100 Slaves 100 Enemies

There have been suggestions that the Fed chose to negotiate weakly, Mr. Barofsky said, to give a “backdoor bailout” to A.I.G.’s banks. He said Mr. Geithner and the Fed’s lawyers had denied this, but added that “irrespective of their stated intent,” there was no doubt about the result: “Tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.’s counterparties.”

Among its notable findings, the report challenged Goldman’s position that it should not have been forced to bear losses on its dealings with A.I.G. because it had successfully hedged away any exposure. Mr. Barofsky said that Goldman’s hedges were unlikely to have held up amid the market turbulence of late last year.

Audit Faults New York Fed in A.I.G. Bailout – NYTimes.com.

The most important regulatory reform is to fire the regulators who were out to lunch – starting with Ben Bernanke – thereby allowing this economic disaster. If we don’t fire the people that blew it, then we give the regulators no incentive to get it right next time. This is what basic economics tells us.

…

We got into this crisis because of a serious failure of the regulators and, more importantly, the economics profession. The failure to come to grips with this reality both means that much of the regulatory reform effort will be misdirected and that we will have done little to prevent the next crisis.

The central problem, which we should force every regulator to say 10,000 times, is that the US had a huge housing bubble. The existence of an $8 trillion bubble guaranteed a severe economic downturn when it burst. This would have been true even if there were no dodgy subprime mortgages, exotic collaterised debt obligations, credit default swaps or over-leveraged investment banks.

- Dean Baker, Regulating the regulators

A few books arrived from Amazon yesterday that I’m looking forward to getting into: It Takes a Pillage: behind the bailouts, bonuses, and backroom deals from Washington to Wall Street by Nomi Prins, Plunder and Blunder: the rise and fall of the bubble economy by Dean Baker, and The Great Financial Crisis: causes and consequences by John Bellamy Foster and Fred Magdoff.

When it comes to historical events like a Second Great Bank Depression (as Prins puts it), I have followed it here and there in the news but I’d rather wait for people I trust to do the research necessary to understand what’s happening. That’s what I figure I pay for when I buy books like these. Like so many things, sure, I could do it myself, which is a great concept in general. But what you can’t do yourself is everything.

I own a house with my wife. Some work needed to be done on it. Sure, I could do it myself — and do it wrong. And then do it myself again — and have it be imperfect. Imperfect is fine with me when it comes to creativity or drafts of writing. Not so when it comes to my roof or a kitchen floor. No thanks, I will pay the money. I figure it’s more efficient for me to work the job I have and then use that money to pay someone to do this other work quickly and correctly — rather than me take on a part-time job known as “home improvement” — a job I’m not all that interested in. Isn’t that what this capitalism thing was supposed to be about?

On the other hand, having people do it for you can also have it’s consequences, which brings me back to the books I bought. Forty pages in to Pillage I’m reminded how much of a mess the so-called experts made of the financial crisis. In a nutshell, something really did need to be done in order to not let our financial system literally crash (e.g. you go to the ATM — no money; your credit card doesn’t work; you don’t get a paycheck, etc.), but what was done simply transferred vast amounts of wealth from tax payers to financial failures who view themselves now as “survivors” even though it was our taxes that allowed them to survive. Worse yet, the bozos who received the money caused the problems. Even more worse the government employees empowered to fix this mess are buddies with the people who created it.

I heard Andrew Ross Sorkin on Fresh Air the other day. He seemed to want to stress that he’s not an apologist for people like Henry Paulson, but he sure sounded like it. Terry Gross and Sorkin got caught up in the same old canard: well, did he mean to let Goldman Sachs survive? Well, of course he did! But Sorkin pussy-foots it and suggests that maybe unconsciously he did but consciously he didn’t. Well, he certainly consciously was not interested in helping regular people by providing banks with incentives to help people work out their mortgage situations rather than foreclose on them.

I bring up Sorkin, because he too has a book out on the financial crisis. And because he’s a New York Times journalist, therefore he obviously must be very important to listen to. But, I’m skipping him and sticking with my mavericks above.

I forgot to mention that Magdoff and Foster are involved with the publication Monthly Review (I think they’re the editors?) which is a — wait for it… SOCIALIST publication! [insert scream here] (Speaking of screaming, have you become a graphic novel reading zombie hooked on The Walking Dead series? *Uggghh* …  I have)

Interesting & Related Links

Dean Baker on Fresh Air

Dean Baker and Nomi Prins on GritTv

Nomi Prins

Monthly Review

Allison Kilkenny: Wall Street celebrates bonuses, schools beg for supplies

Rising healthcare costs are killing wage increases. From 1980 to 2007 the average cash income for the vast majority of Americans (the bottom 90 percent) increased only $2,697, to $33,321. Healthcare spending per household rose more than three times as much, increasing $8,797, to $15,369, according to the Centers for Medicaid and Medicare Services. Household healthcare spending now equals almost half of the average income of the vast majority of Americans.

- David Cay Johnston, The Nation, September 2, 2009

Mark Weisbrot of CEPR wrote a review of the new documentary from Michael Moore, Capitalism: A Love Story, which comes out on October 2, 2009. Weisbrot’s review will give you an idea of some of the movie’s content. The use of an Iggy Pop song as background music for robbing banks piqued my interest, as did this — probably because I was born in 1973:

He gets the economic story right. How is it that Michael Moore’s father could buy a house and raise a family on the income of one auto worker, and still have a pension for his retirement? And yet this is not possible in the vastly more productive economy of today? The answer is not complicated: in the first half of the post-War era, employees shared in the gains from productivity growth; since 1973, most of them have hardly done so at all … Moore also explains the structural changes, such as Ronald Reagan’s rollback of union and labour relations to the 19th century, that helped bring about the most massive upward redistribution of income in US history.

