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

Three Major Issues The Presidential Candidates Are Ignoring

 

 What if they held an election but didn’t discuss the most important economic issues?

That’s what’s happening here in 2012.

Yes, taxes and the deficit are significant. But there are even more crucial issues that will determine whether the country continues to slide into wider income inequality and destroys what’s left of the middle class.

And these three crucial issues have been barely mentioned during a campaign obsessed with who pays what in taxes and who doesn’t.

Dean Baker, of the Center on Economic Policy Research, neatly summed up several of the left-out issues recently.

On one of the most critical economic issues, the so-called free trade pacts such as NAFTA and the more recent Korean trade agreement, both parties agree: they favor them.

The media cooperates in keeping this issue off the table by repeating the misleading claims of proponents of the agreements while omitting or marginalizing critics.

“Free trade” is really the big lie of our economy and our politics. As the critics point out, these agreements should be accurately labeled “corporate rights agreements” since they are much more concerned with that issue than with trade. Not only do they result in lower wages in the U.S. and devastated small farming in other countries, these agreements allow corporations to challenge environmental and labor protections in special courts in which the public has no voice.

Both parties crank up the rhetoric to promote the notion that the  “free trade” is the road to economic prosperity for everybody. But as Baker points out, the reality of “free trade” is far grimmer for those that work for wages to earn a living because it puts “downward pressure on the wages of manufacturing workers by putting them in direct competition with low-wage workers in the developing world.”

The absence of any discussion of these agreements in the political debate exposes a major fraud on the part of both parties. While the Democrats tout themselves as the party of the little guy, their support for “free trade” shows how closely they hew to the corporate agenda on issues that matter most. For the Republicans, their support for “free trade” agreements which, in the real world, prop up some corporations while punishing others shows they’re less interested in picking economic winners and losers than their free market rhetoric lets on.

And there’s a huge trade deal being secretly negotiated right now, the Trans-Pacific Partnership (TPP), which I previously wrote about here, calling it a Free Trade Frankenstein. Others have called it “NAFTA on steroids.” As with other trade negotiations, the public has been kept out while the corporate lobbyists have full access.

The only TPP issue on which the president and his challenger disagree is who could whip out his pen faster and sign the TPP once the secret negotiations are concluded.

The second major economic issue left out of this election is the deeply unpopular 2008 bailout of the financial sector and corporate America, including the $700 billion Troubled Asset Relief Program and the $16 trillion in cheap or free loans the Federal Reserve provided to corporate America in the wake of the financial collapse.

All this financial assistance was provided with little public debate and without any conditions imposed on the recipients.

The Obama administration dismisses all questions about the bailout by insisting that all the TARP money has been paid back. Case closed, the administration contends.

But could a different kind of bailout, one which imposed specific conditions on banks and corporations, helped more struggling Americans than the one we got, which propped up bank and corporate executives? Why did those portions of TARP that were targeted at ordinary Americans facing foreclosure fail so badly?

And how does this bailout, which picked winners and losers, jibe with the Republicans’ free market rhetoric? What about a belated bailout for the rest of us? Plenty of fodder for tough questions for the president and his challenger, if anybody cared to ask.

The third issue is one that the two parties have disagreed on: increasing the minimum wage.

As a candidate in 2008, President Obama promised to raise the federal minimum wage from $7.25 an hour to $9.50 by 2011 but has taken no action to do so. For his part, Republican challenger Mitt Romney has said he favors tying the minimum wage to inflation, until the right wing of his party objected.

According to a recent paper by the Economic Policy Institute, phasing in the $9.80 minimum wage would raise the wages for 28 million workers, who would earn an additional $40 billion during the phase-in, while gross domestic product would increase by $25 billion and 100,000 new jobs would be created.

We need a robust debate on these issues in the remaining weeks of the presidential campaign that challenges the president and Mr. Romney on where they stand and what actions they’ll take, not just a stale rehash of the same old arguments on taxes. But we won’t get that debate unless we demand it.

