Corporate Greed

Two Bills Signed Into Law By Trump So Far

(1) Repeal of the “Disclosure of Payments by Resource Extraction Issuers” Rule.

The rule was that oil, gas and mineral companies had to disclose (to the Securities and Exchange Commission) any payments (taxes, royalties, fees, bonuses, etc) given to foreign governments relating to commercial development of oil, natural gas, or minerals. Designed to prevent companies from engaging in corruption with foreign governments, it has only been a rule since last September. It is gone now.

(2) Repeal of the “Stream Protection” Rule:

The rule, which has only been around since December, was a comprehensive regulatory environmental protection plan which governed the conditions in which a coal mining company can and cannot dump mining waste into streams and waterways. They would have had to monitor affected streams during mining, and the company had to develop a plan for restoring damaged waterways to something close to their natural state after mining is done. Except, no more. That rule is repealed under the reason that compliance would result in the loss of coal mining jobs. (In truth, the rule would only have taken about 120 jobs in the next 20 years, while the coal mining industry as a whole has lost 25,000 jobs since 2012, much of that due to continue automation and lower demand.)

Trump’s Carrier Deal Is The Opposite Of Capitalism

 

So a few days ago, President-elect Donald Trump tweets that Carrier is not moving to Mexico and it is keeping jobs here.  He pats himself on the back for delivering on a campaign promise.  Except now we learn the truth:

The Carrier deal, brokered by President-elect Donald Trump, may not have saved as many factory jobs as was presented at the plant last week in Indianapolis.

Carrier workers received a flyer from the United Steelworkers, Local Union 1999. It details which jobs are staying here in Indy and which are going to Mexico. The numbers are a bit different from last week’s big announcement.

Last Thursday, amid much fanfare, President-elect Trump spent time on the factory floor and talked with union workers at the westside Indianapolis Carrier plant.

“We’re keeping a little over 1,100 jobs it turns out,” he told them.

He also made a big announcement about a big deal reached with United Technologies, Carrier’s parent company, to save 1,100 American jobs that were going to be moved to Mexico.

Carrier worker T.J. Bray, who’s also a communications rep for the union, told reporters across the country he was thrilled. His phone rang again while we talked with him Monday afternoon.

“I’ve been getting non-stop phone calls. Non-stop media. It’s been a wild, wild week,” Bray said.

But Bray and other union workers just learned some new numbers about the actual number of production jobs saved by the Trump-Pence deal.

“We didn’t know the breakdown before because no one would give us any information,” Union President Chuck Jones told Eyewitness News by phone Monday. “Now what we’re losing is 550 member jobs.”

“We found out today that more jobs are leaving than what we originally thought,” Bray said. “It seemed like since Thursday, it was 1,100 then it was maybe 900 and then now we’re at 700. So I’m hoping it doesn’t go any lower than that.”

Union workers got a letter at the plant saying Trump’s deal with Carrier will save only 730 factory jobs in Indianapolis, plus 70 salaried positions – 553 jobs in the plant’s fan coil lines are still moving to Monterrey, Mexico.

All 700 workers at Carrier’s Huntington plant will also lose their jobs.

So basically, dealmaker Donald Trump forced Indiana to cough up 7 million dollars to save 730, not 1100, jobs.  I mean, good news if you’re one of those people… but even then, is it?  This came about as a negotiation, a deal — not as a result of economic policy.  Trump cannot intercede like that for every company that intends to ship jobs overseas.

And by the way, interceding like that, and arranging for corporate welfare, isn’t exactly laissez-faire economics.  It is certainly not Republican.  Hell, even Sarah Palin has a problem with it:

Foundational to our exceptional nation’s sacred private property rights, a business must have freedom to locate where it wishes. In a free market, if a business makes a mistake (including a marketing mistake that perhaps Carrier executives made), threatening to move elsewhere claiming efficiency’s sake, then the market’s invisible hand punishes. Thankfully, that same hand rewards, based on good business decisions.

But this time-tested truth assumes we’re operating on a level playing field.

When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent. Meanwhile, the invisible hand that best orchestrates a free people’s free enterprise system gets amputated. Then, special interests creep in and manipulate markets. Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail.

Politicians picking and choosing recipients of corporate welfare is railed against by fiscal conservatives, for it’s a hallmark of corruption. And socialism. The Obama Administration dealt in it in spades. Recall Solyndra, Stimulus boondoggles, and all their other taxpayer-subsidized anchors on our economy. A $20 trillion debt-ridden country can’t afford this sinfully stupid practice, so vigilantly guard against its continuance, or we’re doomed.

Reaganites learned it is POLICY change that changes economic trajectory. Reagan’s successes were built on establishing a fiscal framework that invigorated our entire economy, revitalized growth and investment while decreasing spending, tax rates, over-reaching regulations, unemployment, and favoritism via individual subsidies. We need Reaganites in the new Administration.

I hate to say this, but Sarah Palin is right.  Right about what Republicans want.  This is, quite simply, Trump picking winners and losers.

Drug Price Gouging

EpiPens, made by a company called Mylan — are allergy injectors — sold two per pack — that contain epinephrine, a drug used to relax muscles. It can open the airways, and reduce swelling during a severe allergic reaction.

Over the years, the price of an EpiPen standard two-pack gradually grew to about $600. The same two-pack cost only about $100 in 2009. Meanwhile, epinephrine, which can be purchased alone, costs just a few dollars.

This isn’t new.  A House of Representatives report found in 2014 that 10 generic drugs experienced price increases just a year prior, ranging from a 420% hike to more than 8,000%.

What’s going on? EpiPen explains:

“With changes in the healthcare insurance landscape, an increasing number of people and families are enrolled in high-deductible health plans, and deductible amounts continue to rise. This shift has presented new challenges for consumers, and they are bearing more of the cost. This change to the industry is not an easy challenge to address, but we recognize the need and are committed to working with customers and payors to find solutions to meet the needs of the patients and families we serve.”

That’s sort of saying “We recognize the problem but don’t claim responsibility for it”.

It’s true that more people are stuck with a high-deductible health plan — 25% now as opposed to 4% before Obamacare. But one reason employers are moving to higher-deductible plans is because they’re reacting to rising health-insurance costs—which are climbing in part because companies like Mylan are hiking drug prices.

In any case, it might behoove Mylan to find those “solutions” quickly: Members of Congress are already calling for an investigation.

And one thing that is sure to come out?  CEO compensation.  According to filings reported by NBC News, Mylan Pharmaceuticals CEO Heather Bresch’s yearly compensation rose from $2,453,456 in 2007 to $18,931,068 last year.

Too Big To Fail Banks Being Pressured

Great news:

Federal Reserve officials strongly signaled they will toughen big-bank capital requirements even more than they have since the 2008 crisis, a move that will add to the pressure on the largest U.S. banks to consider shrinking. Fed governors Daniel Tarullo and Jerome Powell, in separate public comments on Thursday, said the Fed would require eight of the largest U.S. banks to maintain more equity to pass the central bank’s annual “stress tests.”

“Effectively, this will be a significant increase in capital,” Mr. Tarullo said on Bloomberg television….Mr. Powell said at a banking conference that the Fed’s move would make big banks “fully internalize the risk” they pose to the economy.

“I have not reached any conclusion that a particular bank needs to be broken up or anything like that,” he said. The point is to “raise capital requirements to the point at which it becomes a question that banks have to ask themselves.”

Emphasis added.

Although there have been some regulatory changes since the bank crash of 2008, big banks still have an unfair advantage in the market: their funding costs are lower because investors figure they’ll be bailed out if they ever implode in the future.

But this news today indicates a recognition of the problem.  Big banks should, as Tarullo said, “fully internalize the risk” they pose to the economy. In other words, if big banks have an automatic advantage simply because taxpayers have little choice but to rescue them in case they fail, they should be required to pay higher insurance premiums against failure. That’s essentially what higher capital requirements do.

This won’t make big headlines, and it’s not sexy and it’s not Trump insulting somebody.  And maybe it still doesn’t go far enough (Bernie Sanders simply wants to break the big banks altogether).  But it is a step in the right direction to fiscal responsibility.

What’s The Panama Papers All About?

The leak amounts to 2.6 terabytes of information — perhaps the largest whistleblower leak in history.  Also, it might topple a country or too.

So it might be interesting to learn what the Panama Papers leak is all about.

It starts with a company called Mossack Fonesca.  That’s a Panamanian law firm that has long been well-known to the global financial and political elite.  The firm’s operations are diverse and international in scope, but they originate in a single specialty — helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. Since its founding in 1977, it’s expanded its interests outside of Panama to include more than 40 offices worldwide, helping a global client base work with shell companies not just in Panama but also the Bahamas, the British Virgin Islands, and other notorious tax havens around the world.  The Panama Papers are leaks from that law firm.

What’s a shell company?  Well, sometimes a person or a well-known company or institution wants to buy things or own assets in a way that obscures who the real buyer is. For example, companies don’t like to tip their hand to what they are doing, and the use of shell companies to undertake not-ready-for-public-announcement projects can be a useful tool.  Shell companies are often used for simple privacy reasons. Real estate transactions, for example, are generally a matter of public record. So an athlete, actor, or other celebrity who wants to buy a house without his name and address ending up in the papers might want to pay a lawyer to set up a shell company to do the purchasing.

Here’s another way to put it, thanks to a Reddit user:

When you get a quarter you put it in the piggy bank. The piggy bank is on a shelf in your closet. Your mom knows this and she checks on it every once in a while, so she knows when you put more money in or spend it.

Now one day, you might decide “I don’t want mom to look at my money.” So you go over to Johnny’s house with an extra piggy bank that you’re going to keep in his room. You write your name on it and put it in his closet. Johnny’s mom is always very busy, so she never has time to check on his piggy bank. So you can keep yours there and it will stay a secret.

Now all the kids in the neighborhood think this is a good idea, and everyone goes to Johnny’s house with extra piggy banks. Now Johnny’s closet is full of piggy banks from everyone in the neighborhood.

One day, Johnny’s mom comes home and sees all the piggy banks. She gets very mad and calls everyone’s parents to let them know.

Now not everyone did this for a bad reason. Eric’s older brother always steals from his piggy bank, so he just wanted a better hiding spot. Timmy wanted to save up to buy his mom a birthday present without her knowing. Sammy just did it because he thought it was fun. But many kids did do it for a bad reason. Jacob was stealing people’s lunch money and didn’t want his parents to figure it out. Michael was stealing money from his mom’s purse. Fat Bobby’s parents put him on a diet, and didn’t want them to figure out when he was buying candy.

Now in real life, many very important people were just caught hiding their piggy banks at Johnny’s house in Panama. Today their moms all found out. Pretty soon, we’ll know more about which of these important people were doing it for bad reasons and which were doing it for good reasons. But almost everyone is in trouble regardless, because it’s against the rules to keep secrets no matter what.

The leaked documents provide details on some of these piggy banks — uh, shell companies. They reveal shocking acts of corruption in Russia, hint at scandalous goings-on in a range of developing nations, and may prompt a political crisis in Iceland.

Here are a few of the highlights, with links to the full stories where you can read the details:

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In a way, the fact that people use shell companies is not new, and it’s always been somewhat understood that there’s some underlying shenanigans behind these accounts.  Some of the shenanigans revealed by the Panama Papers involves nothing more than legal avarice.The name of Ian Cameron, the late father of British Prime Minister David Cameron, shows up in the Panama Papers, for example. Mossack Fonseca helped him set up his investment company Blairmore Holdings (named after his family’s ancestral country estate) in the British Virgin Islands, where, marketing material assured investors, the company “will not be subject to United Kingdom corporation tax or income tax on its profits.”

