Weekly Audit: Congress Must Get Tough On Wall Street

 

 

 

by Zach Carter, Media Consortium blogger

Congress returns from its April recess this week with financial reform at the top of its to-do list. With millions of Americans still bearing the brunt of the worst recession in 80 years, Congress needs to start protecting our economy from Wall Street excess, and repair the shredded social safety net that has allowed the Great Recession to exact a devastating human cost.

Big banks are an economic parasite

In an excellent multi-part interview with Paul Jay of The Real News, former bank regulator William Black explains how the financial industry has transformed itself into an economic parasite. Black explains that banks are supposed to serve as a sort of economic catalyst—financing productive businesses and fueling economic growth. This was largely how banks operated for several decades after the Great Depression, because regulations had ensured that banks had incentives to do useful things, and barred them from taking crazy risks.

The deregulatory movement of the past thirty years destroyed those incentives, allowing banks to book big profits by essentially devouring other parts of the economy. Instead of fueling productive growth, banks were actively assaulting the broader economy for profit. None of that subprime lending served any economic purpose. Neither do the absurd credit card fees banks charge, or the deceptive overdraft fees they continue to implement.

As Matt Taibbi explains in an interview with Amy Goodman and Juan Gonzales of Democracy Now!, banks didn’t just cannibalize consumers. They also went directly after local governments, bribing public officials to ink debt deals that worked wonderfully for the banks, and terribly for communities. In Jefferson County, Ala., J.P. Morgan Chase helped turn a $250 million sewer project into a $5 billion burden for taxpayers. The deal generated nothing of value for either citizens or the economy, but J.P. Morgan Chase was still able to line the pockets of its shareholders and executives. This kind of behavior was illegal, but the transactions involved were complex financial derivatives, which are not currently subject to regulation. To this day, nobody at J.P. Morgan Chase has been prosecuted for bribery or corruption.

Congress set to avoid tough regulations

There is a clear need for Congress to enact some firm restrictions against risky and predatory bank activities. But at the behest of Treasury Secretary Timothy Geithner, Congress is doing its best to avoid inserting any hard terms in legislative language, instead leaving the specifics to federal regulators to work out. As Tim Fernholz emphasizes for The American Prospect, this is an exercise in futility. Regulators already have the power to impose more stringent rules on nearly every arena of Wall Street business that matters (derivatives are a very noteworthy exception). If they wanted to fix things, they could do it without Congressional help. The trouble is, the financial sector has polluted most of the regulatory agencies, so that many regulators now act more like lobbyists for the banks they regulate, rather than law enforcers. Indeed, as I note for AlterNet, the top bank regulator in the U.S. spent over a decade lobbying for the nation’s largest banks before taking up his current job. If Congress doesn’t establish firm rules, regulators under future administrations would be free to simply undo any measures that the current agencies actually implement.

Megabanks equal mega risks

As Stacy Mitchell illustrates for Yes! Magazine, most of the problems in the financial sector are connected to the size of our banking behemoths. Big banks have enormous power—if they fail, the economy goes off a cliff. As a result, any responsible government wouldn’t allow any of our megabanks to actually fail. But knowing that the government will protect them from any true catastrophes, big banks take bigger risks—if the risk pays off, they get rich, if it backfires, taxpayers will suck it up. That puts the interests of big banks at odds with the public interest, and creates an economy where bankers don’t try to finance useful projects with a safe and steady return, but instead back crazy bets that just might pay off.

You can’t fix that problem with regulations or idle threats of taking down a big bank when it gets itself in trouble—the markets won’t believe it, and the banks will still take risks. The only solution, Mitchell notes, is to break up the banks into smaller institutions that can fail without wreaking havoc on the economy.

Economic inequality weakening the economy

All of this ties into rampant economic inequality in the United States. Since the 1970s, conservatives have waged a constant battle on the social safety net, shredding protections for ordinary people, while empowering corporate executives to take advantage of them. In an illuminating blog post for Mother Jones, Kevin Drum highlights the fact that average income has only rose from about $20 an hour in 1972 to $23 an hour today. This isn’t because workers were slacking off—productivity has increased at roughly five times that rate. In other words, nearly all of the economic gains since the Nixon era have accrued to the wealthy.

When people don’t have access to strong and improving income, they finance things with credit. But if wages never actually improve, that debt becomes a significant burden. When an entire society finds itself overly indebted, people stop buying things, and the economy tanks. The predation in the American financial sector makes this problem even worse.

