Our Unrepresentative Representation

Sunday, 18 December, 2011 08:28 Written by Dr. Art Kamm

Summary
The Occupy Wall Street movement has reason to protest.  Special interest-driven deregulation policy was at the heart of the recent economic collapse.  It has been the “99%” that has paid the price for this policy failure with lost employment, devalued housing prices, retirement accounts being cut in half, and increased levels of poverty while the wealthiest in America continued to do well.  A valid question is why our elected representatives are not working together to put a stop to failed policy that has been so damaging to the majority of Americans.  This article will examine the disproportionate number of the wealthy who hold elected office in Washington and the conflict of interest they face in setting policy versus their own financial interests as well as the special interests that finance their campaigns.  And it will explore an incentive that politicians have to stay in office where they can act on non-public information to their own financial benefit.  It examines the issue of whether our Congress has become ‘Our Unrepresentative Representation’.
Policy Was at the Heart of the Great Recession
Alan Greenspan, who presided over the Federal Reserve for 18 years before stepping down in 2006, was one of our nation’s leading voices for deregulation.  He was considered an economic sage whose words affected market direction and, as noted by Bob Woodward, was celebrated as the “Maestro” (ref).   Yet, it was a humbled Alan Greenspan who admitted before Congress in 2008 that his belief in deregulation had been shaken (ref).  ”Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief” he relayed to the House Committee on Oversight and Government Reform.  Henry Waxman, chair of the committee, asked “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”  Mr. Greenspan’s responded “Yes, I’ve found a flaw…I’ve been very distressed by that fact”.
When the Fed cut interest rates to near record lows from 2001 until mid-2004, housing prices climbed far faster than inflation or household income giving rise to concerns of a speculative bubble in both home prices and construction that would go bust; concerns that were ignored and calls for tighter regulation on subprime mortgages and other high risk mortgages were resisted.  Republican lawmakers tried to blame the mortgage meltdown on Fannie Mae and Freddie Mac claiming that Democratic lawmakers blocked measures to reform the companies.  Greenspan disagreed placing far more blame on Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage backed securities.  He stated that demand for these securities was so high that Wall Street companies pressured lenders to lower their standards and produce more “paper” (note the impact of repealing Glass-Steagall below).  Mr. Greenspan stated “The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the source of the crisis) would have been far smaller and defaults accordingly far lower”.
A 2008 report published by the Organization for Economic Co-Operation and Development (OECD) agreed with Mr. Greenspan’s testimony.  The report concluded that the financial crisis originated from distortions and incentives created by policy actions and identified 2004 as being critical to causality (ref).
Quoting from that report:
“In 2004 four time specific factors came into play. (1) the Bush Administration ‘American Dream’ zero equity mortgage proposals became operative, helping low-income families to obtain mortgages; (2) the then regulator of Fannie Mae and Freddie Mac, the Office of Federal Housing Enterprise Oversight (OFHEO), imposed greater capital requirements and balance sheet controls on those two government- sponsored mortgage securitisation monoliths, opening the way for banks to move in on their “patch” with plenty of low income mortgages coming on stream; (3) the Basel II accord on international bank regulation was published and opened an arbitrage opportunity for banks that caused them to accelerate off-balance-sheet activity; and (4) the SEC agreed to allow investment banks (IB’s) voluntarily to benefit from regulation changes to manage their risk using capital calculations under the ‘consolidated supervised entities program’. (Prior to 2004 broker dealers were supervised by stringent rules allowing a 15:1 debt to net equity ratio. Under the new scheme investment banks could agree voluntarily to SEC consolidated oversight (not just broker dealer activities), but with less stringent rules that allowed them to increase their leverage ratio towards 40:1 in some cases.) The combination of these four changes in 2004 caused the banks to accelerate off-balance sheet mortgage securitisation as a key avenue to drive the revenue and the share price of banks….
“When OFHEO imposed greater capital requirements and balance sheet controls on Fannie and Freddie, banks that had been selling mortgages to them faced revenue gaps and an interruption to their earnings. Their solution was to create their own Fannie and Freddie look-alikes: the structured investment vehicles (SIVs) and collateralised debt obligation (CDOs). The influence of the controls affecting Federal Mortgage Pools and the corresponding response in private label RMBS is shown in Figure 2 [see report]. This new surge of RMBS caused by the Fannie- Freddie regulator was picked up much too late by Bank regulators to take effective action. ”
In the context of the above it is important to note some other deregulation (also, failure to regulate) policy decisions.  The banking industry had been seeking repeal of the Glass-Steagall Act since at least the 1980′s and it occurred in 1999 (ref).  Glass-Steagall was legislation that was put into place following the Great Depression that, amongst other things, separated commercial from investment banking to remove the conflict of interest inherent to an institution controlling both a commercial bank and an investment bank (note Greenspan’s testimony that investment banks were pressuring commercial lenders to issue more “paper”, i.e. risky mortgages, because of the high demand for mortgage-backed derivatives).  Also, there was CFTC’s failed attempt at regulating and bringing transparency to OTC derivatives in the late 1990′s thus allowing the market for those financial instruments to grow unregulated for the next ten years (ref).  These instruments, backed by risky assets, were at the heart of such dramatic failures as Bear Sterns and AIG.  And there was tax policy that contributed to pushing more income and wealth into a small sliver of our population when our economy is 70% personal consumption.


Reference for above figure (ref)
In both instances where 1% of our population held up to 24% of this nation’s income (prior to the Great Depression and Great Recession) our country experienced a severe economic downturn (ref).
Above figure from Krugman (ref).
And who paid the price for these failed policies?  It was those in what has been called the “99%” by the Occupy Wall Street movement.  Their purchasing power not keep pace with the growth of the economy.

