, as with Obama, is simply a way to achieve austerity with some minor taxation of the rich. The rich may oppose this taxation, but as Buffett ably points out, it won’t change any of their behaviors, let alone their rich lifestyle.

Spitzer on Housing & Job Creation

Originally posted at AMERICAblog.

Eliot Spitzer has a piece in Slate wherein he offers advice to the President about how to reduce unemployment and fix the housing market. On housing, Spitzer writes:

The administration, in conjunction with the Federal Reserve, should insist that banks, in return for all the taxpayer subsidies they have gotten and continue to receive, reduce any mortgage that exceeds the value of the house. Once it is established that the homeowner is underwater, other variables can be considered to determine how much the mortgage should be reduced: the income of the borrower, the year the mortgage was issued, the behavior of the bank in recommending the mortgage, or the culpability of the borrower in misrepresenting income levels.Borrowers with reduced mortgages would have more money to spend, thus boosting the economy and relieving the housing market of a huge overhang. Owners would regain mobility, and the market could set a clearing price. Many also believe that the banks would come out ahead—facing fewer foreclosures, less abandonment, fewer houses stockpiled.

Spitzer is right that the weak housing market and the ongoing foreclosure crisis is a huge drag on the economy. Being underwater is the single largest predictor of a house being foreclosed. Large-scale principle reduction would be a way to keep homeowners in their homes, reduce foreclosures, enable more homeowners to move to pursue new jobs, and reduce the stress of unemployment and under-employment on the housing market. Spitzer is also right to point out that Wall Street banks already received their bailout from the American public. Asking for something in return now is fair and a stronger economy is better for both the housing market and the banks too.

On jobs, Spitzer’s suggestion is pretty simple:

He should establish a jobs program. Do the simple math: We are spending more than $110 billion annually in Afghanistan. Stop it. Or scale it back to the sort of covert operations and drone war that is warranted. Savings? Perhaps about $100 billion—per year. Use that money to create up to 5 million jobs at $20,000 each.

Repurposing money from war to jobs here in the US is undoubtedly a solid idea.

The real question becomes, does the administration want to pursue new ideas for job creation? Does the administration want to do what it takes to solve the foreclosure crisis? David Dayen thinks there are real new ideas that can be implemented by the administration, but they’re more interested in rehashing their original deficit reducing, job creating plans and bashing Congress for not taking action. Dayen likes Spitzer’s emphasis on the housing market and suggests a way for the administration to get widescale principle reduction without congressional say-so:

Fannie and Freddie own well over half of the mortgage market and they are full wards of the state. They could be employed to give mass refinancing deals or even principal reduction. The FHFA, Fannie and Freddie’s government overseer, has been reluctant to do this. I believe he serves at the pleasure of the President, so there are options to make that work.

It comes down to a question of what solutions the Obama administration want to deploy. It’d be great if the administration went this route, but I won’t hold my breathe for this sort of action.

Striking Verizon Workers Speak Out


This is a great video of striking Verizon workers speaking about why they’re out on strike and what the strike means to them. It’s clear that these are smart, savvy, informed union members. The workers in this video are just a few of the 45,000+ Verizon workers of the CWA and IBEW who are out on strike now. Laura Clawson of Daily Kos gives more background as to what the strike is about:

A New York Times story by Steven Greenhouse is revealing, placing the workers’ view—that Verizon’s demands are an assault on middle-class jobs—against Verizon’s argument that that’s not the case because Verizon workers could take a pay cut and still be considered middle class. That’s the company’s argument: There shouldn’t be a problem driving down benefits and job security, because by some measures workers will still be in the middle class—just hanging on by their fingernails instead of solidly so.So to management, the idea that this is about middle-class jobs is just some kind of cynical talking point. And that’s probably the most revealing evidence of just how much this is about middle-class jobs, because it’s about the very definition of what it means to be in the middle class (always a nebulous term anyway). Verizon’s official position is that what used to be a middle-class job—that what Verizon negotiated in their last contract as a middle-class job—is now too good for regular working people and that big chunks of the job security and benefits it offered must now be removed for that same job to count as appropriately middle class. If that’s not an idea to fight back against, I don’t know what is.

Will the 50 state settlement ever come?

