Steve's Politics Blog

New Economic Perspectives has the article Geithner: “The End of Capitalism as We Know It” by William K. Black.  Black makes a couple of important points.

First he talks about an item in David Axelrod’s new book.

… the finance guys argued that retroactive steps to claw back the money would have violated existing contracts.

.
.
.
Notice that there is a contradiction in the description of the issue. Preventing banks that received bailouts from paying future bonuses is not “clawing back” bonuses. Clawing back bonuses means recovering bonuses that were improperly paid based on false accounting statements that massively overstated bank income. Neither of the practices I have described would have “violated existing contracts.” The people that “violated existing contracts” were the bankers who massively inflated reported net income in order to collect massive bonuses while the bank suffered huge losses and the bankers that made massive bonuses by leading frauds that ripped off customers. Both forms of fraud invalidate any contractual claim by the managers to bonuses. Bankers should not get paid in full under normal bankruptcy provisions when they run the bank into insolvency (including a liquidity crisis).

Second is his comment about capitalism as we know it.

Anyone that wants to save “capitalism” must destroy the current corrupt system “we know” that is posing as “capitalism.” To sum it up, there was no greater service that the Obama administration could have done for (real) capitalism than to produce “the end of capitalism as we know it.” Geithner was absolutely right in his diagnosis and absolutely wrong in his response. Wall Street hates “capitalism” – Geithner and Summers acted to save, rather than exorcize, its corrupt doppelgänger.

The supporters in Congress of the oligarchs claim to be supporters of capitalism and free markets, when, in truth, they support no such things.  They actually support oligarchy and controlled markets as long as the oligarchs are in control of the markets.

Israeli Prime Minister Benjamin Netanyahu has posted on his Twitter page the following tweet:

I’m determined to speak before Congress to stop Iran. RETWEET if I have your support.

You can use the above link to respond to his tweet.

I have told Netanyahu that I am standing with the Jewish Senator from Vermont to advocate boycotting his speech. The President of The United States conducts our foreign policy. Congress’s attempts to undercut him, and to invite you to speak publicly to a joint session of our Congress comes dangerously close to treason for Speaker Boner. If you don’t come in some sort of uniform, you might be considered a spy. If your Ambassador did not have diplomatic immunity, he might be considered the same. We cannot prosecute your Ambassador, but we can insist that he leave our country. Conspiring against our President is not what we tolerate from foreign diplomats assigned to our country.

I fit all of the above in 140 characters 🙂

Democracy Now has the broadcast Exclusive: Freed CIA Whistleblower John Kiriakou Says “I Would Do It All Again” to Expose Torture. There is also a full transcript available at the previous link.

In a broadcast exclusive interview, we spend the hour with John Kiriakou, a retired CIA agent who has just been released from prison after blowing the whistle on the George W. Bush administration’s torture program. In 2007, Kiriakou became the first CIA official to publicly confirm and detail the agency’s use of waterboarding.

Well, it’s really about 45 minutes or less because the news summary at the beginning takes up about 15 minutes.

At about 43 minutes into the video, Kiriakou talks about the “crime” for which he was punished. To hear his explanation, he was trying to protect the reputation of the person whose name he confirmed to a reporter, but did not reveal to the public. It is proof that no good deed goes unpunished.

Just to take a little dig at some relatives of some relatives, none of whom are probably reading this blog, I will excerpt some remarks at the end of the interview about Greece.

JOHN KIRIAKOU: Sure. I served in Greece for a couple of years, going back and forth, really, between headquarters and Greece. I was working on terrorism issues. But at the time—and this kind of seems quaint now—it was Euroterrorism, communist terrorism, specifically the Revolutionary Organization 17 November. I had a great experience in Greece. It’s a great country.

But the Greeks have had a tough time for the last—especially for the last seven years or so. The recession has hit Greece probably harder than any other country in western Europe, certainly harder than in the United States. And part of the problem was, you had two governing parties—PASOK and Neo Demokratia, New Democracy—that were really corrupted by the system. And now, Syriza, which is a young, new, populist party, has won a sweeping victory in the recent parliamentary elections, falling only two seats short of an absolute majority, which in Greece is really an incredible feat.

