Tuesday, November 25, 2008

New wars for secession on the horizon?

Two big things all in one day:

  1. Glenn Beck wonders if secession is on the table for states that are opposed to bailouts (h/t Think Progress). I think it's a valid question- I mean, you had hundreds of protests around the country, people called their "representatives" like never before, and yet the damn thing passed anyway. One of the arguments raised in the Declaration of Independence for secession from England was "For imposing Taxes on us without our Consent"- to say nothing of the taxation to be laid upon future generations when the tab comes due. "Temporary deficits" indeed.
  2. A professor at the diplomatic academy of Russia’s Ministry of Foreign Affairs said the U.S. will break up because of the nation’s financial crisis. Side note: conspiracy theories don't usually end up on Bloomberg.com unless they have to do with short-selling.
“The dollar isn’t secured by anything,” Igor Panarin said in an interview transcribed by Russian newspaper Izvestia today. “The country’s foreign debt has grown like an avalanche; this is a pyramid, which has to collapse.”

Panarin said in the interview that the financial crisis will worsen, unemployment will rise and people will lose their savings -- factors that will cause the country’s breakup.

“Dissatisfaction is growing, and it is only being held back at the moment by the elections, and the hope” that President- elect Barack Obama “can work miracles,” he said. “But when spring comes, it will be clear that there are no miracles.”

The U.S. will fracture into six parts: the Pacific coast; the South; Texas; the Atlantic coast, central states and the northern states.

Economists agree: Paulson 'Truly Idiotic'

I'm surprised that more people haven't come to this conclusion, but I do feel validated when a professor at Columbia agrees with me. Paulson is either a genius or a fool, and I'm really not sure which one scares me more. Here are the salient points: until there can be some value attached to these "assets" this deleveraging will not stop, that a solution is best done by helping struggling homeowners, that politics as usual is interfering with the solution. By the way, I'm not the only one saying these things, but nobody in power is listening. Here's some highlights of the interview:

The Paulson Plan: 'Truly Idiotic'

Deal Journal: What the heck is going on out there? The Citigroup bailout isn’t a good sign of confidence in the overall financial system, is it?
Charles Calomiris: The key thing we’ve learned during the downward spiral of confidence is that you have to deal with the problem in the mortgage market directly. There are probably 18 million subprime and Alt-A mortgages out of 57 million total. Probably half will end up in foreclosure.

In the middle of a financial crisis, we’re using half measures designed in an inappropriate way, and we don’t accompany them with other measures. This has just been a completely mismanaged policy response.

DJ: There’s this perception that we can “fix” the price of individual mortgages. But shouldn’t the price of homes find its natural equilibrium?
CC: The market price is not decreed by God. The market price is an outcome of a variety of things. Recapitalizing the banks is helpful for giving them breathing room, and for providing credit in the meantime. But it doesn’t resolve the problem.

The problem is the completely opaque distribution of losses because no one knows how to value these mortgage losses. The way to solve the problem is from the bottom up.


DJ: What about creating government incentives for the formation of new banks?
CC: Recapitalizing the banks is a good idea in principle. Starting new banks is a good idea. It’s all fine, but we have to come to grips that unlike any financial crises – and I’m an expert on them – this one is a complete outlier. In other crises, the uncertainty on the total of the losses was resolved in a matter of months. We’ve been trying to resolve mortgages and CDO tranches for a year and a half. It’s not going well.


DJ: Why isn’t anyone listening to these ideas?
CC: The point is that they have made huge errors in the design of their assistance plan and they were forecastable errors.

For instance, Paulson doesn’t want there to be a stigma [around capital injections.] Does he really believe that by getting J.P. Morgan to participate, he creates the perception that JPM and Citi are the same?

Does he really believe that injecting preferred stock into banks is socialism but buying assets at above market price isn’t? Does he really believe that?

There actually is a stock of knowledge about this. The scandal is that when Congress has been considering this, not one independent economist has been allowed to testify. Do you know why they weren’t? Paulson and Bernanke didn’t want anyone causing problems.

DJ: Wait, that sounds like a conspiracy.
CC: Democrats didn’t want anyone [economists] testifying because it was before an election and no one was willing to stand before that bulldozer known as Paulson. No one wanted to make tough political decision before the election. They didn’t empower any experts to come in and testify. Why is that? They were playing politics, too. That’s what we’re dealing with–a complete leadership failure in Congress and the administration.

Don’t underestimate the role of politics in the decision not to fix things.

Like a bad poker game

Why can't we try this? Currently, the world of high finance is in a ultra-high-stakes poker game. They've all got bad cards, but how do you tell who the winners are? Make everyone show their cards.

Bridge Loan to Nowhere?: "Henry Paulson and Ben Bernanke's bailout plan is not only the most expensive; it is also the most likely to fail. But there is more than one way to restore trust and restart markets. First, take a leaf from the New Deal. That is, just send bank examiners into all the institutions--investment houses and insurance companies, as well as banks--to assess them. Insolvent ones are closed; everyone knows then that those that survive are solvent. Economic life restarts. The total cost to taxpayers is minimal.

Guess why Wall Street hates this one and why Bernanke and Paulson do not even consider it. In all likelihood much of the Street is insolvent, which is why short-sellers were going wild until the SEC restricted them.

Democracy Now! | Noam Chomsky: "What Next? The Elections, the Economy, and the World"

It's ideas and speeches like this that exemplify the type of political dissent this country needs most, especially now. I love Noam Chomsky, can I say that? He points out so many things that bear focusing upon- not least of which is the concept that change comes from us, not from Washington. That was his message before Obama co-opted it, and it's still his message today.

This is a speech that I first heard on Democracy Now, but now I've taken the transcript and added some hyperlinks if you are curious (as I was) about some of the suprising things that Chomsky talks about. For example, did you know the Obama campaign won the largest award in the advertising industry? I didn't. And why did the advertising industry award a political campaign it's highest honor? Because Obama had a tremendous sales presentation- and enough people purchased brand Obama, that now he's heading to the White House. Chomsky also points out that this was not a landslide election. Oh sure, the electoral college results make it appear as if it were, but the two major candidates were only separated by some 7 million votes. And did you believe the stories about record turnout? Not true. But it sure was a great sales job, so he deserves the advertising industry's highest honor. He beat out Apple- can you imagine? Obama ran a better sales campaign this year than the people who brought you the ubiquitous iPod. But the product is already turning out to be different than advertised- he's not going to raise taxes on the riches Americans after all, and his cabinet is filling up with warmongers.

As usual, pay special attention to the bolded sections:

Democracy Now! | Noam Chomsky: "What Next? The Elections, the Economy, and the World"

NOAM CHOMSKY: Well, let’s begin with the elections. The word that the rolls off of everyone’s tongue is historic. Historic election. And I agree with it. It was a historic election. To have a black family in the white house is a momentous achievement. In fact, it’s historic in a broader sense. The two Democratic candidates were an African-American and a woman. Both remarkable achievements. We go back say 40 years, it would have been unthinkable. So something’s happened to the country in 40 years. And what’s happened to the country- which is we’re not supposed to mention- is that there was extensive and very constructive activism in the 1960s, which had an aftermath. So the feminist movement, mostly developed in the 70s-–the solidarity movements of the 80’s and on till today. And the activism did civilize the country. The country’s a lot more civilized than it was 40 years ago and the historic achievements illustrate it. That’s also a lesson for what’s next.

