Sara Horowitz
Sep 5 2011
http://www.theatlantic.com/business/archive/2011/09/a-jobs-plan-for-the-post-cubicle-economy/244549
Sara Horowitz the founder of Freelancers Union, a nonprofit organization representing the interests and concerns of the independent workforce.
Just as workers left the plow for the assembly line, they are now leaving the cubicle for the coffee shop. Here's what Washington needs to know--and what it needs to do.
About 150 years ago, American workers began a profound shift from farms to factories. After suffering through poor work conditions, low pay, and no workplace protections, the workers organized and successfully helped build the framework of laws that became known as FDR's New Deal. This landmark legislation from the 1930s protected workers and supported labor unions by limiting the number of hours that could be worked and setting a baseline minimum pay. But from a larger perspective, the New Deal demonstrated that government had acknowledged the shift in the U.S. workforce, heard their voice, and created a new system in which they could thrive.
Now we find ourselves in the middle of an equally large transition: just as workers left the plow for the assembly line, they are now leaving the cubicle for the coffee shop. Welcome to the Gig Economy, where over 42 million Americans are working independently - as freelancers, part-timers, consultants, contractors, and the self-employed. They are simultaneously holding multiple jobs, working for different employers, and mastering diverse skills. They are accountants and fashion designers and website architects. And, they are completely left out of the New Deal, which protects the rest of the workforce.
If the New Deal had evolved to meet the ever-expanding U.S. workforce, then independent workers would have access to unemployment insurance, affordable health insurance, protection from discrimination, and guaranteed payment for their work. Instead, New Deal protections are stuck in the last century, and those basic needs are out of reach for one-third of the workforce. But we can't simply extend the New Deal to include all workers. Instead, the New Deal must be updated to reflect this new reality. A "new" New Deal will require creating a completely new paradigm for worker supports and building completely new systems for those supports.
The New Deal was based on linking all rights to a single job, which made sense for the Manufacturing Era. At that time, people worked for one company for a long time, so attaching protections to the job was the easiest way to cover the majority of workers. The "new" New Deal must be rooted in portability and mobility. The protections and rights must be centered on the individual, not the job, and must move with the individual from gig to gig.
Take the example of health insurance. Large companies benefit from big cost savings because existing laws allow them to group workers together in large risk pools. But as the way we work today becomes more outsourced, open, and flexible, smaller groups that share an affinity outside of work at a large company should be able to group together to share in these same cost savings. Some of health reform's proposed solutions, like creating Consumer Owned and Operated Plans (CO-OPs) are a great start in harnessing the power of smaller groups, but the savings are still tilted toward large companies, not the independent workers of the Gig Economy
Unemployment insurance is another example. If we simply plug freelancers into our unemployment system, the system would quickly go bankrupt since freelancers - who have no certainty of gigs - experience frequent periods of unemployment. Instead, we could allow freelancers to contribute to a pre-tax fund during flush times that they could draw from during lean times.
Coming together in unions is another right attached to a job and not available to independent workers, meaning they can't fully leverage their political power. By evolving this policy to allow freelancers to unionize, seemingly disparate workers would recognize their shared needs and have the ability to come together to get their needs met. (At Freelancers Union, this is what we call "new unionism," where we're bringing independent workers together to create power in politics and power in markets.)
Creating a "new" New Deal is crucial if we want to build economic security for one-third - and growing - of the workforce. Just as government acknowledged the shift from agrarian to industrial work, and thus created the New Deal, it's now time to acknowledge the shift happening today. But this isn't just about evolving our laws - it's about the changing role of government in our society. As government subsidies are declining, it's up to all of us to be entrepreneurial and together build solutions to these problems, something I'll discuss in a future column. For the workers of the Gig Economy, social media, collaborative consumption, and crowdsourcing are tools of the trade. Our "new" New Deal must follow suit and be created - collaboratively - by us.
Showing posts with label New Deal. Show all posts
Showing posts with label New Deal. Show all posts
Wednesday, September 14, 2011
Thursday, August 11, 2011
The People's Rogue: FDR vs. the Nine Old Men
Saturday 6 August 2011
Robert Wilbur, Truthout | Book Review
http://www.truth-out.org/peoples-rogue-fdr-vs-nine-old-men/1312315217
Throughout American history, Supreme Court justices have enjoyed undeserved reverence, which has allowed them, by and large, to be water boys (and girls) for the forces of money and power. The vaunted system of checks and balances is skewed in favor of the Supremes, and, inexplicably, ordinary men and women do not seem to realize that they're being rolled. The present political gridlock as a proximate result of the Supreme Court's Citizens United decision recalls the situation FDR confronted In Jeff Sheshol's new book, "Supreme Power: Franklin Roosevelt vs. the Supreme Court."
The president must have been savoring that afternoon of December 26, 1936. Tea was served, and the president entertained his attorney general with meandering reminiscences of his month-long tour through Latin America, wondering aloud which mementos to donate to the Smithsonian and which to keep in the White House. Eventually he got to the point. Go ahead, he told his A.G. Tell me what you have in mind. The A.G. began with a request: Do not laugh at me when I say that I have the solution. With this, as Shesol recounts, both men broke out laughing.
What Franklin Delano Roosevelt and Homer Cummings found so entertaining was a plan, hatched in the Justice Department, to neuter Chief Justice Charles Evans Hughes and the five other conservatives on the Supreme Court. The plan called for the kind of serious political mischief that brought out the devil in FDR. What made it all the more exciting was that the stakes could not be higher: New Dealers versus robber barons; checks and balances versus the power to govern a country on the verge of death throes.
When FDR assumed the presidency in March 1933, writes Shesol:
the cry was not "justice" but "relief." What was at stake was not simply the eventual return of prosperity. It was the survival of democracy. Could representative government, with its checks and balances, with its suspicion and fragmentation of power, respond quickly to mass hunger, unemployment, desperation, and rage? And if not, could such a system endure much longer? The experience of Germany, Italy, and Japan suggested that it could not.
Even before the very first of the hundred days, even before Roosevelt and Cummings were sworn in, New Dealers had a premonition that, sooner or later, there would be a clash between the executive branch and Hughes and his "old fossils." Anticipating this contingency - this inevitability - senator-elect William McAdoo of California proposed to Cummings a plan to pack the court and, "get the antiquated judges off the bench." Cummings liked the idea. So, according to McAdoo, did president-elect Roosevelt.
The daring experiments of the hundred days evolved with fewer cries from the political right than might have been expected, because small businessmen were hurting too, and they were inclined to give FDR a chance to assuage their pain. A chance, that is, until the New Deal came up against the traditional way of conducting business: sweatshops, long hours, measly wages, union busting, child labor, and other outrages.
It is true that the Justice Department did not scrutinize every piece of New Deal legislation with the care it would have done in ordinary times. But it is also true that the Hughes court scrutinized the same legislation with almost preternatural attention to constitutional nuance and precedent, unearthing rulings that had been forgotten for 50 years or more. So, when the Hughes court struck, it dealt FDR a body blow. First it shot down the blue eagle, symbol of the National Recovery Administration (NRA). Next, it rescinded the firing of a disruptive Republican member of the Federal Trade Commission. And for good measure, it struck down the Frazier-Lemke Farm Mortgage Moratorium Act (actually a bill pushed by rabble-rouser Huey Long, but signed by FDR anyway, and so identified with the New Deal). All three by a vote of 9 to 0, and all on the same day: Black Monday, May 27, 1935, just as the New Deal was finally getting a foothold.
At the dawn of the New Deal era, about 70 percent of judges, from the Supreme Court to night court, were Republicans, thanks to decades of GOP rule in Washington, the statehouses and municipalities. Emboldened by Black Monday, the courts picked off child labor laws, minimum wages and mortgage relief; the plaintiffs were seemingly "little people" who did not want government meddling in their affairs. The reality was that they were stooges for conservative "vigilante committees" bankrolled by the likes of Rockefeller, DuPont and Mellon. The right was on a roll, and like many on a winning streak, they did not know when to stop. On January 6, 1936, by a vote of 6 to 3, the Supreme Court put to death the Agricultural Adjustment Act (AAA), striking a devastating blow at hard-pressed farmers - and setting in motion the plan that would take Cummings to his fateful tea with FDR a year later.
The court-packing bill is often perceived as a legislative freak. This is not correct. By the time the Supreme Court struck down the AAA - with lower courts killing progressive legislation at every opportunity - almost all Democrats and progressives, and some enlightened Republicans, realized that something had to be done to reign in the judiciary - starting at the top. This was all the more important because two crucial bills were waiting in the wings: the Wagner Act, which gave unions the right of collective bargaining, and the jewel in the New Deal crown, Social Security. Legislators, scholars and activists had no shortage of plans in store for the courts, including numerous constitutional amendments to limit judicial review and other powers, bills to force judges into retirement at age 70 or 75, and various ingenious plans for court packing.
There is nothing in the Constitution that sets the number of Supreme Court judges at nine. Originally, there were six; for a while, there were ten; but for decades before the era of FDR, there were nine Supreme Court justices. Though several presidents had tried to pack the court with justices to their own liking, only one was successful: Ulysses S. Grant, who was able to tilt the balance in his favor by adding a single judge. It is doubtful that Roosevelt, Cummings, and their fellow plotters would ever acknowledge Grant, of all presidents, as a soul-brother in jurisprudence.
Nevertheless, the situation in the country was exigent. An amendment to the Constitution, favored by Professor Felix Frankfurter of Harvard, would take too long to pass at a time when Americans were starving. Similar considerations applied to bills that set an age limit on judges. To FDR and his eager attorney general, court packing was the quick and decisive way to go. There were, in fact, a number of court-packing schemes to choose from. The responsibility for reviewing these and putting together a bill was, incredibly, given to a young lawyer in the solicitor general's office named Warner W. Gardner, who worked closely with Cummings. The solicitor general himself avoided the pair because he found the scheme unsavory.
The 1934 midterm elections underscored FDR's popularity - and defied conventional wisdom that the president's party loses seats in the House and Senate. On the contrary, the voters swept the remaining Republicans into the Potomac, seemingly giving FDR an ironclad grip on the legislature. Cummings and Gardner had a court-packing bill ready for FDR, with the dark twist that appealed to him: starting from the premise that court dockets, from the Supreme Court on down, were so overloaded that they imposed an excessive burden on judges, and an especially heavy burden on the nine aging men of the Supreme Court, the bill increased the number of judges throughout the federal judiciary and, in particular, increased the number of Supreme Court judges to 15.
A major problem with the bill, however, was its central premise, which was false - willfully false. Court dockets were not overloaded. A second immediate problem was that FDR waited until February 5 to present his bill to Congress - an astounding blunder in timing, for FDR had allowed the members of his own party to campaign for constitutional amendments and other measures when, in fact, their party leader already had a plan that he did not see fit to share. It would certainly have been understandable if FDR had wished to keep the mechanics of such an explosive plan a secret, but, as Shesol points out, he could have spared Democrats a great deal of embarrassment with a cautionary whisper to candidates not to campaign against the Supreme Court.
The bill stirred scant enthusiasm - especially not among the members of Congress with egg on their chins, nor among many of Roosevelt's advisers. Nor - if the primitive polls of the day are to be believed - among the public at large, probably because Americans did not apprehend how sweeping this bill was. On the other hand, Americans were so programmed to believe in the sanctity of the judiciary, and especially that of the Supreme Court, that the right was quite successful in portraying this bill as a lethal attack on the Constitution itself. As Roosevelt's team sought to garner support for the bill, fellow Democrats continued to introduce constitutional amendments to rein in the court. It turned out that, when it came to the court-packing bill, Roosevelt was not as popular as the recent electoral results suggested. Roosevelt had to make a Faustian pact.
To keep his grip on the Senate, Roosevelt needed Majority Leader Joseph Robinson, to whom he had promised a Supreme Court seat when he was running for president. No one knows whether Roosevelt ever intended to keep this promise, for although Robinson seemed to be a loyal New Dealer, most New Dealers were convinced that he was a closet reactionary. Now, however, Roosevelt had to reiterate his promise: if Robinson would help the president to ratchet the Supreme Court up to 15 justices, one seat would be Robinson's.
On the Supreme Court, surprisingly, events began to break in Roosevelt's favor. In a twofold triumph for the New Deal, the court upheld the constitutionality of both Social Security and the Wagner Act, and the tide was beginning to turn also in Roosevelt's favor in lower courts across the country. Some of Roosevelt's advisers told him what seems obvious today: with the victories for Social Security and the Wagner Act, the swing votes on the court - Hughes and Owen Roberts - understood that not only the court-packing bill, but the Democratic campaign oratory of the recent election, as well as the flood of amendments and bills, boded ill for the power of the Supreme Court should it continue to overturn virtually every progressive bill that came before it. Hughes, a former governor of New York, Secretary of State, presidential candidate (and near-winner) and a masterful lawyer for moneyed interests, took the measure of the forces arrayed against him; he and Roberts knew it was time to back down. Roosevelt's more percipient aides advised him to withdraw the court-packing bill and to leave it hanging over Hughes' head like the sword of Damocles; the bill could always be revived if the court swung back to the right, and in the meantime, Roosevelt could claim a crushing victory.
The political arithmetic showed the fate of the bill on the floor of the Senate was a dead heat in the days before the vote. Without Robinson to make promises and twist arms, the bill would be history. And, just a couple of crucial days before the vote, Roosevelt lost Robinson in a way that this generally most astute of presidents could not have predicted: Robinson complained of pain in his chest and left the Senate early; the next morning his maid found him on his bedroom floor, dead, with his glasses and a copy of the Congressional Record just beyond the reach of his hand.
Now Roosevelt's aides pressed him hard to withdraw the bill. How to explain it? The fashionable explanation was - and almost certainly in most quarters still is - hubris. Shesol's explanation is more nuanced, more insightful. It is undoubtedly true that Roosevelt misconstrued the results of the midterm election, at least when it came to the court-packing bill. And it is also true that, as Shesol writes, Roosevelt had an iron will, though it generally was tempered by excellent judgment. But how unsound was that judgment of his in the present instance? Was it really correct that the court-packing bill would hang over Hughes' head like a sword? The bill was unpopular now - would it become any more popular in the months to come? And specifically, would it suddenly acquire popularity if Hughes or Roberts were to goose-step back to the right? Roosevelt may well have thought, correctly, that the bill stood its best chance of passage while his own popularity was, so it seemed, at its peak.
Roosevelt did not withdraw the bill, which was defeated by an astounding 80-20, with almost all of the nays from Democrats, because the Republicans had already been reduced to a handful. Southern Democrats voted against the bill because many of them were in the pocket of its foes, and because they feared a Roosevelt court would abolish Jim Crow and lynching. Moderates saw little reason to stir up a mares' nest so long as the Hughes court was behaving itself. Even on the left, support for the bill was weaker than one might think because of civil liberties issues. And senators of all denominations knew that the bill was predicated on a myth. Absent a national emergency, the Senate was not prepared to upset a precarious system of checks and balances for a reason that defied the facts.
None would deny that the court-packing bill delivered Roosevelt a humiliating slap in the face, but Shesol, like most historians who have written on this issue, overestimates its significance and duration. By 1937, FDR had succeeded in passing most of the signature legislation of the New Deal. Of course, Roosevelt would continue to govern, but in the domestic arena, there would be no more bills as sweeping as the Wagner Act or Social Security; subsequent legislation would be more targeted, more closely focused on less all-embracing issues. And soon after the start of his third term, FDR would become increasingly preoccupied with foreign affairs. Soon, FDR would wield more power than ever before, the failure of his court-packing scheme notwithstanding - and he would wield it more judiciously than the other two wartime presidents with whom he is compared, Lincoln and Wilson.
Shesol is surely wrong to attribute the court-packing affair to the beginning of the Democratic Party's abandonment by Southerners. Southerners controlled the key committees for decades thereafter, and the Solid South remained solid until Lyndon Johnson rammed through his civil rights legislation and Nixon welcomed the Southerners with open arms.
Shesol has written an engrossing, witty, and carefully researched history of a Supreme Court out of control and a President's fight to contain it. Shesol inclines toward the view that Hughes and his fellow conservatives had only themselves to thank; he clearly appreciates the magnitude of the economic and human catastrophe of the Great Depression. Shesol suggests that the crisis tempered Hughes and Roberts, yielding consistently more liberal verdicts. It seems more probable that FDR prevailed by brute political force, losing the battle but winning the war. Had FDR not rung the fighting juices out of these two aged reactionaries, Social Security might still be a progressive's fantasy.
Robert Wilbur did research in biological psychiatry for many years. He also writes for popular magazines and newsletters. He is active in progressive politics, especially opposition to the Middle East wars and capital punishment, and fighting for animal rights.
Robert Wilbur, Truthout | Book Review
http://www.truth-out.org/peoples-rogue-fdr-vs-nine-old-men/1312315217
Throughout American history, Supreme Court justices have enjoyed undeserved reverence, which has allowed them, by and large, to be water boys (and girls) for the forces of money and power. The vaunted system of checks and balances is skewed in favor of the Supremes, and, inexplicably, ordinary men and women do not seem to realize that they're being rolled. The present political gridlock as a proximate result of the Supreme Court's Citizens United decision recalls the situation FDR confronted In Jeff Sheshol's new book, "Supreme Power: Franklin Roosevelt vs. the Supreme Court."
The president must have been savoring that afternoon of December 26, 1936. Tea was served, and the president entertained his attorney general with meandering reminiscences of his month-long tour through Latin America, wondering aloud which mementos to donate to the Smithsonian and which to keep in the White House. Eventually he got to the point. Go ahead, he told his A.G. Tell me what you have in mind. The A.G. began with a request: Do not laugh at me when I say that I have the solution. With this, as Shesol recounts, both men broke out laughing.
What Franklin Delano Roosevelt and Homer Cummings found so entertaining was a plan, hatched in the Justice Department, to neuter Chief Justice Charles Evans Hughes and the five other conservatives on the Supreme Court. The plan called for the kind of serious political mischief that brought out the devil in FDR. What made it all the more exciting was that the stakes could not be higher: New Dealers versus robber barons; checks and balances versus the power to govern a country on the verge of death throes.
When FDR assumed the presidency in March 1933, writes Shesol:
the cry was not "justice" but "relief." What was at stake was not simply the eventual return of prosperity. It was the survival of democracy. Could representative government, with its checks and balances, with its suspicion and fragmentation of power, respond quickly to mass hunger, unemployment, desperation, and rage? And if not, could such a system endure much longer? The experience of Germany, Italy, and Japan suggested that it could not.