This particular kind of move is perfectly legal and doesn’t even involve any secrecy. It is entirely typical for investment companies whose employees all work or reside in New York, London, or Connecticut to be domiciled for tax purposes in someplace like the Cayman Islands.  Although when Bernie Sanders talks about this stuff, this is what he means.

On the other hand, there is shadier stuff.  One wealthy client, US millionaire and life coach Marianna Olszewski, was offered fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money-laundering and tax evasion.

An email from a Mossack executive to Ms Olszewski in January 2009 explains how she could deceive the bank: “We may use a natural person who will act as the beneficial owner… and therefore his name will be disclosed to the bank. Since this is a very sensitive matter, fees are quite high.”  (It’s not clear with Ms. Olszewski has broken the law).

Meanwhile, as I write this, Iceland is going ballistic.  Protests throughout (below is a live YouTube stream) as the Prime Minister there refuses to resign:

Anyway, to be continued.

Thursday Morning Schadenfreude

Awwwwww:

CWcTBL2WIAEGqPhMartin Shkreli, a pharmaceutical entrepreneur and former hedge fund manager who has been widely criticized for drug price gouging, was arrested Thursday morning by the federal authorities.

The investigation, in which Mr. Shkreli has been charged with securities fraud, is related to his time as a hedge fund manager and running the biopharmaceutical company Retrophin — not the price-gouging controversy that has swirled around him.

Mr. Shkreli, 32, is now chief executive and founder of Turing Pharmaceuticals, which has drawn scrutiny for acquiring a decades-old drug and raising the price of it overnight to $750 a pill, from $13.50.

He was arrested in his Midtown Manhattan apartment, according to a law enforcement source, who declined to be identified because the indictment had not been unsealed. Federal prosecutors in Brooklyn were expected to hold a news conference on the charges later Thursday.

UPDATE:  Wish this was true….

Tales Of The One Percenters

Honestly.  What is it going to take for the people and/or the government to throw these rich bastards in jail?  No, not for being rich, but for, you know, breaking laws and regulations that effect the lives of actual people…. when?!?

Case Study Number One:

Volkswagen chief executive Martin Winterkorn resigned Wednesday as a growing scandal over falsified emissions tests rocked the world’s biggest carmaker.

“I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part,” Winterkorn said after an emergency meeting with Volkswagen directors.

Winterkorn, 68, was Volkswagen (VLKAY) CEO for eight years. The German company, which also owns the Audi and Porsche brands, had just achieved his long-standing goal of overtaking Toyota (TM) to become the biggest automaker three years ahead of target.

But his position had looked increasingly precarious since the scandal broke Friday, when U.S. regulators said the company had deliberately programmed some 500,000 diesel-powered vehicles to emit lower levels of harmful gases in official tests than on the roads.

The crisis escalated Tuesday when Volkswagen revealed it had found significant emissions discrepancies in 11 million diesel vehicles worldwide.

Winterkorn, an engineer and former head of Audi, said he was stunned by the scale of the misconduct, and was accepting responsibility to clear the way for a “fresh start” for the company.

Stunned, my ass.  You don’t intentionally program an entire line of cars to “cheat” emissions tests without the CEO knowing about it.  So this guy straps on a golden parachute, and leaves Volkswagon.  But people die when these things are avoided:

Volkswagen has admitted that 11 million of its cars worldwide were designed to cheat emissions testing, in an escalating scandal that has loaded pressure on the wider motor industry.

Campaigners have long claimed engine emissions figures under laboratory tests are far exceeded in real-life conditions, and experts have said thousands of premature deaths could be averted by ensuring cars meet their legal limits.

Emphasis mine.

Case Study Number Two:

Hedge fund manager Martin Shkreli is 32 years old but he’s acting half that age on Twitter today after news broke that his company, Turing Pharmaceuticals, had raised the price of the life-saving drug Daraprim from $13.50 to $750 per pill.

That’s not a typo — $13.50 to $750.00 per pill.

Daraprim is used to treat toxoplasmosis, a condition caused by a parasite that exists in nearly a quarter of the U.S. population over age 12, but which can prove deadly for the unborn children of pregnant women and for immunocompromised individuals like AIDS patients. These vulnerable populations will now have to pay over 5,000 percent more for their treatment.

Due to the sudden price hike, Shkreli, whose company only acquired Daraprim last month, has already dethroned the dentist who killed Cecil the Lion as the most-hated man in America.

***

Shkreli did a news show circuit as well, beginning with Bloomberg, where he attempted to argue that Daraprim had been underpriced before Turing swept in.

“The price per course of treatment to save your life was only $1,000 and we know these days, [with] modern pharmaceuticals, cancer drugs can cost $100,000 or more, rare-disease drugs can cost half a million dollars,” Shkreli said, as if it should be shocking that cheap, life-saving medicine could cost less than a laptop.

When confronted by the reporter with the low cost of producing Daraprim—about $1 per pill by her estimate—Shkreli claimed that the price hike was necessary for Turing Pharmaceuticals to increase revenue, and that some of the profits would be funneled into research and development costs for a Daraprim alternative. But as Emory University infectious disease professor Dr. Wendy Armstrong told RawStory, “I certainly don’t think this is one of those diseases where we have been clamoring for better therapies.”

Why do one percenters get away with this?  Because they can:

But as reprehensible as Shkreli’s actions might appear, what is even more harrowing is that they are not illegal. With his social media swagger, Shkreli makes an easy target for a problem that extends far beyond the confines of his ego: the rampant overpricing of life-saving medicine. As USA Today reported, many new cancer drugs cost over $100,000 per year—a fact that Shkreli, ironically, sees as justification for raising the cost of Daraprim. And technically, there’s no way to stop him.

As a spokesperson for the Food and Drug Administration told The Daily Beast’s Ben Collins on Twitter in response to Shkreli’s actions, their power in this situation is, well, nonexistent.

An FAQ page on the FDA’s website asks, “What can the FDA do about the cost of drugs?” and the answer is, essentially, nothing: “We understand that drug prices have a direct impact on the ability of people to cope with their illnesses as well as meet other expenses. However, FDA has no legal authority to investigate or control the prices charged for marketed drugs.”

Martin_Shkreli__3449094bThis is true, but states have laws against gouging.  An industrious state Attorney General could make a name for himself on this.

In any event, Shkreli’s media blitz cast him in an even worse light — he came off as slimy and greasy as a used car salesman.  Just .look at his picture.  The latest news today is that Shkreli has agreed to reduce the price, although he will not say by how much.

He’s not the first person to corner the market on a drug and hike the price.  But he’s one of the most frequent offenders.  Fortunately, Bernie Sanders and Hillary Clinton have weighed in, and this could become a political hot potato.  Any chance for reform?  We’ll see.

 

Airlines Colluding? I Bet They Are!

Because of bankruptcies and mega-mergers over the past decade, the United States has gone from nine major airlines to four — Delta, Southwest, American and United — and those four fly about 80 percent of all domestic passengers.  So 14 years after the 9/11 attacks nearly drowned the airline industry in red ink, the limited competition has helped airlines post some of their biggest profits in history.  American, for example, which just merged with US Airlines, just logged $1.2 billion in profit, its most profitable three months ever.

I don’t begrudge these guys making a profit, but with only four airlines, it becomes very easy to collude.  They have a joint interest in keeping capacity tight, which they can now do, and keep prices up.  And it is fairly easy to “signal” each other of their intentions.

So this is a welcome development:

The U.S. government is investigating possible collusion between major airlines to limit available seats, which keeps airfares high, according to a document obtained by The Associated Press.

The civil antitrust investigation by the Justice Department appears to focus on whether airlines illegally signaled to each other how quickly they would add new flights, routes and extra seats.

A letter received Tuesday by major U.S. carriers demands copies of all communications the airlines had with each other, Wall Street analysts and major shareholders about their plans for passenger-carrying capacity.

Justice Department spokeswoman Emily Pierce confirmed Wednesday that the department was investigating potential “unlawful coordination” among some airlines. She declined to comment further, including about which airlines are being investigated.

Thanks to a series of mergers starting in 2008, American Airlines, Delta Air Lines, Southwest Airlines and United now control more than 80 percent of the seats in the domestic travel market. During that period, they have eliminated unprofitable flights, filled a higher percentage of seats on planes and made a very public effort to slow growth in order to command higher airfares.

It worked. The average domestic airfare rose 13 percent from 2009 to 2014, when adjusted for inflation, according to the Bureau of Transportation Statistics. And that doesn’t include the billions of dollars airlines collect from new fees: $25 each way to check a bag and $200 to change a domestic reservation. During the past 12 months, theairlines took in $3.6 billion in bag fees and another $3 billion in reservation change fees.

All of that has led to record profits for the industry. In the past two years, U.S. airlines earned a combined $19.7 billion.

Get ’em!

ExxonMobile Can No Longer Deny It

Yes, human civilization is facing one of the greatest threats it has ever faced and no, we aren’t going to do anything about it. Or so says ExxonMobil in their latest report issued coincidentally on the same day as the latest IPCC report on the dangers of climate change. The report marks a rhetorical turning point of sorts where the fossil fuel industry accepts that climate change does pose significant risks.

Apparently ExxonMobil did not get the memo that climate change is a hoax as the world’s largest energy corporation acknowledged that the carbon being pumped into the atmosphere posed serious risks.

“We know enough based on the research and science that the risk (of climate change) is real and appropriate steps should be taken to address that risk,” Ken Cohen, Exxon’s government affairs chief, said in an interview. “But given the essential role that energy plays in everyone’s lives, those steps need to be taken in context with other realities we face, including lifting much of the world’s population out of poverty.”

97% of scientists might have a point. 

But before anyone starts celebrating a new enlightened fossil fuel industry, recognize this public acknowledgement of the danger does not translate into a commitment to reduce carbon emissions. In fact, ExxonMobil sees the climate change issue as part of a larger calculus that still favors their current business model. One that reasonable governments will be “highly unlikely” to mess with.

Exxon says that renewable energy sources are not now cheap enough nor technologically advanced enough to meet growing demand for energy, let alone also replace oil and gas. Governments therefore face a choice between restricting access to energy or raising the cost of energy significantly. In Exxon’s view, governments will chose to raise the cost of fossil fuels to encourage alternatives somewhat, but stop well short of enacting policies that will sharply curtail consumption, especially in developing countries, because populations would resist and social upheaval would result.

Now that is some impressive rhetorical jujitsu. Unlike Koch Industries which just lobs crazy people at Congress, ExxonMobil takes the warnings that climate change will cause social unrest and political instability and turns them on their head. Regulating carbon consumption, not climate change, becomes the real threat to social stability.  GO figure.

Newsflash: Having A Problem With The 1 Percenters Makes You A Nazi

Venture capitalist Tom Perkins compared liberals' push to reduce inequality in the United States to Nazi Germany's war on Jews.

In a letter to the editor published in The Wall Street Journal Perkins, a founding member of Kleiner Perkins Caufield & Byers, asks whether a "progressive Kristallnacht" is coming. Perkins's letter is in response to an editorial on speech codes at American colleges.

