Dangerous Counter-Narratives: Our Global Finance Ponzi Scheme and Iranian Cooperation

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According to this post, this op-ed in the WSJ got badly edited after it was originally published. The bolded words are just some of what WSJ axed after the fact. (h/t Naked Capitalism)

The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.

At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy that benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a kind of deadly symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever-more money back to our governments, keeping the scheme afloat.

In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made. Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland’s NAMA and a lineup of special-purpose vehicles that make Enron look simple. Some politicians understood this; others just panicked and did as they were told.

The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.

The edits are interesting in their own right. But I couldn’t help but think of an op-ed Flynt Leverett wrote back in 2006. Though the entire op-ed was, according to CIA officials, unclassified, during the review process the White House decided the parts that described Iran’s cooperation with the United States after 9/11 had to be redacted.

Back in 2006, the fact that Iran had made significant efforts to reach out the US undercut the Village’s entire narrative about national security.

It’s not clear whether WSJ’s editors decided on their own that revealing that the serial bankster bailouts benefit just the banksters was too dangerous for WSJ’s readers, or whether someone in Timmeh Geithner’s neighborhood called to complain (as they did when an Irish Times columnist revealed that Timmeh was behind nixing the IMF’s efforts to restructure Ireland’s debt).

But when a counter-narrative comes to be viewed as this dangerous, it’s usually a testament to the fragility of the narrative it threatens. In Leverett’s case, the counter-narrative threatened the stupid efforts to shore up US hegemony in the Middle East by attacking Iran; in this case, the counter-narrative threatens our continuing willingness to embrace austerity so the banksters can get richer. Of course both narratives are about the same thing: sustaining US power.

I can’t decide whether it’s pathetic or funny that our power continues to rest on such fragile narratives.

Obama Administration Finally Brags about Jobs Created in Auto Bailout

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The Obama Administration was gung ho to brag about the GM IPO last year. But if I’m not mistaken, this is the first time the White House has bragged nationally about jobs created thanks to the auto bailout (Ron Bloom, who got promoted into an official Assistant to the President role at the beginning of the year, wrote this).

Today brings word of more good news for the American auto industry. GM announced that it would hire 4,200 workers at seventeen of its plants around the country.

President Obama took office amidst the worst recession in a generation and nowhere was this devastion [sic] felt harder than in the American auto industry and the communities it has supported for decades. In the year before GM and Chrysler filed for bankruptcy, the auto industry shed over 400,000 jobs.

Facing this situation head on, the President made a bold and, at the time, politically unpopular choice: Despite calls from critics to simply let these companies – and the entire American auto industry – crumble, he refused to allow these companies to fail. Had the Administration failed to intervene, conservative estimates suggest that it would have cost at least an additional one million jobs and devastated vast parts of our nation’s industrial heartland.

But at the same time, the President did not provide unconditional support.  He insisted that the companies and their stakeholders make tough choices and undertake massive restructurings requiring huge sacrifices from all of their stakeholders.

Because of this “tough love,” the American auto industry is now positioned to grow and prosper as the economy recovers.  Since GM and Chrysler emerged from bankruptcy in June 2009 the auto industry has added 115,000 jobs – the fastest pace of job growth in the auto industry since 1998. Last year, for the first time in 16 years, the Detroit Three actually gained market share compared to their foreign counterparts.

And these companies are not  just making cars and trucks – they’re making the kind of fuel efficient cars and trucks that will power us to energy independence, protect consumers against rising gas prices, and ensure America wins the future.

Some of the workers GM is hiring and re-hiring in today’s announcement will be at work producing larger-than-initially-planned quantities of the widely acclaimed Chevy Volt. And just last month, Ford – which didn’t receive government assistance but which supported our aid to GM and Chrysler and has said publicly that it would not have survived if the rest of the American auto industry had been allowed to collapse – reported its best first-quarter profit in more than a decade thanks in large part to its new fuel-efficient vehicles.

