Posts Tagged ‘wall street’

White House Backing Away from Net Neutrality? Not So Much

January 10th, 2010 admin No comments

An opinion column at CNET News suggests that the White House is backing away from the strong Net Neutrality position taken by FCC Chairman Genachowski. Larry Downes, “nonresident fellow at the Stanford Law School Center for Internet & Society,” writes:

The Obama administration and its allies at the Federal Communications Commission are retreating from a militant version of Net neutrality regulations first outlined by FCC Chairman Julius Genachowski in September.

That’s my reading of a number of recent developments, underscored by comments made by government speakers on a panel on the first day of a Tech Policy Summit at CES in Las Vegas….

The administration is clearly backtracking. But why?

Part of the reason is some unexpected political pressure, including a letter signed by 72 congressional Democrats opposing the FCC’s proposed rules soon after they were announced.

But the bigger explanation is the growing priority within the administration for nationwide, affordable broadband service. In the course of preparing the national broadband plan, mandated by the 2009 stimulus bill, universal high-speed access has taken on increased significance in the government’s hopes for a rapid economic recovery. Beyond the current financial woes, Congress, the FCC and the White House all recognize the importance of improving the communications infrastructure to maintain U.S. competitiveness in technology innovation….

The major carriers are making the investments, and have every business reason to make more. But the Net neutrality rules, depending on how the FCC defines key terms, could hamstring their efforts to make their money back. Net neutrality is making Wall Street uncomfortable about financing broadband deployment. That in turn is making the White House nervous.

Net neutrality is turning out to be a noisy side show and a growing distraction from the real priority for both the White House and the FCC: getting the country wired for recovery.

The argument that somehow the administration had completely changed position on the criticality of Net Neutrality as a key component of expanding broadband deployment and the recovery plan was a new one to me. I asked Tim Karr, campaign director for Free Press and the smartest Net Neutrality expert I know, for his take on this interpretation:

Downes offers a series of loose assumptions and scant evidence to support his idea that the White House is backing away from Net Neutrality.

The notion that Net Neutrality is a “sideshow” when it comes to the “real priority” of using the Internet for our recovery blithely ignores the role an open Internet plays to fuel innovation and economic growth in the country.

I gather Downes was too busy conjuring conclusions to have read yesterday’s report from several NYU legal scholars and economists who find that Net Neutrality fosters an essential “open and entrepreneurial dynamic” that “creates billions of dollars in value for American public.” (

The idea that Net Neutrality thwarts investment in network improvements has been thoroughly debunked by real market data. And connecting more people to a non-Neutral (and therefore value-less) Internet is not a sound economic solution.

There has been a concerted effort by AT&T to undermine Genachowski’s strong NN position, including a massive astroturfing campaign with progressive bloggers and organizations (of which I’ve been a target, receiving a handful of e-mails from USIIA, a proxy for AT&T and the phone and cable industry) in an attempt to convince us that strong NN means massive job loss and thus Democratic losses. That effort did get 72 Congressional Dems (all but two of whom received “received campaign donations this year from Internet service providers, the companies most likely to be impacted by new regulations”). But there’s no evidence, outside of Downes’ interpretation, that the administration is wavering.

The FCC is still taking public comments on its strong NN proposed rule-making. Save the Internet has an easy-to-use online tool that you can use to add your support for the proposed rule. But you have to act soon–the comment period closes next Thursday, Jan. 14.

NY-SEN: Horald Ford to seek GOP nomination

January 9th, 2010 admin No comments

Braking newz: — At a press conference in Washington, DC today, former Tennessee Rep. Horald Ford today announced he would seek the GOP nomination to challenge U.S. Senator Kirsten Gillibrand (D-NY) in the 2010 election.

“I’m a life-long conservative who has dedicated his political capital to weakening the Democratic Party,” Ford said.

Ford said teabaggers would just love him.

“For starters, I’m to the right of most New York Republicans,” Ford said. “Dede Scozzafava? HA! I’m to the right of that Doug Hoffman dude, and he didn’t even run as  Republican.”

Asked for specific examples of his conservative record, Ford rattled off a comprehensive list.

“Well, I’m pro-life,” he said. “I want to outlaw abortion. I said so in 2006 — live, on national TV. It’s up there on YouTube if you want to see it.

