Bottom Line on Fed Bailout is No Secret

Were the bankers and Federal Reserve trying to hide something in particular? Or were they just fighting Bloomberg’s lawsuit to reveal the details of the Fed’s sweetheart bailout loans out of habitual arrogance?

I’ve been wondering about this as I make my way through Bloomberg’s expose based on the data the news service forced the Fed to turn over after several years of litigation.

The Fed and the banks tried to scare the courts into keeping the data secret, warning that disclosure would stigmatize those who received the low interest loans and cause them irreparable harm.

Finally, the courts saw through all the Fed’s and the bank’s bogus arguments and ordered the data made public.

The numbers are all so mind-bogglingly huge that it’s easy to be overwhelmed, for the information to lose it’s meaning. But as Columbia Journalism Review’s The Audit pointed out, Bloomberg went straight to the heart of the issue, reminding us what kind of a bailout our politicians delivered, in which banks and other corporations got access to $1.2 trillion in low-interest loans – about the same amount U.S. homeowners are struggling with on 6.5 million delinquent or foreclosed mortgages.

But as RJ Eskow reminds us, we knew a lot of the grisly details before the latest data dump – like that the 10 largest banks got $667 billion in low-interest loans from the Fed.

What we didn’t know until now is how much of that money was an outright gift from taxpayers; Eskow estimates that it amounts to about $27 million on each $1 billion worth of loan, based on the difference between the usual 3.8 percent interest rate and the 1.1 sweetheart rate the Fed charged as part of its bailout. Because the Fed attached no strings to its generosity to the banks, the bankers never paid it forward to the rest of us, who saw our access to credit shrink. And it never occurred to the Fed that it might have stimulated the economy with a few well-placed low-interest loans to the rest of us.

The bottom line is that the Fed shouldn’t be handing out trillions of dollars without any accountability or transparency. Most Americans are not going to have wade through the details to confirm their gut feeling – we’re getting screwed.

Federal Reserve / Martin Column - 08/26/2011

This is Not What Real Democracy Looks Like

Why is the work of the so-called Super Congress deficit panel going to be conducted in secret as if its members were planning a covert military operation?

Do you buy the idea that these decisions its members have to make, which are supposed to cut $1.5 trillion from the federal budget over the next 10 years, are just so tough that if they do it in public they’ll just never get it done?

Do you think that secrecy is designed to protect your interests?

I don’t. The Super-Congress is just the latest example of the fear on steroids politics that our leaders have come to rely on when they shove something nasty down our throats. By now the formula is familiar: create a crisis, warn of dire consequences, limit information and debate.

Meanwhile behind the curtain the politicians can wheel and deal with the lobbyists and bankers who fund their careers. According to them, all theses issues are just too complicated for us common folk to contemplate.

The only thing this secrecy protects is the interests of the lobbyists and the politicians who want to cut their deals without the glare of publicity or the inconvenience of accountability when they sell out the interests of their constituents in favor of their corporate contributors.

The Super-Congress is a microcosm of all the issues raised by the infusion of massive corporate cash and influence into our politics, as well as the poisonous impact of the revolving door between Congress and the businesses that lobby it.

While the president has been railing about the influence of money in politics, his own party has made sure that their top fund-raisers have seats at the Super-Congress table, like Sen. Max Baucus (whose top fundraiser Jim Messina was so good Obama hired him away for his presidential campaign, and Sen. Patty Murray, who also happens to chair the Democratic Senate Campaign Committee, which means it up to her to lead the party’s fundraising efforts to maintain its Senate majority.

The Republicans have also deployed top money-getters like Rep. Jeb Hensarling, who’s vice-chair of the House financial services committees, a traditional money magnet, which has worked well for Hensarling, who since 2009 has snagged at least $35,000 from the giant auditing firm KPMG, another $35,000 from UBS bank and $32,500 from Bank of America.

Who do you think will have access to Baucus, Murray and Hensarling while the Super-Congress deliberates behind closed doors? Ordinary Americans, or those who can make significant contributions to Baucus and Murray’s fundraising efforts?

In response to these potential conflicts, the Project on Government Oversight and other open government groups wrote to congressional leaders urging maximum transparency.

As Bill Buzenberg summed it up in the Guardian, “Over the years, Washington has evolved into a highly oiled special-interest machine, plying candidates with money, on one hand, and grooming insiders to help close the deal, on the other. So far, this ethically corrupt system has proven extraordinarily resistant to reform.”

In response to these potential conflicts, the Project on Government Oversight and other open government groups wrote to congressional leaders urging maximum transparency so that the rest of us can see and read exactly what’s going on. Contact your representative and demand that the Super-Congress conduct our business in public view, the way democracy is supposed to work.