What’s next will depend on whether the same thing happens. Changes and progress very rarely are gifts from above. They come out of struggles from below. And the answer to what’s next depends on people like you. Nobody else can answer it. It’s not predictable. In some ways, the election—the election was surprising in some respects.

Going back to my bad prediction, If the financial crisis hadn’t taken place at the moment that it did, if it had been delayed a couple of months, I suspect that prediction would have been correct. But not speculating, one thing surprising about the election was that it wasn’t a landslide. By the usual criteria, you would expect the opposition party to win in a landslide under conditions like the ones that exist today. The incumbent president for eight years was so unpopular that his own party couldn’t mention his name and had to pretend to be opposing his policies. He presided over the worst record for ordinary people in post-war history, in terms of job growth, real wealth and so on. Just about everything the administration was touched just turned into a disaster. [The] country has reached the lowest level of standing in the world that it’s ever had. The economy was tanking. Several recessions are going on. Not just the ones on the front pages, the financial recession. There’s also a recession in the real economy. The productive economy, under circumstances and people know it. So 80% of the population say that the country’s going in the wrong direction. About 80% say the government doesn’t work to the benefit of the people, it works for the few and the special interests. A startling 94% complain that the government doesn’t pay any attention to the public will, and on like that. Under conditions like that, you would expect a landslide to a opposition almost whoever they are. And there wasn’t one.

So one might ask why wasn’t there a landslide? That goes off in an interesting direction. And other respects the outcome was pretty familiar. So once again, the election was essentially bought. 9 out of 10 of the victors outspent their opponents. Obama of course outspent McCain. If you look at the—and we don’t have final records yet from the final results, but they’re probably going to be pretty much like the preliminaries a couple of months ago. Which showed that both Obama and McCain were getting the bulk of their financing from the financial institutions and for Obama, law firms which means essentially lobbyists. That was about over a third a few months ago. But the final results will probably be the same. And there is a—the distribution of funding has over time been a pretty good predictor of what policies will be like for those of you who are interested, there’s very good scholarly work on this by Tom Ferguson in Umass Boston, what he calls the investment theory of politics. Which argues essentially that elections are moments when groups of investors coalesce and invest to control the state and has quite the substantial predictive success. Gives some suggestion as to what’s likely to happen. So that part’s familiar. The—what the future is as I say, depends on people like you.

The response for the election was interesting and instructive. It kept pretty much to the soaring rhetoric, to borrow the cliché, that was the major theme of the election. The election was described as an extraordinary display of democracy, a miracle that could only happen in America and on and on. Much more extreme than Europe even than here. There’s some accuracy in that if we keep to the West. So if we keep to the West, yes, it’s probably true. That couldn’t have happened anywhere else. Europe was much more racist than the United States and you wouldn’t expect anything like that to happen.

On the other hand, if you look at the world, it’s not that remarkable. So let’s take the poorest countries in the Western Hemisphere. Haiti and Bolivia. In Haiti, there was an election in 1990 which really was an extraordinary display of democracy much more so than this.

In Haiti, there were grassroots movements, popular movements that developed in the slums and the hills, which nobody was paying any attention to. And they managed, even without any resources, to sweep into power their own candidate. A populist priest, Jean-Bertrand Aristide. That’s a victory for democracy when popular movements can organize and set programs and pick their candidate and put them into office, which is not what happened here, of course.

I mean, Obama did organize a large number of people and many enthusiastic people in what’s called in the press, Obama’s Army. But the army is supposed to take instructions, not to implement, introduce, develop programs and call on its own candidate to implement them. That’s critical. If the army keeps to that condition, nothing much will change. If it on the other hand goes away activists did in the sixties, a lot can change. That’s one of the choices that has to be made. That’s Haiti. Of course that didn’t last very long. A couple of months later, there was military coup, a period of terror, we won’t go through the whole record. Up the present, the traditional torturers of Haiti, France, and the United States have made sure that there won’t be a victory for democracy there. It’s a miserable story. Contrary to many illusions.

Take the second poorest country, Bolivia. They had an election in 2005 that’s almost unimaginable in the West. Certainly here, anywhere. The person elected into office was indigenous. That’s the most oppressed population in the hemisphere, those who survived. He’s is a poor peasant. How did he get in? Well, he got in because there were again, a mass popular movement, which elected their own representative. And they are the source of the programs, which are serious ones. There’s real issues, And people know them. Control over resources, cultural rights, social justice and so on.

Furthermore, the election was just an event that was particular stage in a long continuing struggle, a lot before and a lot after. There was day when people pushed the levers but that’s just an event in ongoing popular struggles, very serious ones. A couple of years ago, there was a major struggle over privatization of water. An effort which it would in effect deprive a good part of the population of water to drink. And it was a bitter struggle. A lot of people were killed, but they won it. Through international solidarity, in fact, which helped. And it continues. Now that’s a real election. Again, the plans, the programs are being developed, acted on constantly by mass popular movements, which then select their own representatives from their own ranks to carry out their programs. And that’s quite different from what happened here.

Actually what happened here is understood by elite elements. The public relations industry which runs elections here-quadrennial extravaganzas essentially- makes sure to keep issues in the margins and focus on personalities and character and so on–and-so forth. They do that for good reasons. They know- they look at public opinion studies and they know perfectly well that on a host of major issues both parties are well to the right of the population. That’s one good reason to keep issues off the table. And they recognize the success.

So, every year, the advertising industry gives a prize to, you know, to the best marketing campaign of the year. This year, Obama won the prize. Beat out Apple company. The best marketing campaign of 2008. Which is correct, it is essentially what happened. Now that’s quite different from what happens in a functioning democracy like say Bolivia or Haiti, except for the fact that it was crushed. And in the South, it’s not all that uncommon. Notice that each of these cases, there’s a much more extraordinary display of democracy in action than what we’ve seen–important as it was-here. And so the rhetoric, especially in Europe is correct if we maintain our own narrow racist perspective and say yeah, what happened was in the South didn’t happen or doesn’t matter. The only matters is what we do and by our standards, it was extraordinary miracle, but not by the standards of functioning democracy. In fact, there’s a distinction in democratic theory, which does separate say the United States from Bolivia or Haiti.

Question is what is a democracy supposed to be? That’s exactly a debate that goes back to the constitutional convention. But in recent years in the 20th century, it’s been pretty well articulated by important figures. So at the liberal end the progressive end, the leading public intellectual of the 20th century was Walter Lippman. A Wilson, Roosevelt, Kennedy progressive. And a lot of his work was on a democratic theory and he was pretty frank about it. If you took a position not all that different from James Madison’s. He said that in a democracy, the population has a function. Its function is to be spectators, not participants. He didn’t call it the population. He called it the ignorant and meddlesome outsiders. The ignorant and meddlesome outsiders have a function and namely to watch what’s going on. And to push a lever every once in a while and then go home. But, the participants are us, us privileged, smart guys. Well that’s one conception of democracy. And you know essentially we’ve seen an episode of it. The population very often doesn’t accept this. As I mentioned, just very recent polls, people overwhelmingly oppose it. But they’re atomized, separated. Many of them feel hopeless, unorganized, and don’t feel they can do anything about it. So they dislike it. But that’s where it ends.