“But that’s not all, folks. I am for the Iraq War. I’m against immigration. I thought Congress should have intervened in the Terri Schiavo case to stop her socialist husband. And I’m for permanent repeal of the Nazi estate tax.

“I’m the teabaggers’ sweetest dream and the Democrats’ worst nightmare.”

Asked about whether his support for the bailouts and his career as a Wall Street consultant might hurt his reputation amongst teabaggers, Ford muttered something about the looming Communist menace and stormed out of the press conference.

Rumor has it Glenn Beck is looking to serve as the Ford campaign’s spokesbagger.

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Kevin Drum: Obama Needs To Be Willing To Earn The Hate Of Bankers (VIDEO)

January 9th, 2010 admin No comments

Barack Obama needs to be wiliing to earn the hate of some bankers in order to pass financial reform. That was the sentiment of Mother Jones journalist Kevin Drum during an appearnce with fellow Mother Jones reporter David Corn on Bill Moyers Journal. Both were there to discuss Wall Street’s stranglehold on politics.

According to Corn, the push for reform is “not a fair fight.” It pits average, middle-class Americans against a well-funded and influential financial services industry that brought the nation’s economy to its knees.

Drum believes that Obama should listen to financial adviser Paul Volcker and former Fed chief Alan Greenspan and move to break up banks that are too big to fail. Both Drum and Corn believe the grassroots network that brought Obama to power could be effectively mobilized to fight for financial reform. But first, Obama has to commit to a new legislative agenda.


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Janet Tavakoli: Timothy Geithner, I Call Your Bluff

January 8th, 2010 admin No comments

The Treasury responded to reports that the New York Fed asked AIG to suppress and delay facts about the bailout. Meg Reilly, a Treasury spokesperson claimed: “In the transaction at the heart of this dispute…the FRBNY [Federal Reserve Bank of New York] made a loan of $25 billion which is on track to be paid back in full with interest.” She claims the loan is currently “above water.”

In the first place, that loan is not the heart of the dispute. Nonetheless, the FRBNY should immediately release the details of all of the Maiden Lane III assets backing that loan and show the current prices BlackRock has placed on them. Based on the current market, it is extremely likely that the loan is underwater.

The assets backing the loan are so-called super senior and AAA rated collateralized debt obligations (CDOs). Similar CDOs trade for under ten cents on the dollar, not close to the average price of 35 cents for the loan’s assets shown in a recent Fed report. The Fed claims prices climbed 4.5%. Yet in the secondary market, prices have dropped.

The Fed awarded no-bid contracts to BlackRock to manage and price these assets (among other things). Given BlackRock’s track record as a CDO manager*, I have no reason to believe its prices are reliable. As I mention above, I have reason to question the prices.

If the Treasury wants to publicly claim the loan is not underwater, now is the time to prove it, even though this particular loan is not the key issue.

As Representative Darrell Issa explained in his letter to the Fed, at the heart of this dispute is my assertion that Treasury Secretary Timothy Geithner, in his former role as President of the FRBNY, paid 100 cents on the dollar to settle AIG’s credit default swap contracts, and he wildly overpaid. Other bond insurers including Ambac, MBIA, and FGIC have settled similar contracts for as little as ten cents on the dollar.

The general public was kept unaware of several politically explosive facts. Risky subprime loans partly backed CDOs that AIG insured. Goldman Sachs played a key role in AIG’s distress with both credit default swap transactions and CDOs that Goldman underwrote. The identities of the banks–including some foreign banks–that received payments were not revealed until five months after the bailout. The November 2009 TARP Inspector General’s report failed to mention that Goldman originated or bought protection from AIG on about $33 billion of the problematic $80 billion of U.S. mortgage assets that AIG “insured” with credit derivatives, about twice as much as the next two largest banks involved.

The TARP report also failed to highlight the character of the synthetic CDOs underwritten by Goldman Sachs that remain on AIG’s books. There is nothing wrong with hedging or taking the opposite view to one’s customers. There is nothing wrong with using credit derivatives to accomplish this goal. But there are serious questions about whether residential mortgage backed securities and downstream CDOs were value-destroying and misrated.

Wall Street was chiefly responsible for the “financial innovation” that did massive damage to the U.S. economy. I assert there should be fraud audits of Wall Street’s securitization activities.