 

 

 

 

 

 

 

 

 

 

 

Congress / Martin Column / Outrage - 08/24/2011

"Wall Street Is Our Main Street" NOT

New York's Attorney General is under pressure from banks and, sadly, the federal government, to agree to a sweetheart settlement that will let the financial industry off the hook for its mishandling of mortgages and foreclosures, today's New York Times reports.

As my colleague Marty Berg has reported, the settlement, negotiated by other state Attorney Generals, is a disaster for consumers who got screwed by the financial industry that taxpayers had to spend hundreds of billions to bail out three years ago. Most of the banks are doing great now, while many Americans are barely hanging on by their fingernails.

The  Obama Administration - from the Justice Department to the Department of Housing and Urban Development – is pushing NY AG Eric Schneiderman to agree to an $20 billion settlement that would actually prevent people from further litigation against Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. It's been widely criticized as a sell-out. Schneiderman's also pissed off Wall Street for trying to scuttle another settlement that would have shortchanged investors.

A member of the Federal Reserve Bank of New York told the Times "Wall Street is our Main Street... we have to make sure we are doing everything we can to support them," that is, of course, "unless they are doing something indefensible." Yeah, right.

There haven't been many heroes over the last few years willing to take on Wall Street on behalf of the silent majority of Americans who can't make campaign contributions. The New York AG is one, and he deserves to know we appreciate his efforts. If you agree, email his people: NYAG.Pressoffice@oag.state.ny.us – or tweet him @AGSchneiderman.

 

 

 

Action / Foreclosures / Harvey Column - 08/22/2011

Of, By and For

I wrote this about the Tea Party a year ago:

I’m not one of those people who is offended by the eruption of angry Tea Party organizations around the country. To the contrary, the TPʼrs are raising questions, pointing out problems and demanding answers from elected officials – just what an active citizenry is supposed to do.

But I disagree with their premise, which is that government is responsible for all that is wrong with our country, and that the solution therefore is a castrated federal government or no federal government at all.

A recent post by a Tea Party supporter framed the split this way:

The key difference between the left and right is that the left sees government as the answer to its dreams while the right sees government as the problem, not the solution.

Take away the hyperbole and that’s pretty much the debate that’s underway today in our country.

I believe that government of, by and for the People is one of the great inventions of humankind in history– along with the rule of law: We need police. We need the military. We also need a cop on the corporate beat in the executive suites of Wall Street. And we need rules and regulations to prevent health insurance companies from ripping us off or condemning us to death.

But a series of catastrophic failures by the U.S. government –  the failure to detect and prevent 9/11, the U.S. Supreme Court’s decision to award the 2000 election to George Bush, and especially the financial debacle that Washington suborned (PDF) – has deeply shaken public confidence in the basic institutions of our democracy.

During the Summer of Our Discontent two years ago, I traced the Town Hall confrontations over health care to displaced rage over the bailout. But let’s consider what happened to health reform, probably the single most urgently needed big government fix since Social Security nearly eighty years ago. President Obama did what Presidents Truman, Nixon and Clinton were unable to do: create a national health program under which all Americans will receive care, and several of the most unfair practices in the private marketplace will end. All Americans will be required to buy coverage. But in a compromise to win the support of the insurance industry – and its beholden members of Congress – Obama failed to include any controls on the price Americans will have to pay  the private insurance companies.

What happened in California when lawmakers in 1984 required people to buy auto insurance, but failed to regulate industry prices or practices? A way of protecting innocent people against bad drivers became a license to steal for the insurance industry, and led to a revolt that I took part in.

A viral New York Times oped on President Obama put a fine point on the administration’s failures:

To the average American, who was still staring into the abyss, the half-stimulus did nothing but prove that Ronald Reagan was right, that government is the problem. In fact, the average American had no idea what Democrats were trying to accomplish by deficit spending because no one bothered to explain it to them with the repetition and evocative imagery that our brains require to make an idea, particularly a paradoxical one, “stick.” Nor did anyone explain what health care reform was supposed to accomplish (other than the unbelievable and even more uninspiring claim that it would “bend the cost curve”), or why “credit card reform” had led to an increase in the interest rates they were already struggling to pay. Nor did anyone explain why saving the banks was such a priority, when saving the homes the banks were foreclosing didn’t seem to be. All Americans knew, and all they know today, is that they’re still unemployed, they’re still worried about how they’re going to pay their bills at the end of the month and their kids still can’t get a job.

