Hyperlinks to items of interest.

• Naked Capitalism's Yves Smith on Federal Reserve Chairman Ben Bernanke's "stonewalls and prevarications."
  
  
• Down With Tyranny's Ken ponders signs that prominent members of the House of Representatives -- including "corporate stooge" Steny Hoyer -- might be contemplating reversing the 1999 repeal of the Glass-Steagall Act (1933).
  
  
• Naked Capitalism's pseudonymous guest contributor George Washington on why the effort to "audit the Fed" (supported by 79% of the American population) is justified and why the Fed's protestations that this would constitute interference with its "independence" are "false."
  
  
• FiveThirtyEight.com's Nate Silver on "Why Progressives Are Batshit Crazy to Oppose the Senate [Health Care] Bill."
  
  
• PhuckPolitics.com on why he opposes the Senate health care bill and why Joe Lieberman might be "doing the right thing for the wrong reasons."
  
  
• Thomas Frank in a very intelligent piece addressing why "Newsrooms Don't Need More Conservatives" and also laying out a general argument against treating "ideological diversity" as though it were the same as racial or socioeconomic diversity.
  

House 'Audit the Fed' bill persists, teeth intact.

From Politico:

The House Financial Services Committee has approved Rep. Ron Paul’s measure to drastically expand the government’s power to audit the Federal Reserve.

The measure, based on a Paul proposal that has attracted more than 300 co-sponsors, passed, 43-26, as an amendment to a financial reform bill. Florida Democrat and fellow Fed critic Alan Grayson co-sponsored the amendment with Paul and played a leading role drumming up support for it among committee members. The adoption of this amendment is an extraordinary victory for Paul, whose libertarian, anti-Fed leanings have often been dismissed by the political establishment.

[...]

The House Financial Services Committee will vote on approving the underlying bill after Thanksgiving recess.

This is precisely the kind of thing I'm talking about when I call for a tactical alliance of left and right in the interest of advancing populist measures.

True, I oppose the extreme laissez faire economic philosophy of Paul and the libertarian tendency. He favors a system with severe restrictions upon the regulation and oversight of markets. By contrast, I favor a social democratic model that protects ordinary people against the inescapable perils of market activity.

But so what? The fact is that left- and right-populism share the interest of instituting democratic checks against powerful, and currently insular and unaccountable, monetary policy-making agencies. As the poet said: in politics, the enemy of my enemy is my friend, and it has always been this way. I don't have to want to play cribbage with someone in order to share some or many of his political interests.

Screw the Federal Reserve.

Another reason to grind our teeth in the direction of the Federal Reserve, courtesy of a report appearing in Bloomberg, as discussed by Yves Smith in the blog Naked Capitalism [emphasis mine]:

It had generally been assumed that the AIG payouts of 100% on credit swaps (when the insurer was under water and bankrupt companies do not satisfy their obligations in full) was the result of some gap in oversight plus traders at AIG exercising discretion (they were unhappy about bonus rows and had reason to curry favor with dealers, who were potential employers).

The article [appearing in Bloomberg] makes clear that AIG had been negotiating to settle on the swaps prior to getting aid from the government, and was seeking a 40% discount. The Fed might not have gotten that much of a discount, but there was clearly no need to pay out at par.

This massive backdoor subsidy to the likes of Goldman, DeutscheBank was authorized by Geithner while he was at the New York Fed. [...]

[T]he fact that this was a backdoor rescue means the Fed is acting as an extra budgetary vehicle of the Treasury. This is a violation of the Constitution and shows how patently false the Fed’s claims of independence are. [...] The real issue is that the Fed BY DESIGN bailed out banks, including foreign banks, through a device not authorized by Congress.

Ron Paul in conversation with Jon Stewart... ...prompts the question: Why can't progressives & libertarians forge a tactical alliance?

Why do I seem to be getting a boner over Ron Paul?

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Ron Paul
www.thedailyshow.com
Daily Show Full Episodes Political Humor Ron Paul Interview

It's not just, I don't think, that he seems intellectually honest. Nor is it only because his response to Stewart's question about the authoritarian-populist teabaggers is hilarious. It's mainly an idea that I've had swishing around in my head for the last couple of years....

I'm not a libertarian (in the American sense...across the pond, it doesn't mean the same thing), not by any stretch of the imagination. In other words, I disagree vehemently with the central tenet of libertarian ideology: the notion that "big government" or "more government" is always bad.