Given the extraordinary circumstances surrounding AIGs trades, the global financial crisis, and the AIG bailout, it is time to reopen this issue. AIG’s counterparties can repurchase the approximately $62 billion CDOs from Maiden Lane III at full price**. If the Fed really believes they are worth 35 cents on the dollar, then these counterparties will be getting a windfall versus ten cents on the dollar. As for Goldman Sachs’s approximately $8.2 billion in CDOs (including synthetic CDOs) that are still on AIG’s books, they can be settled at ten cents on the dollar, and excess collateral currently held by Goldman can be returned. This is the value at which other bond insurers have settled similar deals. The return of payments to AIG can be used to pay down its public debt, before banks pay tax-payer subsidized bonuses to their employees.

* BlackRock managed Pacific Pinnacle CDO ($1 billion; closed 1/1/07; event of default 2/4/08); Pinnacle Point Funding ($2B closed 6/7/07; acceleration 12/13/07); Tenorite CDO I ($1 B closed 5/11/07; liquidation 2/7/08); and Tourmaline CDO III ($1.5 billion closed 4/5/07; event of default 3/31/08). (Earlier I wrote a post that included a 2005 Tourmaline deal managed by BlackRock that ended up being part of a CDO bailed out by the Fed.) I highlight BlackRock’s 2007 CDOs similar to those in it now manages for the Fed, because in 2007 mainstream media was already reporting on the potential for these CDOs of this type to blow up. I wrote an article for the precursor to Risk Professional in early 2007 warning about the type of value-destroying CDOs that AIG insured. I had also issued earlier warnings on other types of value-destroying CDOs.

**The price can be adjusted for interim principal and interest payments, as applicable.

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Midday Open Thread

January 7th, 2010 admin No comments
  • Although U.S. car sales perked up in the last five months of 2009, they were still the Worst in 27 Years. America actually “lost” some 3.6 million cars last year because 14 million were scrapped, while 10.4 million were bought, according to a report by the Earth Policy Institute. It was the first time since World War II  that scrapping exceeded sales and reduced the total cars on the road from the all-time high of 250 million by 1.5%. EPI’s Lester Brown thinks that’s a good thing.

    Market saturation may be the dominant contributor to the peaking of the U.S. fleet. The United States now has 246 million registered motor vehicles and 209 million licensed drivers — nearly 5 vehicles for every 4 drivers. …

    No one knows how many cars will be sold in the years ahead, but given the many forces at work, U.S. vehicle sales may never again reach the 17 million that were sold each year between 1999 and 2007. Sales seem more likely to remain between 10 million and 14 million per year.

  • Anti-abortion protesters have started wearing birght orange vests with the words “Pro-Choice Clinic Escort” outside a Louisville, Kentucky, clinic to trick patients into believing they are there to help them.
  • Not too surprisingly, scientists have found Serious Emotional Disturbances Among Children After Katrina.
  • Did anybody clap as Arnie made more promises he can’t keep in his last State of the State address?
  • If U.S. policy is going to have any chance of success in Afghanistan, Thomas Ricks writes, it will have to improve greatly, according to Fixing Intel: A Blueprint for Making Intelligence Relevant in Afghanistan written by Army Major General Michael Flynn and Marine Capt. Matt Pottinger (formerly of the rock band Blind Dog Whiskey). And that doesn’t just apply to the military escalation there:

    “An NGO wanting to build a water well in a village may learn, as we recently did, about some of the surprising risks encountered by others who have attempted the same project. For instance, a foreign-funded well constructed in the center of a village in southern Afghanistan was destroyed — not by the Taliban — but by the village’s women. Before, the women had to walk a long distance to draw water from a river, but this was exactly what they wanted. The establishment of a village well deprived them of their only opportunity to gather socially with other women.

  • Uthman al-Mukhtar reports that assassinations and bombings have brought fear back to Anbar province in Iraq.
  • Heather Hurlburt and Kelsey Hartigan of the National Security Network have co-authored a very nice piece debunking the same tired nuclear weapon mistruths repeated yet again by the Wall Street Journal editorial page. An excerpt:

    WSJ Claim:  The warning comes in a recent letter from 40 Republican Senators and Independent-Democrat Joe Lieberman reminding the President of his legal responsibility under the National Defense Authorization Act of 2010 to present budget estimates for modernizing U.S. nuclear forces along with any new Start pact.