In a functioning democracy like say Bolivia or the United States in earlier stages, they did something about it. That’s why we have the New Deal measures, the Great Society measures. In fact just about any step, you know, women’s rights, end of slavery, go back as far as you like, it doesn’t happen as a gift. And it’s not going to happen in the future. The commentators are pretty well aware of this. They don’t put it the way I’m going to, but if you read the press, it does come out. So take our local newspaper at the liberal end of the spectrum, “Boston Globe,” you probably saw right after the election, a front page story, the lead front page story was on how Obama developed this wonderful grassroots army but he doesn’t have any debts. Which supposed to be a good thing. So he’s free to do what he likes. Because he has no debts, the normal democratic constituency, labor, women, minorities and so on, they didn’t bring him into office. So he owes them nothing

What he had was an army that he organized of people who got out the vote for Obama. For what the press calls, Brand Obama. They essentially agree with the advertisers, it’s brand Obama. That his army was mobilized to bring him to office. They regard that as a good thing, accepting the Lippman conception of democracy, the ignorant and meddlesome outsiders are supposed to do what they’re told and then go home. The Wall Street Journal, at the opposite end of the spectrum, also had an article about the same thing at roughly the same time. Talked about the tremendous grassroots army that has been developed, which is now waiting for instructions. What should they do next to press forward Obama’s agenda? Whatever that is. But whatever it is, the army’s supposed to be out there taking instructions, and press work. Los Angeles Times had similar articles, and there are others. What they don’t seem to realize is what they’re describing, the ideal of what they’re describing, is dictatorship, not democracy. Democracy, at least not in the Lippman sense, it proved- I pick him out because he’s so famous, but it’s a standard position. But in the sense of say, much of the south, where mass popular movements developed programs; organize to take part in elections but that’s one part of an ongoing process. And brings somebody from their own ranks to implement the programs that they develop, and if the person doesn’t they’re out. Ok, that’s another kind of democracy. So it’s up to us to choose which kind of democracy we want. And again, that will determine what comes next.

Well, what can we anticipate if the popular army, the grassroots army, decides to accept the function of spectators of action rather than participants? There’s two kinds of evidence. There’s rhetoric and there’s action. The rhetoric, you know, is very uplifting: change, hope, and so on. Change was kind of reflective any party manager this year who read the polls, including the ones I cited, would instantly conclude that our theme in the election has to be change. Because people hate what’s going on for good reasons. So the theme is change. In fact, both parties put both of them, the theme was change. So the theme is change. In fact both parties, both of them the theme was change. You know, break from the past, none of old politics, new things are going to happen. The Obama campaign did better so they won the marketing award, not the McCain campaign.

And notice incidentally on the side that the institutions that run the elections, public relations industry, advertisers, they have a role—their major role is commercial advertising. I mean, selling a candidate is kind of a side rule. In commercial advertising as everybody knows, everybody who has ever looked at a television program, the advertising is not intended to provide information about the product, all right? I don’t have to go on about that. It’s obvious. The point of the advertising is to delude people with the imagery and, you know, tales of a football player, sexy actress, who you know, drives to the moon in a car or something like that. But, that’s certainly not to inform people. In fact, it’s to keep people uninformed.

The goal of advertising is to create uninformed consumers who will make irrational choices. Those of you who suffered through an economics course know that markets are supposed to be based on informed consumers making rational choices. But industry spends hundreds of millions of dollars a year to undermine markets and to ensure, you know, to get uninformed consumers making irrational choices.

And when they turn to selling a candidate they do the same thing. They want uninformed consumers, you know, uninformed voters to make irrational choices based on the success of illusion, slander, and effective body language or whatever else is supposed to be significant. So you undermine democracy pretty much the same way you undermine markets. Well, that’s the nature of an election when it’s run by the business world, and you’d expect it to be like that. There should be no surprise there. And it should also turn out the elected candidate didn’t have any debts. So you can follow Brand Obama can be whatever they decide it to be, not what the population decides that it should be, as in the south, let’s say. I’m going to say on the side, this may be an actual instance of a familiar and unusually vacuous slogan about the clash of civilization. Maybe there really is one, but not the kind that’s usually touted.

So let’s go back to the evidence that we have, rhetoric and actions. Rhetoric we know, but what are the actions? So far the major actions are selections, in fact the only action, of personnel to implement Brand Obama. The first choice was the Vice President, Joe Biden, one of the strongest supporters of the war in Iraq in the Senate, a long time Washington insider rarely deviates from the party vote. In cases where he does deviate they’re not very uplifting. He did break from the party and voting for a Senate resolution that prevented people from getting rid of their debts by, individuals, that is, from getting rid of their debts by going into bankruptcy. It’s a blow against poor people who’ve caught in this immense debt that’s a large part of the basis for the economy these days. But usually, he’s a, kind of, straight party-liner with the democrats on the sort of ultra naturalist side. The choice of Biden was a, must have been a conscious attempt to show contempt for the base of people who were voting for Obama, or organizing for him as an anti-war candidate.

Well, the first post-election appointment was for Chief of Staff, which is a crucial appointment; determines a large part of the president’s agenda. That was Rahm Emanuel, one of the strongest supporters of the war in Iraq in the House. In fact, he was the only member of the Illinois delegation who voted for Bush’s effective declaration of war. And, again, a longtime Washington insider. Also, one of the leading recipients in congress of funding from the financial institutions hedge funds and so on. He himself was an investment banker. That’s his background. So, that’s the Chief of Staff.

The next group of appointments were the main problem, the primary issue that the governments’ going to have to face is what to do about the financial crisis. Obama’s choices to more or less run this were Robert Rubin and Larry Summers from the Clinton--Secretaries of Treasury under Clinton. They are among the people who are substantially responsible for the crisis. One leading economist, one of the few economists who has been right all along in predicting what’s happening, Dean Baker, pointed out that selecting them is like selecting Osama Bin Laden to run the war on terror.


Yeah, I’ll finish. This saves me the problem of what’s coming next, so I’ll finish with the elections. Let me make one final comment on this. There was meeting on November 7, I think of a group of couple, of a dozen advisers to deal with the financial crisis. Their careers were, records were reviewed in the business press, and Bloomberg News had an article reviewing their records and concluded that these people, most of these people shouldn’t be giving advice about the economy. They should be given subpoenas.


Because most of them were involved in one or other form of financial fraud, that includes Rahm Emanuel, for example. What reason is there to think that the people who brought this crisis about are some how going to fix it? Well, that’s a good indication of what’s likely to come next, at least if we look at actions. We couldn’t, but it won’t. You can bring this up. Ask what we expect to see in particular cases. And there’s evidence about that from statements from Obama’s website. I’ll mention just one thing about Obama’s website, which gives an indication of what’s happening. One of the major problems coming is Afghanistan and Pakistan. That’s pretty serious. Take a look at Obama’s website under issues, foreign policy issues. The names don’t even appear. I mean, we’re supposed to be ignorant and meddlesome outsiders. We’re not supposed to know what Brand Obama is. So you can’t find out that way. The statements that you hear are pretty hawkish. And it doesn’t change much as you go through the list. I’ll wrap up here. So it’s up to you to continue.

