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The Economy: Aren’t we missing the point?

Posted by msrb on March 16, 2009

The Undoing of the Bankster-bailout-stimulus-package-monopoly-money ‘Economic Recovery’ Plan

This blog has already stated its position on why the bankster-bailout-stimulus-package-monopoly-money ‘economic recovery’ plan won’t work under any circumstances in the current economic, social and political framework.

The blog Moderators, and contributors from affiliated blogs, will also endeavor to write about the other mechanisms, including the “Plateau Resilience Effect,” that are certain to result in the plan’s failure. For now, here’s a recent article by Ralph Nader, in which he advocates stepping up the policing of Wall Street … MSRB

Seven Avoidance Indicators

By Ralph Nader
March 13, 2009

Indicators of avoidance are what come to mind while absorbing the various rescue, recovery, stimulus and guarantee programs coming out of the Obama Administration to slow and reverse a splintering and shattering economy. If the Obamites do not act now when the political time is ripest, to put into motion forces of deterrence and prevention, the casino capitalists of tomorrow will again be able to de-stabilize our economy.
The other day I saw Alan Greenspan, former chairman of the Federal Reserve, just about predicting another round of recklessness in about fifteen years. But he called it “human nature” not casino capitalism.

Here are seven avoidance indicators which outline what Washington is not doing to prevent another round of greed and misdeeds by the Wall Street few against the innocent many throughout the country.

1. Where are the resources for comprehensive law enforcement against the Wall Street crooks, swindlers and purveyors of costly deceptive practices? Isn’t there a need to add two to three hundred million dollars for more FBI agents, prosecutors and corporate crime attorneys under the Justice Department to obtain the fines and disgorgements which will far exceed in dollars what is spent by the forces of law and order?

Americans want justice. They want jailtime not bailtime for these crooks. Look how many of the swindled just turned out in a New York City winter to let Bernard Madoff have a piece of their mind as he entered the courtroom and immediate imprisonment.

There has been very little movement so far in Congress or the White House toward this necessary action.

2. Where are the anti-trusters to revive the moribund divisions in the Justice Department and Federal Trade Commission? Failed banks, brokerage firms, and now insurance companies are being taken over by shaky acquirers, often with the encouragement of the federal government. Other industries are experiencing similar mergers and acquisitions in an already over-concentrated economy.

Our government needs to be on top of this accelerating creation of more companies deemed to be “too big to fail.” A variety of antitrust policies are needed to prevent, restructure or, at least, require spinoffs to minimize the anti-competitive effects of the “urge to merge.”

3. What about Congress and Obama shifting some power to the investors and shareholders who are paying for all these losses? The corporate bosses have made sure for many years that shareholders, who own their companies, have little or no right to control them. Had there been less of a gap between ownership and control, the bosses could never have engaged in such reckless speculation, looting and draining of the trillions of dollars with which they were entrusted. These include mutual funds, pension funds and various trusts. Power to the owners seems to be off the table.

4. The federal officials are talking up stronger regulation and re-regulation proposals but we have not yet been informed of their specific plans. There is not much talk of regulatory prohibition. That is, flat-out prohibition of banks, insurance companies, and other fiduciary institutions from speculating in derivatives or, to be more specific, bets on debts and the even more hyped creations of bets on bets on debts on debts.

5. By now, Washington should be devising ways to pay for these gigantic deficits and bailouts. A fraction of one percent sales tax on the hundreds of trillions of dollars in derivative transactions annually would produce hundreds of billions of dollars in revenue and tamp down some of this Wall Street gambling with other peoples’ money.

Such a tax on speculative trades in these abstract instruments can make the Wall Streeters pay for their own bailouts and reduce some of the taxes on human labor.

6. Our government doesn’t highlight not-for-profit institutions like the 8000 credit unions that are increasing their loans and continue to serve over 80 million Americans without a single insolvency. One would think that with the financial goliaths in a free fall, despite ever-larger bailouts from the federal government, that the cooperative model of credit unions would become a useful teaching instrument.

In his new paperback book, Agenda for a New Economy, David Korten makes an important distinction between the “phantom wealth” of Wall Street and the “real wealth” of Main Street.

His twelve-point agenda raises the fundamental question of why Wall Street is needed and how the functions of a just and progressive economy can be fulfilled with a sensible transition to a “real wealth” economy engaged by and accountable to real people striving for the necessities and wants of life through environmentally friendly, more efficient institutions.

Lest any remaining doubters out there are thinking about our country returning to business as usual Wall Street style, please read the confidential powerpoint presentation “AIG: Is the Risk Systemic?” by the AIG financial giant grasping $180 billion, so far, in federal aid and guarantees

In 21 pages of very large type, you will see why the AIG bosses believe that failure of their gigantic corporation would only “trigger a cascading set of further failures which cannot be stopped except by extraordinary means.” In other words, AIG says to Uncle Sam and you the taxpayer save it or be prepared for a global collapse through a dominoes effect of unknown catastrophic sequences. For the full astonishing AIG text, see: http://www.aig.com/Related-Resources_385_136430.html. Right from the horse’s mouth!