Their homes losing value (most often the middle class’s key investment).  Their retirement accounts being cut in half.  And jobs disappearing as corporations cut back on expense to maintain profitability.  And this pain is being experienced while the richest of Americans quintupled their income during the heart of the Great Recession (ref) and millionaire households (the “1%”) hold a sum of wealth equivalent to almost three times the size of our national economy that is anticipated to double within the next decade as money makes money at historically low tax rates (ref).  And income from that wealth (dividends and capital gains) is not subject to payroll tax that supports programs that the rest of America depends on during their senior years (Social Security and Medicare).
And yet the drumbeat of deregulation and tax policy largely benefitting the wealthiest continues.  We continue to hear that it is not smart to tax our ‘job creators’; yet job creation in large part was anemic during 4 year periods where ‘trickle down’ policy was in place (ref).

* Total Non-Farm Payroll expressed in millions
The money we borrowed to support the tax benefit to the wealthiest (the debt being assumed by America’s taxpayers and future generations) went to support both ‘Wall Street’ and high growth business interests abroad (ref).  We continue to hear that regulation is stifling business, and yet it was deregulation of the financial industry that was at the heart of the financial crisis as noted by both Mr. Greenspan’s testimony as well as the OECD report (see above).  We continue to hear about privatizing Social Security; this after we have witnessed the level corporate risk taking that lead to the financial crisis Mr. Greenspan said left him in ‘shocked disbelief’.  And with an estimated 45,000 Americans dying each year (ref) (including over 2000 military veterans) due to a lack of access to essential care, those who are denied coverage are required to pay tax to support the healthcare benefits of our elected officials, the same officials who are accepting large sums of money from special interests opposed to universal coverage.
And there is question about the emotion underlying the Occupy Wall Street movement?
With these failed policies having caused so much pain for much of America, a fair question is why our elected representatives are not working together in putting a stop to this. They are after all our elected representation.  It is difficult to dismiss that many our elected officials face a conflict of interest regarding their charge to represent ‘the people’ versus their own financial self-interests as well as the special interests that carry them to office. This article will examine the disproportionate number of the wealthy who hold elected office in Washington and the conflict of interest they face in setting policy versus their own financial interests as well as the special interests that finance their campaigns.  And it will explore an incentive the wealthy have had for staying in office where they can act on non-public information to their own financial benefit.  It will explore whether our Congress has become our ‘unrepresentative representation’.

Unrepresentative Representation

Disproportionate Wealth
The Senate has been called a millionaires club (ref) with about half of its members holding that status.  In 2009 244 members of Congress were millionaires – 138 Republicans and 106 Democrats (ref).   However, a picture is worth a thousand words.  The following graphics were sent to me by one of my readers:


A significant imbalance exists (around 40- to 50-fold) regarding the number of millionaires holding elected office in Washington versus the general public.  The median American family had a net worth of $96,000 in 2009 per the Federal Reserve Board while the median net worth for members of the US House of Representatives and Senate was $725,000 and $2.4 million, respectively (ref).  The reference provides a list of the 20 wealthiest members of Congress based on 2009 reports, 10 Republican and 10 Democrats, with Representative Darrell Issa (R-California) holding the top spot with an average net worth of over $300 million dollars.

Special Interest Contributions
There is a high correlation between candidate spending and winning elected office (ref).  In the 2010, candidate spending correlated to success in 85% of House races and 83% of Senate races.  And historically the correlation has even been greater; in 2004; 98% of House seats and 88% of Senate seats went to the candidates who spent the most.  Why does this correlation exist?  Because candidate exposure is expensive.  Elections are won by the expensive tactic of manipulating high probability voters through repeated messaging over TV during prime time hours (information obtained from a political consulting group during my exploration of a Senate run).  The average cost of winning a Senate seat was $8.28 million in 2010 and $1.09 million for a House seat (ref).
Most self-financing candidates faltered in the 2010 cycle and significant investments from outside groups helped to elect more than 200 federal candidates.  ”In two-thirds of races where outside groups spent at least some money on advertisements and other political communications, the dollars spent supporting the winner, coupled with amounts spent opposing the loser, exceeded dollars spent supporting the loser or attacking the winner..” (ref).
As a candidate can not raise near enough within their own district to support an election effort, the vast majority of campaign contributions come from outside sources.  What follows for Representative Issa’s campaign contributions (Jan 2005 – Dec 2007) holds true for most elected officials.  Only 5% of his contributions came from within his district; 54% ($674,370) came from outside his state and 94% ($1,173,693) came from outside his district (ref).  The largest sum of out-of-state contributions came from the Washington DC area where special interest lobbying groups operate.

