President Barack Obama - Represent Consumers

Stepping up on middle out: From rhetoric to reality

President Obama’s latest effort to portray himself as the champion of the middle class has so far been long on rhetoric and painfully short of real proposals.

The problem is that if smooth rhetoric alone could do the job, the economy would be humming along right now, not sputtering.

To get this done, the president is going to have to harness all of our fabled American know-how . He’s also going to have to adopt a quality that’s been too rare in our politics: the ability to admit mistakes and abandon failed policies. Tweaking the status quo is not going to get us anywhere. This is not the job for a temp.

I know it’s not just up to the president. We’re all going to have get involved. So here are my seven suggestions to help the president start to fill in the details that could take “middle out” into the realm of reality.

Some of them should be easy: the president already said he’d do them, like create a robust jobs program raise the minimum wage. Some of these proposals are bound to get the president out of his corporate-friendly comfort zone. But we need to get real - and so does the president. We should demand that the president stop pursuing policies that will further erode what’s left of the middle-class. Here’s my summons to President Obama:

Repudiate the Trans-Pacific Partnership: Take your pick: it’s either a “Free Trade Frankenstein,” as I described it previously, or “NAFTA on Steroids,” as it’s been labeled elsewhere. Either way it’s not free and has little to do with trade and everything to do with strengthening corporate rights around the globe and weakening protections for labor, the environment, local agriculture and generic drugs. We know from NAFTA that these phony deals kill jobs, not promote them. It’s the 2013 version of the Big Lie. You can’t be both for the middle class and the TPP. (If we let the president get away with this, our bad.)
Do something about African-American unemployment: The rate is 13.6, twice the national rate. For African-American youth, the rate is an unbelievable 42.6 percent, and worse this year than last. This is a national disgrace. Mr. President, you can’t advocate middle out economics and tolerate 42 percent unemployment for African-American youth – and we shouldn’t let you. Yes, Republicans will stand in your way. It’s your job to develop a strategy that doesn’t allow them to stop you from taking action.
Drop the loony “bipartisan” agreement that will allow student loan rates to float upward to an exorbitant beyond the usurious 8 percent range. Go back to the drawing board and lead an effort to reduce the cost of higher education, not just the relatively small portion that goes to paying the cost of a student loan. In the meantime, put a moratorium on student loan payments until the unemployment rate has stabilized at 5 percent. (Hat tip to investigative journalist Dave Lindhorff for that one.)
Push for your own American Jobs Act, the legislation you proposed in 2011 that would cut payroll taxes for businesses, double the size of the payroll tax cut for individuals, give aid to states to prevent public sector layoffs, and increase infrastructure spending. All together, the Jobs Act would create 1.9 million jobs. You haven’t mentioned it lately, but an updated version was recently reintroduced in Congress.
Make raising the minimum wage a top priority. It was a good idea when you proposed it back when you ran for president in 2008 and it’s a better idea now that you’re president in full control of your bully pulpit.
Dump Larry Summers as a candidate to run the Federal Reserve: You have a clear choice to make here. Summers is the Robert Rubin protégé who, under Bill Clinton, pushed the deregulation of high finance that led to the crash of 2008, and then helped craft the policies in your administration that propped up banks and bankers with unlimited amounts of nearly free cash but offered only the most tepid support to homeowners facing foreclosure and the unemployed. As far as the middle class goes, Summers has never missed a chance to get it wrong. Since he left your administration, he’s taken a job with too-big-to-fail Citibank. Your other choice is the current No. 2 at the Fed, Janet Yellen, who was one of those ignored voices expressing concerns about the banks before the crash, and continued to push the Fed toward fulfilling its obligations towards those in the country who aren’t wealthy bankers. Americans know the difference between these two. You can’t be both for Larry Summers and the survival of the middle class.
Don’t abandon Detroit: By standing aside, you are conceding the city’s future to the state’s right-wing governor, Rick Snyder, the banks and their lawyers to dictate the future of the city’s 700,000 residents. Snyder is downright hostile to the traditionally Democratic city and he’d like nothing better than to build his reputation with his conservative backers as the man who finally broke Detroit. The bankers have already done their best to pick the city clean. Detroiters would stand a much better chance with the resources and creativity of your administration on their side. You’ve shown that you know how to use federal authority to keep bankers afloat, now use it to help one of the nation’s great cities.

Dummies For Austerity

From Athens, Greece to Stockton, California and Detroit, bankers feast while citizens and workers starve.

The diet takes many forms. But the basic idea behind it is that the only way to save our government is to starve it, cut services to those who need them most, and above all, keep the big bondholders and wealthy political contributors happy.

Meanwhile, beyond the government halls and bankers’ offices, the austerity diet causes real suffering.

In Greece, the bankers have exacted a painful price, with tax hikes, and layoffs that pushed unemployment over 27 percent, including 50 percent youth unemployment, in exchange for $310 billion in aid from the European Union and the International Monetary Fund.

And of course the money doesn’t go to the Greeks. It goes to the too big to fail bankers who the Greek government borrowed from.