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Posted in Congress, Federal Trade Commission, jailtime not bailtime, Justice Department, Wall Street | Tagged: , , , , | Leave a Comment »

Restoring the Constitution: ACT II

Posted by terres on January 6, 2009

As President, [Obama] cannot remain silent and do nothing, otherwise he will inherit the war crimes of Mr. Bush and Mr. Cheney and become soon thereafter a war criminal himself. Inaction cannot be an option. ~ Ralph Nader

Monday, January 5, 2009  San Francisco Chronicle:

Bush-Cheney deserve censure for declaring war against the Constitution

Bruce Fein, Ralph Nader

Before Inauguration Day, the 111th Congress should pass a forward-looking resolution censuring President Bush and Vice President Dick Cheney for executive aggrandizements or abuses that have reduced Congress to vassalage and shredded the rule of law. The resolution should express a congressional intent to prevent repetitions by the President-elect Barack Obama or his successors. The objective is not Bush-Cheney bashing, but to restore a republican form of government in which “We the People” are sovereign, and the president is checked and publicly scrutinized by Congress and the courts. The Bush-Cheney duumvirate won an undeclared war against the Constitution. Most troublesome, they captured the power to initiate war from a spineless Congress. The Founding Fathers were unanimous in denying the president that constitutional authority. They knew that presidents would chronically deceive Congress and concoct excuses for war to control public information, benefit political friends through government contracts, quell dissent, assert emergency powers and enjoy the intoxicating thrill of, “I came, I saw, I conquered.”

By wielding the threat of international terrorism, the Bush-Cheney team put the nation on a permanent war footing – the first time in history that war has been undertaken against a tactic. They maintained that the entire post-9/11 world is an active battlefield where United States military force may be used to kill suspected members of al Qaeda irrespective of international boundaries.

They claimed executive privilege and state secrets to conduct secret government – thereby circumventing political and legal accountability. This included directives to former White House officials Karl Rove and Harriet Miers to flout congressional subpoenas for testimony. They detained hundreds of people (including American citizens) as enemy combatants without accusation or trial. They authorized torture (waterboarding and extraordinary rendition), abductions, secret prisons and illegal surveillance of American citizens.

Like its immediate predecessors, the 110th Congress eagerly yielded its authorities – even the power of the purse – to the president. The Iraqi War Resolution, the $700 billion Troubled Asset Relief Act, the Foreign Intelligence Surveillance Act amendments, and the declination to hold Rove in contempt of Congress were emblematic.

If left unrebuked, the Bush-Cheney usurpations of power will become part of the constitutional firmament and risk creating a safe harbor for future presidential abuses. Every member of Congress, moreover, is required to take an oath to “support (the) Constitution” pursuant to Article VI. There is no corresponding oath to support the Republican or Democratic parties or to subordinate the Constitution in the name of political harmony. Censure would be no novelty.

The Senate voted to rebuke President Andrew Jackson for constitutional lawlessness in 1834: “Resolved, That the President, in the late executive proceedings in relation to the public revenue, has assumed upon himself authority and power not conferred by the Constitution and laws, but in derogation of both.”

The censure resolution we contemplate would enumerate the serial Bush-Cheney constitutional violations; and, censure them for complicity in wrecking the Constitution’s finely tuned balance of powers. In two previous congressional sessions, Sen. Russ Feingold, D-Wis., introduced censure resolutions against the president and vice president for deceiving Congress about the war in Iraq and warrantless spying on American citizens in contravention of FISA.

The resolution should also endorse a remedial legislative agenda that would be binding on all future presidents, including the president-elect. It should include a criminal prohibition on intentional misrepresentations to Congress to obtain authorization for war; or, the president’s initiation of war without an express congressional mandate. The president’s withholding of information demanded by Congress should likewise be prohibited.

An independent prosecutor should be created to prosecute crimes allegedly perpetrated by high-level executive-branch officials in the course of executing presidential directives or defending presidential prerogatives. FISA should be amended to restore individualized warrants based on probable cause to spy on Americans in order to gather foreign intelligence.

Censure will not, by itself, remedy the Bush-Cheney vandalizing of the Constitution. But if members of Congress neglect even that modest step, our republic and democracy will have been irreparably harmed.

Bruce Fein, a deputy attorney general in the Reagan administration, is chairman of the American Freedom Agenda and author of “Constitutional Peril: The Life and Death Struggle for our Constitution and Democracy” (Palgrave Macmillan, 2008). Ralph Nader is a citizen advocate and author.

