Congressman Frank, thanks for being here. I don't know if you've read Simon Johnson's piece for The Atlantic yet, but it articulated many concerns I and others have. Economic recovery might not be possible if all the current Wall Street oligarchs remain in power and the system is one of private profit and public risk. Non-bailout companies are a different matter, but for the insolvent banks, why go more the successful Swedish route of temporary nationalization, receivership, breaking them up, and so on? Even when measures are implemented to protect the taxpayer, it seems there's always an exemption and no real check on bailout CEOs trying to exploit the situation, most recently with the toxic assets plan and accounting changes. I don't envy Geithner, but it seems he and Larry Summers are far too wedded to protecting specific people and institutions versus the financial system, the economy as a whole, and average citizens. Wealth and power could wind up being even more concentrated with the same people who created this mess in the first place and have shown repeatedly that they cannot be trusted to do the right thing on their own – and all without a recovery. It seems both unpatriotic and like a hostage situation. I'd feel better if Paul Krugman, Robert Reich and Simon Johnson were being heeded much more.
What safeguards are there for the average citizen? Where, if at all, are the oligarchs being confronted and not getting their way, all for the sake of a more effective recovery? Thanks.
DDay explains how JP Morgan Chase is greedier than the actual J.P. Morgan. You'll be shocked to learn that even bailout recipients are still actively working to screw over average citizens, even if it will hurt economic recovery.
In "Hoping to Build on History's Greatest Rip-off By Making It Even Greater," Jonathan Schwarz links an op-ed by Dean Baker, who writes:
In effect, the cutters are proposing that the government default on the bonds held by the Social Security trust fund: U.S. government bonds that were purchased with money raised through the designated Social Security tax.
It is truly incredible, and unbelievably galling, that anyone in a position of responsibility would suggest defaulting on the government bonds held by the Social Security trust fund at the precise moment that the government is honoring trillions of dollars of bonds issued by private banks.
While the government has no legal or moral obligations to pay off the banks' debts to wealthy investors (who presumably understood the risks they were taking), the Social Security bonds carry the full faith and credit of the U.S. government.
It is understandable that people are angry. We have a government and an elite that never stop looking for ways to take money from ordinary workers and redistribute it upward to the richest people in the country.
I'm reminded of the mafia raiding union pension funds – it's an almost identical dynamic. It is not enough for these people to be rich. It is not even enough for them to be bailed out from their losses, or to become even richer. They are actively working to screw over average citizens. Americans don't like to believe we have a class system, let alone class warfare, but a few things are clear. One, we're witnessing class warfare by and for the rich. Two – these people are evil. They do not give a damn about who gets hurt, or if the country gets hurt, if they benefit, despite already enjoying great privilege. Their actions, taken collectively, form the greatest impediment to economic recovery. The "shock doctrine" can be pushed in different directions, and they want to exploit a crisis they themselves created Picture a drowning man, rescued at great personal risk, who then clubs his rescuer and throws him into an undertow. Three, these people will never, ever stop voluntarily, which is why safeguards and oversight are essential, not to mention solid social systems they can't destroy easily, and public awareness of their dirty tricks. Prosecuting and jailing a few of these bastards would help, too.
There's a little good news on that front. Barney Frank outlined several accountability measures in the chat today, and DDay also posts on a Congressional Oversight Panel report. Elizabeth Warren, who's been consistently sharp on all this mess, summarized their findings:
The report looks back at how these types of financial crises have been traditionally handled over time. Warren offers three choices to policymakers: liquidation (essentially what we did in S&L crisis), receivership (the Swedish option), and subsidization (what we're doing to keep zombie banks alive, like in Japan). As you can see above, Warren handles each of these options expertly, and finds four crucial actions needed to successfully resolve banking crises:• Transparency. Swift action to ensure the integrity of bank accounting, particularly with respect to the ability of regulators and investors to ascertain the value of bank assets and hence assess bank solvency
• Assertiveness. Willingness to take aggressive action to address failing financial institutions by (1) taking early aggressive action to improve capital ratios of banks that can be rescued, and (2) shutting down those banks that are irreparably insolvent.
• Accountability. Willingness to hold management accountable by replacing – and, in cases of criminal conduct, prosecuting – failed managers.
• Clarity. Transparency in the government response with forthright measurement and reporting of all forms of assistance being provided and clearly explained criteria for the use of public sector funds.
Warren concludes that the TARP bailouts failed to provide transparency, accountability or clarity. The Geithner Treasury Department plans, including PPIP and increased transparency, still fall short. "Bottom line: Treasury's efforts to date could be enough, but we will continue to press Treasury about these four tests." Essentially, Warren gives a mixed review, and she thinks that the Treasury efforts are based on the idea that the problems are temporary and not systemic…
The current power dynamics stink. The more Warren, Krugman, Reich and Baker are heeded, the better.
(Cross-posted at Blue Herald)