Meanwhile the health consequences of austerity-related cuts to the social safety net amid extended recession across U.S. and are widespread and dire. Oxford and Stanford University researchers found that the U.S. suicide rate jumped during the 2007-2009 recession, with 4,750 “excess deaths” – beyond what pre-existing trends would predict, with the highest increases in the states that experienced the most job losses.

In Greece, suicide rates have skyrocketed, increasing 26 percent over the past year. The Oxford and Stanford University researchers found that, with cuts to HIV prevention and a huge increase in youth unemployment and drug abuse, the rate of the infection has risen 200 percent, while the country has seen its first malaria outbreak in decades after mosquito-spraying programs were cut.

In the U.S., more than 5 million Americans have lost access to health care – including Stockton’s retired city employees. Millions of long-term unemployed Americans will see their unemployment benefits slashed or eliminated as a result of the congressionally-approved sequester budget cuts. Meanwhile, in England, austerity policies have thrown 10,000 British families have been thrown into homelessness.

“The harms we have found include HIV and malaria outbreaks, shortages of essential medicines, lost healthcare access, and an avoidable epidemic of alcohol abuse, depression and suicide,” David Stuckler, Oxford researcher and co-author of “The Body Economic: Austerity Kills,” said. “Austerity is having a devastating effect.”

With no end in sight. In the U.S. Senate, it’s not just Republicans who are enthusiastically getting behInd austerity. Democrats supported a $4.1 billion cut to the nation’s food stamp program, the Nation’s Greg Kaufman reported.

In addition, while debating the farm bill, Democrats supported a draconian measure that would bar the families of those convicted of certain violent crimes from receiving food stamps – ever.

For his part, President Obama himself who has advocated cuts to Social Security (which will do nothing to bring down the deficit) in his budget earlier this year. His supporters say the president is just trying to appear more reasonable in budget negotiations than intransigent Republicans, and that the president would never cut Social Security. But they ignore the fact that when President Obama appointed a task force to make recommendations on entitlements in 2010, he stacked it with austerity hawks from both parties bent on cutting Social Security, like former Clinton chief of staff Erskine Bowles and former Republican Sen. Alan Simpson. While that commission failed to agree on specific recommendations, the president has continued to pursue proposals that would reduce Social Security benefits.

Austerity’s proponents don’t even pretend that that the majority supports it. The bankers and the politicians assure us they know what’s best, then try to sell their noxious cutbacks through fear and demonization – of the undeserving poor, overpaid government workers and others characterized by losing Republican presidential candidate Mitt Romney as the “47 percent” who get assistance from the government.

Sanjay Basu, the Stanford researcher who worked with Stuckler, insisted that the negative health affects of recession are worsened by austerity. The researchers found the negative health affects and the anguish that accompanies them aren’t inevitable. The citizens of European countries that chose stimulus and maintained social safety nets, like Germany, Iceland and Sweden, fared much better than countries that imposed austerity, like Spain, Italy and Greece.

We don’t have to swallow the austerity diet. But we will have to fight to get a menu that doesn’t include it.

“Ultimately what we show is that worsening health is not an inevitable consequence of economic recessions,” Basu said. “It's a political choice."

Austerity / Congress / Martin Column / President Barack Obama - 06/01/2013

Can left & right unite – against cat food diet?

If our dysfunctional politicians can collaborate to do the bidding of the 1 percent, why can’t members of the 99 percent find ways to work with those we disagree with to protect all of our interests?

Specifically, can progressive Democrats who oppose President Obama’s proposed cuts to Social Security work with members of the Tea Party who also oppose the cuts – along with everything else the president does?

The gulf between these two groups is obviously deep and wide.

Rank and file Democrats tend to want to put government to work in their interests, and believe that it can. Meanwhile, the Tea Party sees the government as the perpetual problem, and the only good thing it could do is ... disappear altogether.

But on the single issue of Social Security, the two groups appear to enjoy a rare agreement – along with most of the rest of the country.

According to this 2011 Marist poll, voters identified with the Tea Party oppose cuts to Social Security nearly as strongly as voters from across the political spectrum: nearly 8 in 10 Tea Partiers are against the cuts. Of all voters, slightly more than 8 in 10 dislike such cuts.

As for the president, he would rather not be seen as cutting Social Security benefits at all. What he’s suggesting is a change to the way cost of living adjustments are calculated, called chained CPI, in exchange for more tax hikes. Supporters say chained CPI is more accurate because it reflects how people actually react to price increases.

According to this theory, if the price of hamburger goes up, people will switch to beans. So why should the government give you more money to buy hamburger, if you’re just going to go out and eat beans? Under chained CPI, Social Security benefits would be limited to increases in the cost of beans. As economist Michael Hudson says of chained CPI, “It’s not really a cost of living index. It’s a cost of lower living standards index.”

Naked Capitalism’s Yves Smith has labeled it, “the cat food index.”

For many rank and file Democrats, it’s a bitter betrayal of President Obama’s 2012 campaign pledge to strengthen the middle class. It’s also a reversal of one of Obama’s unequivocal campaign promises as a candidate back in 2008. Drawing a contrast to his opponent, John McCain, Obama said McCain favored raising the retirement age and reducing Social Security cost of living adjustments. “Let me be clear,” candidate Obama said. “I will not do either.”