Like most Greek Americans, I’m very excited about this. I think it was time for a change. It was time for a populist regime in Greece, a leftist populist regime. And I think that under Alexis Tsipras’s leadership, I think the country may come out of its recession. Now, with that said, there’s going to have to be some give from the troika in terms of aid and assistance to Greece. The Greek people have suffered terribly. Suicides are up something like 300 percent. There’s a brain drain, where doctors, lawyers, engineers are moving to the United States or Europe or Australia. And that has to come to an end. The Greeks have to stay in Greece and try to rebuild their country. But I think that can be done under Syriza. I’m very excited about it.

Seems like I have proof here that not all Greek Americans think alike. Their non-Greek relatives by marriage should not necessarily accept what they say as gospel to use an odd word.

As a little afterthought, I have to wonder why does President Obama think it more important to prosecute CIA whistle blowers for trying to protect the reputations of their fellow CIA officers than it is to prosecute criminal bankers, but leave the bankers free to further ply their criminal trade? Why the same attitude about leaving the criminals in the CIA untouched, and jailing the ones who are doing nothing criminal? Is this part of the Constitutional law that Obama was teaching before he became President? I don’t think this behavior is what I voted for when I voted for President Obama (twice).

New Economic Perspectives has the article Oral Testimony of William K. Black.

The article points to a transcript of the testimony Joint Committee of Inquiry into the Banking Crisis. Rather than read the article’s summary of the testimony, I went right to the transcript. The transcript is long, so even the lengthy excerpts below are only a small part of the transcript. (I wish I had found the link to the promised video.)

Marc MacSharry

Okay. In terms of the likelihood of a repeat, does Professor Black think that the set of parameters that currently exist make it quite likely that it will all happen again?

Professor William Black

Yes, and it will be worse. This is not just Ireland and Europe – this is the United States. There has been no accountability for the bankers and no accountability for the regulators. So, it will take the next boom before this happens again. In the savings and loan crisis, as the committee heard we got over these 1,000 felony convictions. None of those people, to my knowledge, participated in the current crisis precisely because they had criminal records. That is what we call specific deterrence. There will be no specific deterrence out of this crisis. The worst actors who know exactly how to use these four ingredients of the recipe that I told the committee are out there, and what they have learned from this crisis is that it is a sure thing and not much of anything happens to one. That is a really perverse incentive structure. It is critical that one reverses that.

Notice the mention of Stephanie Kelton and her current position. This is a name that I have been trying to get readers of my blog to burn into their memories. It is going to be extremely important for people to know who she is, and to remember who hired her – Bernie Sanders.

Marc MacSharry

Would Professor Black feel that the euro, therefore, is arguably unfit for purpose because of the smaller economies on the periphery like Ireland, which are less than 1% of the eurozone?

Professor William Black

The euro is a disaster. It never made sense in terms of the economic literature on an optimal currency area. My colleague, Professor Stephanie Kelton, who is now the chief economist on the Senate budget committee, is one of a number of scholars who wrote this in advance and their predictions have proven absolutely correct.
.
.
.

Professor William Black

We have not set this up but I thank Deputy Doherty. My answer is not in response to Ireland. I am not talking about Ireland. I am responding to the generic question. Here is an example of that dated 15 July 1987 from Charles Keating, our most notorious fraud in the savings and loan crisis to his chief political fixer. “Highest priority – get Black. Good grief – if you can’t get Wright [the Speaker of the House] and Congress to get Black – kill him dead – you ought to retire.” That is the kind of thing I am talking about. Our joke in the savings and loan crisis was the highest return on assets was always a political contribution for any banker. In our context, the Speaker of the House held hostage our Bill to get funding to close the institutions, to extort special favours for several fraudulent Texas savings and loan branches. Five US Senators who became known as the Keating Five sought to keep us from taking enforcement action against the worst fraud. The President of the United States attempted to appoint two members, chosen by Charles Keating, to run the agency. I told the committee it was a three presidential appointee agency that ran it. A Mr. Phelan, doubtless a distant cousin, was hired by the House ethics committee to investigate the ethics complaints against the Speaker of the House, James Wright. He did resign at the end of this process, but three of the recommended charges by Mr. Phelan after his investigation were that an ethics case should be brought against the Speaker of the House for his effort to fire William Black, his effort to fire Joe Selby, who was one of those two top regulators I told the committee about, and because he held hostage our funding to extort favours on behalf of folks.

