Still Masters Of The Universe

What we're seeing from the big bank earnings reports is that the government reacted to a situation where the financial industry titans were too big to fail, and facilitated theconsolidation of them so that they grew even bigger. Goldman Sachs and JP Morgan Chase are the biggest of the lot, having seen their competition either eliminated or weakened.

“One theme here is that Goldman Sachs and JPMorgan really have emerged as the winners, as the last of the survivors,” said Robert Reich, a professor at the University of California, Berkeley, who was secretary of labor in the Clinton administration.

Both banks now stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits.

Even Bank of America and Citigroup posted big profits in the last quarter, although the elimination of mark-to-market accounting plays a major role in hiding the true weakness of a lot of these banks. The imminent failure of more community banks and larger firms like CIT present opportunities for JP Morgan and Goldman Sachs as well.

Paul Krugman gets shrill on Goldman Sachs today, and he makes the larger point that we have only made Wall Street more dangerous to the overall economy through no-strings bailouts and failing to rein in the excess.

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers [...]

The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.

And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.

Basically, Krugman hinges the success of the bailout on meaningful financial regulation to keep Wall Street from making the same gambles. I'm not hopeful about that. But what I am hopeful about is the recognition, from across the political spectrum, that the bailout has produced perverse incentives that need to be reversed in whatever way possible.

The (Wall Street) Journal's take -- "We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business" -- is actually more in keeping with that of Robert Reich, who says that "Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs.... Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street." [...]

There is much in the Wall Street Journal that I don't agree with but, when it comes to the failure of the administration to address and fundamentally reform what Kessler calls "the structural problems that got us into trouble in the first place," we are of the same mind. There is no daylight between a progressive position focused on the paramount need to get the real economy going and one based purely on what makes free markets work.

The editorial goes so far as to suggest imposing a tax (yes, the Wall Street Journal is proposing a tax!), an FDIC-style bailout tax to be precise, "for those in the too-big-to-fail camp."

Even Reagan-era economist Bruce Bartlett is arguing for higher taxes, albeit regressive ones. I actually think the proper context is in terms of the health care debate. Goldman Sachs and other Wall Street firms took advantage of a financial crisis to redistribute wealth upwards. To pay for health care for the indigent, we should unwind that redistribution, perhaps with Charlie Rangel's surtax that adds brackets at the high end. It is impossible for conservatives to argue against redistribution of wealth with a straight face, given the example of Goldman Sachs.

...Simon Johnson:

We are looking at a concentration of political power in the US banking system that we haven’t seen since the 1830s: Shades of Andrew Jackson vs. the Second Bank of the United States. We put up with a lot from our banking elite in this country, but historically we draw the line at financial power so concentrated it can confront the power of the President.

The logic for reform and for breaking up the big banks begins to build. Bank of America’s fall was, in some senses, a fortunate accident for Goldman and JP Morgan. But it has also given them an excessive and unsustainable degree of political power.

Of course, you also have to ask: Who can break that power, when, and how?

...This is a dangerous time, politically. 80% of the public believe that Wall Street benefited from the bailouts, and not taxpayers. That's an unsurprising result. The question is how the public reacts. We could see a right-wing populism take shape if the teabaggers ever get their act together, or a New Deal coalition reformed. I talked to a writer last night who said he felt like he was living through history, as the Depression-era battle lines are being drawn. We don't know who will win yet, but it doesn't look good from where I sit.

Quoting the Wall Street Journal Editorial Page For The First Time

Big thanks to The Wall Street Journal editorial board for admitting, after years and years, that the Employee Free Choice Act does not eliminate the secret ballot:

The bill doesn't remove the secret-ballot option from the National Labor Relations Act but in practice makes it a dead letter. The bill allows a union to automatically organize a worksite if more than 50% of workers simply sign an authorization card, so pressure for employees to sign in public view would be enormous. The legislation also imposes a contract through binding arbitration if labor and management reach a stalemate.

The rest of it is untrue, but they are accurate in one respect - the bill doesn't remove the secret ballot from the National Labor Relations Act. In fact, what the WSJ doesn't tell you is that employees can call for a secret ballot election if 30% of them request one. Therefore, the rights of the minority in the workplace are protected and the secret ballot is in no way eliminated.