Conflicting Interests
Personal Wealth vs Tax Policy
Regarding the disproportionate number of the wealthy holding elected office, consider tax policy, especially capital gains and dividends.  Capital gains in the 1970′s were taxed at 35% (ref) and have since been lowered to the current 15% rate (ref).  Capital gains and dividends comprise a disproportionate amount of the income for the wealthy and, as Warren Buffet has noted, is responsible for the lower net income tax paid by the wealthiest (ref).  Additionally, this income is not subject to payroll tax that supports Social Security and Medicare, programs that much of America depends on in their later years.  The president’s plan to raise taxes may include a change in how capital gains are taxed (ref).   Consider that the richest 0.1% of Americans pay 44 percent of all capital gains taxes and the richest 1% pay 68% of that tax.  The bottom 80% of Americans account for less than 3% of all capital gains taxes paid.  About 40% of members of the US House of Representatives and nearly half of all US senators reported capital gains in 2009 (ref).  Many of the GOP presidential candidates have suggested eliminating the capital gains tax all together (ref).  Increasing the tax rate on capital gains, which largely affects the wealthiest and which would help reduce the federal deficit, would directly affect 176 members of the House and 48 US senators (ref).  I submit that many in our Congress face a conflict of interest between their own financial self-interests versus policy that could help reduce our federal deficits to the benefit of our future generations.
Campaign Financing vs Representation
The conflict that exists for politicians whose campaigns are financed largely by money raised outside their districts is apparent and expressed in their behavior.  A few examples are provided below.
During the healthcare reform debate it was found that more that a dozen lawmakers placed comments into the Congressional record that were ghostwritten, in whole or in part, by lobbyists working for Genentech (ref).  This was caught because the remarks made by multiple lawmakers lined up word for word.  Genentech’s PAC had made financial contributions to many House members including some who filed statements into the Congressional Record.  Although the head of Genentech’s Washington office claimed that “there was no connection between the contributions and the statements”, company employees had been among the hosts at fund-raisers for some of those lawmakers.  Additionally there is the example of senator Joe Lieberman’s behavior during that debate.  Consider his position of opposing a public option after he had reportedly accepted $427,644 from insurance companies since 2005 including at the time a recently received sum of $65,200 from Aetna and its employees (ref), this after tax payer money supports his own healthcare benefits.
Consider the attempts to raise taxes on the wealthiest of Americans to help reduce deficits.  A recent poll (ref) showed nearly three-quarters of Americans (including two-thirds of Republicans) favoring such a measure as well as the evidence that when such policy was in place in the 1990′s our country had a strong economy and was paying down its debt.  So a reasonable question is how does 100% of the Republican elected representation in the senate oppose a tax increase when up to two-thirds of their party constituents agree with an increase.  Consider that behavior in light of a substantial level of funding for Karl Rove’s Crossroads GPS reportedly coming from a small circle of extremely wealthy Wall Street hedge fund and private equity moguls “bitterly opposed to a proposal by congressional Democrats – and endorsed by the Obama administration – to increase the tax rates on compensation that hedge funds pay their partners” (ref).  These hedge fund moguls and other wealthy donors contributed tens of millions of dollars (to protect their interests) that helped to secure big GOP victories in the 2010 midterm elections.
Consider CFTC’s Brooksley Born’s failed attempt to regulate and bring transparency to OTC derivatives in the late 1990′s (ref).  These are the financial instruments that were at the heart of dramatic corporate and fund failures that sparked the market collapse at the start of the Great Recession.  In 1998, ten years before the economic crisis, a hedge fund (Long Term Capital Management, LTCM) was near collapse and had used these instruments to leverage $5 billion into more than $1 Trillion while doing business with 15 of Wall Streets largest financial institutions.  At that time the President’s working group was informed that the entire American economy hung in the balance and the Fed intervened to avert the crisis.  Although the attempt to regulate was portrayed as a battle of ideologies between Born (Keynesian) and Greenspan/Rubin (Austrian and neoconservative laissez faire), Wall Street lobbying efforts proved to be powerful.  ”Under heavy pressure from the financial lobby, legislation prohibiting regulation of derivatives by Born’s agency was passed by the Congress”.  This paved the way for ten years of unregulated growth of a market that was highly profitable to Wall Street and ultimately harmful to much of America.

Incentives (Insider Trading)
As reported by 60 Minutes (ref) “members of Congress and their aides have regular access to powerful political intelligence, and many have made well-timed stock market trades in the very industries they regulate”.  Essentially, there is no law prohibiting Congress from ‘Insider Trading’, something that is a criminal offense for corporate insiders.  Consider, for example, the closed door meetings between Congressional leaders and Treasury Secretary Hank Paulson and Fed Chairman Bernanke where lawmakers were being warned that a global financial meltdown could occur within a few days.  These meetings were so secretive that cell phones and Blackberries were confiscated beforehand to prevent leaks.  Literally the day following one such meeting, Alabama representative Spencer Bachus (who was at the time the ranking Republican member on the House Financial Services Committee and now its Chairman), bought option funds that would go up in value if the market went down.  So although publicly he took the position of trying to keep the economy from cratering, he was privately betting that it would.  Consider that it was Congress that enacted financial deregulation policy, and a ranking committee member who supported such policy could act on insider information to profit from its failure while much of America suffered the consequences of its failure.
Before retiring, Congressman Brian Baird (Washington) spent six unsuccessful years trying to get his colleagues to to prohibit insider trading in Congress and establish rules governing conflicts of interests.  Despite outcries from the offices of Democratic Congresswoman Pelosi and Republican Speaker Boehner following the airing of the 60 Minutes report (both were questioned publicly by Steve Kroft about their involvement in the practice), at least 93 members of Congress have signed on as cosponsors of the Stock Act and for the first time the bill has been introduced in the Senate.

Discussion
Republic, Lost
Harvard law professor, Lawrence Lessig, is author of “Republic, Lost: How Money Corrupts Congress – And a Plan to Stop It”.  A point he made in interview (ref) is that the OWS movement has it wrong when it refers to the 99%.  Lessig points out that only 0.05% of America max out Congressional campaign contributions, and only 0.26% give more than $200.  As money provides access to government, it is not OWS’s 99%, but rather the 99.95% that is denied access.  He points out that as 30 – 70% of a politician’s time is spent in fundraising, they become dependent on the funders rather than the people (and it is only worse now as the Citizen’s United ruling gives corporations the rights of a person).  Politicians are therefore responding to a small sliver of our society.  And he notes that politicians also extort business for financial gain by demanding corporate participation in campaign fundraising to get what it wants.
In a separate interview (ref) Dr. Lessig makes the point that in 1980 98% of financial assets traded in our economy were subject to the normal rules of transparency, anti-fraud requirements, and basic exchange-based rules of the New Deal.  By 2008, 90% of traded assets were traded invisibly because they were not subject to such obligations.  But what concerns him is what happened after 2008.  After “every independent analyst had said there was a link between the structure of deregulation and the collapse (and he mentions Greenspan’s Congressional testimony),…Wall Street was able to blackmail the Democrats and the Republicans into handing them essentially a ‘Get Out of Jail Free’ card and effect no fundamental change in the architecture of our financial system”.

