The Truth About the American Economy

Robert Reich

Chancellor's Professor of Public Policy, University of California at Berkeley; Author, 'Aftershock'

05/31/11 

The U.S. economy continues to stagnate. It's growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.
It's vital that we understand the truth about the American economy.
How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?
The Great Prosperity
During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.
During these three decades everyone's wages grew -- not just those at or near the top.
Government enforced the basic bargain in several ways. It used Keynesian policy to achieve nearly full employment. It gave ordinary workers more bargaining power. It provided social insurance. And it expanded public investment. Consequently, the portion of total income that went to the middle class grew while the portion going to the top declined. But this was no zero-sum game. As the economy grew almost everyone came out ahead, including those at the top.

Read more:
http://www.huffingtonpost.com/robert-reich/the-truth-about-the-ameri_b_869033.html

"Toma la Plaza": Frustration with Unemployment, Budget Cuts Fuels Grassroots Protests in Spain

"Toma la Plaza": Frustration with Unemployment, Budget Cuts Fuels Grassroots Protests in Spain

Attention Shifts To Rip Van Eric Holder, Who Contrary To Conventional Wisdom, Is Not Frozen In Carbonite

  Tyler Durden


Finally, with about a two year delay, popular opinion has finally caught up with the fact that America has an Attorney General, and that Attorney General is not getting paid $186,600 a year merely to conduct medical research on the dangers of carbonite freezing. In its headline article "Prosecutors Faulted for Not Catching Credit-Crunch ‘Bandits’" Bloomberg has done what every other media was supposed to do years ago, namely ask the well-rested Eric Holder what the hell is the reason that not a single criminal investigation being launched against an entire generation of criminal and corrupt bankers (granted, not all of them....just the multi-millionaires). "In November 2009, Attorney General Eric Holder vowed before television cameras to prosecute those responsible for the market collapse a year earlier, saying the U.S. would be “relentless” in pursuing corporate criminals. In the 18 months since, no senior Wall Street executive has been criminally charged, and some lawmakers are questioning whether the U.S. Justice Department has been aggressive enough after declining to bring cases against officials at American International Group Inc. (AIG) and Countrywide Financial Corp." It is stunning that this is only the first time someone in the mainstream media has had the temerity to actually wonder why nobody had previously thawed Holder from his resting place deep in the nether regions of Jaba's barge where his carbonite statue is publicly presented for all to enjoy.
Some observations on why America can just do away with its ranks of public prosecutorial muppets:

Prosecutions of three categories of crime that could be linked to the causes of the crisis -- corporate, securities and bank fraud -- declined last fiscal year by 39 percent from 2003, the period after the accounting scandals at Enron Corp. and WorldCom Inc., Justice Department records show.

“You need a massive prosecutorial effort,” said Solomon Wisenberg, a white-collar defense attorney at Barnes & Thornburg LLP in Washington and a former federal prosecutor. “I don’t see evidence that it’s happening. If we were talking baseball, it would be at the AAA level.”

The Justice Department and Federal Bureau of Investigation dispute that, saying they are continuing to investigate potential wrongdoing connected to the emergency, and some probes didn’t find criminal behavior. They say they stepped up mortgage-fraud prosecutions, which more than doubled in fiscal 2010 from 2009, the first full year for which there is data.

And some more:

To prosecute fraud, the government generally must show executives knowingly made false statements or omitted the truth about a company’s financial health. Bankers have argued that they broke no laws and can’t be blamed for an industry-wide breakdown in risk controls.

Well, for those who have read Levin's paperweight, so aptly summarized by Matt Taibbi, this is not the case, so if only Holder would be so kind to stop accepting indulgences from his Wall Street amigos, he may be better served (and serve the public) to actually do his damn job. For once in his life.
Luckily, the anger is building:


Read More:
http://www.zerohedge.com/article/attention-shifts-rip-van-eric-holder-who-contrary-conventional-wisdom-not-frozen-carbonite?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+surviv

Models of Community: Alternatives to Corporate America

charles hugh smith 

There are community-based alternatives to Corporate America.



As I have often observed, the majority of America's household income flows to a handful of corporate cartels protected by the Central State. Most of the mortgage payments flow to the "too big to fail" banks. Most of the telecom payments flow to the few companies in the telecom cartel. Most of the energy money flow to the energy cartel. Most of the food budget go to the Big Ag cartel and the retail cartel. Most of the money spent on "entertainment" flows to the corporate media cartel, and so on.

Most of the global media is owned by 5 or 6 corporations. Most of the radio stations in the U.S. are owned by two corporations. This tremendous concentration of ownership of the nation's assets gives these cartels immense political power, and so the Central State acts as "partner" to Corporate America, protecting the cartels from competition by insuring that regulations are used to stamp out or limit competitors. Corporate losses are shifted to the backs of the taxpayers, all in the name of the "common good." Profits are private but losses are public--a peculiar definition of "common good."


Corporate profits are now the bellwether, and the raison d'etre, of the entire U.S. economy. The central State and the Federal Reserve have a single domestic goal: boost the U.S. stock market, which they have made the proxy for the economy's "health." If corporate profits and the stock market are rising, then all is well. Or so we are constantly told by Fed and Treasury hacks, toadies and lackeys.


If The Pledge of Allegiance reflected reality, it should now read: I pledge allegiance to the profits of the Corporate States of America, and to the stock market for which it stands, one nation under the Federal Reserve, with taxation and serfdom for all.