The editorial has some other missteps, like quoting a National Labor Relations Board study from 2005 (which has an interest in preserving the status quo) instead of the voluminous research showing firings and intimidation of organizers by management before elections. But you have to appreciate them finally giving up the number one talking point on the right. Expect this line to be used in lots of pro-Employee Free Choice Act materials.

This doesn't presume safe passage, of course. Arlen Specter is being pulled in so many directions, as the most important swing vote on the matter, that he could absolutely flip, and there are plenty of squishy moderate Democrats who want no part of the law. They are only betraying their constituents, of course. And now that the most dishonest rhetoric from the right has been neutered, perhaps they will have no recourse as well.

Zombie Liars And The Right-Wing Puke Funnel

Media Matters chronicles the evolution of a wingnut talking point, where Rush reads something, distorts it, bounces it to Drudge and the Wall Street Journal editorial board and Fox, and then Rush cites the chatter as an "example" of how the talking point is growing. It's all so depressingly familiar.

Wall Street Journal senior economic writer Stephen Moore and Fox News anchors Bill Hemmer and Megyn Kelly promoted on February 10 the falsehood that the economic recovery bill includes a provision that would, in Moore's words, "hav[e] the government essentially dictate treatments." Former New York Lt. Gov. Betsy McCaughey apparently originated the false claim in a February 9 Bloomberg "commentary," which Rush Limbaugh and Matt Drudge touted that day. Indeed, Moore credited Limbaugh, saying of the provision, "I just learned of this myself yesterday. In fact, Rush Limbaugh made a big deal out of it on his radio show and it just -- it caused all sorts of calls into congressional offices." Limbaugh later took credit for spreading this story, saying during the February 10 edition of his radio show: "Betsy McCaughey writing at Bloomberg, I found it. I detailed it for you, and now it's all over mainstream media. Well, it's -- it headlined Drudge for a while last night and today. Fox News is talking about it."

The name "Betsy McCaughey" may not be totally familiar to you, but it may interest you to know that perhaps nobody is more responsible for the fact that America is the only industrialized nation on Earth without a universal health care system than her. The latest distortion, that because of the health IT provisions in the stimulus - backed by every side of the ideological spectrum from Barack Obama to Newt Gingrich - a National Coordinator of Health Information Technology will

...monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions.

Now, I can't think of anyone who should be more worried about electronic medical records being made public than Rush Limbaugh, but McCaughey is predictably peddling nonsense here. It talks about doctors having "complete, accurate information" to guide patients' care, but nothing about a federal bureaucracy having any authority to do the same. It's a deliberate lie, a misreading of the language of the bill.

But McCaughey, a Hudson Institute Senior Fellow, has a long history of distorting legislation to scare Americans about "socialized medicine." She was the writer of the long New Republic piece, allowed into the magazine by then-editor Andrew Sullivan, that slandered the Clinton health care plan with one lie after another. James Fallows provides the history, with a telling reminder of how the Village worked to screw health care reform in the 1990s:

Much of the problem for the plan seemed, at least in Washington, to come not even from mandatory alliances but from an article by Elizabeth McCaughey, then of the Manhattan Institute, published in The New Republic last February. The article's working premise was that McCaughey, with no ax to grind and no preconceptions about health care, sat down for a careful reading of the whole Clinton bill. Appalled at the hidden provisions she found, she felt it her duty to warn people about what the bill might mean. The title of her article was "No Exit," and the message was that Bill and Hillary Clinton had proposed a system that would lock people in to government-run care. "The law will prevent you from going outside the system to buy basic health coverage you think is better," McCaughey wrote in the first paragraph. "The doctor can be paid only by the plan, not by you."

George Will immediately picked up this warning, writing in Newsweek that "it would be illegal for doctors to accept money directly from patients, and there would be 15-year jail terms for people driven to bribery for care they feel they need but the government does not deem 'necessary.'" The "doctors in jail" concept soon turned up on talk shows and was echoed for the rest of the year.

