Financial reform

Rolling Stone examines the legislative process that produced the financial reform that the Obama administration is so proud of.

“The bill Congress just passed doesn't go after the criminals where they live, or even make what they're doing a crime; all it does is put a baseball bat under the bed and add an extra lock or two on the doors. It's a hack job, a C-minus effort. See you at the next financial crisis.”

It’s not a C-minus effort. Congress didn’t pass meaningful reform because they weren’t trying to pass meaningful reform. They were trying to pass some bullshit that looked like reform to a public that doesn’t really understand what’s going on and is barely paying attention anyway. They accomplished what they set out to do.

The law does exactly what it is designed to do: It causes no serious threat to the profits of our representatives' biggest financial sponsors, and it gave Democrats something, anything, they can take back to the voters and say, "Look, we reined in Wall Street, we passed financial reform!" In that regard, it's no different than George Bush's Medicare "reform" -- it improves nothing, but allows for lots of self-congratulation.

Of course, it also gives Republicans something they can point to were they to argue that "Democrat" leadership is ineffective. And they'd be right. But, for Republicans, even this Band-Aid on a bullet wound is too much fettering of financial markets. Rather than argue -- correctly -- that this law will do nothing to prevent future financial meltdowns that taxpayers will have to clean up, the GOP will argue that this Marxist-style takeover of our uniquely American free-enterprise system must be repealed, along with healthcare reform, Social Security and, perhaps, the right to vote and own property.

I had a post label that I used for so many Bush-era efforts, "It Just Looks Like Results," that I used when describing the many, many photo-ops and half-assed efforts that replaced actual governing in this country from 2001-2008. Looks like it's time to dust off that label, because the change we were promised during the campaign just ain't coming. Sure, the Obama administration is light years better than the alternative that Republicans half-heartedly threw out there ("OK, the election is unwinnable but, hey, we gotta run somebody, and we're not about to waste a real candidate" [think Bob Dole in 1996 and Lynn Swann's running for the PA governor's seat in 2006]), but the real power in this country doesn't change every four years or even every eight years. It's an entrenched aristocracy whose only interest is maintaining its wealth and power. And it never faces re-election. If Obama were the threat to the status quo that he appeared to be during the campaign, he never would have gotten out of the primaries. Ask Hillary Clinton and John Edwards how the media covered their candidacy.

If you still think real change is possible working within the system, click the link above and see what the system did to the financial reform bill.

How Republicans rescue the economy

By lining the pockets of the rich and connected. Krugman on the Bush administration’s Wall Street bailout proposal.

If the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

So, essentially, Paulson wants to give away billions of dollars in free money to corporations, while homeowners struggling with stagnant wages and facing forclosure as a result of ballooning ARMs get nothing. It’s trickle-down economics at its finest, which is to say, more of the same.

UPDATE: It appears that skepticism about the plan is well placed.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

The bailout plan

Glenn, on the latest plan to save the American economy from collapse, which he points out was formed “largely without any debate and mostly in secret.” There’s so much worth reading there that you’re better off clicking through and reading the whole thing, but here are some passages that sent my Rage-O-Meter off the charts:

We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded.

More amazingly, they're free to walk away without having to disgorge their gains; at worst, they're just "forced" to walk away without any further stake in the gamble. How can these bailouts not at least be categorically conditioned on the disgorgement of ill-gotten gains from those who are responsible? The mere fact that shareholders might lose their stake going forward doesn't resolve that concern; why should those who so fantastically profited from these schemes they couldn't support walk away with their gains? This is "redistribution of wealth" and "government takeover of industry" on the grandest scale imaginable -- the buzzphrases that have been thrown around for decades to represent all that is evil and bad in the world. That's all this is; it's not an "investment" by the Government in any real sense but just a magical transfer of losses away from those who are responsible for these losses to those who aren't.

[...]

The beneficiaries of this week's extraordinary Government schemes aren't just the coincidental recipients of largesse due to some random stroke of good luck. The people on whose behalf these schemes are being implemented -- the true beneficiaries -- are the very same people who have been running and owning our Government -- both parties -- for decades, which is why they have been able to do what they've been doing without interference. They were able to gamble without limit because they control the Government, and now they're having others bear the brunt of their collapse for the same reason -- because the Government is largely run for their benefit.

