March 16, 2009
OBAMA DOES MORE IN 40 DAYS THAN BILL CLINTON DID IN 8 YEARS -- BUT TRUSTS OUR FUTURE TO ECONOMIC WAR CRIMINAL LARRY SUMMERS & HECKUVA-JOB GEITHNIE by Evert Cilliers
I don't agree with most anything the pundits say about Obama's first weeks on the job, so I feel a little like a hooker working the Vatican: naked and cheap, with nothing but my distrust of men's motives to earn me a quick rhetorical buck.
I think Obama could be a transformative president a la George I'm-not-your-King Washington, or Abe Save-Our-Union Lincoln, or Teddy Trust-Buster Roosevelt, or Franklin New-Deal Roosevelt, or Lyndon Great-Society Johnson, or that poodle of the vampire elite, Ronald Trickle-Down Reagan.
After all, going by his budget, it looks like Obama is bringing back a New New Deal with a liberal vengeance. Through the smoke and ashes of our financial meltdown one can espy labor unions dancing on the graves of the rentiers. We finally have a president who is taking grownup responsibility for our country of childish things, and who is not, like most of his countrymen, quite ready to throw the least among us under the bus. He's smart enough and bold enough and kind enough to change our nation for the better, something it hasn't been since Martin Luther King got LBJ to sign off on Civil Rights.
But as smart as Obama is, he's got one major blundering bat in his belfry: he's still drinking the Kool-Aid of free-market fundamentalism -- the vile, vicious, virulent voodoo virus that causes our otherwise sturdy capitalism to shit itself every few years.
Our pragmatism-over-ideology First Egghead has gone and attached to his nimble ankles a vexingly solid ball and chain.
The ball is Larry Summers, the Chief of the White House National Economic Council.
The chain is Treasury Secretary Tim Geithner.
Together they could drag Obama down to a one-term presidency.
1. THE ECONOMIC WAR CRIMINAL AND THE WALL STREET STOOLIE
Larry Summers used to be Bill Clinton's Treasury Secretary. That's when he oversaw the repeal of the New Deal's Glass-Steagall Act, and the deregulation of derivatives in the Commodity Futures Modernization Act of 2000. Larry Summers thereby became -- along with Robert Rubin, Alan Greenspan and Phil Gramm -- one of the Architects of Our Financial Ruin.
In short, Larry Summers is a leading economic war criminal.
This is the man Obama chose to head up his Economic Council. Oy goddam vey.
It's as if Truman had picked Hermann Goering to lead a defeated Germany.
Summers helped to create the box in which we are now suffocating, a box in which Treasury Secretary Tim Geithner has toiled all his life. As President of the Federal Reserve Bank of New York, Geithner was Henry Paulson's right-hand man last year, when they took $350 billion from US taxpayers and simply handed it over to the banks, with no accountability whatsoever -- a piece of midnight fraud that bilked us of seven times more money than Madoff took from his customers. Except they didn't have to run a Ponzi scheme. They just did a reverse Robin Hood: stole from us poor taxpayers and gave to the rich, no questions asked.
In short, Geithner is a Wall Street stoolie.
Making him Treasury Secretary is like picking A-Rod to tackle steroid abuse in baseball.
It's not as if Obama didn't have any excellent options besides these two. Sensible and sane economists abound: Paul Krugman, Joseph Stiglitz (both Nobel Prize winners), James Galbraith, Michael Hudson, Dean Baker, Nouriel Roubini. There's Robert Reich. Heck, there's George Soros. But Obama goes and picks ... aaaargh!
It's a measure of our current myopia that nobody is calling maximum bullshit in a maximum screech on Obama's maximum travesty of ethics and common sense.
So we're going to give it the old college try here. BTW, a word of caution to those university professors who love reading 3quarksdaily, the best website of the intelligentsia, for the intelligentsia, and by the intelligentsia.
Hi there, propeller heads. Be warned: you're not going to get the scholarly Oxbridge tone you're accustomed to in this here screech-rant-WTF piece of populist persiflage. I've put on my gonzo goggles to study Obama's grand triumphs and gross errors. Things have come to such an unpretty pass, I believe that in this hour of our impending doom, we need an all-out Fear-and-Loathing-Hunter-S-Thompson hammer-of-Thor and fiery-tongs-from-Hades attack to ram some fer-cryin'-out-loud common sense up our nation's collectively addlepated, boneheaded, beefbrained, boobish, Boeotian butts. (For your information, eggheads, I considered but nixed two other styles. I could've done a Terry Eagleton, turning many a bon mot as wittily and Brittily as Oscar at his most Earnest. Or for satirical purposes, steeped you in a swamp of Judith Butlerese, as I problematized the Obama presidency as a performative politics of the gesture foregrounded to subvert Washington's gender construct.)
To get back to the point. Obama, one of the best pickers of talent in the business, has hitched his financial wagon to two Death Stars of the Apocalypse.
How can this be? This is my man, Barack Hussein Obama. First Dad of Sasha and Malia, with the hottest First Lady ever. Book-writing book-reading Constitutional Law prof intellectual. Deliverer of the best semi-State of the Union speech in memory, with more standing ovations than Bernadette Peters got over her entire Broadway career. A perfect deus ex machina come to save our sorry asses.
And this man of almost magical giftedness makes a mistake THIS BIG?
Gadzooks and forsooth and holy shit, folks. We got us here a fatal flaw as potentially crippling as Oedipus not knowing he snuffed his Pater and begot a bunch of munchkins by his Mater.