This article appeared on page B – 5 of the San Francisco Chronicle

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Posted in Congress, Founding Fathers, Iraqi War, lawlessness, secret prisons | Tagged: , , , , | 1 Comment »

Government Without Law

Posted by msrb on January 3, 2009

December 26, 2008

Government Without Law
By Ralph Nader

Over thirty years ago, a book came out titled “How the Government Breaks the Law, by Jethro K. Lieberman.” Even then it was old news and the examples cited seemed small compared to today’s chronic law-breakers in the White House and at many federal departments and agencies. Many recent books have been written on the expansive outlaw behavior of George W. Bush and Dick Cheney.

Less attention has been devoted to the explosion of unauthorized actions by the Executive in recent years. What should be the most frequent question by reporters to government officials — namely, “By what authority are you acting?” – is the rarest of inquiries.

A two part series on Treasury Secretary Henry M. Paulson Jr. in the Washington Post by David Cho in late November brought this point out in a stunningly frank admission by the Corporate bailout czar himself.

Speaking of the takeover of Fannie Mae and Freddie Mac, as well as other megaseizures of failing Wall Street firms, Mr. Paulson expressed these anarchic words: “Even if you don’t have the authorities – and frankly I didn’t have the authorities for anything – if you take charge, people will follow.”

Whew! There you have it! He becomes the law and the law is what he says it is because no one – neither a rubber-stamping President, nor a supine Congress, nor any citizen, deprived of any standing to sue, is going or can do anything about it.

Reporter Cho goes on to write: “Senior government officials said Paulson helped craft rescue programs for financial firms, though he was not sure he had an unquestionable legal basis for the initiatives including the bailouts of the failing investment bank Bear Stearns in March and the wounded insurance giant American International Group (AIG) in September.”

Mr. Paulson went further. Playing Congress, he backed the Federal Reserve – already a government within a government funded by banks– to unprecedented unilateral expansion of its powers and its self-made assets. The Post reported that officials from the Treasury and the Fed “never knew whether they had the legal authority to interfere with the market for such derivatives but did so anyway because the opaque trading threatened the wider financial system.”

Unauthorized Executive Branch actions tend to be contagious. Noticing that the crisis left Wall Street on its knees and willing to unilaterally assume over $8 trillion in a variety of loan, subsidy and capital obligations, the Bush regime kept making more of its powers all by itself. Why not, they may have been thinking? Look what they’ve gotten away with in the areas of military and foreign policy actions.

Weekend gigantic corporate bailouts – a more recent one being the $300 billion plus assumption of Citigroup’s financial risks – engineered by Citigroup co-boss, Robert Rubin–were very secret affairs.

The more public grab of power was the $700 billion goliath to rescue the casino capitalists on Wall Street which was submitted in only 3 ½ pages of proposed legislation to Congress by Paulson and Ben Bernake, the Fed’s chairman in September.

This was too much for the ideologies of House Republicans who beat it on the first round. Even the spineless Democrats thought the requested authority was too much of a blank check. So what happened? Bush told Paulson to give various members of Congress “sweeteners” such as pork and tax breaks for favored lobbyists to get the required votes. Consequently, Paulson was granted staggering discretion to spend the $700 billion when, where and to whom he wanted under whatever conditions or no conditions at all. All in the name of socialism saving capitalism from massive collapse. Ironic.

Mr. Paulson came away from Capitol Hill with Congress in his hip pocket – not exactly what the framers of our Constitution had in mind in 1787.

Thus embolden, Paulson initiated a unilateral, administrative repeal of a Congressional enactment in the tax code – section 382 – to give the banks a huge windfall of about $140 billion. George K. Yin, former chief of staff of the Congressional Joint Committee on Taxation, rejected the legality of the Treasury Department’s decision. He told the Post: “I think almost every tax expert would agree that the answer is no. They basically repealed a 22-year-old law that Congress passed [and Reagan signed] as a backdoor way of providing aid to banks.”

Section 382 of the Tax code “sharply restricts a company from using the tax losses of a company it acquires to reduce its own tax liability,” according to the respected Citizens for Tax Justice.

The Treasury’s two-page notice generated a brief specialized display of outrage from members of the Tax writing committees in Congress and a hundred national, state and local organizations signed a joint letter to Congress demanding the legislators reverse the Treasury’ unauthorized edict.

So what did the House of Representatives do? It passed, later rejected by the Senate a provision in the auto bailout bill, a provision that would have extended the unauthorized Treasury ruling to the automobile industry!

What is going on here is a revolutionary coup d-etat of our legal system by executive branch diktats.

Is the organized legal profession through their bar associations in challenge mode? Are law professors churning over this mockery of the legislature and executive branch administrative law? Are conservative groups – always upset about judicial activism – going into high gear against the new monarchy in and around the White House in downtown Washington, D.C.? Are all those futurists worried enough about the trillions of debt dollars being piled on our children and grandchildren to protest and act? Not really.