"Writing from the epicenter of progressive thought, San Francisco, I would call attention to the parallels of fascist Nazi Germany to its war on its "one percent," namely its Jews, to the progressive war on the American one percent, namely the "rich," Perkins wrote in the letter to the editor.

He continued that he perceives "a rising tide of hatred of the successful one percent. There is outraged public reaction to the Google buses carrying technology workers from the city to the peninsula high-tech companies which employ them."

Perkins cites outrage over real-estate prices as an example of overblown liberal outrage.

"This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendent "progressive" radicalism unthinkable now?" Perkins concluded in the letter.

Perkins is listed as a partner emeritus on the Kleiner Perkins Caulfield & Byers website.

Here's the full letter to the editor:

Regarding your editorial "Censors on Campus" (Jan. 18): Writing from the epicenter of progressive thought, San Francisco, I would call attention to the parallels of fascist Nazi Germany to its war on its "one percent," namely its Jews, to the progressive war on the American one percent, namely the "rich."

From the Occupy movement to the demonization of the rich embedded in virtually every word of our local newspaper, the San Francisco Chronicle, I perceive a rising tide of hatred of the successful one percent. There is outraged public reaction to the Google buses carrying technology workers from the city to the peninsula high-tech companies which employ them. We have outrage over the rising real-estate prices which these "techno geeks" can pay. We have, for example, libelous and cruel attacks in the Chronicle on our number-one celebrity, the author Danielle Steel, alleging that she is a "snob" despite the millions she has spent on our city's homeless and mentally ill over the past decades.

This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendent "progressive" radicalism unthinkable now?

Tom Perkins

San Francisco

Mr. Perkins is a founder of Kleiner Perkins Caufield & Byers.

Yes, proposals to tax the richest one percent at a rate closer to what they were paying under Ronald Reagan or to charge giant tech companies a small fee for using city bus stops for their private shuttles…. that's JUST like the Nazis. Except they're not. Really, not even close.

The biggest historical difference of course, is that the Jews in pre-war Germany — even the most wealthy ones — did not have any political power whatsoever which would ensure that their riches were safe, or grew exponentially.  Can that be said of the 1 percenters?  I think not.

Nice try at victimhood though.  I'm sure we won't see the last of it.

Four Graphs: What’s Wrong With America Today

Corporate profits and profit margins are at an all-time high. American companies are making more money and more per dollar of sales than they ever have before.

Corporate profits as a percent of GDP

Wages as a percent of the economy are at all-time low. Why are corporate profits so high? One reason is that companies are paying employees less than they ever have as a share of GDP.

Profits as a percent of GDP

Fewer Americans are employed than at any time in the past three decades. Another reason corporations are so profitable is that they don’t employ as many Americans as they used to.

Employment as a percent of the population

The share of our national income that is going to the people who do the work  (“labor”) is at an all-time low.  The rest of the income, naturally, is going to owners (“capital”), who have it better today than they have ever had it before.

Labor share of income

Report: Richest 7% Got Richer During Recovery

WASHINGTON (AP) — A new report says the richest Americans got richer during the first two years of the economic recovery while average net worth declined for the other 93 percent of the nation'shouseholds.

The Pew Research Center report says wealth held by the richest 7 percent of households rose 28 percent from 2009 to 2011, while the net worth of the other 93 percent of households dropped by 4 percent.

It says the main reason for the widening gap is that affluent households have stocks and other financial holdings that increased in value, while the less wealthy have more of their assets in their homes, which haven't fully regained their value since the housing downturn.

Remember this?

 

Not Even Trying

Mike Lux wrote this piece yesterday, telling people about a new report on Wall Street. It's not pretty:

There is a new report out this morning once again reminding us of the greatest disappointment progressives have in the Obama administration: the lack of toughness in regards to Wall Street.The report, issued by the Campaign for a Fair Settlement (full disclosure: this is a coalition I have helped in various ways since their founding), is probably the most harshly critical analysis yet by a coalition aligned with traditional progressive Democratic groups. The report opens with this damning list of hard-to-dispute facts, and then just goes on from there:

• The Administration has yet to prosecute a single major bank or top level executive for the widespread fraud leading to the system’s collapse.
• Civil penalties have similarly failed to be imposed on top executives, and fines levied against the banks have been so small as to amount to a minor cost of doing business.
• Settlements have left the banks themselves in control of providing relief and restitution to homeowners, giving them credit for cleaning up their balance sheets more than preventing foreclosures.
• Far from showing any signs of having been chastened, the biggest banks are now even bigger, and have successfully slowed down or weakened key elements of the financial reform bills passed in the wake of the collapse.

And signs even early on in the second Obama administration are not encouraging:

• With no mention of Wall Street and the banks anywhere in either his second inaugural speech or his 2013 State of the Union address, the President appears to be wishing the crisis behind him more than addressing its still festering wounds.
• Statements by new appointees like Treasury Secretary Jacob Lew have suggested that they view the “too big to fail” problem as having been largely solved, even as new studies confirm how much the systematically risky banks still benefit from market assumptions that they retain that status.
• Despite having faced withering rebukes for their handling of key cases and settlements, agencies like the Office of the Comptroller of the currency have reignited that criticism in their attempts to amend the disastrous Independent Foreclosure Review settlement, yet again constructing terms far more favorable to the banks than to homeowners and borrowers.

The report barely mentions the Consumer Financial Protection Bureau, the one agency where progressives have generally given the administration better marks, it is mostly dismissive of the good things that passed in Dodd-Frank given how slow regulatory agencies have been in writing rules, and it seems to have little faith in the Residential Mortgage Backed Securities Task Force co-chaired by NY AG Eric Schneiderman- which is notable given that the coalition has historically been relatively close to Schneiderman politically.

So there are two questions that Obama loyalists might ask about this report. The first is whether all this negativity is truly deserved. The second is, why are Wall Street accountability activists so obsessed with this issue?

On the first question, I am sad to say the answer is mostly yes. If I had been writing the report, I would have been more positive about the accomplishments of CFPB, would have given the administration more credit on a few things in terms of Dodd-Frank and a few of the appointments they have made, would have pointed out that Republicans are doing everything they can to starve regulatory agencies of resources, and being the loyal Democrat I am, I would have written the report more diplomatically. 

But when you add up all the results of the Obama administration’s dealings with Wall Street, it is hard to avoid the fact that life hasn’t changed much at all for the big banks, and that they continue to make money hand over fist while the rest of the economy is stuck in the mood. It is hard to think of any one of the report’s bullets listed above that aren’t accurate. Most damning of all are these absolutely true words in the report’s conclusion:

“The irony in all this is that the areas in which the Obama Administration has been found most wanting by critics for its handling of Wall Street accountability are not the result of intractable differences with a Congress hamstrung in inaction. Instead, they are areas almost wholly under the sole control of the Administration through its executive powers, and carried out largely through cabinet agencies.”

On the second question, the reason Wall Street activists are so obsessed with the lack of toughness toward Wall Street is that Wall Street is ground zero for the rest of the problems in our economy. These monstrously huge mega-banks completely dominate our economy, siphoning off money that might otherwise go into productive uses in the mainstreet economy so that the big bankers can keep speculating away. And when they screw up in ways that hurt the rest of us, even when they blatantly violate the law, the fact that they are never seriously punished means they have no incentive to stop. 

Until the Obama administration fixes this problem, the rest of the economy is going to keep suffering, and the risk of future financial meltdowns will keep growing.

I'm going to guess that's not in the cards. This round of looting will go unpunished and we're being set up for yet another fall.

Elizabeth Warren on Banking Committee

Wall Street doesn't like Elizabeth Warren, a strong advocate of Wall Street reform.  They hoped she wouldn't be elected Senator from Massachusetts, but she was.  And now, it appears that their worst nightmare is about to happen: she's going to be in a position of real power over them. The Huffington Post's Ryan Grim is reporting that sources have told him that Warren has secured a key committee assignment.

Nearly two years after Wall Street waged a successful campaign to keep consumer advocate Elizabeth Warren from running the Consumer Financial Protection Bureau, the incoming senator will be tapped to serve on the Banking Committee, according to four sources familiar with the situation. It's a victory for progressives who battled to win her a seat on the panel that oversees the implementation of Dodd-Frank and other banking regulations.

There are very few people in Washington, D.C. who have a deeper understanding of the financial world than Warren, and basically none who have the passion to use that knowledge for good, to protect Main Street rather than Wall Street. She can light a fire, and educate, other Senators on the committee to make financial reform real. This is real change.

Walmart So Cares About Children

On the subject of striking Walmart workers:

Numerous activities over the past year or longer “have caused disruptions to Walmart’s business, resulted in misinformation being shared publicly about our company, and created an uncomfortable environment and undue stress on Walmart’s customers, including families with children,” Walmart outside counsel Steven Wheeless said in a letter sent on Friday to Deborah Gaydos, assistant general counsel of the UFCW.

Yes, won’t someone PLEASE THINK OF THE CHILDREN, asks Walmart, a business that compensates  its CEO more in one hour than retail employees earn in an entire year, has refused to pay overtime, understaffs to the point of compromising employee safety, and pays such a meager wage that a majority of its employees with children are living below the poverty line. But yes, think of the children. Better late than never.

It most be hard to run a business when you are so busy having strike organizers arrestedfiring striking warehouse workers on the spot, and engaging in punitive measures against workers trying to organize a strike.

Nice Work If You Can Get It

Citigroup CEO Vikram Pandit abruptly resigned today, leaving the helm of the bank that he guided through the financial crisis of 2008.

Other banks have recovered since 2008.  Not so with Citigroup.  Overall, Citi lost 88 percent of its value under Pandit

So he's stepping down.  Johnny, what do we have for the bank CEO who ruined shareholders' holdings in Citi?

If no alterations are made to Pandit’s compensation package, Citigroup will have paid him about $261 million in the five years since he became CEO, including his personal compensation and about $165 million for buying his Old Lane Partners LP hedge fund in 2007 in a deal that led to his becoming CEO. The bank shut Old Lane soon after Pandit took the post, causing a $202 million writedown.

And that's for a BAD job?

Stephen King Goes Cujo On The 1 Percenters

Well, he's a pretty rich guy himself.  Still, he has some thoughts on other rich people and taxes and he minces no words.  An excerpt:

I’ve known rich people, and why not, since I’m one of them? The majority would rather douse their dicks with lighter fluid, strike a match, and dance around singing “Disco Inferno” than pay one more cent in taxes to Uncle Sugar. It’s true that some rich folks put at least some of their tax savings into charitable contributions. My wife and I give away roughly $4 million a year to libraries, local fire departments that need updated lifesaving equipment (Jaws of Life tools are always a popular request), schools, and a scattering of organizations that underwrite the arts. Warren Buffett does the same; so does Bill Gates; so does Steven Spielberg; so do the Koch brothers; so did the late Steve Jobs. All fine as far as it goes, but it doesn’t go far enough.

What charitable 1 percenters can’t do is assume responsibility—America’s national responsibilities: the care of its sick and its poor, the education of its young, the repair of its failing infrastructure, the repayment of its staggering war debts. Charity from the rich can’t fix global warming or lower the price of gasoline by one single red penny. That kind of salvation does not come from Mark Zuckerberg or Steve Ballmer saying, “OK, I’ll write a $2 million bonus check to the IRS.” That annoying responsibility stuff comes from three words that are anathema to the Tea Partiers: United American citizenry.