If there is any "pitchfork moment" -- an episode that understandably would send people into the streets in mass outrage -- it would be this. Nobody really even seems to know how much of these losses "the Government" -- meaning working people who had no part in the profits from these transactions -- is undertaking virtually overnight but it's at least a trillion dollars, an amount so vast it's hard to comprehend, let alone analyze in terms of consequences. The transactions are way too complex even for the most sophisticated financial analysts to understand, let alone value. Whatever else is true, generations of Americans are almost certainly going to be severely burdened in untold ways by the events of the last week -- ones that have been carried out largely without any debate and mostly in secret.

Third, what's probably most amazing of all is the contrast between how gargantuan all of this is and the complete absence of debate or disagreement over what's taking place. It's not just that, as usual, Democrats and Republicans are embracing the same core premises ("this is regrettable but necessary"). It's that there's almost no real discussion of what happened, who is responsible, and what the consequences are. It's basically as though the elite class is getting together and discussing this all in whispers, coordinating their views, and releasing just enough information to keep the stupid masses content and calm.

[...]

Here is the current draft for the latest plan. It's elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of all: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency" [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

Paul Krugman adds some perspective to this last point.

Even if you have full faith in Henry Paulson, Intrade currently gives John McCain a 48 percent chance of being president. Are you willing to give essentially unlimited discretion over the use of $700 billion — with explicit protection against any review by Congress or the courts — to Phil Gramm?

You might read this and hear echoes of Congress voting to give George Bush authorization to use force at his own discretion, and that’s because Congress seems intent on giving away all of its oversight ability. In short, Congress is legislating itself right out of existence.

What’s your (talking) point?

I’m not sure what to make of this latest talking point from the wingnut right — that the Supreme Court’s ruling that Gitmo detainees have the right to challenge their detentions in court (you know, instead of allowing the government to lock up people indefintely and without charges) makes the United States less safe.

Of course the GOP wants to keep people scared, so Antonin “Fucking Douchebag” Scalia writes a dissenting opinion with the baseless claim that this decision “will almost certainly cause more Americans to be killed,” John McCain ramps up the fear factor of his original reaction to the ruling [from “It obviously concerns me . . . but it is a decision the Supreme Court has made. Now we need to move forward. As you know, I always favored closing of Guantanamo Bay and I still think that we ought to do that,” to “Our first obligation is the safety and security of this nation and the men and women who defend it. This decision will harm our ability to do that,” in 24 hours. (Clearly on Thursday he hadn’t been told what to think or say about the ruling yet)], and now out trots Newt Gingrich with his “this decision will cost us a city” shit.

But in addition to putting The Fear out there, aren’t all three of these idiots expressing very little faith in the Bush administration? Because the only way that this decision makes the country less safe is if detainees’ legal challenges lead to terrorists being released from custody. And the only way that would happen is if the administration has insufficient evidence to prove they are terrorists (and if the administration has insufficient evidence against these people, how do we know they are terrorists?)

Could it be that Scalia, McCain and Gingrich all are saying that the administration is incapable of proving that actual terrorists are actual terrorists? Are they saying the administration is incapable of doing its job of protecting the American people from terror attacks?

Could it be that the Justice Department has been so busy purging itself of non-Bushies and concocting questionable and politically motivated prosecutions of Democrats that it has been unable to find enough evidence against people the administration claims TO KNOW to be terrorists that it can’t even produce enough evidence to warrant charges and a trial?

UPDATE: To answer my own question, yes.

An eight-month McClatchy investigation in 11 countries on three continents has found that Akhtiar was one of dozens of men — and, according to several officials, perhaps hundreds — whom the U.S. has wrongfully imprisoned in Afghanistan, Cuba and elsewhere on the basis of flimsy or fabricated evidence, old personal scores or bounty payments.

American pariah

Big deal, lots of people want to be on American Idol. You’ve seen the length of those lines at the auditions.

Nigel, 58, also spilled that during the planning for the second annual Idol Gives Back fundraising special, which aired in April, America’s biggest TV show had a spat with no less a power than the White House!

He said that the show’s producers were so disappointed with President Bush’s efforts to combat the very poverty that the show was trying to relieve that they were embarrassed to have him on their TV show.