Monday, November 24, 2008

Why does anyone still listen to Paulson??

In addition to the rather large list of laughable Paulson quotes that I highlighted last week, I also said this:

I nominate the following statement to be the one most likely to come back to bite Paulson's ass:
As policymakers face the difficult challenges ahead, they will begin with two considerable advantages: a significantly more stable banking system, one where the failure of a major bank is no longer a pressing concern; and the resources, authority and potential programs available to deal with the future capital and liquidity needs of credit providers.
"The failure of a bank is no longer a pressing concern"??? So what will he say once Citigroup goes belly up? Oh, that won't be a "failure", because the government will either dump a bunch of money into them, or help them become acquired.

And surprise, surprise, the taxpayers are now dumping billions into Citigroup in a futile attempt to keep them going. I love being right and everything, I just wish I were wrong about this.

Given what we know about Paulson, it should come as no surprise that he will probably try to tap the next installment of the TARP program, after saying he would leave it to Obama.

Paulson may ask Congress for the remaining $350 billion from the Troubled Asset Relief Program as he puts together plans to boost consumer credit. Treasury and Federal Reserve officials are working on an effort to buttress the market for securities backed by auto, student and credit-card loans, Paulson said last week. He’s also assembling an office to address mortgage foreclosures.

Six days ago, Paulson told Congress “it was only prudent to reserve our TARP capacity, maintaining not only our flexibility, but that of the next administration.” Since then, the collapse in Citigroup Inc. shares threatened a renewed bout of financial turmoil, and forced the Treasury to mount a rescue of the bank late yesterday.

The only question now is what will they all say when the next installment of $350 billion dollars isn't enough? Still no help in sight for struggling poor or middle-class citizens, but we've rushed the banksters hundreds of billions of dollars. Isn't capitalism great?

Citi, AIG Won't Drop Big Sports Sponsorships

ABC news has been breaking these stories wide open lately. Here's another one:

Citi, AIG Won't Drop Big Sports Sponsorships

Struggling Citibank just sealed a multi-billion-dollar emergency "backstop" deal with the U.S. government. The financial behemoth, suffering with billions in bad mortgage-related assets on its books, recently shed 53,000 workers and saw its stock price lose over half its value. Yet it's in a 20-year contract to pay the New York Mets $400 million to name the team's new stadium "Citi Field."

"This type of spending is indefensible and unacceptable to Citigroup's new partner and largest investor: the American taxpayer," said Rep. Elijah Cummings, D-Md., in a statement Monday.

Citi isn't alone: Imploding insurance giant AIG is paying the British soccer team Manchester United $125 million for the privilege of having its logo appear on Man U's uniforms. That, despite the fact the firm is standing largely thanks to a $150 billion lifeline from the U.S. Treasury.

"A friend of mine joked they should put 'US Treasury' on the front of their uniforms," said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based nonpartisan watchdog group which is outraged by the expenditures.


Who else is taking public support while holding pricey naming deals? It's not a short list. Among the biggest:

  • PNC Bank ($7.7 billion in TARP funds pledged) is locked in a 20-year, $30 million deal to keep the home of the Pittsburgh Pirates named "PNC Park." A spokesman there said the bank did not use TARP funds to make payments on the deal.
  • J.P. Morgan Chase ($25 billion from TARP) has a 30-year, $66 million contract for the Arizona Diamondbacks to call their stadium "Chase Field." "That was an agreement that was signed 11 years ago," by a bank that was bought by Chase, said bank spokesman Tom Kelley. "Tell me what 2008 has to do with 1997? That's a contractual obligation."
  • Comerica ($2.3 billion in TARP funds pledged) has an identical deal with the Detroit Tigers to refer to their home field as "Comerica Park." Both expire in 2028. "From our perspective, they're not connected," said Comerica's Wayne Mielke of the stadium deal and the bank's anticipated receipt of bailout funds. "Why should it be reviewed?" The cost of the naming rights, said Mielke, "does not inhibit our ability to lend."
  • Capital One  famous for their tagline, "What's in your wallet?" and a recipient of $2.3 billion in TARP money  are the proud and paying sponsor of the Capital One Bowl, formerly known as the Florida Citrus Bowl. The bank did not respond to requests for comment.

US spied on Blair, Iraqi president

I wonder if there will be a larger outcry now that it's not just American citizens?

The Raw Story | Report: US spied on Blair, Iraqi president

The National Security Agency spied on British Prime Minister Tony Blair and Iraq's first interim president Ghazi al-Yawer, according to a report Monday.

A former Army Arab linguist at the NSA told ABC News that he saw and read a file on Blair's "private life" and listened to "pillow talk" phone calls of Iraq's first president while working at a secret NSA facility in Georgia.

Fed Pledges Top $7.4 Trillion to Ease Frozen Credit

The price tag to "save the financial system" is rapidly expanding- so much so that it's now about half of last year's GDP. When do we stop and say that there's not enough money- once we're lending more than our entire economy can produce? Because that's where this is derailed train is headed. It's absolutely sickening to think that with the amount of money that has been pledged so far, we could have paid off half of the outstanding mortgages in the US. As a matter of fact, that probably would have done a lot more to stem the crisis than anything they've done so far.

Pay special attention to the bolded sections below:

Fed Pledges Top $7.4 Trillion to Ease Frozen Credit (Update1)

By Mark Pittman and Bob Ivry

Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

Too Big to Fail

Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort.

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as “too big to fail,” he said.

The government committed $29 billion to help engineer the takeover in March of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8 billion in addition to TARP allocations to bail out New York-based American International Group Inc., once the world’s largest insurer. Yesterday, Citigroup Inc. received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury Department also will inject $20 billion into the bank after its stock fell 60 percent last week.

“No question there is some credit risk there,” Poole said.


Congressman Darrell Issa, a California Republican on the Financial Services Committee, said risk is lurking in the programs that Poole thinks are safe.

“The thing that people don’t understand is it’s not how likely that the exposure becomes a reality, but what if it does?” Issa said. “There’s no transparency to it so who’s to say they’re right?”

The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world’s companies and brought down three of the biggest Wall Street firms.

The Dow Jones Industrial Average through Friday is down 38 percent since the beginning of the year and 43 percent from its peak on Oct. 9, 2007. The S&P 500 fell 45 percent from the beginning of the year through Friday and 49 percent from its peak on Oct. 9, 2007. The Nikkei 225 Index has fallen 46 percent from the beginning of the year through Friday and 57 percent from its most recent peak of 18,261.98 on July 9, 2007. Goldman Sachs Group Inc. is down 78 percent, to $53.31, on Friday from its peak of $247.92 on Oct. 31, 2007, and 75 percent this year.


Regulators hope the rescue will contain the damage and keep banks providing the credit that is the lifeblood of the U.S. economy.

Most of the spending programs are run out of the New York Fed, whose president, Timothy Geithner, is said to be President- elect Barack Obama’s choice to be Treasury Secretary.

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.

“It’s unprecedented,” said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. “The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer.”

New Deal

President Franklin D. Roosevelt’s New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government’s current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office.