The Real Cost of Poverty: Lost American Lives
But the real cost of this special interest-driven policy failure is in the staggering number of American lives it has claimed.  The latest census shows that 1 in 2 Americans have fallen into poverty or are scraping by on earnings that classify them as low income (ref).  ”The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families”.  However, what is not discussed is that one of the consequences of poverty is that it claims lives.
As I wrote in a previous article on income/wealth inequality as a moral crisis for this country (ref), a study conducted by Columbia University’s School of Public Health estimated that in 2000 875,000 deaths could be attributed to a cluster of social factors bound up with poverty and income inequality (ref).  The Great Recession has caused an increase in poverty and applying the 2000 mortality rate in the Columbia University report to the number of Americans currently living in poverty an estimated 1,228,169 Americans died in 2009 from the effects of poverty and income inequality (ref).



This estimated annual increase of more than 350,000 lost American lives due to poverty since 2000 (of which failed policy has contributed) dwarfs the total 4484 US military fatalities incurred over the entire course of the Iraq War (ref).  This staggering loss of American lives due to the consequences of poverty is never part of the political dialog and our news sanitizes the picture of poverty in our country.

Consider that Congress just reached a deal that would prevent yet another threatened government shutdown by including a cut of $3.5 billion for low-income heating and utility subsidies (a cut of about 25%) while maintaining the Bush era tax cuts largely favoring the wealthiest.  In striking such a deal, our Congress has placed a higher value on special interest-driven policy than the lives of American citizens – and that does represent a moral crisis for our country.

Beware this Boy
A Christmas Carol is one of my favorite seasonal stories.


In writing the above this holiday season I was reminded of Scrooge saying that if the poor are to die then “they had better do it and decrease the surplus population”.  I could hear the voice of the Marley’s ghost screaming at Scrooge that “Mankind was my business”.  I could see the Ghost of Christmas Present revealing the two wretched children to Scrooge, the girl being ‘Want’, the boy being ‘Ignorance’ and saying to Scrooge: “Beware them both, and all of their degree, but most of all beware this boy, for on his brow I see that written which is Doom, unless the writing be erased.”

Really not a bad time of year to reflect on what has happened to our Congress.  We must erase the writing on the brow of ignorance.   We must not allow our Congress to remain Our Unrepresentative Representation.

http://www.artonissues.com/2011/12/our-unrepresentative-representation/

This County Needs a few Good Communists by Chris Hedges

Posted on May 31, 2010 by dandelionsalad

by Chris Hedges
Featured Writer
Dandelion Salad
Truthdig
May 31, 2010

Image by Sterneck via Flickr

The witch hunts against communists in the United States were used to silence socialists, anarchists, pacifists and all those who defied the abuses of capitalism. Those “anti-Red” actions were devastating blows to the political health of the country. The communists spoke the language of class war. They understood that Wall Street, along with corporations such as British Petroleum, is the enemy. They offered a broad social vision which allowed even the non-communist left to employ a vocabulary that made sense of the destructive impulses of capitalism. But once the Communist Party, along with other radical movements, was eradicated as a social and political force, once the liberal class took government-imposed loyalty oaths and collaborated in the witch hunts for phantom communist agents, we were robbed of the ability to make sense of our struggle. We became fearful, timid and ineffectual. We lost our voice and became part of the corporate structure we should have been dismantling.

Hope in this age of bankrupt capitalism will come with the return of the language of class conflict. It does not mean we have to agree with Karl Marx, who advocated violence and whose worship of the state as a utopian mechanism led to another form of enslavement of the working class, but we have to speak in the vocabulary Marx employed. We have to grasp, as Marx did, that corporations are not concerned with the common good. They exploit, pollute, impoverish, repress, kill and lie to make money. They throw poor families out of homes, let the uninsured die, wage useless wars to make profits, poison and pollute the ecosystem, slash social assistance programs, gut public education, trash the global economy, loot the U.S. Treasury and crush all popular movements that seek justice for working men and women. They worship only money and power. And, as Marx knew, unfettered capitalism is a revolutionary force that consumes greater and greater numbers of human lives until it finally consumes itself. The nightmare in the Gulf of Mexico is the perfect metaphor for the corporate state. It is the same nightmare seen in postindustrial pockets from the old mill towns in New England to the abandoned steel mills in Ohio. It is a nightmare that Iraqis, Pakistanis and Afghans, mourning their dead, live each day.

Capitalism was once viewed in America as a system that had to be fought. But capitalism is no longer challenged. And so, even as Wall Street steals billions of taxpayer dollars and the Gulf of Mexico is turned into a toxic swamp, we do not know what to do or say. We decry the excesses of capitalism without demanding a dismantling of the corporate state. The liberal class has a misguided loyalty, illustrated by environmental groups that have refused to excoriate the Obama White House over the ecological catastrophe in the Gulf of Mexico. Liberals bow before a Democratic Party that ignores them and does the bidding of corporations. The reflexive deference to the Democrats by the liberal class is the result of cowardice and fear. It is also the result of an infantile understanding of the mechanisms of power. The divide is not between Republican and Democrat. It is a divide between the corporate state and the citizen. It is a divide between capitalists and workers. And, for all the failings of the communists, they got it.

Unions, organizations formerly steeped in the doctrine of class warfare and filled with those who sought broad social and political rights for the working class, have been transformed into domesticated partners of the capitalist class. They have been reduced to simple bartering tools. The social demands of unions early in the 20th century that gave the working class weekends off, the right to strike, the eight-hour day and Social Security have been abandoned. Universities, especially in political science and economics departments, parrot the discredited ideology of unregulated capitalism and have no new ideas. Artistic expression, along with most religious worship, is largely self-absorbed narcissism. The Democratic Party and the press have become corporate servants. The loss of radicals within the labor movement, the Democratic Party, the arts, the church and the universities has obliterated one of the most important counterweights to the corporate state. And the purging of those radicals has left us unable to make sense of what is happening to us.