 

Federal Reserve / Income inequality / Martin Column / Mitt Romney / TARP / TPP - 09/25/2012

Where’s Our Bailout? (Redux)

Between August 2007 and April 2010, the U.S. Federal Reserve handed out up to $1.2 trillion in public money to banks and other companies in the form of short-term loans to help them cope with cash flow problems, according to a recent report by the Bloomberg news service. In addition to U.S. banks and speculators, big bucks went to financial institutions owned by foreign governments; domestic firms like Ford and G.E. as well as Toyota and Mitsui and a German real estate investment firm.

While American taxpayers kept big businesses all over the planet alive, no such loans are available to taxpayers to cover their own personal cash-flow problems, including not being able to pay their mortgages, monthly bills, put food on their tables or a few holiday presents under the tree.

New figures, ironically also issued by the Federal Reserve, show how much help $1.2 trillion could be – if put in the hands of Americans. According to the Fed, the total amount of all money Americans owed on their credit cards as of last September was $693 billion. All of that could be paid off – in full – leaving another $500 billion, say, to help people avoid foreclosures or give every consumer in the United States a hefty tax cut.

Imagine the “stimulus effect” on our economy of paying off every credit card in the nation.

Although the Fed has portrayed the bailouts as the only way to keep money flowing in the economy, the Money Industry has yet to open its spigot and expand lending. Instead, they’ve used our dollars mostly to inflate CEOs’ executive salaries and pay themselves even more ridiculous bonuses.

Zeroing out America’s credit cards would solve that problem instantly. The credit card companies would get the money, of course, but Americans could start fresh and begin investing in their families, their businesses and their local economies.

Unfortunately, our country’s leadership owes its allegiance to the multi-national mega-corporations that grease the system with billions of dollars in campaign contributions. Wall Street’s “investment” in Washington caused the financial depression we are in today, and its no wonder that Washington’s attention is focused so narrowly on the welfare of the wealthy and large corporations. In fact, with its infamous decision equating corporations to human beings, the United States Supreme Court has turned the corruption of our democracy by money into a principle of our Constitution. Until we change that, Americans will be second class citizens in a country controlled by wealth and power.

 

Citizens United / Foreclosure / Harvey Column / Outrage / Supreme Court / TARP - 01/11/2012

News Flash: Giving Banks Billions Won't Create Jobs

Last year, President Obama signed into law the $30 billion Small Business Lending Fund as a way to stimulate job creation.

"It's going to speed relief to small businesses across the country right away," Obama said at the time.

It was supposed to help create 500,000 jobs.

Well, not so much.

Not only has the program been a dismal failure, with few banks applying to participate, but it turned into another giant taxpayer handout to bankers.

Only $4 billion was handed over to banks under the lending scheme. The bankers didn’t use it to boost small businesses, and it turned out they weren’t even required to. Instead the bankers used more than $2 billion to pay off their bailout debt to the Troubled Asset  Relief Program, according to a story in the October 12 Wall Street Journal (no link).

“It was basically a bailout for a 100-plus banks,” Giovanni Coratolo, vice-president of small-business policy at the U.S. Chamber of Commerce, told the Journal.

None of this should come as a surprise. Bankers said at the time that the problem was not that they didn’t have enough money to lend, but that demand for loans was weak because of the continuing bad economy.

“Until you start to see the economy improve and job growth you won’t see lots of loan demand,” Thomas Dorr, chief financial officer of Bank of Birmingham in Michigan, which received $4.6 million from the program, told Bloomberg. “You can’t force banks to lend.”

The lending program was either just another veiled handout to the banks or another lame attempt at trickle-down stimulus. Either way it contributes to the strong impression that our political leaders aren’t actually working on solutions, they’re getting in our way.

Congress / D.C. Disconnect / Martin Column / President Barack Obama / TARP - 10/13/2011

Government of Honeywell, By Honeywell, For Honeywell

 

Of all the corporate big shots offering the rest of us stern lectures about the sacrifices we’re going to have to make, is there any more infuriating than Honeywell’s CEO’s, David Cote?