Even before the very first of the hundred days, even before Roosevelt and Cummings were sworn in, New Dealers had a premonition that, sooner or later, there would be a clash between the executive branch and Hughes and his "old fossils." Anticipating this contingency - this inevitability - senator-elect William McAdoo of California proposed to Cummings a plan to pack the court and, "get the antiquated judges off the bench." Cummings liked the idea. So, according to McAdoo, did president-elect Roosevelt.
The daring experiments of the hundred days evolved with fewer cries from the political right than might have been expected, because small businessmen were hurting too, and they were inclined to give FDR a chance to assuage their pain. A chance, that is, until the New Deal came up against the traditional way of conducting business: sweatshops, long hours, measly wages, union busting, child labor, and other outrages.
It is true that the Justice Department did not scrutinize every piece of New Deal legislation with the care it would have done in ordinary times. But it is also true that the Hughes court scrutinized the same legislation with almost preternatural attention to constitutional nuance and precedent, unearthing rulings that had been forgotten for 50 years or more. So, when the Hughes court struck, it dealt FDR a body blow. First it shot down the blue eagle, symbol of the National Recovery Administration (NRA). Next, it rescinded the firing of a disruptive Republican member of the Federal Trade Commission. And for good measure, it struck down the Frazier-Lemke Farm Mortgage Moratorium Act (actually a bill pushed by rabble-rouser Huey Long, but signed by FDR anyway, and so identified with the New Deal). All three by a vote of 9 to 0, and all on the same day: Black Monday, May 27, 1935, just as the New Deal was finally getting a foothold.
At the dawn of the New Deal era, about 70 percent of judges, from the Supreme Court to night court, were Republicans, thanks to decades of GOP rule in Washington, the statehouses and municipalities. Emboldened by Black Monday, the courts picked off child labor laws, minimum wages and mortgage relief; the plaintiffs were seemingly "little people" who did not want government meddling in their affairs. The reality was that they were stooges for conservative "vigilante committees" bankrolled by the likes of Rockefeller, DuPont and Mellon. The right was on a roll, and like many on a winning streak, they did not know when to stop. On January 6, 1936, by a vote of 6 to 3, the Supreme Court put to death the Agricultural Adjustment Act (AAA), striking a devastating blow at hard-pressed farmers - and setting in motion the plan that would take Cummings to his fateful tea with FDR a year later.
The court-packing bill is often perceived as a legislative freak. This is not correct. By the time the Supreme Court struck down the AAA - with lower courts killing progressive legislation at every opportunity - almost all Democrats and progressives, and some enlightened Republicans, realized that something had to be done to reign in the judiciary - starting at the top. This was all the more important because two crucial bills were waiting in the wings: the Wagner Act, which gave unions the right of collective bargaining, and the jewel in the New Deal crown, Social Security. Legislators, scholars and activists had no shortage of plans in store for the courts, including numerous constitutional amendments to limit judicial review and other powers, bills to force judges into retirement at age 70 or 75, and various ingenious plans for court packing.
There is nothing in the Constitution that sets the number of Supreme Court judges at nine. Originally, there were six; for a while, there were ten; but for decades before the era of FDR, there were nine Supreme Court justices. Though several presidents had tried to pack the court with justices to their own liking, only one was successful: Ulysses S. Grant, who was able to tilt the balance in his favor by adding a single judge. It is doubtful that Roosevelt, Cummings, and their fellow plotters would ever acknowledge Grant, of all presidents, as a soul-brother in jurisprudence.
Nevertheless, the situation in the country was exigent. An amendment to the Constitution, favored by Professor Felix Frankfurter of Harvard, would take too long to pass at a time when Americans were starving. Similar considerations applied to bills that set an age limit on judges. To FDR and his eager attorney general, court packing was the quick and decisive way to go. There were, in fact, a number of court-packing schemes to choose from. The responsibility for reviewing these and putting together a bill was, incredibly, given to a young lawyer in the solicitor general's office named Warner W. Gardner, who worked closely with Cummings. The solicitor general himself avoided the pair because he found the scheme unsavory.
The 1934 midterm elections underscored FDR's popularity - and defied conventional wisdom that the president's party loses seats in the House and Senate. On the contrary, the voters swept the remaining Republicans into the Potomac, seemingly giving FDR an ironclad grip on the legislature. Cummings and Gardner had a court-packing bill ready for FDR, with the dark twist that appealed to him: starting from the premise that court dockets, from the Supreme Court on down, were so overloaded that they imposed an excessive burden on judges, and an especially heavy burden on the nine aging men of the Supreme Court, the bill increased the number of judges throughout the federal judiciary and, in particular, increased the number of Supreme Court judges to 15.
A major problem with the bill, however, was its central premise, which was false - willfully false. Court dockets were not overloaded. A second immediate problem was that FDR waited until February 5 to present his bill to Congress - an astounding blunder in timing, for FDR had allowed the members of his own party to campaign for constitutional amendments and other measures when, in fact, their party leader already had a plan that he did not see fit to share. It would certainly have been understandable if FDR had wished to keep the mechanics of such an explosive plan a secret, but, as Shesol points out, he could have spared Democrats a great deal of embarrassment with a cautionary whisper to candidates not to campaign against the Supreme Court.
The bill stirred scant enthusiasm - especially not among the members of Congress with egg on their chins, nor among many of Roosevelt's advisers. Nor - if the primitive polls of the day are to be believed - among the public at large, probably because Americans did not apprehend how sweeping this bill was. On the other hand, Americans were so programmed to believe in the sanctity of the judiciary, and especially that of the Supreme Court, that the right was quite successful in portraying this bill as a lethal attack on the Constitution itself. As Roosevelt's team sought to garner support for the bill, fellow Democrats continued to introduce constitutional amendments to rein in the court. It turned out that, when it came to the court-packing bill, Roosevelt was not as popular as the recent electoral results suggested. Roosevelt had to make a Faustian pact.
To keep his grip on the Senate, Roosevelt needed Majority Leader Joseph Robinson, to whom he had promised a Supreme Court seat when he was running for president. No one knows whether Roosevelt ever intended to keep this promise, for although Robinson seemed to be a loyal New Dealer, most New Dealers were convinced that he was a closet reactionary. Now, however, Roosevelt had to reiterate his promise: if Robinson would help the president to ratchet the Supreme Court up to 15 justices, one seat would be Robinson's.
On the Supreme Court, surprisingly, events began to break in Roosevelt's favor. In a twofold triumph for the New Deal, the court upheld the constitutionality of both Social Security and the Wagner Act, and the tide was beginning to turn also in Roosevelt's favor in lower courts across the country. Some of Roosevelt's advisers told him what seems obvious today: with the victories for Social Security and the Wagner Act, the swing votes on the court - Hughes and Owen Roberts - understood that not only the court-packing bill, but the Democratic campaign oratory of the recent election, as well as the flood of amendments and bills, boded ill for the power of the Supreme Court should it continue to overturn virtually every progressive bill that came before it. Hughes, a former governor of New York, Secretary of State, presidential candidate (and near-winner) and a masterful lawyer for moneyed interests, took the measure of the forces arrayed against him; he and Roberts knew it was time to back down. Roosevelt's more percipient aides advised him to withdraw the court-packing bill and to leave it hanging over Hughes' head like the sword of Damocles; the bill could always be revived if the court swung back to the right, and in the meantime, Roosevelt could claim a crushing victory.
The political arithmetic showed the fate of the bill on the floor of the Senate was a dead heat in the days before the vote. Without Robinson to make promises and twist arms, the bill would be history. And, just a couple of crucial days before the vote, Roosevelt lost Robinson in a way that this generally most astute of presidents could not have predicted: Robinson complained of pain in his chest and left the Senate early; the next morning his maid found him on his bedroom floor, dead, with his glasses and a copy of the Congressional Record just beyond the reach of his hand.
Now Roosevelt's aides pressed him hard to withdraw the bill. How to explain it? The fashionable explanation was - and almost certainly in most quarters still is - hubris. Shesol's explanation is more nuanced, more insightful. It is undoubtedly true that Roosevelt misconstrued the results of the midterm election, at least when it came to the court-packing bill. And it is also true that, as Shesol writes, Roosevelt had an iron will, though it generally was tempered by excellent judgment. But how unsound was that judgment of his in the present instance? Was it really correct that the court-packing bill would hang over Hughes' head like a sword? The bill was unpopular now - would it become any more popular in the months to come? And specifically, would it suddenly acquire popularity if Hughes or Roberts were to goose-step back to the right? Roosevelt may well have thought, correctly, that the bill stood its best chance of passage while his own popularity was, so it seemed, at its peak.
Roosevelt did not withdraw the bill, which was defeated by an astounding 80-20, with almost all of the nays from Democrats, because the Republicans had already been reduced to a handful. Southern Democrats voted against the bill because many of them were in the pocket of its foes, and because they feared a Roosevelt court would abolish Jim Crow and lynching. Moderates saw little reason to stir up a mares' nest so long as the Hughes court was behaving itself. Even on the left, support for the bill was weaker than one might think because of civil liberties issues. And senators of all denominations knew that the bill was predicated on a myth. Absent a national emergency, the Senate was not prepared to upset a precarious system of checks and balances for a reason that defied the facts.
None would deny that the court-packing bill delivered Roosevelt a humiliating slap in the face, but Shesol, like most historians who have written on this issue, overestimates its significance and duration. By 1937, FDR had succeeded in passing most of the signature legislation of the New Deal. Of course, Roosevelt would continue to govern, but in the domestic arena, there would be no more bills as sweeping as the Wagner Act or Social Security; subsequent legislation would be more targeted, more closely focused on less all-embracing issues. And soon after the start of his third term, FDR would become increasingly preoccupied with foreign affairs. Soon, FDR would wield more power than ever before, the failure of his court-packing scheme notwithstanding - and he would wield it more judiciously than the other two wartime presidents with whom he is compared, Lincoln and Wilson.
Shesol is surely wrong to attribute the court-packing affair to the beginning of the Democratic Party's abandonment by Southerners. Southerners controlled the key committees for decades thereafter, and the Solid South remained solid until Lyndon Johnson rammed through his civil rights legislation and Nixon welcomed the Southerners with open arms.
Shesol has written an engrossing, witty, and carefully researched history of a Supreme Court out of control and a President's fight to contain it. Shesol inclines toward the view that Hughes and his fellow conservatives had only themselves to thank; he clearly appreciates the magnitude of the economic and human catastrophe of the Great Depression. Shesol suggests that the crisis tempered Hughes and Roberts, yielding consistently more liberal verdicts. It seems more probable that FDR prevailed by brute political force, losing the battle but winning the war. Had FDR not rung the fighting juices out of these two aged reactionaries, Social Security might still be a progressive's fantasy.
Robert Wilbur did research in biological psychiatry for many years. He also writes for popular magazines and newsletters. He is active in progressive politics, especially opposition to the Middle East wars and capital punishment, and fighting for animal rights.
Friday, July 29, 2011
The US Constitution Makes Default Illegal
The US Constitution Makes Default Illegal
What a Real President Would Do
August 1, 2011
Webster G. Tarpley, Ph.D.
TARPLEY.net
http://tarpley.net/2011/07/27/a-real-president-would-call-default-unconstitutional
My fellow Americans:
I speak to you tonight in an hour of grave danger to our nation. As you know, within the next few hours our government is in danger of failing to make payments of interest and principal which the United States Treasury has contracted to make. In technical terms, we are not far away from beginning to default on payments associated with those US Treasury securities which represent the public debt of the United States. As part of the same crisis, there is now a threat to over 70 million checks which your government issues every month — payments which go to recipients of Social Security, to providers of health services under the Medicare program, to Medicaid beneficiaries, to our active-duty and retired military personnel, to our defense contractors, to our government employees — in short, to everyone who receives a benefit from the federal government, who works for the federal government, or who does business with the federal government.
Default Means National Bankruptcy and World Chaos
A default of this kind means nothing less than national bankruptcy. Default is the essence of chaos and anarchy. It is a peril which we have successfully avoided during our entire existence as a nation, through a terrible civil war and the two world wars of the past century.
The United States dollar continues to play the role of the world reserve currency. This means that the central banks on every continent have chosen to maintain large portions of their reserves in the form of US Treasury securities. This role has been slightly diminished in recent years, but it is substantially intact. For the US government to default on payments through the US Treasury would therefore provoke a radical devaluation of the central bank reserves of the entire globe, wiping out some central banks and leaving others critically weakened. This might lead to massive dumping of US Treasury securities, leading to a general world panic to which no asset class would remain immune. We might see a dramatic decline of the dollar. This would represent the disintegration of the current world financial system, and a breakdown crisis of economic activity of unthinkable proportions. This might happen immediately, or it might require months or even years to explode in its full fury. In any case, it would put the United States on the road to national decline.
If you recall how financial markets seized up and ceased to function in the terrible days of September and October 2008, you have some inkling of the kind of catastrophic market climate that would be unleashed by the national bankruptcy of the United States. Borrowing, credit, mortgages, car financing, credit cards, and the like would not just require astronomical interest rates; many kinds of lending would disappear altogether. Millions more jobs would be lost.
The Public Credit is an Asset for All Americans and for the World
The United States Treasury securities market, with its $1 trillion per day of turnover, represents a unique national asset for our country. It is a signal achievement of the American System of Political Economy founded by Alexander Hamilton. It is the broadest, deepest, and most liquid market in the world. It is capable of absorbing trillions of dollars of securities and turning them into cash within a few hours – a capability unique on this planet. Despite how indignant we all are about the abuses of Wall Street, it would be extremely unwise to permit the Treasury securities market to be wrecked by ideological fanatics. All the more so since the Treasury market is unique in the world, and its extinction would leave no currency whatsoever in a position to function as the reserve medium of the world. This would have terrible implications for world trade and investment.
In short, our Treasury securities are the bedrock of all economic activity in this planet, and the common interest of humanity is well served by avoiding their chaotic insolvency.
The “Tea Party Caucus”: Right-wing Anarchists Funded by Malefactors of Great Wealth
Why, many Americans may wonder, should this crisis exist today? Here it is useless to talk in euphemisms in order to appear conciliatory; it is now necessary to call things by their names. As a result of the current world economic and financial depression which began in 2007-2008, the extreme right wing of the Republican Party, now calling itself the Tea Party, has been energized and revitalized. They have also begun to receive large amounts of political funding, including from a sinister individual who is reported to be the richest man in New York City. These are the malefactors of great wealth about whom presidents of both parties have been warning you for over a century. The goal of these opulent backers of the so-called Tea Party is to eliminate taxation and regulation upon themselves and their private business interests, many of which are in direct conflict with the public good. The impact of this Tea Party on public opinion has been magnified out of all proportion by the collusion of corrupt media cartels; in reality, the supporters of the so-called Tea Party do not exceed about 15% of our population.
Neo-Feudalism
Thanks to the economic royalists who support them, a Tea Party contingent numbering almost 90 members has entered the House of Representatives. Many are political novices. Many of them sincerely believe in the strange and un-American foreign doctrines of the Austrian school, according to which government is an unnecessary evil which needs to be abolished. It is entirely proper to see them as a species of right wing anarchist. The market, by contrast, they fetishize as infallible, and deserving of unbridled free reign over all the human affairs. They want a market without a government, something which has not existed in human affairs since the transition from the Old Stone Age to the Neolithic age, when the state emerged. The free market with no role whatsoever for government went out with Alley Oop the cave man, and it is not likely to return.
And all too often, the market of which they speak turns out not to be free, but rather dominated by predatory cartels, monopolies, and oligopolies. They are devoted to the causes of deregulation, privatization, the abolition of trade unions, more privileges for the wealthy, and a race to the bottom among the states. The world for which they are striving resembles perhaps nothing so much as feudalism as seen in Europe after the fall of the Roman Empire – and, like that anarchic chaos, it can only be described as A New Dark Age.
Most especially, these right wing anarchists of the Tea Party hate the social safety net which incorporates the precious economic rights for which the struggles of the American people won recognition during the New Deal and the Great Society. I am referring of course to Social Security, Medicare, Medicaid, unemployment insurance, the Head Start Program, the WIC program of high-protein meals for expectant mothers and infants, and many more. I am also referring to the right to collective bargaining for wage earners in the public and private sectors alike, and other features of a humane modern society.
Their reasons for this view read like a catalogue of the seven deadly sins, with pride, greed, rage, and envy in the lead. To these we must add class hatred, and also racism, since many of them are obsessed with the idea that their taxes are being spent to help minority groups.
New Deal America Repudiates the Tea Party
The problem faced by the Tea Party Republicans is that two thirds to three quarters of the American people warmly support the social safety net created by the New Deal and the Great Society. A recent poll has also shown that fully 80% of Americans want tax rates on the super-rich to be increased. Despite so many years of radio ranting, venal professors, and merciless sloganeering by politicians, the American people continue to repudiate the ideological platform of the so-called Tea Party. There is no hope their program could ever get passed.
Out of their despair that their ideological goals could ever be met through the democratic process, these wealthy individuals and their anarchist following have evolved a diabolical strategy. Their strategy is extortion. It is an attempt to place the United States government under duress. It is an attempt to mutilate, alter, and denature our Constitution through unconstitutional means.
It is nothing short of an illegal coup d’etat.
The Tea Party cloaks themselves in public as the greatest admirers of the U.S. Constitution. But in one concrete instance after another, we find that the Tea Party is at war with the Constitution.
The Tea Party Hates the Constitution in Practice
Our Constitution speaks not once but twice about the general welfare. To the Tea Party, this is anathema, since they believe that government should serve the wealthy few.
In terms of the issue at hand, Article I, Section 8 of the Constitution specifies that the Congress shall have the power “To borrow money on the credit of the United States.”
This is once again anathema to the Tea Party. In such a fundamental provision as this, enacted in response to the bitter lessons of ungovernability taught by the Articles of Confederation interlude, the Tea Party faction sets itself above the wisdom of the founders. The Tea Party would rewrite this provision to read that the Congress shall NOT have the power to borrow money on the credit of the United States, and the framers be damned.
This is what they admit when they demand their so-called balanced budget amendment. Such an amendment would destroy the finely wrought mechanism of the separation of powers and its accompanying checks and balances, which have served us so well over the centuries. But it is also a subterfuge, since the Tea Party knows very well that this amendment has no chance of being approved by the Congress, nor by the states. Rather, it has included in their litany of cut, cap, and balance purely as a deal-breaker, to make absolutely sure that no possible settlement can be forthcoming in the time available. They are determined to make all negotiations fail.