It's actually worse than picking Goering to run a defeated Germany.
With this pick, Obama proves he possesses a big fat blind streak of moral irresponsibility.
He rewards Mephistopheles.
He raises an economic war criminal to the height of economic power inside the White House.
And he picks as his Treasury Secretary a guy who wasted $350 billion of our taxes on a giveaway to the banks last year.
Talk about no accountability whatsoever ad infinitum for our economic war criminal Larry Summers and our Wall Street Stoolie Tim Geithner.
The bigger you screw up, the bigger your next job.
The problem with Geithner and Summers is simple: they're both in too deep to even realize they're part of Wall Street's Gaming of America.
How do we know this? One example: it never occurred to Tim Geithner to ask the banks to account for what they did with the money Paulson gave them. How come? The only explanation: like Paulson, he's all pally-wally with the bank guys. Both Geithner and Summers are consummate insiders, which is probably why Obama thought they'd be perfect for their jobs -- they know all the players, they know where the bodies are buried. But this insider status is also exactly why they're completely wrong for the job. They have no outsider's perspective, no distance, no elevation above the fray. They're right in the middle of it all, and hence completely in earnest. Perfectly honest. Utterly sincere. To wit, total dupes. Their ignorance is no bliss to us. In fact, it could be our hell.
For an analysis of what happened, these Flimflam Twins can do no better than tell us the banks made “bad decisions.” What they can't tell us is that unknowingly and in all innocence, they're acting as fierce protectors of Wall Street's securitization racket, and are willing to do anything to make the most broken Wall Street bankers whole, including not telling us which banking counterparties AIG is giving our money to. They're a little like our troops in Iraq, who have to believe they're rendering a sterling service to America, even though every poor blown-to-bits soul there has died for nothing more than a Bush-Cheney policy blunder -- but for the sake of their parents, we have to say they died for our country.
So Geithner and Summers sincerely believe they're doing the right thing, and serving their country selflessly, as they strive to enable Wall Street to continue its cheating ways.
Were Geithner and Summers able to put on Main Street goggles over their Wall Street eyes, they'd have a totally different vision about how to help our economy.
Let's look at the economy we actually have. Here's our recent economic history in a nutshell. For the past 30 years, the productive manufacturing side of our economy has shrunk, while the nonproductive financial side has expanded. Instead of making things, we're making deals. We've stopped making things; now we buy them. We've become a market for China. We're not exporters anymore, we're importers. Seventy percent of our economy is consumption. How do you grow an economy that's all consumption? In our economy, you can't do it by increasing wages, because management has curtailed labor unions and keeps wages down. In fact, wages in America peaked in 1973. So the business elite won't pay us more to consume more, but they will let us plunge ourselves into debt to boost consumption. Today the average household carries a credit card debt of $8,650. It's this credit bubble that Wall Street has blown up into a vast Ponzi-like pyramid chain-letter scheme on top of the real economy over the last decade: $500 trillion of derivatives contracts masquerading as assets were created in a scam that has now exploded into toxic ashes to poison the entire world economy.
That's what's happened to us. These are the facts of our economy, which was once the manufacturing engine of the world, and won WW2 because of our industrial might.
So how do we get a real economy back? Well, that's what Obama's budget is about. Solve the healthcare cost spiral, improve the education of our children, invest in infrastructure, and build a green energy future.
You sure as hell don't get our real economy back by giving $170 billion to AIG. Imagine what Detroit could do with that money if we insist they build hybrid cars, and come up with a new generation of electric cars. Imagine if we gave the solar and wind energy industry the money we are pouring into the nonproductive financial industry.
But if you've got Wall Street eyes, you try and think how you can save Wall Street, when what you should be doing is let Wall Street die, in such a manner as to cause Main Street the least harm.
It's not that we need to buy the toxic assets from the banks and then everything will be fine. We have to realize that the entire Wall Street is a toxic asset from top to bottom. Wall Street must be cut down to a mini-Wall Street so they can never again endanger Main Street and the entire world economy.
There are three options to consider:
1. Do we kill Wall Street right now, like tomorrow, and endure a sharp shock to the world economy?
2. Do we let Wall Street die the natural suicide it has committed all by itself?
3. Do we help Wall Street die a slow death over a year or two to lessen the shock to the rest of us?
If you were to ask the American people what to do, the majority would be tempted to say, what the hell, we'll go for the first option: drive a stake through Wall Street's foul vampire heart pronto, and we'll be happy to live with the consequences. Our pain will be worth their death.
My personal preference would be for us not to interfere in Wall Street's self-induced death agonies. Let them suffer, like good capitalists, the bad verdict of capitalism: you screw up, you die. Let them all follow Lehman Brothers into the grave.
But cooler heads might say, let's prop them up, and slowly liquidate the insolvent ones over the course of a year. Let's slowly get rid of AIG bit by bit. They should have stayed an insurance company, but since they wanted to be a hedge fund too, we'll sell off their insurance parts bit by bit, until we're stuck with the toxic paper, which we'll get rid of in a fire sale next year, for a cent on the dollar. (I think it's some kind of crime that AIG gets bought by us and gets $170 billion, while Detroit, which actually manufactures stuff, has to beg for $39 billion.)