Cote, who was paid $20 million last year, has been a particularly outspoken member of President Obama’s deficit commission, with a special kind of shameless gall to be able, with a straight face, to warn the rest of us that we will have to get by with less retirement and health care if the country is going to deal with its deficit.

I’d like to propose a new rule: before the president hands somebody like Cote [pronounced Ko-tay] a billion-dollar megaphone, that person and his company should demonstrate that they are following generally accepted rules of good citizenship.

In the case of Honeywell, the company makes the rules it has to live by. And why shouldn’t it? One of the largest contractors to the federal contractors, it’s also one of the heaviest hitters when it comes to lobbying, spending $6.5 million last year. Among manufacturing firms, only General Electric spent more.

But when it comes to political contributions, Honeywell far outstrips GE, with $2.3 million spent in the 2009-2010 election cycle compared to GE’s $1.4 million.

And Honeywell doesn’t just rely on high-paid lobbyists, when the bailout faced a skeptical public in 2008, Cote (who sits on the board of J.P. Morgan Chase) wrote to his employees to suggest they get out and support the bailout.

But in every set of rules that the government sets  related to Honeywell, those millions spent influencing the government turn out to be very solid investments.

For example, taxes. Cote’s Honeywell doesn’t pay any, according to the Citizens for Tax Justice.

It’s all perfectly legal in the rigged world of the U.S. tax code, where corporations like Honeywell use the political access that only money can buy to write the rules they have to live by.

How rigged is the U.S. tax code?

Well, for example, look at the plight of homeowners who lose their home to foreclosure. Even after those poor saps lose their homes, if the lender forgives some of the mortgage debt because the house sells for less than the homeowner owed, the IRS could still come after them.

I know, I know, those homeowners should have had the foresight to hire more lobbyists and increase their contributions to political campaigns.

Taxes are hardly the only place where Honeywell falls short on the standards of good citizenship.

Honeywell has major contracts in Iran, and despite U.S. sanctions against that country, the company has taken a somewhat relaxed view toward compliance, agreeing that it wouldn’t take on any new work in Iran while it closes out its current work.

Because you wouldn’t want sanctions to be too disruptive to Honeywell’s ability to make profits.

Back home in the U.S., Cotes’ Honeywell has been especially good at squeezing sacrifices from other people, like its workers and the communities who live near its facilities.

Dirt Diggers Digest has compiled a useful summary of Honeywell’s actions at the Illinois plant that is the sole facility in the country where uranium ore is converted into the uranium hexafluoride gas used in the production of both nuclear power and nuclear weapons, a risky process using highly toxic materials.

Last year workers at the plant balked when the company sought to eliminate retiree health benefits, reduce pensions for new hires, cap severance pay and contract out maintenance. So Honeywell locked them out and brought in replacement workers.

After an explosion at the plant, Honeywell was cited by the Nuclear Regulatory Commission for improperly coaching replacement workers during investigations by federal inspectors, while the Environmental Protection Agency fined the company $11.8 million for illegally storing hazardous waste – only the latest in more than $650 million in fines for misconduct, according to the Project on Government Oversight.

But the federal contracts keep pouring in, because in Honeywell’s world, misconduct is just part of doing business, and doesn’t have real world consequences. And apparently that misconduct doesn’t give David Cote any qualms about telling the rest of us what we need to do.

Do you have candidates for most infuriating corporate bigwig? Let WheresOurMoney.org know.

 

 

 

 

 

Executive Pay / Financial Crisis / Martin Column / Outrage / Social Security / TARP - 04/16/2011

Happy Talk

Treasury officials and many politicians are busy patting themselves on the back because the Troubled Asset Relief Program will end up costing taxpayers less then expected.

The way these folks describe it the TARP and other aspects of the federal bailout were just supposed to function as a loan program for the banks while they were having some trouble.

TARP is also winning praise for having “restored trust” in our financial system.