Stopping the president’s scheme will take more than just the efforts of his disgruntled base. President Obama seems to welcome their opposition, wearing it as a badge of honor. He would like people to think he’s making a principled, political sacrifice for the greater good of the country against the wishes of his own base.

Getting the 99 percenters in the Democratic base to work with their opposite numbers in the Tea Party might not be as outlandish as it first appears.

One of the founders of the Tea Party has already been reaching out to Democratic Party activists to discuss specific issues. Earlier this year, Mark Meckler met with MoveOn.org’s Joan Blades.about crony capitalism and with activist Jose Antonio Vargas about immigration. These talks haven’t yielded action – yet. Here’s Meckler talking about it.

The Tea Party has its own links to the 1 percent that undermine its credibility as a grassroots activist movement – and its ability to fight for the interests of ordinary Americans.

The Tea Party has been closely linked to the Club for Growth and Freedomworks, big-money conservative Republican operations that in the past have pushed for privatization of Social Security, most recently pushed by President George W. Bush. Privatization would be a financial bonanza for Wall Street… and would have been a catastrophe for the rest of us if George Bush’s 2005 plan had gone into effect. Most Americans would have lost all their benefits in the great crash of 2008.

Earlier this month, when one conservative Oregon Republican member of Congress criticized the president’s Social Security scheme as “a shocking attack on seniors,” the Club for Growth threatened to find an even more conservative Republican to run against him. The Club for Growth apparently thinks chained CPI is a good downpayment on further, deeper Social Security cuts down the road.

Members of the Tea Party will have to decide whether they want to work for the interests of the elites in Club for Growth and Freedomworks or join with other ordinary citizens to fight for their own interests. (Meckler quit his leadership role with the Tea Party, saying it was becoming too top down)

The Democratic base will face its own challenges. Is it prepared to fight the president and Democratic leadership that,not so long ago it worked so hard to elect, and has defended so vociferously, despite growing income inequality and continuing high unemployment?

If the two groups found a way to move beyond their disagreements, that would really be something fresh in American politics, showing leadership to replace stale rhetoric with robust action in support of the majority of Americans. Not only could that coalition mobilize a successful campaign against Social Security cuts, it could throw a genuine scare into a complacent political class and the 1 percent it serves.

Austerity / Bipartisanship / Martin Column / President Barack Obama / Social Security / Tea Party - 04/22/2013

Post-election, President Obama's populism goes missing

When it comes to reviving the middle class and reducing the country’s widening income gap, President Obama in his second term has so far offered little more than a classic bait and switch from the strong promises he made during his successful reelection campaign.

While the president has provided leadership on issues that don’t challenge the economic status quo, like immigration reform and same-sex marriage, his administration is still not bucking the bankers and the austerity hucksters peddling their scams.

Meanwhile, the president pleads for patience, based on the discredited theory that if we just hold out a little longer, the recovery that’s humming along for the 1 percent will trickle down to the rest of us.

When Republicans floated that myth during the Reagan administration, Democratic officials howled. Now they fall in line, with a barely a peep as issues of longtime unemployment, falling incomes, the growth of lousy, low-income jobs and rising health care costs ? without any proposals to address them, at the same time his administration pursues a massive secret Pacific trade deal that dwarfs NAFTA – which was a disaster for jobs in the U.S.

In his inaugural address, the president proclaimed “an economic recovery has begun” and left it at that.

Back in December 2011, the president was warming up the populist theme he would use to batter his opponent, Mitt Romney, as an out-of-touch plutocrat. In Osawatamie, Kansas the president said: “I am here to say the [the supply siders] are wrong. I’m here in Kansas to reaffirm my deep conviction that we’re greater together than we are on our own. I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, when everyone plays by the same rules.”

When it came to the economy, Obama blew Romney away. In a Bloomberg poll, respondents were asked who they thought did a better job laying out a vision for the country’s economic future: President Obama beat Romney by 10 points.

But where are the policies that would give that vision even a fighting chance of becoming reality? Since his reelection, the president has pivoted sharply away from the populism that got him elected towards cuts that hurt the very people he said government should protect.

On a recent visit to family in Detroit, I was struck again by the painful gap between the president’s rhetoric and his actions, and the stark contrast between the recovery for the banks and corporate profits and the stock market while ordinary people continue to suffer.

Detroit was hit hard by the 2008 financial collapse, and though the Obama administration helped engineer the bailout of General Motors, the city is still struggling under the weight of years of economic decline and bad politics. Home prices have fallen 35 percent over the past three years. That the unemployment rate has dropped from a post collapse high of 16 percent in September 2009 to 10.6 percent in January, still high above the national rate of 7.9 percent, offers only small comfort.

The city, the seventh-largest in the country in 1990 with more than 1 million people, is now 18th largest, with 700,000 people, and officials have closed schools and laid off teachers. While some auto jobs have returned, they pay half of what they used to, along with scaled-back benefits.

Now the city’s residents are caught in a feud between Michigan’s Republican state government and their own Democratic politicians. While Detroit’s situation may be worse than other old urban areas, the others are not far behind.