In the wake of an historic recession, there is no doubt that much work remains. And we will not rest until every American who is looking for work can find a job. But today’s announcement is another positive sign – including more than 2 million private sector jobs created over the past 14 months – that we’re seeing across the country.

The comparative silence about the success of the bailout in the terms that really matter to actual people–jobs–not only confirms Main Street suspicions about the White House viewing the economy solely through the lens of the banksters, but it also leads beltway folks like John Dickerson to wonder out loud whether there is anything a President can do to fix the economy (Dickerson must have skipped those weeks when his American history class covered the New Deal).

The effects of the too-small stimulus, though real, are a lot harder to see. But aside from the decade-long Military Industrial Complex stimulus the DC area has enjoyed, the auto bailout and related energy investments was the biggest concentrated stimulus the Administration championed. And it has had an effect, both in hiring at GM and Chrysler, but also in hiring in MI more generally.

It’d be nice if the Administration not only bragged about that, but replicated it for places like Nevada.

Update: John Dickerson corrects me; this July 2010 briefing (a presser leading up to an Obama trip to visit several plants in the MidWest, bragged about jobs created). Thanks to Dickerson for the correction.

Air Force: We’re Screwed

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The Air Force is using stimulus dollars to rebuild some family housing at Eielson Air Force Base in Alaska. Since they’re using stimulus dollars, they have to get a waiver for anything they say they can’t source to an American company. Among the list of items that can’t be sourced in America?

Screws:

  • 1″ Collated Screws, Shank #10
  • 2-1/2″ Collated Screws
  • 3″ Ceramic Coated Bugle Head Course Thread Screws
  • 3/4″ Collated Screws, Shank #10

And it’s more than screws that Americans don’t make anymore, according to the Air Force. Lots of stuff that you or I might buy at Lowes (or better yet, a local hardware store). Things like “Residential Style Polished Chrome Toilet Paper Holders” and “24″ Bath Vanity Light Fixtures.”

Now, as Mike Mandel–who found the entry in the Federal Register where the Air Force granted this waiver to buy screws and other stuff from China–notes, the official data show that we do still make screws. So it may be the data aren’t catching our decline in screw-making, or it may be the Air Force didn’t look very hard for American-made screws.

I see four possibilities.

First, the Air Force could be lazy. The parts are really available, but they can’t find them.

Second,   U.S. manufacturers only make sophisticated parts, not towel bars and door stops.

Third,  these industries were doing great through 2007,   and have only gone offshore since the recession.

Fourth,  the official data didn’t pick up the offshoring in the 2000s.

And frankly, even if Americans no longer do make screws, that’s not as big of a problem as some more complex items that we’re on the verge of not making anymore: propellant chemicals, space qualified electronics, power sources for space and military applications (batteries and photovoltaics), specialty metals, hard disk drives, and flat panel displays (LCDs). Those are the kind of things that, when we stop making them, we lose the capacity to make them going forward (and open up our military machine to vulnerabilities).

Still, there’s something viscerally disturbing about not making screws in this country anymore. Sure, like underwear and socks, they’re probably all made in one Chinese city somewhere. But it seems like a key skill, like boiling water, that we no longer want to do anymore.

Some Context on MI’s Emergency Financial Manager Law

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On Saturday, I described how the democratically-elected government of Benton Harbor, a poor, segregated MI city about an hour south of me, lost its power to the city’s Emergency Financial Manager.

There are two parts of the story that I didn’t explain, which this post from wizardkitten does well. First, the EFM law goes back some years in MI and EFMs already had a great deal of power.

The idea of the state appointing an Emergency Financial Manager for local governments in distress actually dates as far back as 1988, and that led to Public Act 72 of 1990 (Blanchard did it!). Basically, it said that in order for the state to protect it’s own credit and fiscal operations, any city or school district that was on the verge of bankruptcy would receive a review of their finances from a state-appointed team, and, if that panel found that the city or school district did not have an adequate plan to get out of trouble, a manager would then come in and help clean up the mess.