In the United States context, these people do not go quietly. If you bring cases against powerful bankers, they will enlist their political allies and they will give very large political contributions to do that. In our context, Alan Greenspan was used to recruit the Keating Five, the five US Senators. He was hired as a lobbyist initially by Charles Keating to recruit those Senators. The United States is not unusual in those terms. If you take on really powerful bankers you will find that you get political push-back. If you do not pick regulators who will stand up to that – this is what I referred to as the Mike Patriarca level – Mike Patriarca was asked by a US Senator, one of the five who was meeting with us, whether he was saying that Arthur Young & Company, then one of the top tier audit firms, would prostitute itself for a client. Committee members, as legislators, know that if they ask that of a bureaucrat what the only possible answer is. When there are five Senators the only possible answer is, “Oh no sir, I would never say that.” The actual answer from Mike Patriarca was “Absolutely, it happens all the time.”
.
.
.
Professor William Black

When I was an enforcement and litigation director I negotiated these things all the time and here is the key that you need to understand. Bankers make the decision and their priorities are not to go to jail, not to lose their job and not to have their bonuses clawed back. To accomplish those three things they also have a fourth priority to not throw anybody junior to the wolves. In the United States we have much broader plea bargaining powers than exists in most of Europe. If you throw the junior person to the wolves we will flip him which means we will get him to plead and to testify about the more senior people. The committee will note that in all of these major deals in the United States nobody got named, loses their bonus, loses their job or goes to jail and they are happy to trade off fines.

The fines sound large. They are large in absolute terms but relative to JP Morgan Chase, to pick a non-random example, they are literally a few weeks’ revenue so they do not care. Also, bankers do not pay the fines; it is the shareholders. This is the third in a triple whammy hit if you follow the recipe to the extent that the banks have followed this recipe. First, they have caused huge losses to the shareholders directly by making bad loans intentionally. Second, they have taken a whole lot of money that should have gone to the shareholders in the form of bonuses for destroying the institution or at least causing huge losses. Third, they come along and are happy to sign an agreement in which the shareholders pay the fines to make sure that they have no accountability. Therefore, this is an utterly useless exercise in terms of deterrence.

I think I understood a lot of the testimony because I am a regular reader of the New Economic Perspectives blog and of the book, “The Best Way to Rob a Bank Is To Own One”. I wonder how much is understood by ordinary people and perhaps even the members of the committee that took the testimony.

I take particular interest in the talk of Gresham’s Dynamic, which I am not sure Black did justice to in explaining it to the uninitiated.

Back in the late 1980’s and early 1990’s I was remarking on the Gresham’s Law as it applied to Mutual Fund Managers. The only ones who could keep their jobs were the ones who were taking insane risks and achieving insane (if temporary) returns for their funds. It was hard to find a mutual fund that was still being managed by prudent investors. I even had to keep reminding myself that it was not how much money that I was making on paper, but it was about how much of it that I would eventually get to keep.

The American public still does not get what a crucial failure of the Obama administration it was and still is in the failure to prosecute the bankers (fraudsters.) This is why I keep harping on this issue to the same extent that Bill Black does.

The Atlanta Journal Constitution has the article Obama compares ISIS to the Crusades, receives heavy backlash.

“Unless we get on our high horse and think this is unique to some other place, remember that during the Crusades and the Inquisition, people committed terrible deeds in the name of Christ,” President Barack Obama said Thursday at the annual National Prayer Breakfast.

Later on the article had this,

Faux Noise contributor Laura Ingraham said, “We’ve evolved, and sorry, this Islamic Jihadist movement is regressing. So the president could just say that, but, instead, he always has to lecture us. It’s something in his DNA.”

Sharon and I both broke out in spontaneous laughter at reading this.  If anybody has a problem with lecturing built into her DNA, then this woman is the prime example.

In response to some of the blatantly racist comments on the Journal’s website, I reminded people of the infamous words of Jack Nicholas, ‘You want the truth?  You can’t handle the truth.’

Several people commenting on the article jumped to the ridiculous conclusion that Obama meant that  “we can’t be upset with what ISIS is doing today.”  I think these people must have DNA problems, too. Maybe it is just a case of too much intermarriage, talking about stereotypes about the readers of The Atlanta Journal Constitution.