Sure, I am skeptical and even fundamentally antagonistic toward the growth of certain sectors of government, and I am absolutely opposed to the frightening steps that our nation seems to be taking toward establishing a surveillance/police state. I think the military is way too big, and I think the people in government cooking up wars for us to get into are mostly cynical assholes who don't have the best interests of the American citizenry at heart.

But, in comparison to governmental power, I am worried more about the concentration of power and influence in the hands of business and financial interests. I can explain why I oppose unchecked business and financial power more than government power with one very simple statement:

The legitimate exercise of governmental and political power -- formally if seldom substantively (particularly lately) -- is conditioned upon the consent of the governed. By contrast, the legitimate exercise of power by business and financial interests is conditioned upon the dominance of those who exercise it over those who do not.

But, when speaking of reigning hegemonic structures with the greatest capacity and incentive to curtail individual liberty, it seems that the most pernicious of all is the unchecked, oligarchic interrelation of governmental and business power.

Since the latter, to lesser or greater degrees in given cases, is clearly what we have in the United States today (and -- to be sure -- have often had throughout history).

So here's the question to which I have been drawn lately: Why can't progressives & libertarians forge a tactical alliance?

For now, let's leave it as a rhetorical question. It's a discourse that I shall undertake to explore in subsequent posts. As a food for thought, I might hypothesize that it's a problem of discourses, cultural politics and short-mindedness. But, honestly, despite my deep-seated opposition to Ron Paul's core libertarian ideology, I confess that I like a lot about the way he's thinking.

Progressives and libertarians both want a country that protects and promotes the free-exchange of ideas, the ability of individuals to live their lives as they please, to not be spied on, to eschew supporting an endless succession of neoconservative military adventures...

As is illustrated in this exchange between Ron Paul and Jon Stewart, the differences between each side have to do with conceptions of (or dedication to) social justice. I won't pretend that that isn't a lot. But the differences between the two tendencies on an array of issues pertaining to respect for the Constitution and individual liberty are fewer and smaller than we sometimes like to pretend.

Do we have to want to have a beer with someone or share her sense of fashion in order to share common political cause?

Is it a pipe dream to think that progressives and libertarians could place aside their many differences in the interest of political expediency, to forge a tactical/temporary political alliance against our common enemy: the forces of authoritarianism?

Documentary on John McCain's role in Keating Five scandal on 'keatingeconomics.com'

View this documentary about McCain's involvement in the Keating Five scandal at the Web site 'keatingeconomics.com'.

The documentary, which was released by Obama's campaign today at noon, is titled: KEATING ECONOMICS: JOHN MCCAIN AND THE MAKING OF A FINANCIAL CRISIS.

Below is reprinted the text that appears on keatingeconomics.com, accompanying the documentary.

The current economic crisis demands that we understand John McCain's attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late '80s and early '90s.

John McCain was accused of improperly aiding his political patron, Charles Keating, chairman of the Lincoln Savings and Loan Association. The bipartisan Senate Ethics Committee launched investigations and formally reprimanded Senator McCain for his role in the scandal -- the first such Senator to receive a major party nomination for president.

At the heart of the scandal was Keating's Lincoln Savings and Loan Association, which took advantage of deregulation in the 1980s to make risky investments with its depositors' money. McCain intervened on behalf of Charles Keating with federal regulators tasked with preventing banking fraud, and championed legislation to delay regulation of the savings and loan industry -- actions that allowed Keating to continue his fraud at an incredible cost to taxpayers.

When the savings and loan industry collapsed, Keating's failed company put taxpayers on the hook for $3.4 billion and more than 20,000 Americans lost their savings. John McCain was reprimanded by the bipartisan Senate Ethics Committee, but the ultimate cost of the crisis to American taxpayers reached more than $120 billion.

The Keating scandal is eerily similar to today's credit crisis, where a lack of regulation and cozy relationships between the financial industry and Congress has allowed banks to make risky loans and profit by bending the rules. And in both cases, John McCain's judgment and values have placed him on the wrong side of history.

Talkin' Dirty Secrets Keepin', Executive Branch Authoritarianism Pushin', Disaster Capitalism Evincin', Patriot Act Recallin', Bailout Blues!

Secretary of the Treasury Henry Paulson
("Hank" to his friends. So let's stick with Henry).