[…]

The Koch brothers are right-wing creepazoids, but they’re giving right-wing creepazoids. Here’s an example: 68 million fine American dollars to Deerfield Academy. Which is great for Deerfield Academy. But it won’t do squat for cleaning up the oil spill in the Gulf of Mexico, where food fish are now showing up with black lesions. It won’t pay for stronger regulations to keep BP (or some other bunch of dipshit oil drillers) from doing it again. It won’t repair the levees surrounding New Orleans. It won’t improve education in Mississippi or Alabama. But what the hell—them li’l crackers ain’t never going to go to Deerfield Academy anyway. Fuck ’em if they can’t take a joke.

Yikes.

Major Airlines: Don’t Go There

Spirit Airlines, and as of yesterday, Allegiant Airlines, have found yet another way to charge customers.

They are making them pay to store luggage in the overhead bins.  How much? Ten to thirty dollars, depending.

Not a good sign.  So far, this new "innovation" is limited to these small, regional, airlines.  But if the big boys deide this is a good idea…. there will be hell to pay.

The Obama Campaign Awakens

With the recess appointment of Richard Cordray to the Consumer Financial Protection Bureau (after the GOP minority in the Senate essentially filibustered the appointment), it's clear that the Obama campaign is awake and feisty.

Mitt Romney responded to the appointment with hyperbole:

President Obama’s Consumer Financial Protection Bureau is perhaps the most powerful and unaccountable bureaucracy in the history of our nation, headed by a powerful and unaccountable bureaucrat with unprecedented authority over the economy. Instead of working with Congress to fix the flaws in this new bureaucracy, the President is declaring that he ‘refuses to take no for an answer’ and circumventing Congress to appoint a new administrator. This action represents Chicago-style politics at its worst and is precisely what then-Senator Obama claimed would be ‘the wrong thing to do.’ Sadly, instead of focusing on economic growth, he is once again focusing on creating more regulation, more government, and more Washington gridlock.

[Emphasis added]

I don't know how Romney thinks this will play successfully.  The CFPB was put in place to protect against the kind of Wall Street abuses that led to this economic crisis in the first place.  Romney, who most people (correctly) believe is a Wall Street crony anyway, is standing up against the CFPB, thus solidifying his creds as a Wall Street one-percenter crony.  How does that help him?

But the Obama campaign is hitting back, and right on target:

“Mitt Romney today stood with predatory lenders and Republicans in Congress over the middle class. He doubled down on his promise to eliminate the Wall Street watchdog and allow Wall Street to write its own rules again, leaving consumers vulnerable to hidden fees, financial traps and excessive risk taking that will hit their pocketbooks. Governor Romney has made clear he has not learned the lessons of the economic crisis, instead, he’s giving the most irresponsible financial actors a bright green light to pursue profit at any cost to communities across America.”

Bullseye.  More like this please.

Verizon Caves

I was going to write about Verizon's decision to charge a $2 "convenience fee" to its customers who make payments over the phone or online with their credit cards.

I was going to rant what a scam it was.  After all, it's convenient to Verizon when people pay that way.  They get the money quicker (than by check).

I was going to suggest that the FCC look into this, but then I noticed a story on Reuters which came out 24 minutes ago.

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And then, you'll never guess what came across the AP wire six minutes ago:

Verizonlosers
TELL ME THAT GOVERNMENT OVERSIGHT AND REGULATION IS BAD.

CFPB Nominee Filibustered

I don't know how the Republicans think they can possibly benefit from things like this:

Earlier today, 53 percent of the Senate voted to move forward with Richard Cordray’s nomination to lead the new Consumer Financial Protection Bureau — depriving him of thesupermajority he needs in order to be confirmed. One of the senators joining this filibuster, Sen. Mike Lee (R-UT), was uncharacteristically candid about why he helped build this wall of obstruction — he simply wants to sabotage the agency:

I have met Mr. Cordray, and my decision to oppose his confirmation by the Senate has nothing to do with his qualifications. Rather, I feel it is my duty to oppose his confirmation as part of my opposition to the creation of CFPB itself. . . . Confirming any director for this bureau would be tantamount to agreeing that we need a uniquely powerful super-agency that is not even designed to prevent a repeat of the financial crisis. Until the CFPB is reformed, I will not support it in any way.

Simply put, this is nothing less than a direct assault on the rule of law. The CFPB was created by an Act of Congress and can only be repealed or modified by an Act of Congress. By his own admission, Lee’s filibuster is an attempt to make an end run around the Constitution’s legitimate lawmaking process.

But, of course, this filibuster is also just once more example of the Tea Party senator’s nihilistic approach to governance. Lee believes that federal child labor laws, FEMA, food stamps, the FDA, Medicaid, income assistance for the poor, and even Medicare and Social Security violate the Constitution. He not only sponsored a radical constitutional amendment that would force the United States to adopt Tea Party fiscal policy forever, he then openly admitted that he was using last summer’s debt ceiling crisis to extort the rest of the Congress into passing his amendment.

People really need to stop and process this.  The CFPB is designed to protect consumers against things like preditory lending (one of the lead reasons for the economic crisis we are in), and fraud against consumers commited by banks and credit card customers.  It protects you; it protects me.  Why would any politician NOT IN THE POCKETS OF BIG BUSINESS be opposed to such a thing?

These people hate Obama so much, they are willing to hurt ordinary Americans rather than give Obama a victory.

That's messed up.

A Judge Uses Common Sense

The New York Times is reporting that federal judge Jed Rakoff has thrown out a proposed settlement between Citigroup and the SEC. The SEC had agreed to $285 million in exchange for no admission of wrongdoing in a complaint about Citigroup defrauding investors in a 2007 residential mortgage backed security. Citigroup had told the investors a third party was picking what assets were securitized, when in fact the firm did it themselves. To make matters worse, Citigroup put bad mortgages into the security and then bet against them without telling their investors of their position. According to the Times, "Investors lost $700 million in the fund, according to the S.E.C., while Citigroup gained about $160 million in profits." 

Judge Rakoff thought $285 million and no admission of wrongdoing or the facts of the case was not good enough for the SEC and wants them to go back and try again, this time with justice in mind – as opposed to what's good for Citigroup. 

The judge, Jed S. Rakoff of United States District Court in Manhattan, ruled that the S.E.C.’s $285 million settlement, announced last month, is “neither fair, nor reasonable, nor adequate, nor in the public interest” because it does not provide the court with evidence on which to judge the settlement.

The ruling could throw the S.E.C.’s enforcement efforts into chaos, because a majority of the fraud cases and other actions that the agency brings against Wall Street firms are settled out of court, most often with a condition that the defendant does not admit that it violated the law while also promising not to deny it.

This truly is justice.  While Citigroup tries to minimize its damage, and the SEC (in the pockets of the banks to begin with) is shirking its duties of being a regulatory agency, someone has the balls to actually think about the investors who were defrauded, and to think about exacting punishment on the fraudulent behavior of Citigroup.

More stories like this please.

More Lies At Patterico

Aaron Worthing again, making things up as he goes along, writes:

And the founders clearly always contemplated corporations and similar business organizations having an outsized say in the political process.

Whaaaa?!?  This is demonstrably untrue.

First, let’s state the obvious. In the Constitution, it says “We the people…”, not “We the corporations…”. The founding fathers never addressed corporations in the Constitution. And why not? Because it never occurred to them that corporations would be perceived as people. And why would they have? Corporations don’t eat, they don’t breathe, they don’t vote, they don’t fight battles in wars. If the founders wanted corporations to have an outsized say in the political process, then why didn’t they just come out and SAY so?

In fact, the founders were wary of any institution (government or corporations) having unchecked power over individual rights. Like many in the Occupy Wall Street movement of today, the founders were concerned about collusion between government and business.

The most notable example? The Boston Tea Party. That historical protest emanated from the laws passed by the Parliament designed to aid and prop up one specific corporation, the East India Tea Company. (Basically, it cut taxes on tea in England, so that people would drink it more, and made up for the lost revenue by taxing the American colonists).

The very idea that the founders were corporatists is just laughable.

Even after the Revolution, our founders sought to limit the influence and power of corporations. Corporations were only permitted to exist 20 or 30 years. They could only deal in one commodity. They could not hold stock in other companies. Their property holdings were limited to what they needed to accomplish their business goals.

And most importantly, corporations could not make any political or charitable contributions nor spend money to influence law-making. In fact, it was a criminal offense in most states.

This went on for over 100 years. Corporation didn’t get “personhood” status until 1886, with Supreme Court case of Santa Clara County v. Southern Pacific Railroad, and even then, the “personhood” status came about as a clerical error. (The court did not make a ruling on the question of “corporate personhood,” but thanks to misleading notes of a clerk, the decision subsequently was used as precedent to hold that a corporation was a “natural person.”)

Need more proof? Here’s what some founding fathers said of the major corporations of the time, i.e., the banks:

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” – Thomas Jefferson, 1802

“I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.” – Thomas Jefferson, 1816

“Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.” – John Adams

Mistrust of corporations continued right up the Industrial Revolution. Even Lincoln famously said:

“The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”

You can’t change facts.

UPDATE:  Aaron the Ankle-biter responds in the comments with a couple of non-responses.  Both here and on in his original Patterico post, he doesn't refute the many objections to his bald, unsupported assertion that "the founders clearly always contemplated corporations and similar business organizations having an outsized say in the political process", save one — he doesn't trust "biased" sources which assert, contra his point, that the founders were actually wary of corporations and sought to limit their power and influence in the social and political arena.  (He also engages in some rather non-sensical line of thought that when the founders protected "freedom of the press", they really were thinking about the speech rights of non-media corporations).

It's easier, I imagine, for the history-challenged Worthing to make things up, and that's his perogative.  But I'll leave it to the reader to find the anser for his or herself, and in doing so, I give this advice to both the reader and Worthing (not his real name): Google is your friend.  Did the founders always contemplate that corporations and similar business organizations having an outsized say in the political process?  The answer is easily discoverable.  Start here.  And Aaron, stop digging.

Baum Law Firm Closes

Never heard of the law firm of Steven J. Baum?

Well, that law firm, located near Buffalo, represents banks and mortgage servicers when they attempt to foreclose on homeowners and evict them from their homes.  It is the biggest law firm of its type in the State of New York.

The firm has been denounced by consumers and consumer advocates for participating in "robo-signing" and allegedly improper foreclosures, with critics saying it helped speed up foreclosures to benefit its lender clients by allegedly authorizing the "assignment" or transfer of mortgages from one lender to another when critics say it lacked authority to do so.  It's been vilified by advocates, other attorneys, politicians and even judges for submitting sloppy and allegedly fraudulent paperwork that is riddled with legal errors, including faulty affidavits and notarizations.

You would think that a law firm facing such allegations (and a $2 million fine to boot) would clean up its act.  But no.  About a month ago, the law firm had an office Halloween party.  And the employees of the the law firm dressed up as — wait for it — people being foreclosed on.  Here are a couple of pictures:

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As you can see, the law firm employees showed an appalling lack of compassion toward the homeowners — invariably poor and down on their luck — that the Baum firm had brought foreclosure proceedings against.

In response to this obvious callousness, the two major lenders for home ownership, Fannie Mae and Freddie Mac (themselves not exactly enjoying a wave of public support) decided to “evict” the law firm of Steven J. Baum from its referral list.  That's right, Baum people — no more business for you!