The Tea Party Goal is to Bankrupt the United States
The goal of the Tea Party faction of Congress is nothing less than the national bankruptcy of the United States, procured by forcing our default on the contractual and legal obligations of this government. They regard default and bankruptcy as positive goods, and indeed as indispensable steps on the path to the free market utopia they fondly imagine. Their reasoning is that, once the United States has gone bankrupt, it will henceforth be either prohibitively expensive or totally impossible for the Treasury to sell its bonds on the world financial markets. Therefore, payments on Social Security, Medicare, Medicaid, and other programs will have to be cut – not by law, but by the brute force of having no money.
This they do in wartime, with some 160,000 troops in the field, many of them fighting determined enemies on the other side of the world.
They claim they want predictabilty to allow businesses to create jobs, yet they court the greatest chaos and instability our nation has ever faced in our financial affairs – insolvency.
These same Tea Party ideologues, still feigning a concern about the American people, have already sponsored legislation which would give foreign creditors — the Chinese, the Japanese, the Saudis, and others — top priority in payments made by the federal government, ahead of our military personnel. According to these bills, we can be sure that Americans whose lives depend on Social Security, Medicare, and Medicaid will be dead last when disbursements are made. We can perhaps now see the real dimensions of the sinister plan with which we are confronted. By driving this government into bankruptcy, the Tea Party hopes to roll back the Constitution by wrecking the Congressional ability to borrow money as a practical matter, while at the same time destroying the entitlement programs which the most extreme Republicans have hated since the time of Franklin D. Roosevelt.
And not just Tea Party fanatics endorse this strategy. Indeed, it has the sympathy of rich elitists of all political stripes, including the academic and foundation left, who welcome the effort to strip away the economic rights of the American people.
Default Spells Genocide Against the American People
This is a policy which threatens the very lives of millions of Americans. It raises the specter of genocide against our own people. And I have not become President of the United States to preside over genocide against Americans.
I am not motivated by any ambition for the aggrandizement of the powers of the presidency. I have negotiated in good faith for months. The other side has not. I have offered reasonable concessions. Indeed, I have waited until now, when the clock reads five minutes to twelve, constantly hoping that the legislative process in Congress would yield an acceptable result. But now, with the specter of national bankruptcy in full view, and no reasonable outcome forthcoming, it is my responsibility to act. Since I sit in the seat that belonged to Washington and Lincoln and Roosevelt, it is my hope that my actions may be worthy of their heritage.
In a Conflict Among Statutes, the Constitution Decides
I am faced first of all with a conflict among statutes passed by Congress. On the one hand there is the debt ceiling law, which states that the Total Public Debt Outstanding of the United States of America shall not exceed $14.294 trillion. Since our public debt reached that level on May 16, this statute could be interpreted as barring any further auctions of United States treasury bills, notes, and bonds. And if we cannot borrow money in this way, since our current income is inadequate to meet all our obligations, we are headed for default, bankruptcy, and, worst of all, social chaos.
But this is not the only statute in the US Code. There are also other statutes to which I must pay attention. All public expenditure of the United States government, as you know, is carried out by law — by a law called the federal budget, which specifies what amounts are to be spent and on what. Every expenditure has to go through the Congress not once but twice — it must be authorized, and then it must be appropriated, and each of these requires the consent of the two houses of Congress and the signature of the president. I am now confronted with a series of expenditures which the current Fiscal Year 2011 budget, passed by Congress and signed into law by me, requires me to make. This includes the entire vast array of social safety net, defense, transportation, health, regulation, inspection, government employment, and other activities which I outlined above. I am under legal compulsion to make these expenditures.
Concerning Treasury securities outstanding, each one of these is an explicit contract that the United States government will pay specific sums of interest and principal at specified dates. Respect from the sanctity of contracts also requires me to make every one of these payments, without exception.
This is therefore my situation: on the one hand, the debt ceiling forbids me to borrow. On the other hand, the federal budget and the implied contracts represented by entitlements and Treasury securities require me to pay. Since tax revenue, partly because of recent and misguided legislation, is not adequate to make all of these payments, something has to give.
It is obvious that, when two or more statutes conflict, we need to look to the Constitution itself for guidance as to which one will apply. Given the extraordinary attention which the Constitution gives the concept of the general welfare, this guiding principle needs always to be kept in mind. Beyond this, our founding document contains two especially relevant provisions. On the one hand, we find that it is Congress which has the power to borrow money. But on the other hand we also have the 14th amendment, section 4 which states:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In other words, this country is not allowed to default. Default is unconstitutional. Default is illegal. Default is a federal crime.
This is not an option which I can choose to exercise or ignore. It is not something I can invoke or not invoke. This is the Constitution talking. This provision binds me, and ought to bind the opposition in Congress, since they too have sworn to uphold the Constitution.
The Debt Ceiling is Unconstitutional and Must Be Disregarded
This provision places upon the President the responsibility to guarantee the timely payment of all United States debt obligations, regardless of attempts to the contrary that might come from other organs of government, including Congress or, for that matter, the courts. These words make me the ultimate guarantor of the solvency of the United States, especially under emergency conditions in which other branches of government have failed to do this. I am the last backstop. The buck stops here.
By contrast, the Constitution nowhere makes any reference to a debt limit. In fact, the first debt limit was instituted in 1917, less than a hundred years ago. Somehow we got through our first century and a quarter of national life, conquered the frontier, won the Civil War, and created the world’s greatest industrial power without any need for a debt ceiling.
In my considered judgment, and in the light of Amendment 14, Section 4, of the U.S. Constitution, a statutory debt ceiling is therefore unconstitutional. And all competent constitutional jurisprudence agrees that the president must not be bound by legislation which the courts are likely to find unconstitutional. This is all the more true in the present acute crisis.
Accordingly, I have issued an executive order directing the Secretary of the Treasury to resume Treasury auctions today, August 1, 2011, with a view to maintaining the uninterrupted ability of the United States to meet all of its financial obligations, budget and debt, foreign and domestic, without exception. The full faith and credit of our country will be maintained.
I cordially invite the Congress to approve and validate this decision ex post facto.
If your child is in Head Start, it will remain open. If you rely on Social Security, this means you will get your check. If your life depends on Medicare, you can rest assured that your doctors and hospitals will be paid on time so that they can continue their useful activity. If you are living in a nursing home and require Medicaid, those payments will also be available. If you are a member of the military, or a government employee of any kind, you will receive your salary on time. If you are a private firm doing business as a contractor with the government of the United States, you will be able to meet your payroll. If you are carrying out medical research or other scientific research funded by a US government grant, you can be assured that this support will not be interrupted. If you are a person or institution or government anywhere in the world who has purchased United States Treasury securities, you will be paid every penny, on time. If you want to buy a United States Savings Bond or cash one in, you can go ahead and do it.
Those intent on bankrupting the government of the United States and pitching our country into chaos may attempt to reverse this decision in the courts. I have directed the Solicitor General of the United States to prepare to refute their arguments. Since our constitutional position is strong, I have no doubt that we will prevail.
Some will say that the debt ceiling has been around for almost a century, and that so many precedents should not be overturned. That kind of thinking would leave us in bondage to judicial monstrosities like Plessy v. Ferguson, which validated racial segregation, or the infamous Dred Scott decision, which said that skin color was the basis for denying people rights given by God and natural law, and recognized by the Constitution. It will not be the first time we have fixed what turned out to be a terrible mistake.
Others in the House of Representatives bent on driving our nation into default have already announced their intention of impeaching me over this issue. I welcome their attack and the opportunity it will give to further clarify these great issues of the American public.
They will try to impeach me for what I am doing to save the public credit of the United States. In my view, I would truly deserve impeachment were I to refrain from taking this timely action. The President must take care that the laws be faithfully enforced, and this includes the federal budget and the commitments embodied in our entitlements programs and in the solvency of our Treasury securities.
I look forward to next year’s elections, which I expect will be largely fought over this issue and the larger questions which it raises.
Some have raised the question of the debt ratings agencies, and of their future evaluation of the United States public debt in the light of these events. I take this opportunity to announce that the Attorney General, the Department of Justice, and the FBI, acting under my direction, have initiated a comprehensive investigation of corruption and malfeasance which has been alleged against these ratings agencies in connection with their failure to provide timely warning to investors who had purchased certain toxic derivative securities in 2007-2008. We are also studying the legal means of depriving these ratings agencies of the extraordinary and quasi-governmental authority they exercise because of laws and regulations which limit certain forms of public and private investment to securities which have received favorable ratings from these agencies. To this end, we are cooperating with the authorities in Italy and other countries who have also undertaken aggressive investigations of the corruption of these ratings agencies.
The Department of Justice is also investigating reports that members of Congress have entered into criminal conspiracies with bankers and hedge fund operators for the purpose of selling Treasury securities short in the context of the current crisis, and linked this to the votes they cast. The Attorney General has promised to report on this issue at the earliest possible date.
For my part, I do not intend to sell America short. Historically, those who have bet against the United States have not prevailed, nor will they prevail today.
My great predecessor, Franklin D. Roosevelt, delivered his first inaugural address on a morning in March 1933 when every bank in our country had been forced to close its doors because of panic runs, and the economic heart of the nation had stopped beating. In the face of that emergency, the defiant rallying figure of FDR promised action with these words:
It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.
Roosevelt spoke these words at a time when a new Congress had failed for almost three months to do anything meaningful to fight the Great Depression and the banking panic which were ravaging the land in those years. Some at that time had concluded that our form of government was unworkable in a modern crisis, and they were looking abroad for new models of totalitarianism. We must always realize that any system of government which cannot solve the most urgent, life and death problems of the everyday life of the people is not long for this world. It risks being swept aside. If democracy brings chaos, that may be the end of democracy. In this sense, the future our democratic representative government depends on our solvency.
It is in this spirit that I am dealing with the current crisis. I remind you all that, while avoiding national bankruptcy and default in the short-term is absolutely indispensable, this will not by itself solve the majority of our economic problems. The world will remain gripped by an economic and financial depression of incalculable proportions. We will still have some 30 million unemployed in our country. We will still witness American families thrown on the street by fraudulent foreclosures. We will require a comprehensive economic recovery program, supplemented by significant domestic reforms, and capped by a new world monetary system, to put the current world depression behind us.
It is, however, my hope that, by rebuffing those political forces seeking to drive our country into bankruptcy and chaos, we have gained the time necessary to address these issues of economic recovery and financial reform free from the climate of blackmail, extortion, and shakedown.
In the meantime, America will be open for business, today, tomorrow, and every day. Equally important, we can be confident in the ability of our constitutional system to protect the general welfare and the public interest from the machinations of small cliques of fanatics, wealthy though they may be.
I ask for your support. Thank you.
What a Real President Would Do
August 1, 2011
Webster G. Tarpley, Ph.D.
TARPLEY.net
http://tarpley.net/2011/07/27/a-real-president-would-call-default-unconstitutional
My fellow Americans:
I speak to you tonight in an hour of grave danger to our nation. As you know, within the next few hours our government is in danger of failing to make payments of interest and principal which the United States Treasury has contracted to make. In technical terms, we are not far away from beginning to default on payments associated with those US Treasury securities which represent the public debt of the United States. As part of the same crisis, there is now a threat to over 70 million checks which your government issues every month — payments which go to recipients of Social Security, to providers of health services under the Medicare program, to Medicaid beneficiaries, to our active-duty and retired military personnel, to our defense contractors, to our government employees — in short, to everyone who receives a benefit from the federal government, who works for the federal government, or who does business with the federal government.
Default Means National Bankruptcy and World Chaos
A default of this kind means nothing less than national bankruptcy. Default is the essence of chaos and anarchy. It is a peril which we have successfully avoided during our entire existence as a nation, through a terrible civil war and the two world wars of the past century.
The United States dollar continues to play the role of the world reserve currency. This means that the central banks on every continent have chosen to maintain large portions of their reserves in the form of US Treasury securities. This role has been slightly diminished in recent years, but it is substantially intact. For the US government to default on payments through the US Treasury would therefore provoke a radical devaluation of the central bank reserves of the entire globe, wiping out some central banks and leaving others critically weakened. This might lead to massive dumping of US Treasury securities, leading to a general world panic to which no asset class would remain immune. We might see a dramatic decline of the dollar. This would represent the disintegration of the current world financial system, and a breakdown crisis of economic activity of unthinkable proportions. This might happen immediately, or it might require months or even years to explode in its full fury. In any case, it would put the United States on the road to national decline.
If you recall how financial markets seized up and ceased to function in the terrible days of September and October 2008, you have some inkling of the kind of catastrophic market climate that would be unleashed by the national bankruptcy of the United States. Borrowing, credit, mortgages, car financing, credit cards, and the like would not just require astronomical interest rates; many kinds of lending would disappear altogether. Millions more jobs would be lost.
The Public Credit is an Asset for All Americans and for the World
The United States Treasury securities market, with its $1 trillion per day of turnover, represents a unique national asset for our country. It is a signal achievement of the American System of Political Economy founded by Alexander Hamilton. It is the broadest, deepest, and most liquid market in the world. It is capable of absorbing trillions of dollars of securities and turning them into cash within a few hours – a capability unique on this planet. Despite how indignant we all are about the abuses of Wall Street, it would be extremely unwise to permit the Treasury securities market to be wrecked by ideological fanatics. All the more so since the Treasury market is unique in the world, and its extinction would leave no currency whatsoever in a position to function as the reserve medium of the world. This would have terrible implications for world trade and investment.
In short, our Treasury securities are the bedrock of all economic activity in this planet, and the common interest of humanity is well served by avoiding their chaotic insolvency.
The “Tea Party Caucus”: Right-wing Anarchists Funded by Malefactors of Great Wealth
Why, many Americans may wonder, should this crisis exist today? Here it is useless to talk in euphemisms in order to appear conciliatory; it is now necessary to call things by their names. As a result of the current world economic and financial depression which began in 2007-2008, the extreme right wing of the Republican Party, now calling itself the Tea Party, has been energized and revitalized. They have also begun to receive large amounts of political funding, including from a sinister individual who is reported to be the richest man in New York City. These are the malefactors of great wealth about whom presidents of both parties have been warning you for over a century. The goal of these opulent backers of the so-called Tea Party is to eliminate taxation and regulation upon themselves and their private business interests, many of which are in direct conflict with the public good. The impact of this Tea Party on public opinion has been magnified out of all proportion by the collusion of corrupt media cartels; in reality, the supporters of the so-called Tea Party do not exceed about 15% of our population.
Neo-Feudalism
Thanks to the economic royalists who support them, a Tea Party contingent numbering almost 90 members has entered the House of Representatives. Many are political novices. Many of them sincerely believe in the strange and un-American foreign doctrines of the Austrian school, according to which government is an unnecessary evil which needs to be abolished. It is entirely proper to see them as a species of right wing anarchist. The market, by contrast, they fetishize as infallible, and deserving of unbridled free reign over all the human affairs. They want a market without a government, something which has not existed in human affairs since the transition from the Old Stone Age to the Neolithic age, when the state emerged. The free market with no role whatsoever for government went out with Alley Oop the cave man, and it is not likely to return.
And all too often, the market of which they speak turns out not to be free, but rather dominated by predatory cartels, monopolies, and oligopolies. They are devoted to the causes of deregulation, privatization, the abolition of trade unions, more privileges for the wealthy, and a race to the bottom among the states. The world for which they are striving resembles perhaps nothing so much as feudalism as seen in Europe after the fall of the Roman Empire – and, like that anarchic chaos, it can only be described as A New Dark Age.
Most especially, these right wing anarchists of the Tea Party hate the social safety net which incorporates the precious economic rights for which the struggles of the American people won recognition during the New Deal and the Great Society. I am referring of course to Social Security, Medicare, Medicaid, unemployment insurance, the Head Start Program, the WIC program of high-protein meals for expectant mothers and infants, and many more. I am also referring to the right to collective bargaining for wage earners in the public and private sectors alike, and other features of a humane modern society.
Their reasons for this view read like a catalogue of the seven deadly sins, with pride, greed, rage, and envy in the lead. To these we must add class hatred, and also racism, since many of them are obsessed with the idea that their taxes are being spent to help minority groups.
New Deal America Repudiates the Tea Party
The problem faced by the Tea Party Republicans is that two thirds to three quarters of the American people warmly support the social safety net created by the New Deal and the Great Society. A recent poll has also shown that fully 80% of Americans want tax rates on the super-rich to be increased. Despite so many years of radio ranting, venal professors, and merciless sloganeering by politicians, the American people continue to repudiate the ideological platform of the so-called Tea Party. There is no hope their program could ever get passed.
Out of their despair that their ideological goals could ever be met through the democratic process, these wealthy individuals and their anarchist following have evolved a diabolical strategy. Their strategy is extortion. It is an attempt to place the United States government under duress. It is an attempt to mutilate, alter, and denature our Constitution through unconstitutional means.
It is nothing short of an illegal coup d’etat.
The Tea Party cloaks themselves in public as the greatest admirers of the U.S. Constitution. But in one concrete instance after another, we find that the Tea Party is at war with the Constitution.
The Tea Party Hates the Constitution in Practice
Our Constitution speaks not once but twice about the general welfare. To the Tea Party, this is anathema, since they believe that government should serve the wealthy few.
In terms of the issue at hand, Article I, Section 8 of the Constitution specifies that the Congress shall have the power “To borrow money on the credit of the United States.”
This is once again anathema to the Tea Party. In such a fundamental provision as this, enacted in response to the bitter lessons of ungovernability taught by the Articles of Confederation interlude, the Tea Party faction sets itself above the wisdom of the founders. The Tea Party would rewrite this provision to read that the Congress shall NOT have the power to borrow money on the credit of the United States, and the framers be damned.
This is what they admit when they demand their so-called balanced budget amendment. Such an amendment would destroy the finely wrought mechanism of the separation of powers and its accompanying checks and balances, which have served us so well over the centuries. But it is also a subterfuge, since the Tea Party knows very well that this amendment has no chance of being approved by the Congress, nor by the states. Rather, it has included in their litany of cut, cap, and balance purely as a deal-breaker, to make absolutely sure that no possible settlement can be forthcoming in the time available. They are determined to make all negotiations fail.
The Tea Party Goal is to Bankrupt the United States
The goal of the Tea Party faction of Congress is nothing less than the national bankruptcy of the United States, procured by forcing our default on the contractual and legal obligations of this government. They regard default and bankruptcy as positive goods, and indeed as indispensable steps on the path to the free market utopia they fondly imagine. Their reasoning is that, once the United States has gone bankrupt, it will henceforth be either prohibitively expensive or totally impossible for the Treasury to sell its bonds on the world financial markets. Therefore, payments on Social Security, Medicare, Medicaid, and other programs will have to be cut – not by law, but by the brute force of having no money.