The manager could hire staff and direct existing staff. They did not need public approval for a new fiscal plan. They could do anything they wanted with the outstanding financial obligations (i.e., the bills). They could renegotiate labor contracts, but they could not abrogate those contracts. They could eliminate positions except of those of elected officials, cut pay and benefits even for elected officials, sell property, review payroll – anything but touch retirement. They could not raise taxes. They also had the ability to start Chapter 9 bankruptcy if all else had failed.

Michigan’s initial muted response to Governor Rick Snyder’s move to increase EFM powers derives, IMO, from our familiarity with the concept and the fact so many are at a loss to figure out what to do with cities gutted by globalization. We’re the frogs in the boiling water of globalization, I guess, and we didn’t notice the heat going up on democracy itself.

The other really important part of Snyder’s new empowerment of EFMs has to do with the real target: teachers. Specifically, the teachers in Detroit’s public schools.

I believe this is a warm-up for Detroit, and perhaps the 150 other school districts that Snyder’s budget cuts are going to put closer to bankruptcy. DPS EMF Robert Bobb has indicated that he “planned to exercise his power as emergency manager to unilaterally modify the district’s collective bargaining agreement”, and by law the school district has now sent out 5,466 layoff notices to its union employees, and 250 pink slips to their administrators as well. (that is nearly a yearly occurrence anyway lately – but this time it takes on a new urgency.)

Bobb, under order by law to produce a plan to balance the books, came up with closing half of Detroit’s schools by 2014, 70 to be exact. He doesn’t want to do this, as class size is expected to swell to 60 and parents would flee the district costing the schools even more money – but the state has given the order. Some schools may turn to charters, and a GM-style bankruptcy that separates the bad debt has been talked about. Whatever happens, it’s going to be seismic.

As far as the city goes, Detroit Mayor Dave Bing is asking for benefit concessions from city employees and a new tax on casinos to help balance a budget that has a $155 million deficit and could grow to $1.2 billion by 2015, and his plan is already meeting resistance. Bing claims that, “If we are unable or unwilling to make these changes, an emergency financial manager will be appointed by the state to make them for us” – a bit of leverage, given what is going on with the Detroit Public Schools, and now this takeover in Benton Harbor. The heat is getting turned up fast in Motown, and it should reach a boiling point soon.

One other reason, I think, why we boiling froggies haven’t reacted sooner: the UAW. What EFMs have in store for teachers really matches what the auto companies accomplished with UAW’s workers even before the 2009 bailout. The UAW willingly accepted a two-tier system of wages (effectively meaning starting UAW workers make less than workers at transplant factories in other states), and took on the costs of retiree health care.

In other words, one of our state’s unions has already been gutted in the face of harsh threats. The threat of EFMs will make it easier to do so with the public unions too.

It’s all about turning MI from a state with a solid middle class into one with desperate workers willing to make huge sacrifices just to keep their jobs.

Using New Emergency Financial Manager Law, They Start Dissolving Governments in Michigan

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In what is likely to be just the first of several dissolutions of democratically elected city governments and school boards in Michigan, the Emergency Financial Manager of Benton Harbor, Joseph Harris, just took away all authority from the city’s elected government.

I, Joseph L. Harris, the duly appointed Emergency Manager for the City of Benton Harbor, Michigan (the “City”), pursuant to the power and authority granted by Act 4 of the Public Acts of Michigan of 2011, being MCL 141.1501 et seq (the “Act”), do hereby resolve and order as follows:

WHEREAS, Section 19(ee) provides that the Emergency Manager may exercise any power or authority of any office, employee, department, board, commission or similar entity of the City, whether elected or appointed;

WHEREAS, the power of the Emergency Manager as set forth in Section 19(ee) of the Act is superior to and supersedes any such officer or entity; and

WHEREAS, now, no City Board, Commission or Authority has authority or power to act on behalf of the City as provided in the Act.

NOW, THEREFORE BE IT RESOLVED AS FOLLOWS:

1. Absent prior express written authorization and approval by the Emergency Manager, no City Board, Commission or Authority shall take any action for or on behalf of the City whatsoever other than:

i) Call a meeting to order.

ii) Approve of meeting minutes.

iii) Adjourn a meeting.