But political theatrics are even trumping efforts to provide relief to those hit hardest by the recession. Sens. Jim Bunning (R-KY) and Tom Coburn (R-NE) have blocked the extension of unemployment benefits twice in the past month. As Kai Wright emphasizes for ColorLines, that recklessness puts up to 400,000 Americans at risk of losing their unemployment checks. That’s a human tragedy—hundreds of thousands of people will have no way to pay the bills. It’s also bad for business, since those people won’t have any money to buy things that businesses produce. It is, in short, short-sighted economic insanity.

The economy is supposed to work for everybody, not just the rich, not just bankers. For that to happen, politicians have to establish meaningful regulations to make sure finance works for the greater good– and safety nets to make sure that anyone who falls through the cracks doesn’t see her life prospects permanently diminished.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Weekly Mulch: Off-shore drilling, auto emissions, mountaintop mining from Obama administration

By Sarah Laskow, Media Consortium Blogger

President Barack Obama announced this week that his administration would open areas from Delaware to Florida and in Alaska to offshore drilling for gas and oil. The Environmental Protection Agency (EPA) and the Department of Transportation also released new guidelines for auto emissions to cut carbon emissions, and the EPA said new benchmarks for issuing mountaintop mining permits would prevent damage to waterways in Appalachia.  The environmental community welcomed these last two announcements but both were overshadowed by the off-shore drilling decision, which green groups largely condemned.

Off-putting off-shore drilling decision

Although as a candidate President Obama began by opposing off-shore drilling, by the end of the campaign he said he would support an expansion of drilling areas.  Mother JonesKate Sheppard explains the series of decisions that made this week’s announcement possible:

“In October 2008, amidst calls of “drill, baby, drill” from conservatives, Congress failed to renew the long-standing moratorium on offshore drilling. Months earlier, George W. Bush had lifted an 18-year-old executive ban on offshore drilling, which had originally been imposed by his father in 1990. Obama, of course, could have issued his own order, but didn’t.”

The administration had been considering the decision to go ahead with drilling for about a year but kept deliberations quiet. Key senators, however, knew the decision was coming, and it’s pushing Democrats like Sens. Mary Landrieu (D-LA) and Mark Warner (D-VA) to warm towards energy legislation, TPMDC reports.

Cars’ carbon emission

The EPA’s announcement on auto emissions, on the other hand, comes as no surprise. It marks the first big step the Obama administration has taken to limit carbon emissions through regulation. Auto regulations are a relatively easy sell.  A chunk of Congress wants to keep the EPA from taking these sorts of actions, but in this case, the auto industry supports the federal regulations. At the Washington Independent, Aaron Wiener notes that “the guidelines drew immediate praise from the Alliance of Automobile Manufacturers, which has long advocated national emissions and efficiency regulations rather than patchwork state-by-state rules.”

Mountaintop removal mining

The coal industry will be less happy about the EPA’s announcement on mountaintop removal mining. The agency admitted that the practice causes significant damage to streams and said its new guidelines would lead to significantly less harm.

The new policies, Jeff Biggers writes at AlterNet, will “effectively bring an end to the process of valley fills (and the dumping of toxic coal mining waste into the valleys and waterways).” It could be, he says, “the beginning of the end of mountaintop removal.”

One sign that mountaintop removal’s doomsday is nigh? Sen. Robert Byrd (D-WV), one of coal’s staunchest and most powerful advocates on the Hill, praised the EPA’s decision, reports Mike Lillis at the Washington Independent.

Green groups groan

Green groups are lauding the EPA’s two announcements. (The Sierra Club called the mining announcement “the most significant administrative action ever taken to address mountaintop removal coal mining,” for instance.) But the push for off-shore drilling has environmental advocates squirming.

“As the president extends olive branches to his critics, he’s alienating allies in the environmental community, who say his policies are reminding them more and more of those of his predecessor, George W. Bush,” says Mother Jones’ Sheppard. “Some enviros are even likening Obama to Alaska’s oil-loving ex-governor, Sarah Palin.”

On Democracy Now!, Brendan Cummings of the Center for Biological Diversity, called the decision “horribly disappointing” and said, “Obama is essentially embracing wholeheartedly the policy of: we can drill our way to energy independence.”