Q. Should Congress pass into law the $700 billion Wall Street bailout -- otherwise known as The Bailout, otherwise known as the Temporary Asset Relief Plan -- proposed by Secretary of State Henry Paulson (and supported, obviously, by all of the Bushies and the Federal Reserve Chairman Ben Bernanke), in its current form?

A. No, if estimates by Daniel Bruno Sanz, and numerous other experts, predict correctly what fate will befall the value of the not-so-Almighty US dollar. (i.e.: free fall) (Huffington Post).

A. No, because it's "an enormously expensive plan that doesn’t seem to address the real problem," according to Paul Krugman, in whose view Senator Chris Dodd's counterproposal is vastly superior, and which "has a real chance" of edging out Paulson's, due to the paternalism, arrogance and pushiness of Paulson's demand for full Executive Branch control, with zero oversight (more on this in a moment). (New York Times Web site)

You want full immunity from any & all future prosecution??
Say it ain't so, Henry. We thought you were different.

A. No, because, first and foremost, Paulson's proposal gives the Executive Branch FULL CONTROL over the allocation of the $700 billion, with ZERO OVERSIGHT and FULL IMMUNITY FROM OVERSIGHT AND EVEN PROSECUTION. Patriot Act, anyone? Just fucking read this sentence, for which some sneaky little fuck in the Bush Administration wins the Totalitarian Fascist of the Year Award (actually, let's just award it to Paulson; oh, and the boldface is mine):

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Yes. That day has really come, America, where your Executive Branch is actually saying: "Just hand over to us all of the control over everything, and just trust us, we'll fix everything behind closed doors. All we need is this $700 billion! Please just sign on the dotted line immediately."

If you're not angry, America, you should be. You respond: "But, I'm too busy to pay attention to this. I've got a job and a wife and a car and mouths to feed, and...." All the more reason you should be angry, America. All the more reason you should be angry....

Here's a taste of what Yves Smith, contributing to Naked Capitalism, which is a fantastic blog for those of us who are looking for straightforward explanations of the Bush Administration's economic shenanigans, has to say about it this sneaky little provision, in a post titled "Why You Should Hate the Treasury Bailout Proposal":

This puts the Treasury's actions beyond the rule of law. This is a financial coup d'etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review? Informed readers are encouraged to speak up.

Nouriel Roubini does not think it passes the smell test:

`He's asking for a huge amount of power,'' said Nouriel Roubini, an economist at New York University. ``He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.''

A. No, because the proposal is fundamentally dishonest, and furthermore, would not work. Smith goes on to articulate a significant (and in a couple of respects, shocking) substantive (again, the boldface is mine) problem:

...The Treasury has been using the formula that it will buy assets at "fair market prices". As we have noted, there is simply huge amounts of cash ready to bottom fish in housing-related assets (we saw an estimate of $400 billion a couple of months ago). The issue is not lack of willing buyers; it's that the prospective sellers are not willing to accept prices that reflect the weak and deteriorating prospects for housing.....

...[T]he plan makes no sense unless the Orwellian "fair market prices" means "above market prices.".....Confirmation of our view came from a reader by e-mail:

I worked at [Wall Street firm you've heard of], but now I handle financial services for [a Congressman], and I was on the conference call that Paulson, Bernanke and the House Democratic Leadership held for all the members yesterday afternoon. It's supposed to be members only, but there's no way to enforce that if it's a conference call, and you may have already heard from other staff who were listening in.

Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more.

I don't think that our leadership has been very good during this negotiation (or really, during any showdowns with this administration) at forcing the administration to own their position. If Paulson wants this plan, then he needs to sell it to the public, and if he sells a different plan to the public (the nonsense buying-at-market-price plan) then we should pass that. I'd rather see the government act as a market maker for the assets to get them transferred over to private equity firms and sovereign wealth funds and other willing holders. And if we need to recapitalize these companies, it seems like the cheapest way for the taxpayer is to go in and buy up the distressed debt and then convert that to equity.

So unlike the Resolution Trust Corporation, which took on dodgy assets which had fallen into the FDIC's lap due to the failure of thrifts, and the Home Owners' Loan Corporation, which was established in 1934 after the housing market had bottomed, this program is going to swing into action with the clear but not honestly disclosed intent of buying assets at above market prices when future markets and the analysts with the best track records on forecasting this decline (you can add Robert Shiller, CR at Calculated Risk, and Nouriel Roubini to the list) believe it has considerably further to fall.