2. That all prior resolutions, or acts of any kind of the City in conflict herewith are and the same shall be, to the extent of such conflict, rescinded.

3. This order shall be effective immediately.

Harris, the former Auditor of Detroit, was appointed last year under the Granholm administration. After Harris cut cops and firemen last year, local residents started talking about firing him.

There are two things it helps to know about Benton Harbor. First, it has long been almost entirely dependent on Whirlpool for jobs. And as Whirlpool moved manufacturing out of state and country, its operations in the city have shifted from manufacturing to call center and resort work.

Just about all the cities that have EFMs now–along with Benton Harbor, Pontiac, Ecorse and Detroit’s schools–or have had EFMs–Hamtramck, Highland Park, Flint, and Three Oaks–have been gutted by the shift of manufacturing under globalization.

But Benton Harbor is particularly notable because of how segregated it is. Here’s how CSM described the segregation in a 2003 report on race riots in Benton Harbor (note, the boundary between Benton Harbor and St. Joseph is the river you can see in the map above).

On one side lies St. Joseph, an Eden-like beach town, brimming with barbered lawns, boutique coffee shops, and summer art festivals. Cross to Benton Harbor, and everything changes. White becomes black, and affluence turns to poverty. Frustrated residents sit on sagging stoops and walk by boarded-up businesses.

When Benton Harbor erupted in violence this week, the trigger was ostensibly a high-speed police chase through a residential neighborhood. It was the second such pursuit in three years, and the second to result in the death of a young black.

But as with most riots, this is a story that goes much deeper than the immediate event that lit the fuse. It’s about years of pent-up frustration over that gulf that separates Benton Harbor from St. Joseph. Over the sense most Benton Harbor residents have that a fair trial is impossible in Berrien County, which encompasses both towns, and that the police force engages in practices – like high-speed chases – that would be unheard of across the river. Over the accumulated anger of being pulled over by cops too often, of having job applications rejected before they were glanced at, of the assumptions that if you live in Benton Harbor, you must be a drug dealer, a criminal, a drop-out.

[snip]

The town of 11,000 is 92 percent black. Federal figures show that the average income is $17,000 a year.

By contrast, St. Joseph (population 8,800) is 90 percent white. Bustling with clothiers and cafes, its average unemployment rate last year was below 2 percent. Indeed, most of Berrien County is white, conservative, and affluent.

Now, Harris is black, and the other cities with EFMs aren’t as segregated (Pontiac is 39% white and 48% African American and Ecorse is 52% white and 40% African American, though Detroit is 12% white and 81% African American).

But it is rather telling that the first city in MI to have its democracy taken away under Rick Snyder’s EFM law is one that has long suffered under both globalization and racism. Rather than finding real solutions to those long-festering problems, we’re just going to shut it down.

The United States of Monsanto

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Last night, I was on BlogTalkRadio with former Ambassador to Nigeria John Campbell talking about WikiLeaks, secrecy, and democracy. As a way to illustrate how the secrecy of diplomatic cables hides a great deal of undemocratic ideas, I raised the emphasis State Department Under Secretary for Management Patrick Kennedy placed in a hearing on WikiLeaks on State’s role in pitching US business.

This formal channel between Washington and our overseas posts provides the Department and other U.S. Government agencies crucial information about the context in which we collectively advance our national interests on a variety of issues. For example, these communications may contain information about promoting American export opportunities, protecting American citizens overseas, and supporting military operations.

I pointed out that WikiLeaks had revealed that our diplomats had proposed a “military-style trade war” to force Europeans to adopt Monsanto’s controversial products.

The US embassy in Paris advised Washington to start a military-style trade war against any European Union country which opposed genetically modified (GM) crops, newly released WikiLeaks cables show.

In response to moves by France to ban a Monsanto GM corn variety in late 2007, the ambassador, Craig Stapleton, a friend and business partner of former US president George Bush, asked Washington to penalise the EU and particularly countries which did not support the use of GM crops.