Detroit has been particularly hard hit by absorbing the costs of bank “walkaways” – bank-owned properties that the bankers have either decided not to pay taxes on or have abandoned before foreclosure is complete. Officials estimate the cost to the city of Detroit this year at $118 million.

That’s just another example of the costs of bankers‘ irresponsible behavior getting passed on to taxpayers, in this case, the remaining residents of Detroit.

When the bankers triggered a nationwide economic collapse, the federal government stepped in to rescue them with all the resources it could muster – no questions asked. But as Detroit and the nation’s other cities have continued to struggle, there’s not even a decent debate about options to help them.

Of course Detroit’s auto workers are not alone. The majority of jobs created during the “recovery” have been low paying.

Also ignored is the plight of the millions of long-term unemployed. Four million Americans have been unemployed more than a year. That’s 30 percent of all unemployed people – triple the 10 percent before the financial collapse.

But you won’t hear the president or any of the rest of our political leaders say much about those four million people – more than the population of of Los Angeles. They’ve been tossed aside, along with the rhetoric that proved so useful just a few months ago.

Income inequality / Jobs crisis / Martin Column / President Barack Obama - 04/02/2013

Hold on to your wallets, the privatization circus is back in town

If public-private partnerships were such a good idea, our bridges and roads wouldn’t be crumbling and our middle class wouldn’t be facing extinction.

Because public-private partnerships, touted by President Obama in his State of the Union speech as a key tool in his administration’s second term, have been around for a long time.

Fifteen years ago, Pulitzer Prize-winning journalists Donald Bartlett and James Steele, after an 18-month investigation for Time Magazine, called public-private partnerships a form of corporate welfare and raised doubts about their effectiveness [no link].

Too often, public-private partnerships have meant local or state governments handing over valuable pubic assets to private control without adequate public oversight.

These partnerships come in many forms – governments leasing out parking lots, contracting with private firms to build toll roads, funding repairs of bridges with money from union pension funds repaid with public bonds.or the ever-popular public subsidy or tax break for the promise of new jobs or even just maintaining the jobs in a particular location.

In the wake of the financial collapse, politicians across the spectrum from economically strapped cities and states have latched on to public-private partnerships as a way to fund projects that were once paid for wholly out of public funds.

One city that has embraced the public-private partnerships with gusto is Chicago, President Obama’s hometown – with dubious results. In one notorious deal, the city leased its parking meters for 75 years to a Morgan Stanley-led partnership in exchange for $1.6 billion upfront. Later citizens watched as parking rates skyrocketed and the full costs of the deal to taxpayers emerged – the city was obligated to pay the Morgan Stanley partnership $11.6 billion over 75 years.

Another fan of private-public partnerships was the president’s former Republican opponent, Mitt Romney. As a private businessman, his firm, Bain Capital, benefited from many goodies bestowed by government officials, making “avid use of public-private partnerships,” the Los Angeles Times reported. While Romney liked to brag about the jobs Bain created at an Indiana steel mill, he didn’t mention the tax breaks and other subsidies taxpayers gave Bain to create those jobs.

As Chicago attorney Clint Krislov said of his city’s foray into public-private schemes: “I think this is just the latest way for people to make money off state and local governments. This is the new way the investment banks, their lawyers, and consultants squeeze the taxpayers....They’re going around making these deals, and it’s very lucrative. It’s like a circus coming to town.”

The most egregious example of a public-private partnership gone wrong is the 2008 federal bailout of the financial industry: after the bankers’ recklessness and fraud wrecked the economy, taxpayers came to the rescue, as government officials promised that the goal was not to enrich bankers but to restore Main Street. But bankers got billions without any conditions, while Main Street continued to suffer. When we hear the grand promises of everything that public-privatization can do for us, we should remember who won and who lost out in the bailout.

Martin Column / President Barack Obama / Privatization / TARP / Tax breaks - 03/14/2013

Recuse Obama's 1 percent economic team

While President Obama campaigned for reelection as a candidate to fight for the 99 percent, he has assembled a second-term economic team that is extraordinarily cozy with the 1 percent.

His picks for Treasury, the head of the Securities and Exchange Commission and director of the Office of Management and Budget are guaranteed not to make anybody on Wall Street or the biggest corporations nervous.

First there was the prospective SEC chief, Mary Jo White, a tough former prosecutor who cashed in as a top defense attorney for big bankers post-bailout. When bankers like John Mack of Morgan Stanley needed to make insider charges go away or Jamie Dimon needed to make sure settling federal foreclosure fraud charges didn’t hurt too much, Mary Jo White was by their sides.

Then came the new Treasury secretary, Jacob Lew, the recipient of a series of lucrative favors from Citibank during his incredibly profitable trip through the Wall Street-Washington revolving door. The most galling was Citibank’s nearly $1 million bonus for Lew – after the bank was bailed out by taxpayers. The bonus was contingent upon him snagging a high-level government job.

That was not Lew’s only taste of taxpayer-funded generosity. Earlier, he got another big, highly unusual bonus on his way out the door from an executive position at state-financed New York University, after making a deal for Citibank to handle the school’s loan business. Meanwhile NYU students were seeing their tuition skyrocket. So after cutting a deal with Citibank, Lew gets a bonus from New York taxpayers to leave NYU. Then he gets hired by Citibank – no big surprise – and then gets a bonus to leave Citibank if he can become a high-ranked alumnus.