The fear of communism, like the fear of Islamic terrorism, has resulted in the steady suspension of civil liberties, including freedom of speech, habeas corpus and the right to organize, values the liberal class claims to support. It was the orchestration of fear that permitted the capitalist class to ram through the Taft-Hartley Act in 1948 in the name of anti-communism, the most destructive legislative blow to the working class until the North American Free Trade Agreement (NAFTA). It was fear that created the Patriot Act, extraordinary rendition, offshore penal colonies where we torture and the endless wars in the Middle East. And it was fear that was used to see us fleeced by Wall Street. If we do not stop being afraid and name our enemy we will continue toward a state of neofeudalism.

The robber barons of the late 19th century used goons and thugs to beat up workers and retain control. The corporations, employing the science of public relations, have use actors, artists, writers, scholars and filmmakers to manipulate and shape public opinion. Corporations employ the college-educated, liberal elite to saturate the culture with lies. The liberal class should have defied the emasculation of radical organizations, including the Communist Party. Instead, it was lured into the corporate embrace. It became a class of collaborators. National cohesion, because our intellectual life has become so impoverished, revolves around the empty pursuits of mass culture, brands, consumption, status and the bland uniformity of opinions disseminated by corporate-friendly courtiers. We speak and think in the empty slogans and clichés we are given. And they are given to us by the liberal class.

The “idea of the intellectual vocation,” as Irving Howe pointed out in his essay “The Age of Conformity,” “the idea of a life dedicated to values that cannot possibly be realized by a commercial civilization—has gradually lost its allure. And, it is this, rather than the abandonment of a particular program, which constitutes our rout.” The belief that capitalism is the unassailable engine of human progress, Howe added, “is trumpeted through every medium of communication: official propaganda, institutional advertising and scholarly writings of people who, until a few years ago, were its major opponents.”

“The truly powerless people are those intellectuals—the new realists—who attach themselves to the seats of power, where they surrender their freedom of expression without gaining any significance as political figures,” 

Howe wrote. 

“For it is crucial to the history of the American intellectuals in the past few decades—as well as to the relationship between ‘wealth’ and ‘intellect’—that whenever they become absorbed into the accredited institutions of society they not only lose their traditional rebelliousness but to one extent or another they cease to function as intellectuals. The institutional world needs intellectuals because they are intellectuals but it does not want them as intellectuals. It beckons to them because of what they are but it will not allow them, at least within its sphere of articulation, either to remain or entirely cease being what they are. It needs them for their knowledge, their talent, their inclinations and passions; it insists that they retain a measure of these endowments, which it means to employ for its own ends, and without which the intellectuals would be of no use to it whatever. A simplified but useful equation suggests itself: the relation of the institutional world to the intellectuals is as the relation of middlebrow culture to serious culture, the one battens on the other, absorbs and raids it with increasing frequency and skill, subsidizes and encourages it enough to make further raids possible—at times the parasite will support its victim. Surely this relationship must be one reason for the high incidence of neurosis that is supposed to prevail among intellectuals. A total estrangement from the sources of power and prestige, even a blind unreasoning rejection of every aspect of our culture, would be far healthier if only because it would permit a free discharge of aggression.”

The liberal class prefers comfort to confrontation. It will not challenge the decaying structures of the corporate state. It is intolerant within its ranks of those who do. It clings pathetically to the carcass of the Obama presidency. It has been exposed as a dead force in American politics. We must find our way back to the old radicals, to the discredited Marxists, socialists and anarchists, including Dwight Macdonald and Dorothy Day. Language is our first step toward salvation. We cannot fight what we cannot describe.

Copyright © 2010 Truthdig

Chris Hedges spent two decades as a foreign reporter covering wars in Latin America, Africa, Europe and the Middle East. He has written nine books, including Empire of Illusion: The End of Literacy and the Triumph of Spectacle (2009) and War Is a Force That Gives Us Meaning (2003).
see
Michel Chossudovsky: The Homeland Security State and the Economical Crisis
The Greeks Get It by Chris Hedges
Theology and Neoliberal Economics by Prof. Michael Hudson
John Bellamy Foster: The Crisis of Capital: Economy, Ecology and Empire (must-see)
The Economy Sucks and or Collapse 2

50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe

http://theeconomiccollapseblog.com/archives/50-economic-numbers-from-2011-that-are-almost-too-crazy-to-believe

Even though most Americans have become very frustrated with this economy, the reality is that the vast majority of them still have no idea just how bad our economic decline has been or how much trouble we are going to be in if we don't make dramatic changes immediately.  If we do not educate the American people about how deathly ill the U.S. economy has become, then they will just keep falling for the same old lies that our politicians keep telling them.  Just "tweaking" things here and there is not going to fix this economy.  We truly do need a fundamental change in direction.  America is consuming far more wealth than it is producing and our debt is absolutely exploding.  If we stay on this current path, an economic collapse is inevitable.  Hopefully the crazy economic numbers from 2011 that I have included in this article will be shocking enough to wake some people up.
At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point.  Hopefully many of you will use the list below as a tool to help you share the reality of the U.S. economic crisis with your family and friends.  If we all work together, hopefully we can get millions of people to wake up and realize that "business as usual" will result in a national economic apocalypse.

The following are 50 economic numbers from 2011 that are almost too crazy to believe....