“Country team Paris recommends that we calibrate a target retaliation list that causes some pain across the EU since this is a collective responsibility, but that also focuses in part on the worst culprits.

“The list should be measured rather than vicious and must be sustainable over the long term, since we should not expect an early victory. Moving to retaliation will make clear that the current path has real costs to EU interests and could help strengthen European pro-biotech voices,” said Stapleton, who with Bush co-owned the St Louis-based Texas Rangers baseball team in the 1990s.

Here’s another example of how our government bureaucracy has decided that Monsanto and highly subsidized American cotton growers are more important than things like funding heating oil for the poor or teachers. {h/t Raj Patel)

On February 18, Republicans in the House of Representatives defeated an obscure amendment to the House Appropriations bill by a 2-to-1 margin. The Kind Amendment would have eliminated $147 million dollars that the federal government pays every year directly to Brazilian cotton farmers. In an era of nationwide belt tightening, with funding for things like education and the U.S. Farm Bill on the chopping block, defending payments to Brazilian farmers may seem curious.

These subsidies are the compromise the US and Brazil have concocted to resolve a trade dispute: Brazilian cotton growers won a case against US cotton subsidies. In response, Brazil proposed suspending its Intellectual Property obligations. Instead, our government effectively agreed to subsidize Brazilian growers to make sure we can continue to pay silly cotton subsidies here in the US without endangering Monsanto’s royalties in Brazil.

In WTO language, Brazil was allowed to suspend its obligations to U.S. companies under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. This constituted a major threat to the profits of U.S. agribusiness giants Monsanto and Pioneer, since Brazil is the second largest grower of biotech crops in the world. Fifty percent of Brazil’s corn harvest is engineered to produce the pesticide Bt, and Monsanto’s YieldGard VT Pro is a popular product among Brazilian corn farmers. By targeting the profits of major U.S. corporations, the Brazilian government put the U.S. in a tough spot: either let the subsidies stand and allow Brazilian farmers to plant Monsanto and Pioneer seeds without paying royalties, or substantially reform the cotton program. In essence, Brazil was pitting the interests of Big Agribusiness against those of Big Cotton, and the U.S. government was caught in the middle.

The two governments, however, managed to come up with a creative solution. In a 2009 WTO “framework agreement,” the U.S. created the Commodity Conservation Corporation (CCC), and Brazil created the Brazilian Cotton Institute (BCI). Rather than eliminating or substantially reforming cotton subsidies, the CCC pays the BCI $147 million dollars a year in “technical assistance,” which happens to be the same amount the WTO authorized for trade retaliation specifically for cotton payments. In essence, then, the U.S. government pays a subsidy to Brazilian cotton farmers every year to protect the U.S. cotton program—and the profits of companies like Monsanto and Pioneer.

Now, how did our country decide this kind of insanity is really in the “national interest”? Who decided Monsanto was a more worthy American “citizen” than the poor and the children?

DC Mayor Gray Arrested: Finally a Leader In Washington DC Finds His Shoes

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Barack Obama famously promised his supporters and voting base in 2007

And understand this: If American workers are being denied their right to organize and collectively bargain when I’m in the White House, I will put on a comfortable pair of shoes myself, I’ll will walk on that picket line with you as President of the United States of America. Because workers deserve to know that somebody is standing in their corner.

But, of course, now that Mr. Obama is safely ensconced in Washington DC at the oh so elite address on Pennsylvania Avenue, neither he nor his shoes are anywhere to be found when when workers and “their right to organize and collectively bargain” are under not just attack, but siege, in Wisconsin, Ohio, and other locales.

Today, however, we see what real Democratic leadership in Washington DC looks like when the rights of their citizens and constituents are being trampled on. District of Columbia Mayor Mayor Vincent Gray and other DC Council members found their shoes, took to the street to protest the wrongs occasioned upon the District and its women by the budget compromise that Mr. Obama applauded and congratulated himself over late Friday night. Mayor Gray and friends led by example:

Updated, 6:22 p.m.: Mayor Vincent Gray, D.C. Council Chairman Kwame Brown (D) and council members Yvette M. Alexander (D-Ward 7), Tommy Wells (D-Ward 6), Muriel Bowser (D-Ward 4) and Michael A. Brown (I-At Large) have been arrested by U.S. Capitol Police officers.