    Fact: The National Nuclear Security Administration (NNSA) already continually refurbishes U.S. nuclear warheads.  Every year, the Departments of Defense and Energy spend approximately $30 billion per year to ensure that the US nuclear arsenal is safe, secure, and reliable. The National Defense Authorization Act of 2010 commits the US to “modernizing “the nuclear weapons complex” and “infrastructure” (ie the labs, research and safety and security facilities) – not, as the Senators and the Journal assert, “weapons.” [National Defense Authorization Act for 2010, p. 394.]

    – Plutonium Page

  • The view that Employer Health Costs Drive Wage Trends gets a debunking in a report from the Economic Policy Institute.
  • Why was the crotch bomber missed? Too much surveillance, not too little, says Glenn Greenwald.
  • It’s the end of the world for the Democrats, says John Mercurio at Politiscope:

    Ten months before the 2010 midterms, we apparently know this much for sure: Democrats face a doomsday scenario. They’ll lose anywhere from 10 to 400 seats in the House and eight to 100 in the Senate. … Elections in November have a funny way of tossing aside conventional wisdom from January (or, for that matter, late October).

Categories: Politics Tags: , , , , ,

Midday Open Thread

January 6th, 2010 admin No comments
  • Robert Borosage and Roger Hickey at the Campaign for America’s Future had a dialog on how progressives can learn from the frustrations of 2009. [Video here.] The main points:
    1. Change is brutal, and will always be resisted by powerful entrenched forces. …
    1. No matter how popular a reform idea is, like the public option, it still faces the buzzsaw of the United States Senate.
    1. Progressives cannot wash their hands of the political process. We have to organize more, independent of the political parties.
    1. This is still the best opportunity in 30 years for progressive reform.
  • All Together Now: Shut Up You Lefties!
  • Kevin Drum answers the question of How Big Finance Bought Uncle Sam:

    Now if the aerospace lobby had told us after the 1986 Challenger disaster that the key to better performance was to turbocharge the engines and quit performing preflight inspections, everyone would have agreed that they were crazy. Yet that’s essentially what the finance lobby has done over the past decade, and in some weird way we were too mesmerized to recognize it. Within months of a near catastrophe caused by one of the industry’s brightest stars, the lobbyists were busily making certain that it would happen again—and that when it did happen, it would be bigger and more disastrous than ever.

  • The Best and Worst Jobs for 2010, according to The Wall Street Journal’s Sarah E. Needleman.
  • I’ve often thought that maybe, just maybe, if someone made a movie about the effects of nuclear weapons, Kids These Days™ might take an interest in nuclear abolition. So I’m pleased that David James Cameron is considering just that for potential post-Avatar plans:

    … on Dec. 22, the Oscar winner visited Tsutomu Yamaguchi, an ailing 93-year-old man who survived the U.S. bombings of Nagasaki and Hiroshima. … The director told a Japanese paper he’s not certain he’ll make a nukes-themed film — but if he did, it would be “uncompromising.”

    – Plutonium Page

  • Frank Munger of the Knoxville News Sentinel has been following the transformation of the US nuclear weapons complex from strictly defense to more diverse functions. Today, he has an article about how Y-12 workers have developed a more effective way to detect tiny amounts of bomb-grade uranium:

    Engineers have come up with a way to make a small amount of U-235 appear much larger. At least it appears that way to radiation detectors, and that could be critically important.

    According to officials at Y-12, the project could change the way monitors are tested at border crossings and airports and make sure the detection systems work properly. This, in turn, could enhance global efforts to stop the smuggling of nuclear materials with bomb-making potential.

    – Plutonium Page

  • In a Charlie Rose BusinessWeek interview with Paul Volcker, The Lion Lets Loose.
  • Chase Davis at California Watch says Politicians rely on county parties to funnel contributions, avoid campaign limits.
  • Gee Oh Pee Chairman Michael Steele steps back into the 19th Century to punctuate his bullshit:

    Our platform is one of the best political documents that’s been written in the last 25 years. Honest Injun on that.