The Obama administration’s energy and environmental policy is creeping ever further towards the center. Ken Salazar, Secretary for the Interior, said this week that “Cap-and-trade is not in the lexicon anymore,” TPMDC reports. It’s no wonder that progressive members of Congress are starting to feel uncomfortable with the direction their climate bill is taking, as Sheppard reports. The president may be using up his reserves of political support from his allies as he stretches to meet conservatives and centrist Democrats on some shaky middle ground.

This post features links to the best independent, progressive reporting about the environment by members of The Media Consortium. It is free to reprint. Visit the Mulch for a complete list of articles on environmental issues, or follow us on Twitter. And for the best progressive reporting on critical economy, health care and immigration issues, check out The Audit, The Pulse, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

Weekly Audit: How Superhero Hilda Solis is Winning the Fight for Workers’ Rights

By Zach Carter, Media Consortium blogger

While the poor judgment of top-level officials at Treasury and the Office of Management and Budget frequently makes the news, there is another, unrecognized economic crew doing terrific work: Officials at the Department of Labor are restoring workers’ rights after nearly a decade of neglect.

To top it all off, President Barack Obama appears ready to make another set of strong, though less high-profile, economic appointments that will help rein in Wall Street excess.

DoL All-Stars

As Esther Kaplan documents in a masterful piece for The Nation, the Department of Labor  (DoL) has been transformed from an agency that enabled corporate excess to one that holds companies accountable.  In less than a year, Labor Secretary Hilda Solis and her team of deputies significantly leveled the playing field between ordinary workers and high-flying executives.

For decades, when conservatives have attempted to confront social problems, they’ve relied on the mantra of enforcement. If we had more cops, we’d fix everything. But as Kaplan documents, under President George W. Bush and his Labor Secretary Elaine Chao, the DoL simply stopped enforcing worker protection laws. From wage theft to mine safety, the Department essentially allowed corrupt employers to do anything they wanted.

That neglect has already ended. Armed with a budget of just $1.5 billion—that’s roughly 0.2% of the Troubled Asset Relief Program—Solis and company have cultivated a list of economic accomplishments that seemed impossible when they took office. As Kaplan details:

“Facing badly depleted enforcement ranks, Solis hired 710 additional enforcement staff, including 130 at OSHA and 250 for the crucial wage-and-hour division, upping inspectors by more than a third. Another hundred will come on next year to staff a crackdown on the misclassification of millions of employees as “independent contractors”–a dodge to avoid paying taxes and benefits–a move that has set off enormous buzz on business blogs. Her team took a plunger to the stagnant regulatory pipeline, moving forward new rules on coal mine dust, silica, and cranes and derricks. She restored prevailing wages for agricultural guest workers and is poised to restore reporting rules on ergonomic injuries.”

Fixing the Fed

Obama also appears ready to make another slate of strong economic appointments at the Federal Reserve, an agency stuffed with free-marketers who helped engineer both an economic catastrophe and resulting bailouts. Obama’s rumored picks—economists Janet Yellen and Peter Diamond and bank regulator Sarah Bloom Raskin—are aggressive about making the economy work for everyday citizens, as I emphasize for AlterNet.

If Congress passes financial reforms similar to what Senate Banking Committee Chairman Chris Dodd (D-CT) has proposed, the Fed’s regulatory responsibilities will actually expand, despite its failures over the past decade. The Fed has never effectively regulated anything and it’s not very concerned with unemployment as an economic problem.

That makes Obama’s pending slate of officials who prioritize bank regulation and broader employment very important. Raskin, in particular, stands out with her strong record as a state banking regulator. If Obama ultimately nominates her, she’ll be the first pure regulator ever appointed to the Fed. The potential picks don’t make up for Obama’s reappointment of bailouteer Ben Bernanke as Federal Reserve Chairman, but they do show that the President is capable of sound judgment.

Strengthening the Dodd bill

But the strength of Obama’s potential Fed nominees doesn’t justify the weakness of Dodd’s financial regulation bill. As Amy Goodman and Juan Gonzalez of Democracy Now! reveal in interviews with economist Robert Johnson and ColorLines Editorial Director Kai Wright , the bill leaves plenty to be desired. Dodd is currently making the rounds and declaring that his bill will end the abuses giant banks deployed against the broader economy, but the truth is, the bill has largely been gutted by bank lobbyists. Here’s Johnson:

“We’re engaged in a Kabuki theater right now, hoping the material is too complex for the American people to understand, declaring victory, and yet basically encoding into law current practices of the banks. Every one of your listeners should ask the question, given this legislation, if the President, House and Senate pass it, will we be in a place where AIG couldn’t have happened, Lehman Brothers couldn’t have happened, Bear Stearns couldn’t have happened, and, more importantly, nine, ten percent unemployment caused by the banking crisis couldn’t have happened? I argue this bill does very little.”