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http://charleshughsmith.blogspot.com/2011/05/models-of-community-alternatives-to.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+google%2FRzFQ+%28oftwominds%29

The Great Switch by the Super Rich

Robert Reich

Tuesday, May 17, 2011
 

Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.

This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.

 

Over that four decades, tax rates on the very rich have plummeted. Between the end of World War II and 1980, the top tax bracket remained over 70 percent — and even after deductions and credits was well over 50 percent. Now it’s 36 percent. As recently as the late 1980s, the capital gains rate was 35 percent. Now it’s 15 percent.

Not only are rates lower now, but loopholes are bigger. 18,000 households earning more than a half-million dollars last year paid no income taxes at all. In recent years, according to the IRS, the richest 400 Americans have paid only 18 percent of their total incomes in federal income taxes. Billionaire hedge-fund and private-equity managers are allowed to treat much of their incomes as capital gains (again, at 15 percent).

Meanwhile, more and more of the nation’s income and wealth have gone to the top. In the late 1970s, the top 1 percent took home 9 percent of total national income. Now the top 1 percent’s take is more than 20 percent. Over the same period, the top one-tenth of one percent has tripled its share.

Read More:

http://robertreich.org/post/5583016733

One Lawman With the Guts to Go After Wall Street

AP / Frank Franklin II

By Robert Scheer

The fix was in to let the Wall Street scoundrels off the hook for the enormous damage they caused in creating the Great Recession. All of the leading politicians and officials, federal and state, Republican and Democrat, were on board to complete the job of saving the banks while ignoring their victims ... until last week when the attorney general of New York refused to go along. 

Eric Schneiderman will probably fail, as did his predecessors in that job; the honest sheriff doesn’t last long in a town that houses the Wall Street casino.

Read More:

http://www.truthdig.com/report/item/one_lawman_with_the_guts_to_go_after_wall_street_20110518

Keep Your Eyes on Greece - by LGMC

The first round of the plutocratic class war to create a new world order is being played out in Greece right now. The large international financial corporations and their handmaiden, the IMF, are pursuing the change of Greece from a first world nation to a neo-feudal vassal state. The IMF has convinced the government to take the IMF money to bail out the banks, protect the wealthy bond holders and institute severe austerity measures that effect the middle class and the poor. The result of this policy will be a stagnation of the economy, a continuation of the recession at best or a complete economic meltdown. The government will have no money to cycle through the economy for infrastructure improvements or social safety net maintenance. The middle class will not have access to capital to create new business and since most monies will be syphoned off to pay for IMF loans there will be less local main street business activity. The result of these policies has always led to a decrease in the middle class and a rise in the working poor. This policy has always worked well in the third world to keep poor countries poor, in debt, and subservient to multinational corporations that have financial interests in those countries.

This is the future of Greece.

Next on the hit list after Greece is Turkey and Ireland. All three of these countries have something in common, they all were praised by the international financial community for following the US economic model of unregulated financial speculation to drive their economies. See a pattern emerging? As in most things economic today we in the US are on the slower track and usually get hip to the trend a little later than the Europeans. The day is coming when Americans will be asked to make the same sacrifice that the Greeks are making today. It will come wrapped in a flag carrying a bible shouting constitutional freedom.

The the Greek middle class have woken up to the future the financial oligarchs have planned for them and. The Greek middle-class are starting to engage in financial disobedience campaigns such as the "I won't pay" campaign designed to speak to the Greek ruling class in terms they understand: money and defiant power.

Keep your eyes on Greece.

The real question is will Americans see the future that awaits them or will they blindly accept what Wall Street banksters and their international financial henchmen say they should?  I would suggest they wake up and resist this rush to a neo-feudal future that wall-street has planned.


Posted by:
LGMC
5-17-11

Our Peculiar State of Suspended Animation

Charles Hugh Smith

Three long years of extend and pretend have left the nation in a state of suspended animation, frozen in a moment of crisis.


The U.S. is in a peculiar state of suspended animation: nothing is actually moving, we're all frozen in an extended moment of disbelief, denial and crisis, waiting for something to finally break loose.

We know the present isn't sustainable, but we go through the motions of phony "reforms" and "trimming the deficit" as if another 1,000 pages of "reforms" will fix what's broken in the economy or that trimming $50 billion from $1.7 trillion annual deficits will actually matter.


The wheels visibly fell off the bubble-debt-fraud economy four years ago in mid-2007. It's worth recalling that the U.S. won a global war (World War II) in less than four years, yet now we are pleased to borrow and and squander an extra $1 trillion a year just to keep our fragile state of suspended animation from being disrupted by unpleaseant reality.


Read More At:
Our Peculiar State of Suspended Animation

Eclipsing a terrible milestone as home prices fall harder than the 1928 through 1933

Further educate yourself on our current financial and housing climate and situation. 

Multiple sets of indicators are clearly showing that the housing market is entering a second winter.  Home prices are inching closer to cycle lows and indicators of housing distress are rampant throughout the country.  Home prices during the troubling five years of 1928 through 1933 saw a decline of 25.9 percent nationwide and this was during the Great Depression.  The latest Case-Shiller data shows that home prices in the 20 City and 10 City composite measures are down by 32 percent from their 2006 peak.  This is now nominally the worst housing correction since the Great Depression.  The continuing correction in housing is economically challenging middle class households in ways vastly different from those during the Great Depression.  What is troubling about the new cycle lows is that the liquidity injected into the banking system by the Federal Reserve simply delayed the inevitable while diverting precious resources to a broken financial system.  The painful lesson of the new reality is that household income, the gas in the engine, is simply too low to support prices even at today’s new lower levels.