2. THE VAMPIRE ELITE IN THE OLIGARCHS' CLUB
Now I can guarantee you that the minds of Summers and Geithner are not flexible enough to entertain any of the three plans I've floated here, as fanciful as they may be. These are ideas that have occurred to me because I've got Main Street eyes, not Wall Street eyes. I can tell you now that it won't occur to the Flimflam Twins for one single moment -- and this is not a fanciful idea -- that it might be better for the world to consider banning the practice of mortgage securitization forevermore. Or that they could reduce moral hazard by firing the CEOs of the insolvent banks our tax money is propping up. Or that they could ensure that no CEO ever again tried to screw the rest of us if they fined all the top Wall Street bankers at least $50 million each on some pretext Andrew Cuomo could come up with, or at least clawed back the bonuses or stock options these CEOs gave themselves when they were making their “bad decisions” that weren't bad for them at all, because it made them millionaires many times over while it punked everyone else.
The Flimflam Twins cannot be expected to think outside the box they love to squirm in, because it's their home: they eat, drink and crap inside it. They're at one with the crew who ran the ship aground. They're trapped on board like hebetudinous rats too waterlogged to jump a sinking ship.
Wall Street is the dog that chewed off Main Street's face, but instead of arranging for cosmetic surgery on Main Street's face, the Flimflam Twins are arranging for super-expensive dentistry on the dog's teeth.
Maybe you think I'm taking this too personally, and that Geithner and Summers are hardworking men who are doing their level best to help America out of a terrible jam. You may have a point. Geithner and Summers are probably fine family men with wonderful kids. But let's get this straight: I'm not saying Geithner is a terrible person, or that Summers is a raging oaf. But if Geithner helped Paulson throw away $350 billion of taxpayers' money last year, and if Summers was all for the deregulation of derivatives that ended up sinking our banks and the world's economy, then they should not be rewarded with the big job of saving our economy. Scorn should be heaped upon them; they did not earn this mission; they disqualified themselves; and the fact that they've done nothing concrete to solve the banking crisis as yet, is proof that they're too mired in the Wall Street ethos to have any idea how radical the shovel is they need to clean up the mess.
So how come Obama picked them? Here's the unfortunate truth: it must be that Obama has swallowed wholesale the Kool-Aid of the Vampire Elite himself. Our pragmatic prez has cosied himself right up into the welcoming embrace of the Oligarchs' Club.
In this club sit the masters of the universe who live by the sword and let the rest of us die by it.
From stumble-bumble Bush/Cheney of the stumble-bumble GOP -- to the stumble-bumble financial titans of stumble-bumble Wall Street -- the Vampire Elite are masters at privatizing gain and outsourcing accountability. They socialize their losses AND their responsibility, financial as well as moral.
As long as you're one of them, you're OK, Jack. Your ideas can screw up the entire world economy, but you'll be the first one we ask to rescue us from what your logic has wrought.
It's like asking your rapist to be your therapist.
Altogether a teratogenic, mind-boggling moral blindness on Obama's part -- a blindness along the same moral axis as good 1930s Germans ignoring what's happening to the neighborhood Jews. A difference of degree, but not of category.
3. HECKUVA JOB, GEITHNIE
So what have Larry goddam Summers and Wall Street stoolie Geithner come up with to solve the banking crisis?
You may recall that the world waited breathlessly for Geithner to tell us about his plans, especially after Obama said the day before that his Treasury Secretary was going to lay it all on the line and that Geithner was going to be “terrific.”
He was terrific all right. So damn terrific, the stock market crapped itself down another 400 points within minutes after Tim opened his terrific mouth.
Heckuva job, Geithnie.
What happened? What had Geithnie told Barack that made Barack think he was going to be terrific? What makes Obama think Geithner would ever be terrific? Is it because Geithner's Dad and Obama's Mom worked for the Ford Foundation together, when Geithner's Dad oversaw the microfinance program that Obama's Mom developed in Indonesia? Is it because both Obama and Geithner did a lot of growing up outside the US in Indonesia (Obama) and Thailand and India (Geithner)? Does all this personal connection blind Obama to the fact that Geithner is a total stoolie for Wall Street? Does our President have the slightest idea how thorny be the garden path he's being led down by Geithnie and Summers?
In case you didn't hear what Geithnie had to say, let me spell out to you -- and to him -- what he was essentially broadcasting:
1. I'll get our useless lying banking CEOs to answer some stress tests in which I ask them what'll happen to their banks under various future scenarios, and I totally trust that their projections will be based on absolutely correct and true numbers.
2. I'll keep insolvent banks alive to protect their shareholders and hope it'll work out for the rest of us.
3. I totally trust that if we oversee our useless banking CEOs, they will solve all our problems sometime before 3001.
4. All these CEOs have to do is one simple thing: keep on asking me for more money and we'll keep giving it to them until they or we run out sometime before 3001.
5. So what if it makes us all bankrupt -- at least we wouldn't have nationalized them.
No wonder Obama comes on like the Keystone Cops when it comes to the banking crisis. He's got Abbott and Costello working for him.
This is from an editorial in the Wall Street Journal of February 23 this year: “Inject another round of public capital if need be, but also replace the board and the management. Give the new managers a mandate to sell Citi's various parts, many of which are viable, profitable businesses. Declare publicly that this is merely a temporary process and that the Treasury's goal is to restore Citi to a healthy (albeit smaller) private bank as rapidly as possible.”
When the WSJ displays more common sense than Obama, something is more hideously awry than a sex-change operation done on a teapot. You've got to understand this about the Wall Street Journal. Their business coverage is the best in the world. Their editorial and op-ed pages are the worst in the world. They're from the “no regulations, please, we're capitalist” free-market fundamentalist Oligarchs' Club school. They're to social responsibility what Russ Limbaugh is to feminism.