This they do in wartime, with some 160,000 troops in the field, many of them fighting determined enemies on the other side of the world.
They claim they want predictabilty to allow businesses to create jobs, yet they court the greatest chaos and instability our nation has ever faced in our financial affairs – insolvency.
These same Tea Party ideologues, still feigning a concern about the American people, have already sponsored legislation which would give foreign creditors — the Chinese, the Japanese, the Saudis, and others — top priority in payments made by the federal government, ahead of our military personnel. According to these bills, we can be sure that Americans whose lives depend on Social Security, Medicare, and Medicaid will be dead last when disbursements are made. We can perhaps now see the real dimensions of the sinister plan with which we are confronted. By driving this government into bankruptcy, the Tea Party hopes to roll back the Constitution by wrecking the Congressional ability to borrow money as a practical matter, while at the same time destroying the entitlement programs which the most extreme Republicans have hated since the time of Franklin D. Roosevelt.
And not just Tea Party fanatics endorse this strategy. Indeed, it has the sympathy of rich elitists of all political stripes, including the academic and foundation left, who welcome the effort to strip away the economic rights of the American people.
Default Spells Genocide Against the American People
This is a policy which threatens the very lives of millions of Americans. It raises the specter of genocide against our own people. And I have not become President of the United States to preside over genocide against Americans.
I am not motivated by any ambition for the aggrandizement of the powers of the presidency. I have negotiated in good faith for months. The other side has not. I have offered reasonable concessions. Indeed, I have waited until now, when the clock reads five minutes to twelve, constantly hoping that the legislative process in Congress would yield an acceptable result. But now, with the specter of national bankruptcy in full view, and no reasonable outcome forthcoming, it is my responsibility to act. Since I sit in the seat that belonged to Washington and Lincoln and Roosevelt, it is my hope that my actions may be worthy of their heritage.
In a Conflict Among Statutes, the Constitution Decides
I am faced first of all with a conflict among statutes passed by Congress. On the one hand there is the debt ceiling law, which states that the Total Public Debt Outstanding of the United States of America shall not exceed $14.294 trillion. Since our public debt reached that level on May 16, this statute could be interpreted as barring any further auctions of United States treasury bills, notes, and bonds. And if we cannot borrow money in this way, since our current income is inadequate to meet all our obligations, we are headed for default, bankruptcy, and, worst of all, social chaos.
But this is not the only statute in the US Code. There are also other statutes to which I must pay attention. All public expenditure of the United States government, as you know, is carried out by law — by a law called the federal budget, which specifies what amounts are to be spent and on what. Every expenditure has to go through the Congress not once but twice — it must be authorized, and then it must be appropriated, and each of these requires the consent of the two houses of Congress and the signature of the president. I am now confronted with a series of expenditures which the current Fiscal Year 2011 budget, passed by Congress and signed into law by me, requires me to make. This includes the entire vast array of social safety net, defense, transportation, health, regulation, inspection, government employment, and other activities which I outlined above. I am under legal compulsion to make these expenditures.
Concerning Treasury securities outstanding, each one of these is an explicit contract that the United States government will pay specific sums of interest and principal at specified dates. Respect from the sanctity of contracts also requires me to make every one of these payments, without exception.
This is therefore my situation: on the one hand, the debt ceiling forbids me to borrow. On the other hand, the federal budget and the implied contracts represented by entitlements and Treasury securities require me to pay. Since tax revenue, partly because of recent and misguided legislation, is not adequate to make all of these payments, something has to give.
It is obvious that, when two or more statutes conflict, we need to look to the Constitution itself for guidance as to which one will apply. Given the extraordinary attention which the Constitution gives the concept of the general welfare, this guiding principle needs always to be kept in mind. Beyond this, our founding document contains two especially relevant provisions. On the one hand, we find that it is Congress which has the power to borrow money. But on the other hand we also have the 14th amendment, section 4 which states:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In other words, this country is not allowed to default. Default is unconstitutional. Default is illegal. Default is a federal crime.
This is not an option which I can choose to exercise or ignore. It is not something I can invoke or not invoke. This is the Constitution talking. This provision binds me, and ought to bind the opposition in Congress, since they too have sworn to uphold the Constitution.
The Debt Ceiling is Unconstitutional and Must Be Disregarded
This provision places upon the President the responsibility to guarantee the timely payment of all United States debt obligations, regardless of attempts to the contrary that might come from other organs of government, including Congress or, for that matter, the courts. These words make me the ultimate guarantor of the solvency of the United States, especially under emergency conditions in which other branches of government have failed to do this. I am the last backstop. The buck stops here.
By contrast, the Constitution nowhere makes any reference to a debt limit. In fact, the first debt limit was instituted in 1917, less than a hundred years ago. Somehow we got through our first century and a quarter of national life, conquered the frontier, won the Civil War, and created the world’s greatest industrial power without any need for a debt ceiling.
In my considered judgment, and in the light of Amendment 14, Section 4, of the U.S. Constitution, a statutory debt ceiling is therefore unconstitutional. And all competent constitutional jurisprudence agrees that the president must not be bound by legislation which the courts are likely to find unconstitutional. This is all the more true in the present acute crisis.
Accordingly, I have issued an executive order directing the Secretary of the Treasury to resume Treasury auctions today, August 1, 2011, with a view to maintaining the uninterrupted ability of the United States to meet all of its financial obligations, budget and debt, foreign and domestic, without exception. The full faith and credit of our country will be maintained.
I cordially invite the Congress to approve and validate this decision ex post facto.
If your child is in Head Start, it will remain open. If you rely on Social Security, this means you will get your check. If your life depends on Medicare, you can rest assured that your doctors and hospitals will be paid on time so that they can continue their useful activity. If you are living in a nursing home and require Medicaid, those payments will also be available. If you are a member of the military, or a government employee of any kind, you will receive your salary on time. If you are a private firm doing business as a contractor with the government of the United States, you will be able to meet your payroll. If you are carrying out medical research or other scientific research funded by a US government grant, you can be assured that this support will not be interrupted. If you are a person or institution or government anywhere in the world who has purchased United States Treasury securities, you will be paid every penny, on time. If you want to buy a United States Savings Bond or cash one in, you can go ahead and do it.
Those intent on bankrupting the government of the United States and pitching our country into chaos may attempt to reverse this decision in the courts. I have directed the Solicitor General of the United States to prepare to refute their arguments. Since our constitutional position is strong, I have no doubt that we will prevail.
Some will say that the debt ceiling has been around for almost a century, and that so many precedents should not be overturned. That kind of thinking would leave us in bondage to judicial monstrosities like Plessy v. Ferguson, which validated racial segregation, or the infamous Dred Scott decision, which said that skin color was the basis for denying people rights given by God and natural law, and recognized by the Constitution. It will not be the first time we have fixed what turned out to be a terrible mistake.
Others in the House of Representatives bent on driving our nation into default have already announced their intention of impeaching me over this issue. I welcome their attack and the opportunity it will give to further clarify these great issues of the American public.
They will try to impeach me for what I am doing to save the public credit of the United States. In my view, I would truly deserve impeachment were I to refrain from taking this timely action. The President must take care that the laws be faithfully enforced, and this includes the federal budget and the commitments embodied in our entitlements programs and in the solvency of our Treasury securities.
I look forward to next year’s elections, which I expect will be largely fought over this issue and the larger questions which it raises.
Some have raised the question of the debt ratings agencies, and of their future evaluation of the United States public debt in the light of these events. I take this opportunity to announce that the Attorney General, the Department of Justice, and the FBI, acting under my direction, have initiated a comprehensive investigation of corruption and malfeasance which has been alleged against these ratings agencies in connection with their failure to provide timely warning to investors who had purchased certain toxic derivative securities in 2007-2008. We are also studying the legal means of depriving these ratings agencies of the extraordinary and quasi-governmental authority they exercise because of laws and regulations which limit certain forms of public and private investment to securities which have received favorable ratings from these agencies. To this end, we are cooperating with the authorities in Italy and other countries who have also undertaken aggressive investigations of the corruption of these ratings agencies.
The Department of Justice is also investigating reports that members of Congress have entered into criminal conspiracies with bankers and hedge fund operators for the purpose of selling Treasury securities short in the context of the current crisis, and linked this to the votes they cast. The Attorney General has promised to report on this issue at the earliest possible date.
For my part, I do not intend to sell America short. Historically, those who have bet against the United States have not prevailed, nor will they prevail today.
My great predecessor, Franklin D. Roosevelt, delivered his first inaugural address on a morning in March 1933 when every bank in our country had been forced to close its doors because of panic runs, and the economic heart of the nation had stopped beating. In the face of that emergency, the defiant rallying figure of FDR promised action with these words:
It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.
Roosevelt spoke these words at a time when a new Congress had failed for almost three months to do anything meaningful to fight the Great Depression and the banking panic which were ravaging the land in those years. Some at that time had concluded that our form of government was unworkable in a modern crisis, and they were looking abroad for new models of totalitarianism. We must always realize that any system of government which cannot solve the most urgent, life and death problems of the everyday life of the people is not long for this world. It risks being swept aside. If democracy brings chaos, that may be the end of democracy. In this sense, the future our democratic representative government depends on our solvency.
It is in this spirit that I am dealing with the current crisis. I remind you all that, while avoiding national bankruptcy and default in the short-term is absolutely indispensable, this will not by itself solve the majority of our economic problems. The world will remain gripped by an economic and financial depression of incalculable proportions. We will still have some 30 million unemployed in our country. We will still witness American families thrown on the street by fraudulent foreclosures. We will require a comprehensive economic recovery program, supplemented by significant domestic reforms, and capped by a new world monetary system, to put the current world depression behind us.
It is, however, my hope that, by rebuffing those political forces seeking to drive our country into bankruptcy and chaos, we have gained the time necessary to address these issues of economic recovery and financial reform free from the climate of blackmail, extortion, and shakedown.
In the meantime, America will be open for business, today, tomorrow, and every day. Equally important, we can be confident in the ability of our constitutional system to protect the general welfare and the public interest from the machinations of small cliques of fanatics, wealthy though they may be.
I ask for your support. Thank you.
Wednesday, July 27, 2011
Obama’s “Big Deal”
Wallowing with Pigs in Search of a Grand Center-Right Coalition
http://blackagendareport.com/content/obama%E2%80%99s-%E2%80%9Cbig-deal%E2%80%9D-wallowing-pigs-search-grand-center-right-coalition
Barack Obama is salivating at the prospect of concluding his Big Deal with the Republicans, the one that will move the center robustly – even transformatively – to the Right, where this president really lives. The debt-limit deadline is Obama’s big chance to panic a significant part of the Democratic Party into joining in the rape of Social Security, Medicare and Medicaid. “When the debt-limit showdown arrives, pray for gridlock, which would at least mean there is still resistance to Republican extortion.”
Wed, 07/13/2011
BAR executive editor Glen Ford
“Obama’s Big Deal is actually the coup de grace for Franklin Roosevelt’s New Deal and Lyndon Johnson's Great Society.”
President Obama says he’s determined to make the “big deal” with the Republicans – not like the little, piddling deals he has been cutting all along to benefit the corporate classes, but the BIG deal, the grand consensus he believes he was born to forge with the GOP. Although it’s true that it will take a whopper of a deal to outclass the bipartisan joint venture that transferred $14 trillion to Wall Street, the vast bulk of it on Obama’s watch, the First Black President is nothing if not ambitious. Obama’s Big Deal is actually the coup de grace for Franklin Roosevelt’s New Deal and Lyndon Johnson's Great Society – relics, like Black activism, standing in the way of a post-everything world.
Obama has been savoring the big moment since last November, when the Republicans seized control of the House and sidelined the president’s main opposition: the left wing of his own party. Delusional Obamites, especially Blacks, are fond of saying their guy really wants Democrats and activists to force him to take a more progressive path – to “make him do it.” It’s actually the other way around. Obama depends strategically on Republicans to “make him do it” – to push him inexorably rightward with their brinksmanship and constant threats of gridlock. It is an intricate and intimate dance, with Obama and the GOP moving and grooving to the same music. Obama often gets so caught up, he mouths the Republicans’ lyrics.
“The reason to do Social Security” – by “do,” Obama means “cut” – “is to strengthen Social Security to make sure that those benefits are there for seniors in the out-years,” says Obama, an exact echo of the apocalypse-soon Social Security scare propaganda perfected over the years by the GOP. Obama has been promising to “do” Social Security, Medicare and Medicaid since just before he was sworn into office in January, 2009, when he announced that these entitlements would be “on the table” in his administration. His deficit reduction commission last year did indeed put the programs on the operating table, with Obama’s corporate surgeons tracing dotted lines around the organs to be excised under the irresistible imperatives of austerity – the Republicans’ copyrighted anthem.
“Obama depends strategically on Republicans to push him inexorably rightward with their brinksmanship and constant threats of gridlock.”
Last November 3, I wrote: “The best outcome that could result from Tuesday’s Democratic debacle is that the Republicans overreach and, in their white nationalist triumphalism, make it impossible for President Obama and congressional Democrats to reach an accommodation with rampaging reaction and racism.” In other words, when the debt-limit showdown arrives, pray for gridlock, which would at least mean there is still resistance to Republican extortion.
The showdown is nigh, although Obama is squeezing every Democratic arm and groin in reach to ensure that he and the Republicans are able to walk down the dusty street arm-in-arm at high noon, so that the outcome can be billed as a grand consensus, a Big Deal for Obama. This requires that he gather Democratic accomplices in the gang rape of entitlements. “So we might as well do it now,” says Obama, while people are panicked by the prospect of a technical U.S. “default.” “Pull off the Band-Aid, eat our peas,” he commands, as if the death blow to the last vestiges of the New Deal and the Great Society is just a short, sharp pain, after which the boo-boo will heal just fine.
The real Obama is a cold, cynical bastard. He is not a wimp, but rather, has plenty of spine to face down and brow-beat the remaining defenders of the social safety net in his own Democratic Party, who have always been the most immediate dangers to his grand center-right coalition. But it must be done quickly, quickly, quickly, to capture the debt-limit panic opportunity.
“He harms poor people because he is contemptuous of them, just like his Wall Street friends and patrons.”
Half or more of the Congressional Black Caucus will do whatever the White House asks of it, will sacrifice anything and everything dear to African American interests in order to preserve this particular Black family in the executive mansion for as long as possible. But many of Obama’s white groupies are facing the fact that they backed a corporate Trojan Horse. Paul Krugman, the columnist for the New York Times, should not have needed a Nobel Prize in economics to realize that Obama “basically shares the GOP’s diagnosis of what ails our economy and what should be done to fix it,” or that the president’s eagerness to gut Social Security, Medicare and Medicaid “is something Mr. Obama and those he listens to apparently want for its own sake.”
In other words, this guy works for the other side because that’s where his soul is – if he has one. He advocates policies that serve corporate pigs because he’s one of them. He harms poor people because he is contemptuous of them, just like his Wall Street friends and patrons. His administration is negligent or hostile to Black aspirations for the same reasons as his white business buddies, with whom he shares a worldview. He is every bit as much a war criminal as Bush, and as morally debased.
The last thing we need is to allow this guy to conclude his long-sought Big Deal with the GOP under cover of a debt-limit crisis.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
http://blackagendareport.com/content/obama%E2%80%99s-%E2%80%9Cbig-deal%E2%80%9D-wallowing-pigs-search-grand-center-right-coalition
Barack Obama is salivating at the prospect of concluding his Big Deal with the Republicans, the one that will move the center robustly – even transformatively – to the Right, where this president really lives. The debt-limit deadline is Obama’s big chance to panic a significant part of the Democratic Party into joining in the rape of Social Security, Medicare and Medicaid. “When the debt-limit showdown arrives, pray for gridlock, which would at least mean there is still resistance to Republican extortion.”
Wed, 07/13/2011
BAR executive editor Glen Ford
“Obama’s Big Deal is actually the coup de grace for Franklin Roosevelt’s New Deal and Lyndon Johnson's Great Society.”
President Obama says he’s determined to make the “big deal” with the Republicans – not like the little, piddling deals he has been cutting all along to benefit the corporate classes, but the BIG deal, the grand consensus he believes he was born to forge with the GOP. Although it’s true that it will take a whopper of a deal to outclass the bipartisan joint venture that transferred $14 trillion to Wall Street, the vast bulk of it on Obama’s watch, the First Black President is nothing if not ambitious. Obama’s Big Deal is actually the coup de grace for Franklin Roosevelt’s New Deal and Lyndon Johnson's Great Society – relics, like Black activism, standing in the way of a post-everything world.
Obama has been savoring the big moment since last November, when the Republicans seized control of the House and sidelined the president’s main opposition: the left wing of his own party. Delusional Obamites, especially Blacks, are fond of saying their guy really wants Democrats and activists to force him to take a more progressive path – to “make him do it.” It’s actually the other way around. Obama depends strategically on Republicans to “make him do it” – to push him inexorably rightward with their brinksmanship and constant threats of gridlock. It is an intricate and intimate dance, with Obama and the GOP moving and grooving to the same music. Obama often gets so caught up, he mouths the Republicans’ lyrics.
“The reason to do Social Security” – by “do,” Obama means “cut” – “is to strengthen Social Security to make sure that those benefits are there for seniors in the out-years,” says Obama, an exact echo of the apocalypse-soon Social Security scare propaganda perfected over the years by the GOP. Obama has been promising to “do” Social Security, Medicare and Medicaid since just before he was sworn into office in January, 2009, when he announced that these entitlements would be “on the table” in his administration. His deficit reduction commission last year did indeed put the programs on the operating table, with Obama’s corporate surgeons tracing dotted lines around the organs to be excised under the irresistible imperatives of austerity – the Republicans’ copyrighted anthem.
“Obama depends strategically on Republicans to push him inexorably rightward with their brinksmanship and constant threats of gridlock.”
Last November 3, I wrote: “The best outcome that could result from Tuesday’s Democratic debacle is that the Republicans overreach and, in their white nationalist triumphalism, make it impossible for President Obama and congressional Democrats to reach an accommodation with rampaging reaction and racism.” In other words, when the debt-limit showdown arrives, pray for gridlock, which would at least mean there is still resistance to Republican extortion.