No wonder we call him “Lucky Lew.”

In the midst of all the recent furor over the sequester, the Senate confirmed Lew with little debate – and few answers to the many questions raised by his taxpayer-funded bonuses and benefits. One Republican senator spoke fiercely against Lew. Sen.Charles Grassley of Indiana said on the Senate floor, “Mr. Lew’s eagerness and skill in obtaining bonuses, severance payments, housing allowances and other perks raises concerns about whether he appreciates who pays the bills.”

Lew was confirmed with barely a peep from Republicans or Democrats. Independent Vermont Sen.Bernie Sanders, who caucuses with Democrats, voted against Lew.

Democrats fell in line with their president. But why did Republicans make so little fuss about Lew? (Only 25 voted against him.) Sen. Orrin Hatch, of Utah for example, offered a long list of reasons why choosing Lew was a bad idea, then voted for him.

This was after Republicans had mounted a robust attack on Obama’s nominee for defense secretary, Chuck Hagel, the former Republican senator from Nebraska. Hagel might have had an easier time if he was pushing Wall Street’s agenda of punishing the vast majority with of Americans with a bitter stew of unemployment, falling wages and austerity after a severe recession that Wall Street, not Main Street, caused.

Lew and White, meanwhile, have both offered comfort to the bankers. Lew told a Congressional committee that he doubted deregulation was a major cause of the financial collapse that wrecked the economy and forced taxpayers to pay for big bankers fraud and recklessness. For her part, White expressed concerns about overzealous prosecutors unfairly targeting bankers.

The latest candidate that Obama wants to put on the economic team, Sylvia Reynolds Burrell is, like Lew, an alumnus of the Clinton administration team who was mentored by then-Treasury secretary Robert Rubin. He helped big bankers’ dreams come undo true by working to end the Depression-era Glass-Steagall law before going through the revolving door himself to become Citibank’s president.

Reynolds went on to work at the Gates Foundation before taking over the Wal-Mart Foundation, the charitable arm of one the nation’s biggest and most profitable corporations, as well as one of the largest employers of low-wage workers.

She is not without ties to big financial institutions, serving on the board of directors of MetLife, the country’s biggest life insurance company. In the post Glass-Steagall world of high finance, Metlife through its subsidiaries lost big on bundled derivatives based on worthless real estate loans.

It’s quite a team the president is assembling, drawn from the country’s largest corporations and those who represent their interests. They may be very smart people. They also share this: one can scrutinize their records and find no hint of any of them questioning the impact of excessive corporate power or the big banks, or advocating policies that would empower and revive the middle-class. President Obama’s economic team exposes the wide and painful gap between his election-year rhetoric about income inequality and his willingness to do something about it.

White has already said she will recuse herself, if she is confirmed, from cases involving her former clients – not that the SEC has shown much interest in scrutinizing the too-big-to fail banks. Lew should likewise remove himself any decision-making that would affect Citigroup, though that would leave him twiddling his thumbs for most days, since the Treasury’s main job in the Obama administration so far has been figuring out ways to prop up Citigroup and the other too-big-to-fail institutions.

Bonuses / Citibank / Income inequality / Martin Column / President Barack Obama / Too Big To Fail - 03/06/2013

Does Jack Lew's Citibank contract violate ethics laws?

The emerging details of prospective Treasury Secretary Jack Lew’s contract with Citibank raise fresh concerns about the persistent issue of the Obama administration’s revolving door with too big to fail banks.

During Lew’s confirmation hearing earlier this month, Sen. Orrin Hatch, R-Utah, questioned the president’s pick to run the Treasury Department about a provision in his employment contract with Citibank – where Lew landed after his previous tenure as a high-ranking official in the Clinton administration.

According to his Citibank contract, he would lose a hefty bonus worth nearly $1 million and other compensation if he left before he received it, except under two very specific circumstances – either he died or obtained a high-level job in the federal government.

If he became a lobbyist, he would lose the bonus. If he became a farmer or the governor of New York, no bonus. Only by getting one of the administration's top jobs could he swim in that vast ocean of cash.

The unusual terms of the contract create a huge potential conflict of interest for Lew, who stood to gain enormous wealth if he landed a government job. Citibank is ensuring that Lew can comfortably move back into the public sector without financial sacrifice. What do the bankers expect for their money? On many tough issues which will require Lew to represent consumers, borrowers and taxpayers when big banks lobby authorities for weaker regulation, can we count on Lew to strongly represent us, even though we have no millions to dangle in front of him?

During his confirmation hearing, Sen. Hatch noted “your employment agreement included a clause stating that ‘your guaranteed incentive and retention award’ would not be paid upon exit from Citigroup but there was an exception that you would receive that compensation ‘as a result of your acceptance of a full time high level position with the United States Government or a regulatory body.’ Now is this exception consistent with President Obama’s efforts to ‘close the revolving door’ that carries special interest influence in and out of the government?”