But Nigel said that Idol relented under pressure from the Pres's people, and allowed him to speak during the star-studded broadcast.

“The President is always saying ‘I want to be on [Gives Back],” said the Brit.

“We didn't ask the President this year to say anything because we are all a bit embarrassed about him, and the office insisted that, because the [primary] candidates were on it, the President would like to come on and say ‘thank you.’"

Of course Bush begged to appear on Idol Gives Back. Given that Bush has done exactly nothing about poverty in eight years, the television show appearance is basically his entire anti-poverty agenda.

Seriously, Bush just wants to be seen in the context of caring about poverty, and near people who are doing something about it. It’s all part of the stagecraft, the appearance of action and results in place of actual action and results, that has marked his entire term in office. In short, it’s insincere bullshit, backed up by nothing.

UPDATE: I agree with Richard Clarke.

McCain’s gas-price ‘solution’

Paul Krugman explains why John McCain’s gas-tax holiday is bullshit.

Why doesn’t cutting the gas tax this summer make sense? It’s Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

In other words, it’s Steal from the Poor and Give to the Rich, straight from the GOP playbook.

But the consumer ends up paying the same price, you say, so how is this stealing from the poor? Because this plan lowers the amount of money the federal government collects in taxes. That means the government has less money to spend. Which means spending cuts are inevitable. And which programs do you think Republicans look at first when the treasury comes up a little short? Things like Medicare, LIHEAP, housing aid for the disabled, student loan programs and environmental protection. These are all things that rich people don’t need, use or are too stupid to care about, and the Bush administration has proposed cuts to all of these programs.

Between McCain’s gas tax holiday and his proposed tax cut for healthcare spending, which also diverts money from the federal treasury to the pockets of private companies, one wonders how if McCain plans to address the deficit at all, and how he plans to fund any government spending. I guess in his view, people will be able to pay for a $12,000 health insurance policy with a $5,000 tax credit, and that people with pre-existing conditions will magically receive insurance, even though insurance companies refuse to cover them. I guess in his view, all those rotting roads and bridges around the country are going to repair themselves. I guess in his view all those people who can’t cover the skyrocketing cost of higher education will wash dishes for the rest of their lives, and somehow this makes us more competitive in the world market. I guess in his view it’s OK if people have to choose which prescription drugs to take and which to skip because they simply can’t afford the medicines they need. Maybe they should’ve been like him and had an admiral for a father and then become a senator so they too could be on government-funded healthcare their entire lives.

It’s not that he doesn’t care about these people and these issues. It’s just that he wants to be president so badly that he’s willing to sacrifice them and all of his principles to get it.

Mission Accomplished

The above dog-and-pony show took place five years ago today, May 1, 2003. And five years after we accomplished our mission,

A double suicide bombing struck a wedding convoy northeast of Baghdad Thursday, killing at least 35 people and wounding 65 others, police said.

In Baghdad, a car bomb aimed at a U.S. patrol in Baghdad on Thursday killed an American soldier and least nine Iraqi civilians and wounded 26, police and military said.

[...]

Around Iraq, at least 1,080 Iraqi civilians and security forces were killed nationwide last month, or an average of 36 a day, according to an AP tally. That's down from March's total of 1,269, or an average of 41 per day.

Officials reported at least 479 deaths in Sadr City but they could not break down the number of militants, Iraqi Security forces and civilians.

I’m not sure how much more of neocon “accomplishments” humanity can take.

Not surprising

When I read this, I knew it was bullshit, because George Bush has never done anything that has indicated a real conern for the nonrich. Therefore, the idea that Bush would unveil a plan to help people with subprime mortgages was patently ludicrous.

Distraught homeowners facing the grim prospect their monthly mortgage payments soon will surge found hope Thursday they can hold onto their houses by qualifying for a five-year freeze in loan rates.

The plan is the Bush administration's biggest move yet to show it is dealing aggressively with the mortgage crisis. The escalating problem is becoming a political issue and threatening to push the country into a recession.

"The holidays are fast approaching and this will be a time of anxiety for Americans worried about their mortgages and their homes," Bush said. The administration's efforts, he said, are "a sensible response to a serious challenge."