#1 A staggering 48 percent of all Americans are either considered to be "low income" or are living in poverty.
#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be "low income" or impoverished.
#3 If the number of Americans that "wanted jobs" was the same today as it was back in 2007, the "official" unemployment rate put out by the U.S. government would be up to 11 percent.
#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.
#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006.  Today, that number has shrunk to 14.5 million.
#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.
#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
#11 Back in 1980, less than 30% of all jobs in the United States were low income jobs.  Today, more than 40% of all jobs in the United States are low income jobs.
#12 Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job.  In July, only 81.2 percent of men in that age group had a job.
#13 One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.
#14 The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.
#15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.
#16 As the economy has slowed down, so has the number of marriages.  According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married.  Back in 1960, 72 percent of all U.S. adults were married.
#17 The U.S. Postal Service has lost more than 5 billion dollars over the past year.
#18 In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.
#19 Nevada has had the highest foreclosure rate in the nation for 59 months in a row.
#20 If you can believe it, the median price of a home in Detroit is now just $6000.
#21 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant.  That figure is 63 percent larger than it was just ten years ago.
#22 New home construction in the United States is on pace to set a brand new all-time record low in 2011.
#23 As I have written about previously, 19 percent of all American men between the ages of 25 and 34 are now living with their parents.
#24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.
#25 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.
#26 One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.
#27 If you can believe it, one out of every seven Americans has at least 10 credit cards.
#28 The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
#29 It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.
#30 The retirement crisis in the United States just continues to get worse.  According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
#31 Today, one out of every six elderly Americans lives below the federal poverty line.
#32 According to a study that was just released, CEO pay at America's biggest companies rose by 36.5% in just one recent 12 month period.
#33 Today, the "too big to fail" banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.
#34 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.
#35 According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.
#36 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.
#37 A higher percentage of Americans is living in extreme poverty (6.7%) than has ever been measured before.
#38 Child homelessness in the United States is now 33 percent higher than it was back in 2007.
#39 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.
#40 Sadly, child poverty is absolutely exploding all over America.  According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.
#41 Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.
#42 In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for more than 18 percent of all income.
#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.
#44 Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.
#45 For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars.  That was the third year in a row that our budget deficit has topped one trillion dollars.
#46 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.
#47 Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars.  When Barack Obama first took office the national debt was just 10.6 trillion dollars.
#48 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
#49 The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.
#50 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Of course the heart of our economic problems is the Federal Reserve.  The Federal Reserve is a perpetual debt machine, it has almost completely destroyed the value of the U.S. dollar and it has an absolutely nightmarish track record of incompetence.  If the Federal Reserve system had never been created, the U.S. economy would be in far better shape.  The federal government needs to shut down the Federal Reserve and start issuing currency that is not debt-based.  That would be a very significant step toward restoring prosperity to America.

During 2011 we made a lot of progress in educating the American people about our economic problems, but we still have a long way to go.

Hopefully next year more Americans than ever will wake up, because 2012 is going to represent a huge turning point for this country.

This Is The Report That Caused Banks To Tank today

Bank stocks plummeted after Fitch Ratings released a statement about U.S. bank exposure to Europe.
Goldman sachs fell fell $4.21, or 4.16%, to close at $95.60 a share.
JPMorgan dropped 3.76%.
Bank of America fell 3.75%,.
Morgan Stanely tumbled $1.27, or 7.97%.
Here's the key part of the report:

U.S. banks have manageable direct exposures to the stressed European markets (Greece, Ireland, Italy, Portugal and Spain), but further contagion poses a serious risk, according to a Fitch Ratings report.

Fitch believes that unless the Eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen. Fitch’s current outlook for the industry is stable, reflecting improved fundamentals at most banks combined with ratings lower than at pre-crisis levels. However, risks of a negative shock are rising and could alter this outlook.

U.S. banks have reduced direct exposure to stressed European markets considerably over the past year in Fitch’s view. Direct exposures appear manageable in the context of banks’ capital positions and diverse earnings streams. Public disclosure of direct exposures has generally improved recently but varies from bank to bank

Read more: http://www.businessinsider.com/bank-stocks-hammered-after-fitch-report-2011-11?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+businessinsider+(Business+Insider)#ixzz1duLFyfpC

European debt crisis spiralling out of control

SLSiri Siri

Wow..just...wow ~ Reports that Germany and France have begun talks to break up the eurozone gu.com/p/339bf/tw via @guardian

European debt crisis spiralling out of control

Reports that Germany and France have begun talks to break up the eurozone amid fears that Italy will be too big to rescue

Larry Elliott, Heather Stewart and John Hooper in Rome · 09/11/2011 · guardian.co.uk

 

Debt crisis sets markets in turmoil amid reports of talks about the break up of the eurozone. Photograph: Jeff Spielman/Getty Images
 

Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue.

Despite Silvio Berlusconi's announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone's third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.

Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase.

In Athens talks to appoint a prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon.

Angela Merkel, the German chancellor, said the situation had become "unpleasant", and called for eurozone members to accelerate plans for closer political integration. "It is time for a breakthrough to a new Europe," she said. "Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe."

The president of the European commission, José Manuel Barroso, issued a new call for the EU to "unite or face irrelevance" in the face of the mounting economic crisis in Italy. "We are witnessing fundamental changes to the economic and geopolitical order that have convinced me that Europe needs to advance now together or risk fragmentation. Europe must either transform itself or it will decline. We are in a defining moment where we either unite or face irrelevance," he said.

Senior policymakers in Paris, Berlin and Brussels are reported to have discussed the possibility of one or more countries leaving the eurozone, while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy. "France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

Financial regulators across Europe were last night carefully monitoring the health of their heavily exposed banks, amid concern that the turmoil could lead to a debt default, or even the break-up of the euro.

George Osborne, just three weeks away from delivering his autumn statement on the health of the economy, believes Europe's problems are blighting the UK's growth prospects, but he will use the sell-off of Italian bonds to insist there is no alternative to his austerity plans.

Nick Clegg, the deputy prime minister, spent Wednesday in Brussels urging the council president, Herman Van Rompuy, and a clutch of EU commissioners to focus on growth, and not further treaty changes, warning that if Europe does not become more competitive it will end up in a spiral of perpetual decline. Both he and David Cameron are urging EU integrationists to recognise that EU Treaty changes in the next few months would be a massive distraction and no cure for the underlying economic crisis. He pointed out that they would require referendums in at least four countries.

The latest chapter in the ongoing sovereign debt crisis came as Bank of England policymakers gathered for their monthly two-day interest rate-setting meeting. The monetary policy committee announced £75bn-worth of quantitative easing last month in an effort to prevent a recession.