These claims, McCaughey's and Will's, were simply false. McCaughey's pose of impartiality was undermined by her campaign as the Republican nominee for lieutenant governor of New York soon after her article was published. I was less impressed with her scholarly precision after I compared her article with the text of the Clinton bill. Her shocked claim that coverage would be available only for "necessary" and "appropriate" treatment suggested that she had not looked at any of today's insurance policies. In claiming that the bill would make it impossible to go outside the health plan or pay doctors on one's own, she had apparently skipped past practically the first provision of the bill (Sec. 1003), which said,

"Nothing in this Act shall be construed as prohibiting the following: (1) An individual from purchasing any health care services."

It didn't matter. The White House issued a point-by-point rebuttal, which The New Republic did not run. Instead it published a long piece by McCaughey attacking the White House statement. The idea of health policemen stuck.

Plus ca change, plus ca la meme chose, n'est-ce pas? Gary Wills has more on McCaughey's lies.

This is how the conventional wisdom often gets set in Washington - an article that "the right people" read builds among the chattering class and then is distilled out to the people, no matter its veracity. While zombies like McCaughey are still churning out the lies, there's a whole new set - Rush, Drudge, Fox - of opinion leaders that get to set the agenda on these matters. Drudge still rules their world.

The New Third Rail

Rupert Murdoch's Wall Street Journal today wrote a much-discussed article theorizing that Google has changed their position on net neutrality and is now approaching cable and Internet providers to get their content a faster lane on the Internet. They also quote a bunch of technology leaders in the article who they claim are edging away from the principles of a free and open Internet.

Most of the stakeholders are calling the article a load of crap. Lawrence Lessig says he was misquoted and that the WSJ mistakes "delivery" for "access." There is a lot of confusion there. Right now consumers can pay more for a faster connection to the Internet. That's not the issue. The issue is if content providers are made to pay to serve their content quicker. That's what would set up a two-tiered Internet and ghetto-ize any company who would be unwilling or unable to pay. I generally believe everyone should have quality and affordable access, but delivery is clearly more important for a network-neutral Internet.

Google's Public Policy blog says that what it's doing is "edge caching," basically setting up their content physically closer to end users so that less bandwidth is needed to access them, optimizing the experience for the user. Frequently the same content has to be loaded and reloaded several times to get from the provider to the user. Reducing that duplication is beneficial to virtually everyone. Atrios rightly brings up the concern that these arrangements, if done exclusively with particular content providers, would have the effect of privileging one set of content over another, but Google claims that the arrangement is non-exclusive:

All of Google's colocation agreements with ISPs -- which we've done through projects called OpenEdge and Google Global Cache -- are non-exclusive, meaning any other entity could employ similar arrangements. Also, none of them require (or encourage) that Google traffic be treated with higher priority than other traffic. In contrast, if broadband providers were to leverage their unilateral control over consumers' connections and offer colocation or caching services in an anti-competitive fashion, that would threaten the open Internet and the innovation it enables.

Despite the hyperbolic tone and confused claims in Monday's Journal story, I want to be perfectly clear about one thing: Google remains strongly committed to the principle of net neutrality, and we will continue to work with policymakers in the years ahead to keep the Internet free and open.

The consensus seems to be that the WSJ story is bogus. David Isenberg, Tim Karr and Reuters are worth reading on this. Matt Stoller is still being somewhat cautious and trying to gather all the data. I think what's most notable is how everyone exploded at the very suggestion of whether or not the principle of net neutrality was being eroded. The differences on what regulation is needed among allies in the movement for a free and open Internet may indeed by real, but nobody wants to be on the side of restricting access or innovation. So that fear, the new third rail of American politics, if you will, is going to be something powerful to harness by advocates to make sure that the core principles are maintained.

Deep Thinkers

Just to add to my assessment of the pervasive influence of know-nothing Dominionism on the right, here's Daniel Henninger, a columnist paid money by the Wall Street Journal, a working writer for a newspaper with an economic focus, blaming the financial crisis on greeters who don't say "Merry Christmas" at shopping malls:

This year we celebrate the desacralized "holidays" amid what is for many unprecedented economic ruin -- fortunes halved, jobs lost, homes foreclosed. People wonder, What happened? One man's theory: A nation whose people can't say "Merry Christmas" is a nation capable of ruining its own economy.

One had better explain that.

Yes, one had.

It has been my view that the steady secularizing and insistent effort at dereligioning America has been dangerous. That danger flashed red in the fall into subprime personal behavior by borrowers and bankers, who after all are just people. Northerners and atheists who vilify Southern evangelicals are throwing out nurturers of useful virtue with the bathwater of obnoxious political opinions.

