Politico has the story headlined Schumer drops objection to Obama tax plan.

Pelosi announced her support in a press release Monday afternoon.

“Today, President Obama once again stood firmly with America’s middle class and small businesses,” she said. “Democrats and the President have always fought for an extension of the tax cuts for middle-income families to offer greater relief and economic certainty to all working Americans. Once again, Republicans must decide: will they continue to hold middle class tax cuts hostage to tax breaks for the wealthiest or will they agree to pass the middle class tax cuts we all agree should become law?

Obama press secretary Jay Carney was also quoted:

Carney also said a White House push could actually help to get the tax cuts through Congress despite suggestions otherwise.“What we’ve seen in the last year or so, the last 10 or 12 months, when the president makes a public case for policy that is sensible, that’s broadly supported by the American people and he continues to make that case when we see the kind of movement that initially seems unlikely in Congress and hopefully that’ll be the case here.”

And to think, it has only taken them almost 4 years to figure out that Obama has to push a policy to get it through Congress.  The White House used to think that Congress would just present Obama with good legislation that he could sign.

Then we get to the Republican reaction:

Republicans weren’t buying the show of unity — or the notion that Obama wasn’t pushing a broad tax increase.

“Americans are struggling in a ‘zombie economy’ and President Obama’s only answer is to pass one of the largest tax hikes in history,” said Amanda Hennenberg, a Romney campaign spokesperson. “President Obama’s tax increases on families and job creators will create more economic uncertainty and fewer opportunities for struggling middle-class families. From Day One, Mitt Romney will take action to lower marginal rates, help middle-class Americans save and invest, and jumpstart economic growth and job creation.”

Have you had it with the so called job creators yet?  They are sitting on trillions of dollars in liquid assets, but they don’t create any jobs with that money.  And why should they?  They can “invest” those assets in fancy financial instruments and make more money that they can in hiring people to do work for which there is no demand.  And why is there no demand?  Because the wealthy suck up all the money and “invest” it in financial derivatives and don’t buy anything that requires workers to produce it.  They also don’t let any money trickle down to the workers so that they can buy stuff.

The only solution that will work is to extract some of those liquid assets by taxing them, and then putting those assets to work with government investments in education, research, and fixing our crumbling infrastructure.  When that infrastructure crumbles into dust, it is going to have to be replaced anyway.  Why not do it now when workers are begging for jobs?  Would we rather that the government try to do this during times of full employment when they would have to pay top dollar to get the work done?

I saw the pointer to the ad shown below on Rachel Maddow’s web site in the article On the offensive on women’s rights.

Rachel Maddow writes:

But let’s not miss the forest for the trees. This new campaign ad hammers Romney for wanting to overturn Roe, outlaw abortions, and scrap aid to Planned Parenthood — and Obama’s re-election campaign wouldn’t put a spot like this together unless it knew the American mainstream agrees with the president’s position.

Indeed, it’s of particular interest that the spot will be airing in Virginia, a Southern state where social issues tend to cut against Democrats, but where state Republicans drew national outrage for pushing a forced-vaginal-ultrasound proposal.

It also occurred to me that maybe others on Obama’s side have been withholding donations as I have because of his weak defense of our ideals. He finally realizes that he has to excite his base if he is going to get the support he needs. Another lesson in how to avoid being taken for granted.

Truth Out has the article After Five Years: Report Card on Crisis Capitalism by Richard D Wolff.  Here is a nice summary from the article:

Lets summarize: (1) capitalists decided in the 1970s to computerize and increasingly relocate production overseas; (2) that enabled them to impose wage stagnation and greatly increase surpluses and profits; (3) financial capitalists lent to consumers and built a speculative bubble based on consumer debt; (4) when rising consumer debts exceeded what stagnant wages could afford, the system crashed; (5) capitalists got trillion-dollar bailouts while lending government the money for those bailouts; and (6) now, capitalists make entire populations pay for the crisis and bailouts by directing politicians to impose austerity. This capitalist system not only fails to “deliver the goods,” it dumps ever-more-outrageous bads.

I am not ready to buy into the solutions this author poses.  I guess I still have some nostalgic  feelings for the good, old fashioned, mixed, capitalist society.

Here is a video for the racists with whom I socialized yesterday. Too bad they will never see it.

No stranger to the contradictions of history and their racial touchpoints is Bill’s studio guest Khalil Gibran Muhammad, head of the New York Public Library’s Schomburg Center for Research in Black Culture and author of The Condemnation of Blackness. Muhammad and Moyers discuss the importance of confronting the contradictions of America’s past to better understand present issues of race and equality.

The new and improved version of the Elizabeth Warren For Senate web site debuted recently.