  • Roger Schuler at Legal Schnauzer (and here) writes that Alabama’s Economy is Imploding Under Governor Bob Riley.
  • Ezili Danto looks at Avatar from a Black perspective.
  • Nathan Hodge of Wired magazine’s Danger Room slams David Ignatius:

    What government agency doesn’t need a good public affairs officer? It’s a rough world out there, with lots of critics. You never know when someone might try to cut your budget or demand a Congressional investigation.

    So much the better if your PAO has a twice-weekly column at the Washington Post, and does the flacking for free. I’m speaking here of David Ignatius, Post columnist and author of spy novels. Let’s examine, shall we?

    Read the whole thing. – Plutonium Page

Deepak Chopra: Is the Fate of Democracy in Sarah Palin’s Hands?

January 6th, 2010 admin No comments

A recent review of Sarah Palin’s bestselling book, Going Rogue, ends by declaring that she is the worst nightmare come true for democrats with a small d. This is both a startling and an obvious claim. It’s obvious in that Palin is a rabble-rouser. Without shame or apology she targets the crazy right, fueling their resentment and anger with outright lies. “Death panels” are only the most colorful example. She is willing to bait the mob with any fear about America’s future, from financial collapse to terrorist devastation.

Palin’s image as an abortion-hating, meat-eating, gun-toting hockey mom is a flimsy contrivance. But if she seems like a prime example of political piffle, Palin’s rise is also startling, because her followers truly bond with her in a visceral way that is rare for any politician. In February Palin will give the keynote speech to a national convention of the tea-bag movement. At that moment we will learn something about political passions and the future of democracy — something we wish wasn’t there.

In his year-end roundup, New York Times columnist David Brooks said that he has always looked to passionate outsiders as omens for the future. John Birchers in the Sixties, feminists in the Seventies, and religious fundamentalists in the Eighties are examples of embattled outsiders who gained center stage through their passionate commitment. Brooks sees that same passion among the tea-baggers, with their blinkered obsession over socialism, taxes, and big government. It’s a potent, toxic mix. Ronald Reagan wasn’t telling the truth when he said that government is the problem, not the solution, but with that slogan he launched a reactionary crusade. Today, thousands of Americans feel more compelled than ever to join that crusade.

Once any political movement wins, it becomes self-justifying. Reaganism was on the whole very harmful to America and at its heart hypocritical, since Reagan presided over an enormous jump in the size of government and a tripling of the deficit. But since the reactionary right was able to seize the reins of democracy, it automatically felt justified. As a result, a generation of Americans has grown up disgusted with government while at the same time buying into a range of bigoted and prejudicial beliefs that make good government impossible. When you will do anything to block healthcare reform, immigration reform, subsidized spending for a crippled economy, and increased revenues to care for an aging population, government isn’t the problem: you are.

People don’t like to feel that they are the problem. Therefore, many flock to a myth-maker like Palin. Her hokey frontier ethic is completely divorced from reality. Few poor people can shoot a moose outside our back window or would want to. They need food stamps and other kinds of compassionate help. Palin touts free enterprise and hates federal programs. But Alaska takes more federal dollars per capita than any other state, and a third of its jobs are government jobs.

What we’re seeing is an old tactic in new bottles. The right wing thrived by distracting voters from reality. The average person’s life isn’t remotely affected by school prayer, flag-burning, late-term abortion, or gay marriage. But if you get enough voters aroused by these issues, the party in power can subsidize the rich with vast tax cuts and look aside as real incomes for the middle-class fail to rise. All the benefits of corruption, from freewheeling lobbyists and influence peddling to Wall Street chicanery and subprime lending, go to the haves and hurt the have nots.

Palin has turned up the volume but pursues the same tactic. Her situation is one that’s easy to identify with if you are hurting. She holds together a family and fiercely defends it in the face of a teenage pregnancy and a Down’s syndrome baby. It’s also easy to identify with her knee-jerk reaction against taxes, federal bureaucracy, and unwanted intrusions from Washington.