The importance of trust-busting

So Dodd’s bill needs to be substantially strengthened as it moves through the Senate. But there’s plenty of other economic work to be done outside of Wall Street. As Barry C. Lynn and Phillip Longman explain for The Washington Monthly, the steady expansion of corporate monopolies has resulted in a fundamentally unstable economy.

The U.S. simply does not create jobs at the rate it once did, and companies aren’t held accountable to market forces like competition. Many of our monopolies are hidden, as Lynn and Longman note. Macy’s and Bloomingdale’s seem like competitors, but they’re owned by the same holding company. The same dynamic holds true in auto manufacturing, banking, pet food, health care and IT. Consumers think they’re choosing between competing goods and services, when in fact they’re shopping in different divisions of the same corporate Goliath.

All hope is not lost. As Laura Flanders emphasizes for GRITtv, the passage of health care reform proves that the Obama administration and Congress can make substantive progressive changes when they put their minds to it. The question is whether Obama is willing to limit his economic accomplishments to lower-level issues, or go big and take on the deep-pocketed corporate campaign contributors.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

Weekly Pulse: Pelosi Makes Her Move; Republican Rep. Calls for Coup

By Lindsay Beyerstein, Media Consortium blogger

Speaker Nancy Pelosi (D-CA) has laid out a strategy to pass health care reform in the next couple of days by allowing the House to vote on the details of the reconciliation package instead of the Senate bill itself. As usual, progressives are fretting that winning will make them look bad. On the other hand, conservatives are baying for blood and calling for revolution.

‘Deem and pass’

Nick Baumann of Mother Jones discusses the parliamentary tactic known as “deem and pass” (D&P), which House Democrats plan to use to avoid voting for the Senate bill before the Senate fixes the bill through reconciliation. The House doesn’t want to sign a blank check. If the health care bill passes the House first, there’s no guarantee that the Senate will make the fixes as promised.

Originally, the hope was that the Senate could do reconciliation first. The problem is that you can’t pass a bill to amend a bill that isn’t law yet. That would be like putting the cart before the horse. To clear that hurdle, the House will invoke a rule that deems that Senate bill to have passed if and when the House passes the reconciliation package.  It’s sort of like backdating a check. Ryan Grim explains the process in more detail on Democracy Now!

D&P does not equal treason

Progressives like Kevin Drum worry that D&P will make the Democrats look bad. Meanwhile, the Tea Party crowd is calling for Nancy Pelosi to be tried for treason, as TPM reports. The bottom line is that D&P is no big deal. Republicans used the process 36 times in 2005 and 2006; Democrats used it 49 times in 2007 and 2008. D&P is constitutional. We know because it has already been upheld by the Supreme Court. Kevin Drum writes, “If you have a life, you don’t care about the subject of this post and have never heard of it.”

Teabag revolution

There is no joy in Tea Party Land, as Dave Weigel reports in the Washington Independent. The tea baggers are frantically lobbying to stop the bill, but the reality is starting to sink in. Their leaders are shifting from trying to kill the bill to planning the tantrum they’re going to throw when it passes:

While many held out hope that plans to pass the Senate’s version of reform in the House would stall out, others pondered their next steps. Some, like Rep. Steve King (R-IA), took a dark view of what might come.

“Right now, they’re civil, because they think they have a chance of stopping this bill,” said King to reporters, waving his arm at a pack of “People’s Surge” activists forming a line to enter the Cannon House Office Building. “The reason we don’t have violence in this country like they do in dictatorships is because we have votes, and our leaders listen to their constituents. Now we’re in a situation where the leaders are defying the people!” Later, King would expand on those remarks and speculate on a possible anti-Washington revolt in which Tea Parties would “fill the streets” of the capital.

Sounds like King is calling for a revolution, doesn’t it? As it turns out, that’s exactly what he says he wants if health care reform passes. Eric Kleefeld of TPMDC reports that King is hoping for something akin to the uprising that overthrew the Communists in Prague in 1989. “Fill this city up, fill this city, jam this place full so that they can’t get in, they can’t get out and they will have to capitulate to the will of the American people,” King said in an interview with the Huffington Post.