And the results are so so sad.  From the Buffalo News:

This month, Fannie Mae and Freddie Mac, the mortgage- finance companies operating under U.S. conservatorship, dropped Steven J. Baum PC from their lists of law firms eligible to handle foreclosures. Servicers including Bank of America Corp. and Ally Financial Inc. also stopped using the firm, which last month agreed to pay the U.S. $2 million and change its practices to resolve a probe of faulty foreclosure filings.

“Disrupting the livelihoods of so many dedicated and hardworking people is extremely painful, but the loss of so much business left us no choice but to file these notices,” Steven J. Baum, who owns the firm, said in the statement.

Payback is a bitch, huh?

To the 67 people employed by the Baum firm… don't let the door hit your ass on the way out.

And Kudos to New York Times columnist Joe Nocera for his work on putting a spotlight on these guys.

BofA Caves

CNN tells about Bank of America's decision:

"In response to customer concerns and the changing competitive marketplace, Bank of America no longer intends to implement a debit usage fee," the company said in a statement. "We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said David Darnell, co-chief operating officer. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."

Also shelved for the time being was Bank of America's "Foreclose or Give Us Your First Born Child" Initiative, and "Castration for Credit Card" Program.

A Good Chart ‘Splains A Lot

Okay, follow me on this.  It's not too difficult.

We all know that there has been overall economic growth in the past two decades.  But the complaint of the OWS movement it that overall economic growth does not raise all boats of the economic stratosphere.  Conservatives, on the other hand, will try to tell you that because of trickle-down economics, when the wealthy benefit, everyone does.

Who's right?  Well, this chart from the Center on Budget and Policy Priorities tells us the OWS folks are right.  What is the chart?  It's a chart that compares how much income various groups make today vs. how much they would be making if everyone's incomes, rich and poor alike, had grown at similar rates since 1979.

So, for example, if you are in the bottom 20% of the income scale, you have $5,623 less per year than you would have if all income groups had benefitted equally from the economic boom.  That's the price that the bottom 20% "pay" for the growing plutocracy.  

As you can see, by 2005 the bottom 80% were collectively earning about $743 billion less per year while the top 1% were earning about $673 billion more. It's sort of uncanny how close those numbers are. For all practical purposes, every year about $700 billion in income is being sucked directly out of the hands of the poor and the middle class and shoveled into the hands of the rich.

Some might argue, "Well, it is the wealthiest people who created the economic boom over the past twenty years, so of course their percentage should be higher."  

There are two responses to that.  One from Elizabeth Warren:

The more complete answer though, in my view, comes from Matt Tiabbi and others who note that the economic progress was actually created not from innovation and winning business strategies, but from cheating.

1)  While ordinary people have to borrow their money at market rates, multi-millionaires like Lloyd Blankfein and Jamie Dimon get billions of dollars for free, from the Federal Reserve. 

2)  If you or I miss a $7 payment on a Gap card or, heaven forbid, a mortgage payment, you can forget about the great computer in the sky ever overlooking your mistake. But serial financial fuckups like Citigroup and Bank of America overextended themselves by the hundreds of billions and pumped trillions of dollars of deadly leverage into the system — and got rewarded with things like the Temporary Liquidity Guarantee Program, an FDIC plan that allowed irresponsible banks to borrow against the government's credit rating.

3)  When a homeowner screws up and can't pay a mortgage, they get foreclosed on.  But time after time, when big banks screw up and make irresponsible bets that blow up in their faces, they've scored bailouts.

4)  And of course, the tax situation:

Bankers on Wall Street pay lower tax rates than most car mechanics. When Warren Buffet released his tax information, we learned that with taxable income of $39 million, he paid $6.9 million in taxes last year, a tax rate of about 17.4%.

Most of Buffet’s income, it seems, was taxed as either "carried interest" (i.e. hedge-fund income) or long-term capital gains, both of which carry 15% tax rates, half of what many of the Zucotti park protesters will pay.  

As for the banks, as companies, we've all heard the stories. Goldman, Sachs in 2008 – this was the same year the bank reported $2.9 billion in profits, and paid out over $10 billion in compensation —  paid just $14 million in taxes, a 1% tax rate.

Bank of America last year paid not a single dollar in taxes — in fact, it received a "tax credit" of $1 billion. There are a slew of troubled companies that will not be paying taxes for years, including Citigroup and CIT.

When GM bought the finance company AmeriCredit, it was able to marry its long-term losses to AmeriCredit's revenue stream, creating a tax windfall worth as much as $5 billion. So even though AmeriCredit is expected to post earnings of $8-$12 billion in the next decade or so, it likely won't pay any taxes during that time, because its revenue will be offset by GM's losses.

Thank God our government decided to pledge $50 billion of your tax dollars to a rescue of General Motors! You just paid for one of the world's biggest tax breaks.

So when you add all these things together, you learn that the rules are rigged so that the rich can generate wealth for themselves — incredible wealth — not by providing better products and services, but by simply playing a game where the rules that apply to the rest of us don't apply to them.

And if you need a more blatent example, there's this: the raiding of employee pension funds for corporate profit — literally taking money from the little guy and putting into into the big guy's pockets.  Happens all the time, according to Ellen Schultz – an award-winning Wall Street Journal reporter and author of Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers.

Corporations have been "exaggerating their retiree burdens" and plundering retirement plans in a variety of ways, including:

  • Siphon billions of dollars from their pension plans to finance downsizings and sell the assets in merger deals.
  • Overstate the burden of rank-and-file retiree obligations to justify benefits cuts, while simultaneously using the savings to inflate executive pay and pensions.
  • Hide growing executive pension liabilities, which at some companies now exceed the liabilities for the regular pension plans.
  • Purchase billions of dollars of life insurance on workers and use the policies as informal executive pension funds. When the insured workers and retirees die, the company collects tax-free death benefits.
  • Exclude millions of low-paid workers from 401(k)'s to make the plans more valuable to the top-paid.

According to Schultz, these and related measures have become commonplace among Fortune 500 companies, including AT&T, Bank of America, JP Morgan, IBM, Cigna, General Motors, GM, Comcast, UPS and the NFL, just to name a few.

And that's what OWS is all about.

How’s Bank of America Doing?

Yesterday, I wrote about Bank of America's chutzpah in seeking to add a $5 monthly fee for use of the Bank of America debit card.  Sadly, BofA wasn't the only big bank contemplating this fee; there is evidence of a possible illegal collusion of big banks to charge customers new fees, just for the convenience of using their debit cards to spend their own money.  

What was the reason for the new fees?  The big banks cited "diminished profits," because now they can't charge exorbitant rates to merchants whose customers use those debit cards, rates than end up costing the consumer about $230 annually in passed-on price increases.

Let's look a little closer at these so-called diminished profits.

Bank of America reported a $6.2 billion profit for the third quarter as gains from the sale of assets like its stake in the China Construction Bank and positive accounting changes outweighed weaker results in its trading business and continued losses in its huge mortgage portfolio.[…]

The other major commercial banks that have reported earnings in recent days posted profits of around $4 billion each. Both Citigroup and JPMorgan Chase benefited from a $1.9 billion increase from the accounting change applied to the declining value of their company debt, posting profits of $3.8 billion and $4.3 billion, respectively. Wells Fargo had record earnings of $4.1 billion despite a 6 percent drop in revenue.

Banks are doing fine folks.  

The Chutzpah Of Bank of America

(1)  So let me get this straight.  After being bailed out by the federal governmentwith our tax dollars – following their gross incompetence, Bank of America wants to start charging fees for use of debit cards?  That is, they want to make customers pay for accessing their own money? By the way, Bank of America gets to use customers' money to make incompetent investment decisions in the first place (I mean, it's not like your money just sits in a vault).

(2) This is nuts.  From Stephen Foster at Addicting Info:

Two protesters involved with Occupy Santa Cruz in California walked into Bank of America earlier this week to close their own accounts as part of the national protest against the greed and irresponsibility of Wall Street, which has only seen its profits soar since it nearly collapsed the economy back in 2008… Rather than allow their customers to close their accounts, they told them that “you can not be a protester and a customer at the same time.” The bank manager threatened to lock the doors and call the police to have their own customers arrested for the simple act of requesting the closure of their own accounts. The two women left the bank and called the police. The officer went into the bank and after talking to the manager, relayed a message to them. According to the bank manager, “If they came in with the signs and they were part of the protest earlier, then they are protesters and cannot be customers at the same time.”

 I don't have a BofA account, but if I did, I just might close my accounts, too.

The Movement That Can’t Be Ignored

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I have to admit — when I first heard of the Occupy Wall Street protests, I thought it was a two or three day story.

But just the opposite has happened — the story grew and the protests grew.

Although some in the media (Fox, I'm looking at you) still feign ignorance about what the movement is about, everyone else has moved on past that by now.  The message, quite simply, is about the grotesque economic inequities that have slowly crept in over the past twenty to thirty years.  Starting in the 1980's, we have seen huge deregulation of the financial sector, and while Wall Street apologists are quick to point out the huge economic gains this country has made in that time, they are tone deaf to the actual complaints: the beneficiaries of those gains are at the top echelon of the economic scale.  The middle and lower classes not only failed to benefit from the country's financial growth; they are actually worse off.

And so Occupy Wall Street has expanded such that it now plays a role in even smaller metropolises.  Both the daily newspapers in Greensboro and Winston-Salem could not avoid covering, and had front page stories about, the Occupy Greensboro and Occupy Winston-Salem movements respectively.

I happened to come across the Occupy Greensboro encampment yesterday, located next to the Greensboro Cultural Center, and was a bit disappointed at the way it looked.  There were about 15 tents and 40 people there, mostly college age and tattooed and body-pierced, with the exception of a couple of tie-dyed wearing-hippies from the 60's.  They were sitting in groups of six or seven, having conversations about the movement and what to do next.  And there was — oh, God — a drum circle.  How much more of a cliche could this setting be?

Later that day, I spoke to an Occupy Greensboro organizer and friend, Devon Currie.  She sheepishly admitted to me that OG actually paid for a permit to occupy the space.  She was against it; it didn't seem in keeping with the whole "occupy" thing.  But she also understood the reasoning — Occupy Greensboro hoped to be broad-based and attract more segments of the community, and it wouldn't serve that goal if everyone was swept up and arrested for trespassing on Day One.  (Besides, she added, who knows what we will do when the permit runs out?)  Fair enough, I thought.

And she pointed out to me that even though Occupy Greensboro appears to look like a typical protest of hippies and hippie-wannabes, the support the group is getting actually is broad-based.  They have received donations (money, food, etc.) from all segments of society (small business owners, etc.).  And in telling me this, she reminded me of something that I clearly and temporarily overlooked — the "Occupy" movement is so much more than those who actually place their bodies at the protests sites.

So it is important not to allow ones perception of the protesters themselves cloud ones perception of the greater cause.  Surveys show that 65% of all Americans stand behind the Occupy Wall Street movement, and that number probably goes up when you take into account the global response (Occupy Rome, etc).  It's just that most of us — myself included — simply can't be a part of the actual occupations.  So let the hippies and hippie wannabes have their conversation "raps" and drum circles — they have (apparently) the time and inclination (and to be fair, college age students are the hardest hit by this economic crisis).  