Also arrested was Sekou Biddle (D), who is filling Brown’s former at-large council seat on an interim basis.

More than 200 protesters gathered, including local officials and activists. Police let them sit in the street for 30 minutes, then began arresting them. Protesters chanted, “No justice, no peace.”

Mayor Gray and council members Brown, Alexander, Wells, Bowser and Brown not only found their shoes and their voice to stand up for the people they represent, they were willing to put their physical liberty on the line to do so. Gray et. al should be congratulated for this principled stand.

There is a lesson to be learned here by other inhabitants of our nation’s capitol.

Democracy and Now Capitalism Are Failing Ideologically; But What Comes Next?

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As I was prepping for my panel on Saturday, I was thinking a lot about PJ Crowley. Crowley is, as you’ll recall, the State Department spokesperson who was ousted after he called the treatment of Bradley Manning “ridiculous and counterproductive and stupid.” In my panel, I quoted Crowley’s comments on American support for unrestricted media. And as I was reviewing all this, I was thinking about Crowley’s almost unremarked criticism last week of the Administration’s decision to move of Khalid Sheikh Mohammed’s trial to Gitmo.

The prosecution of #KhalidSheikhMohammed and others under untested military tribunals undercuts our global promotion of the rule of law.

For all my disagreements with Crowley about Manning’s incarceration (though note that Crowley is also one of the few in government who has criticized the embarrassing lack of security that made the alleged leak possible), I find his adherence to a now-outmoded approach to diplomacy charming. Almost quaint.

You see, Crowley still appears to believe that America’s claim to exceptionalism–the conceit that it serves as a model of democracy and rule of law and liberty to others around the world–not only still exists but still forms a part of our international policy. He believes that this country would choose to follow the law out of consideration that doing so will allow us to exercise power through persuasion rather than force.

Crowley’s ouster–the firing of a guy because he dared remind his bosses that American used to choose to do things the right way rather than the way of maximal power–seems symbolic that that approach is now dead.

Indeed, whether or not we’ve conceded it’s dead, others now recognize it, as Glenn Greenwald points out today. (h/t harpie)

Aside from what conduct like [his endorsement of Manning’s treatment and his persecution of whistleblowers] reveals about Obama, it also severely undermines the ability of the U.S. to exercise any shred of moral leadership in the world. Consider this series of events:

Washington Post, March 13, 2011:

Associated Press, April 4, 2011:

Reuters, yesterday:

The United States is beset by violence, racism and torture and has no authority to condemn other governments’ human rights problems, China said on Sunday, countering U.S. criticism of Beijing’s crackdown. . . . “The United States ignores its own severe human rights problems, ardently promoting its so-called ‘human rights diplomacy’, treating human rights as a political tool to vilify other countries and to advance its own strategic interests,” said a passage from the Chinese report.

China also “accused the U.S. . . . of pushing for Internet freedom around the world as a way to undermine other nations, while noting that Washington’s campaign against secret-spilling website WikiLeaks showed its own sensitivity to the free flow of information,” and further “lambasted the U.S. over issues ranging from homelessness and violent crime to the influence of money on politics and the negative effects of its foreign policy on civilians.” China’s human rights record is atrocious, but can anyone contest the validity of its objections to the U.S. and the Obama administration’s purporting to act as human rights arbiters for the world?

Now, all that simply shows that our ideological claim to serve as a model of law and liberty is dead.

But this–this is an ideological collapse America may have a much more difficult time dealing with, because it’s an ideological failure internally.