February 8, 2015

I did a terrible disservice to the President in this original post.  I did not do a follow-up to try to find a video of his remarks.

Today, I found The Christian Science Monitor article Obama criticized for ‘Crusades’ remark: What did he really mean? (+video).

Obama criticized for ‘Crusades’ remark: What did he really mean? (+video)
President Obama’s opponents took strong issue with his comments linking Christianity to some violent episodes in the religion’s past. But are they missing his essential point?
.
.
.
Obama’s point seems to have been that Islam, like Christianity, isn’t inherently violent and extremist. But the backlash highlights a commonly-held notion, held by many, that America is involved in a religious war where the enemy is fueled by the religion’s founding documents.

When you hear the full context of his remarks, I don’t think there is much you can criticize. It is unfortunate that this video clip stops where it does, because you still don’t get to hear all of what he said.

February 9, 2015

Wisely, The White House has posted the transcript of Remarks by the President at National Prayer Breakfast.

I am not a believer in a deity, but I can respect the humanity in what the President had to say. Anybody who is absolutely sure that the President is wrong in his remarks is certainly not practicing the humility that the President is suggesting.

In trying to track down an interview I saw about Davos 2015, my search started here.

The Socialist Party in the UK has the article Davos summit: ‘The pitchforks are coming!

At a packed Davos session a retired hedge fund manager made an interesting revelation. His former peers are planning their escapes. They’ve been buying airstrips and farms in remote locations just in case they need to make a quick getaway! Perhaps they’re heeding the advice of multi-millionaire Nick Hanauer who warned fellow oligarchs last year that “the pitchforks ARE coming!”

The interview I am looking for is with this unnamed hedge fund manager. I finally tracked down the article WEF Davos 2015 Hub Culture Interview Robert Johnson of the Institute for New Economic Thinking which featured the video below:

Robert Johnson of the Institute for New Economic Thinking feels that this Davos is quiet, people aren’t talking. And explains why, and what they should do about it.

There is also the interview Davos Economist: Elite Are Afraid of Ferguson-Style Riots.

Davos economist Robert Johnson, who made headlines this week for revealing that the wealthy are buying secret boltholes as a hedge against global instability, warned in a subsequent interview that the elite are also afraid of more riots in the mould of Ferguson, Missouri.

Along the way of my search, I found a number of other articles.

The Guardian in the UK has the article Davos 2015: world leaders ‘failing on social cohesion’, Davos 2015: overriding pessimism over growing inequality, As inequality soars, the nervous super rich are already planning their escapes. CNBC has many video in the article Davos 2015 – World Economic Forum. Many of the article themselves have links to other article.

Naked Capitalism has the article What Thomas Piketty and Larry Summers Don’t Tell You About Income Inequality by Lynn Parramore, Senior Editor at INET. Originally published at INET.  I think the article is an interview of economist Lance Taylor by Lynn Parramore. The article introduction explains the following:

In a new paper for the Institute For New Economic Thinking’s Working Group on the Political Economy of Distribution, economist Lance Taylor and his colleagues examine income inequality using new tools and models that give us a more nuanced — and frightening —picture than we’ve had before.  Their simulation models show how so-called “reasonable” modifications like modest tax increases on the wealthy and boosting low wages are not going to be enough to stem the disproportionate tide of income rushing toward the rich. Taylor’s research challenges the approaches of American policy makers, the assumptions of traditional economists, and some of the conclusions drawn by Thomas Piketty and Larry Summers. Bottom line: We’re not yet talking about the kinds of major changes needed to keep us from becoming a Downton Abbey society.

I’ll let you read the article to see what Taylor says about the causes and what can be done about it.  One thing that struck me was the following question and brief answer:

LP: In your view, is there anybody in the U.S. offering meaningful approaches to income inequality?

LT: Not in the general political debate.

In my opinion, our best hope for a politician who might offer meaningful approaches to the problem is Bernie Sanders.  In this department, he is even way ahead of Elizabeth Warren.  Elizabeth Warren certainly has an excellent understanding of the causes of the problem.  However, I believe that she is way behind Bernie Sanders in understanding economics well enough to be able to propose solutions that will have much impact.