And all of a sudden these charlies have a better handle on what must be done than Summers, Geithner or Obama!?
And we haven't even mentioned the fact that Larry goddam Summers, when he was president of Harvard, said women weren't pointy-headed enough to command the heights of math and science; drove Cornel West back to Princeton; divided the faculty into Civil War factions; protected his friend Andrei Shleifer who fraudulently used his Harvard credentials to try and profit from personal investments with the crooked Russian oligarch mafia while he was advising the Russian government; and practiced diplomacy out of Genghis Khan 101.
The same Larry goddam Summers who, when he was chief economist of the World Bank in the early 90s, signed off on a staff member memo that contained this bizarre aside: “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that ... I've always thought that under-populated countries in Africa are vastly underpolluted.”
In my moral universe, Larry Summers, Robert Rubin, Bill Clinton, Phil Gramm and Alan Greenspan would languish in exile on the island of Saint Helena, where Napoleon spent the last six years of his life under British supervision. They'd be living in a trailerpark on strict rations of three Big Macs and a 6-pack of Bud a day, with only the Bible for reading matter.
Instead, they're walking free. Rubin left Citigroup, the bank he helped ruin, with $115 million in his back pocket; Bill Clinton is fighting AIDS after he did nothing in 1994 to stop 800,000 Tsutsis in Rwanda from being macheted to death; Alan Greenspan fesses up that “those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief” while neatly ducking any true mea culpa; Phil Gramm, who created the legal “Enron loophole” (his wife was on the board of Enron when it tanked) and has lately distinguished himself for outstanding numbskulledness in the face of reality by saying our recession is “mental” and that we are “a nation of whiners,” was tipped to be John McCain's Treasury Secretary; and Larry goddam Summers sits in the White House, charged with cleaning up a mess he knew how to make but is clueless about how to clean up.
It's good to be a king in the Oligarchs' Club. You need never take responsibility for your fuckups and your accountability to anyone is a big fat rounded-off zero. A suicide bomber takes more responsibility for his actions than these guys -- along with all his victims he has the decency to at least blow himself up, too.
4. THE DISEASE OF BUBBLEPHILIA
These guys all suffer from a disease that doesn't hobble them, but sure as heck cripples us.
It's called Bubblephilia.
Bubblephilia is a love of money, power, or privilege so profound, its victims are genetically unable to relate to the concerns of the rest of us. It's not simply that they don't get it. They never can.
They live in a hermetically sealed bubble of privilege so cozy, they never need look outside it.
Bubblephiliacs come in six stripes:
1. Business bubblephiliacs. The Enron crew. Every investment banker on Wall Street. Masters of the universe like John "$22,000 commode" Thain. CEOs like "Chainsaw" Al Dunlop. There are exceptions: Rupert Murdoch. You might not like the Aussie monger of sex and conservative politics, but he ain't no bubblephiliac.
2. Political bubblephiliacs. Dick "Darth Vader" Cheney and his first-term puppy, George W. Bush, who took five years to start doing his job. (It's a toss-up whether the job was done worse when George finally got around to doing it himself, or when he at first let Dick do it.) An interesting case is Hugo Chavez: not a bubblephiliac. Instead, a determined and ruthless Robin Hood, who plays to his base, the poor, with the cunning of Machiavelli.
3. Religious bubblephiliacs. Most popes become bubblephiliacs. But there are a few who don't. If you're a Catholic, you know who they are.
4. Celebrity bubblephiliacs. Paris Hilton, of course, darling. We love her for it, because she's so nuttily funny. An interesting case of this strain of bubblephilia is Brangelina. Mostly they take their bubble with them wherever they go and invite poor kids in to come share it. They give a lot of money to charity; I can't tell if they're true bubblephiliacs or not.
5. Born-rich bubblephiliacs. You can't really blame them. Their bubble started encasing them in the womb. In order to break out of their bubble, they have to become teachers in the Bronx or missionaries in Ethiopia or find some Stanley Kowalski to bonk some reality-grit into them.
6. Revolving-door bubblephiliacs. These guys swivel their foie gras-padded hips between the political and the business world. Dick Cheney and Henry Paulson -- one of the “Government Sachs” crew -- are prime examples.
Not that everyone with immense power, privilege or money has this malignancy.
Take Warren Buffet. No bubblephiliac he. Neither are Barack and Michele. Nor George Clooney. Nor, among the dead, Audrey Hepburn or FDR.
Just because you're immensely privileged by inheritance or beauty, or you're a powerful senator or dictator, or you've made billions, doesn't automatically make you a bubblephiliac. You're a bubblephiliac because you're one of those AND you're morally blind: hence, naturally isolated in the psychopathology of your bubble.
One of the profound ironies of bubblephilia is that many of its greatest victims are also some of the greatest givers to colleges, charities, think tanks and the like. They can also be on-the-face-of-it nice guys, like George W. Bush. As a rule, they are a bunch of the smoothest-talking villains you can imagine, since they're totally taken in by themselves. Their con starts with being conned by their own egos.
5. HOW WALL STREET'S BONUS SYSTEM SCREWS THE REST OF US
Since they're also severely empathy-challenged, bubblephiliacs can wreak great harm on average folk, and in this skunk hour of our nation, a dark cloud has befallen the world because of the machinations of Wall Street bubblephiliacs.
Let's forget for a moment what kind of an individual one must be to think it worthy to spend one's lifespan on this planet devoted to making money from money so one can buy a Rolex before the guy in the office next door gets his, or have a bigger yacht or a faster horse than Prince Alwaleed Bin Talal, or a stupider hair piece than Donald Trump.
