With the terrible environmental catastrophe currently taking place in the Gulf, I thought some good anti-oil industry propaganda was needed. So here’s a website I came across with some good political art on the ecological, social, and imperial impact of global oil policy: Art Not Oil: A True Portrait of an Oil Company. Enjoy.
It’s been over a year since Wall Street sent the US — and the world — to the precipice of complete economic meltdown. Yet we may be right to ask a simple question: Why haven’t we seen any of the Wall Street fat cats — whose greed-driven and fraudulent activities brought about the crisis — shackled and sent off to prison, where many no doubt belong? Well, Kevin Hall at McClatchy has recently asked the same question.
There have been some high-profile arrests and federal convictions of financial giants — such as Ponzi scheme king Bernard Madoff and Stanford Financial Group chairman Robert Allen Stanford. They weren’t among the causes of the financial meltdown, however, just poster boys for an era of lax enforcement, weak regulation and devout faith in free markets.
“A lot of people who are responsible (for the crisis) seem to have gotten awfully rich in the process,” said Barbara Roper, the director of investor protection for the Consumer Federation of America.
The absence of what many would call justice stands out all the more because past financial crises always had their villains. The depression-era had electricity and railroad magnate Samuel Insull, who partly inspired the movie “Citizen Kane.” The savings and loan crisis of the 1980′s had banker Charles Keating. Energy giant Enron Corp.’s spectacular collapse offered the late CEO Kenneth Lay, a Texas crony of President George W. Bush.
Hall goes on to note that there are some potential convictions coming.
The FBI has more than 580 large-scale corporate fraud investigations under way. At least 40 of them are scrutinizing players in sub-prime mortgage lending, which was the first domino to fall and triggered a global financial crisis.
“The investigations are very complex; it’s not something that’s going to turn overnight,” said Bill Carter, a spokesman at FBI headquarters. “They are labor intensive. They involve a review of records.”
To date, the closest thing to a prosecution of a major actor in the financial meltdown is a civil fraud case that the Securities and Exchange Commission brought on June 4 against Angelo Mozilo, the perma-tanned CEO of mortgage-lending giant Countrywide.
Yet thus far all we have are a few successful civil cases that amount to little more than a slap on the wrist of these economic titans. US Senator Bernie Sanders (I-VT) recently addressed the Senate on this issue and makes a compelling case for the need for justice now and, in the process, puts the lie to the “too big to fail” nonsense about these financial institutions:
Illustration by Victor Juhasz
Matt Taibbi, in his as-usual entertaining way, has written an excellent article explaining the roots and causes of the global financial mess we now find ourselves in. He focuses particularly on the central role AIG played in bringing about this economic apocalypse and, more importantly, how the kleptocratic financial elites at the center of it all are forcing the American taxpayers to pay off their gambling debts to the tune of trillions of dollars. Privatize profits, socialize losses. And the theft is taking place mostly in secret with almost no democratic oversight.
As complex as all the finances are, the politics aren’t hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.
As Taibbi and Glenn Greenwald point out, not only is the public outrage over the AIG bonuses justified, it is long overdue and far too little considering the scope and audacity of the overall theft (not just the bonuses). We can no longer afford to sit back and allow a sociopathic oligarchy to loot the public treasury without fear of consequence. I say bring out your pitchforks!
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The insurance giant A.I.G., which is at the center of the current economic meltdown, is going to pay $165 million in bonuses according to the NY Times. The company, one of the main purveyors of credit-default swaps, has already received $170 billion in taxpayer money. So their bailout amounts to nothing more than socialism for the rich, an upward distribution of income from regular Americans to the already wealthy. It’s an old story: those most responsible for economic disaster are rewarded while everyone else suffers.
A.I.G. claims it is legally obligated to make the bonus payments as a result of contract agreements made prior to the company’s demise. But looking deeper into the Times article you see the bonus plan for the financial products unit (the section of A.I.G. that “sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall) was locked into place in early 2008 just as the mortgage crisis was becoming most apparent. So rather than merely trying “to encourage people to stay” as the article alludes, at least some of the bonuses are because these corporate crooks simply saw the writing on the wall and wanted to get their legally guaranteed loot – probably knowing the American taxpayer would come to their rescue if the worst ultimately happened.
Unsurprisingly, a senior government official claimed under the cloak of anonymity the Obama administration is outraged by the bonuses but, despite American taxpayers owning 80% of A.I.G., they are powerless to stop the theft:
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.
But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured.
If the now government-controlled insurer will have to pay back the bonuses, why even let them make them in the first place? I say let these A.I.G. executives sue for their fraudulent bonuses; even if they win at least the administration will take a strong stand. And if the government is upset and it is actually policy that A.I.G. will have to repay taxpayers then why does the official have to speak off-the-record? The cleptocracy spreads far and wide.
Here’s a great video of a brief exchange between Sen. Bernie Sanders (I-VT) and Treasury Secretary Timothy Geithner discussing the details of the bailout. While there are some important and valid criticisms of Sen. Sanders regarding his support for nativist, reactionary policies against immigrants recently, in this video he does rightly challenge Geithner and the new Obama administration over whether they will hold the very Wall Street executives responsible for the current crisis accountable to the American taxpayer.