It is a mistake to feel sorry for the financial industry or to keep giving them money. Now they want to bundle life insurance policies that cover people with terminal illnesses. Why? Guaranteed pay outs. Of course, their big concern is losing money if a cure is found for any of these illnesses. Just another example of the cruel, inhumane, macabre, warped nature of people who use greed as a motivational factor and celebrate it as CAPITALISM.

To help understand how to manage these risks, Ms. Tillwitz and her colleague Jan Buckler — a mathematics whiz with a Ph.D. in nuclear engineering — traveled the world visiting firms that handle life settlements. “We do not want to rate a deal that blows up,” Ms. Tillwitz said.

The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet.

[From Back to Business - Wall Street Pursues Profit in Bundles of Life Insurance - Series - NYTimes.com]

…In the U.S. economy, a 5 percent reduction in average work hours could save roughly 7 million jobs.

via Beat the Press Archive | The American Prospect.

I know what you’re thinking: “But I love my job! If I could I would work 5% more hours and have 5% less time to live my life, I would be so much happier!”

Cost is supposedly an issue for providing health care reform (not even universal health care), yet Congress is ready to pay $6.9 billion for equipment that the military doesn’t want or need.

The Democratic-controlled House is poised to give the Pentagon dozens of new ships, planes, helicopters and armored vehicles that Defense Secretary Robert M. Gates says the military does not need to fund next year, acting in many cases in response to defense industry pressures and campaign contributions under an approach he has decried as “business as usual” and vowed to help end.

The unwanted equipment in a military spending bill expected to come to a vote on the House floor Thursday or Friday has a price tag of at least $6.9 billion.

House Seems To Be Set on Pork-Padded Defense Bill
by R. Jeffery Smith
Washington Post
Thursday, July 30, 2009

In one finding, 75 percent of respondents said they were concerned that the cost of their own health care would eventually go up if the government did not create a system of providing health care for all Americans. But in another finding, 77 percent said they were concerned that the cost of health care would go up if the government did create such a system.

via New Poll Finds Growing Unease on Health Plan – NYTimes.com

That’s the last paragraph of the article. Obviously, people have no idea what to think about health care reform. Partly because no one has produced any details about it. And partly because the insurance industry is spending millions of dollars on propaganda to convince people that reforming health care will eliminate your choice of doctor (nevermind the 47 million people with no insurance and therefore no doctor) and increase your health care costs. How adding a public option could increase your private insurance is a mystery, probably because it doesn’t make any sense. If the government provides an option, it will create competition for the private  insurance industries who will be forced to lower costs.

As far as health care being “too expensive”, this is simply not true. Dean Baker points out the following in his Beat the Press blog in this post titled, NPR Wonders Why Public Support for a Health Care Plan With a “Huge” Cost is Slipping:

The program’s huge price tag is equal to about 0.5 percent of projected GDP over the next decade. The Iraq war at its peak cost more than 1.0 percent of GDP. NPR and other news outlets rarely, if ever, referred to the “huge” cost of this war, which was twice the “huge” cost of President Obama’s health care program. Perhaps the decision of supposedly neutral media sources to constantly warn that the costs of the program are “huge” has something to do with its dwindling public support.

Douglas Rushkoff, who started his book writing career with Cyberia, an overview of cyberculture, back in the 90s, and then made the word “meme” popular with his Media Virus book, diverted away from his criticism of the advertising world and got into some graphic novel/comic book projects, which looked at Judaism and how that religion (and I’m going to say most religions) got diverted from their original intent by men who decided to take it over and manipulate it to serve a small group of powerful people rather than the people themselves. In the case of Christianity, think televangelists.

Apparently (I have not read the book), Rushkoff has now taken on corporate culture. It’s not that he is against corporations. Generally, Rushkoff tries to always remain positive by avoiding dead end criticism and instead promotes the positive and healthy. So, in this case, he is not against corporations he is for more possibilities, more diversity — which corporations work to eliminate.

This idea makes sense, and personally I wonder why I would need to read the book. Corporations want a monoculture, because that would maximize profits. Instead, we should be doing things ourselves and buying locally and from people we know. OK, got it. Buy locally. Produce locally. Share. Cooperate. Agreed.

For a while Rushkoff worked with companies and tried to get them to think differently. A recent book was called Get Back in the Box. The premise, as I understand it, is that corporations don’t make anything anymore. They merely work to fool people into spending money on their products rather than making their products better than other corporations.

Of course, this is by design. Noam Chomsky has pointed out that business leaders don’t want competition. More competition makes making money harder. It’s easier to have no competition, off-shore your factories to practically slave-labor, reduce money spent on improving your products, and then spend money on propaganda to convince people to give you their money for your mediocre widgets. Wouldn’t it be even better to get out of the product producing business and just get into finance where you can just speculate and not worry about the pesky masses of workers who make irrational demands like paying them a living wage? And that’s what has been happening until — pop goes the housing bubble.

In Rushkoff’s Get Back in the Box, he argues that companies would be better off if they ditched this model and concentrated on making whatever it is they came into existence for in the first place. I think this would seem obvious to most regular people. But it would seem the business leaders (the best and the brightest?), people who do not do well by rocking boats, need someone to tell them this. And this is a reason I haven’t paid too much attention to Rushkoff since reading Media Virus. I feel like he’s speaking to a social, business, religious, and cultural elite that I have never been, will never be, and do not want to be a part of.

On the other hand, I find his ideas interesting even if they seem fairly obvious and don’t seem to require an entire book to comprehend. And I have been reminded of Rushkoff’s articles that have appeared in places like Arthur magazine, which feel addressed to normal people, ground level critical thinkers and creative types.

I’m glad to see Arthur has been resurrected.

Here’s the Rushkoff video:

via Rushkoff’s site.