Let's just concentrate on what these financial bubblephiliacs get up to. They do nothing useful for society: they simply play with money in order to make money. They are the guys who've been betting big with 30:1 leverage on CDOs and other sophisticated weapons of financial mass destruction in the past decade, guys who in packaging and selling and insuring derivatives ran wild with the Gaussian copula formula thought up by the brilliant quant David X. Li that he himself knew had its limitations.
And the way they play is instructive. No matter what happens, they make money. It starts with their compensation scheme: the infamous bonus system.
What this does is allow the bonus receiver to cash out every year with a big bonus on the big profits his risky trades make for his bank, which he obviously deserves to get a big slice of, because the riskier his trades, and the bigger his bank's leverage, the more money he can make for himself and his bank. In 2007 alone, 40% of all corporate profits came from this kind of gambling income. Yep, the guys who did nothing for society at large, but only helped rich guys and themselves get richer by playing with money, made the most money.
But and however and nevertheless:
Everybody in on this mad-money gamble knows that any time from half-a-decade to two decades on, the particular gamble they're betting on will go kerflooey.
Something will happen: the Russian government will default on their bonds, or an asset bubble will burst. The golden goose, laying yummy eggs, will sooner or later encounter the unlikely but eventual dead certainty of Nassim Taleb's black swan. In which case, kaboom! ... there goes pricked, puckered and punctured, for example, the housing bubble; the entire edifice blows up like an elephant who binged out on one too many fermenting blueberries.
Poof! goes the bank that employed the toxic trader. Bang! goes the investment of shareholders. Ding! go the pension funds that held these instruments. And plonk! goes your 401K.
But the bonus system endures. The guys who made these gambles that they knew would sooner or later end up in a huge disaster, well, THEY KEEP ALL THE BONUS MONEY THEY MADE. No kerflooey for them. They get rich out of wrecking everything for everyone else. And then they do exactly the same thing all over again, because they know they'll always be making money while everyone else gets cleaned out.
Nifty game, eh?
It's an out-and-out scam. There are at least 20,000 Bernie Madoffs on Wall Street who sucker us by way of their risk-taking out of our pensions and 401Ks so they can have mansions in the Hamptons while regular folks get foreclosed out of their homes. The only reason this rigged casino capitalism is not illegal is because our legal system is rigged to favor the rich anyway. Heck, when a rich guy goes to jail, he goes to a nice jail where he can play tennis; when a regular guy goes to jail, his anus is in constant jeopardy from some over-muscled penis person.
Now, say those bonuses weren't paid out every year, but were paid out every five or 10 years, and with a claw-back provision that ensures you pay back if your trades wreck your bank or the world. Then the Vampire Elite would be making way less money, but we common folks would suffer way less, too. And we may have actual capitalism for everybody. Instead of what we have now: socialism for the Vampire Elite and capitalism for everybody else.
The same bubblephiliac mentality operates for CEOs who get paid Croesus amounts even when their companies do churchmouse poorly. It doesn't matter how lousily they do their job; they always make out. They can even walk away from a company they've totally ruined with a golden parachute in the tens or hundreds of millions.
That's the kind of behavior that financial bubblephiliacs are great at, and it puzzles them mightily when anyone questions their modus operandi. Hey, they're simply following the wonderful free-market system. They will also invariably call anyone who wants to change things a socialist, when it is they who are the socialists who scam the rest of us poor capitalists. They figure their religion -- free-market fundamentalism -- entitles them to rob pensioners, entire nations, and indeed, the whole world -- as they've just blithely done, flying high over the rest of us in the plush leather seats of their luxury corporate jets.
6. THE BUBBLEPHILIAC PIPELINE STARTS AT OUR IVY LEAGUE COLLEGES
Where do these financial industry bubblephiliacs spring from? Chances are one gang comes from Harvard where they hooked up together, another lot from Yale, another from Stanford, etcetera. At these Ivy League colleges, the faculty are expert at mixing connected legacy students with the upcoming meritocracy and blending them into a tangy stew of perfect little shits called Wall Street bankers and white-shoe lawyers and all the other species of privileged Salvatore Ferragamo-loafered, Armani-suited, Albert Thurston-suspendered bubblephiliacs.
Years ago I read a news story about a priest who took an MBA at Harvard. He thought the kids were very nice and well-behaved and that they worked really hard. Then one day one of the profs discussed labor relations and showed a documentary about a strike. To the surprise of the priest, the nice, well-behaved Harvard students suddenly started jeering at the screen and mocked the dress, speech and manner of the workers.
That's your Harvard-Yale-bred upscale privileged bubblephilia right there, in all its snotnosed brattiness.
I'm always amazed that the Wall Street Journal is so quick to accuse Democrats and union officials asking for a slightly bigger slice of their pie as engaging in class warfare, when the Wall Street Journal clique are, and have always been, the most unscrupulous class warriors themselves -- from the moment they start out at Harvard despising honest salt-of-the-earth folks who earn their living by the sweat of their brow and the toil of their hands, to when they bank their last bonus check before another bubble bursts. For a privileged bubblephiliac to accuse an auto worker of engaging in class warfare is like a child molester accusing a child of engaging in child molestation.
7. NATIONALIZE IN THE SHORT TERM TO FORCE CAPITALISM ON OUR BANKS
So what do I think we have to do about the banks in this strange hour, when capitalism itself seems to be faltering?