Read full post below:

http://www.doctorhousingbubble.com/eclipsing-terrible-milestone-home-prices-fall-harder-1928-through-1933-great-depression-finance-collapse-lessons-from-the-great-depression/

$6.5 Trillion Lost, One House at a Time

charles hugh smith

(May 10, 2011)


The $6.5 trillion lost in the bursting of the housing bubble is not a "paper loss," it is tragically real.
Is anyone surprised that housing continues to slide? According to this report, Home Market Takes a Tumble: Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008, housing has declined in value for 57 straight months, almost 5 years.
Since the housing bubble topped in most areas in 2006, and it's now 2011, that makes sense: 2006 + 5 = 2011.
American homeowners have lost $6.5 trillion in equity in those 57 months. Here is the data from the Fed Flow of Funds household balance sheet:
Homeowner's equity:
2006: $12.8 trillion
2011: $6.3 trillion
Net decline: $6.5 trillion
That is a big number, and the analysis I presented in The Housing Bubble Broke the Middle Class (April 27, 2011) suggested that this $6.5 trillion was roughly half of the middle class's total net assets.
It's difficult to grasp such large numbers, so let's look at some actual houses. The sales price of houses is public record, and more or less at random, here is a selection of recent home sales here in Northern California. I purposefully selected sales from a spectrum of neighborhoods ranging from working-class to very desirable, exclusive suburbs (the price will telegraph the property's desirability).
The key point here is that these catastrophic losses are taken by someone: either the homeowner, the lender, or the taxpayer. The gains were paper, but the losses are real. That is the ongoing tragedy of the housing bubble.
1. Recent sale: $820,000
Last sold 2007: $1.172 million
Nominal loss: $355,000
(does not include transaction costs or losses due to inflation)
Even if owner put down 30%, their equity was wiped out.


2. Recent sale: $110,000
Last sold 2005: $370,000
Nominal loss: $260,000


3. Recent sale: $160,000
Last sold 2004: $455,000
Nominal loss: $295,000


4 Recent sale: $175,000
Last sold 1999: $205,000
Nominal loss: $30,000
Nationally, prices have round-tripped to 2003, but that masks the reality that in many locales, prices have returned to 1998 or even lower.


This is a home in a very desirable suburb:
5. Recent sale: $650,000
Last sold 2005: $1.25 million
Nominal loss: $600,000
If you add up the losses from just these four homes purchased in the bubble era, the loss exceeds $1.5 million. That is a staggering loss from only four homes. Now multiple that by hundreds of thousands of homes.

Here are two homes in less desirable ("rough") neighborhoods:
6. Recent sale: $85,000
Last sold 2004: $295,000
Nominal loss: $210,000


7. Recent sale: $135,000
Last sold 2005: $419,000
Nominal loss: $284,000
Sadly, the subprime mortgage fraud enabled the "dream" of effortless profits from owning and churning real estate to filter down to even marginal areas. The bubble put real estate out of reach of qualified moderate-income buyers, and yet it was touted as a wonderful "innovation." It was certainly wonderful for Wall Street and those who originated the embezzlement-special mortgages, but less so for the taxpayers who were handed the bill to save the "too big to fail" banks and investment banks.


8. Recent sale: $255,000
Last sold 1996: $189,500
Nominal gain: $65,500
This is interesting because it offers an example of the pernicious effects of even "low" inflation. As we are constantly reminded, the U.S. has been in a "low inflation" environment for decades. This is of course a key part of the propaganda campaign to mask the severe erosion in wages' purchasing power.
On the face of it, the home seller pocketed a hefty profit of $65,500. But let's factor in commission and inflation. The transaction costs (commission, closing, transfer fees, etc.) are typically around 7%, so the actual net capital gains would be around $47,500, not $65,500.
According to the BLS inflation calculator, which likely underestimates "real" inflation, it now takes $270,000 to buy what $190,000 bought in 1996.
So the owner actually lost purchasing power in owning this house for 15 years. Minus commission and closing costs, the proceeds were around $237,000, which is about $33,000 less than the inflation-adjusted break-even point of $270,000.
Yes, there is the mortgage deduction and tax breaks to factor in, but considered strictly as an investment, the nominal and real gains in real estate still matter.
Put another way: a house purchased in 1996 for $100,000 has to be worth $142,000 today just to keep up with inflation. Factoring in transactions costs, then the house would have to be sold for roughly $152,000 for the owner to extract $142,000--the sum needed to simply maintain purchasing power.
In other words, a house that rose 50% over the past 15 years has simply kept pace with inflation. The nominal "gain" is utterly illusory.