The showdown is nigh, although Obama is squeezing every Democratic arm and groin in reach to ensure that he and the Republicans are able to walk down the dusty street arm-in-arm at high noon, so that the outcome can be billed as a grand consensus, a Big Deal for Obama. This requires that he gather Democratic accomplices in the gang rape of entitlements. “So we might as well do it now,” says Obama, while people are panicked by the prospect of a technical U.S. “default.” “Pull off the Band-Aid, eat our peas,” he commands, as if the death blow to the last vestiges of the New Deal and the Great Society is just a short, sharp pain, after which the boo-boo will heal just fine.
The real Obama is a cold, cynical bastard. He is not a wimp, but rather, has plenty of spine to face down and brow-beat the remaining defenders of the social safety net in his own Democratic Party, who have always been the most immediate dangers to his grand center-right coalition. But it must be done quickly, quickly, quickly, to capture the debt-limit panic opportunity.
“He harms poor people because he is contemptuous of them, just like his Wall Street friends and patrons.”
Half or more of the Congressional Black Caucus will do whatever the White House asks of it, will sacrifice anything and everything dear to African American interests in order to preserve this particular Black family in the executive mansion for as long as possible. But many of Obama’s white groupies are facing the fact that they backed a corporate Trojan Horse. Paul Krugman, the columnist for the New York Times, should not have needed a Nobel Prize in economics to realize that Obama “basically shares the GOP’s diagnosis of what ails our economy and what should be done to fix it,” or that the president’s eagerness to gut Social Security, Medicare and Medicaid “is something Mr. Obama and those he listens to apparently want for its own sake.”
In other words, this guy works for the other side because that’s where his soul is – if he has one. He advocates policies that serve corporate pigs because he’s one of them. He harms poor people because he is contemptuous of them, just like his Wall Street friends and patrons. His administration is negligent or hostile to Black aspirations for the same reasons as his white business buddies, with whom he shares a worldview. He is every bit as much a war criminal as Bush, and as morally debased.
The last thing we need is to allow this guy to conclude his long-sought Big Deal with the GOP under cover of a debt-limit crisis.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
Wednesday, December 1, 2010
The Story Behind Obama’s Remarks on FDR
http://www.newdeal20.org/2010/11/18/the-story-behind-obamas-remarks-on-fdr-27539/
The Story Behind Obama’s Remarks on FDR
Thursday, 11/18/2010
Thomas Ferguson
What really went on in the first few months after FDR was elected?
“We didn’t actually, I think, do what Franklin Delano Roosevelt did, which was basically wait for six months until the thing had gotten so bad that it became an easier sell politically because we thought that was irresponsible. We had to act quickly.” - President Obama
Sometimes a chance remark trains a searchlight on aspects of the historical record that would otherwise be shrouded in Stygian blackness for a generation. So I think it was yesterday when in the Huffington Post, Leo J. Hindery, Jr. quoted from a transcript of President Obama’s remarks to a group of liberal bloggers who were querying his handling of the financial crisis.
Many readers responded in shocked disbelief: The President can’t mean what he said. He must have misspoken — he can’t really be claiming that Roosevelt sat on his hands, deliberately letting the Depression get worse and worse.
Perhaps it was just a slip. But in 2010, even slips can be revealing — and this one comes from a definite part of the political spectrum. The President was repeating a canard that goes back to the circle of die hards around President Herbert Hoover as he exited the White House in a cloud of bitterness in 1933. In recent years, as a vast campaign against the memory of the New Deal has gathered steam, such claims have gone mainstream. For example, take the carefully hedged version recently put forward by Amity Shlaes in her study of the New Deal, “The Forgotten Man“: “But Roosevelt was not interested in cooperation. We will never know all his motives, but it was clear that a crisis now could only strengthen his mandate for action come inauguration in March.”
We are unlikely ever to know for sure. But as President Obama took office, the Council on Foreign Relations was cranking up a remarkably one-sided conference purporting to be a “Second Look at the Great Depression and the New Deal.” Ms. Shlaes was a prominent participant, as was the Council’s co-chair, one Robert Rubin, whose myriad protégés thronged the Obama Treasury and economic councils.
Whether our highly intellectual president picked up the idea by reading it or hearing somebody else say it, it was, and is, in the air. And you can be sure that his words will now be rattling around for years to come and likely cited as proof of Franklin D. Roosevelt’s “irresponsibility.”
So it makes sense to look more closely at what really happened between Roosevelt and Hoover. This is not too easy to do, though one or two studies, notably Elliot Rosen’s “Hoover, Roosevelt, and the Brains Trust“, have written with insight on the subject.
I often joke that North America is the true “Dark Continent.” We probably know more about tribes in the Amazon jungle than we do about the real nature of power in the United States. Neither political science, nor history, nor economics do very well on this. If you want to understand what really happened between Hoover and Roosevelt between November 1932, when FDR won the election by a landslide, and March 1933, the old inauguration day before passage of the 20th Amendment to the Constitution, you need to comb through the papers of private bankers and the material in more easily available public sources such as the splendid Roosevelt Library in Hyde Park, New York. I have been engaged in this over more decades than I now care to admit. The bottom line is this: Hoover and a substantial bloc of New York bankers wanted Roosevelt to commit to staying on the gold standard and US participation in the upcoming London Economic Conference. These commitments would have meant continued austerity and completely destroyed any chance of fundamental reform — which was why the banks and Hoover were so insistent. In effect, they were hoping to continue with Hoover’s policies, if not Hoover himself.
Roosevelt exchanged some messages with them, but finally refused the whole package. He and his advisers correctly concluded that the idea was to suck them into a foolish set of commitments. FDR was simply not willing to make the kind of arrangements with bankers that President Obama was. That’s the heart of the matter.
Thomas Ferguson is Senior Fellow at the Roosevelt Institute and Professor of Political Science at the University of Massachusetts, Boston. He is the author of many books and articles, including Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems.
The Story Behind Obama’s Remarks on FDR
Thursday, 11/18/2010
Thomas Ferguson
What really went on in the first few months after FDR was elected?
“We didn’t actually, I think, do what Franklin Delano Roosevelt did, which was basically wait for six months until the thing had gotten so bad that it became an easier sell politically because we thought that was irresponsible. We had to act quickly.” - President Obama
Sometimes a chance remark trains a searchlight on aspects of the historical record that would otherwise be shrouded in Stygian blackness for a generation. So I think it was yesterday when in the Huffington Post, Leo J. Hindery, Jr. quoted from a transcript of President Obama’s remarks to a group of liberal bloggers who were querying his handling of the financial crisis.
Many readers responded in shocked disbelief: The President can’t mean what he said. He must have misspoken — he can’t really be claiming that Roosevelt sat on his hands, deliberately letting the Depression get worse and worse.
Perhaps it was just a slip. But in 2010, even slips can be revealing — and this one comes from a definite part of the political spectrum. The President was repeating a canard that goes back to the circle of die hards around President Herbert Hoover as he exited the White House in a cloud of bitterness in 1933. In recent years, as a vast campaign against the memory of the New Deal has gathered steam, such claims have gone mainstream. For example, take the carefully hedged version recently put forward by Amity Shlaes in her study of the New Deal, “The Forgotten Man“: “But Roosevelt was not interested in cooperation. We will never know all his motives, but it was clear that a crisis now could only strengthen his mandate for action come inauguration in March.”
We are unlikely ever to know for sure. But as President Obama took office, the Council on Foreign Relations was cranking up a remarkably one-sided conference purporting to be a “Second Look at the Great Depression and the New Deal.” Ms. Shlaes was a prominent participant, as was the Council’s co-chair, one Robert Rubin, whose myriad protégés thronged the Obama Treasury and economic councils.
Whether our highly intellectual president picked up the idea by reading it or hearing somebody else say it, it was, and is, in the air. And you can be sure that his words will now be rattling around for years to come and likely cited as proof of Franklin D. Roosevelt’s “irresponsibility.”
So it makes sense to look more closely at what really happened between Roosevelt and Hoover. This is not too easy to do, though one or two studies, notably Elliot Rosen’s “Hoover, Roosevelt, and the Brains Trust“, have written with insight on the subject.
I often joke that North America is the true “Dark Continent.” We probably know more about tribes in the Amazon jungle than we do about the real nature of power in the United States. Neither political science, nor history, nor economics do very well on this. If you want to understand what really happened between Hoover and Roosevelt between November 1932, when FDR won the election by a landslide, and March 1933, the old inauguration day before passage of the 20th Amendment to the Constitution, you need to comb through the papers of private bankers and the material in more easily available public sources such as the splendid Roosevelt Library in Hyde Park, New York. I have been engaged in this over more decades than I now care to admit. The bottom line is this: Hoover and a substantial bloc of New York bankers wanted Roosevelt to commit to staying on the gold standard and US participation in the upcoming London Economic Conference. These commitments would have meant continued austerity and completely destroyed any chance of fundamental reform — which was why the banks and Hoover were so insistent. In effect, they were hoping to continue with Hoover’s policies, if not Hoover himself.
Roosevelt exchanged some messages with them, but finally refused the whole package. He and his advisers correctly concluded that the idea was to suck them into a foolish set of commitments. FDR was simply not willing to make the kind of arrangements with bankers that President Obama was. That’s the heart of the matter.
Thomas Ferguson is Senior Fellow at the Roosevelt Institute and Professor of Political Science at the University of Massachusetts, Boston. He is the author of many books and articles, including Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems.
Saturday, November 13, 2010
10 Commandments to Revive Progressives After the November Defeat
http://www.huffingtonpost.com/rabbi-michael-lerner/10-commandments-to-revive_b_777961.html
Please forward this to everyone on your email lists to help them understand what the media obscures and the Dems don't understand about this election and what should happen next! Reading this will undermine despair and misdirected anger.
10 Commandments to Revive Progressives After the November Defeat
Rabbi Michael Lerner
Editor, Tikkun Magazine
1. Don't let the media frame this as a defeat of progressives. Had Obama embraced and fought for a progressive agenda, even if he had passed none of it, he would have entered the 2010 elections as the champion of the huge idealism of the American people that was elicited in 2008 and which would have led the Democrats to an electoral sweep in 2010. Being seen as fighting for the needs of ordinary people -- never letting anyone forget for a moment that he had inherited the mess that Republican and pro-corporate Democrats had created, positioning himself as the champion of those who resented the Wall Street and corporate interests -- his popularity would have grown; he could have won a much bigger victory for the Democrats in 2010, and that would have allowed him to actually legislate the policies of a progressive vision.
Had Obama refused to give more money to the banks and Wall Street unless equal or greater amounts were allocated for a visionary New Deal-style program for jobs and a freeze on mortgage foreclosures; had the Democrats refused to fund the escalation of war in Afghanistan; had they advocated for "Medicare for Everyone" instead of passing a plan that forced 30 million people to buy health care, but puts no serious restraints on the costs that insurance companies or pharmaceutical can charge; had Obama fought courageously for a carbon tax and ended the bargain taxes for the wealthy; had the Democrats insisted on stopping the harassment of immigrants; had the Obama Administration called for a national effort to overturn Citizens United, such as the ESRA -- Environmental and Social Responsibility Amendment to the U.S. Constitution--this election result would have been 100% different.
Had Obama set up public forums at which his supporters could give him public feedback and used the web creatively to allow his supporters to weigh in, and had Obama consistently spoken honestly to Americans about the constraints he was facing and who was putting pressure on him to do what -- there would have been no electoral defeat. It wasn't the progressive agenda that got defeated, it was the corporate-military accommodation of the Democrats and Obama who couldn't address popular outrage, not only at the economic problem, but at the way we had been manipulated in 2008; and the humiliation many felt at having allowed themselves to hope that someone in politics would fight for what they said they would fight for.
2. Challenge the elitism in the Left. Whenever you hear someone saying that it is the stupidity or reactionary nature of Americans that led to this defeat, remind them of why, absent any other voice that they would encounter expressing their outrage, it was rational for Americans to be attracted to the right-wing voices that were expressing that outrage (albeit with programs that will actually make things worse). When Americans thought they had a chance at progressive change, they voted for it in 2008 -- so they are neither stupid nor reactionary.
3. Challenge the religo-phobia in the Left. As long as the progressive world seems to be aligned with those who think that anyone who believes in God must be either stupid or at a lower stage of psychological development, we will get nowhere with an American public sincerely committed to a spiritual worldview. Allow yourself to explore the various spiritual progressive communities and movements that currently exist.
4. Do not demean those who disagree with us. Act as though every person, no matter what their politics, is created in the image of God or deserves fundamental respect, and only challenge their ideas and policies, but without attributing bad motives to them. And do not demean your own leaders -- stop the back-biting and competition that so often drives the most creative thinkers and activists out of the movement! Make the progressive world focus more on taking care of each other in its meetings and public events.
5. Take time every day to rejoice in the grandeur and awesome mystery of the universe -- and remember that the world is filled with loving people who would be there with us if they knew that we took love as seriously as we take critique. And try the ancient idea of a Sabbath--one day each week totally dedicated to celebrating the universe rather than acting upon it to change it (in my Jewish practice of the Sabbath--in Hebrew: Shabbat-- this includes: no work or thinking about work; no computer, no use of phones or cell phones or other technology; no shopping; no catching up on errands or housework or anything else you "have to do"--just 100% dedicated to fun, pleasure, thanksgiving, celebration of nature, and joy, nothiing else let in. Who has the time? Well, I do, and I also use the other six days to run a magazine, be a rabbi of a synagogue, chair the Network of Spiritual Progressives, and write books. Try Shabbat--it will give you a different perspective on reality, and make a progressive movement that can begin to speak to what is good in the religious world that the Right understands and the Left pooh-poohs to its detriment.
6. Build a unified political movement that calls for A New Bottom Line in American society so that instead of judging institutions, legislation or policies rational or productive only to the extent that they maximize money and power, they are judged by how much they maximize love and caring, kindness and generosity, ethical and ecological behavior and awareness, and the extent to which they tend to encourage us to be more caring toward each other and the earth and more able to respond to the universe with awe, wonder and radical amazement at the grandeur of being and consciousness and to experience true gratitude at being alive.
7. Build within the Democratic Party an opposition to the corporate-oriented leaders of that party, from Steny Hoyer and Nancy Pelosi to Diane Feinstein and Charles Schumner. Create a spiritual progressive caucus in every city. Run candidates in the primaries against that leadership -- follow the example of the Tea Party in their effort to move the Republican party to the Right.
8. Build outside the Democratic Party a separate political party that talks about love, kindness, generosity, and The Caring Society -- Caring for Each Other and Caring for the Earth. Let that party be based on the notion of A New Bottom Line as expressed in Commandment Six. Let this party talk explicitly about building a world that supports love and generosity! Stop speaking the language of the bureaucrats and the technical manipulators -- start speaking the language of the heart. End the time in which Democrats believe that progressives have "no place to go" and hence will support their corporate-oriented candidates no matter how far they are from progressive ideals.
If the Greens are able to transform themselves to a party that puts love and caring and the language of the heart at the forefront of its public identification, rather than a primarily technocratic, issues-debating, hard-nosed "realistic" from the left, policy-but-not-love-generating social force, then it could be this. But at the moment it is not, and it may be easier to create something new than to reform the inner workings and political culture of the Greens,
9. Create a United Progressive Fund so that all the different progressive organizations stop competing with each other for funding and instead allocate according to how many people belong to any given progressive organization.
10. Don't be realistic! The powers that be in the media, politics and economics define "realism." The most important changes in our country have come about because people were willing to fight for what everyone supposedly knew to be "unrealistic" (e.g. ending segregation, ending ten thousand years of unchallenged male supremacy and sexism, legitimating gay and lesbian lives, building an environmental movement, and the list goes on).
Realism is idolatry -- believing in God is believing that there is some Force in the Universe (some of us call it God) that makes possible the transformation from "that which is" to "that which could and should be." Support a Global Marshall Plan to once and for all end global poverty, hunger, homelessness, insufficient education or health care -- and pay for it through a Tobin tax on all international financial transactions of over $1 million. End the domination of money in politics and challenge the irresponsible environmental policies of corporations -- through the ESRA -- the Environmental and Social Responsibility Amendment to the U.S. Constitution.
Follow these ten commandments and the progressive forces will finally be able to reshape this country before it is too late. If you wish to help us do this, please join and help create a local chapter of the Network of Spiritual Progressives here. But if you like these ideas but don't want to work inside our organization, then bring these ideas into whatever organization you are already part of and insist that they debate these ideas, align with us in our campaign for the ESRA and for our proposed Global Marshall Plan, and insist that they develop the kind of broad strategy we are presenting here.
Please forward this to everyone on your email lists, paste it onto your Facebook page, put it up on any webpage or Yahoo group in which you are a part. It will help undermine despair!! Thanks.
Rabbi Michael Lerner is editor of Tikkun magazine, a Jewish and Interfaith Critique of Politics, Culture and Society; chair of the Network of Spiritual Progressives, and rabbi of Beyt Tikkun Synagogue.
--------------------------------------------------------------------------------
web: http://www.spiritualprogressives.org/
email: info@spiritualprogressives.org
--------------------------------------------------------------------------------
Copyright © 2010 Network of Spiritual Progressives®.
2342 Shattuck Avenue, #1200
Berkeley, CA 94704
510-644-1200 Fax 510-644-1255
Please forward this to everyone on your email lists to help them understand what the media obscures and the Dems don't understand about this election and what should happen next! Reading this will undermine despair and misdirected anger.
10 Commandments to Revive Progressives After the November Defeat
Rabbi Michael Lerner
Editor, Tikkun Magazine
1. Don't let the media frame this as a defeat of progressives. Had Obama embraced and fought for a progressive agenda, even if he had passed none of it, he would have entered the 2010 elections as the champion of the huge idealism of the American people that was elicited in 2008 and which would have led the Democrats to an electoral sweep in 2010. Being seen as fighting for the needs of ordinary people -- never letting anyone forget for a moment that he had inherited the mess that Republican and pro-corporate Democrats had created, positioning himself as the champion of those who resented the Wall Street and corporate interests -- his popularity would have grown; he could have won a much bigger victory for the Democrats in 2010, and that would have allowed him to actually legislate the policies of a progressive vision.
Had Obama refused to give more money to the banks and Wall Street unless equal or greater amounts were allocated for a visionary New Deal-style program for jobs and a freeze on mortgage foreclosures; had the Democrats refused to fund the escalation of war in Afghanistan; had they advocated for "Medicare for Everyone" instead of passing a plan that forced 30 million people to buy health care, but puts no serious restraints on the costs that insurance companies or pharmaceutical can charge; had Obama fought courageously for a carbon tax and ended the bargain taxes for the wealthy; had the Democrats insisted on stopping the harassment of immigrants; had the Obama Administration called for a national effort to overturn Citizens United, such as the ESRA -- Environmental and Social Responsibility Amendment to the U.S. Constitution--this election result would have been 100% different.