(That said — there ARE interesting ways, besides donating, that you can voice your protest)

But the movement and its supporters are much, much broader.  As this weekend's must-read New York Times editorial states (in supporting the protests):

The protests, though, are more than a youth uprising. The protesters’ own problems are only one illustration of the ways in which the economy is not working for most Americans. They are exactly right when they say that the financial sector, with regulators and elected officials in collusion, inflated and profited from a credit bubble that burst, costing millions of Americans their jobs, incomes, savings and home equity. As the bad times have endured, Americans have also lost their belief in redress and recovery.

Sure, there are nay-sayers.  Some Tea Party spokespersons, for example. like to draw a distinction between their protests ("Oh, we would never break any laws") and the OWS protests.  Of course, as Jon Stewart pointed out, the Tea Party movement is named after one of the most historically praised criminal ventures, where patriots actually committed felonies by breaking into merchant vessels and tossing the contents overboard.  By contrast, the trespassing misdemeanors of the OWS protesters is comparatively tame.

The movement is already a success.  It has occupied the headlines of every major news outlet AND local news outlet.  It's put the issue of economic disparity at the forefront.

And it has got the attention of the lords of finance, some of whom privately "dismiss the protesters as gullible and unsophisticated".  Unfortunately, the large Wall Street bankers can't say this publicly, for fear of further lending support to the OWS movement.  

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True, some smaller financial institutions recognize that there truly is a problem, i.e., that Wall Street has severely screwed over Main Street, and that something needs to be done.

But even if we have a lot of people saying "Okay.  We get the problem", what comes next? However, 

It is not the job of the protesters to draft legislation. That’s the job of the nation’s leaders, and if they had been doing it all along there might not be a need for these marches and rallies. Because they have not, the public airing of grievances is a legitimate and important end in itself. It is also the first line of defense against a return to the Wall Street ways that plunged the nation into an economic crisis from which it has yet to emerge.

And as long as they keep that pressure on, which they will be able to do with the support of the broader community, we just might get our nation's leaders to finally address and tackle this problem.  Along this line, I leave the last word to Paul Krugman:

And there are real political opportunities here. Not, of course, for today’s Republicans, who instinctively side with those Theodore Roosevelt-dubbed “malefactors of great wealth.” Mitt Romney, for example — who, by the way, probably pays less of his income in taxes than many middle-class Americans — was quick to condemn the protests as “class warfare.”

But Democrats are being given what amounts to a second chance. The Obama administration squandered a lot of potential good will early on by adopting banker-friendly policies that failed to deliver economic recovery even as bankers repaid the favor by turning on the president. Now, however, Mr. Obama’s party has a chance for a do-over. All it has to do is take these protests as seriously as they deserve to be taken.

And if the protests goad some politicians into doing what they should have been doing all along, Occupy Wall Street will have been a smashing success.

And today, sadly, we see a rather meager start.

Five Facts About The Wealthiest 1%

From Livescience.com:

FACT #1: The wealthiest 1 percent of households own 34.6 percent of all privately held wealth, and 42.7 percent of all financial wealth (total net worth minus the value of one's home).

Meanwhile, according to the NYU economist Edward Wolff a 2010 report, the bottom 80 percent of the population holds just 15 percent of the total wealth and only 7 percent of the total financial wealth (as a large portion of their wealth is tied up in their homes). The bottom 40 percent of Americans — that's 120 million people — hold just 0.3 percent of the wealth.

The wealth inequality is not solely because of the inheritance of "old money" among the wealthiest Americans; there is also an extreme and growing inequality in the distribution of incomes. While the top 1 percent of earners earned 12.8 percent of the total national income in 1982, their share rose to 21.3 percent in 2006, a level not seen since the Depression era. Today, an American in the top 1 percent takes in an average of $1.3 million per year, while the average American earns just $33,000 per year. [Wealth distribution pie chart]

FACT #2: The United States has more income and wealth inequality than most countries that have been studied, including India and China — countries that are traditionally viewed as having unequal distributions of wealth.

The degree of income inequality in each country is assigned a "Gini coefficient" — a number that ranges from zero (if everyone in the country has the same income) to 1 (if one person in the country has all the income). According to data gathered by the Central Intelligence Agency for 2010, the United States has a Gini coefficient of 0.45, on par with such countries as Iran (0.44) and Mexico (0.48); this is higher than the Gini coefficients of 94 of the 134 countries that have been studied, including China (0.42) and India (0.37), and much higher than Canada, Australia and all of Europe. Sweden has the lowest Gini coefficient at 0.23. 

The United States' Gini coefficient has been rising for decades; it was just 0.35 in the 1960s. [World map of Gini coefficients]

FACT #3: Among the 299 companies listed in the S&P 500 Index, the average CEO's compensation was $11.4 million in 2010, or 343 times more than the median pay ($33,190) of American workers. The ratio of CEO pay to median worker pay was just 42:1 in 1980, and is currently 25:1 in Europe.

According to the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), which tracks executive salaries on a website called Executive Paywatch, those 299 CEOs have a combined income of $3.4 billion per year, which could pay for 102,325 average American jobs.

Bill Domhoff, a sociologist at UC Santa Cruz, claims the ballooning of chief executives' salaries in recent years has resulted from the fact that, for the most part, they set their own wages. "If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select — and which includes some fellow CEOs on whose boards they sit — gives them the pay they want," Domhoff wrote in a 2011 articleon his website. [Graph of worker vs. CEO salaries]

FACT #4: Between 1979 and 2005, the average after-tax income for the top 1 percent increased by 176 percent, compared with an increase of only 6 percent for the bottom 20 percent. Between 1990 and 2005, the purchasing power of the federal minimum wage actually declined by 9.3 percent when adjusted for inflation.

This rapid widening in the income gap between the rich and poor was identified in a 2007 report by the Center on Budget and Policy Priorities. The report attributed the trend to tax policies that favor the wealthy. According to Domhoff, other contributing factors include the diminishing political clout of labor unions and decreased expenditure on social services. [Graph of widening income gap]

FACT #5: Most Americans have no idea that the wealth distribution is as concentrated as it is, but regardless of their gender, age, income level or party affiliation, they believe wealth should be much more evenly distributed than they think it is.

In 2010, Michael Norton of Harvard Business School and behavioral economist Dan Ariely of Duke University surveyed 5,522 Americans about their views on the country's wealth distribution. They found that most respondents (regardless of their genders, ages, income levels and party affiliations) guessed that the top 20 percent of Americans hold about 60 percent of the wealth (rather than the 85 percent that they actually hold). Survey respondents also guessed that the bottom 40 percent hold between 8 and 10 percent of the wealth in the U.S. (rather than the 0.3 percent that they actually hold).

Perhaps even more striking than their misconceptions were their beliefs about the ideal wealth distribution. Survey respondents said that the ideal distribution would be one in which the top 20 percent owned between 30 and 40 percent of the total wealth, and that the bottom 40 percent should hold between 25 percent and 30 percent of the wealth — about 1,000 times more than the bottom 40 percent actually do hold. [Graph of actual, estimated and idea wealth distributions]

Numbers don't lie.

Three Ways That Wall Street Occupies Washington, DC

From Think Progress:

1. Wall Street Occupies Washington With Massive Campaign Contributions: On Nov. 12, 1999 President Bill Clinton signed into law the repeal of the Glass-Steagall Act of 1933, a Depression-era law that created a firewall between commercial and investment banking. Repealing this law was one of the top legislative goals of the financial industry. In the 1998 election cycle, commercial banks spent $18 million on congressional campaign contributions, with 65 percent going to Republicans and 35 percent going to Democrats. Securities and investment firms donated over $40 million. The mega-bank Citibank spent $1,954,191 during that cycle, and it was soon able to merge with Travelers Group as a result of the repeal of banking regulations. Between 2008 and 2010, when new financial regulations were being written following the financial crisis, the finance, insurance, and real estate industries spent $317 million in federal campaign contributions, with $73 million of that coming from Political Action Committees (PACs). The hold of campaign contributions is starkly bipartisan. As Sen. Jim Webb (D-VA) explained to Real Clear Politics in an interview last year, he couldn’t get a vote on a windfall profits tax on bonuses at bailed out banks due to campaign contributors. “I couldn’t even get a vote,” Webb explained. “And it wasn’t because of the Republicans. I mean they obviously weren’t going to vote for it. But I got so much froth from Democrats saying that any vote like that was going to screw up fundraising.”

2. Wall Street Occupies Washington With Its Lobbyists: One way to control what Washington lawmakers do is to give them access to exclusive funding streams that allow them to finance their campaigns. But yet another is to control the stream of information. From the deregulatory period of 1998 to 2009, the financial sector spent $3.3 billion on lobbyists. In 2007, the financial industry employed 2,996 separate lobbyists, five for every member of Congress. During the debate over financial reform last year, the industry flooded the nation’s capital with its own lobbyists. On just one issue — regulating derivatives — financial industry lobbyists outnumbered consumer group lobbyists and other pro-reform advocates by 11 to 1. In fact, by 2010, the industry had hired a whopping 1,600 former federal employees as lobbyists. Included among these lobbyists were high-ranking former public leaders like former Democratic House Majority Leader Dick Gephdart (MO) and Kenneth Duberstein, Ronald Reagan’s chief of staff. Much of this lobbying is done through elite K Street firms that specialize in hiring government insiders. Yet there are also bank-funded front groups like the Chamber of Commerce that deploy lobbyists on behalf of the big banks.

3. Wall Street Literally Occupies Washington By Placing Its Staff In Government Positions: Shortly after Clinton signed into law the repeal of the firewall between commercial and investment banking, his Treasury Secretary andGoldman Sachs alumni Robert Rubin left the government to work for newly-formed Citigroup — whose merger was only possible thanks to the policies Rubin championed and enacted. His compensation at Citigroup topped $15 million, not including stock options. Goldman’s alumni are found across the government, including bailout architect and former Treasury Secretary Hank Paulson, Paulson’s bailout chief Neil Kashkari, and Commodity Futures Trading Commission chairman Gary Gensler. The revolving door, of course, works both ways. Obama budget director Peter Orszag joined Citigroup shortly after leaving the government. This is just a small sampling of Wall Street’s staffers who found their way into government.

Dumbest Slur Against Occupy Wall Street Evah

It started with a David Brooks column in the New York Times yesterday.  Here's an excerpt:

Unfortunately, the country has been wasting this winter of recuperation. Nothing of consequence has been achieved over the past two years. Instead, there have been a series of trivial sideshows. It’s as if people can’t keep their minds focused on the big things. They get diverted by scuffles that are small, contentious and symbolic.

Take the Occupy Wall Street movement. This uprising was sparked by the magazine Adbusters, previously best known for the 2004 essay, “Why Won’t Anyone Say They Are Jewish?” — an investigative report that identified some of the most influential Jews in America and their nefarious grip on policy.

If there is a core theme to the Occupy Wall Street movement, it is that the virtuous 99 percent of society is being cheated by the richest and greediest 1 percent.

This is a theme that allows the people in the 99 percent to think very highly of themselves. All their problems are caused by the nefarious elite.

See that second paragraph?  It's actually the fourth paragraph in Brooks' column.  And it mentions, as an aside, that the Occupy Wall Street movement was sparked by an ad in Adbusters, and that seven years ago, the magazine did an expose on rich Jews.  What that articles has to do with Occupy Wall Street, is anybody's guess.