The Black Hole at the Pit of the Economy

By Mike Lux

 

Disturbing numbers being reported from the housing sector are a reminder that America is in real danger of a Lost-Decade-of-Japan kind of situation if we don’t do something serious about the ground zero of our economic collapse: Wall Street.
There are a wide variety of serious long-term issues that we have to deal with in order to reverse the decline of America’s middle class — rebuilding our manufacturing sector and infrastructure, strengthening the labor movement so that middle-class wages begin rising again, breaking up the concentrated economic power in sectors like banking and insurance, and restoring our tax base by making sure wealthy individuals and corporations are paying their fair share would be my top four long-term priorities to achieve this goal — but in the short run, we cannot fix our economy without taking on the big Wall Street banks and making dramatic changes to revive the housing sector.
Three different sets of numbers on housing caught my eye this morning:
1. The percentage of homeowners with underwater mortgages — where the value of a mortgage exceeds the value of the property — has now climbed to 28.4 percent. It has been at around a quarter of all (single-family) home mortgages, but is continuing to climb, edging closer to a third. This is a truly stunning number, especially when you consider how many homeowners are in their second or even third decade of paying off their mortgage.
2. Housing prices continue their decline, in fact scoring their biggest quarterly drop since the crash months in 2008. Home values have declined a net 29.5 percent since their peak in 2006, and after a modest increase after the 2008 crash, started declining again last fall and are now at their lowest level, making them equal to the bottom point of the crash. And analysts expect them to continue to fall for another year at least.
3. A new report out by National People’s Action shows that one out of ten homes in Cleveland, Columbus, and Cinncinnati will have received a foreclosure notice since the housing crisis began. Those are depression-level numbers, and I expect they parallel other hard hit states like MI, FL, and NV. Where the housing crisis is at its worst, we are seeing economic devastation on a massive scale.
All of this adds up to terrible news not just in the housing sector but in the rest of our economy as well. Homes represent the No. 1 source of wealth and equity for middle-class Americans, and their best chance for having some kind of decent retirement. Being secure in your home equity makes people far more likely to start a small business, and far more likely to have the confidence to buy the other consumer items that make the economy hum. And home prices are cyclical, in the sense that bad news for your neighbor in terms of a foreclosure usually means bad news for your home value.
This is not a dramatic, high-profile issue, but it is a simple fact that until we do something big to solve the housing crisis, this economy is going to stay stagnant. But it can only be done by taking on the banking industry directly. As we learned during the financial crisis, government has a lot of regulatory tools at their disposal, and with passage of last year’s financial reform bill, they now have more. The Treasury Department, the other financial regulatory agencies of federal government, the U.S. Justice Department, the state Attorneys General, state legislators like those in California considering a bill forcing bankers to pay all the costs of foreclosures, all have the power to do far, far more to force bankers to start writing down mortgages and giving some relief to homeowners.
Bankers have too much hoarded money, and too much political power. They have had the power to gamble trillions of dollars of other people’s money, buy off the rating agencies, and then get bailouts with no strings attached when everything went south. They have had the power to play fast, loose, and sloppy with hundreds of years of real estate law, and leave homeowners holding the bag. They have had the power to blatantly rip off Main Street businesses and consumers with a swipe fee industry that had no regulation up until last year’s financial reform bill. They have had their way with lawmakers and regulatory agencies of both parties. But if we started standing up to them, we would give a very big boost to this badly damaged economy. Swipe fee regulations and forcing mortgage write downs would pump scores of billions of dollars directly back into our economy, and have a huge multiplier effect. Given that Congress isn’t going to consider any kind of fiscal stimulus, and is in fact pursuing Hoover-style belt tightening policies, taking on the banks is the best economic policy we could have.
We are facing some huge long-term issue battles in the coming months. Republicans are trying to do away with Medicare, Medicaid, the safety net, labor unions — basically the entire set of progressive achievements of the 20th Century. Those incredibly important fights are getting all the attention they deserve. But if we don’t do something in the very short term to break the stranglehold the Wall Street banks have on our economy’s throat, the black hole will swallow any prospect for a strong economic recovery.

Slumlord Millionaire

 By Kevin Drum

 Fri May. 6, 2011

A couple of days ago the Los Angeles city attorney's office sued Deutsche Bank. Why? Because it's a slumlord:

The Frankfurt, Germany-based bank has foreclosed on more than 2,000 homes over the last four years in neighborhoods across the city, according to the suit — many concentrated in the northeast San Fernando Valley, northeast Los Angeles and South Los Angeles.
Los Angeles officials say the bank has been a dreadful landlord and neighbor. Prosecutors say that during a yearlong investigation, they found evidence that Deutsche Bank had illegally evicted some tenants, let others live in squalor and allowed hundreds of unoccupied properties to turn into graffiti-scarred dens for squatters, gang members and other criminals.

Deutsche Bank, unsurprisingly, is passing the buck: they say the party responsible for keeping up foreclosed houses is the loan servicer, not the bank. But loan servicers, who make their money from the fees they collect during the foreclosure process, are notoriously unwilling to spend money once the foreclosure is finished, and they're also notoriously hard to prosecute. So Los Angeles is trying a different tack: holding the ultimate owner of the property—Deutsche Bank, in this case—responsible for the condition of their property. They're the ones who hired the slumlord, after all.
All I can say is: good for them. The foreclosure mess of the past three years has been one of the biggest black marks on both the banking industry and the Obama administration, which has essentially punted the entire issue, hoping that if it kicked the can down the road long enough the problem would just fade away as the economy improved. HAMP, its primary program for loan modifications, has not only been a miserable failure on its own merits but has failed to change the incentives in the housing industry, which are almost Dickensian in the way they reward the most egregious possible behaviors. As Mike Konczal put it a few months ago, "Obama's Treasury team took a system that had a terrible design and doubled-down on it."
The problem is simple: the HAMP program provides only modest incentives for banks to perform the kinds of loan modifications that might genuinely help distressed homeowners. Opposed to that are the lucrative fees that loan servicers make by stringing homeowners along—fees for insurance, appraisals, title searches, legal services, etc.—and then eventually allowing them to default anyway. Loan modifications, even with the HAMP incentives added in, are still net money losers. There's way more money to be made by offering homeowners a sliver of hope, collecting fees along the way, and then foreclosing after all.
There are plenty of ways we could change those incentives, but we haven't done any of them. So Los Angeles is trying to change them on its own. If banks are required to maintain foreclosed properties properly, that suddenly makes foreclosure a less appealing prospect and the financial incentives start to tip in the direction of making a loan modification. Sure, you take a small hit, but you avoid the cost of not being ultimately responsible for maintenance and upkeep.
Maybe it'll work. Given the bottomless legal resources of big banks, I wouldn't bet the ranch on it. But it's worth a try. Right now the foreclosure industry is practically designed to make as much money from people's misery as possible, and more misery means more money. Anything that can turn those incentives around is a step in the right direction. Here's hoping LA, as it's so often been in the past, is a trendsetter for the rest of the country.