Had Obama set up public forums at which his supporters could give him public feedback and used the web creatively to allow his supporters to weigh in, and had Obama consistently spoken honestly to Americans about the constraints he was facing and who was putting pressure on him to do what -- there would have been no electoral defeat. It wasn't the progressive agenda that got defeated, it was the corporate-military accommodation of the Democrats and Obama who couldn't address popular outrage, not only at the economic problem, but at the way we had been manipulated in 2008; and the humiliation many felt at having allowed themselves to hope that someone in politics would fight for what they said they would fight for.
2. Challenge the elitism in the Left. Whenever you hear someone saying that it is the stupidity or reactionary nature of Americans that led to this defeat, remind them of why, absent any other voice that they would encounter expressing their outrage, it was rational for Americans to be attracted to the right-wing voices that were expressing that outrage (albeit with programs that will actually make things worse). When Americans thought they had a chance at progressive change, they voted for it in 2008 -- so they are neither stupid nor reactionary.
3. Challenge the religo-phobia in the Left. As long as the progressive world seems to be aligned with those who think that anyone who believes in God must be either stupid or at a lower stage of psychological development, we will get nowhere with an American public sincerely committed to a spiritual worldview. Allow yourself to explore the various spiritual progressive communities and movements that currently exist.
4. Do not demean those who disagree with us. Act as though every person, no matter what their politics, is created in the image of God or deserves fundamental respect, and only challenge their ideas and policies, but without attributing bad motives to them. And do not demean your own leaders -- stop the back-biting and competition that so often drives the most creative thinkers and activists out of the movement! Make the progressive world focus more on taking care of each other in its meetings and public events.
5. Take time every day to rejoice in the grandeur and awesome mystery of the universe -- and remember that the world is filled with loving people who would be there with us if they knew that we took love as seriously as we take critique. And try the ancient idea of a Sabbath--one day each week totally dedicated to celebrating the universe rather than acting upon it to change it (in my Jewish practice of the Sabbath--in Hebrew: Shabbat-- this includes: no work or thinking about work; no computer, no use of phones or cell phones or other technology; no shopping; no catching up on errands or housework or anything else you "have to do"--just 100% dedicated to fun, pleasure, thanksgiving, celebration of nature, and joy, nothiing else let in. Who has the time? Well, I do, and I also use the other six days to run a magazine, be a rabbi of a synagogue, chair the Network of Spiritual Progressives, and write books. Try Shabbat--it will give you a different perspective on reality, and make a progressive movement that can begin to speak to what is good in the religious world that the Right understands and the Left pooh-poohs to its detriment.
6. Build a unified political movement that calls for A New Bottom Line in American society so that instead of judging institutions, legislation or policies rational or productive only to the extent that they maximize money and power, they are judged by how much they maximize love and caring, kindness and generosity, ethical and ecological behavior and awareness, and the extent to which they tend to encourage us to be more caring toward each other and the earth and more able to respond to the universe with awe, wonder and radical amazement at the grandeur of being and consciousness and to experience true gratitude at being alive.
7. Build within the Democratic Party an opposition to the corporate-oriented leaders of that party, from Steny Hoyer and Nancy Pelosi to Diane Feinstein and Charles Schumner. Create a spiritual progressive caucus in every city. Run candidates in the primaries against that leadership -- follow the example of the Tea Party in their effort to move the Republican party to the Right.
8. Build outside the Democratic Party a separate political party that talks about love, kindness, generosity, and The Caring Society -- Caring for Each Other and Caring for the Earth. Let that party be based on the notion of A New Bottom Line as expressed in Commandment Six. Let this party talk explicitly about building a world that supports love and generosity! Stop speaking the language of the bureaucrats and the technical manipulators -- start speaking the language of the heart. End the time in which Democrats believe that progressives have "no place to go" and hence will support their corporate-oriented candidates no matter how far they are from progressive ideals.
If the Greens are able to transform themselves to a party that puts love and caring and the language of the heart at the forefront of its public identification, rather than a primarily technocratic, issues-debating, hard-nosed "realistic" from the left, policy-but-not-love-generating social force, then it could be this. But at the moment it is not, and it may be easier to create something new than to reform the inner workings and political culture of the Greens,
9. Create a United Progressive Fund so that all the different progressive organizations stop competing with each other for funding and instead allocate according to how many people belong to any given progressive organization.
10. Don't be realistic! The powers that be in the media, politics and economics define "realism." The most important changes in our country have come about because people were willing to fight for what everyone supposedly knew to be "unrealistic" (e.g. ending segregation, ending ten thousand years of unchallenged male supremacy and sexism, legitimating gay and lesbian lives, building an environmental movement, and the list goes on).
Realism is idolatry -- believing in God is believing that there is some Force in the Universe (some of us call it God) that makes possible the transformation from "that which is" to "that which could and should be." Support a Global Marshall Plan to once and for all end global poverty, hunger, homelessness, insufficient education or health care -- and pay for it through a Tobin tax on all international financial transactions of over $1 million. End the domination of money in politics and challenge the irresponsible environmental policies of corporations -- through the ESRA -- the Environmental and Social Responsibility Amendment to the U.S. Constitution.
Follow these ten commandments and the progressive forces will finally be able to reshape this country before it is too late. If you wish to help us do this, please join and help create a local chapter of the Network of Spiritual Progressives here. But if you like these ideas but don't want to work inside our organization, then bring these ideas into whatever organization you are already part of and insist that they debate these ideas, align with us in our campaign for the ESRA and for our proposed Global Marshall Plan, and insist that they develop the kind of broad strategy we are presenting here.
Please forward this to everyone on your email lists, paste it onto your Facebook page, put it up on any webpage or Yahoo group in which you are a part. It will help undermine despair!! Thanks.
Rabbi Michael Lerner is editor of Tikkun magazine, a Jewish and Interfaith Critique of Politics, Culture and Society; chair of the Network of Spiritual Progressives, and rabbi of Beyt Tikkun Synagogue.
--------------------------------------------------------------------------------
web: http://www.spiritualprogressives.org/
email: info@spiritualprogressives.org
--------------------------------------------------------------------------------
Copyright © 2010 Network of Spiritual Progressives®.
2342 Shattuck Avenue, #1200
Berkeley, CA 94704
510-644-1200 Fax 510-644-1255
Friday, October 29, 2010
50 years ago: Kennedy intervenes for imprisoned Martin Luther King
http://www.wsws.org/articles/2010/oct2010/twih-o25.shtml
50 years ago: Kennedy intervenes for imprisoned Martin Luther King
25 October 2010
With days to go before his 1960 presidential contest with Vice President Richard Nixon, Massachusetts Senator John F. Kennedy intervened to secure the release of Martin Luther King Jr. from a Georgia state prison. Kennedy called King’s wife, Coretta, while Robert Kennedy personally pressured the judge in the case.
King had been arrested for participating in a Georgia sit-in. The misdemeanor charge of failing to vacate private property would not have resulted in prison, but the judge in the case seized on an earlier trumped-up charge against King—operating a motor vehicle without a proper Georgia drivers license—to order King’s jailing for four months. The civil rights leader was hustled away on October 26 in the early morning so that his attorneys could not lodge a habeas corpus plea.
Kennedy’s intervention arose from his emphasis during the campaign on what he argued was the erosion of US global prestige during the Eisenhower administration. He understood that the abuse of King by state authorities was an embarrassment to the US, which was attempting to portray itself in its Cold War duel with the Soviet Union as an unswerving advocate of democracy and freedom.
The move was not without its political risks. The Southern elite had been drifting out of the Democratic Party “New Deal coalition” for some time, and Nixon was leading in the polls in a number of Southern states. During the 1960 campaign, prominent “Dixiecrats” openly campaigned against Kennedy. Among them were Sen. Harry Byrd of West Virginia, Sen. Strom Thurmond of South Carolina, and Gov. S. Ernest Vandiver of Georgia, who defended the prison sentence and called King a “race agitator.”
50 years ago: Kennedy intervenes for imprisoned Martin Luther King
25 October 2010
With days to go before his 1960 presidential contest with Vice President Richard Nixon, Massachusetts Senator John F. Kennedy intervened to secure the release of Martin Luther King Jr. from a Georgia state prison. Kennedy called King’s wife, Coretta, while Robert Kennedy personally pressured the judge in the case.
King had been arrested for participating in a Georgia sit-in. The misdemeanor charge of failing to vacate private property would not have resulted in prison, but the judge in the case seized on an earlier trumped-up charge against King—operating a motor vehicle without a proper Georgia drivers license—to order King’s jailing for four months. The civil rights leader was hustled away on October 26 in the early morning so that his attorneys could not lodge a habeas corpus plea.
Kennedy’s intervention arose from his emphasis during the campaign on what he argued was the erosion of US global prestige during the Eisenhower administration. He understood that the abuse of King by state authorities was an embarrassment to the US, which was attempting to portray itself in its Cold War duel with the Soviet Union as an unswerving advocate of democracy and freedom.
The move was not without its political risks. The Southern elite had been drifting out of the Democratic Party “New Deal coalition” for some time, and Nixon was leading in the polls in a number of Southern states. During the 1960 campaign, prominent “Dixiecrats” openly campaigned against Kennedy. Among them were Sen. Harry Byrd of West Virginia, Sen. Strom Thurmond of South Carolina, and Gov. S. Ernest Vandiver of Georgia, who defended the prison sentence and called King a “race agitator.”
Saturday, July 3, 2010
Hands Off Social Security: There Are Better Ways to Cut the National Debt
Robalini's Note: A great article on the National Commission on Fiscal Reform, which is attempting to "reform" social security by slashing it and privatizing it. In part, this is to open up more money for Wall Street to play with in predator games, but its also about demolishing the greatest success of the New Deal. The punch line: the guys in the commission are from Wall Street and the defense industry, the two most parasitic institutions in America, hands down. That doesn't mean some real reforms of SS shouldn't happen. But the reforms shouldn't come from the fuckers who are the real blame for our budgetary crisis, and it shouldn't be done in secret...
http://www.truth-out.org/hands-off-social-security-there-are-better-ways-cut-national-debt60808
Hands Off Social Security: There Are Better Ways to Cut the National Debt
Saturday 26 June 2010
Robert Weiner and Jonathan Battaglia | The Palm Beach Post | News Analysis
The Social Security Trustees' Annual Report on the program's finances comes out Wednesday, delayed from March by the health bill. It will be turned into a marketing tool by advocates of cutting Social Security to reduce the national debt.
Among those, the president's newly appointed National Commission on Fiscal Reform (the "debt commission") is threatening to strangle the economic lifeblood of seniors by denying the solvency of Social Security and then using the solvent funds for other purposes.
It's an illusion that cutting Social Security would reduce the deficit. If the new report does not point out that the money seniors have given to Social Security keeps it solvent through 2043, and after that 80 percent funded, it's a propaganda fraud for defunders.
Moreover, that future shortfall is only a blip - a point missed by nearly all media. After the Baby Boomers reap their Social
Security benefits, since those Boomers have had the fewest children ever (2.1 per couple vs. the current 2.7 rate), the system will return to full solvency because it will pay benefits to fewer people.
To cut a national deficit by cutting Social Security, which does not have a deficit, is theft from seniors who have paid in.
If a bank told a customer, "Sorry. We've spent your money on other items," would anyone accept that or say: "Fine, you made money on my money but you still owe me mine. Pay up."
The debt commission is littered with politicians and industry CEOs who have a history of wanting to scale back Social Security benefits. House Judiciary Committee Chairman John Conyers, D-Mich., told us in an interview, "The commission is loaded with billionaires who want to convert Social Security's money to business."
Commission Co-chairman Erskine Bowles is linked to Wall Street as a Morgan Stanley board member, and Honeywell CEO David Cote to the defense industry, both of which would benefit from Social Security's money. Will these captains of industry stand up for people who need Social Security the most? Or look for ways to transfer its money to defense and stocks?
Co-chairman Alan Simpson, along with Dave Camp, Judd Gregg, Tom Coburn and Mike Crapo, made statements supporting cutting or privatizing Social Security. Sen. Richard Durbin told "bleeding-heart liberals" to be open to Social Security cuts. Alice Rivlin co-authored a 2005 report titled Restoring Fiscal Sanity that advocated $47 billion in entitlement cuts, including an "increase in the retirement age under Social Security."
Why could the administration not appoint former Connecticut Congresswoman Barbara Kennelly, president of the National Committee to Preserve Social Security? Or Al Gore, who famously said he would protect Social Security in a "lockbox"? Or expert "policy wonk" Bill Arnone, a partner at Ernst & Young, co-author of the firm's retirement planning guide, a spokesman for the positive economics of Social Security?
The program remains indispensable in enabling the 38 million senior citizens over 65 nationwide and 3 million in Florida to live their lives in dignity. Without Social Security, nearly half of Americans age 65 or older would be below the poverty line. For two-thirds of the elderly, Social Security provides the majority of their income. For one-third, it provides nearly all.
We need the courage of the late Florida Congressman Claude Pepper. In 1978, when Commerce Secretary Juanita Kreps suggesting raising the retirement age, Rep. Pepper and House Social Security Chairman James Burke ran over for a meeting, and Rep. Pepper said they would "fight it to our death." Ms. Kreps suddenly said the proposal hadn't been drawn up.
The debt commission has plenty of options. Defense Secretary Robert Gates said the military needed to cut its "gusher of defense spending." Congress could also scale back the Bush tax cuts for the wealthy to the levels they were under President Clinton and could get rid of tax breaks for U.S. corporations doing business overseas. The deficit needs to be cut, but not at the cost of our seniors.
During a 2006 speaking tour, every time President Bush spoke of his plan to privatize Social Security, his approval ratings dropped. His advocacy of cuts helped cost Republicans the Congress. While up a hair recently, the market has lost 20 percent since 2000. Voters knew that would have meant 20 percent less food on the table for seniors or money for electricity.
President Obama should not let the commission make the same mistake, or this time it will cost him and his party.
Robert Weiner was chief of staff of the House Select Committee on Aging, chaired by the late U.S. Rep. Claude Pepper, and a senior public-affairs director in the White House. Jonathan Battaglia is policy analyst at Robert Weiner Associates.
http://www.truth-out.org/hands-off-social-security-there-are-better-ways-cut-national-debt60808
Hands Off Social Security: There Are Better Ways to Cut the National Debt
Saturday 26 June 2010
Robert Weiner and Jonathan Battaglia | The Palm Beach Post | News Analysis
The Social Security Trustees' Annual Report on the program's finances comes out Wednesday, delayed from March by the health bill. It will be turned into a marketing tool by advocates of cutting Social Security to reduce the national debt.
Among those, the president's newly appointed National Commission on Fiscal Reform (the "debt commission") is threatening to strangle the economic lifeblood of seniors by denying the solvency of Social Security and then using the solvent funds for other purposes.
It's an illusion that cutting Social Security would reduce the deficit. If the new report does not point out that the money seniors have given to Social Security keeps it solvent through 2043, and after that 80 percent funded, it's a propaganda fraud for defunders.
Moreover, that future shortfall is only a blip - a point missed by nearly all media. After the Baby Boomers reap their Social
Security benefits, since those Boomers have had the fewest children ever (2.1 per couple vs. the current 2.7 rate), the system will return to full solvency because it will pay benefits to fewer people.
To cut a national deficit by cutting Social Security, which does not have a deficit, is theft from seniors who have paid in.
If a bank told a customer, "Sorry. We've spent your money on other items," would anyone accept that or say: "Fine, you made money on my money but you still owe me mine. Pay up."
The debt commission is littered with politicians and industry CEOs who have a history of wanting to scale back Social Security benefits. House Judiciary Committee Chairman John Conyers, D-Mich., told us in an interview, "The commission is loaded with billionaires who want to convert Social Security's money to business."
Commission Co-chairman Erskine Bowles is linked to Wall Street as a Morgan Stanley board member, and Honeywell CEO David Cote to the defense industry, both of which would benefit from Social Security's money. Will these captains of industry stand up for people who need Social Security the most? Or look for ways to transfer its money to defense and stocks?
Co-chairman Alan Simpson, along with Dave Camp, Judd Gregg, Tom Coburn and Mike Crapo, made statements supporting cutting or privatizing Social Security. Sen. Richard Durbin told "bleeding-heart liberals" to be open to Social Security cuts. Alice Rivlin co-authored a 2005 report titled Restoring Fiscal Sanity that advocated $47 billion in entitlement cuts, including an "increase in the retirement age under Social Security."
Why could the administration not appoint former Connecticut Congresswoman Barbara Kennelly, president of the National Committee to Preserve Social Security? Or Al Gore, who famously said he would protect Social Security in a "lockbox"? Or expert "policy wonk" Bill Arnone, a partner at Ernst & Young, co-author of the firm's retirement planning guide, a spokesman for the positive economics of Social Security?
The program remains indispensable in enabling the 38 million senior citizens over 65 nationwide and 3 million in Florida to live their lives in dignity. Without Social Security, nearly half of Americans age 65 or older would be below the poverty line. For two-thirds of the elderly, Social Security provides the majority of their income. For one-third, it provides nearly all.
We need the courage of the late Florida Congressman Claude Pepper. In 1978, when Commerce Secretary Juanita Kreps suggesting raising the retirement age, Rep. Pepper and House Social Security Chairman James Burke ran over for a meeting, and Rep. Pepper said they would "fight it to our death." Ms. Kreps suddenly said the proposal hadn't been drawn up.
The debt commission has plenty of options. Defense Secretary Robert Gates said the military needed to cut its "gusher of defense spending." Congress could also scale back the Bush tax cuts for the wealthy to the levels they were under President Clinton and could get rid of tax breaks for U.S. corporations doing business overseas. The deficit needs to be cut, but not at the cost of our seniors.
During a 2006 speaking tour, every time President Bush spoke of his plan to privatize Social Security, his approval ratings dropped. His advocacy of cuts helped cost Republicans the Congress. While up a hair recently, the market has lost 20 percent since 2000. Voters knew that would have meant 20 percent less food on the table for seniors or money for electricity.
President Obama should not let the commission make the same mistake, or this time it will cost him and his party.
Robert Weiner was chief of staff of the House Select Committee on Aging, chaired by the late U.S. Rep. Claude Pepper, and a senior public-affairs director in the White House. Jonathan Battaglia is policy analyst at Robert Weiner Associates.