This is not merely a “messaging” problem, however. If government can’t protect average people’s wallets from thievery; if instead, all government can do is protect the interests of the wealthy and big corporations at the expense of vast numbers of the rest of us who sink into economic oblivion; if the United States Supreme Court is right that corporate power, won through campaign contributions and lobbying, is protected by the First Amendment… then those who say government is too big and costs too much are going to find an increasingly receptive audience.

Not in my lifetime has the ideological divide been so stark as it is today. But the debate was just as intense when our Founders, constructing a new nation based on a constitution backed by a Bill of Rights, contended with competing visions of the role that the federal government would play in the new nation.

In the midst of economic and political chaos, I am reassured by that.

Harvey Column / Tea Party - 08/20/2011

Republic Gone Bananas

It wasn’t the sight of members of Congress fleeing the Capitol building last week after the debt ceiling debacle that startled me. It was the policeman armed with an M16 combat rifle outside the House of Representatives, guarding them.

 

The New York Times piece never mentioned the cop. Nor did the caption on the photo by Stephen Crowley. Only one of the hundreds of people who commented on the story online mentioned the unknown officer.

But that was the real story to me.

Yes, the debt ceiling got raised – that was never seriously in doubt, because the financial consequences of default would have been devastating even for the Tea Partiers…. especially for the Tea Partiers. Slightly more interesting was the question of whether the president and the Dems would negotiate their way out of the paper bag the Tea Party people had put them in. (Nope.)

It was the heavily armed Capitol policeman that summarized for me all that has happened to this country over the last decade as we slid into a stinking pool of fear, anger and greed so at odds with our heroic journey. To see that kind of weaponry at the greatest living monument to democracy seemed undeniably to question it.

Maybe some members of Congress have concluded that they need more guns to ward off a nut job like the one who opened fire on Congresswoman Gabrielle Giffords and passers-by in Tuscon last January. But a machine gun on the steps of the Capitol building seems like way more firepower than necessary to stop a lone assassin.

It reminded me of the images we have come to expect from banana republics where the corrupt leaders treat themselves like royalty, insulated from the struggling populace by security men wielding polished pistols or machine guns.

When I lived and worked in Washington in the Seventies, the Kennedy and King assassinations were only a few years old and the wounds were still raw.

 

 

 

Shockingly, President Reagan was shot at the Hilton up on Connecticut Avenue, just after taking office in 1981. But no one – least of all Reagan, who deeply understood the power of imagery and symbolism – would have permitted the conduct of lunatics to steal our freedom and trap us in a mental state of siege.

Or is it simply that the moment has come when the rulers must protect themselves from the ruled?

Congress / Harvey Column - 08/08/2011

Debt Wish

The most perplexing question that arises out of the S&P downgrade of the U.S. debt is why we’re still worrying about what they think, after all the credit rating agencies’ previous political shenanigans.

The credit rating agencies claim they are entitled to their opinions under the First Amendment, even if they are bought and paid for by Wall Street.

But anything that the S&P offers should be taken with a huge grain of salt. As James Kwak pointed out on Baseline Scenario, the S&P’s latest insights into our financial/economic/political mess weren’t exactly earth-shattering. Apparently S&P wanted us to know that they recognized we’re suffering from political gridlock in Washington.

Thank you, S&P.

If the rating agency really wanted to offer a public service, it might have pointed out that the big banks’ bundled mortgages were nothing but trash before the economy collapsed.

But of course, as we know should all know by now, S&P and the other credit rating agencies are no more interested in peddling public service any more than they are interested in offering accurate information or thorough analysis.

S&P and the others are interested in serving the interests of Wall Street, and right now Wall Street is interested in forcing its austerity agenda on the rest of us. S&P is just trying to do its small part to batter any resistance we might offer.

Like the too big to fail banks, S&P has perfected the kind of lack of shame which allows it to dispense its financial opinions with a straight face, demanding to be taken seriously even though it missed the fraud, sloppiness and greed that led up the financial collapse.

Come to think of it, there is a more perplexing question about S&P: how come a swarm of federal investigators hasn’t taken the agency down, following up on the earlier Senate investigation?

Jane Hamsher has an interesting take on that question at firedoglake, posing the theory that S&P’s thrashing of the U.S. credit rating is an effort to pay back Republicans for keeping the authorities off S&P’s back. In the bigger picture, S&P is just trying to play its part in efforts by leaders of both parties to slash Social Security and other programs that benefit the middle class under the guise of balancing the budget.

But the S&P tipped its political hand by favoring cuts to social programs over tax loophole-closing, revenue-raising, or real defense cuts. When Wall Street and its cronies need help, the credit rating agencies will always do their part.