The Unwisdom of Elites By PAUL KRUGMAN

  Published: May 8, 2011

The past three years have been a disaster for most Western economies. The United States has mass long-term unemployment for the first time since the 1930s. Meanwhile, Europe’s single currency is coming apart at the seams. How did it all go so wrong?

Paul Krugman

Well, what I’ve been hearing with growing frequency from members of the policy elite — self-appointed wise men, officials, and pundits in good standing — is the claim that it’s mostly the public’s fault. The idea is that we got into this mess because voters wanted something for nothing, and weak-minded politicians catered to the electorate’s foolishness.
So this seems like a good time to point out that this blame-the-public view isn’t just self-serving, it’s dead wrong.
The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes.
Let me focus mainly on what happened in the United States, then say a few words about Europe.
These days Americans get constant lectures about the need to reduce the budget deficit. That focus in itself represents distorted priorities, since our immediate concern should be job creation. But suppose we restrict ourselves to talking about the deficit, and ask: What happened to the budget surplus the federal government had in 2000?
The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.
So who was responsible for these budget busters? It wasn’t the man in the street.
President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand — and the bulk of the cuts went to a small, affluent minority.
Similarly, Mr. Bush chose to invade Iraq because that was something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11. In fact, it took a highly deceptive sales campaign to get Americans to support the invasion, and even so, voters were never as solidly behind the war as America’s political and pundit elite.
Finally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who. Let me give a particular shout-out to Alan Greenspan, who played a crucial role both in financial deregulation and in the passage of the Bush tax cuts — and who is now, of course, among those hectoring us about the deficit.
So it was the bad judgment of the elite, not the greediness of the common man, that caused America’s deficit. And much the same is true of the European crisis.
Needless to say, that’s not what you hear from European policy makers. The official story in Europe these days is that governments of troubled nations catered too much to the masses, promising too much to voters while collecting too little in taxes. And that is, to be fair, a reasonably accurate story for Greece. But it’s not at all what happened in Ireland and Spain, both of which had low debt and budget surpluses on the eve of the crisis.
The real story of Europe’s crisis is that leaders created a single currency, the euro, without creating the institutions that were needed to cope with booms and busts within the euro zone. And the drive for a single European currency was the ultimate top-down project, an elite vision imposed on highly reluctant voters.
Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?
One answer is simple accountability. People who advocated budget-busting policies during the Bush years shouldn’t be allowed to pass themselves off as deficit hawks; people who praised Ireland as a role model shouldn’t be giving lectures on responsible government.
But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.