The 1979 U.S. government bailout of Chrysler consisted of bond guarantees, adjusted for inflation, of $4.2 billion, according to a Heritage Foundation report.

The commitment of public money is appropriate to the peril, said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. and a former economist at the New York Fed. U.S. financial firms have taken writedowns and losses of $666.1 billion since the beginning of 2007, according to Bloomberg data.

“This is the worst capital markets crisis in modern history,” Harris said. “So you have the biggest intervention in modern history.”

Federal Lawsuit

Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.

Collateral is an asset pledged to a lender in the event a loan payment isn’t made.

“Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,” Bernanke said Nov. 18 to the House Financial Services Committee. “We think that’s counterproductive.”

The Fed should account for the collateral it takes in exchange for loans to banks, said Paul Kasriel, chief economist at Chicago-based Northern Trust Co. and a former research economist at the Federal Reserve Bank of Chicago.

“There is a lack of transparency here and, given that the Fed is taking on a huge amount of credit risk now, it would seem to me as a taxpayer there should be more transparency,” Kasriel said.

$4.4 Trillion

Bernanke’s Fed is responsible for $4.4 trillion of pledges, or 60 percent of the total commitment of $7.4 trillion, based on data compiled by Bloomberg concerning U.S. bailout steps started a year ago.

“Too often the public is focused on the wrong piece of that number, the $700 billion that Congress approved,” said J.D. Foster, a former staff member of the Council of Economic Advisers who is now a senior fellow at the Heritage Foundation in Washington. “The other areas are quite a bit larger.”

The Fed’s rescue attempts began last December with the creation of the Term Auction Facility to allow lending to dealers for collateral. After Bear Stearns’s collapse in March, the central bank started making direct loans to securities firms at the same discount rate it charges commercial banks, which take customer deposits.

In the three years before the crisis, such average weekly borrowing by banks was $48 million, according to the central bank. Last week it was $91.5 billion.

Lehman Failure

The failure of a second securities firm, Lehman Brothers Holdings Inc., in September, led to the creation of the Commercial Paper Funding Facility and the Money Market Investor Funding Facility, or MMIFF. The two programs, which have pledged $2.3 trillion, are designed to restore calm in the money markets, which deal in certificates of deposit, commercial paper and Treasury bills.

“Money markets seized up after Lehman failed,” said Neal Soss, chief economist at Credit Suisse Group in New York and a former aide to Fed chief Paul Volcker. “Lehman failing made a lot of subsequent actions necessary.”

The FDIC, chaired by Sheila Bair, is contributing 20 percent of total rescue commitments. The FDIC’s $1.4 trillion in guarantees will amount to a bank subsidy of as much as $54 billion over three years, or $18 billion a year, because borrowers will pay a lower interest rate than they would on the open market, according to Raghu Sundurum and Viral Acharya of New York University and the London Business School.

Bank Subsidy

Congress and the Treasury have ponied up $892 billion in TARP and other funding, or 12 percent.

The Federal Housing Administration, overseen by Department of Housing and Urban Development Secretary Steven Preston, was given the authority to guarantee $300 billion of mortgages, or about 4 percent of the total commitment, with its Hope for Homeowners program, designed to keep distressed borrowers from foreclosure.

Most of the federal guarantees reduce interest rates on loans to banks and securities firms, which would create a subsidy of at least $6.6 billion annually for the financial industry, according to data compiled by Bloomberg comparing rates charged by the Fed against market interest currently paid by banks.

Not included in the calculation of pledged funds is an FDIC proposal to prevent foreclosures by guaranteeing modifications on $444 billion in mortgages at an expected cost of $24.4 billion to be paid from the TARP, according to FDIC spokesman David Barr. The Treasury Department hasn’t approved the program.


Bernanke and Paulson, former chief executive officer of Goldman Sachs, have also promised as much as $200 billion to shore up nationalized mortgage finance companies Fannie Mae and Freddie Mac. The FDIC arranged for $139 billion in loan guarantees for General Electric Co.’s finance unit.

The tally doesn’t include money to General Motors Corp., Ford Motor Co. and Chrysler LLC. Obama has said he favors financial assistance to keep them from collapse.

Paulson told the House Financial Services Committee Nov. 18 that the $250 billion already allocated to banks through the TARP is an investment, not an expenditure.

“I think it would be extraordinarily unusual if the government did not get that money back and more,” Paulson said.

‘We Haircut It’

In his Nov. 18 testimony, Bernanke told the House Financial Services Committee that the central bank wouldn’t lose money.

“We take collateral, we haircut it, it is a short-term loan, it is very safe, we have never lost a penny in these various lending programs,” he said.

A haircut refers to the practice of lending less money than the collateral’s current market value.

Requiring the Fed to disclose loan recipients might set off panic, said David Tobin, principal of New York-based loan-sale consultants and investment bank Mission Capital Advisors LLC.

“If you mark to market today, the banking system is bankrupt,” Tobin said. “So what do you do? You try to keep it going as best you can.”

“Mark to market” means adjusting the value of an asset, such as a mortgage-backed security, to reflect current prices.

Some of the bailout assistance could come from tax breaks in the future. The Treasury Department changed the tax code on Sept. 30 to allow banks to expand the deductions on the losses banks they were buying, according to Robert Willens, a former Lehman Brothers tax and accounting analyst who teaches at Columbia University Business School in New York.

‘Wells Fargo Notice’

Wells Fargo & Co., which is buying Charlotte, North Carolina-based Wachovia Corp., will be able to deduct $22 billion, Willens said. Adding in other banks, the code change will cost $29 billion, he said.

“The rule is now popularly known among tax lawyers as the ‘Wells Fargo Notice,’” Willens said.

The regulation was changed to make it easier for healthy banks to buy troubled ones, said Treasury Department spokesman Andrew DeSouza.

House Financial Services Committee Chairman Barney Frank said he was angry that banks used the money for acquisitions.

“The only purpose for this money is to lend,” said Frank, a Massachusetts Democrat. “It’s not for dividends, it’s not for purchases of new banks, it’s not for bonuses. There better be a showing of increased lending roughly in the amount of the capital infusions” or Congress may not approve the second half of the TARP money.

Thursday, November 20, 2008

Can even Keynes save us now?

Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.
-John Maynard Keynes (English economist, journalist, and financier) 1883-1946

US seeks to $300 billion from Gulf States

This is a troubling development. It's unclear from this report whether this is supposed to be a loan, a gift, debt forgiveness, or some mix. In any case, one certainly has to wonder what the powers that be are up to? I never expected them to monetize all of this new debt they're creating, but I also never expected them to go to the gulf nations with hat in hand, either.

US seeks 300 billion dlrs from Gulf states: report

KUWAIT CITY (AFP) – The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait's daily Al-Seyassah reported Thursday.

Quoting "highly informed" sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait.

Al-Seyassah said Washington sought the amount as "financial aid" to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession.

The daily said the United States plans to use the funds to help the ailing automobile industry , banks and other companies suffering from the global financial turmoil.

The four nations, all members of OPEC, produce together 14 million barrels of oil per day, around half of the cartel's production and about 17 percent of world supplies.

The four states are estimated to have amassed close to 1.5 trillion dollars in surplus in the past six years due to high oil prices that rocketed above 147 dollars in July before sliding to just above 50 dollars.