A. No. But also, Naomi Klein warns us to be equally wary of alternative far-Right proposals, particularly those of Newt Gingrich, that seek to use this moment's crisis as an opportunity to shotgun through legislation that would push agendas of privatization, reverse what few social justice safeguards we may still recognize in this country, and -- of course -- to deregulate the private sector even further, including the repeal of the Sarbanes-Oxley Act. This is serious and twisted shit. Excerpt of Klein's piece, which draws upon her convincing theory of 'disaster capitalism' (Huffington Post):

I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).

The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.

Drill, Baby Drill! God damn, am I sick of the Grand Old Party. I mean, although I have always found his politics to be barbaric, its underlying principles deeply racist in character, in a weird way I have always found Newt Gingrich to be essentially a principled and intellectually honest man. (Keep in mind, this is in comparison to the majority of the bullshit artists of the Far Right.) Having said that, this is one of those moments in which I'd like nothing more than to punch him right smack dab in the middle of that fat, smug, pink, greasy cracker face of his.*

Newt Gingrich: "What about the plantation-owners??"

_______________
* What's gotten into me today?

By the way, did you know that we may well be on the verge of a second Great Depression?

First of all: if you are like me and tend not to understand anything about the economy, you owe it to yourself as a citizen, but more importantly as a voter in the upcoming presidential election, and even more importantly as someone who can help inform undecided voters (a constituency that J has often remarked that she doesn't "get," and I agree that it's one of life's great mysteries, like how come anyone likes this person?), to listen to today's highly informative episode of Fresh Air, hosted by Terri Gross.

Warning! In addition to being highly informative, this listening experience exposes to the listener the cynicism, corruption and incompetence that has caused the shocking shockwave of economic strife, Sturm und Drang and the like that has befallen the United States of America. And in this respect, it's pretty infuriating. But, it's the good kind of infuriating, wherein you finally feel like you have a basic sense of what the fuck is going on with Ye Grande Olde Economie, thanks to the success of decades of Grand Old Party ideological warfare. This is the ultimate consequence of the Reagan Revolution, and you got what you wanted, America! Assholes....

But anyway, subject yourself to this unusually informative radio program, and you'll come away armed with the kind of terrifying knowledge that energizes you to spread the word, or perhaps to spread your wings and fly, or perhaps simply to start bar fights. Not surprisingly, you'll also be equipped with a convincing yet subtle set of basic arguments as to why anybody who cares at all about the economy had better get off her ass and vote for Barack Obama.*

As if the fact that no less formidable paragon of bleeding-heart Marxism than Alan Greenspan recently said that the country "can't afford" John McCain's economic platform isn't all the proof we needed? Speaking of which, enjoy this simple but eloquent cartoon, which came to my attention through the blog of the, erm, festively monikered Barack OBlogger:

(By the way, I've discovered that there are a number of political cartoons on the Web site of the Ventura County Star that are after my own bleeding heart in a sort of simple, satisfying old-school way. The cartoonist is Steve Greenberg.)

Terri's guest is the very lively and lucid Michael Greenberger, a professor of law at the University of Maryland, and the former Director of the Division of Trading and Markets at the Commodity Futures Trading Commission (CFTC). In which capacity "he was responsible for supervising exchange traded futures and derivatives" (michaelgreenberger.com). What this means is that he knows lots and lots about the shady, irresponsible business practices that is causing the economy to tank, and he describes it from the perspective of a regulator. And from that perspective, things don't look good. (I wonder which perspective John McCain is viewing it from?)

Turns out the Republican Party economic ideology of deregulating everything and its mother, as practiced and expanded continually during all GOP presidencies since Reagan, and which McCain fully and ernestly intends to continue, has profoundly fucked the country. Shadiest of all has been the Bush/Cheney administration, which has been eager at every turn to run up larger and larger and larger deficits, and which espouses explicitly (and, at times, furtively) a policy of opacity: in other words, the administration has clamored, maneuvered, lied and used subterfuge at every opportunity to hide from the American people the true state of the country's finances, as well as the inevitable consequences of their irresponsible behavior with respect to the bottom line of an average American household.