$3 Billion Stock Bonanza for American CEOs

By Tom Eley 4 May 2011

CEOs of the largest American corporations are raking in tens of millions of dollars in stock market gains, the result of stock option handouts in 2009, when stock prices were at about half their current level.
According to an April 26 analysis by the Wall Street Journal, CEO stock equity among corporations listed on Standard & Poor’s 500 index has increased by over $3 billion since September 30, 2009. The report was published a month after a study by the Harris Group consulting firm showed that CEO pay increased 30 percent from 2009 to 2010, likely reaching a record high. (See: “US CEO compensation up by 30 percent”)
Following the Wall Street crash of September 2008, the Bush and Obama administrations promoted the notion that awarding a larger portion of executive compensation in the form of stock options, rather than cash salaries and bonuses, would represent a “reform” of executive pay. It would, they said, rein in the excesses of the past and tie executive compensation more directly to corporate performance.
It was also claimed that the change would give the corporate chiefs a financial incentive to expand production and hire workers.
This supposed reform was for the most part embraced by Wall Street and the corporate elite as a whole. And for good reason.
By March of 2009, Obama had made crystal clear to the financial elite that it would not only suffer no negative consequences from the fraud and criminality that had precipitated the financial meltdown, but it would instead end up profiting handsomely from the crisis. No one would be held accountable for turning the financial system into a gigantic Ponzi scheme, and the government would concentrate its energies on making the American people pay off the bad debts of the bankers.
On the 9^th of that month, the Dow Jones Industrial Average fell to 6,547, its lowest level in absolute terms since 1996. In the course of the same month, the Obama administration rejected calls from some quarters for crippled banking giants such as Citigroup and Bank of America to be nationalized, opposed demands that bailed-out banks account for their use of public funds, intervened to block legislation in Congress limiting executive pay at companies receiving taxpayer dollars, and rejected the recovery plans submitted by General Motors and Chrysler, demanding more sweeping layoffs and more severe cuts in auto workers’ wages and benefits.
Together with the Federal Reserve’s policy of virtually free credit for major banks and corporations, the administration’s pro-corporate policies heralded a massive run-up of stock prices. This made the supposed “reform” of executive pay in the form of expanded stock options an almost sure-fire means of driving CEO compensation higher than ever.
The banks were under absolutely no obligation to increase their lending to businesses and consumers, and the corporations were not required to hire a single worker. They could use the windfall made possible by the government to build up their cash hoards and fatten the bank accounts and stock portfolios of their top executives.
This is precisely what they have done. On the one side, CEOs and the wealthiest shareholders are richer than ever. On the other, mass unemployment is accepted as a permanent feature of American life, the assault on workers’ wages and benefits continues unabated, and social spending is being cut to the bone to shield the rich from paying taxes on their gains.
At the same time, the Fed’s cheap dollar policy has fueled a global binge in speculation that has sent gas and food prices through the roof.
The CEOs who took a bigger chunk of their compensation in the form of stock options when the market was at its nadir have made a killing. As one expert on executive pay told the Journal, “instead of limiting pay, we’ve turbocharged it.”
Ford CEO Alan Mulally has gained the most through the surge in stock values. A $16 million package of stock options given to him in March 2009 is now valued at over $200 million.
Other CEOs who have seen their portfolios increase by more than $30 million are Michael Jeffries of clothing retailer Abercrombie and Fitch ($150 million), Eugene Isenberg of oil and gas driller Nabors Industries ($96 million), Howard Shultz of Starbucks ($63.5 million), Frits van Paasschen of Starwood Hotels and Resorts Worldwide ($51 million), James Owens of Caterpillar ($43.5 million), Lawrence Ellison of Oracle ($35.5 million), Richard D. Fairbank of Capital One ($34.5 million), and Andrew Liveris of Dow Chemical ($34 million).
These fortunes are not derived from generating “growth,” but from destroying jobs, slashing wages, and, in many cases, cutting production. Among the companies listed above, Starbucks has shed 39,000 jobs since the recession began and closed scores of its shops; Caterpillar has laid off 20,000 workers, and this March, with the aid of the United Auto Workers union, imposed massive wage and benefits cuts on its workforce; Abercrombie and Fitch laid off 10 percent of its corporate staff in 2009 and in 2010 announced the closure of 170 stores.
Not accidentally, two of the executives who have pocketed the most cash through growth in stock values are the CEOs of corporations “organized” by the United Auto Workers—Mulally at Ford and Owens at Caterpillar.

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Jeffrey D. Sachs: World is drowning in corporate fraud

NEW YORK – The world is drowning in corporate fraud, and the problems are probably greatest in rich countries — those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.
Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs.
There is, however, scant accountability. Two years after the biggest financial crisis in history, fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return.
Corruption pays in American politics as well. The Florida governor, Rick Scott, was CEO of a major health care company known as Columbia/HCA. The company was charged with defrauding the U.S. government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion. The FBI’s investigation forced Scott out of his job. But a decade after the company’s guilty pleas, Scott is back as a “free-market” Republican politician.
When President Obama wanted somebody to help with the bailout of the U.S. auto industry, he turned to a Wall Street “fixer,” Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.
Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country’s oil fields — access worth billions of dollars. When Nigeria’s government charged Halliburton with bribery, the company settled out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney.
Impunity is widespread — indeed, most corporate crimes go unnoticed. The few that are noticed typically end with a slap on the wrist, with the company — meaning its shareholders — picking up a modest fine. The real culprits at the top rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.
Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.
Second, companies are the major funders of political campaigns in places like the U.S. Politicians often look the other way when corporate behavior crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them.
Reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.
We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.
Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy’s legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments’ inability politically — and sometimes even operationally — to impose taxes on the wealthy.
So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the U.S. nor any other “advanced” country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.
Jeffrey D. Sachs is professor of economics and director of the Earth Institute at Columbia University. This column was provided by Project Syndicate, a Prague-based not-for-profit association of 390 newspapers in 145 countries.

Political War is Being Fought Right Now!

A series of bills aimed at watering down the Consumer Financial Protection Bureau will be up for vote this week. What's a consumer agency that can't protect?

by Abigail Field, contributor

FORTUNE -- An obscure but extremely important political war is being fought in Washington right now over the design and power of the Consumer Financial Protection Bureau, the new agency created in the wake of the financial meltdown to protect consumers and help prevent another financial crisis.
Either the banks will win or the American people will win. It's impossible for both stakeholders to declare victory.

Ready for a fight.

The fight will only get more interesting if Elizabeth Warren, currently the special advisor in charge of the agency, gets the nod from President Obama to run it, as is expected. It's worth noting that if this agency had existed before the housing bubble, we would have most likely avoided the worst of it and the financial meltdown it triggered. But it would have been powerless to help under the laws currently proposed. Although many factors fed the crisis, the "but-for" cause was the millions of mortgages that never should have been made during final years of the housing bubble. Those mortgages fraudulently pushed home prices into the stratosphere and filled many of the securities that so quickly turned to junk. The Consumer Bureau could have prevented those loans from being made.

And yet the very players who brought us the bubble and the meltdown -- the big banks that stopped underwriting their loans and offloaded them to investors -- are pushing hard to make the Consumer Bureau so feeble it won't be able to stop a future bank-driven disaster. The banks are spending tremendous cash on lobbying, and their trade groups are telling Representatives to vote for weakening the Bureau.