Beyond the scary rhetoric that gave birth to the bailout and self-congratulatory sermons it’s being buried with, the bailout consisted of a set of rules and a way of picking winners and losers in the economic crisis that did anything but build trust.

Remember when the Fed chair, Ben Bernanke, insisted that he was a Main Street guy, that he was interested in the financial system only inasmuch as it helped out Main Street?

But the bailout institutionalized a system where the government could only afford to bail out the biggest bankers and corporate officials while abandoning smaller banks and business owners along with millions of troubled homeowners and vulnerable employees.

As Fortune’s Alan Sloane wrote, “the more bailout rocks you turn over, the more well-connected players you find who aren't being forced to pay the full price of their mistakes.”

Oh well, the apologists say, nothing’s perfect. It could have been so much worse.

One official who hasn’t joined in the festivities is Neil Barofsky, the former special inspector for the Troubled Asset Relief Program, who bid the bailout a scathing farewell in the New York Times, which you can read here.

The Obama administration and bailout apologists would like to have us believe that it was just a necessary first stage of the recovery to ensure that the bankers stayed rich and the wealthiest Americans’ increasing share of the nation’s wealth kept on growing.

But in Barofsky’s view, there was nothing inevitable about the no-strings attached bailout that filled the bankers’ pockets while offering little to Main Street. It had nothing to do with the operation of the free market either. It was very carefully crafted by public officials working hand in hand with Wall Street to maintain its power while gnawing away at the increasingly fragile livelihoods of ordinary Americans.

As Barofsky notes, “Treasury officials refuse to address these shortfalls. Instead they continue to 
stubbornly maintain that the program is a success and needs no 
material change, effectively assuring that Treasury's most specific 
Main Street promise will not be honored.”

And while recent employment gains are welcome news, Dean Baker points out the losers – African-Americans among whom unemployment remains distressing high and wage earners in general, whose pay is not keeping up with inflation.

The bailout celebration is just part of the happy talk designed to buoy the notion that the recovery is well underway. But this bailout-fueled recovery continues to pick highly predictable winners – with the powerful, wealthy and politically connected doing swimmingly while everybody else just limps along.

 

 

Around the Web / Martin Column / SIGTARP / TARP - 04/04/2011

In Taxbreakistan, the Usual Casualties

Rather than confronting the country’s growing economic disparity and attempting to reduce it, our political leaders are pursuing policies that just make it worse.

Remember when we were told that the bailout was supposed to save our economy? It worked amazingly well for those who are well off – the banks are back in the black, the bankers are pocketing huge bonuses, corporate profits are soaring and the stock market is humming along.

But for those less fortunate, the situation remains dire: unemployment is stuck around 10 percent, wages are stagnant, state and local governments face staggering cutbacks in all services, and foreclosures continue unabated.

The most recent example of this glaring callousness is the deal President Obama reached with GOP leaders to extend the Bush-era tax cuts for 2 years in exchange for keeping unemployment compensation coming for 13 months.

Both the president and the Republicans profess to be unhappy with everything they had to give up and said nasty things about each other. The president insisted it was simply the best deal to be had to get some stimulus in the face of Republican intransigence.  But the president never took to the airwaves to challenge the Republicans on the tax cuts or the unemployment insurance. After his party’s “shellacking” in the midterms, he just headed for the back room to make a deal on his own, without ever trying to galvanize public opinion, which according to the polls, wasn’t even sympathetic to the high-end tax cuts.

So far the Senate has appears ready to pass the deal with votes to spare but the House has balked.

Back when he was candidate Obama, the president had no qualms about proclaiming just how unfair the tax cuts for the wealthiest were, how little they do for the rest of the economy, and how worthy they were of opposing. Now the president labels as `sanctimonious’ those who agree with the position he took so forcefully when he ran for president.

But the tax cuts for the wealthy won’t work any better now that that they’re the Obama tax cuts than they did when they were the Bush tax cuts.

The Center for American Progress breaks the $954 billion Obama tax cut deal into two parts: first, a $133 billion tax cut for the wealthiest, including $120 billion in lower taxes for the top 2% of U.S. households, plus $13 billion in estate tax savings. The other $821 billion consists of government cash for unemployment benefits, tax cuts for the middle class and small-business job-creation incentives.