For example: did you know that Cheney/Bush, in attempt to hide the yearly deficit expenses of the Iraq War -- which according to The Washington Post is certain to exceed $3 trillion --, tried to keep these expenses off the books? Specifically off of Congress's yearly report to the American taxpayer of spending and deficits. Fortunately, that plan was thwarted by Congress. And sure enough, the Bush Administration also wanted to keep the Federal Reserve's $200 billion taxpayer-funded bail-out of Fannie Mae and Freddie Mac off the books. The idea, you see, is that if that menacing figure of $200 billion -- which is being supplied out of the pockets of the taxpayers -- is prevented from appearing on the books, then the taxpayers wouldn't have to go through the psychological turmoil of knowing that it is indeed they who are strapping to their backs the burden of this awesome sum. Thankfully, Congress again told Cheney/Bush: "Fuck off."

And now, here's something that's sure to put an even bigger bounce in your taxpaying step. In today's Fresh Air interview, Greenberger explains that the Fed's $85 billion loan to bail out insurance giant AIG is backed up by -- that is to say, it uses as collateral -- AIG's considerable assets. In the Fed's public statements, it has used this fact as a means by which to reassure the US taxpayer that he won't have to shoulder this burden.

But wait, what do AIG's 'assets' consist of, exactly? The assets that are being used to back up the US Government's $85 billion loan? Why, AIG's assets consist of the insurance policies of its customers. Bet that makes holders of AIG policies feel cozy and warm. Or perhaps, a bit toasty.

Now, these policies are for the most part held not by AIG itself, but by smaller, subsidiary companies under AIG's umbrella. Wow. So, what does that mean, that the risk is spread around a lot or something? I'm going to answer no, even though I don't really understand my own question (you have to forgive me, because I'm of necessity reconstructing Greenberger's

comments from memory, as the Web version of the show to which I have provided a hyperlink will not begin functioning until later in the day on which I'm typing these words).

Turns out that AIG, like apparently everyone else, held a lot of subprime mortgage-backed securities. Remember: this means that it invested a significant percentage of the life insurance policies of its customers in those sketchy-ass subprime mortgage loans. So, when the housing sector tanked -- as it would do inevitably, given that the sector was skyrocketing exclusively due to incompetent oversight and lack of governmental regulation (of which, if you want more, vote for John McCain, who's always been in favor of more and more DE-regulation and shows no sign of changing tack in any sense other than rhetorically) -- so AIG's fortunes tanked.

But here's what's even more sinister: Greenberger describes an additional reason for AIG's southward turn: credit-default swaps. Credit-default swaps are a kind of insurance policy against defaults on loans, particularly risky loans (like subprime mortgages, etc.). If that doesn't make sense, and I'm sure it doesn't, just listen to Greenberger talking to Terri Gross, and it will become clear. So: anyway, despite occasional clamors from responsible people, the federal government has made it its policy to exercise virtually no regulation and no oversight with respect to credit-default swaps, or CDS. Therefore, there is zero obligation of transparency on the part of the entities involved with these transactions.

AIG has made a regular and frequent part of its business to issue CDS, a practice that is apparently unusual for insurance companies; for an insurance company to make such risky investments would be unthinkable in an environment with the appropriate oversight, transparency and regulation. Especially since oftentimes, if not in the majority of instances, the buyers of these swaps did so to protect against the risk of a default or bankruptcy on subprime mortgages!

This unregulated, mysterious CDS market is several times the size of the stock market!

Wow. If McCain manages to fucking win this election -- I know this is a clichee, but --, I'm sorry but anybody with any sense would pack up and leave for Canada. We can avoid that, but only if we stay in the faces of those who are undecided in this election and explain to them what the consequences will be if McCain wins.

Not to mention that in this economy, if the American people were to vote the same party of the last eight years into office all over again, it would be the biggest act of collective masochism the world has ever seen.

Okay; off to take a shower to wash away the self-righteousness..... But it just won't wash awaaaay / No, it doesn't ever wash awaaaayaayayayay, / Darlin', pleaeeeeeeese. To be sung in the style of Bryan Adams, ca. 'Everything I Do I Do It For You'. And that's a wrap.

_________________
* And, also to remind Barack supporters to register to vote ; it's unbelieveably easy and quick to put the requisite paperwork together, thanks to this kickass feature on Barack Obama's Web site. Remember: this election could very easily turn on whether or not a sufficient number of young people show up at the polls on election day. So don't hold back out of politeness: remind your friends; get in their faces and make sure they vote.