Thursday, April 29, 2010
Fight the Derivatives Cancer
http://tarpley.net/2010/04/25/fight-the-derivatives-cancer-with-a-wall-street-sales-tax-plus-bans-on-hedge-funds-credit-default-swaps-and-synthetic-cdos/
Fight the Derivatives Cancer with a Wall Street Sales Tax, Plus Bans on Hedge Funds, Credit Default Swaps, and Synthetic CDOs
Webster G. Tarpley
April 24, 2010
The Obama administration has been posturing this week about the life and death issue of Wall Street reform. Obama’s predicament is that of a Wall Street puppet who has been put into the White House thanks among other things to almost $1 million of contributions from the infamous Goldman Sachs – but who now needs to make a show of fighting his own Wall Street patrons for political reasons. Of course, Obama’s health-care reform was largely a bailout of insurance companies, which are themselves a key part of Wall Street. But Obama is now pretending to quarrel with Wall Street to shore up his waning credibility, partly because many House Democrats are desperately seeking anti-banker, economic populist street creds in order to avoid defeat in November. So far, the results have been largely feckless and inadequate.
The urgent problem raised by all this is the $1.5 quadrillion derivatives bubble. The financial crisis which struck the United States and the world in September and October 2008 was in fact a world derivatives panic. This panic marked the first phase of a world economic depression caused by derivatives speculation. The second phase of this depression, which is now beginning, can also be attributed in large part to derivatives, since derivatives are the main tool being used in the speculative attacks on Greece, Spain, Portugal, Italy, Ireland, and other nations, building up towards a chaotic collapse of the euro.
Derivatives are the Cause of the World Depression of Our Time
Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.
Asset-Backed Securities
Derivatives can be defined as any financial paper which is based on other financial paper. In other words, they are financial instruments whose value depends upon or is derived from the value of other financial instruments. Any kind of securitization results in the creation of derivatives. If individual mortgages are wrapped up and packaged together as a mortgage-backed security (MBS), that is a derivative. Any asset-backed security (ABS), be it based on car loans, credit card debt, or anything else, also qualifies as a derivative.
Beyond this, there are generally speaking two kinds of derivatives. The first type includes the derivatives which are traded more or less openly on exchanges like the Chicago Board Options Exchange, etc. These include options, futures, and indices, plus all the combinations of these. These are what expire in each quadruple witching hour in the markets. This type of derivative has generally amounted to about $600 trillion of speculation in recent years.
OTC Derivatives
Then there are the so-called over-the-counter (OTC) derivatives, otherwise known as structured notes, counterparty derivatives, or designer derivatives. These often take the form of contracts which are kept secret by the counterparties, and which are often not included on the balance sheets of banks and other institutions which enter into these contracts. This type of derivative is currently not reportable to any regulatory agency. This secrecy is a result of the successful effort by Robert Rubin, Larry Summers, and Alan Greenspan to block the modest proposal of Brooksley Born of the Commodity Futures Trading Commission to bring the OTC derivatives into the sunlight during the second Clinton administration. Since these derivatives are not reportable at the present time, we must guess at their amount, and the best guess is that OTC derivatives make up almost $1 quadrillion of ultra-toxic speculation.
CDOs, CDS, and SIVs
OTC derivatives include collateralized debt obligations (CDOs), which often represent the packaging together of large numbers of mortgage backed securities, along with other debt instruments. A CDO can also be concocted out of other CDOs, in which case it qualifies as a synthetic CDO or CDO squared (CDO²). Notice that a synthetic CDO is not really an investment, but rather a form of gambling, in which a speculator in effect places a bet on the performance of some other financial instruments. This fact exposes the big lie inherent in the widespread reactionary myth that the current depression was caused by poor people taking out subprime mortgages on slum properties and then defaulting on these loans, thus bringing down the US and British banking systems. This fantastic story ignores the fact that derivatives were only a wager placed by speculative bettors from afar on mortgage backed securities which included some subprime notes.
Credit default swaps represent bets on whether a given asset or company will go bankrupt or not. As such, they can be used as insurance against such an eventuality, or else they can be used to make money on the insolvency. CDS are therefore a form of insurance, but they are issued by counterparties who have not registered as insurance companies and who have not met the legal and capital requirements which are necessary to function as an insurance company. It ought therefore to be clear that CDS have been totally illegal all along, and have flourished only because of an outrageous failure by state insurance regulators to enforce applicable laws against the privileged class of financiers.
Structured investment vehicles (SIVs) are another type of derivative, commonly used to wrap up masses of CDOs and synthetic CDOs and then to park them off-balance sheet, where they can be hidden from regulatory and public scrutiny.
All Derivatives Illegal under the New Deal, 1936-1982
All kinds of derivatives, be they exchange traded or over-the-counter, were strictly banned and outlawed in the United States between 1936 and 1982 thanks to a wise measure enacted under the New Deal of President Franklin D. Roosevelt. In the wake of several attempts by predatory and sociopathic speculators to manipulate the prices of wheat and corn during the First Great Depression, the Commodities Exchange Act of 1936 outlawed the selling of options on agricultural products. This law had the effect of blocking most derivative speculation, until the counterattack of free-market fanatics gathered steam under the presidency of Ronald Reagan, an ideological zealot of the Austrian and Chicago schools. The very existence of derivatives today and their resulting ability to bring on a new world depression are thus directly attributable to the reckless and irresponsible dismantling of the New Deal regulatory regime. It should be added that derivatives were also banned in many states as a result of laws prohibiting gambling or forbidding bucket shops, which were betting parlors in which side bets could be placed on stock market fluctuations.
If Obama wants to pretend to have something in common with Franklin D. Roosevelt, he ought to be proposing measures to ban at least the most poisonous types of derivatives, and to discourage the others. Notice that he does nothing of the kind. Obama’s Cooper Union speech of April 22, 2010 approvingly cites Warren Buffett’s remark that derivatives represent financial weapons of mass destruction. But Obama then says that derivatives nevertheless have an important and legitimate role to play. So which is it? Some years back, French President Jacques Chirac rightly referred to derivatives as “financial AIDS.” What useful purpose can these toxic instruments possibly serve?
Again: in his 1936 re-election speech in Madison Square Garden in New York City, Franklin D. Roosevelt famously noted that the forces of organized money hated him, and that he welcomed their hatred. Obama, in sharp contrast, called on the Wall Street predators to join him in his efforts, compounding this with the monstrous thesis that Wall Street and Main Street are in the same boat. Nothing could be farther from the truth. The recent Goldman Sachs scandal has underlined once again that the Wall Street investment houses serve no useful social purpose whatsoever. They exist solely for the purpose of pursuing speculative profits through a process of looting and pillaging the rest of the economy. The Wall Street zombie banks are monopolizing US credit, while Main Street goes broke.
Thanks no doubt to the efforts of certain House Democrats, the reform bill is likely to contain two points which can qualify as positive half measures.
Force Derivatives Out in the Open
The first is the effort to end the secrecy of OTC derivatives by forcing these instruments to be traded on public exchanges or through clearing houses. This is a step in the right direction. But this provision needs to be strengthened by making all derivatives of any type whatsoever reportable to a central regulatory authority. This would include, for example, the derivatives held by hedge funds. In 1998, the Connecticut-based hedge fund Long-Term Capital Management went bankrupt with more than $1 trillion worth of derivatives, blowing a huge hole in the international banking system, and causing Greenspan to rush in with a crony bailout. Nobody has any idea of the amount of derivatives held by hedge funds today. Highly leveraged hedge funds are perfectly capable of causing a worldwide systemic crisis with derivatives, so they must emphatically be made to report their holdings.
This reporting requirement should also include the derivatives held by non-financial corporations, whose shareholders deserve to know if and when management is dabbling in these toxic instruments. Some years back, the Gibson Greeting Card Company took a huge loss on derivatives, so this is no theoretical danger.
In addition, all derivatives must henceforth be clearly listed ON the balance sheets of banks and all other financial institutions. The intolerable practice of hiding derivatives off-balance-sheet must be immediately brought to an end.
The other positive half measure which might survive Obama’s usual quest for a “bipartisan” sellout is the so-called Volcker Rule, which specifies that commercial banks with insured deposits are not allowed to engage in proprietary speculation with their own money. Depending on how this is worded, this may include a long overdue ban on derivatives speculation by commercial banks. Senator Blanche Lincoln of Arkansas, the chair of the Senate Agriculture committee—who is fighting for her political life against a primary challenge this spring—has been backing a provision that would explicitly prohibit commercial banks from engaging in derivatives speculation. These ideas go in the right direction. But we need to do much more. We need to go back to the full New Deal regulations embodied in the Glass-Steagall Act. This law stated that a financial institution could be either or a commercial bank, or an investment house, or an insurance company, but never more than one of these. In other words, the suicidal folly of the Gramm-Leach-Bliley Act of 1999, which repealed Glass-Steagall, must be rolled back.
Outlaw Credit Default Swaps
Beyond this, we must urgently address the catastrophic effects and obvious illegality of credit default swaps. More than a year ago, Senator Warner of Virginia asked Fed boss Bernanke about the advisability of creating a “bright line prohibition” against these CDS. Remember that CDS are already illegal, because they always involve an investor masquerading as an insurance company without having fulfilled the legal and capital requirements that would be demanded from a real insurance company. Credit default swaps have cost the US taxpayer almost $200 billion in the case of AIG alone, because of the bankruptcy of the AIG London-based hedge fund which had issued more than $3 trillion of derivatives – a total greater than the gross domestic product of France.
Credit default swaps are also a clear and present danger today, since they are the principal tool being used by wolf packs of banks and hedge funds against Greece and other nations, accelerating the arrival of the dreaded second wave of the world economic depression. Unless credit default swaps are banned now, they will be increasingly used for speculative attacks against the bonded debt of American states like California, New York, Illinois, and all the others. Before long, credit default swaps will be used by international speculators to attack the value and integrity of United States Treasury securities, threatening our country with the calamity of national bankruptcy. If the United States fails to shut down credit default swaps with timely legislation now, credit default swaps will be used to help destroy the United States and human civilization in general.
Ban Synthetic CDOs
The synthetic CDO or CDO² must also be outlawed. These are the toxic instruments which brought down Bear Stearns, Merrill Lynch, and Lehman Brothers in the great derivatives panic of 2008. What are we waiting for to ban this kind of highly destructive derivative? Such a ban is easy to formulate: “Any collateralized debt obligation which contains other collateralized debt obligations is hereby prohibited.” End of story. This language recalls the approach of the very successful Public Utility Holding Company Act of the New Deal. One layer of CDO is more than enough risk, and it must not be further compounded.
Another ban which is long overdue and which should be included in the current legislation is the outlawing of the Adjustable Rate Mortgage (ARM). The ARM is another catastrophic innovation of recent decades which inherently carries with it an intolerable risk for any homeowner. No American family should be deprived of a roof over their heads because of the unpredictable and volatile fluctuations of interest rates over the life of a mortgage. These ARMs shift an unacceptable risk to the mortgage buyer. Fixed-rate mortgages should be the only legal kind, and any reset or change in interest rates on a residential mortgage should be strictly outlawed. While we are at it, we also need to outlaw the high-interest payday loan, a type of devastating usury to which the poorest and most defenseless parts of our population are now exposed. The outlawing of payday loans should take the form of a de facto federal usury law establishing an upper limit of no more than 10% on any promissory note or credit card. This was the limit traditionally set by state usury laws before the coming of the Volcker 22% prime rate three decades ago, and it should be restored. This simple prohibition of adjustable rate mortgages and payday loans will be far more effective than the proposed creation of an inefficient and unwieldy consumer protection bureaucracy, especially one that is located inside the Federal Reserve. The Federal Reserve has repeatedly struck out when it comes to recognizing systemic risk, when it comes to preventing financial bubbles, and when it comes to protecting ordinary Americans. The Federal Reserve failed in the run-up to the crash of 1929, in the run-up to the banking crisis of 1933, in the run-up to the stock market crash of 1987, in preventing the dot com bubble of 1999-2000, and in regard to the financial derivatives which caused the banking panic of 2008. Locating any consumer protection bureaucracy inside the privately owned Federal Reserve is simply to guarantee that such a bureaucracy will be subject to regulatory capture by Wall Street at the earliest possible moment.
Wall Street Sales Tax of 1% on All Financial Transactions
Derivatives which escape prohibition under these blanket bans on credit default swaps and synthetic CDOs must then be subjected to their fair share of the tax burden. In a time when haircuts, bowling alleys, and restaurants are threatened with new taxation, it is simply inconceivable that the financial turnover of US financial markets should remain immune to all taxation, rather like the French aristocrats of the pre-1789 old regime. Rather than crush the US economy under an ill-advised and oppressive Value Added Tax (VAT) or national sales tax, we must institute a Wall Street sales tax of 1% on all financial transactions and turnover, including derivatives. This is the levy known as the Tobin tax, the Wall Street sales tax, the financial transactions tax, the trading tax, the securities transfer tax, or the Robin Hood tax. A low-ball conservative estimate of US financial turnover (including derivatives) in any given year might be about one quadrillion dollars. In that case, a 1% Wall Street sales tax would yield $10 trillion, $5 trillion of which could be used to confront the federal budget deficit, the costs of entitlements, and the various unfunded liabilities of the federal government. The other $5 trillion would be available for revenue sharing with the states, who could use these funds to deal with their own budget crises, which currently threaten police, firemen, health services, and other indispensable parts of the fabric of civilization itself. One of the main causes for budget deficits of all levels of government in the United States is the glaringly obvious exemption of financial turnover from all taxation, while financial speculators use various tricks to escape paying the corporate income tax. The proceeds from such a Wall Street sales tax would almost certainly decline as speculation became less attractive, but in the meantime they would provide much-needed relief for the public treasury. Needless to say, any idea of paying the proceeds of such a tax to the International Monetary Fund is out of the question. Many other countries are in the process of instituting a Tobin tax on financial turnover, so the inevitable objection that a Wall Street sales tax would represent a crippling competitive disadvantage for US financial markets is increasingly untenable.
Additional Safeguards: Bankruptcy Triage, Reserve Requirement, Hedge Fund Ban
Further safeguards against the derivatives plague are also in order. Current bankruptcy law gives special privileged treatment to derivatives. These poisonous instruments continue to exact their claims even when protection against other creditors has been provided by the federal courts. This abusive and unwarranted favoring of derivatives must be reversed. Derivatives must be made to wait their turn in bankruptcy court, and sent to the end of the line after all other creditors and claims have been satisfied. If bankruptcy triage becomes necessary, it should be at the expense of derivatives.
Another needed measure is the establishment of a reserve requirement for anyone issuing derivatives. We have seen how Goldman Sachs is accused of designing their notorious ABACUS 2007-AC1 CDO, colluding with hedge fund speculator John Paulson to load this CDO with all kinds of super-toxic paper with the intent of designing an instrument which would have the best possible chances of going bankrupt in the short run. A reserve requirement for those issuing derivatives would mean that they would have to buy and hold on their own books for the life of the investment at least 20% of any derivatives they issued. This would represent an additional deterrent against the deliberate concocting of toxic derivatives with the intention of then allowing a speculator to short them with the help of credit default swaps.
A final necessary change involves the grave risk inherent in the existence of hedge funds. Despite their name, the main business of hedge funds is pure predatory speculation. Hedge funds are currently allowed to fly below the radar of the Securities and Exchange Commission, escaping regulation because they have only a limited number of super-rich investors. It is high time that this loophole came to an end. Once a hedge fund is regulated, it is no longer a hedge fund, so the call to regulate hedge funds is for all practical purposes a call for their abolition. Hedge funds should have been subject to regulation no later than the immediate aftermath of the Long-Term Capital Management debacle of 1998. The hedge fund loophole in the SEC rules must be closed now.
Seize and Liquidate the Zombie Banks
Obama’s $50 billion resolution fund for bankrupt banks is unnecessary. What we need most of all is to have the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and other regulators enforce the applicable laws. Every Friday, Sheila Bair of the FDIC shuts down a number of small town banks because of insolvency. In her interview yesterday on CNBC, Ms. Bair blatantly admitted that she has no intention of enforcing these same public laws against the large Wall Street and other money center banks. She covers this malfeasance and nonfeasance with her opinion that bankruptcy does not work for the big banks. But there is little doubt that, if their massive derivatives holdings were priced according to mark to market rules, J.P. Morgan Chase, Citibank, and Bank of America would all be thoroughly insolvent candidates for Chapter 7 liquidation. Unless and until this is done, these zombie banks will continue to block any real economic recovery in the United States. Ms. Bair’s policies showed the destructive folly of the current administration’s illegal policies, which are all based in the final analysis on the discredited doctrine of Too Big to Fail.
Any Wall Street reform bill should also deal with the public scandal of the ratings agencies – Standard & Poor’s, Fitch, and Moody’s. These agencies enjoy a quasi-governmental status when it comes to certifying the quality of certain investments. But the failure of these agencies to provide timely warnings during the onset of the derivatives panic was nothing short of spectacular. During that crisis, the ratings agencies were certifying investments as AAA investment-grade until mere hours before they collapsed. Senator Carl Levin’s investigation of the ratings agencies has now unearthed horror stories of corruption and incompetence. The ratings agencies need to be stripped of any special role in relation to the United States government. Senator Levin’s findings merit criminal referrals to the Justice Department for prosecution of these agencies and their executives. In short, the United States government should take this opportunity to shut down these rating agencies, before these corrupt entities join in the looming speculative assault on the US Treasury, which is being prepared by George Soros and the other hedge funds.
Wall Street speculators will certainly howl that the measures outlined here represent a vindictive policy of discrimination against derivatives, which they will attempt to portray as a beneficial innovation serving the public interest. But no serious analysis of the banking panic of 2008 can ignore the obvious role of financial derivatives as one of the principal causes of this disaster. As for the charge of discrimination, it should be clear that the proposals made here generally represent nothing more than ending the privileged special treatment which has been granted to derivatives so far. Derivatives have been exempted from the gambling laws. Derivatives have been given special status in bankruptcy proceedings. Derivatives have been made non-reportable, and carrying them off balance sheet has been allowed. Derivatives have been exempted from the usual laws governing the operations of insurance companies. Hedge funds have been exempted from the scrutiny of the Securities and Exchange Commission. Wall Street derivatives banks have been exempted from the usual bankruptcy laws and probably from the antitrust laws as well. Finally, derivatives, like all financial instruments, have been exempted from state sales taxes. This distorted treatment amounts to a systematic pattern of facilitating and fostering derivatives speculation under US laws and regulations. This pattern might be defensible if derivatives represented a public good. But all experience shows that derivatives are just the opposite – they are a public menace which now threatens to destroy our civilization and way of life.