Lew’s answer doesn’t pass the smell test. “I’m not familiar with records that were kept, so I don’t have access to things that I don’t know about,” Lew testified.

Is Lew, with a reputation as a serious numbers cruncher, policy wonk and savvy political negotiator, suggesting that when it came to the terms of his own bonus, he didn’t read the relevant documents?

Either his statement is false or he just disqualified himself from any government job, especially one overseeing the nation’s complicated finances.

Lew’s response begs for further inquiry. Hatch didn’t pursue it during the hearing. Neither did any of the major media in their coverage. The only initial coverage came from Pam Martens in her “Wall Street on Parade” blog. She referred to the “bombshell” Hatch dropped during the hearing. A week later, Bloomberg columnist Jonathan Weil covered the issue, writing that it appeared that Citibank paid Lew a “sort of bounty” to get a high-powered job in the administration. Lew has certainly earned that Citibank bonus with a series of powerful positions, first in the State Department, then as director of President Obama’s Office of Management and Budget and then as his chief of staff.

Lew and the Obama administration may have other problems aside from whether Lew’s Citibank bonus disqualifies him from a job overseeing it and other megabanks. Government watchdog Bart Naylor, an analyst with Public Citizen in D.C., said, after reviewing excepts of Lew’s contract, that the Justice Department should investigate for a possible criminal violation of USC 18 Section 209, which reads:

“Whoever receives any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government, of any independent agency of the United States, or of the District of Columbia, from any source other than the Government of the United States, except as may be contributed out of the treasury of any State, county, or municipality; or

Whoever, whether an individual, partnership, association, corporation, or other organization pays, makes any contribution to, or in any way supplements, the salary of any such officer or employee under circumstances which would make its receipt a violation of this subsection—?”

Naylor, said: “ The Department of Justice should answer whether the contract between Citi and Mr. Lew is in accord with federal ethics law. This law prevents a private company from making `any contribution’ to an employee `for his services’ to the executive branch of the government. Citi’s contract states that Mr. Lew would sacrifice any bonus he earned unless he landed a high level federal job. Authorities must answer whether the $1 million bonus Mr. Lew qualified for by taking a high level government job constituted a `contribution’ from Citi.”

Even if Lew’s Citibank bonus doesn’t constitute a criminal violation, it certainly violates the spirit of the law and gravely undermines the public’s confidence in him and in the administration’s ability to protect the public from the onslaught of Citibank lobbying and political contributions. If the Obama administration wishes to retain any shred of credibility in its ability to regulate too big to fail banks, it should immediately launch an investigation into the circumstances surrounding Lew’s contract – and the contracts of the many other former Citibank officials who have served in the administration.

Here’s a partial list:

•Former Citigroup chief economist Lewis Alexander, who joined Treasury in 2009 as a top adviser to former Treasury Secretary Tim Geithner. Alexander is probably best known for having incorrectly predicted, while still at Citi in 2007, that the U.S. would avoid a recession from the crash of the housing bubble. He left the Treasury Department in 2011.

•Former vice-chairman of Citigroup’s global markets Lewis Susman was named to the plum assignment of U.S. ambassador to Great Britain in 2009. He earned his job the old-fashioned way, as one of President Obama’s top contributors and bundlers during the 2008 campaign.

• Michael Froman, a veteran of the revolving door who served in the Clinton Treasury Department before his work as a chief financial officer at Citibank, is credited with introducing President Obama to Robert Rubin, the former Clinton Treasury secretary who oversaw the dismantling of the Glass-Steagall Act before becoming Citibank CEO during the financial crisis. Froman is a special assistant to the president and deputy national security adviser for international economic affairs. The New York Times reported that Froman received more than $7.4 million in compensation from Citibank between January 2008 and joining the White House in February, 2009 – including a $2.25 million bonus, which the White House claimed Froman donated to charity.

•David Lipton, another Clinton Treasury veteran who was paid huge Citibank bonuses ($1.275 million in 2008 and $762,000 in 2009) while serving as the bank’s head of country global risk management. President Obama appointed him special assistant to the National Economic Council and the National Security Council.

The administration should get a clue, withdraw Lew’s nomination, and find somebody to lead the Treasury who puts the interests of the public and taxpayers ahead of those of the big bankers.

Citibank / Executive Pay / Lobbying / Martin Column / President Barack Obama / Revolving door / Too Big To Fail - 02/25/2013

Failed policies fuel phony housing recovery

In his State of the Union speech, President Obama cited the recovery of the housing market as evidence the economy is getting stronger.

If by “recovery,” the president meant a fabulous bargain-shopping opportunity for flush hedge funds, he was spot on.

If was he was talking about what most people understand by “recovery” – restoring families’ stability, healthy communities and a sense of economic well-being – not so much.

While the president paid lip service to bolstering the middle class, four years of his administration’s failed policies have set the stage for the financial industry’s further plundering of one of our basic needs – housing.

Before the financial crisis the wizards of high finance figured out how to turn our homes into complex investment vehicles that made them billions – before they crashed the economy. Now the financial geniuses how figured out how to make a killing picking over the carcass of the collapsed housing boom.

