Banker's Holiday Continues, Part 8 (or 9)--
“Four of the [Banking] industry’s top trade groups spent nearly as much on lobbying in the first three months of this year as they did in all of 2001.” Stepehen Laboton, NY Times, 6/4/09
End of school: grading, graduation, and goodbyes. Gawd, I hate goodbyes. Kids have the get-out-of-jail-free smiles plastered on their faces since Memorial Day. They don’t want to sit through lessons about racism as a justification for economic exploitation during the age of imperialism; Kipling’s “the white man’s burden,” etc. “Yeah, right, Mr. T, can we have our party now?” RIF-d (i.e., “reduction in force,” a euphemism for you no longer have a job) teachers shuffle out the door wondering what they did wrong (nothing), blaming older teachers that don’t work as hard as they do. Everyone else heads home, again, shaking their heads.
This year’s graduates, the first batch at my school I taught as 9th graders, were especially touching as they crossed the dais with their diplomas, looking simultaneously like they’d been shot out of a happy cannon and totally unsure of where the hell they were going. Politicians like to huff and puff about our failing public schools (usually as a pretext for cutting funding and implementing some punitive accountability measures), but this year’s grads are better prepared for what lies ahead than I ever was, at least as smart as my generation, and a whole lot smarter than the collective stupidity of this country’s leadership since I graduated from high school.
But those goodbyes. I freeze up tight. I fear I'll explode in tears; red face, snot, choked up, “I’ll really miss you, man!” So I really have to psych myself up to make it through w/ the right degree of stoic composure, ‘onward and upward, summer adventures, don’t forget me when you make it big, fond farewell and pip pip cheerio.’ And, still, I probably reflexively do a little avoidance. But I muddle through, hug someone too tight, gush too much after a couple beers, but I make it through another year w/ my stodgy dignity more or less intact: happy to collaborate and learn from students and colleagues and do what I can to give kids a little leg up and over on their way who knows where, to English literacy and world citizenry! The stuff of teacherly hopes. But I still hate the goodbyes.
So, at any rate, I haven’t had any time (or emotional energy) for writing for awhile but I’ve followed the news on the economy some. (I can’t help myself.) Sorry to say, if you haven’t noticed (and if you follow only TV reports you might not have), but our side is losing. Sure, the stock market is rebounding, banks credit is loosening. Unfortunately, unemployment continues to grow (pushing 10%), there’s no certain ebb to the tide of mortgage foreclosures yet, and there are more blue hairs working at Fred Meyers. But Wall Street’s confidence in its ability to continue fleecing the public is rising, so things are getting back to normal. Some catch-up.
preposterous hopes— too big to fail?
Maybe foolish but there really did appear to be an opportunity in this economic crash, because of its shocking severity (“apple pie and Chevrolet,” the latter just went bankrupt!), to see some real political-economic reform. At minimum, some basic national antitrust wakeup call to the effect that private banks and corporations “too big to fail” are a threat to democracy and nothing more than a “socialism for the rich.” If a business is too big to fail then make it public, and so politically accountable, or reduce and limit its size so that it cannot become too big to fail. To fail to make this correction makes a massive shell game mockery of our democratic system, one that people recognize (here and abroad) even if they don’t understand the complexities of the economy.
banks win, consumers lose
It’s embarrassing, really. Despite promises and rhetoric to the contrary, Obama has given in to the status quo on Wall Street. Lawmakers who have discussed the issue with the administration say the president’s senior aides concluded that a battle with Wall Street was simply not worth the cost. What aides? His guys from Wall Street, Geithner and Summers? What costs? Their friends in banking, their investments?
It’s so galling you couldn’t make this stuff up. The economy tanks, demand plummets. The government pours trillions of dollars into saving the financial sector, instead of nationalizing and reorganizing it. So out of gratitude the banks sit on the money because they don’t want to start lending until they know the full extent of the damage from the housing crash. And then at the first signs of stabilizing markets they begin raising staff salaries, again, and rates on customers (you know, to cover their costs from losses in the housing market). Meanwhile, the O Team finally gets around to some “compromised” regulatory reform proposals (being furthered by galling bank interests as I write) that, mostly, will increase the power of the Federal Reserve to police Wall Street, which is like asking Miller Brewing to police drunk driving.