The Treasury Secretary does his best avoiding Sanders’ questions about whether we should change the leadership on Wall Street at this time due to their failures and the vital issue of transparency concerning where taxpayer’s money is spent.
Here is an interview with the extremely perceptive American thinker and intellectual Kevin Philips that is well worth watching. It’s from a recent Bill Moyers Journal on PBS, where Philips discusses a wide-range of issues surrounding the most recent US election and the possible direction America is heading. His main conclusion, “we are in an age of disappointment.”
Journalist Chris Hedges has written a scathing critique of the American elite establishment:
Our oligarchic class is incompetent at governing, managing the economy, coping with natural disasters, educating our young, handling foreign affairs, providing basic services like health care and safeguarding individual rights. That it is still in power, and will remain in power after this election, is a testament to our inability to separate illusion from reality. We still believe in “the experts.” They still believe in themselves. They are clustered like flies swarming around John McCain and Barack Obama. It is only when these elites are exposed as incompetent parasites and dethroned that we will have any hope of restoring social, economic and political order.
Read the rest here. While I absolutely agree with the basic thrust of his argument, I have to differ slightly over Hedges’ contention that the ruling class is simply incompetent. Certainly there is plenty incompetence to go around, as he shows. But I think it’s more accurate to say issues like governing effectively, managing the economy, education and the like are merely not very high priorities in elite circles. Painting it as incompetence somewhat assumes these people are trying to do the right thing for the social good, yet are unable to.
That aside, I recommend this article and any others by Hedges. Thanks to Left I on the News for the link.
Here’s economist Joseph Stiglitz interviewed on the Colbert Report.
Beautiful credit! The foundation of modern society. . . . “I wasn’t worth a cent two years ago, and now I owe two millions of dollars.” (Mark Twain, The Gilded Age)
Click on the image for Tom Tomorrow's latest cartoons at Salon.com
In a recent article at MRzine, economist William Tabb details the roots of the current global economic crisis. He sees this crisis as simply the most recent in a long line of capitalist crises, a predictable and integral part of the workings of the system. Here’s how he traces what has happened:
In the late 1990s, as you may remember, the economy expanded thanks to the Internet and the high tech boom as investors made money on this new technology, which led others to float the stock of new companies that promised to do the same. Many had no business plan, no chance of ever making money, but the animal spirits of investor/speculators, greed, and the herd mentality bid up prices of such stock until they reached such unrealistic levels that in 2000-2001 the stock market came crashing down. To address the crisis, the Federal Reserve lowered interest rates and kept lowering them. This made it cheaper for companies and individuals to borrow and helped people pay off debt and borrow more. One area that was particularly impacted was real estate: because it is not so much the cost of a home as how much must be paid each month to stay in it that matters, low-interest mortgages made ownership cheaper. As housing prices rose and kept rising, mortgage originators grew lax in their standards. Ninja (no income, no job) loans and little or no down payment became common. To keep the bubble going, low teaser-rate loans which would reset in the future were offered, and interest-only mortgages were popularized; by 2005, adjustable-rate mortgages allowing borrowers to make very low initial payments for the first years were the norm in more than half of new home loans. By 2006, the most popular mortgage option included paying less than the amount due each month, the difference being added to the principal and subject to dramatically higher monthly payments in the future.
Even if you were a banker who saw where all this was heading, you could not refuse to play. If you did, your bank would earn less than its competitors, your stockholders would wonder why they shouldn’t get someone else who could increase the profits, and you would be out of a job. If you were the person handing out the loans and interviewing people, your income depended on how many loans you originated. What happened to them after that was not your problem. You will have earned your bonus. The banks learned to securitize these loans — that is, to gather a bunch of them, some millions of dollars worth, and sell these collateralized debt obligations to someone else who would receive the income. You would get paid up-front with money you could lend to still more borrowers. Since the values kept rising and defaults for years were very low, the rating agencies thought these were safe instruments. Government regulators saw nothing wrong. They mostly came from the banking industry, at least the political appointees at the top did, and they laid down policy. Between mid-2000 and 2004, American households took on three trillion dollars in mortgages. Interestingly, during these same years, the U.S. private sector borrowed what BusinessWeek calls “an astonishing $3 trillion” from the rest of the world — astonishing because that is a lot of money. Between a third and half of the mortgages were financed with foreign money. Banks, especially in Europe, hold a lot of the toxic securitized debt. Some of their banks are in more trouble than ours thanks to these unwise purchases of presumably “safe” assets.
The creation of these bubbles was necessary to maintain economic growth in the United States during this time because labor – as a political and social force – had been so severely weakened and on a steady decline since the early 1970s. In the years following WWII strong industrial unionism played a crucial role in fueling consumerism. It was an arrangement in which the working class shared in the prosperity of growth to an unprecedented degree. But these boom years were short-lived. As Dee Hon wrote a year ago concerning the growth of US debt:
In 1972, wages reached their peak. According to the US department of Labor Statistics, workers earned $331 a week, in inflation-adjusted 1982 dollars. Since then, it’s been a downward slide. Today, real wages are nearly one-fifth lower – this, despite real GDP per capita doubling over the same period.