Certainly housing prices appear to be going up, but a large reason for that is the hedge funds that are swooping in to take advantage of the low, low prices. CNN Money reports that Blackstone Group spent $2.7 billion to buy 17,000 single-family homes. Bloomberg reported that Blackstone was spending $100 million a week to buy distressed homes to rent and hold until prices rise.The buyout firm GTIS Partners said it plans to spend $1 billion through 2016 buying single-family properties and converting them to rentals, while Oaktree Capital Management of Los Angeles started a fund that would buy $450 million worth of single-family homes, the Los Angeles Times reported. Also here in Southern California, G8 Capital of Ladera Ranch bought several portfolios of distressed properties to rent.

The real estate investment firm McKinley Capital Partners of Oakland has purchased hundreds of homes in the San Francisco Bay Area. The Urban Strategies Council reported that in Oakland, speculators had bought 42 percent of all properties that went through foreclosure.

“This is an outrage,” Oakland Councilwoman Desley Brooks told the Oaklandlocal.com nonprofit news site. “People in Oakland typically (buy a home) and put in roots in a neighborhood and stay there and this strategy with investors is doing away with that. It's taking away from our ability to have neighborhoods where people know each other ... we need that in Oakland.”

While interest rates are at record lows, many individual buyers in hard-hit areas don’t have the savings, credit or income to buy.

Is this just the marketplace at work? I don’t think so. The Obama administration insisted that it was implementing policies to ease the foreclosure crisis, putting in place incentives to ensure banks would help homeowners through loan modifications and principal reductions for underwater homes.

But in contrast to the massive, no questions asked shoveling of money to prop up the big banks in the bailout, help for homeowners was late, inadequate and tepid. The incentives were too small and the policies lacked teeth to hold bankers accountable when they didn’t take action or when they foreclosed using fraudulent or forged documents.

A particularly damning admission about these policies came from the mouth of former Treasury Secretary Tim Geithner, as quoted by Neil Barofsky, former special inspector-general of Troubled Asset Relief Fund, aka the bailout. In his book,”Bailout,” Barfosky contends Geithner acknowledged that the foreclosure relief programs weren’t really intended to help homeowners but instead, to help banks manage their foreclosure portfolios, or in Geithner’s colorful words, to “foam the runway for the banks.”

The president has yet to make any such acknowledgement, and wants us to believe that his policies have helped middle-class Americans regain a foothold. Nothing could be further from the truth. It looks like these policies have facilitated a massive takeover of the affordable U.S. housing market by the same speculators who brought it down.

Foreclosures / Martin Column / President Barack Obama - 02/21/2013

Standard & Poors' defense sounds familiar

What a shame that the feds’ big lawsuit against Standard and Poors probably won’t go to trial.

The public is missing the chance to view up close many of the players whose fraud and fecklessness helped fuel the financial collapse, wriggling and squirming under scrutiny by sharp lawyers in dramatic confrontation, with prosecutors who want to prove they can take on Wall Street and its high-priced lawyers, while Standard and Poor’s fights to save its business.

The stakes are too high for the government or the credit rating agency to take their chances turning the case over to a “jury of their peers.”

Before the Justice Department filed its case, Standard and Poors had already rejected a settlement offer that required it to pay $1 billion and admit responsibility. The case will eventually settle without that grand showdown in court, so the authorities can hold their face-saving press conference and the company will survive, stripped of a painful share of its profits but with enough semblance of its professional standing to go forward.

That means most of the jousting will take place in the court of public opinion, where both sides have shown considerable prowess.

For its part, the Obama administration has convinced a sizable chunk of the electorate that its efforts actually have reformed the financial system that led to the 2008 meltdown. Standard and Poors, meanwhile, has managed to prevent meaningful reform of the questionable practices that helped create that meltdown, despite damning official reports from the Financial Crisis Inquiry Commission and the Permanent Senate Subcommittee on Investigations that laid a large chunk of the blame for the collapse squarely on the failures of the credit rating agencies.

As part of its defense, Standard and Poors has suggested that it wasn’t inflating its ratings of investments based on worthless mortgages just because that’s what the big banks were paying it do.

No, the credit rating agency insists it was taken in, along with all the other highly paid geniuses who were profiting or pumping up the housing bubble.

If the case went to trial, Standard and Poor’s could conceivably call all the top Obama administration officials who likewise have said, over the years, that the financial collapse was an unforeseeable event that came from nowhere.

They could call on Treasury Secretary Geithner and Larry Summers, Obama’s chief economic adviser until November 2010, both of whom embraced this feeble notion.

It wouldn’t be difficult for prosecutors to undermine this defense, since there are plenty of experts who were predicting the collapse of the bubble, though none of them were in the D.C.-Wall Street power axis. They were ignored before the collapse, as they are being ignored now.

If the Standard & Poor’s case did make it to trial, prosecutors would perform a real service by demolishing this phony propaganda in order to win their case.

Financial Crisis Inquiry Commission / Martin Column / President Barack Obama - 02/10/2013

To protect investors and taxpayers, go outside the club

Here’s who would be better than President Obama’s pick to head the Securities and Exchange Commission: Almost anybody.