Among the many new features I found is a listing of all the Elizabeth Warren field offices in Massachusetts.  For those of us out in the boonies of central and western Massachusetts, it is nice to know where the Worcester and Springfield offices are.

There are links to videos going back to May 1, 2012.  Of course, I have a much more extensive set of links to videos on this blog.

Just use the search box over on the right side of this blog to look for warren video.  It is too bad that there is no search box on the new Warren web site.

The Nation Of Change has the article Jobs Report: Challenge Congress to Act, Obama to Fight.

As former White House Council of Economic Advisers chairman Laura Tyson wrote earlier this week, “Congress left at least one million jobs on the negotiating table” just in the past year alone, thanks to congressional Republicans who are “holding unemployed workers hostage to the outcome of November’s election.”

That is almost enough jobs to close the jobs deficit we’ve been calculating since January, based on the number of jobs the economy would have to create on average each month—about 400,000—to bring the unemployment rate down to 5 percent by the end of 2014. From January to May, the economy created a net 832,000 jobs; to be on pace to meet the 5-percent-in-2014 goal, the economy should have created 2 million jobs.
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But let’s not wait for Obama to lead. We have to push. Start by confronting members of Congress this weekend, before they return to Washington for more right-wing political grandstanding such as “repealing Obamacare,” as well as candidates running for Congress. Ask them whether they will take steps to put people to work on the work that needs to be done, or will they push instead for policies designed to enrich the already rich, while imposing austerity on everyone else. It will be up to us to make it clear to every politician, from Obama down to the freshman House candidate, that political reward only lies in support of an authentic middle-class jobs agenda.

One of the major messages of this blog, is that we can’t just choose between politicians at election time.  We need to push the elected politicians to go down the right path.  If we had gathered together to push Obama to fight harder, then the Republicans would not have had the courage to block his every move.  If we cannot stay focused on fighting this battle, then the battle will go to the only side that can stay focused.

The more the focused side can keep you worrying about your financial stability, the less you can focus on the root cause of the instability.  The root cause is the attack by the Republicans and their supporters on your middle-class life-style.

President Obama discusses legislation he signed on Friday that does two important things: It keeps thousands of construction workers on the job rebuilding our crumbling infrastructure, and it stops interest rates on federal loans from doubling this year for more than seven million students.

We can blame President Obama for the economic performance brought on by Republican blockage in the Congress, or we can solve the problem by getting rid of the blockage. The solution is in the hands of the voters.

If you, as a voter, cannot figure out where the problem lies, then you surely won’t be able to figure out what the solution is. How hard are you working to understand the biggest political issue you may face in your lifetime?

The New York Times article On Tricky Terrain of Class, Contrasting Paths addresses the issue of how to play the class warfare story in the Presidential campaign.

Most of all, even Mr. Obama’s inner circle seems cognizant of the risks of making wealth an issue. Asked whether Mr. Obama’s emphasis on fairness for the middle class and his contrast with Mr. Romney pushed that line, Mr. Axelrod replied: “It is not right to say that to work for and hope for and fight for some basic economic security means that you resent people who’ve done very, very well.”

I was at a birthday party today listening to some people complain about not even being able to get a full day of vacation off from work to attend a son’s wedding, even though the vacation time had been asked for many months in advance.  Those same people who didn’t like the way management was treating them, then turned around to say how much they did not like President Obama.

At the same party today, I also heard a story of a violent confrontation at an auto service station between an irate customer and a technician who insisted on applying the testing standards that the law demands.  Because the customer who was launching the attack was a person of color, President Obama was blamed for letting “these people” into the country.

My bet is that the party goers’ inability to put two and two together to see where the work pressure is coming from are being blinded by their prejudice. If  there are not enough people who can put their prejudice aside so that they are able to figure out who is for them and who is not, then the Democrats haven’t got a hope.

So, while there are risks in President Obama focusing on the attacks being made on the middle class by the ruling capitalists, it is the best and most honest focus.  If the American people are not ready for such honesty, maybe they need another dose of Republican control to wake them up.  Talk about a little shock therapy.

I’d be willing to let the people have their shock therapy if I weren’t forced to accompany them through the treatment.

I found the article Crime of the Century by Robert Scheer on the Truth Out web site.

How to explain a $450 million settlement for one bank whose defense, in a plea bargain worked out with regulators in London and Washington, is that every institution in their elite financial circle was doing it? Not just Barclays but JPMorgan Chase, Citigroup and others are now being investigated on suspicion of manipulating the Libor rate, so critical to a $700 trillion derivatives market.

Remember how upset the Republicans are about this country’s $14 trillion debt?  That number doesn’t look so big when compared to the “$700 trillion derivatives market”, does it?