FAITH in the free market is at a low in the world’s biggest free-market economy. In 2010, 59% of Americans asked by GlobeScan, a polling firm, agreed “strongly” or “somewhat” that the free market was the best system for the world’s future. This has fallen sharply from 80% when the question was first asked in 2002. And among poorer Americans under $20,000, faith in capitalism fell from 76% to 44% in just one year. [my emphasis]

Now, granted, capitalism still commands majority support in this country; it’s just among the people paying the price of capitalism’s failure where support has really tanked. (Update: In this Gallup poll from a few weeks ago, 67% of those polled said corporations and banksters have too much power.)

But consider this: by a count of 67% to 59%, more people in China believe in the power of free markets right now than in the US. The communists like capitalism better than the capitalists themselves! (Maybe that’s because they’ve taken the jobs of the poorer Americans who lost theirs to globalization).

I wrote a fair bit about the collapse of capitalism as an ideology, internationally, back in January.

A corollary to the question, “after such a catastrophic failure in 2008, why aren’t we reining in capitalism and expanding the safety net?” is “why isn’t anyone declaring victory over capitalism in the same way capitalism once declared victory over communism?”

But who would declare victory? (Some humor: “Hu would declare victory.”)

[snip]

But I also think something else is going on with ideology as it existed during the Cold War. With the failure of both communism and (thus far, in more limited fashion) capitalism, it becomes increasingly clear that ideology doesn’t make for successful countries, governance does. Whether or not capitalism will experience a resurgence, our country has become corrupt and ineffective enough that it’s not clear we’d go with it. Moreover, the bogeyman that has replaced the Evil Empire–terrorism–is as much about an increasingly viable challenge to the nation-state, at a time when a rising number of failed states offer a geographic beachhead for such challenges. One of the most important ways to combat “terrorism” is to prevent militarization and climate issues to create more failed states. And that means there will be less emphasis on ideology as it worked in the Cold War and a greater premium on governance.

Which is important because failing capitalism is having real repercussions on things like food supply. Which, as we saw in Tunisia and may well see across the globe, cuts through any debate about ideology quickly. When it comes to the point where governments can’t feed their people, then they begin to fear the popular classes again, even if they’ve managed to insulate themselves from that for deacades.

Which brings us full circle, I think. DeBoer suggests we need greater ideological diversity in the blogosphere, and he’s right. But what we need just as badly is some way to articulate and mobilize the needs of the working class before our failure to govern (which the narrowness of our discourse fosters) ends up in food riots.

With the end of the Cold War, the US has had the luxury, for now, of completely ignoring the ideological left because the threats to the country–as the governing class sees them–have everything to do with the market and nothing to do with workers. But ultimately, the combination of failed governance and the market will lead right back to the workers.

But capitalism as an ideology internationally works differently than it does domestically. Internationally, it provides ideological cover for policies that concentrate wealth and create instability. As uprisings in North Africa and the Middle East show, ultimately reality will intrude and make such policies harder to sustain.

But free market ideology in the US has allowed far more than just anti-worker policies. In the same way our exploitation of democracy as an ideology internationally allowed us to rule through persuasion, working class belief in capitalism paved the way for corporations to take over our government without a fight.

That said, it’s unclear where this goes. Where ideology fails, force usually takes its place.

But it does seem like an opportunity. Now if only the left were prepared with a viable “something else” to offer.

The Charismatic Blonde Women and the Consent Decree

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DDay reported on OCC’s attempt to preempt a foreclosure settlement on Monday. Today, Yves Smith has a long post giving the consent decrees the banks are trying to roll out in lieu of a real foreclosure settlement the disdain they deserve.

Wow, the Obama administration has openly negotiated against itself on behalf of the banks. I don’t think I’ve ever seen anything so craven heretofore.

[snip]

The part I am puzzled by is who is behind this rearguard action. It clearly guts the Federal part of the settlement negotiations. If you pull out your supposed big gun (ex having done a real exam to find real problems, and it’s weaker than your negotiating demands, you’ve just demonstrated you have no threat. Now obviously, a much more aggressive cease and desist order could have been presented; it’s blindingly obvious that the only reason for putting this one forward was not to pressure the banks, as American Banker incorrectly argued, but to undermine the AGs and whatever banking/housing regulators stood with them (HUD and the DoJ were parties to the first face to face talks).