This marks the beginning of the triumph of neoliberalism in American domestic life and the death of Keynesian economics. Yet, consumer spending remained essential to keeping the entire system afloat. How was this accomplished with a broken labor force? Debt. As Hon continues:
Even as wages fell, consumerism was encouraged to continue soaring to unprecedented heights. Buying stuff became a patriotic duty that distinguished citizens from their communist Cold War enemies. In the eighties, consumers’ growing fearlessness towards debt and their hunger for goods were met with Ronald Reagan’s deregulation the [sic] lending industry. Credit not only became more easily attainable, it became heavily marketed. Credit card debt, at $880 billion, is now triple what it was in 1988, after adjusting for inflation. Barbecues and TV screens are now the size of small cars. So much the better to fill the average new home, which in 2005 was more than 50 percent larger than the average home in 1973.
This is all great news for the corporate sector, which both earns money from loans to consumers, and profits from their spending. Better still, lower wages means lower costs and higher profits. These factors helped the stock market begin a record boom in the early ’80s that has continued almost unabated until today.
Unsurprisingly, the Financial industry has become a more important factor in the US economy during this time. NY Times columnist David Leonhardt recently pointed out, “Of every dollar paid to the American work force in 2008, almost 10 cents went to people working at investment banks and other finance companies, up from about 6 cents or 7 cents throughout the 1970s and ’80s.” In addition to this important rise, most recently financial markets account for 30 percent of total corporate profits.
Financial bubbles like the dotcom and housing bubbles have always been products of capitalism. It’s just that the two most recent ones simply helped continue the consumerist trend and thus keep the entire global economic system going. (Do not doubt the importance of consumerism, recall president Bush pleading with Americans to do their patriotic duty and go shopping following 9-11.) This is the inevitable product of financial globalization: its accompanying off-shoring of jobs and exploitation of cheap labor, inexpensive energy supplies that kept the cost of moving products vast distances low, and an unquestioned ideology that said markets are the most efficient instruments for organizing the resources of society while never taking into account the true cost of economic activity, the so-called “externalities” like the environment and public health.
In response to the crisis the American taxpayer comes in to save the day, proving once again the so-called free market system is one of socialized cost and privatized profit, those massive externalities to be paid for by the rest of us. This financial debt bubble has all been little more than an insane fraud, destined to collapse – a true laissez-fairy tale economy if ever there was one.
Here are two films I highly recommend. The first is Our Daily Bread (1934) by King Vidor, whose most well-known works were from the silent era. It was filmed and set during the Depression and stars Karen Morley and Tom Keene as Mary and John Sims, a couple down on their luck and behind in rent. Their bad luck turns around when Mary’s wealthy uncle offers them a farm in the mid-West. Ultimately, it’s a story about how the two form a communal farm with people of various backgrounds and beat the odds.
Remember, it is from the 1930s so the acting is melodramatic and campy, but it does represent a powerful social characteristic of the time – communal organization and working with others as opposed to the individualistic alienation so common today. For that it’s worth watching.
Marxist critic Louis Proyect describes his reaction to this aspect of the film as follows:
When watching “Our Daily Bread,” I was reminded of my visits to farm cooperatives in Sandinista Nicaragua. There is something truly inspiring about men and women working together to produce for their common good. It is one of the great contradictions of American society that with every increase in abundance since the 1930s, there has been a concomitant decrease in the potential for group solidarity. Workers used to think in terms of their collective power. Now they see themselves more as individual actors looking for ways to benefit themselves and their family. Although nobody can predict when this will change, we can be sure that as economic insecurity grows working men and women will once again be forced to look to each other for mutual aid.
Next is the 1954 classic Salt of the Earth. Salt was a far more controversial film than Our Daily Bread. The director, Herbert Biberman, who along with nine other Hollywood writers and directors, had actually spent six months in prison prior to making it on charges of contempt of Congress as a result of hearings held by the U.S. House Committee on Un-American Activities.
Here’s a synopsis of the film from Wikipedia:
Salt of the Earth (1954) is an American drama film written by Michael Wilson, directed by Herbert J. Biberman, and produced by Paul Jarrico. All had been blacklisted by the Hollywood establishment due to their involvement in socialist politics.
The movie became a historical phenomenon and has a cult following due to how the United States establishment (politicians, journalists, studio executives, and other trade unions) dealt with the film. Salt of the Earth is one of the first pictures to advance the feminist social and political point-of-view.
In 1950–1951, in the fictional village of Zinc Town, New Mexico, the drama tells the story of a long and difficult strike led by Mexican-American and Anglo miners against the Empire Zinc Company. The film shows how the miners (the union men and their wives), the company, and the police, react during the strike. In neorealist style the producers and director used actual miners and their families as actors in the film.
Both films are public domain and freely distributable online.