Both Citigroup and JPMorgan Chase were reported by The Wall Street Journal years ago to be suspected of rigging the Libor interest rate. The leaders of those banks, despite such media exposure, clearly remained confident enough to continue on their merry way.

The sad reality is that they will probably get away with it. The world of high finance is by design as obscure and opaque as the bankers and their political surrogates can make it, and even this most recent crack in their defense of deception will soon be made to go away.

My blog posts castigating the world of high finance may start to sound repetitive.  It is because these articles are so easy to find.  May be the repetition will finally start sinking into the minds of the voters.

In a previous post A simple remedy for a Wall Street danger, James M. Stone talked about the danger facing banks who try to take large “hedging”  positions in financial derivatives that are supposed to nearly balance each other out and minimize risk.  The risk is in the imbalance between the two sides of the hedge.  If that imbalance is smaller than the original risk, then the risk has been made smaller.  If the imbalance is bigger than the original risk, then the risk has been made larger.

The “hedging” positions on each side of these trades have become so huge, that the likely imbalance itself is big enough to sink the bank.  The total notional value of these hedges is as much as 240 times the size of the bank’s equity.

From Wikipedia we have the definition, “The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus referred to as notional”  Note that when they say that the amount does not generally change hands, they use those weasel words to disguise the fact the this amount could need to change hands under extreme circumstances, such as a financial collapse.

I understand all this, but there is still a nagging question. Hedging is supposed to minimize risks.  A perfect hedge neither makes money nor loses money under any circumstance.  Why would banks engage in these huge transactions that put the entire bank at risk of going out of business?  I would have thought that any hedge transaction that is meant to offset the risk in any normal bank investment, would not be larger than that investment itself.  There is something going on here that I don’t get.

Well, the answer to that question is in the article The ‘Perfect Hedge’ Remains Elusive at JPMorgan.

In the process of writing and rewriting the Volcker Rule over the last two years, the banks pushed hard to be allowed to hedge risk related to “market-making” and to “portfolio hedging.” Market-making is when a firm acts as buyer or seller to help facilitate a trade for a client. The banks actually made a persuasive case that if they are going to take risks for clients, they should be able to seek to hedge each trade individually.

However, they also sought an exemption for something much more expansive: “portfolio hedging.” In other words, they wanted the ability to try to hedge their entire firm’s portfolio against macroeconomic factors. And that’s where JPMorgan’s botched trade comes in.

So let’s discuss how JPMorgan got in this mess in the first place. Here’s an overly simplistic primer, but you’ll probably get the idea: The company’s chief investment office originally made a series of trades intended to protect the firm from a possible global slowdown. JPMorgan owns billions of dollars in corporate bonds, so if a slowdown were to occur and corporations couldn’t pay back their debt, those bonds would have lost value.

To mitigate that possibility, JPMorgan bought insurance – credit-default swaps – that would go up in value if the bonds fell in value.

But sometime last year, with the economy doing better than expected, the bank decided it had bought too much insurance. Rather than simply selling the insurance, the bank set up a second “hedge” to bet that the economy would continue to improve – and this time, traders overshot, by a lot.

Jamie Dimon, the bank’s chief executive, said of the trade on “Meet the Press”: “We know we were sloppy. We know we were stupid.” Senior executives at the bank say privately that the trade should have never been made; they even concede that it looks like a proprietary trade – which the Volcker Rule would explicitly prohibit – rather than a “hedge.”

The point is that hedges are meant to reduce risk.  A purchase of a derivative like a credit default swap which may be used to hedge is not a hedge transaction at all when not balanced.  It can make huge profits for a bank.  The “risk management” departments of banks were named for the function that they used to provide when they were initially created.  They were supposed to mitigate risks, but not make any profit themselves. In fact mitigating risks usually means lowering profits. Banks have learned that these “hedging” transactions, when unbalanced, can lead to huge profits for the banks.  Since the “risk management” departments were experts in making these kinds of derivative investments, why not have these departments actually make money instead of just losing money while mitigating risks?

It may not be obvious to the smart bankers what seemed only too obvious to me.  If mitigating risk is a profit diminishing operation in the long run, then if you expect to make profits over the long run, you are not doing risk management anymore.

I guess the temporary success in making huge profits in the “risk management” departments blinded these executives to the obvious.  Well, actually, no.  This would be far too generous an interpretation to make.  The executives were hoping that they could fool the regulators or at least fool the politicians who voted on  funding the regulators, or let the politicians fool their constituents.  After all, if the house of cards came falling down, the banks might go under, but the executives would walk away with the fortunes they made before the collapse.  So they could be fully cognizant of the risks that they were making their banks take, and it would still make sense for them personally to have the banks take this risk.

You might even relate the bankers’ brazen behavior to what Eliot Spitzer had to say in the video of my previous post, Striking fear in Wall Street’s heart.