The proposed regulations do nothing structurally about the size of those private profiteers too big to fail and little about the shadow banking and “off balance sheet entities” that mark the most grotesque dishonesty of the banking crisis. According to those that know better, the proposal to require some skin-in-the-game (5%, reportedly)from loan operators is laughably insufficient. No one has been more wrong in the run-up to this collapse than credit-rating agencies like Moody’s and Standard & Poor's. And, yet, not a peep about reforming these institutions. Nor a word about limiting the “brokered deposits” or “hot money” that has destroyed many regional banks.
The administration’s talk about consumer protection, see Geithner on Meet The Press, seems like token public relations. (Throw the dogs a bone, watch them scurry after it.) Curbing predatory credit card practices is welcome but small potatoes compared to losing your job or home or pension. Obama made promises about helping save people’s homes from foreclosure and then abandoned those plans to a congress full court pressed by the banks. (How, at this point, you might wonder, increduously, could the unpopular banks exert this kind of influence? I don't know but I bet it has something to do w/ money.) Consumers trying to hang-on to their homes are lost in the black hole maw of the mortgage servicing industry: a Kafkaesque labyrinth of customer service reps, a system mismanaged and overwhelmed by the demands put on it. Meanwhile, the banks squeeze another cool $13 billion in “bailout” money out of a congressional bill intended, in the President’s words, to “stand up to the Special Interests, and stand up for the American people.”
Bernie Madoff’s Wall Street
Mad greedy Bernie Madoff goes to jail for 150 years. Yes. It’s like dunking some asshole at a county fair. But let’s remember Madoff was NOT some rogue operator or extreme aberration on Wall Street. He was an insider’s-insider, a respected confident to the head of the Securities Exchange Commission. Madoff helped set the rules. For goodness sakes, if insider expertise was what’s needed to save the economy than Bernie Madoff would have made a better (or at least more honest) choice to join the O-team than Geithner and/or Summers. And it’s hard to imagine, grand larceny thief that he is, how he could have advised any more favorable terms for Wall Street than those two supposedly paragons of business propriety.
Obama explains the collapse thusly: "A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory system basically crafted in the wake of a 20th century economic crisis--the Great Depression--was overwhelmed by the speed, scope and sophistication of a 21st century global economy."
And William Greider responds: “That is not what happened, to put it charitably. Unlike some other presidents, Obama is much too intelligent not to know this. The regulatory system was not overwhelmed by historic forces. It was systematically gutted and dismantled by the government in Washington at the behest of the banking interests.”
Banking interests from which Madoff was not an exception but a leading light. They believed in the wonder of securitization, investments without risk, based on inscrutable formulas and off the books trading. It’s guys playing with other people’s money, with said people totally oblivious until it is too late. So that’s their own damn fault, say P.T. Barnum capitalists. But is playing suckers really the kind of “business model” we need or want? I wouldn’t think so but, to this point, the O Team has done everything they can to mask the problem and jumpstart the banker’s game of bubbles and busts. More casino capitalism for everybody!
In Rolling Stone, Matt Taibbi (The Great American Bubble Machine), already identifies the new bubble sector as the carbon cap-and-trade still being ironed out in congress.
apologies and promises
Obama apologists will argue he’s too busy with health care or creating this carbon trading system to take on the banks. But if he’s doing this alone then we’re lost. And if he cannot put some people on the job to make sure the right thing gets done in congress in support of new bank rules and forestalling more home foreclosures then he does not possess the leadership we need. Come on, all the talk about standing up for Main Street, while turning a blind eye to cutthroat Wall Street deal-making, after already giving these guys the farm and then some, is contemptible.