But that was enough for Fox News to take the ball and run with it:

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And now the meme has spun out of control.

Yes, apparently every anti-Semite reads Adbusters, and so when Adbusters put an advertisement in there about Occupy Wall Street, the anti-semites came out in force.  (*roll eyes*)

Of course, getting labelled anti-Semite is easy these days.  Being critical of Israel's policies, especially its expansion into Gaza, is enough to be called an anti-semite.  Pretty silly really. Especially when the article asked a question that many, on the right and left, asked: Why were we not allowed to discuss the neocons' emphasis on protecting Israel? (And that would include neocons like Brooks?)

Is Occupy Wall Street the Antithesis of the Tea Party?

A lot of comparisons are being made between these two movements.  And if one were to watch the media, it certainly looks like the fault lines are drawn, i.e.,:

Tea Party = loved by Fox News = conservative
Occupy Wall Street = treated with disdain by Fox News = liberal 

But some are noting that the OSW movement really isn't hippies in a drum circle with union guys giving speeches.  It seems to hae drawn libertarians as well.

But why?

Here's why:

What’s wrong's with the country?  The unity of government and corporate power against people’s freedom and prosperity.

That's a message that both movements can rally behind.

People Like Class Warfare

A new Washington Post/Bloomberg poll asked Americans whether they would support or oppose a variety of ideas to reduce the budget deficit. Unppoular ideas were pretty much what you expect: raising taxes on the middle class, reducing Social Security benefits, and reducing Medicare benefits. But a couple of ideas enjoyed broader support — most of the public approves of reducing military spending and a large majority (68%) wants to see tax increases on those who make $250,000 or more per year.  Even 54% majority of GOP voters support raising taxes on the wealthy.

A chart:

I often wonder what polls GOP leaders read when they say that raising taxes on the wealthy isn't popular.

Meanwhile, we have a vote tonight on the American Jobs Act.  Most Americans support its provisions; it enjoys strong support from economists; it includes ideas from both parties; and the CBO found it will even lower the deficit over the next decade. All told, the plan would likely add about 1.9 million jobs to an economy that desperately needs them. 

And yet, it won't pass:

Democrats would need all 53 of their members to vote yes along with seven Republicans, and already three members of the Democratic caucus have said they will vote no. Sen. Joseph Manchin of West Virginia questions the effectiveness of the package, wondering whether we'll get the bang from the buck. Sen. Ben Nelson, D-Neb., and Sen. Joseph Lieberman, I-Conn., both don't like the way Democratic leaders have proposed to pay for this bill with a new 5.6 percent surtax on any personal income over $1 million. They say that this is not the time to be raising taxes on anyone, including millionaires.

I guess that begs a question: "Why isn't this a time to be raising taxes on millionaires?"

The answer, of course, is "because it's an election year", and candidates – Democrats and Republicans – hope for some large contributions from the richies.

We really have to get money out of pollitics.  It's why we can't fix anything.

Elizabeth Warren on “Class Warfare”

(Extended) quote of the day:

“I hear all this, you know, ‘Well, this is class warfare, this is whatever'.  No. There is nobody in this country who got rich on his own — nobody.

“You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”

Man, does this woman need to be in the Senate or what???

Bank of America to Rick Perry: “We’ll Help You Out”

Bank of America.  

The mortgage-fraud syndicate that we had to bail out.  

The one that announced today that it’s laying off another 10,000 workers.

The one that was caught employing a military contractor to conduct “cyber war” against business journalists who were reporting on Bank of America’s constant crimes. 

The one that saw a 50% plunge in stock value this year, helping to destroy the pension funds and 401ks of millions of relatively innocent Americans.

Here’s some BofA executive talking to GOP Presidential candidate Rick Perry. What’s he saying?

 

He's saying "We'll help you out".  WE, plural.  Meaning, the Bank of America.

There you have it — Rick Perry, corporate crony.

Who’s Doing Well In This Economy?

Exxon!!!!!

NEW YORK — Exxon (XOM) said Thursday that higher oil prices and improved refining margins boosted its second-quarter profits 41%.

The largest publicly traded oil company reported earnings of $10.68 billion, or $2.18 per share, for the three months ended June 30. That compares with $7.56 billion, or $1.60 per share, for the same part of 2010. Revenue grew 36% to $125.5 billion.

It's the highest profit for Exxon since it set a corporate earnings record of $14.8 billion in the third quarter of 2008. But the results fell short of Wall Street estimates of $2.30 per share. Revenue topped projections of $119.2 billion.

Whew!  I was so worried about them.

Let’s Be Clear About Wisconsin

This is not about balancing the state's budget.

It's about taking advantage of a state's financial woes in order to bust unions.

In any financial crisis, somebody is going to get hurt financially.  Ideally, those who suffer are those who are can absorb the blow the most.  That would be the wealthiest members of society.

But in Wisconsin, the wealthiest members of society have financed the election of Republicans, who now run the state's governship and congress.  So who is getting shafted instead?  The working man.  The union man.

Anytime someone on the left begins to hint at raising taxes on the wealthy, Rush Limbaugh and his ilk cry out "Class warfare!  Class warfare!  The lower and middle classes are attacking the rich!"

Make no bones about it — there IS class warfare, but it is the wealthy attacking the middle and lower classes.  That's what is going on in Wisconsin.  And it's starting in Indiana, too.  And coming to a state near you.

The days of the corporate fat cats are back.

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Here's an angry guy:

 

Arizona’s Illegal Immigration Law Explained

NPR got to the bottom of Arizona's much-discussed controversial anti-immigration law — the one would require certain aliens to have documentation with them at all times, and gives the Arizona police broad powers to stop and detain anyone who appears to be an undocumented alien.  

The Arizona law would undoubtedly send hundreds of thousands of illegal immigrants to prison in a way never done before. 

So it comes as no surprise (in retrospect) that NPR discovered who was the impetus for pushing such a law: the private prison industry, who stand to make lots of money running and filling jails.  This law was a plan they devised some time ago, and they helped write the bill, and lobby for its passage.  Read the whole thing.

Socioeconomic Warfare

Rush Limbaugh and his ilk like to accused progressives of starting a war against the rich.  It's silly rhetoric.  On the other hand, when I read things like this, I want to start a war against the rich:

Charles Munger, the billionaire vice chairman of Berkshire Hathaway Inc., defended the U.S. financial-company rescues of 2008 and told students that people in economic distress should “suck it in and cope.

“You should thank God” for bank bailouts, Munger said in a discussion at the University of Michigan on Sept. 14, according to a video posted on the Internet. “Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.”

Bank rescues allowed the U.S. to avoid what could have been an “awful” downturn and will help the country as it deals with the housing slump, Munger, 86, said. He used the example of post-World War I Germany to explain how the bailouts under Presidents George W. Bush and Barack Obama were “absolutely required to save your civilization.”

Now, for the record, I was in favor of the bank bailout.  It was a necessary evil.  But can't these rich pricks be a little more humble about it?

Financial Reform To Pass

Senator Scott Brown (R-MA) signed on yesterday.  Senator Ben Nelson (D-NE) signed on hours ago.  That's 60, and it means that the financial regulation bill will pass the Senate without filibuster.  It should be good news — installing Wall Street reforms to prevent another meltdown is the responsible sensible thing to do.  Unfortunately, I fear the bill has been watered down so much that it contains enough loopholes so that it doesn't necessarily prevent a recurrence of the cycle of asset price boom and busts leading to financial institution failures. 

But elements of the Dodd-Frank bill do hold out the possibility of coping with the aftermath of such failures in a politically and economically viable way, that avoids the moral injustice associated with “bailouts.”

Suddenly, FinReg

Seems our lawmakers pulled a late nighter in Washington, and actually came up with a bipartisan bill to address abuses in the financial sector — the kind of abuses that led to the current crash and recession.

It looks pretty comprehensive too.  A strong bill — probably the toughest reform since FDR went after Wall Street following the Great Depression. 

What's in the bill?  This WaPo infographic is good, or you might want to read below the fold….

Should Taxpayers Pay For The Oil Spill?

Republican leaders think so.

This is tremendously stupid politics.  The public — particularly Republicans — are weary of taxpayer bailouts already.  Now we want more?

Oh, sure — count on Republicans to say, "Well, we bailed out the banks.  So why not BP?"

But that argument falls flat.  The bailout of the banks was necessary to stem the economic downflow.  It was designed to make sure that the entire banking system stayed afloat.  (And remember, we did let Sheasron Lehman die first).

This is not the same situation.  BP messed up.  While the oil spill may wreak havoc with BP's bottom dollar, it doesn't send the entire oil industry into turmoil and collapse, unlike the financial sector bailout.  Plus, the oil and gas companies get huge tax breaks already.

Also, BP is, you know, British.  Let the Brits bail them out.

Democrats need to jump on this one.  Politically, it's a huge gamechanger.  The 30 second ads write themselves: "Democrats want BP to pay for its spill; Republicans want you to pay for BP's spill."

P.S.  Although I agreed with it at the time, and still do, voters might want to be reminded that the bailout of the banks was done when Bush was president.

UPDATE from Josh Marshall, noting that Boehner is backtracking:

Okay, it seems like we know what Boehner meant. It seems he thinks BP should be on the line for everything. But only up to $75 million once the oil itself if cleaned up.

UPDATE:  Boehner steps into the ridiculous again

Washington (CNN) – House Republican Leader John Boehner mocked Congress for holding multiple hearings on the BP oil spill before experts have figured out how to halt oil still gushing into the Gulf. He sarcastically called the packed hearing schedule, "Congress at its best."

"You know, why don't we get the oil stopped, alright? Figure out what the hell went wrong, and then have the hearing and get the damn law fixed!" an exasperated Boehner told reporters at his weekly press conference on Capitol Hill.

I'm going to go out on a limb and speculate that figuring out how to cap the spill is in no way impeded by Congress looking into the root cause of the spill.  If it is an impediment, then we're in serious trouble.

Is the Senate Financial Reform Bill Any Good?

Edmund Andrews, who used to cover these issues for the New York Times and now is at the Fiscal Times and blogging at Capital Gains and Games, says it’s very good indeed:

Against that backdrop, it’s astonishing that the Senate bill actually became stronger as the process dragged on. The proposed consumer financial protection agency is stronger and I believe more independent than it would have been in the original Senate bill (more on that in a moment). The multi-trillion market in financial derivatives, which is almost unregulated right now, would for the most part have to be take place on exchanges or at least through clearinghouses — either of which require greater transparency and more pfront capital by the players. Banks, whose deposits are federally insured, would be prohibited from trading derivatives. And as an added surprise bonus, from none other that freshman Senator Al Franken, the bill includes a very smart reform to fix the corrupt busines model of credit-rating agencies.

You can argue that some of these reforms will backfire, and some probably will. But you cannot argue that the reforms amount to little or nothing. These are big changes.

Good.

The New York Times has a nice summary.

Libertarian Ad Doesn’t Work

This ad is supposed to make you think that we're over-regulated as a society, but judging by the comments on YouTube, it actually makes you realize how important government regulation is and how much we take it for granted.

All you need to do is change the tone of the background music, and the snarky nonsensical questions at the bottom, and this exact same video would be a pretty good advertisement for your federal tax dollars at work for you. Starting with, when you turn on your radio, and hear only one station at each frequency, instead of an unintelligible jumble of stations trying to drown each other out, yep, that’s the FCC, just as the arrowed caption says. And so on throughout the video.