So the only part that I’d still love to know was who exactly is behind the C&D order? Is it just the OCC?

But what I’d like to know is why, coincident with the roll-out of this Potemkin resolution to the foreclosure problem, someone told Reuters that the Administration was considering Jennifer Granholm and/or Sarah Raskin to head the Consumer Finance Protection Board.

The White House is considering Federal Reserve Governor Sarah Raskin and former Michigan Gov. Jennifer Granholm to head a new agency charged with protecting consumers of financial products, a source aware of the process said Tuesday.

You see, as Yves reminds us, one part of the whole AG settlement that this consent decree seems intended to replace was that Tom Miller, Iowa’s Attorney General, would get the CFPB position as his reward for shepherding through such a crappy settlement.

So now, with the consent decrees the apparent new plan to appear to address foreclosures without penalizing the banksters, the Administration rolls out the claim that it is considering Granholm and Raskin?

And the report is all the more weird given that Granholm was previously floated for the position in late March, at which point she declined to be considered and–the next day–accepted a position with Pew. This morning, in response to the Reuters story, Granholm tweeted,

This story says I’m under consideration for the CFPB job. I have declined to be considered for this post. I’m happy in my new roles at Pew, Berkeley and Dow. And, by the way, while I don’t know Raskin and she may be great, I think nominating Elizabeth Warren is a fight worth waging.

See, best as I can guess (and this is a guess), by pulling the plug on the AG settlement, the Administration lost its best case for appointing someone not named Elizabeth Warren to assume the CFPB position. Whereas they might have been able to claim (falsely) that Miller had achieved this great progressive settlement for homeowners, now they’ve decided to stick with the status quo rather than even a bad settlement. Which leaves them with the increasingly urgent problem of who heads the CFPB when it goes live in July.

And so they float a report that the one blond woman who is as much of a rock star as Warren is might get the position? Do they think Democrats can’t tell the difference between charismatic blonde women (or that progressives would confuse the down-to-earth but centrist Granholm for Warren)?

It’s like they’ve got a Craigslist posting up somewhere:

Wanted: blonde woman with great people skills and rock star looks to serve as figurehead for a position purported to exercise real power to protect American consumers, but which will instead be asked to serve up Timmeh Geithner coffee and complete deference. Democratic affiliation a plus but not necessary.

How Allowing Money Laundering Keeps Our Bubblicious Finance Afloat

/in , /by

Last June, Bloomberg did a long story on the Deferred Prosecution Agreement that Wachovia negotiated with DOJ. As “punishment” for helping Mexican drug gangs to launder more than $363 billion  through casas de cambios for three years, Wachovia had to pay $50 million fine and a $110 million forfeiture of the proceeds that were clearly from drug gangs.

In my post on Bloomberg’s article last year, I compared the size of this business (plus some other illegal ones Wachovia engaged in) to how much Wachovia was losing in mortgage shitpile.

So $373 billion in wire services (some of which were surely legal), $4 billion in bulk cash services, and some portion of $47 billion in digital pouch services (again, some of which is surely legal and may pertain to remittances). Compare those numbers to the $40 to $60 billion or so in Wachovia subprime losses Wells Fargo ate when it took over Wachovia. Was Wachovia laundering money for drug cartels because it was so badly exposed in mortgage-backed securities, or was it so heavily involved in products that could be used for money laundering just for fun?

It sure looked to me like Wachovia was covering this up–and berating their own money laundering guy who kept pointing to these transactions–because they were so deep in the shitpile.

The Guardian just did its own long story on this (h/t NC) that, among other things, confirms my suspicion there was a connection between the shitpile and the money laundering.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade,” he said. “There were signs that some banks were rescued that way.”

Of course, it almost certainly wasn’t just drug lords. Our banks were almost certainly overlooking other dubious cash transfers during this time, from oil dictators to the mob to illegal corporate gains.

And we couldn’t prosecute such money laundering, the Guardian article suggests, because doing so would have hastened the collapse of the bubble.