The daily also said that the United States has asked Kuwait to forgive its Iraqi debt estimated at around 16 billion dollars.

Washing their hands while the automakers circle the drain

Can you see what's happening here? Everyone agrees that the American automakers are utter failures, and don't really deserve to exist anymore. They been mismanaged for decades, with the ultimate focus on short-term profits at the expense of the long-term business model. As such, there's simply no way for them to come back from this without major bankruptcy reorganization. Given that everyone knows this, here's what I think is happening with the automaker bailout. Every politician in Washington D.C. is hoping against hope that they go bankrupt sometime between right now and when Obama is inaugurated.

It's a win-win....everyone gets to avoid the blame. After all, there can only be blame- hundreds of thousands of job losses, cities around the country will be hit hard. However, if the automakers get bailed out, Congress will become increasingly unpopular, especially once the first $25 billion proves to be insufficient. And it will be insufficient... GM says they're burning $5 billion a month. So by asking Congress for $25 billion, of which GM is asking only $10-12 billion, that only buys them another 2 months.

If they don't get bailed out, the blame gets transferred to a lame-duck Congress, which won't really stick to the incoming members. Plus, the rhetoric can blame it all on Bush-era policies and Obama still gets a fresh start. It's about the best outcome that can be hoped for at this point- a point not lost on those in Congress and the lame-duck Bush Administration:

For now, however, with the federal emergency loan plan stalled in the Senate, lawmakers in both parties are engaged in a high-stakes game of chicken, positioning themselves to blame each other for the failure.

Senate Majority Leader Harry Reid, D-Nev., scrapped plans Wednesday for a vote on a bill to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund.

It's really up to Bush's team to act, he said.

"I don't believe we need the legislation," Reid said. Treasury Secretary Henry Paulson can tap the financial industry bailout money to help auto companies, Reid said, but "he just doesn't want to do it."

Not our responsibility, countered the White House.

"If Congress leaves for a two-month vacation without having addressed this important issue ... then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation," said Dana Perino, the White House press secretary.

She said there was "no appetite" in the administration for using the financial industry bailout money to help auto companies.

It's great when elected leaders step up to the plate and make the really hard decisions, isn't it?

Wednesday, November 19, 2008

A very special welcome to the newest Warrior in the "War On Christmas"

I love the smell of hypocrisy in the morning!! Uber- dumbass Bill O'Reilly has been rallying the troops to defend Christmas in the imaginary "War on Christmas" for years. In fact, he's already begun this year's lobbying for Christmas. Annually, he encourages boycots of stores that say "happy holidays" or some variant thereof instead of "Merry Christmas". Now isn't it delicious when he screws up and lists his "holiday" reading list.

h/t: Think Progress

Conservative Pundit: God is what's wrong with Republicans

GOP should be 'giving up on God'

Nationally syndicated conservative columnist Kathleen Parker believes that the Republican Party's recent election woes can be summarized as "Three little letters, great big problem: G-O-D."

In her latest column, "Giving Up on God", Parker cautions Republicans not to "overlook or dismiss the gorilla in the pulpit."

Writes Parker, "To be more specific, the evangelical, right-wing, oogedy-boogedy branch of the GOP is what ails the erstwhile conservative party and will continue to afflict and marginalize its constituents if reckoning doesn't soon cometh."

After Obama's election, "like it or not, we are a diverse nation, no longer predominantly white and Christian," she continues.

"Suffice it to say, the Republican Party is largely comprised of white, married Christians," observes Parker. "Anyone watching the two conventions last summer can't have missed the stark differences: One party was brimming with energy, youth and diversity; the other felt like an annual Depends sales meeting."

Continues Parker, "It isn't that culture doesn't matter. It does. But preaching to the choir produces no converts. And shifting demographics suggest that the Republican Party -- and conservatism with it -- eventually will die out unless religion is returned to the privacy of one's heart where it belongs."

After calling for Republican vice presidential candidate Sarah Palin to quit the race in a September 29 column entitled "How Palin can save McCain," Parker revealed that she received hate mail from angry right-wingers.

"Only Palin can save McCain, her party and the country she loves," Parker had written. "She can bow out for personal reasons, perhaps because she wants to spend more time with her newborn. No one would criticize a mother who puts her family first. Do it for your country."

Two days later, Parker wrote, "Allow me to introduce myself. I am a traitor and an idiot. Also, my mother should have aborted me and left me in a Dumpster, but since she didn't, I should 'off' myself. Those are just a few nuggets randomly selected from thousands of e-mails written in response to my column suggesting that Sarah Palin is out of her league and should step down. Who says public discourse hasn't deteriorated?"

Undoubtedly, Parker's e-mail box will fill up with angry invectives, threats, and, perhaps, prayers for her soul. And the same right-wing bloggers that claimed to have never heard of her before her infamous Palin column will most probably again blog ignorance.

Two more reasons the Automakers don't deserve a bailout

OK, sure, they've already failed, and everyone knows it. But it makes it harder to say that you desperately need money when you're still doing things like this:

The CEOs of the big three automakers flew to the nation's capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough.

All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

and today's Wall Street Journal:
Under pressure from senators over the issue of executive compensation, Chrysler's Mr. Nardelli said he would be willing to accept a salary of $1 a year as part of a federal bailout. Lee Iacocca made the same commitment when he ran Chrysler and secured federal loan guarantees in 1979. The chief executives of GM and Ford declined to make the same commitment.
And why would they agree to cut their compensation, if the bankers didn't have to and still got their bailout?

A short primer & interview on Anarchy theory

The author of ‘Anarchy Alive!’ says the economic meltdown is a sign capitalism has reached its limits and explains why he won’t be voting or serving in any army

Interview by David B. Green in Haaretz Magazine, November 2008, p.22

Over the telephone Uri Gordon does not sound like he’s gloating, but for an anarchist such as himself, the earth-shaking economic developments of the past six weeks have to have provided some satisfaction. After all, today’s anarchists are certain of the wrong-headedness of the modern capitalist system, with its inevitable march toward a greater concentration of the world’s wealth in an increasingly smaller number of hands. Most also see the need for a radical change in humanity’s relationship with the environment, an understanding that seems to have been adopted by at least much of the West in recent months, as the effects of oil depletion and climate change become felt. Gordon, 32, is the author of “Anarchy Alive!: Anti-Authoritarian Politics from Practice to Theory” (Pluto Press, 183 pages, $26.95/16 pounds ), a somewhat high-brow analysis of contemporary anarchism. Raised in Haifa, Gordon received his doctorate in political theory from Oxford University in 2005; his thesis served as the basis for the book. But as he describes in the book’s introduction, he arrived in the United Kingdom in the fall of 2000, after the anti-globalization movement had begun to draw tens of thousands to its demonstrations, and shortly before the huge protests in Europe against the imminent allied invasion of Iraq. He soon found himself spending as much time on the barricades as in the library. He resolved the apparent conflict, he writes, when he realized that “I could easily construe my activism as fieldwork, and actually gear my academic work to the needs of activists.”