Women and health care reform

Health care reform seems poised to pass. Amid the heady excitement, there’s a sense of gloom in the reproductive rights community. Bart Stupak was defeated, but health care reform will probably end private insurance coverage for abortion.

In The American Prospect, Michelle Goldberg urges feminists to support reform anyway. She argues that the women suffer disproportionately under the status quo. If reform passes, it will insure 17 million previously uninsured women. Expanding health care coverage might help reverse rising maternal mortality rates in the United States.

A recent report by Amnesty International found that at least two women die in childbirth every day in the U.S., a much higher rate than most developed countries. The anti-choicers had the advantage because they were willing to kill health reform over abortion. The pro-choice faction did not allow itself the luxury of nihilism.

This post features links to the best independent, progressive reporting about health care by members of The Media Consortium. It is free to reprint. Visit the Pulse for a complete list of articles on health care reform, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

Weekly Pulse: Obama Stalls for Time with Health Care Summit

 

By Lindsay Beyerstein, Media Consortium Blogger

President Barack Obama’s February 25 health care summit, where he will appear on TV with Republican leaders, has been hailed and assailed as yet another gesture towards bipartisanship. But the summit is really a delaying tactic. It’s a decoy, something shiny to keep the chattering classes entertained while Congressional Democrats wheel and deal furiously behind the scenes.

At this point, there are two ways forward, and neither of them require Republican support. The first option is for the House to pass the Senate health care bill as written—but with the understanding that the Senate will later fix certain contentious parts of the bill through reconciliation. The second option is for the Senate to pass the reconciliation fix first and the House to pass the bill later.

Someone has to go first

Art Levine of Working In These Times diagnoses a severe case of paralysis on the left: Nancy Pelosi is willing to entertain the first option, but labor leaders like Rich Trumka, President of the AFL-CIO, want the Senate to go first because they don’t trust the Senate to fix the bill later. Nobody wants to go first, but somebody has to. If neither the House nor the Senate takes the initiative, reform will fail by default and Americans will continue to suffer.

If the Democrats are going to attempt reconciliation, they need a plan to steer the legislation through the Senate. While everyone else is talking about the summit, procedural experts are probably huddling with leadership, nailing down the details.

Obama’s ‘Waterloo’

Everyone knows that Obama isn’t going to pick up any Republican votes, summit or no summit. The House bill got 1 Republican vote, the Senate bill got 0. Quite simply, Republicans want health care reform to fail. No Republican president since Richard Nixon has attempted comprehensive health care reform. In opposition, Republicans have been intractably opposed reform because they’re afraid the Democrats will take credit for it. Sen. Jim DeMint (R-SC) famously said he wanted “break” Obama by making health reform the president’s “Waterloo.”

Health care reform in the media

Meanwhile, as Monica Potts notes in TAPPED, the media seems to be bending over backwards to treat the Republican’s pro forma suggestions as serious proposals for reform, even though the Congressional Budget Office has already analyzed the plan and determined that it will leave millions uninsured without lowering costs. The health care bills as written are already chock full of Republican proposals, like eliminating the public option, easing restrictions on buying insurance across state lines, allowing people to band together in insurance-purchasing coops.

Kevin Drum of Mother Jones worries that the upcoming summit will just give the Republicans more free airtime to spread falsehoods about “government controlled health care.”

Voices of the uninsured

This week, The Nation is publishing the stories of some of the millions of uninsured and underinsured Americans: An uninsured woman who was diagnosed with throat cancer last month; a father with a severely disabled son who is about to hit is $5 million lifetime insurance benefit cap; a single mom on the verge of medical bankruptcy; and many others.

In other news

Dr. Gabor Maté, the official physician of Canada’s only supervised drug injection site, talks about the science of addiction and his new book with Amy Goodman of Democracy Now!.

Todd A. Heywood reports in the Michigan Messenger that American Family Association of Michigan is doubling down in the dying days of Don’t Ask Don’t Tell. Not only do they want to ban gays from the military, they want to re-criminalize homosexuality.

This post features links to the best independent, progressive reporting about health care by members of The Media Consortium. It is free to reprint. Visit the Pulse for a complete list of articles on health care reform, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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