But if you go one layer deeper, Palin’s kind of mobocracy would lead to the following:
— reluctant assistance for victims of disasters like Katrina
— a burgeoning underclass cut adrift from government aid
— an out-of-control medical system at the mercy of insurance companies and ever-rising costs
— the vicious criminalization of illegal immigrants
— a belligerent military stance around the world
— an atmosphere of permanent fear-mongering
— the driving out of tolerant, educated people from the political system
— a chaotic attack on all government programs
— a huge mismatch between income and spending by the government

This list would represent fear-mongering on my part except for the fact that all these things occurred during the Bush years. Democracy suffered a huge setback with the long reign of right-wing ideology. All that Sarah Plain offers is an amped-up version fueled by more blatant appeals to mindless fear and rage. Will she succeed? It’s an open question. The American public has barely emerged from the fog of illusion; Palin’s success or failure will tell us a lot about whether the same fog, only thicker, is about to return.

Deepak Chopra on
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Paul A. London: Financial Reform: Fixing the Fed

January 6th, 2010 admin No comments

Ben Bernanke, Chairman of the Federal Reserve, staked out a clear position for the upcoming debate over financial regulation at the American Economic Association on January 3. Bernanke had to make his case because the role of the Federal Reserve Bank is central to financial reform, and that debate starts in earnest now that the Congress and the President are returning from Christmas vacations. Not surprisingly, Bernanke argued that the Fed ought to have a broad mandate, and that it would be a mistake to take away its role in the supervision of financial institutions as some legislative proposals would. I agree with him but understanding the reasoning is very important.

Bernanke’s argument on January 3 was two-fold. He said that supervision of financial institutions had to be strengthened and he took great pains to show with data and slides that those who believe that is monetary policy — low interest rates — caused the 2008 financial debacle are mistaken.

Bernanke said unambiguously that the Fed had almost failed to avoid a catastrophe but he did not fully explain how that was connected to the monetary argument he was at such pains to address. To understand why the Federal Reserve allowed the dot com and sub-prime crises to build and explode, we have understand why the Fed did not better supervise the banks and financial system in the years prior to 2008 and why the monetary argument Bernanke spoke about at length is so important.

The short answer to these questions is that monitoring private sector excesses and supervising banks had become a secondary task for the Fed because for the last 30 years it has been preoccupied with inflation and monetary issues even when inflation was not a problem. The Fed’s leaders, Wall Street, and the media for over three decades had repeated a catechism that described the Fed’s role as inflation fighting, and which rarely if ever mentioned supervision of private sector players. Facing catastrophe in 2008, Bernanke put aside that pernicious preoccupation and did what the Fed was created to do: As the designated agent of the Federal government, he threw roughly two trillion Fed dollars into saving the financial system, which had to be done. He stopped thinking of the Fed as the Federal Anti-inflation Bank and used it as the Federal Reserve Bank as it was intended.

Bernanke made clear on January 3 that he now understands that reform must center on better supervision and regulation because hands-off faith in the wisdom of financiers bolstered by shamanistic statements about inflation and interest rates did not work. Bernanke knows that inflation was not the reason for the Fed’s creation, which followed a financial panic and deep recession. Nor did inflation cause the Great Depression or any of the milder job-killing recessions of the post-World War II era. Collapsing speculations like the one we are still working through have caused far more damage. Bernanke and the Fed came to the support of the financial system in 2008 and 2009 because the Bernanke is a student of the Great Depression. In the 1930s, when the Fed failed to supply reserves, economic collapse followed and the Fed was consigned to irrelevance for the following 20 years. Bernanke does not want that to happen again and perhaps he fears that some legislative proposals now being considered could do just that.

Republican electoral calculations, more specifically Richard Nixon’s electoral strategy in 1968, were what transformed the Federal Reserve Bank into the Federal Anti-Inflation Bank. The 1968 election marked the triumph of monetarists and inflation hawks who had been hanging around on the outskirts of academic economics for decades. Why did Nixon decide to support this particular group of academics in 1968? That is an interesting question that I wrote a few pages about in my book, The Competition Solution: The Bipartisan Secret behind American Prosperity (AEI Press 2005).

In a nutshell, Nixon was facing Lyndon Johnson’s vice president, Hubert Humphrey in the 1968 election and wanted to undermine Humphrey’s support among union workers. Unemployment was less than four percent and inflation was low but rising. Low unemployment did not make the unions happy, however, because they were not getting wage settlements as big as they wanted. Johnson had kept inflation down by twisting the arms of powerful business and labor interests that had more power to raise prices and wages at that time than they do today. Not surprisingly, the unions did not like this because they saw it as keeping wages down.