“Anarchy Alive!” deals with most of the big questions curious readers might have about the movement: its connection to the violently revolutionary anarchism of the early 20th century, and the views of today’s anarchists on violence; the attitude of anarchists to technology and to environmental issues, and why it is that so many of the protesters against Israel’s West Bank separation barrier seem to be anarchists - part of a general discussion of anarchism and the question of Israel/Palestine. Gordon describes the integral concept for anarchists of “prefigurative action,” which in the simplest terms means that they are not waiting for a revolution in order to begin living according to their beliefs. Since another major tenet of the movement is the need for decentralization of all aspects of life, it makes perfect sense that many anarchists live in small communities, and try to achieve a level of sustainability. Gordon, for example, is a resident of Kibbutz Lotan, up the road from Ketura, where he teaches politics and ethics at the Arava Institute for Environmental Studies. (He has also contributed several opinion articles on environmental themes to Haaretz English Edition. ) He spoke to us from there.

Q: How did you happen to become an anarchist?

A: I grew up in a left-wing family, although my parents were not politically active. I did my army service in Army Radio, and reported from the West Bank during 1996-1997, covering the redeployment from the cities. I became interested in environmental issues after my release, when I picked up a book, “Our Angry Earth,” by Isaac Asimov and Frederick Pohl. It helped me realize that this would be the defining issue of the coming century. I started studying politics and economics at Tel-Aviv University, looking at environmental issues from a philosophical and economic perspective; I also became involved with groups like Green Action and in the struggle against the Trans-Israel Highway. It became clear to me that exploitation of nature by humans is intimately connected with the exploitation of humans by humans.

Q: How would you summarize the basic tenets of anarchist beliefs?

A: We object to centralization of power, to hierarchical structures in society and to the institution of the state. We’re opposed to capitalism and social classes, to school systems designed to produce obedient workers and citizens, and to most forms of organized religion. We believe in horizontal forms of organization, in voluntary association and mutual aid, and believe that decisions should be made at the smallest or most local level possible.

Q: Does this mean that you won’t vote in the upcoming election in Israel, or wouldn’t serve in the army today?

A: I probably won’t vote. In principle, I don’t want to signify my consent to be ruled, or my acquiescence to a system whereby we get to choose who pushes us around. Elections give people the illusion of democratic participation, but as the famous Jewish anarchist Emma Goldman said: If voting changed anything, they’d make it illegal. And no, I wouldn’t serve in any army of any country. If everyone were an anarchist, there wouldn’t be armies and there wouldn’t be wars.

Q: You seem to be ignoring the basic characteristics of human nature. Given the choice, societies - even the kibbutz - seem to prefer capitalism, inegalitarian as it may be. And humans also seem to be naturally aggressive, no?

A: I don’t agree. If you ask people, do you want to take orders or do your own thing, to compete or to cooperate - I think that if they had the choice to think about it, rather than being indoctrinated by a society based on competition and hierarchy, they would choose cooperation. Anarchists always say that their forms of organization are not novel. Most human relationships are naturally horizontal and cooperative. There’s a difference between order and hierarchy. Anarchy is also a form of order, but it’s based on agreement, rather than command. On agreed rules rather than enforced laws that protect the privileged from the many.

Q: But just look at the way people behave in Israel, driving - and parking - as if there were nobody else on the streets.

A: People behave the way they do because of their culture and their mutual expectations. It’s not surprising that in a culture that educates us to compete with each other and either to command or to obey, you’d get people trying to elbow their way around and do as much as they can for their own benefit. Anarchism also calls for a revolution in consciousness and culture, one that will allow free rein to human sociable instincts, to mutual aid.

Q: It all sounds good, but what if everyone really were an anarchist? Would we have institutions like hospitals, universities, or even airlines?

A: Centralized economies aren’t the only way to organize production and services. In an anarchist system, any form of productive activity would be owned and run directly by the workers, rather than by private bosses or the state. Production would be for need, not for profit. Various workers’ enterprises would coordinate between themselves to perform any larger scale tasks. The basic idea is that, if you leave people to their own devices, they will organize quite well, and that top-down, centralized forms of organization are in place to maintain existing systems of privilege and domination, rather than in order to get things done. Look at Catalonia, during the high stages of the Spanish Revolution, in 1936. There was a well-formed anarchist system. The peasants owned the land, tram workers ran the trams, and everything functioned - and this was in middle of a civil war. The original kibbutzim were also anarchistic, even if they didn’t call themselves that. In Degania, the founders said, we are trying to create a society without exploited and exploiters. We want direct democracy, from each according to their ability and to each according to their needs.

Q: You say you wouldn’t serve in the army today. But what if every Israeli said that - surely you don’t deny that Israel has genuine defense concerns?

A: I think that occupation creates terrorism, and not vice versa. If all Israelis had the political consciousness to refuse to go to military service, we would have already arrived in a revolutionary situation. It would mean that they had all shed their artificial, drummed-up fears and risen up against their exploiters. In general, though, when people discuss politics, they put themselves in the place of the politician and imagine what they would do. But people like you and me aren’t being asked what we think the state should do. Whatever agreement the political elites end up signing is not going to be the end of the conflict. It’s only the beginning of the peace process. What matters at this stage is building ties of binational solidarity and cooperation, to have grassroots movements that seek to show and demonstrate with their own acts and lives that another Middle East is possible. You don’t have to be an anarchist to agree that it’s through everyday relationships that peace is accomplished. So when my friends and I go to villages of Palestinians whose lands are being confiscated for construction of the segregation barrier, we are showing with our own bodies that something is stronger than the perpetual threat being projected by parties on all sides of the political spectrum. We are showing that we have values that transcend all forms of separation.

Q: Do you see the economic meltdown as a vindication of your beliefs?

A: I think the current global financial crisis is definitely a strong indication that capitalism is reaching its limits, and so I am convinced that various efforts to “buy time,” in this sense, are not going to cut it. On one hand, we are reaching the limits of the finite planet that we live on - of the resources we can extract, and the pollution we can emit - and on the other, a system of capitalism based on speculation on future debt is no longer managing to function. The way out is not for governments to bail out the banks, but for people to begin creating grassroots structures that are self-sufficient, and that will allow them to detach themselves from both capitalism and the state.

Q: We’re talking just before the election in the U.S., but it occurs to me that you probably don’t care who wins it.

A: Actually, I want Obama to win, because I hope that when he breaks everybody’s hearts, people will then wake up to the fact that it doesn’t matter whether it’s a blue or red puppet in capitalism’s hand. At the same time, in the short term, we’ve had eight years of a very right-wing administration in Washington, which has dragged the whole world into a very bad position, and just the relief from that will make a difference in the lives of many Americans, and many Iraqis, hopefully, and Palestinians and Israelis.

The Expanding Prison/Industrial Complex

Two main items of interest in today's news as it relates to the growing Prison/Industrial Complex. First:

Cheney at an intelligence briefing, Oct 2008
A judge has yet to approve the indictment against Mr Cheney

A Texas grand jury has charged US Vice-President Dick Cheney for "organised criminal activity" related to alleged abuse of private prison inmates.

The indictment says Mr Cheney - who has invested $85m (£56m) in a company that holds shares in for-profit prisons - conspired to block an investigation.

The indictment has not been seen by a judge, who could dismiss it.