The point for a healthy society of commerce and politics is not that religion saves, but that it keeps most of the players inside the chalk lines. We are erasing the chalk lines.

Feel free: Banish Merry Christmas. Get ready for Mad Max.

Got that, secular progressives? Deregulation, predatory lending and corporate greed had nothing to do with this. It's you and your atheist friends who are promoting anarchy and the destruction of morals. If there were only crosses on top of Wall Street skyscrapers, the investment bankers and hedge fund managers inside wouldn't have given in to the temptation of greed. Your 401 (k) might have been saved if you practiced Lent this year.

Thanks a lot, heathens. Good luck heating your home with those Bibles you like to burn.

Just Too Much Stupid

I don't know if I'm going to be able to take the next 95 days.

There's a front-page article in the Wall Street Journal, now Rupert's paper, not in the opinion section but the front page of the weekend section, with the title Too Fit to Be President?.

Speaking to donors at a San Diego fund-raiser last month, Barack Obama reassured the crowd that he wouldn’t give in to Republican tactics to throw his candidacy off track.

“Listen, I’m skinny but I’m tough,” Sen. Obama said.

But in a nation in which 66% of the voting-age population is overweight and 32% is obese, could Sen. Obama’s skinniness be a liability? Despite his visits to waffle houses, ice-cream parlors and greasy-spoon diners around the country, his slim physique just might have some Americans wondering whether he is truly like them.

This isn't some late-night post at Little Green Footballs. This is in a newspaper. Someone got paid to write this.

And this is where Amy Chozick did her research:

Amy Chozick starts a thread:

Is Obama too skinny to be president?
15-Jul-08 06:04 pm

Does anyone out there think Barack Obama is too thin to be president? Anyone having a hard time relating to him and his “no excess body fat”? Please let me know. Thanks!

A reply is posted:

Re: Is Obama too skinny to be president?
15-Jul-08 10:21 pm

Yes I think He is to skinny to be President.Hillary has a potbelly and chuckybutt I’d of Voted for Her.I won’t vote for any beanpole guy.

Amy responds:

Re: Is Obama too skinny to be president? 16-Jul-08 09:12 am

Love your response and your username (onlinebeerbellygirl). Would you mind shooting me an email so I can ask you a few more quesitons? My email is [redacted] Thanks so much!

-Amy

Google cached copy of this here. Somehow, us bloggers are the ones accused of poor research skills and not understanding the fundamentals of reporting.

I want to choke myself with my own hands.

Conservatives Off The Reservation

I don't think Ted Stevens can be pressured, but National Review gives it a shot.

One of Alaska Sen. Ted Stevens’s most memorable moments of the last few years came during the Senate fight over the infamous “Bridge to Nowhere.” In 2005, when Sen. Tom Coburn introduced a measure that would have redirected the money Stevens had earmarked for the bridge to hurricane-ravaged New Orleans, Stevens gave an apoplectic speech on the Senate floor in which he threatened to resign if the Senate passed the measure. It was the nation’s loss that the Senate voted the measure down, simultaneously missing two opportunities.

Now that a grand jury has indicted Stevens on seven counts of making false statements, it is time for him to make good on his threat. Stevens is of course innocent until proven guilty of the crimes with which he is charged. But even if he committed no crime, the facts that have emerged over the course of the federal investigation into his personal finances are damning enough on their own. The indictment was just the last straw.

Not to be outdone, the Wall Street Journal editorial page goes after the presumptive nominee for daring to shake the tax tree:

Mr. Stephanopoulos pressed, "So that means payroll tax increases are on the table, as well?" Here came the words that have caused the McCain campaign well deserved grief: "There is nothing that's off the table. I have my positions, and I'll articulate them. But nothing's off the table."

So given a chance to reiterate his opposition to tax increases -- and underscore a main contrast with his opponent -- Mr. McCain punted. Democrats were quick to pounce, with the Democratic National Committee issuing a press release headlined, "McCain Tax Pledge? Not so much." It provided citations of the presumptive GOP nominee asserting that "Senator Obama will raise your taxes. I won't." Expect the "nothing's off the table" line to show up in Democratic TV spots this fall.