It's like what I do when I run across a person who thinks government over-regulates and should stay out of business decisions.  I always ask: "You think so?  Tell me, how much rat feces do you like in your hot dogs?"

Dig A Little Deeper, NYT

An article on the front page of today's New York Times contains quotes from various conservation groups indicating that perhaps the oil spill isn't as bad as people think it is.  Example:

Other experts said that while the potential for catastrophe remained, there were reasons to remain guardedly optimistic.

“The sky is not falling,” said Quenton R. Dokken, a marine biologist and the executive director of the Gulf of Mexico Foundation, a conservation group in Corpus Christi, Tex. “We’ve certainly stepped in a hole and we’re going to have to work ourselves out of it, but it isn’t the end of the Gulf of Mexico.”

Yeah, will if you click on that link and poke around a little bit at the Gulf of Mexico Foundation website, you'll quickly see that it has a rather startling number of board members who work with, or for, the oil industry.

At least half of the 19 members of the group’s board of directors have direct ties to the offshore drilling industry. Seven board members are currently employed at oil companies, or at companies that provide products and services “primarily” to the offshore oil and gas industry. Those companies include Shell, Conoco Phillips, LLOG Exploration Company, Devon Energy, Anadarko Petroleum Company and Oceaneering International.

The Gulf of Mexico Foundation’s president is a retired senior vice president of Rowan Companies Inc., an offshore drilling contractor.

Smell an oily dead fish?  Of course you do.  It gets worse.  From the Gulf of Mexico Foundation website, you'll read things like this, under "Board News":

Board meets in Houston
January 2010
– The GMF held its winter Board of Directors meeting in Houston on January 25-26. The meeting was hosted by Transocean, which also sponsored a dinner for Board members the first evening. The meeting focused on further development of on-going and proposed projects.

Who is "Transocean"?  Well, it's a company which constructs and operates oil rigs.  One of its executives is on the board of the Gulf of Mexico Foundation, the "conservation group" quoted in the New York Times article.

But Transocean isn't just any company that constructs offshore oil rigs.  Transocean is the company that actually built and operated the Deepwater Horizon oil rig for BP.  Nine of the 11 workers who died when the rig exploded were Transocean employees.

In other words, the "conservation group" downplaying the extent of the disaster in the New York Times was actually a front group comprised of members with connections to the oil industry in general, and connections to the specific oil rig which was ground zero for the disaster.

Don't you think the New York Times readers would like to know that?

Third Time A Charm? Don’t Bet On It

As I am writing this, the Senate is voting on financial reform legislation.  This is the third time in three or four days that the Senate has held this vote, and each time, the Republicans have universally voted "no".

Important to understand, however, is what the Senate is actually voting on.  They are voting on merely whether to have a debate on financial reform legislation.  That is what Republicans are saying "no" to.  A debate — not an actual bill, but a debate about whether to have a bill and what it should contain.

I'll update this post if I hear what the results are, but I am guessing the Republicans will — again — vote "no".

UPDATE:  yes, it's a no.

UPDATE #2:  The Senate Dems are going to try again this evening.  Ezra Klein notes that the Democratic leadership is considering a new procedural approach, which I call the "Kentucky Derby" ploy:

Word is that the Democrats might make the Republicans actually filibuster FinReg tonight. That is to say, stand on the floor and talk and talk and talk. And if the Democrats are serious about forcing the Republicans to really filibuster the bill, this is the right week for it: The Kentucky Derby starts Friday, and Kentucky's senior senator, Mitch McConnell, would surely prefer to attend. Given that his members are already talking about breaking ranks, McConnell may find himself eager to get this kabuki dance over with a little bit early.

UPDATE #3:  GOP caves.

Sh*tty Deal Or No Sh*tty Deal?

CSPAN's getting a little blue today:

Language aside (and really, who gives a shit what language they use?), it's remarkable substantively.  These Goldman Sachs guys are…. well…. shits.

And apparently, they are getting their asses handed to them.  John Cole blogs:

I’m watching this on C-Span3 while I work, and this just does not feel like the normal dog and pony show. Goldman is getting absolutely fucking killed. Claire McCaskill is close to lining these people up against a wall.

Our Senators are pissed for a change.

Lesson Not Learned

WSJ:

Wall Street On Track To Award Record Pay

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture.

Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal.

Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year’s $117 billion—and to top 2007’s $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels.

I have no comment.

That's because I'm speechless.  We're facing double digit unemployment because of these bastards, the deficits are huge because we bailed out these bastards, and now they're increasing their own compensation?

UPDATE:  Thankfully, Kevin Drum, while as dumbfounded as me, can eke out a few thoughts:

There's an insanity here that's almost beyond analysis.  Wall Street can spark an economic slowdown that misses destroying the planet and causing a second Great Depression only by a hair's breadth — said hair being an 11th hour emergency infusion of trillions of taxpayer dollars — and then turn around and use those trillions to return to bubble levels of profitability within 12 months.  And they can do it even though the rest of the economy is still suffering through the worst recession since World War II.  It's mind boggling.

Is there any silver lining here?  Probably not, but I'll try: If Wall Street can shrug off the worst recession of our lifetimes as if it's a minor fender bender and get the party rolling all over again in less than 12 months, it means the next bubble is already in the works and its collapse will be every bit as bad as this one.  That in turn means it will almost certainly happen while today's politicians are still in office.  So maybe news like this will finally spur lawmakers to realize once and for all that the financial industry needs to be cut down to size.  Half measures won't do it.  Self-regulation won't do it.  Compensation limits won't do it.  Byzantine, watered-down rules won't do it.  Something like a Morgenthau Plan for Wall Street is the only thing that has even half a chance of working.

Will Congress finally get this?  Probably not.  The financial lobby is just too strong.  But we can hope.

RELATED:  The Dow surpassed 10,000 today.  Republicans are downplaying the significance of that.  And while I tend to agree with them (10,000 is just a number), recall that Republicans weren't singing that tune a few months ago.  The Wall Street Journal ran an entire editorial on this in early March. The drop in the Dow, the WSJ insisted, was a direct result of investors evaluating "Mr. Obama's agenda and his approach to governance."  Karl Rove and Lou Dobbs made the same case. So did Rush Limbaugh, Sean Hannity, and Fred Barnes. It was one of Mitt Romney's favorite talking points for a while, too.

To Republicans, Obama was to blame for the continuing fall of the Dow last spring.  But now that it keeps going up and up?  Well, the Dow doesn't mean anything.

But since when has logical, or even rhetorical, consistency been a characteristic of today's Republican party?

UPDATE TO RELATED:  OMG!  Fox News is pitching that the surge in the Dow is an example of the "Bush recovery"!!

Cavuto

The Other New FTC Rule

Earlier today, I mentioned a new FTC rule which, rather unusually, applied to bloggers: if you endorse or recommend something in exchange for payment (or a free sample), you must disclose the fact that your review was paid for.  While I tend to frown on the regulation of bloggers (and the Internet in general), this regulation struck me as reasonable.

The FTC issued another regulation — a "guideline" actually – which applies to advertisers running testimonial ads, and I really like this one:

Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as "results not typical" – the revised Guides no longer contain this safe harbor.

So if the new weight-loss pill ad feature a woman from Bumblefuck, Kentucky who lost 50 in three weeks, look for the part of the ad (whether it is on TV, on the radio, in print, or on the web) that says "Results not typical".

The Lehman Crash: One Year Later

We may be seeing the hint of a whiff of the first signs that our economic woes are taking a turn for the better, but what about the long term?  What about the reforms that Obama promised to ensure that Wall Street greed and bungling don't get us into another mess 5, 10, or 20 years down the road?

For my money (literally), the best suggested reform was a consumer protection agency.  Like the ones we have for food and drugs (FDA) and consumer products (CPSC), except that the focus is on financial products.  Yeah, private ratings agencies (it was thought) should do that, but they dropped the ball as well.

So where is it?

Answer: it's coming.  Wall Street will oppose it, and they'll line up the usual suspects to whip the ignorant mobs into a frenzy ("More government regulation!  That's socialism!").  But it has to pass.  It has to.

The New Gilded Age

The first Gilded Age was a time in the late 19th-early 20th century.  It was a time of huge ecnomic disparity.  On the one end, you had masses of poor immigrants and farmers, huddled in tenement shacks, and ekeing out a living.  Child labor, poor health — these were the earmarks ofOn the other end of the spectrum, you had huge "robber-barons" with incredible wealth owned such as Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, Henry Flagler, and J.P. Morgan.

Well, new figures have come out, and we're now living in a situation where the disparity between the wealthiest in the country vs the poorest in the country are even greater than the Gilded Age.  Here's the chart that explains it all:

Newguilded

As of 2007, the weathiest top 0.01% in this country received 6% of the entire national income.

Look, I'm no socialist, but I think these people, whoever they are, can afford to pay higher taxes than people who make even, say, $100,000 per year.  Seriously.  If someone making $100,000 pays 36% in taxes, then someone making $10,000,000 a year can probably be put in a brand new uber-rich tax bracket of 40%, which will reduce the deficit, pay for health care reform, etc.*

I mean, as Charlie Sheen said, "How many yachts can you ski behind?"

* Remember, this isn't the burden you might think it is.  Our tax rates are progressive and marginal.  In other words, under my plan, a person making $10M a year will pay 36% in taxes on every dollar he earns above $100,000 but under $10M.  Then, for every dollar above $10M, he pays 40%.

Financial Regulation

This subject is waaaay above my pay grade, but — shooting from the hip here — I think Obama needs to do at least these things:

(1)  Get rid of the alphabet soup of federal regulators.  Just as our national defense and security was merged under the new Department of Homeland Security, many financial regulation departments can be merged/eliminated with one board overseeing every aspect of the financial community.

(2)  For God's sake, don't allow financial institutions to pick which oversight department gets to regulate them.  That was bone-headed from the start.  If financial institutions get to pick which regulatory body oversees them, then they will do exactly what they did — pick the most lax regulator (in recent years, it was the Office of Thrift Supervision, which was too overworked to actually do any oversight).  In fact, what happened was that regulatory bodies competed to get business by effectively saying to financial institution that they were lax in oversight.  How dumb is that?

(3)  Allow the Fed to limit the amount that large financial institutions can leverage.  That's pretty straightforward and self-explanatory.

(4)  Set clear rules.  The markets like certainty; business likes certainty.  If you establish regulations, make them airtight… without loopholes.

(5)  Include oversight of ratings agencies.  It is staggering that all those agencies gave those toxic assets AAA ratings, when they were clearly junk.  Of course, the financial institutions are the ones who pick the ratings agencies, so there is a conflict of interest.  At the very least, those ratings agencies should be audited to make sure they "did the work", rather than just act as a rubber stamp to various financial packages.

(6)  End unregulated financial products.  Every consumer good — from soup to nuts — is overseen by at least one federal agency (like the Consumer Product Safety Commission, the FDA, etc.).  The same should be true for financial products.  Nothing should be traded on any market — either the public one or the private one — without someone in government looking at the nature of the commodity to see if it has the potential to create economic turmoil.  This obviously applies to the credit swaps of the recent past, but all future financial products.

(7)  Executive compensation reform.  Bonus compensation should be tied to merit and success, not an automatic "gimme".

Today Obama rolls out his plan for overhauling the financial regulatory system.  We'll see what the details are….