The deal is supposed to create somewhere between 2.2 and 3.1 million jobs, though some find those estimates vastly inflated. CAP contends that the deal offers a relatively expensive way to create those jobs.

Economist Dean Baker questions a lot of the phony hysterics being used to sell the deal as scare tactics. He doubts the president’s assertion that is the only way or last chance to extend unemployment benefits. If unemployment stays above 8 percent as the Federal Reserve projects that it will, both Republicans and the president will feel pressure to extend benefits.

But one of the worst aspects of the deal is the way that it actually raises taxes on the working poor, according to the Tax Policy Center. That’s because the president has agreed, as part of the deal, to phase out his own Making Work Pay tax cut (implemented as part of his previous stimulus package) and replaced it with a temporary Social Security payroll tax cut. The Making Work Pay tax cut was focused on the working poor, giving single people with incomes of at least $6,452 and less than $75,000 a $400 tax break and couples making less than $120,000 an $800 tax break. People at the lower end of those income ranges would do worse under the present Obama tax cut deal. Wealthier taxpayers meanwhile, stand to do better with the payroll tax break than they did under Making Work Pay, which phased out at higher income brackets.

To me the tax deal looks suspiciously like the bailout – shoveling money to those who have suffered the least, without any conditions imposed to require that they plow some of that cash back into the economy, only the vain hope that they will share their prosperity.

We assumed that’s what the bailout recipients would do with all of our tax money.

We know now how that worked out.

Federal Reserve / Martin Column / President Barack Obama / TARP - 12/14/2010

Bombing Ants in the Sausage Factory

The only aspect of the financial reform legislation that’s truly strong is the level of rhetorical nonsense that both parties have unleashed around it: Democrats and the media exaggerate when they praise it as “the toughest financial overhaul since the Great Depression.”

Not to be outdone, the Republican House minority leader, John Boehner, has weighed in, describing the proposal as a nuclear weapon being used to kill an ant.

Which would make the financial crisis the ant, I guess.

On Tuesday, the nuclear bomb had to go back to the, uh, sausage factory, for some more grinding after Sen. Robert Byrd’s death and the defection of a former Republican reform supporter left the Dems with less than the 60 votes they need to overcome the wall of Republican opposition.

One of the few chinks in that wall had been Sen. Scott Brown. But Brown balked after a $20 billion tax on hedge funds and banks was inserted into the legislation to pay for the costs of modest additional regulation. The Republican senator from Massachusetts said he opposed placing a greater burden on financial institutions and he feared the costs of the tax would be passed on to consumers. So the reform proposal is headed back to the conference committee.

Let’s be clear: overheated and mangled rhetoric aside, the financial reform proposal does nothing to reduce the risk posed by our “too-big to fail” banks or to prevent another crisis. The proposal leaves much of the details to regulators subject to lobbying by the very institutions they’re supposed to oversee.

Now legislators think they’ve found a better bet to fund their reform: you!

According to the New York Times, they’re considering ending the Troubled Asset Relief Program early and diverting about $11 billion in taxpayer funds.

The Times observed this leaves legislators with a couple of awkward choices. “So,” the Times concludes, “the choice becomes a tax that might be passed along to consumers, or a charge directly to American taxpayers.”

Is this the best they can do? I’m increasingly sympathetic to Sen. Russ Feingold, the Wisconsin Democrat who is bucking his president and party, opposing reform because it doesn’t get the job done.

I would suggest that Boehner got it wrong, that the ant[s] are not the financial crisis; they’re the legislators scrambling around serving the banks’ interests when they’re supposed to be serving ours.

But that would give ants a bad name.

Financial Reform Legislation / Martin Column / TARP - 06/29/2010

Quotable: Neil Barofsky

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car."

Neil Barofsky, January 2010

Homepage Content / Quotable / SIGTARP / TARP - 04/01/2010