Now my view of capitalism is rather individual. I believe in a strong social safety net. No hunger. No homelessness. Free healthcare. Free education all the way to Ph.D. No taxes for families earning less than $50,000 a year. No taxes in the first two years for any small start-up, since small businesses are the lifeblood of our economy. A 25% tax rate for businesses that employ fewer than 100 people. A 35% tax rate for all other businesses, with no loopholes whatsoever. (I mean, they actually have to pay 35% in taxes, not 0% like many corporations have under Bush/Cheney with their legalized accounting tricks.) A tax rate that's progressively bigger the more you earn, and if you earn over five million dollars a year, every dollar over five million is taxed 90% (before the Reagan Revolution, a 90% tax rate for top earners was not uncommon). I believe in using the tax code to help us get a more level economic playing field.
I'm against big corporations; they should be broken up instead of being allowed to swallow everything around them, until they're “too big to fail.” Mergers should be discouraged. Economies of scale are BS. I dislike big corporations because in my experience they are way more bureaucratic, bloated and inefficient than the government. To get my internet connection re-activated by Verizon, it once took me 8 weeks and 17 hours of phone calls to 26 different employees to get it done -- while my dealings with US government agencies have always been quick, cordial and satisfying.
So you may not be surprised that I think nationalizing the “too-big-to-fail” banks in the short term is the only way to enforce capitalism upon them.
Nationalizing the banks is exactly what the FDIC does every day with smaller failed banks, to the tune of two or three a week. They take them over, liquidate their losses, fix them up if they're fix-uppable, and sell back to the private sector any healthy remains left.
Yet Obama claims “we're not Swedish,” referring to the fact that the Swedes solved their housing-bubble-and-bank-meltdown crisis of the early 90s by nationalizing the banks and re-privatizing the fixed-up units.
Yes, sirree, when it comes to “too big to fail” banks, Obama suddenly wants to make an exception to our official, everyday, pragmatic, common-sense policy.
He wants an exception for the banks run by the Oligarchs' Club.
He's like a judge who sentences all serial killers to death, but when it comes to a serial killer who's also a fat glutton, he hands out a life sentence.
Listen, we had better be Swedish with the big banks, too, otherwise we're going Japanese. And we know what happened over there. The 90s was Japan's lost decade, because they kept their zombie banks alive by consistently throwing good money at bad balance sheets.
Just like Larry goddam Summers wants us to do. The same Larry goddam Summers who, according to the Wall Street Journal, when the stimulus bill was legislated, called Chris Dodd to tell him, hey, dude, remove the caps on executive pay at firms who get stimulus money, including Citigroup.
That goddam Larry goddam Summers.
So you know whose side he is on, this supposed savior. He's fighting Cognac tooth and Armani nail against nationalization, whatever he may say for public consumption.
To nationalize or not to nationalize, that is the rub. This is Obama's big Rorchach test.
The test on which turns the fate of our nation, and the fate of the world, for the next 10 years.
If Obama nationalizes the banks, we have a shot. We can then wipe out the shareholders to whom our bailout money is being funneled by bankers who used the first $350 billion of TARP to do everything but lend. We can then get a true accounting of how worthless these banks are. We can then replace their moronic CEOs with new people who'll jump at the opportunity to reap lifetime fame as the guys who took the once-in-a-century opportunity to restructure Citigroup, break it up into smaller units, and sell the healthy units back to the private sector, in units small enough to prevent them from ever becoming a bank that is too big to fail.
Otherwise you've got a zombie bank that sucks up our tax dollars like an oil pump attached to our jugular veins, and ruins our recovery like they've ruined everything else.
If Obama doesn't nationalize insolvent banks, his recovery plan will fly into thin air on wings of gossamer fairy dust, and he'll be a one-term president, saddling poor Hillary with a bigger mess than he inherited. She'll end up having to clean up after her husband, George W. Bush and Barack Obama.
8. AN ODIOUS COMPARISON BETWEEN BILL CLINTON AND BARACK OBAMA
OK, now that I've got that screech off my aching chest, what has Obama done right? It's a long list. An odious comparison with Bill Clinton is instructive.
Bill Clinton couldn't get a $16 billion recovery bill passed.
Bill Clinton put his wife in charge of a health initiative that got nowhere.
Bill Clinton didn't have the balls to force the military to accept gays.
Bill Clinton turned a blind eye when the Hutus started killing the Tsutsis with machetes imported from China, while the UN guy in Rwanda was screaming for intervention (the UN did blowall too). Over a hundred days, Bill let 800,000 humans be brutally massacred without raising one digit. Sometimes the Hutus got so exhausted chopping up people, they merely cut their Achilles tendons so they couldn't run away, and then the murderers went to sleep, waking up refreshed the next morning to chop up their victims for good.
Don't tell me Bill can ever atone for what he didn't do. He can mea culpa till he's red in the face, but there are 800,000 folks out there whose bones don't have a life to forgive him.
What in fact did Bill Clinton achieve in eight years besides splooging an intern's dress?
Bill left us with a surplus, a gift of the tech boom. He reformed welfare. And with NAFTA, he gave USA Inc. the greenlight to outsource our jobs. He completed the Reagan Revolution, giving Bush/Cheney the opportunity to finally fuck us.
We think of Clinton as a good president because times were good back then. But in terms of devastation caused by his financial legislation, and by his inaction on Rwanda, it's a tossup who is the worst president ever, Bush or Clinton.