Over at Naked Capitalism, Matt Stoller has a piece pointing out that for nine months the press has been reporting an imminent settlement between the banking industry and the fifty state attorneys general lead by Iowa’s Tom Miller regarding robosigning and fraudulent securitization, despite this settlement never coming. Stoller writes:

And so, the moral of the story is, the robo-signing/chain of title/overall mortgage securitization liability issue is a bear of a problem. It isn’t going away. So here’s a tip to journalists writing about the housing market. Don’t trust what Bank of America, Iowa Attorney General Tom Miller, various Federal regulators, Obama officials, and probably other bank-associated parties tell you.

Don’t trust the bank-friendly conventional wisdom, because it will end up making otherwise good stories inaccurate (this goes for headline writers as well). The banks don’t know their legal liability and the regulators don’t know how to fix this problem. And everyone’s suing everyone.

While it’s certainly true that most of the parties involved are likely content to produce a settlement in the absence of fully understanding what went on, there’s an extent to which settlement is difficult in the absence of real investigation into robosigning, fraudulent foreclosures, and securitization fraud. Or rather, in the absence of the sort of investigations NY AG Eric Schneiderman, DE AG Beau Biden and NV AG Catherine Cortez Masto say they are determined to pursue, it’s hard to know what a settlement would require. But given that the banks, Miller and the administration seem to want to shut off the ability of AGs to investigate like Schneiderman et alia want to investigate, there’s an inherent tension that is likely a factor in delaying any actual settlement from being reached.

Stoller’s right – reporters need to treat claims of an imminent settlement skeptically and they need to push back on past sources who said a settlement was around the corner. Maybe a settlement will emerge in the not too distant future, but nothing in the press coverage suggests that contemporary claims are more trustworthy than those which came before.

The smear campaign against NY AG Eric Schneiderman begins

Originally posted at AMERICAblog.

Of all the state attorneys general in America, New York’s Eric Schneiderman has been most active in pursuing investigations of the foreclosure crisis and potentially illegal activities that have infected the housing sector.  As a result, it’s not shocking that there now seems to be a concerted effort to smear Eric Schneiderman by Wall Street banks and their lackeys.

While investigating foreclosure fraud in New York, Schneiderman also has jurisdiction to look at fraudulent securitizations and settlements in this area, as we’ve seen with his action around the Bank of America/Countrywide settlement with Bank of New York Mellon. Schneiderman has also been vocal in his skepticism of the progress of the 50 state settlement talks being pursued by Iowa AG Tom Miller, the administration and major Wall Street banks. His opposition to a deal could result in it being scuttled and this scares the crap out of the banks.

First, via David Dayen, we saw Bank of New York trot out Katheryn Wylde, a member of the board of the NY Fed and president of Partnership for New York City, to the press to bash Schneiderman’s questioning of the merits of the BoA/BoNY settlement. Here’s the hit:

A BNY Mellon spokesman told me the bank didn’t want to comment on the broader implications of the AG’s filing, but directed me to Kathryn Wylde, CEO of the Partnership for New York City, a business development non-profit. She said that the AG’s “careless action” hurts New York’s standing as a financial center.

“It’s disappointing from the standpoint of the business community that the AG would make a fraud accusation against a major financial institution — in the press,” she told me. “And to not have any consultation with the institution? The bank was blindsided by what appears to be an outrageous charge.” (The AG’s press office didn’t respond to my request of comment.)

Dayen points out:

So you have a board member for an federal overseer of banks on Wall Street (Wylde claims that the NY Fed “serves no regulatory function,” which is just absolutely not true) attacking a state regulator for stepping into a settlement where he has found massive fraud in a preliminary investigation. She’s taking up for BNYM, which the NY Fed oversees, against the state Attorney General. This is just a classic case of regulatory capture.

There’s almost no way this is not coordinated. Wylde is pretty powerful in New York circles, I understand, and she’s raising fears of a slowdown to New York City’s main economic engine to stall regulatory oversight. The banks must continue looting, the story goes, or they’ll stop creating jobs in Manhattan.