Hopefully it's only the first in a long line of indictments against Bush & Co., although everyone's expecting pardons- if not blanket pardons, at least for the worst offenders. And this is yet another indication of the corruption at the highest levels of our government. Of course he holds shares in private prisons, a business that's only set to become more profitable, says today's Wall Street Journal.

Prison companies are preparing for a wave of new business as the economic downturn makes it increasingly difficult for federal and state government officials to build and operate their own jails.

The Federal Bureau of Prisons and several state governments have sent thousands of inmates in recent months to prisons and detention centers run by Corrections Corp. of America, Geo Group Inc. and other private operators, as a crackdown on illegal immigration, a lengthening of mandatory sentences for certain crimes and other factors have overcrowded many government facilities.

Prison-policy experts expect inmate populations in 10 states to have increased by 25% or more between 2006 and 2011, according to a report by the nonprofit Pew Charitable Trusts.

[Fettered Growth]

Private prisons housed 7.4% of the country's 1.59 million incarcerated adults in federal and state prisons as of the middle of 2007, up from 1.57 million in 2006, according to the Bureau of Justice Statistics, a crime-data-gathering arm of the U.S. Department of Justice.

Corrections Corp., the largest private-prison operator in the U.S., with 64 facilities, has built two prisons this year and expanded nine facilities, and it plans to finish two more in 2009. The Nashville, Tenn., company put 1,680 new prison beds into service in its third quarter, helping boost net income 14% to $37.9 million. "There is going to be a larger opportunity for us in the future," said Damon Hininger, Corrections Corp.'s president and chief operations officer, in a recent interview.

Some other surprising statistics from the land of the free:

  • The U.S. has less than 5% of the world's population, yet has more than 25% of the world's prisoners. [Wikipedia]
  • As a percentage of total population, the U.S. also has the largest imprisoned population, with 739 people per 100,000 serving time, awaiting trial or otherwise detained. [King's College]
  • The American prison population has quadrupled since 1980, partially as a result of mandated sentences that came about during the "war on drugs." [Wikipedia] Despite this, somehow drugs are still widely available.
Dissident voice reports that

Why is this happening? Inmates have become the raw material for a prison-industrial complex, shoring up perpetual profits for McJails. Corporate prisons are paid on a per-prisoner/per-day basis, and thus they lobby hard for longer mandatory sentences. Inmates also provide cheap labor, and they are about to become, once again, guinea pigs for pharmaceutical trials. All of this signals the conversion of people into valuable “bio-mass.”

Incarceration makes sense, politically. Prisons provide jobs to rural and small town Americans who would otherwise be unemployed. These workers and their families represent votes, especially in the South, where electoral majorities are White and electoral minorities are Black. The drug war is, in large part, a race war by other means.

Study after study documents the following: African Americans are disproportionately stopped and searched; African Americans are disproportionately arrested; African Americans are disproportionately charged; and African Americans are disproportionately convicted. And all felons are disenfranchised, never to vote again.

See why Bush & Co. loves private prisons? Put all those undesirables in jail, let em rot. If they get out, they're still not going to be voters, so who cares? In the meantime, you're providing jobs, AND you get a healthy dividend check.

For more information: American Gulag Project

Times are tough all over

It seems like a daily occurrence now. I open the paper to see another story of people who have fallen on hard times. Maybe it's people struggling to make their mortgage payment. Maybe it's a single mother trying to decide whether to pay the electric bill or put food on the table. Perhaps a young family that cannot afford all the medical care that they need. Or maybe, like today, it's a story of the most drastic cutbacks of all- the very richest are being forced to cut back on gifts and allowances that they give to their mistresses.

Fully 82% of men in the study said they planned to lower the allowances to their mistresses, while more than three quarters planned to provide fewer gifts, less expensive gifts and fewer perks, like jet rides, resort vacations and top restaurant meals.
Yes, it truly is a dark day in America when 80% of multi-millionaires are forced to cutback in this way. 80%!! We need a bailout for extra-marital lovers!! They're vital to the luxury goods portion of economy. Just think about how many people are employed by the resort vacation industry, top restaurants, jewelry sales, not to mention all the aviation jobs provided by all those private jet-rides. Congress better act- and soon! I suggest a modest bailout- perhaps $25 billion? Just enough to get them through the current crisis, without encouraging any moral hazards or windfall profits. Let it never be said in these great United States of America that we failed, during our darkest hours, to take care of those that matter the most!

Tuesday, November 18, 2008

Financial Armageddon rocks!

Financial Armageddon is right on:

Today, Henry Paulson served up his latest round of reassurances that things were looking up. According to the Associated Press, in a report entitled "Paulson, Bernanke Defend $700 Billion Bailout," the Treasury Secretary said that

the U.S. has "turned a corner" in averting a financial collapse.

With that in mind, Iit seemed like a great time to go back and see whether Mr. Paulson's remarks should be taken at face value. Below is a sampling of his past prognostications (in chronological order):

"Bush, Paulson: Economic Upturn Will Take Time," MSNBC, Oct. 15, 2008:

“I believe [the financial rescue plan] is a major step in restoring confidence in our capital system, and that is key — it’s the most important thing we can do for our economy,” Paulson said.

"Paulson 'Very Optimistic' on Freddie, Fannie Rescue," Bloomberg, July 20, 2008:

The banking system is "sound" and regulators are being "vigilant," though some banks are starting to struggle, he said.

"US Treasury Secretary: Economic Fundamentals are Sound" , VOA News, 20 July 2008:

"We are going through a challenging time with our economy,...but our economy has very strong long-term fundamentals."

"Paulson Says Economy Strong Despite Oil Strains," Reuters, June 24, 2008:

Treasury Secretary Henry Paulson said on Tuesday that the global economy was being strained by costly energy but said U.S. economic fundamentals were sound.

In an interview on Mexican television, Paulson said he thought that most of the slump in U.S. housing prices would be over by year-end and that growth should be stronger by then.

"Paulson Again Downplays Credit Crisis, Expects Continued Economic Growth," Thomson Financial, August 20, 2007:

"US economic fundamentals are healthy: unemployment is low, wages are rising and core inflation is contained," Paulson told the House Financial Services Committee today. "Although the recent reappraisal of risk, coupled with weakness in the housing sector, may well result in a penalty, the fundamentals point to continued US economic growth."

Paulson has said previously that the August credit crunch will act as a penalty on growth, but that the US is not headed toward recession.

Paulson added that unlike previous market downturns, turbulence in the markets over the last few weeks was not caused by problems in the 'real economy,' and instead reflected "excesses in the credit markets."

He also downplayed problems in the subprime mortgage market, saying that US home ownership has increased over the last decade and that home ownership in general is not threatened.

"Even in the current environment, the vast majority of new homeowners will not have difficulty keeping their homes," he said.

"Paulson Sees Subprime Woes Contained," Reuters, August 1, 2007:

Treasury Secretary Henry Paulson said on Wednesday the repricing of credit risk was hitting financial markets, but U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades....

"The market has focused on this. There's a wake-up call, and there's an adjustment to this repricing of risk, but I see the underlying economy as being very healthy," he told reporters before leaving Beijing.

Paulson added that he did not see anything that caused him to reconsider his view that the economic damage from the housing correction was "largely contained," despite losses in a number of financial institutions and a long period for subprime issues to move through the economy.

We report. You...cry.

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