If this doesn’t strike you as U.S. Grade A crapola, then you haven’t been paying attention.

I assumed that what was really happening was that banks were reposessing properties and then having a hard time reselling them, getting stuck with assets that are producing no revenue and losing value every day. I figured this plan was designed to keep the cash rolling in from mortgagees and to allow the White House to take credit for a politically popular initiative.

Turns out I wasn't cynical enough.

In fact, there’s a growing consensus among financial observers that the Paulson plan isn’t mainly intended to achieve real results. The point is, instead, to create the appearance of action, [kind of sounds like “it just looks like results,” huh? — Dr. S] thereby undercutting political support for actual attempts to help families in trouble.

In particular, the Paulson plan is probably an attempt to take the wind out of Barney Frank’s sails. Mr. Frank, the Democratic chairman of the House Financial Services Committee, has sponsored legislation that would give judges in bankruptcy cases the ability to rewrite mortgage loan terms. But “Bankers Hope Bush Subprime Plan Will Scuttle House Bill,” as a headline in CongressDaily put it.

As Elizabeth Warren, the Harvard bankruptcy expert, puts it, “The administration’s subprime mortgage plan is the bank lobby’s dream.” Given the Bush record, that should come as no surprise.

There are, in fact, three distinct concerns associated with the rising tide of foreclosures in America.

One is financial stability: as banks and other institutions take huge losses on their mortgage-related investments, the financial system as a whole is getting wobbly.

Another is human suffering: hundreds of thousands, and probably millions, of American families will lose their homes.

Finally, there’s injustice: the subprime boom involved predatory lending — high-interest loans foisted on borrowers who qualified for lower rates — on an epic scale. The Wall Street Journal found that more than 55 percent of subprime loans made at the height of the housing bubble “went to people with credit scores high enough to often qualify for conventional loans with far better terms.”

And in a declining housing market, these victims are stuck, unable to refinance.

So there are three problems. But Mr. Paulson’s plan — or, to use its official name, the Hope Now Alliance plan — is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.

The plan sets voluntary guidelines under which some, but only some, borrowers whose mortgage payments are set to rise may get temporary relief.

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. “Foreclosure is to no one’s benefit,” said Mr. Paulson in a White House interactive forum. “I’ve heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure.”

But won’t the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores. In fact, the plan actually provides an incentive for some people to miss debt payments, because that would make them look like bad credit risks and eligible for relief.

Now, Mr. Paulson’s attempt to help investors, while doing little or nothing for distressed and defrauded borrowers, might make sense if his plan would reduce investor losses enough to seriously improve the overall financial situation.

But only a small fraction of subprime borrowers will qualify for relief, and many of these borrowers will eventually face foreclosure anyway. So the plan is unlikely to reduce overall mortgage-related losses by more than a few percent, at most — not enough to make any real difference to financial stability. Indeed, interest-rate spreads that have been signaling a crisis of confidence in the financial system didn’t narrow at all when the plan was announced.

Still, you might say that the Paulson plan is better than nothing. But the relevant alternative isn’t nothing; it’s a plan that — like Barney Frank’s proposal — would actually help working families. And that’s what the administration is trying to avoid.

So, much like Bush’s tax cuts, this plan is designed to help the rich and marketed as assistance to the nonrich. (Remember that “By far the vast majority of my tax cuts go to the bottom end of the spectrum” bullshit?) And, like Bush’s tax cuts, this plan does almost nothing to help the nonrich.

And why should it? After all, who among us considers millions of families facing the loss of their homes a more significant problem than investors facing reduced returns?

Feeling safer yet?

If I had any confidence in the Bush administration, it would be shaken. But as it is, I'm not really surprised by this.

Undercover investigators carried all the bomb components needed to cause "severe damage" to airliners and passengers through U.S. airport screening checkpoints several times this year, despite security measures adopted in August 2006 to stop such explosive devices, according to a new government report.

Agents were able to smuggle aboard a detonator, liquid explosives and liquid incendiary components costing less than $150, even though screening officers in most cases appeared to follow proper procedures and use appropriate screening technology, according to an unclassified version of a report by the Government Accountability Office, Congress's audit arm.