City analysts believe the renewed turmoil in the eurozone is pointing to a deep recession in Europe. "It's unavoidable that there will be an outright contraction in the fourth quarter of this year, and a 60%-70% chance of another decline in the first quarter of next year," said Nick Parsons, head of strategy at National Australia Bank.

Shares fell heavily on both sides of the Atlantic. The Italian stock market lost 4% of its value. The FTSE100 index of leading shares closed 106.96 points down, at 5460.38. The Dow Jones closed 389 points down at 11,780.94.

Christine Lagarde, head of the IMF, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade" of weak growth and deflation.

"Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of a downward spiral of uncertainty, financial instability and potential collapse of global demand … we could run the risk of what some commentators are already calling the lost decade."

Simon Derrick, currency strategist at BNY Mellon, said: "We're at the point of asking the question, if I put my money into Italy, am I going to get it back? The fact is, there isn't a safety net." He added that the mood in the City was reminiscent of Black Wednesday, in September 1992, when the UK crashed out of the European Exchange Rate Mechanism.

The surge in Italian bond yields was eventually capped by the European Central Bank, which intervened in the markets to buy limited quantities of Italian debt. But analysts say the ECB will eventually have to step up its action, and act as a lender of last resort to bring interest rates down to pre-crisis levels. Sony Kapoor, director of Brussels-based think-tank Re-Define, said: "We may be fairly close to the point where an existential threat to the eurozone, and hence the ECB, is on the horizon. This could easily spiral out of control."

The ECB is seen as the only institution with the firepower to rescue Italy, because the EU lacks the resources to bail out such a large economy. Ben May, of Capital Economics, said Italy would need a €650bn bailout to keep it out of financial markets for the next three years or so. "The European Financial Stability Facility will not be able to provide a bailout of this size," he said.

Officials in Brussels insisted on Wednesday there would be no rescue package for Rome, saying, "financial assistance is not on the cards". A key test will come on Thursday morning when Italy has to raise €5bn from investors on the bond market.

Economic and monetary affairs commissioner Olli Rehn ratcheted up the political pressure on Italy with a strongly-worded letter to finance minister Giulio Tremonti. In it, Rehn demanded concrete written details of how Italy will implement each of the 39 separate reform measures it has promised to undertake.

In Rome the head of state, Giorgio Napolitano, insisted that Berlusconi would be leaving office soon, and that his departure would not be the prelude to a lengthy period of political instability.

His intervention came after hurried consultations with the speakers of both houses of parliament to ensure the speediest possible approval for a package of economic reform and austerity measures agreed with the European institutions. On Tuesday evening, after losing his majority in the chamber of deputies, Berlusconi told Napolitano he would resign.

But, to prevent the economic measures being blocked by the fall of his government, he said he would only go once the package had been approved.

As concern grew that he might delay the passage of the legislation, which has become a litmus test of Italy's credibility in the markets, Berlusconi said he would insist on holding new elections and one of his ministers speculated that could be next February.

After the yield on Italy's benchmark bonds soared above 7%, taking interest rates to a level beyond which previous euro zone debt crisis victims have sought a bail-out, the president issued a statement to say the new economic measures would be "approved in the space of a few days" and that there was "no uncertainty over the prime minister's decision to resign".

Napolitano, who cannot begin consultations with party leaders until Berlusconi leaves office, said that either a new government would be formed "to take every necessary decision" or an election would be held "within the shortest time".

That would still mean a vote was not held until January. But a source close to the president stressed to the Guardian that "early elections are not a foregone conclusion."

Bill Black: The High Price of Ignorance

Posted: 07 Nov 2011 03:30 AM PST

This is Naked Capitalism fundraising week. Over 370 donors have already invested in our efforts to shed light on the dark and seamy corners of finance. Join us and participate via our Tip Jar or read about why we’re doing this fundraiser and other ways to donate on our kickoff post and one discussing our current target.

 

By Bill Black, an associate professor of economics and law at the University of Missouri-Kansas City, a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Follow him on twitter @WilliamKBlack

I have just finished giving three talks, in three days, in three states during which I continued one of my common obsessions – doing research about financial crises. Among of the primary beliefs I’ve had reinforced over these 72 hours are my views about how incredibly harmful financial ignorance is, and how precious are the sources who combine sound information about finance with humanity. As a father, I do not play silly games about which kid I like best, so I will simply express my personal belief that Naked Capitalism is one of the preeminent sites for learning about finance, while always remembering people.

My first talk was in central Missouri to the Missouri Association for Social Welfare (MASW). MASW is made up of people who have worked, often for decades, to help those mode in need in our State. They have seen their efforts overwhelmed by the ongoing crisis and they are eager to learn why it occurred and how to prevent or reduce future crises. This is a group that combines policy wonks and boots on the ground caregivers. They are well read, but they do not find that regular media sources provide them with any comprehensive understanding of why we suffer recurrent, intensifying crises. A few of their members, however, read our blog (NewEconomicPerspectives – created and maintained by my UMKC economics colleague Stephanie Kelton) and Naked Capitalism. They learned from these sites about my work and reached out to me to keynote their conference because they have a thirst for learning about finance and the crisis.

Thursday I presented “in the belly of the beast” – the University of Chicago’s School of Law. The students on their law forum reached out to bring someone with views very different from their own faculty and the other speakers. They were not rejecting their faculty’s views ala the Harvard economics students who walked out of Professor Mankiw’s class to protest what they viewed as his unwillingness to discuss rival theories. The students simply wanted to have an opposing viewpoint expressed. They knew that I existed because of media appearances that were largely generated because many members of the financial media who read Naked Capitalism and NewEconomicPerspectives. Many of our readers learned of us and our research findings and theories by reading Naked Capitalism. Naked Capitalism is so important because it does not simply feature the views of an individual. It seeks out and gives visibility to diverse, thoughtful views from those who inhabit the reality-based world and support their theories with sound analytics and compelling data.