Yves Smith of Naked Capitalism also weighs in against the attack from BoNY and Wylde:

“Fraud accusation…in the press”? This woman evidently has reading comprehension problems. If she had bothered to go through any of the news reports on the motion, the charges were not made in “the press”, they were made via a court filing.
…
And no, Bank of New York was not entitled to “consultation” when it is about to be accused of fraud, particular when the facts and law are as clear as they are in this instance. Her argument indicates either abject ignorance or deliberate deceit.

Ouch. That’s really embarrassing for Wylde. And again, this is a person who sits on the board of the New York Federal Reserve.

But this isn’t the only smear that’s being trotted out to undermine Eric Schneiderman’s investigation and pursuit of accountability on Wall Street. The New York Daily News has a story attacking Schneiderman for doing entirely legal and proper fundraising to pay off campaign debts – specifically a loan that he made to his campaign. There’s nothing at all illegal about him fundraising to pay a campaign debt, but clearly someone is pushing a story to impugn Schneiderman’s character.

Wall Street has a history of going after any attorney general who takes a serious interest in making banksters follow the law. The stakes here are incredibly high – Schneiderman’s investigations into robosigning and foreclosure fraud have the potential to cost banks tens if not hundreds of billions of dollars. That makes Schneiderman a high priority target and we’re seeing that targeting happen now. Schneiderman is doing critically important work that has the potential to hold lawless banksters accountable, to help keep homeowners in their homes, and to ensure that the rule of law – the foundation of our country – is maintained in the face of attempts by wealthy elites to twist it for their personal benefit. Anyone who cares about the outcome of his investigations should join together in identifying and opposing the smears, as Dayen and Smith have with Wylde and hopefully others will with the Daily News smear.

Warren Buffett & Shared Sacrifice

Warren Buffett has what will surely be a much talked about, much blogged about and much emailed op-ed in the New York Times today, calling on Congress to stop “coddling billionaires” and raise taxes on the super rich. Obviously there are elements to Buffett’s piece which are superb. It is very rare that someone outside of the Congressional Progressive Caucus talks seriously from a loud microphone about raising taxes on the rich. It’s even more rare when that person is taken seriously and not a left wing class warrior.

Buffett goes after the fundamental unfairness which taxes working at a higher rate than investing. Buffett also points out that while there were higher tax rates on the rich, the economy created far more jobs. Lower tax rates haven’t helped with job creation – they’ve only assisted the consolidation of wealth into fewer and fewer hands.  These are all important arguments to be made.

But when it gets down to prescriptions, here’s what Buffett has to offer:

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

He doesn’t offer specific recommendations for how large increases in brackets of $1 million and $10 million would be. Presumably they’d be large, but without him being explicit, it’s hard to imagine large numbers being attached to this idea. Most politicians just don’t want to tax their multi-millionaire peers at a particularly high rate.

What’s worse, though, is without explanation Buffett buys into the deficit hysteria and presumably the accompanying push by deficit fetishists to cut social spending. I have no idea why Buffett thinks large, dramatic cuts to the deficit will pull the economy back from the brink, when the underlying reason for taxing the rich at a higher rate isn’t simply one of “shared sacrifice” but one of giving government the ability to do more, bigger things at a time when there is hesitance to use the power of deficit spending. Increased revenues allows for infrastructure spending, educational investment, and a shift to green energy sources. These, in turn, will create the jobs we need to get the economy on track.

“Share sacrifice” is undoubtedly a step better than the current system wherein wealthy elites are running up the score in the class war and forcing poor and working class Americans to give up their economic security on the alter of deficit reduction. But a better framework would be one which doesn’t actually put any significant burden on the people who the economic downturn already hurts the most. The unemployed, the under-employed, the homeless, and struggling homeowners have already lost tremendously through this recession. Asking them to give up their unemployment benefits, their social support benefits, the quality of their children’s schools and their roads is absurdly unfair. So no, Buffett is wrong. We don’t need “shared sacrifice” – we need wealthy elites to be held accountable for crashing the economy and siphoning off trillions of wealth from poor, working, and middle class Americans. Yes, part of that should be through significantly higher taxes for millionaires and billionaires, for hedge fund managers, and people who don’t work but instead live off of returns on their investments and the investments of their great-grand parents. But this should not come alongside cuts to the Big Three social safety programs, nor any other government program which gives Americans the ability to lift themselves up and improve the quality of their lives.