Obviously, all this is a developing story. Stay tuned, unless you are willing to be turned out.

Posted in Congress, Federal Reserve, Henry M. Paulson, Wall Street | Tagged: , , , , | Leave a Comment »

Senate Majority: Out of Touch with Reality

Posted by msrb on October 2, 2008

More from pundits on bailout of Wall Street gamblers

Ralph Nader: “As predatory lending mushroomed out of control, the regulators — key among them, the Federal Reserve and the Office of Comptroller of Currency — sat on their hands. The Federal Reserve took exactly three formal actions against subprime lenders from 2002 to 2007. Bloomberg news service found that the Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006. [Full Article by Nader: In the Public Interest: Behind The Deregulatory Curtain.]


A demonstrator stands outside the New York Stock Exchange in New York, September 29, 2008. REUTERS/Shannon Stapleton. Image may be subject to copyright.

ROBIN HAHNEL, a professor emeritus of economics at American University, currently visiting at Portland State University, is the author of “Panic Rules!: Everything You Need to Know About the Global Economy,” “The ABCs of Political Economy: A Modern Approach,” and “Economic Justice and Democracy: From Competition to Cooperation.”

He said today: “An unregulated financial industry is an accident waiting to happen. Eighty years ago that lesson was learned and New Deal legislation ushered in an unprecedented era of financial stability. But over the past 30 years the U.S. financial industry, Republican free market ideologues, and ‘New Democrats’ have conspired to eliminate necessary safeguards. The result is a financial system now dominated by three megabanks where those engaged in unregulated, risky investment banking once again have full access to the savings of ordinary people in commercial banks that are experiencing a category four financial meltdown.

“A week ago Secretary of the Treasury Paulson came to Congress with a terrible three-page proposal designed to bail out Wall Street but not Main Street with no oversight or judicial review. A week of negotiations with congressional leadership added 99 pages of window-dressing to the Paulson plan, devoid of any enforceable protections for taxpayers or homeowners, that was voted down by the House of Representatives, leaving us with no effective government response to a financial crisis that worsens by the hour.”

TIMOTHY CANOVA, a professor of international economic law at the Chapman University School of Law in Orange, California, is the author of an articles related to the current crisis titled: The Legacy of the Clinton Bubble.

He said today: “I am unconvinced that this $700 billion bailout for Wall Street will have any lasting positive effect. If the goal is to help the credit markets, the Federal Reserve already has the authority to purchase commercial paper and support the money markets. The Bush administration is once again using fear to scare people into supporting a dangerous course. There are almost 10,000 foreclosures a day now, and between one and two million adjustable rate mortgages are due to adjust upward in the next year. Without help for the bottom of the pyramid, Wall Street will be back next year asking for another trillion dollars.
This was Japan’s quagmire in the 1990s. The decline in housing prices must be stopped in its tracks and the sooner the better.

“Obama is saying many of the right things — that we should be helping Main Street as well as Wall Street, and that we need to re-regulate Wall Street. But like many in Congress, he’s also saying that these things can wait until next year, that such measures should not be in the bailout package. However, now is the time when Wall Street is desperate for taxpayer help for Congress to demand real help for Main Street.”

Canova addressed what he thinks is missing from the bailout plan: “First, there should be a moratorium on foreclosures and the Bankruptcy Code should be amended to allow people to modify their mortgage loans and stay in their homes. Congress should also extend the ban on short-selling in financial stocks. This could all be accomplished immediately. Any exceptions to a moratorium on foreclosures or to a ban on short-selling can wait some weeks or even months. Likewise, Congress should pass at least $50 billion in revenue sharing for state and local governments which have been hit hard by the decline in tax revenues stemming from falling property values.”

On the need to scrutinize the Federal Reserve, Canova said: “It was the Fed that helped gut the Glass-Steagall Act that had kept banks separate from securities speculation, and it was the Fed that lobbied against margin requirements and reserve requirements, and against the regulation of derivatives and hedge funds. All of this was the inevitable result of making the Federal Reserve ‘autonomous,’ a euphemism for the capture of the Fed by the same financial interests it should have been regulating. It’s like the fox running the henhouse.

“The Fed clearly violates both the Constitution’s Appointments Clause and its private non-delegation doctrine. But the federal courts have dismissed these challenges on very narrow procedural grounds, namely that plaintiffs lack standing because the courts say they cannot show they were directly injured by the Fed. It’s ludicrous, and Congress has the power to change the Fed’s structure and make it more accountable to a wider range of interests and perspectives.” (Source)

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Posted in Congress, deregulation, Glass-Steagall Act, main street, Wall Street | Tagged: , , , , | 1 Comment »

 
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