My reaction to the U. Chicago conference was that the students did well to reach out in this manner. On our panel (on private-sector fraud and corruption) the other panelists’ (all Chicago-school) principal concern was that we reduce the prosecution of elite white-collar criminals, reduce the incentives to blow the whistle on the CEO, and reduce the incentives to bring a qui tam civil fraud actions against corporations. We inhabit alternative universes. In our reality-based universe, the problem is elite fraud. In their faith-based theoclassical economics universe the problem is that the “mob” is seeking to murder innocent bank CEOs by bringing back the weapon of the French terror, the “guillotine.” These are the exact terms used by one of my co-panelists. We may never be able to convince the theoclassical Chicago-school faculty to cease their identification with and apologias for the one percent, but we are read by at least some of their students because of the visibility provided by Naked Capitalism.

My talk Saturday was in LA at the invitation of the “Occupy Wall Street” (OWS) participants as part of a “teach-in.” Again, the participants are eager to learn about why we suffer recurrent, intensifying financial crises. Some of the protesters are well versed on the nature of the ongoing crisis and its causes because they read Naked Capitalism and blogs such as NewEconomicPerspectives. Many of the protestors, however, are not well informed and have views about the crisis that are intense but not fact-based. They too have read

articles on blogs, but those articles and blogs are the antithesis of Naked Capitalism. They are sensational, but contrary to the facts. Many of these myths are enormously harmful – they led the speakers to view it as impossible to succeed, that no one could be trusted, and that our government had never done anything successful. Collectively, their messages were the ideal toxic blend of views that would render any effort against the “control frauds” and “systemically dangerous institutions” useless. The opponents of OWS could not have designed a more self-defeating meme. Naked Capitalism understands how grim the situation is and how difficult our tasks are, but it does not give in to hopelessness and defeatism.

The research project that reinforced my view about the crushing costs of financial ignorance was reviewing Attorney General Holder’s testimony before the Financial Crisis Inquiry Commission (FCIC). It is apparent that neither Holder nor his senior staff read Naked Capitalism (at least in that era). Attorney General Holder made two extraordinary statements at that hearing demonstrating his utter ignorance. Chairman Angelides asked Holder to explain the actions the Department of Justice (DOJ) took in response to the FBI’s warning in September 2004 that mortgage fraud was “epidemic” and its prediction that if the fraud epidemic were not contained it would cause a financial “crisis.” Holder testified: “I’m not familiar myself with that [FBI] statement.”

For those of you who have never been involved in preparing an agency head to give a major piece of testimony (something I did fairly often), let me confirm that it is a very big deal. The staff briefs the head of the agency thoroughly on the key issues and how the agency responded to them. The DOJ’s (the FBI is part of DOJ) preeminent contribution with respect to this crisis was the 2004 warning to the nation (in open House testimony picked up by the national media). (Stop and think how widely known the warning would have become if Naked Capitalism was operating in 2004 and had input from white-collar criminologists.) For Holder not to know about the most important (and most praise-worthy) action by his department requires that none of his senior staffers knew about the FBI testimony.

 

For none of his senior staffers to know about the FBI testimony requires that they know nothing about the department’s most important and (potentially) useful act. That depth of ignorance could not exist if his senior aides cared the least about the financial crisis and made it even a minor priority to understand, investigate, and prosecute the frauds that drove the crisis. Because Holder was testifying in January 14, 2010, the failure of anyone from Holder on down to know about the FBI’s warnings also requires that all of them failed to read any of the relevant criminology literature or Naked Capitalism. We need to reach the point where the failure of senior officials who need to be financially literate (and that includes everyone at the senior levels of DOJ) to regularly read Naked Capitalism and NewEconomicPerspectives marks one as irredeemably unprofessional.

 

Holder’s prepared testimony is a further testament to the costs of ignorance. In addition to claiming that the DOJ’s response to the developing crisis under President Bush was superb, Holder implicitly took the position that (without any investigation or analysis) that fraud could not and did not pose any systemic economic risk. Implicitly, he claimed that only economists had the expertise to contribute to understanding the causes of the crisis. If you don’t investigate; you don’t find. If you don’t understand “accounting control fraud”; you cannot understand why we have recurrent, intensifying financial crises. If Holder thinks we should take our policy advice from Larry Summers and Bob Rubin, leading authors’ of the crisis, then he has never read Naked Capitalism.

 

Now let me state at the outset what role the Department plays and does not play in addressing these challenges” [record fraud in investment banking and securities].

 

“The Department of Justice investigates and prosecutes federal crimes.…

 

As a general matter we do not have the expertise nor is it part of our mission to opine on the systemic causes of the financial crisis. Rather the Justice Department’s resources are focused on investigating and prosecuting crime. It is within this context that I am pleased to offer my testimony and to contribute to your vital review.

 

Two aspects of Holder’s testimony were preposterous, dishonest, and dangerous.

 

I’m proud that we have put in place a law enforcement response to the financial crisis that is and will continue to be is aggressive, comprehensive, and well-coordinated.

 

DOJ has obtained ten convictions of senior insiders of mortgage lenders (all from one obscure mortgage bank) v. over 1000 felony convictions in the S&L debacle. DOJ has not conducted an investigation worthy of the name of any of the largest accounting control frauds. DOJ is actively opposing investigating the systemically dangerous institutions (SDIs).

 

Holder’s most disingenuous and dangerous sentence, however, was this one:

 

Our efforts to fight economic crime are a vital component of our broader strategy, a strategy that seeks to foster confidence in our financial system, integrity in our markets, and prosperity for the American people.

Yes, the “confidence fairy” ruled at DOJ. It is the rationale now for DOJ’s disgraceful efforts to achieve immunity for the SDIs’ endemic frauds. The confidence fairy trumped and traduced “integrity in our markets” and “prosperity for the American people.” Prosperity is reserved for the SDIs and their senior managers – the one percent. But then you know that because you read Naked Capitalism.