Anyway, Obama is who we have now to solve our worst crisis since the Great Depression, and he's the best man we could possibly have for the job, because:
1. He's a pragmatist when he's not morally blind.
2. He got a servicable $782 billion recovery package through, and he's got a pretty solid housing crisis plan, and he's put a stop to torture, nontransparency and a lot of other Bush crap.
3. He presented a truthful and unvarnished budget, with money for all the things he promised in his campaign -- healthcare, education, infrastructure, green energy -- a budget that rolls back the Reagan revolution, and gets the nation back to its true centrist liberal self; a budget that asks the better-off folks to step up to the plate and fork over more taxes; a budget that Paul Krugman says is “pretty good.”
4. He has intramarital instead of intern sex in the White House.
OK, so there are a few feculent flies in the Obama ointment: he wants to leave 50,000 troops in Iraq after we leave in 19 months; his Attorney General uses the same Gonzalez “national security” arguments to stymie suits against us by released people we tortured; and he doesn't want to prosecute torturers or those who sanctioned torture.
Still, the smartest guy in Washington has come out of the starting gate with a magnificent prance to his gallop and a victory ribbon tied to his upturned tail. If he keeps going like this, he could end up as beloved as Lincoln, FDR and Washington.
But not if he listens to Larry goddam Summers and Tim Wall-Street-Stoolie Geithner.
Maybe he won't. The story goes that in one meeting with advisors, Larry was trying to push a point with Barack, and at one point said: “Mister President, I don't want to over-press this point.”
And Mr. Cool shot back: “But you do, Larry. You absolutely do.”
Who knows, Larry goddam Summers might be struck by an epiphany on the road to Damascus if he gets softened up by enough zingers from his boss. Come to think of it, even Hitler must have started as a nice baby.
What's probably going to happen is that between them, Summers and Geithnie are going to waste another trillion or two before their boss tells them to try the nationalization option. Hey, what's another trillion or two between friends?
9. SECURITIZATION IS NOT A WORKING MODEL FOR CREDIT
Nationalization will help, but what we really need is for the entire securitization racket to be banished from the face of the earth. It was supposed to lay off risk. But at the first sign of bad news -- when only 6% of subprime mortages were being defaulted on -- the entire market for securitized investments folded like a pair of gonads belonging to a fluffy cloud on a sunlit day when clouds don't last a minute. One little sardine took one little bite at the whale's tail and a hundred tons of fish blubber went belly up. So the idea of risk being laid off was total BS. Every formula thought up by every quant was BS. And this is what Summers and Bernanke and Geithner are trying to revive -- the toxic securitization racket.
The securitization racket started only a decade ago, so there's no reason it cannot be killed stone dead and buried under the statue of a bull in front of the Stock Exchange now that it's in its death throes. In fact, whilst the securitization of mortgages happened at an annual rate of $1,000 billion in January 2007, it was down to $50 billion by January 2008. Down by 95% -- so now might be the time to put in the final boot and stomp it to tiny pieces of itsy-bitsy smithereens.
Here's the rad, bad, sad story of how securitization works.
In the old “originate & hold” model, banks made money from holding their loans and mortgages, and earning the interest paid on these loans to them.
Securitization is a whole other story. Now you “originate & distribute” the loan to someone else, and make money off the fee when you sell your loan to someone else, who then collects the interest on it. The loan can get bundled with other loans, and then get sliced and diced, so it gets repackaged and resold, fees being made all along the way. There's a compelling incentive to write more and more mortgages, so more can be sold off again and again, and more fees collected.
Read this brilliant summation by perhaps my favorite economist, Nouriel Roubini, one of the three or four people who saw the whole shitstorm coming while Wall Street was too busy dreaming up new scams to notice a Godzilla of Debt headbutting its way up through the sidewalks of Lower Manhattan:
“In residential mortgages the process started with peddling mortgages that were toxic in every aspect of their features: no down payment, no verification of income, assets and jobs (the “no doc” loans that were effectively “liar” loans), interest rate only mortgages, negative amortization mortgages, and teaser rates. Why were these toxic mortgages peddled, originated and distributed after being sliced and diced? Because everyone in this securitization food chain was making a fee and transferring the credit risk to someone else down this food chain.
“Think of this fee generation process along this long food chain: it started with mortgage brokers whose income/fee was based on maximizing the volume of mortgages being generated and approved; they had all the incentive to ignore the creditworthiness of the borrowers and maximize mortgage volume and their personal income. The fee generation machine then passed to the bank originating the mortgage that was packaging these mortgages into MBS (mortgage-backed securities) and thus making a fee in this process and transferring the risk down the line to someone else; again the bank cared little about the quality of it own origination as it was transferring the credit risk.
"The fee generation machine included the home appraisers who were being paid by the mortgage originators and had all the incentive to inflate the appraised value of the home to get more and more fees and more and more business; this fee machine also included the mortgage servicers who got fat fees from servicing the mortgages and getting even fatter fees when the hapless borrower falls behind in its mortgage payments and who thus have no incentive to prevent foreclosure. The securitization food chain continued with the investment banks slicing and dicing the MBS into the equity, mezzanine and senior tranches of CDOs and making fat fees on that process and on managing such CDOs. The fees compounded when the CDOs became CDOs of CDO (CDO squared) and CDOs of CDOs of CDOs (CDO cubed).