The annual reports of Johnson’s Council of Economic Advisors show that Johnson had many fights with unions from 1966 through 1968. He, like every president since World War II, had locked horns with Big Steel and the steel workers union. The newspapers also covered his battle with the International Association of Machinists, representing workers at the established airlines. The IAM’s president, Roy Siemiller, contemptuously defied Johnson’s 3 percent wage increase guidelines and got more than 5 percent. The powerful head of the AFL-CIO, George Meany, deplored Johnson’s efforts to keep wages in check. Other union leaders shared his views. Nixon, an astute politician, wanted to play on this discontent.

University of Chicago economists led by Milton Friedman offered Nixon a monetary theory of inflation that ignored the issue of union and business power, just what Nixon wanted. Republican business allies had long preferred this approach because it absolved them of responsibility for the “price push” aspect of inflation. The Chicagoans said that inflation was caused by errors in setting money supply not by greedy companies and unions. This was a huge difference in political terms because it shifted the primary blame for inflation from bad actors in the private sector to the government’s money supply policy directed by the Federal Reserve.

Leaning on monetarist theory, Nixon promised Meany and the other labor leaders that he would not twist their arms to keep wages down. Instead he would use the Fed to control inflation. He repeated this promise all through the 1968 campaign and made it again explicitly at his first press conference in January 1969 after taking office. As a result, after 1968 the Federal Reserve might more rightfully have been called the Federal Anti-inflation Bank.

Of course, monetary policy aimed at controlling inflation by raising interest rates failed in the early 1970s. Prices continued to rise despite higher interest rates and slower economic growth. Nixon recognized that the new policy was not helping him so he junked it before the 1972 election. He broke his promise and began pressuring powerful industries and unions to hold prices and wages down just as Johnson had. When this did not work either, he instituted wage and price controls which were popular for long enough to secure his reelection. Both steps recognized that market power in the hands of companies and unions was a root cause of rising prices, and that Fed-engineered monetary policy could not do the job if companies and unions continued to have the power to set prices and wages.

Unfortunately, the idea that the Fed’s role was almost exclusively to fight inflation long outlived Nixon. It did so because it absolves the private sector — financial institutions in the most recent debacle — of responsibility for the country’s economic ills, and blames government, the favorite whipping boy of many Americans. Bernanke acknowledged this at the AEA, clearly blaming the economic crisis on abuses by the private sector and arguing that monetary policy had little or nothing to do with the housing catastrophe. He is right, but the day after the speech, the Wall Street Journal was already emphasizing in its headlines a few words in the speech about monetary policy, in effect discounting Bernanke’s much lengthier endorsement of stronger supervision and regulation of private sector abusers.

To reform financial regulation in 2010, policy makers need to abandon the discredited monetarist accretions of recent decades. A more realistic approach would recognize that in most cases inflation as well as speculations are the result of abuses in private markets that must be exposed. Take healthcare as an example. Inflation in healthcare is not the result of Fed monetary policy anymore than the housing fiasco was, as Bernanke showed during his speech. Cozy, non-transparent, and non-competitive arrangements throughout the U.S. healthcare system are what keep driving costs up and government must use regulation and competition policy to dismantle them.

Financial reform means recasting the role of the Federal Reserve Bank in keeping with its title. Its job is to provide reserves to financial institutions when bad investments threaten to cripple their ability to lend to healthy borrowers, and supervising the various financial players so that they do not get in such trouble that they have to turn to the government to bail them out. Coordinating policy with other central banks is an important Fed role and fighting inflation sometimes is too, but better supervision, as Bernanke emphasized, is crucial.

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Susan Madrak: You Still Want To Gut Social Security? Bring. It. On.

January 4th, 2010 admin No comments

You find the darndest things on Craigslist, don’t you?

Looks like the The Peter G. Peterson Foundation is putting together another scare piece (remember “I.O.U.S.A.”?) to use in their latest attempt to kill Medicare and Social Security.

As a Philadelphian, I’m thrilled we were chosen to take part – even if they picked us because tightwad billionaire Peterson knew it would be cheaper than filming in New York.

But this is more than mere marketing – and it isn’t even the major thrust of his sophisticated astroturf campaign. The fact is, billionaire Peterson has spent decades of his time – and millions of dollars – pushing for the eventual gutting of these two programs. He’s a deficit hawk, all right – but only when there’s a Democratic administration.