Reagan Did It
Of course, Obama did not make the deregulatory mess our financial system is in but he’s enmeshed in a wonky conservative account of the crisis. It was Alan Greenspan, as Fed Chair, with Ben Bernanke’s help, who, back in the High Tech bubble recession of ’01-’02, reduced interests rates too much, setting the stage for the housing bubble. Or the one I heard the other day, the crash was caused by government over-reaction to the collapse of Bear Stearns and Lehman Brothers in September. (Apparently, the trillions the public have put into the financial system has been necessary only because the government started a panic!) These aren’t credible explanations for the scale and systemic reach of this economic downturn, but they support the status quo economic policies coming out of the Wall Street-Washington axis.
So where did this whole mess really start? Krugman nails it on the Garn-St Germain Depository Institutions Act, of 1982. This is some Reagan supported legislation that deregulated standards on debt-to-asset ratios and led directly to the Savings & Loan collapse of the late-80s. And, most importantly, it inaugurated a “free market” revolution of deregulation and privatization and tax cuts for the rich and a general drift towards levels of inequality not seen since the Gilded Age. The Reagan Revolution. And it ended as a credible economic model, even if some haven’t got the memo yet, in the crash last fall.
More Chapters
As an epic novel the crisis has entered one of those long, digressive passages in Moby Dick. Emerging are the stories of forgotten heroes like Brooksley Born and Sheila Bair and Elizabeth Warren (pictured above). I don’t know what to make yet of the preponderance of women fighting the good fight here. I hope there are more of them to step up, though.
community services and the free market religion
Locally, it would seem the free market religion still holds sway. Tax revenues are down so the state budget was slashed. You might expect some politicians to question a tax base structure that puts such basic community services as police, health care, and education at the mercy of the ups and downs of the market but I haven’t heard a word.
It seems like the same old game. Russel Investments, for example, is this huge investment services firm-- homebased, or up to now, in Tacoma—who manages $136 billion in assets from 147 countries. Because Russel has been talking about moving, local congressman, Norm Dicks, has pledged more than $148 billion to keep them in Tacoma. (And Gov. Gregoire will chip in another $700,000.) You have to wonder how the math here adds up to benefit the local community? What it appears to be is the same old state and municipal groveling to win favor with big corporations in hopes for some growth trickle down.
Which brings me back to where I started following this crazy mess last summer. I’ve supported government spending because I hate to see people lose their jobs or homes or pensions. I watched people lose jobs this spring and I felt bad for them. I do not know what I’d do if in their place; I’d really feel lost. Or if my parents lost their pensions, it’d be very hard on them. These are hardships I would not wish on anybody. But these wishes beg the question as to how much longer this growth economy, that I hope the government can revive, can be sustained?
People have been raising this question for a long time and been dismissed as hippy-dippy Chicken Littles for a long time as well but the signs of stress on climate and our food and water supply have multiplied in the last decade more than anyone expected. It is becoming increasingly apparent to all that we cannot continue to consume resources as we have indefinitely, and the rate of per capita consumption in our country cannot be extended to the billions in China and India without dire consequences for the planet.
The grandeur of “free market” theory is based on the delusion of a perpetual motion machine. It fails to account for the finite energy sources it needs as inputs or the impact of the wastes it generates as outputs. From a broad view what we’re experiencing economically are pressures, breakdowns caused by debt (investments in the future) growing faster than our ability to produce real wealth. We’re pushing up against Malthusian limits (the days of cheap energy are numbered) and need another green revolution to stretch those limits. But at the moment it’s hard to imagine how this need can be reconciled with an economic growth model based on ever increasing demand and consumption.
muddling through
Back in the day my friend Pam and I used to go for these long walks after work. Ranting, laughing, shaking our heads at the office drama, upside-down politics, the impossibly Dilbertian people that filled our work lives. We developed a ritual in these conversations where at some point one of us would, sigh, and exclaim as to the wonder that the world keeps spinning, that people don’t stop in the street and go stark raving mad from the upside down craziness of it all. Something like Peter Finch in Network, I suppose we imagined. We settled on this little ritual as an ironic punctuation mark on our ravings: because at the end of the day what always astonished us most was that, despite all the dysfunctional drama of our workplace, our programs and organization always seemed to muddle through. And that seems true of the world, too: it seems to muddle through just like us. You have to wonder, though, how long this can last.
Currently playing:"Tell Me," The Rolling Stones
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