 

 

 

Around the Web / Congress / Martin Column - 08/07/2011

Disorder in the Court

I went to law school in a less cynical age, back when justice was a cause, lawyers were respected for their commitment to that cause, and courts were hallowed institutions where, unlike the halls of Congress, might did not make right.

In July 1974, I was just a few weeks away from starting my first year at Georgetown Law when the U.S. Supreme Court issued its momentous decision on whether President Richard Nixon had to turn over secret Oval Office tape recordings to a special prosecutor, who Nixon had reluctantly appointed to investigate crimes committed by Republican political operatives – the infamous break-in at Democratic Party offices at the Watergate Hotel.

Nixon had turned over some of the tapes, but claimed executive privilege for the rest. Whatever was in the tapes was assumed to be a threat to his presidency. But Nixon had campaigned on a platform to move the Supreme Court in a more conservative direction, and by the time the case got to the high court, he had appointed four of its nine members, including Justice William Rehnquist, who later became Chief Justice. Nixon hoped his conservative appointees would protect his presidency with a favorable ruling. But the Court voted 8-0 to require him to hand over the tapes. Rehnquist properly abstained because he had worked for Nixon. In one of the recordings, Nixon could be heard ordering the CIA to stop the FBI from investigating the burglary. Impeachment proceedings, conducted with great dignity and on a bi-partisan basis, now seemed certain to lead to a conviction. A few weeks later, Nixon became the first president to resign his office. It was a cloudy, humid day in D.C., and I was working on Capitol Hill. I will never forget the sight, nearly thirty-seven years ago to the day, of the President Nixon's helicopter lifting up into the cloudy, humid skies for one last ride that August.

The key figures in this unprecedented moment in American history were all lawyers. For a young and idealistic soon-to-be-student of the law, it was a majestic and inspiring example of the power and wisdom behind our democratic form of government, and a victory for the rule of law.

Those days are long gone. Powerful corporate interests have waged a decades long campaign to vilify lawyers who go to court to defend consumer or civil rights. The lure of big money – and the weight of law school debts – has led the best and the brightest graduates to a corporate law career. And the courts, deliberately populated with judges appointed for their ideological views, have become politicized and, all too often, ideological.

This dangerous development is on display at the very top, where the United States Supreme Court has drawn down a deep reservoir of public trust in the integrity and independence of the judiciary.

The Court unilaterally intervened in Florida’s vote counting process and made George Bush President in 2000. In two arcane procedural decisions over the last decade that were well under the radar of the American people, the Court erected unprecedented new barriers to the ability of plaintiffs to bring a lawsuit in federal courts.

In April, the Court ruled that corporations can require courts to enforce “arbitration clauses” buried in the fine print of AT&T’s cell phone contract, which most people never see, at least until after they sign up for service, and to which there is no alternative. Consumers suing to block nickel and dime rip-offs by big corporations are going to find themselves tossed out of court on their hind parts unless they can prove that they cannot possibly vindicate their legal rights before private arbitration judges ultimately paid by the defendants themselves.

And then there is the infamous Citizens United case, in which the Supreme Court ruled that restrictions on the right of corporations to spend unlimited amounts of money to elect candidates violates the corporations’ free speech rights. By granting these artificial entities the same exact First Amendment protections as human beings, the Supreme Court majority nullified the average American’s right to speak up.

In a thoughtful essay in a legal newspaper, Daniel Purcell, a San Francisco lawyer who typically represents corporations, writes that several of the decisions,

…put more arrows than ever before in the quivers of attorneys like me, who tend to represent defendants. We have more opportunities to end, or dramatically reduce the scope of, litigation before it really begins. But it does not reflect well on our society that our rules favor institutions to the extent they currently do. Throughout our history, when the balance of power has shifted too heavily in one direction, societal forces have corrected the imbalance by changing the procedural ground rules. Time will tell if any counterweight to institutional power still exists in modern America. I have my doubts.

With public respect for the legislative and executive branches at record low levels, the erosion of confidence in the judicial branch is deeply disturbing – reinforcing the impression of many Americans that they have no real power in our democracy; that our governmental institutions protect and placate only the wealthy and powerful.

There is a perceptible and growing sense that the United States Supreme Court has exceeded its rightful authority to interpret the law. Ralph Nader has called for the impeachment of five of the nine Supreme Court Justice – Scalia, Thomas, Roberts, Alito and Kennedy – who have formed the majority in support of these highly controversial decisions. Others are calling for a constitutional amendment specifying that the right of free speech belongs to human beings, not corporations.

With Wall Street and Washington locked in a distasteful and destructive embrace, the Supreme Court could become an issue that joins all elements of the political spectrum.

Harvey Column / Supreme Court - 08/01/2011