Sen. Jim DeMint (R-SC) is leading the Senate effort, trying to get rid of the Consumer Bureau entirely. But the greatest threat to the Consumer Bureau is "efforts by House Republican leadership to eviscerate it little by little," according to Travis Plunkett, legislative director of the Consumer Federation of America. "They realize that financial reform is still very popular with the public so instead of a head-on assault, they're taking a death by a thousand cuts approach."

Two of the bills Plunkett is talking about are scheduled to be voted on by a House Financial Services subcommittee on May 4. Both are ultimately expected to pass both the committee and the House of Representatives.

One bill, sponsored by Rep. Spencer Bachus (R-AL), would render the Consumer Bureau less able to act, less efficient, and thus less powerful, by putting a bipartisan committee in charge instead of a single director. Another bill, by Rep. Sean Duffy (R-WI), would effectively neuter the Bureau, preventing it from issuing meaningful rules.

Not all regulators created the same
To really understand who has power in Washington, it's helpful to contrast the Consumer Bureau's rule-making power with that of the main bank regulator, the Office of the Comptroller of the Currency.
The OCC's rules govern national banks, and thus affect Americans everywhere. Unfortunately for consumers, the OCC often decides that its rules trump state laws, typically using that power to destroy consumer protections. For example, the OCC chose to exempt most banks from state laws against predatory lending, and took away enforcement powers from state attorneys general, as Illinois Attorney General Lisa Madigan explained to the Financial Crisis Inquiry Commission.

To make its powerful rules, the OCC complies with the Administrative Procedures Act, which all agencies have to follow. Once issued, the rules can only be vetoed by Congress, by its passing a new law.

Contrast the OCC's nearly unchecked power to Consumer Bureau's. For starters, the new agency joins only OSHA and the EPA in having to comply with two laws besides the Administrative Procedures Act when it wants to issues rules. And the Consumer Bureau faces a hurdle no other agency does: the FSOC veto (pronounced F-Sock).

Read the complete article at: http://finance.fortune.cnn.com/2011/05/03/the-war-over-consumer-finance-protection-intensifies/?source=cnn_bin&hpt=Sbin

Exxon's Profit Rises in Quarter, Helped by Higher Oil Prices

By CLIFFORD KRAUSS

Published: January 31, 2011  

HOUSTON — Exxon Mobil, the largest American oil company, reported a 53 percent increase in its fourth-quarter profit on Monday, helped by an improving world economy that has increased energy demand and crude prices.

It was the strongest quarterly profit in more than two years, reflecting the strong recovery in oil markets. They soared in 2007 and 2008, collapsed in 2009, and returned to loftier heights by the end of 2010.

“It’s a home run,” said Fadel Gheit, managing director for oil and gas research at Oppenheimer & Company. “It’s a big positive earnings surprise on strong operating results across all business segments underpinned by strong production growth, higher oil and gas prices and improved margins.”
Exxon’s performance was in line with the strong results of most other large energy companies, which have benefited not only from rising oil prices but also from improved margins in their refinery businesses.

Nevertheless, the results do not equal the record profits set a few years ago, when oil and gas prices were far higher than they were at the end of last year or even today.

Oil prices have been steadily creeping up in recent months to over $90 a barrel, settling on Monday at $92.19. The turbulence in Egypt has made traders skittish about the possibility of shortages of supplies if the Suez Canal is somehow blocked or political tensions spread to nearby Saudi Arabia. But natural gas prices, which are increasingly important to big oil companies, which have been increasing their gas investments in recent years, remain depressed.

Oil and gas prices rose again on Monday, with developments in Egypt serving as a reminder that the energy markets were vulnerable to political events in such vital producing countries as Nigeria, Iraq and Iran, which did not suffer major production interruptions in 2010.

Rising political tensions mixed with continued growth in economic demand usually means higher energy prices. But the Organization of the Petroleum Exporting Countries still has the capacity to produce more oil in the event of a slowdown in traffic in the Suez Canal or interruptions in production in one or two producing countries.

Exxon Mobil’s profit in the quarter was $9.25 billion, or $1.85 a share, compared with $6.05 billion, or $1.27 a share in the period a year ago. Analysts surveyed by Thomson Reuters had expected $1.63 a share. Total revenue in the quarter was $105.2 billion, up from $89.8 billion in the quarter a year earlier.

For the year, Exxon Mobil made $30.46 billion, or $6.22 a share, compared with $19.28 billion, or $3.98 a share, for 2009. Revenue for 2010 rose to $383 billion from $310 billion the previous year.
Exxon Mobil said its production increased 19 percent in the quarter

Read the complete Article at: http://www.nytimes.com/2011/02/01/business/01oil.html

GOP prepares to gut new consumer protection bureau - USATODAY.com

After all her hard work, it looks like the new Consumer Protection Financial Protection Bureau is about to be dismantled. This is such a sad and disappointing day for those of us who have supported Ms. Warren in her admirable efforts to TAKE ON Wall Street. We are extremely disappointed in President Obama. This is a clear message that he is indeed Wall Street's friend and not ours. The Banks have again won this round but we are asking all of you to FIGHT - write your Congress people, Representatives, protest, revolt. We cannot abandon Ms. Warren in this time of need. She is the one of the very few who truly wants to help the Middle Class.

Read the development below.