The wandering candidate also put his chief economic adviser, Douglas Holtz-Eakin, in an uncomfortable spot. Back in June, the McCain campaign went after Mr. Obama's proposal for a Social Security payroll tax increase on income above $250,000. A President McCain, his adviser then said, wouldn't consider a payroll tax increase "under any imaginable circumstances." So much for that.

Amazingly, the WSJ is really hitting McCain for being an undisciplined candidate more than anything. They acknowledge that he doesn't know crap about the economy and can't keep his positions straight. It's actually far more damning than just an anti-tax jihad.

All of these politicians, when they lose or are sent off to prison, will be excommunicated by conservatives, even though they have advocated for conservative policies for most of their entire careers. That's how it works.

WSJ Misleading About Democratic Plans On Energy

When I read this Wall Street Journal article about the Democrats possibly caving on oil exploration, my immediate thought was "I give up!" But there appears to be much ado about nothing here, and when you consider the source of Murdoch's new toy, you have to be skeptical.

Much of the headline is made out of this quote by Dick Durbin:

"Sen. Durbin said any compromise on drilling, however, would be contingent at a minimum on a requirement that oil and gas companies sitting on existing acreage either produce oil on those areas within a specified period or return the leases to the government."

This is pretty much what the Democrats have been saying on this issue all along. It's perfectly consistent with the "Use It Or Lose It" plan, and the Obama campaign's dismissal of this as another stunt by a party addicted to oil. Nancy Pelosi went even further in a news conference today.

House Speaker Nancy Pelosi (D-Calif.) on Thursday shut the door on expanding oil and gas drilling beyond areas that have already been approved for energy exploration, drawing a clear distinction from her counterparts in charge of the Senate.
“This call for drilling in areas that are protected is a hoax, it’s an absolute hoax on the part of the Republicans and this administration” Pelosi said at her weekly press conference. “It’s a decoy to punt your attention away from the fact that their policies have produced $4-a-gallon gasoline.”

There may be some Bush Dogs with loose lips talking to the WSJ, with the media all too happy to sow discord, but from the standpoint of the leadership, I don't think they're backing off of their pledge... for now.

The Full-Court Press

After yesteday's unfortunate sellout in the Senate, all the elements of the right wing are out for blood and ready to finally tear out the Fourth Amendment to the Constitution once and for all.

From the propaganda front, the Wall Street Journal editorial board gloats about the Senate FISA victory and actually considers it as a line of attack in November, attacking the "Obama-Dodd" faction for wanting to surrender to our enemies, or something.

From the executive front, the President demanded his telecom amnesty and expanded surveillance powers in an Oval Office press conference today, where he also let slip the truth:

Bush was praising the Senate for approving his long-sought update to a foreign surveillance law. Critics say the bill legalizes his warrantless wiretapping program, which was implemented outside the boundaries of the law, and frees phone and internet companies from any responsibility for violating customers' privacy.

"The senate bill also provides fair and just liability protections for companies that did the right thing and assisted in defending America, after the attacks of Sept. 11," Bush said.

As recently as his State of the Union address, Bush would only call for legal immunity for companies "believed to have assisted" in his so-called Terrorist Surveillance Program.

(There was also the whole "Give me what I want or I will let the vital Protect America Act, which is all that stands between us and Al Qaeda on our shores, to lapse" thing in there.)

And like puppets on a string, the Bush Dogs in the House are imploring to give the Dear Leader his spying powers:

Some House Democrats were prepared to support immunity, regardless. In a Jan. 28 letter, 21 Democrats in the conservative Blue Dog Coalition sent a letter to House Speaker Nancy Pelosi, D-Calif., supporting immunity and listing other provisions that they believed were needed in a FISA bill.

They wrote that the Senate bill "contains satisfactory language addressing all these issues, and we would fully support that measure should it reach the House floor without substantial change."

The list of these "Democrats" is at the link.

Meanwhile, the traditional media is simply reporting the facts, with headlines like Senate Bows To White House On FISA Bill (Yes, I know that's from the Moonie Times, but they're right). You'd think the Democratic legislators would be ashamed of themselves. Anyone who hasn't figured out by now that the popular, and proper, course of action is to do the opposite of anything Mr. 24% says honestly doesn't seem to me equipped to sit as a representative of the American people.