“Then the rating agencies that blessed these CDOs chains and tranches with AAA rating were getting their fat fees (and most of their profits) from rating – or better misrating -- these toxic products and converting – via voodoo magic – bundles of BBB subprime mortgages into AAA rated tranches of CDOs. Along this fee generation machine the monoline insurers were making fat fees insuring these toxic instruments and providing additional AAA blessing on this garbage and trash. And finally if this garbage of CDOs (or CDOs cubed) was not fully distributed to clueless and greedy investors, banks created off-balance sheet SIVs and conduits that would buy the leftover trash that no investor wanted to touch and repackaged it into structures that were financed with the most short term ABCP; these SIVs were then blessed with credit enhancement and guarantees of liquidity lines from the banks that made them de facto on balance sheet items even if they were de jure off balance sheet; but there were extra fat fees to be made from managing this toxic SIVs and conduits and thus the fee generation machine kept on rolling.
“In this securitization food chain – or better scam -- every institution made a fee and transferred the credit risk down the line. Then no wonder the credit risk was transferred to those who were the least able to understand it: somehow greedy and clueless investors searching for yield bought tranches of instruments – CDO or CDO cubed – that were new, exotic, complex, illiquid, marked-to-model rather than marked-to-market and misrated by the rating agencies. Who could then ever be able to correctly price or value a CDO cubed? And for all the talk about the benefits of financial innovation what was the social value of a CDO cubed? There was indeed zero social value in this type of financial innovation that is closer to a con game than to a financial product of any use.”
Will the securitization racket actually be banished? Probably not. Because if it were, there'd be no reason for the majority of gamblers on Wall Street to exist.
Should they exist? Should we continue to allow Wall Street to do things like buy companies with leveraged buy-outs -- i.e. paying for a company by loading it with debt? You can go through one Wall Street money-making strategy after another, and every one will have an iffy stench to it. The biggest stench that outstinks all other stenches is that Wall Street -- the finance business -- gets to buy real things and real businesses in the real economy with the money they make from their flimflam schemes.
I say: regulate them out of existence. Let banks make money the old-fashioned way: by lending out money to credit-worthy customers with whom they build a personal relationship.
Warren Buffet says derivatives are financial weapons of mass destruction. So ban them. Shrink the already incredible shrinking Wall Street down to the size of a pimple on a flea's elbow so its casino capitalism can never again endanger capitalism itself.
Save the livelihood and pensions of regular folk forever from Wall Street's machinations. Turn Wall Street into a museum, with Madam Tussaud sculptures of all the Wall Street CEOs who've been ripping us off. Fire them all from their jobs and reapppoint them as museum guides, so they can take us on tours of their nefarious deeds.
To think that once upon a time people wanted to hand over our Social Security money to Wall Street. A certain George W. Bush was all for it. For that alone he also belongs in the Wall Street Museum of Fraud, Looting and Other Nefarious Misdeeds.
Anyway, Wall Street has gone and creatively destructed itself, and it behooves us to pour a billion tons of bunker-buster-bomb-proof concrete on the smoldering grave that Wall Street has so conveniently dug for itself, so its maggoty vestiges can never again rise from its rotten cadaver to toxify us into worldwide putrefaction.
Will it happen? Not with Geithner and Summers fronting for Wall Street.
10. THE ANNOYING ENDURANCE OF THE DAMNED
Meanwhile, all we can do is indulge in the audacity of hope.
Nouriel Roubini advises nationalization and still gives us a 30% chance of failure if we do that. Dr. Doom figures that even the new broom of nationalization might not sweep away our gloom.
It's a pity suicide bombing isn't part of the evangelical tradition, because we could've sent some of our own religious crazies to Wall Street to blow themselves up in a few choice corner offices.
But if we can't avenge ourselves bodily, we can at least stick around, to be a constant thorn in the fat flesh of the Vampire Elite. No matter what they do to take us down, we always pop up. Stuck in their craw, there we are, a constant presence, embarrassingly tangible and eerily ubiquitous: hail the annoying endurance of the damned.
And so we wait for the outcome of this particular titanic battle.
Obama vs the Vampire Elite.
Let's audaciously hope that Obama actually intends to take on the bubblephiliacs of Wall Street, despite the counsel of his ball and chain.
Meanwhile, what's a nation to do? For a start, don't berate yourself because you had to put medicine for your kids or a meal out with them on your credit card. Your credit card debt does NOT put you on the hook for screwing up our economy. Wall Street did it, not people who bought a house they knew they couldn't afford. Let the Wall Street Journal or the GOP or Fox News or CNBC blame the victims, but know deep in your bones and sharp in your heart: the bubblephiliacs of the Vampire Elite have always been, and will always be, nothing more than toxic scum on the sweet green blooming pond of life.
If you're one of the increasing millions of Americans who've been bankrupted by medical bills, or lost your job, or have your home foreclosed, and your dignity hovers an inch above the water in your toilet bowl, my heart is bleeding blood as red as yours, fellow human. I once bought 17 cans of tuna with the last money I had, so I could be OK for the next 17 days. I hung on to a shred of dignity: I didn't buy dog food. So you're forever on my mind.
As you are on our President's mind. He saw the hungry children in Indonesia when he was a child there, and he saw your struggle in the urban ghetto of Chicago when he was a community organizer there.
And for everyone else, our heads barely peeking above the storm, our loins marrow-chilled with Obama-fumbles-the-credit-crisis fear, yet our hearts mezzo-filled with Obama hope, what is there to say?
Chin up. And keep your seatbelts fastened, folks. There be dragons lurking round every turn and corner of the next few years, breathing hot flames to singe the curly hairs on the butt of every honest, decent, law-abiding, well-meaning, hardworking citizen on earth.
Posted by Evert Cilliers at 02:35 AM | Permalink