The main indication I have that Bernie Sanders gets this is his appointment of Stephanie Kelton as the head Economist for the minority on the Senate Budget Committee.  She was sitting beside Bernie Sanders when he made an important presentation to the committee.  I’d bet my bottom dollar that she is the one who suggested the chart around which his presentation focused.  I would also be willing to bet that she is the one who prepped him on the words to speak.

See my previous post Senator Bernie Sanders presents Tcherneva’s research to Show How Reagan Helped Destroy the Middle Class for the evidence.

If Bernie Sanders and Stephanie Kelton don’t manage to change the country’s thinking on a whole lot of economic mythology, then we are in for a very long and unhappy time in America that is not going to end nicely.  Think of how well the French nobility came out in the the French Revolution. (Did you get the sarcasm of that last sentence?) (If you think that Hillary Clinton has a chance of getting a clue about getting a clue, I have only one thing to say, “Oh, puhleeze!” She probably still bows down at the altar of Larry Summers. At least Elizabeth Warren has demonstrated that she doesn’t think very highly of Larry Summers.)

Sarah Clark started a conversation on this topic with a post on her Facebook page.

My response to the question she posed was:

Don’t mistake the anti-abortionists’ highjacking of a legitimate technique for illegitimate purposes as deligitimizing the technique for legitimate purposes.

If a woman decides to have an abortion, that does not endanger me, my relatives, or society as a whole. In this case, I have no right to tell the woman what she should or shouldn’t do.

If a parent decides not to vaccinate a child, then that does threaten me, my family, and society as a whole. If the author of the article has proof, as he suggests he does, that the technique he suggests does work, then I would support it. If the technique does not work well enough, then I would suggest going back to a policy that I think we used to have. If you want to send your child to a public school, then you have to provide evidence of the required immunizations.

If you do not want to have your child vaccinated, then find some other way to provide for the child’s education.

In continuation of the conversation, Sarah posted two very useful links. Massachusetts Department Of Public Health – Immunization Exemptions and Vaccine Preventable Disease Exclusion Guidelines in School Settings and State Vaccination Exemptions for Children Entering Public Schools.

Talking Points Memo has the article Jon Stewart Skewers Netanyahu Over Accepting GOP Invite To U.S. (VIDEO).  Originally, I wasn’t going to post this because I didn’t feel that it was a very significant or pointed segment.  However, after thinking about this one part, I changed my mind.

Jon Stewart broke out in laughter on Thursday’s edition of “The Daily Show” at news that President Obama would not be meeting with Israeli Prime Minister Benjamin Netanyahu.

Obama told press that he was declining to meet with Netanyahu because “general policy” said U.S. leaders don’t meet with a foreign leader too close to that country’s election, lest it appear America is meddling in another country’s affairs.

I am very disappointed in President Obama’s reaction. We all can see that figuratively Netanyahu has slapped Obama in the face. Obama’s reaction is to try to pretend that it didn’t happen. When will the President show the outrage that Netanyahu deserves? As my previous post suggested, Obama should at least declare Israel’s ambassador as persona non grata and force him to be recalled by Israel. Why the ambassador? Because he has been reported as purposely negotiating with Speaker Boner to arrange this visit without prior knowledge of our President. This is an intentional attempt to embarrass our President.

President Obama needs to read my previous post Nixon’s Madman Theory. Unless the President learns to apply this theory liberally (pun intended), then people are going to continue to walk all over him.

Roots Action has sent me an email with a link to a petition to sign.

Instead of letting diplomacy work, Netanyahu wants the U.S. to impose harsher sanctions on Iran, all but ensuring that talks collapse and increasing the risk of war.

I am not about to let Netanyahu dictate to us when we should go to war.  His attempt to influence U.S. politics has gone way beyond the acceptable. Congress’s negotiation with a foreign power probably violates a number of U.S. laws – see the Logan Act.

Violation of the Logan Act is a felony, punishable under federal law with imprisonment of up to three years.

Perhaps the members of Congress want to prove that they know what an impeachable act is.  Maybe they want to try it on for size before seeing if they can accuse the President of other impeachable acts.

What will it take for the majority to recognize that the Republicans have just gone too far?

When will President Obama declare Israel’s Ambassador to the U.S. persona non grata and have him recalled to Israel?