After all, stories of undercover agents, news organizations and even private citizens sneaking banned items past airport screeners abound. So yeah, it’s troubling that six years after 9/11 airport screeners appear to see less than WWE referees. But given the incometence of the Bush administration and the failures of its anti-terror efforts, it’s hardly surprising.

And when it’s revealed that six years after anthrax attacks killed five people and scared the crap out of everyone who receives mail, the government is ill equipped to deal with another such attack, it’s just, sadly, par for the course.

The United States has done too little to prepare for another potential domestic anthrax attack six years after spore-laden mail killed five people, a former CIA director and other experts said on Wednesday.

"I think we're very poorly prepared," James Woolsey, who headed the CIA from 1993 to 1995, said at a news conference to unveil a report by a security consulting firm warning of U.S. vulnerability to another anthrax attack.

Frankly, I’d like to know exactly what the Bush administration is equipped to deal with. Even protecting a major American city destoryed by a hurricane two years ago ... well, you already know where this is headed, don’t you?

Dozens of construction projects launched by the Army Corps of Engineers to protect the New Orleans region from the most catastrophic floods are behind schedule by an average of nearly eight months, an internal audit shows. Local officials are concerned the completion date will have to be pushed back a second time.
The audit reviewed 60 ongoing projects to make southern Louisiana's flood protections far more robust than when Hurricane Katrina destroyed the system in 2005. USA TODAY got a copy of the Army Audit Agency's report under the Freedom of Information Act.

Nearly 85 percent of construction contracts for upgrades to the region's flood-control system are behind schedule by an average of about 230 days, the audit says. About 74 percent of pre-construction design contracts for other improvements also are lagging, by an average of 122 days, or about four months.

So the government has done pretty much nothing to protect us from pretty much anything over the last several years. But at least it isn’t actively poisoning its citizens. Is it?

"It seemed like some mornings it was just criss-crossing the whole sky. It was just like a giant checkerboard," described Bill Nichols. He snapped several photos of the strange clouds from his home in Stamps, in southwest Arkansas. Nichols said these unusual clouds begin as normal contrails from a jet engine. But unlike normal contrails, these do 'not' fade away.

Soon after a recent episode he saw particles in the air. "We'd see it drop to the ground in a haze," added Nichols. He then noticed the material collecting on the ground.

"This is water and stuff that I collected in bowls. I had it sitting out in my backyard in my dad's pick-up truck," said Nichols as he handed us a mason jar in the KSLA News 12 parking lot back in September after driving down from Arkansas.

KSLA News 12 had the sample tested at a lab. The results: A high level of barium, 6.8 parts per million, (ppm). That's more than three times the toxic level set by the Environmental Protection Agency, or EPA.

The source of this toxic dusting is unknown, so I can’t say with any certainty that the government is behind it. But if someone else is doing it, the government failed to prevent it.

Is there one thing, one fucking thing, that this administration has done right? The Bush administration’s record of failure on every single score is incredible. And unprecedented, which is why there can be no doubt that George Bush will go down in history as the worst president this country has ever had. And probably ever will have. Imagine what kind of monster a future president would have to be to make this legacy of failure look good by comparison.

It’s going to be a very long 431 days.

To the rescue

In case there's any doubt about what the administration's priorities are.

Under the command of President Bush's two senior political advisers, the White House rolled out a plan this weekend to contain the political damage from the administration's response to Hurricane Katrina.

It orchestrated visits by cabinet members to the region, leading up to an extraordinary return visit by Mr. Bush planned for Monday, directed administration officials not to respond to attacks from Democrats on the relief efforts, and sought to move the blame for the slow response to Louisiana state officials, according to Republicans familiar with the White House plan.
...
In interviews, Republicans reflecting the White House line said that the normally nimble White House political operation had fallen short in part because the president and his aides were scattered outside Washington on vacation, leaving no one obviously in charge at a time of great disruption. Mr. Rove and Mr. Bush were in Texas, while Vice President Dick Cheney was at his Wyoming ranch.

It's nice to know that while people are starving and dying, so much effort is being directed toward making sure people don't think badly of the president. But it's gotta be a tough job, making gross incompetence and indifference to human suffering look good.

By the way, how many tragedies have to befall this nation before these people decide that a month away from their jobs is too long?