Couldn’t this administration find somebody who has not been spending her time defending too-big-to-fail banks, acting as an apologist for them, and whose law firm was paid to advise the government on the bailout?

That’s a description of Mary Jo White, most recently of the elite Debevoise & Plimpton law firm, one-time U.S. attorney for the Eastern District of New York…. and now the President’s choice to head the SEC.

There’s a long list of qualified people Obama might have chosen if he wanted to go outside the government-financial complex whose members have dominated economic policy, people with credible experience who have honed a critical perspective on the financial industry.

That list would start with Neil Barofsky, the former prosecutor who served as a tough special inspector general of the Troubled Asset Relief Program, better known as the taxpayer-funded bailout. It would also include Bill Black,who helped expose congressional corruption as a fearless federal regulator during the savings and loan scandal of the 1980s, now a University of Kansas City-Missouri law professor and white-collar crime expert – and consistent critic of the Obama administration’s failure to hold bankers accountable. High on the list would be Eliot Spitzer, the one-time attorney general of New York and television commentator and a sharp thorn in the side of bankers and the politicians who protect them. Christy Romero who also be on the list. Like White, she worked as a lawyer at an elite firm, but as the current special inspector general for the bailout she has been a fierce advocate for taxpayers.

Mary Jo White, according to the president, is “tough as nails.” At one time White was a hell of a prosecutor. When she was U.S. Attorney for the Eastern District of New York, though she prosecuted no major bank executives, she won convictions of the New York Mob boss known as Dapper Dan, John Gotti, and the World Trade Center bombers.

That was before she followed the well-worn path from public prosecutor to elite lawyer, joining the white-shoe law firm of Debevoise & Plimpton, where the average partner makes $2.1 million a year.

That was before she got cozy with J.P. Dimon and J.P Morgan, representing them in the widely criticized settlement of foreclosure fraud charges in a case involving 49 state attorneys general, the Feds and the too big to fail banks.

That was before representing Bank of America’s Ken Lewis on fraud charges and Morgan Stanley’s John Mack in an SEC insider-trading investigation.

Once she got through the revolving door, she worked the system on behalf of her clients, becoming a consummate well-paid insider in the Wall Street-Washington power nexus. In the process of strenuously protecting Mack from an interview at the SEC, White got herself into the middle of a full-fledged scandal, using her clout to help get a whistleblower at the federal agency canned, according to Rolling Stone’s Matt Taibbi. In addition, White’s husband is another veteran of the revolving-door, working as a top SEC official as well under previous do-nothing SEC commissioner Christopher Cox, in between stints as a bankers’ lawyer.

One fact that tells you al you need to know about what’s wrong with White as a banking enforcer is that her former client, Jamie Dimon told Fox Business News that White was “perfect” for the SEC job.

White might have made a better candidate to protect investors at the SEC if, since the bailout, she had expressed one iota concern about bankers’ excess, fraud or recklessness that led to the financial collapse.

Instead, White has expressed concern about prosecutors unfairly targeting bankers to get scalps to feed the angry public’s thirst for justice. In a legal brief on Lewis’ behalf, White wrote: “Some have looked to assign blame for every aspect of the financial crisis...This case is a product of that dynamic and does not withstand legal or factual scrutiny.”

In remarks at a New York University Law School event last year, White said: “You should be aggressive where there is a crime,” but prosecutors shouldn’t “fail to distinguish what is actually criminal and what is just mistaken behavior, what is even reckless risk-taking, and not bow to the frenzy.”

Her law firm meanwhile was itself cashing in on the bailout, receiving a contract worth $159,175 as one of 16 law firms Treasury hired to work on the bailout, American Lawyer reported.

White obviously lives in a far different world from most Americans, who are still rankled that so few bankers have been held accountable for the financial collapse.

Maybe it’s understandable that in her role as defender of too-big-to-fail bankers, she didn’t express much empathy for investors who lost savings, for cities and towns ravaged by foreclosure or workers laid off in the worst economic downturn since the Great Depression.

And it probably wouldn’t have endeared her to her clients if she had expressed outrage at the bankers’ epic greed and recklessness that led them to wreck our economy.

In her new job, she will face many tough challenges; overseeing implementation of many of the Dodd-Frank financial reform’s unfinished regulations, and convincing a deficit-obsessed Congress and president to beef up staffing and salaries at her chronically underfunded agency so that it can compete with her former colleagues at the fancy law firms. It’s hard to imagine White rising to this challenge, especially since after her SEC tenure she’ll probably head back to a big Wall Street firm.

Don’t get me wrong, I don’t believe there’s anything wrong with representing bankers – or mob bosses. Our legal system works best when both sides have strong, aggressive advocates. White made her choice to leave the relatively poorly paid public sector to join a private firm and provide bankers a “tough as nails” defense lawyer. But does that really qualify her as the best person to lead the SEC, an agency already reeling from a lack of credibility for not pursuing fraud in the financial sector aggressively enough? Don’t investors and taxpayers deserve protection from somebody whose primary concerns since the bailout haven't been profiting from it and keeping bankers comfortable?

Financial Crisis / Martin Column / President Barack Obama / Revolving door / Securities and Exchange Commission (SEC) - 02/04/2013