And in a classic piece of disaster capitalism, he and his powerful allies are moving in for the kill. Be very, very afraid.

A New York City Production Company is looking for participants for a documentary web series about the financial issues facing everyday people. We are interviewing real people, not actors, talking about their lives, experiences, and thoughts about one or more of the major issues facing Americans today.

We are looking to cover stories from as many different ethnicities and political viewpoints as possible. Whatever your age, background, or income, if you have an interesting story, we’d love to hear from you.

Since this is documentary journalism we can not by law compensate the interviewees but we will pay for travel and food. The shoot should take a few hours and we will do our best to schedule around your convenience.

What do you suppose the odds are of my viewpoints being included in this “documentary journalism”?

You will be helping other people by telling your story. Other Americans who feel alienated and hopeless will gain comfort by knowing they are not alone. And together we can make a difference in the future of our country and for our children.

Yes, we’ll be stripping the recession-battered country bare of what tattered remnants of a safety net that remain – and we’ll make you like it! It certainly will make a difference.

The videos are for The Peter G Peterson Foundation, a non-profit, non-partisan, organization whose only mission is to educate the American people about the country’s financial situation and incite them to take action on their behalf.

Dear sweet Jesus, shoot me now. The man worked for Nixon. He was the CEO of Lehman Brothers, which held the same kind of influence we now see with Goldman Sachs. (So you know he has only our best interests at heart!)

You don’t have to be a political expert to participate. We just want to know your personal story.

The topics are:

1. The Healthcare System – What it does to the participants and the need for reform in a way that works.
2. The Tax System – How complicated and unfair it is.
3. Social Security and Medicare – What will happen to the younger generations once the Entitlements go broke.
4. The Federal Government’s Financial Situation – 11 trillion in National Debt with no plans to balance the budget and pay it back.
5. Our own personal financial issues – High school loans, credit card debt and mortgage rates are crippling Americans.

Some of the possible “stories” we’re looking for:
* A person who can’t pay their mortgage or their taxes
* A recent college graduate with credit card debt and student loans.
* A young family adjusting to the costs involved in raising children.
* A person with serious healthcare expenses.
* A small business owner who would like to provide healthcare but can’t.
* A person who has been or is being audited due to a mistake by their accountant or not knowing how to file taxes properly.
* Anyone who is infuriated by these issues.

Please remember, the types listed above are only possible guidelines. If you have an interesting story about your financial struggles, we’d love to hear from you!

Fellow Philadelphians, I think you know what to do. Let’s send these sorry excuses for human beings back to Wall Street with some real stories.

The series will premiere on prominent websites with potential TV airings.
If interested, please send an email with your name, contact info, and a brief description of your your situation to John at We will be shooting in Philadelphia mid to late January so time is of the essence.

Look, if the healthcare battle hasn’t opened your eyes to the fact that immensely wealthy and powerful corporate interests are perverting our democracy, you’re not paying attention. Why else do you suppose the Washington Post turned over a chunk of their news section the other day to a Peterson propaganda supplement – as news content?

The Washington Post published in its news pages an article by The Fiscal Times — “an independent digital news publication reporting on fiscal, budgetary, health-care and international economics issues” — that promoted the creation of a task force to reduce the deficit in part through cuts to Medicare, Medicaid, and Social Security. But the Post did not disclose that the Times is funded by conservative billionaire Peter G. Peterson, whose organizations have long advocated reducing the deficit through entitlement cuts and have called for the creation of such a commission.

The Fiscal Times article ran on Page A10 of the January 31 edition of the Post. The article’s byline noted that authors Elaine S. Povich and Eric Pianin report for The Fiscal Times; a note at the end of the article stated that it “was produced by the Fiscal Times, an independent digital news publication reporting on fiscal, budgetary, health-care and international economics issues.

Oddly enough, there was no inclusion of opposing views in this “news” piece. But then, the Washington Post has a long and proud tradition as a willing andmaiden to powerful interests.

So here it comes, the cranking up of the Mighty Wurlitzer. If they want a fight, bring it on.

This time, we’re ready.

Midday Open Thread

January 3rd, 2010 admin No comments