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GOP prepares to gut new consumer protection bureau
In Washington, when you can't kill an idea you hate, you can always go back and maim it.

By Mandel Ngan, AFP


That's what's happening this week in Congress, as House Republicans move to defang, declaw and de-energize a new agency created last year — over their unanimous opposition — to protect consumers.

OPPOSING VIEW: Stop excessive regulation

For decades before the creation of the Consumer Financial Protection Bureau, consumers were the orphans in a federal regime set up to regulate financial institutions. Anyone with a credit card might remember the consequences.

Banks were allowed to raise credit card interest rates on existing balances at any time for any reason. Regulators did nothing to stop it until 2008. Charging sky-high fees when a consumer missed a payment deadline even by a few minutes? Also fine with regulators. Explaining the rules in language so incomprehensible that a financial wizard would be hard-pressed to figure them out? Ditto.

The full list is much longer, including a major contribution to the ruinous financial crisis of 2008, which was triggered by outrageous mortgage lending practices that never should have been permitted. You might remember the lenders' TV commercials: No income? No assets? No problem.

A splintered collection of regulators just stood by and watched.


Read full article below:
Our view: GOP prepares to gut new consumer protection bureau - USATODAY.com

Join The BORG or Starve
By: masaccio Sunday May 1, 2011 10:40 am	Tweet3

Ken Cuccinelli

One recent Big Conservative Flap saw King and Spalding, the giant Atlanta-based law firm, walk off the job of defending the Defense of Marriage Act, and getting fired from its job of attacking health care reform by, the Attorney General of Virginia. Cuccinelli is quoted as saying:

“King & Spalding’s willingness to drop a client, the U.S. House of Representatives, in connection with the lawsuit challenging the Defense of Marriage Act (DOMA) was such an obsequious act of weakness that I feel compelled to end your legal association with Virginia so that there is no chance that one of my legal clients will be put in the embarrassing and difficult situation like the client you walked away from, the House of Representatives,” Cuccinelli wrote to firm partner Joseph Lynch in a letter obtained by the Washington Examiner.

This is not a statement intended to convey facts. It’s diplomat-speak, intended to send a message. Cuccinelli is telling the managing partners of law firms that if they want to get legal work from the Attorney General of Virginia, they and everyone who works for them have to truly believe in all of Cuccinelli’s political positions. That should be a problem: big law firms are full of smart people, and lots of smart people aren’t homophobes, misogynists, or Rushdoonyites. That leaves the State of Virginia with a small subset of smart lawyers, and a big group of average or worse lawyers, facing the smart lawyers. It doesn’t matter. Cuccinelli has figured out that in today’s judicial climate, the average guys will still win.
Lawyers are used to advocating for positions they may not personally hold. Indeed, the function of lawyers in a competently run society is to make the best argument they can for the position of their clients, whether they agree with it or not. Sensible lawyers advise their clients of their views of the case and how it should be managed, but in the end, the views of the client control. The theory is that both sides do this, and the matter is decided by a neutral smart judge.
Of course, no one believes that any more. No one really believes that an important case will be decided against the long-term interests of the Corporate Persons who dominate our society. That is especially true at the Supreme Court, which just last week made it clear that the interests of human beings must fall to the demands of efficient operation of Corporate Persons. It’s also true of most Circuit Courts. For example, the Eighth Circuit thinks that the interest of NFL owners must be protected, despite a blistering dissent, pointing out that the Owners had failed to show any injury at all. The idea that courts favor the hyper-rich is so common that it is routinely included in ESPN’s reporting.
Of course, it was never the case that judges are entirely neutral. In close cases, it is reasonable to assume that the judge’s personal views will give the edge to one or the other party. The goal of one lawyer is to get the argument close enough for the judge’s outlook to be decisive, and for the other, the goal is to make the court think that the case is so clear that the judge would be embarrassed to rule for the other side. That used to be possible, but after Bush v. Gore, 531 U.S. 98 (2000), every judge knows there is no reason to be embarrassed by any argument, no matter how foolish.
I wouldn’t even call this intellectual dishonesty. Scalia and Cuccinelli do not accept the attitude our legal forebears had about the nature of the world. The old legal tradition was built on the idea that societies evolve, that oppression by the powerful against the powerless would be mediated by society through laws, and that in due course the misery of the powerless would be relieved. Legal tradition accommodated that framework both in case law, and by generous interpretation and enforcement of statutes regulating the actions of the powerful.
Scalia and the other conservatives who dominate the Supreme Court, and powerful people like Cuccinelli, and their hyper-wealthy contributors, among others, don’t believe in evolution. They believe that this legal tradition is garbage and should be shoved down the oubliette in the new castle of law they are building. New Law is based on two principals.
1. All rules must be interpreted in the way that increases economic efficiency, no matter the impact on individuals.
2. The prejudices and bigotry of our ancestors cannot be displaced by courts or legislatures.
While they erect this new legal edifice, they are forced to use the old forms of law, cases and rules of statutory construction, so they have to distort the old cases and torture the old rules until they break out of the confines of that tradition. It won’t take long for them to create a whole new environment of cases and rules. The new generation of lawyers never knew any other tradition, and most boomer lawyers bought into the new tradition because it was profitable, or necessary to survive.
Soon, we won’t even remember the olden days of liberal democracy.

International Worker's Day 2011

This is the time for all of us to learn, reflect, educate, teach and participate.  The time is now to take back our country and restore what was once the middle class.  Happy May Day to all who are ready to fight the good fight!