Fight the Derivatives Cancer with a Wall Street Sales Tax, Plus Bans on Hedge Funds, Credit Default Swaps, and Synthetic CDOs
Webster G. Tarpley
April 24, 2010
The Obama administration has been posturing this week about the life and death issue of Wall Street reform. Obama’s predicament is that of a Wall Street puppet who has been put into the White House thanks among other things to almost $1 million of contributions from the infamous Goldman Sachs – but who now needs to make a show of fighting his own Wall Street patrons for political reasons. Of course, Obama’s health-care reform was largely a bailout of insurance companies, which are themselves a key part of Wall Street. But Obama is now pretending to quarrel with Wall Street to shore up his waning credibility, partly because many House Democrats are desperately seeking anti-banker, economic populist street creds in order to avoid defeat in November. So far, the results have been largely feckless and inadequate.
The urgent problem raised by all this is the $1.5 quadrillion derivatives bubble. The financial crisis which struck the United States and the world in September and October 2008 was in fact a world derivatives panic. This panic marked the first phase of a world economic depression caused by derivatives speculation. The second phase of this depression, which is now beginning, can also be attributed in large part to derivatives, since derivatives are the main tool being used in the speculative attacks on Greece, Spain, Portugal, Italy, Ireland, and other nations, building up towards a chaotic collapse of the euro.
Derivatives are the Cause of the World Depression of Our Time
Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.
Asset-Backed Securities
Derivatives can be defined as any financial paper which is based on other financial paper. In other words, they are financial instruments whose value depends upon or is derived from the value of other financial instruments. Any kind of securitization results in the creation of derivatives. If individual mortgages are wrapped up and packaged together as a mortgage-backed security (MBS), that is a derivative. Any asset-backed security (ABS), be it based on car loans, credit card debt, or anything else, also qualifies as a derivative.
Beyond this, there are generally speaking two kinds of derivatives. The first type includes the derivatives which are traded more or less openly on exchanges like the Chicago Board Options Exchange, etc. These include options, futures, and indices, plus all the combinations of these. These are what expire in each quadruple witching hour in the markets. This type of derivative has generally amounted to about $600 trillion of speculation in recent years.
OTC Derivatives
Then there are the so-called over-the-counter (OTC) derivatives, otherwise known as structured notes, counterparty derivatives, or designer derivatives. These often take the form of contracts which are kept secret by the counterparties, and which are often not included on the balance sheets of banks and other institutions which enter into these contracts. This type of derivative is currently not reportable to any regulatory agency. This secrecy is a result of the successful effort by Robert Rubin, Larry Summers, and Alan Greenspan to block the modest proposal of Brooksley Born of the Commodity Futures Trading Commission to bring the OTC derivatives into the sunlight during the second Clinton administration. Since these derivatives are not reportable at the present time, we must guess at their amount, and the best guess is that OTC derivatives make up almost $1 quadrillion of ultra-toxic speculation.
CDOs, CDS, and SIVs
OTC derivatives include collateralized debt obligations (CDOs), which often represent the packaging together of large numbers of mortgage backed securities, along with other debt instruments. A CDO can also be concocted out of other CDOs, in which case it qualifies as a synthetic CDO or CDO squared (CDO²). Notice that a synthetic CDO is not really an investment, but rather a form of gambling, in which a speculator in effect places a bet on the performance of some other financial instruments. This fact exposes the big lie inherent in the widespread reactionary myth that the current depression was caused by poor people taking out subprime mortgages on slum properties and then defaulting on these loans, thus bringing down the US and British banking systems. This fantastic story ignores the fact that derivatives were only a wager placed by speculative bettors from afar on mortgage backed securities which included some subprime notes.
Credit default swaps represent bets on whether a given asset or company will go bankrupt or not. As such, they can be used as insurance against such an eventuality, or else they can be used to make money on the insolvency. CDS are therefore a form of insurance, but they are issued by counterparties who have not registered as insurance companies and who have not met the legal and capital requirements which are necessary to function as an insurance company. It ought therefore to be clear that CDS have been totally illegal all along, and have flourished only because of an outrageous failure by state insurance regulators to enforce applicable laws against the privileged class of financiers.
Structured investment vehicles (SIVs) are another type of derivative, commonly used to wrap up masses of CDOs and synthetic CDOs and then to park them off-balance sheet, where they can be hidden from regulatory and public scrutiny.
All Derivatives Illegal under the New Deal, 1936-1982
All kinds of derivatives, be they exchange traded or over-the-counter, were strictly banned and outlawed in the United States between 1936 and 1982 thanks to a wise measure enacted under the New Deal of President Franklin D. Roosevelt. In the wake of several attempts by predatory and sociopathic speculators to manipulate the prices of wheat and corn during the First Great Depression, the Commodities Exchange Act of 1936 outlawed the selling of options on agricultural products. This law had the effect of blocking most derivative speculation, until the counterattack of free-market fanatics gathered steam under the presidency of Ronald Reagan, an ideological zealot of the Austrian and Chicago schools. The very existence of derivatives today and their resulting ability to bring on a new world depression are thus directly attributable to the reckless and irresponsible dismantling of the New Deal regulatory regime. It should be added that derivatives were also banned in many states as a result of laws prohibiting gambling or forbidding bucket shops, which were betting parlors in which side bets could be placed on stock market fluctuations.
If Obama wants to pretend to have something in common with Franklin D. Roosevelt, he ought to be proposing measures to ban at least the most poisonous types of derivatives, and to discourage the others. Notice that he does nothing of the kind. Obama’s Cooper Union speech of April 22, 2010 approvingly cites Warren Buffett’s remark that derivatives represent financial weapons of mass destruction. But Obama then says that derivatives nevertheless have an important and legitimate role to play. So which is it? Some years back, French President Jacques Chirac rightly referred to derivatives as “financial AIDS.” What useful purpose can these toxic instruments possibly serve?
Again: in his 1936 re-election speech in Madison Square Garden in New York City, Franklin D. Roosevelt famously noted that the forces of organized money hated him, and that he welcomed their hatred. Obama, in sharp contrast, called on the Wall Street predators to join him in his efforts, compounding this with the monstrous thesis that Wall Street and Main Street are in the same boat. Nothing could be farther from the truth. The recent Goldman Sachs scandal has underlined once again that the Wall Street investment houses serve no useful social purpose whatsoever. They exist solely for the purpose of pursuing speculative profits through a process of looting and pillaging the rest of the economy. The Wall Street zombie banks are monopolizing US credit, while Main Street goes broke.
Thanks no doubt to the efforts of certain House Democrats, the reform bill is likely to contain two points which can qualify as positive half measures.
Force Derivatives Out in the Open
The first is the effort to end the secrecy of OTC derivatives by forcing these instruments to be traded on public exchanges or through clearing houses. This is a step in the right direction. But this provision needs to be strengthened by making all derivatives of any type whatsoever reportable to a central regulatory authority. This would include, for example, the derivatives held by hedge funds. In 1998, the Connecticut-based hedge fund Long-Term Capital Management went bankrupt with more than $1 trillion worth of derivatives, blowing a huge hole in the international banking system, and causing Greenspan to rush in with a crony bailout. Nobody has any idea of the amount of derivatives held by hedge funds today. Highly leveraged hedge funds are perfectly capable of causing a worldwide systemic crisis with derivatives, so they must emphatically be made to report their holdings.
This reporting requirement should also include the derivatives held by non-financial corporations, whose shareholders deserve to know if and when management is dabbling in these toxic instruments. Some years back, the Gibson Greeting Card Company took a huge loss on derivatives, so this is no theoretical danger.
In addition, all derivatives must henceforth be clearly listed ON the balance sheets of banks and all other financial institutions. The intolerable practice of hiding derivatives off-balance-sheet must be immediately brought to an end.
The other positive half measure which might survive Obama’s usual quest for a “bipartisan” sellout is the so-called Volcker Rule, which specifies that commercial banks with insured deposits are not allowed to engage in proprietary speculation with their own money. Depending on how this is worded, this may include a long overdue ban on derivatives speculation by commercial banks. Senator Blanche Lincoln of Arkansas, the chair of the Senate Agriculture committee—who is fighting for her political life against a primary challenge this spring—has been backing a provision that would explicitly prohibit commercial banks from engaging in derivatives speculation. These ideas go in the right direction. But we need to do much more. We need to go back to the full New Deal regulations embodied in the Glass-Steagall Act. This law stated that a financial institution could be either or a commercial bank, or an investment house, or an insurance company, but never more than one of these. In other words, the suicidal folly of the Gramm-Leach-Bliley Act of 1999, which repealed Glass-Steagall, must be rolled back.
Outlaw Credit Default Swaps
Beyond this, we must urgently address the catastrophic effects and obvious illegality of credit default swaps. More than a year ago, Senator Warner of Virginia asked Fed boss Bernanke about the advisability of creating a “bright line prohibition” against these CDS. Remember that CDS are already illegal, because they always involve an investor masquerading as an insurance company without having fulfilled the legal and capital requirements that would be demanded from a real insurance company. Credit default swaps have cost the US taxpayer almost $200 billion in the case of AIG alone, because of the bankruptcy of the AIG London-based hedge fund which had issued more than $3 trillion of derivatives – a total greater than the gross domestic product of France.
Credit default swaps are also a clear and present danger today, since they are the principal tool being used by wolf packs of banks and hedge funds against Greece and other nations, accelerating the arrival of the dreaded second wave of the world economic depression. Unless credit default swaps are banned now, they will be increasingly used for speculative attacks against the bonded debt of American states like California, New York, Illinois, and all the others. Before long, credit default swaps will be used by international speculators to attack the value and integrity of United States Treasury securities, threatening our country with the calamity of national bankruptcy. If the United States fails to shut down credit default swaps with timely legislation now, credit default swaps will be used to help destroy the United States and human civilization in general.
Ban Synthetic CDOs
The synthetic CDO or CDO² must also be outlawed. These are the toxic instruments which brought down Bear Stearns, Merrill Lynch, and Lehman Brothers in the great derivatives panic of 2008. What are we waiting for to ban this kind of highly destructive derivative? Such a ban is easy to formulate: “Any collateralized debt obligation which contains other collateralized debt obligations is hereby prohibited.” End of story. This language recalls the approach of the very successful Public Utility Holding Company Act of the New Deal. One layer of CDO is more than enough risk, and it must not be further compounded.
Another ban which is long overdue and which should be included in the current legislation is the outlawing of the Adjustable Rate Mortgage (ARM). The ARM is another catastrophic innovation of recent decades which inherently carries with it an intolerable risk for any homeowner. No American family should be deprived of a roof over their heads because of the unpredictable and volatile fluctuations of interest rates over the life of a mortgage. These ARMs shift an unacceptable risk to the mortgage buyer. Fixed-rate mortgages should be the only legal kind, and any reset or change in interest rates on a residential mortgage should be strictly outlawed. While we are at it, we also need to outlaw the high-interest payday loan, a type of devastating usury to which the poorest and most defenseless parts of our population are now exposed. The outlawing of payday loans should take the form of a de facto federal usury law establishing an upper limit of no more than 10% on any promissory note or credit card. This was the limit traditionally set by state usury laws before the coming of the Volcker 22% prime rate three decades ago, and it should be restored. This simple prohibition of adjustable rate mortgages and payday loans will be far more effective than the proposed creation of an inefficient and unwieldy consumer protection bureaucracy, especially one that is located inside the Federal Reserve. The Federal Reserve has repeatedly struck out when it comes to recognizing systemic risk, when it comes to preventing financial bubbles, and when it comes to protecting ordinary Americans. The Federal Reserve failed in the run-up to the crash of 1929, in the run-up to the banking crisis of 1933, in the run-up to the stock market crash of 1987, in preventing the dot com bubble of 1999-2000, and in regard to the financial derivatives which caused the banking panic of 2008. Locating any consumer protection bureaucracy inside the privately owned Federal Reserve is simply to guarantee that such a bureaucracy will be subject to regulatory capture by Wall Street at the earliest possible moment.
Wall Street Sales Tax of 1% on All Financial Transactions
Derivatives which escape prohibition under these blanket bans on credit default swaps and synthetic CDOs must then be subjected to their fair share of the tax burden. In a time when haircuts, bowling alleys, and restaurants are threatened with new taxation, it is simply inconceivable that the financial turnover of US financial markets should remain immune to all taxation, rather like the French aristocrats of the pre-1789 old regime. Rather than crush the US economy under an ill-advised and oppressive Value Added Tax (VAT) or national sales tax, we must institute a Wall Street sales tax of 1% on all financial transactions and turnover, including derivatives. This is the levy known as the Tobin tax, the Wall Street sales tax, the financial transactions tax, the trading tax, the securities transfer tax, or the Robin Hood tax. A low-ball conservative estimate of US financial turnover (including derivatives) in any given year might be about one quadrillion dollars. In that case, a 1% Wall Street sales tax would yield $10 trillion, $5 trillion of which could be used to confront the federal budget deficit, the costs of entitlements, and the various unfunded liabilities of the federal government. The other $5 trillion would be available for revenue sharing with the states, who could use these funds to deal with their own budget crises, which currently threaten police, firemen, health services, and other indispensable parts of the fabric of civilization itself. One of the main causes for budget deficits of all levels of government in the United States is the glaringly obvious exemption of financial turnover from all taxation, while financial speculators use various tricks to escape paying the corporate income tax. The proceeds from such a Wall Street sales tax would almost certainly decline as speculation became less attractive, but in the meantime they would provide much-needed relief for the public treasury. Needless to say, any idea of paying the proceeds of such a tax to the International Monetary Fund is out of the question. Many other countries are in the process of instituting a Tobin tax on financial turnover, so the inevitable objection that a Wall Street sales tax would represent a crippling competitive disadvantage for US financial markets is increasingly untenable.
Additional Safeguards: Bankruptcy Triage, Reserve Requirement, Hedge Fund Ban
Further safeguards against the derivatives plague are also in order. Current bankruptcy law gives special privileged treatment to derivatives. These poisonous instruments continue to exact their claims even when protection against other creditors has been provided by the federal courts. This abusive and unwarranted favoring of derivatives must be reversed. Derivatives must be made to wait their turn in bankruptcy court, and sent to the end of the line after all other creditors and claims have been satisfied. If bankruptcy triage becomes necessary, it should be at the expense of derivatives.
Another needed measure is the establishment of a reserve requirement for anyone issuing derivatives. We have seen how Goldman Sachs is accused of designing their notorious ABACUS 2007-AC1 CDO, colluding with hedge fund speculator John Paulson to load this CDO with all kinds of super-toxic paper with the intent of designing an instrument which would have the best possible chances of going bankrupt in the short run. A reserve requirement for those issuing derivatives would mean that they would have to buy and hold on their own books for the life of the investment at least 20% of any derivatives they issued. This would represent an additional deterrent against the deliberate concocting of toxic derivatives with the intention of then allowing a speculator to short them with the help of credit default swaps.
A final necessary change involves the grave risk inherent in the existence of hedge funds. Despite their name, the main business of hedge funds is pure predatory speculation. Hedge funds are currently allowed to fly below the radar of the Securities and Exchange Commission, escaping regulation because they have only a limited number of super-rich investors. It is high time that this loophole came to an end. Once a hedge fund is regulated, it is no longer a hedge fund, so the call to regulate hedge funds is for all practical purposes a call for their abolition. Hedge funds should have been subject to regulation no later than the immediate aftermath of the Long-Term Capital Management debacle of 1998. The hedge fund loophole in the SEC rules must be closed now.
Seize and Liquidate the Zombie Banks
Obama’s $50 billion resolution fund for bankrupt banks is unnecessary. What we need most of all is to have the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and other regulators enforce the applicable laws. Every Friday, Sheila Bair of the FDIC shuts down a number of small town banks because of insolvency. In her interview yesterday on CNBC, Ms. Bair blatantly admitted that she has no intention of enforcing these same public laws against the large Wall Street and other money center banks. She covers this malfeasance and nonfeasance with her opinion that bankruptcy does not work for the big banks. But there is little doubt that, if their massive derivatives holdings were priced according to mark to market rules, J.P. Morgan Chase, Citibank, and Bank of America would all be thoroughly insolvent candidates for Chapter 7 liquidation. Unless and until this is done, these zombie banks will continue to block any real economic recovery in the United States. Ms. Bair’s policies showed the destructive folly of the current administration’s illegal policies, which are all based in the final analysis on the discredited doctrine of Too Big to Fail.
Any Wall Street reform bill should also deal with the public scandal of the ratings agencies – Standard & Poor’s, Fitch, and Moody’s. These agencies enjoy a quasi-governmental status when it comes to certifying the quality of certain investments. But the failure of these agencies to provide timely warnings during the onset of the derivatives panic was nothing short of spectacular. During that crisis, the ratings agencies were certifying investments as AAA investment-grade until mere hours before they collapsed. Senator Carl Levin’s investigation of the ratings agencies has now unearthed horror stories of corruption and incompetence. The ratings agencies need to be stripped of any special role in relation to the United States government. Senator Levin’s findings merit criminal referrals to the Justice Department for prosecution of these agencies and their executives. In short, the United States government should take this opportunity to shut down these rating agencies, before these corrupt entities join in the looming speculative assault on the US Treasury, which is being prepared by George Soros and the other hedge funds.
Wall Street speculators will certainly howl that the measures outlined here represent a vindictive policy of discrimination against derivatives, which they will attempt to portray as a beneficial innovation serving the public interest. But no serious analysis of the banking panic of 2008 can ignore the obvious role of financial derivatives as one of the principal causes of this disaster. As for the charge of discrimination, it should be clear that the proposals made here generally represent nothing more than ending the privileged special treatment which has been granted to derivatives so far. Derivatives have been exempted from the gambling laws. Derivatives have been given special status in bankruptcy proceedings. Derivatives have been made non-reportable, and carrying them off balance sheet has been allowed. Derivatives have been exempted from the usual laws governing the operations of insurance companies. Hedge funds have been exempted from the scrutiny of the Securities and Exchange Commission. Wall Street derivatives banks have been exempted from the usual bankruptcy laws and probably from the antitrust laws as well. Finally, derivatives, like all financial instruments, have been exempted from state sales taxes. This distorted treatment amounts to a systematic pattern of facilitating and fostering derivatives speculation under US laws and regulations. This pattern might be defensible if derivatives represented a public good. But all experience shows that derivatives are just the opposite – they are a public menace which now threatens to destroy our civilization and way of life.
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