Rebecca's Bailout Plan

This might be the only time I will say this: Thank you, thank you House Republicans for voting 'No' to Bush's bullshit "bailout my friends and leave the american people with the debt" plan.

I just got a new issue of the nation with their bailout plan. I haven't read it yet so I'm sure I'll have more to say on this topic later. If you haven't yet, take a glance at Nader on the Bailout and Kucinich's "Main Street Recovery Plan." I, also, saw Paul Krugman on Keith Olberman tonight and he had some good points that found their way here.

First, let's start with what's bad:

1. Buying bank's bad assets. Um, would you buy a house that was ruined by Katrina? No. It's absurd.
2. Giving Bush 700 Billion (or 350 Billion now and 350 Billion later unless you explicitly vote No) to do whatever the fuck he wants. Didn't we already do that in Iraq? Where has that gotten us? Here. That's where.
3. Rewarding people for royaly fucking up the economy ... no, ALL the economies in the whole fucking world. Austrailia's market dropped 15% in the first 5 minutes; Japan dropped 5%. Capitalism is 'sink or swim' but the only businesses that seem to be allowed to sink are small business.
4. Not helping out average americans who are drowning ... BAD. BAD. BAD.

Ok so ... Here's what I think:

1. Yes, we need to help Wall Street. Why? Because they aren't lending to businesses and students and that is the money that makes the world go 'round. Here's what we do: The Treasury buys Preferred Stock in the companies they bail out. Enough stock to have a controlling interest in the company - to prevent ridiculous CEO compensations and ensure that tax payers get their money back ... with interest. This way, if the company is back on it's feet, the tax payers gets payed back by buying low and selling high. If the company goes backrupt, preferred stock holders get paid first.
2. Start with 50 Billion; not 700 Billion
3. In the short term, the Treasury should lend directly to businesses and students alleviating the credit crunch and ensuring, again, that tax payers get their money with interest.
4. Take some of the 700 Billion and create some fucking jobs idiot. Our infrastructure is crumbling and we have an energy and environmental crisis. Let's revive the Tennesee Valley Authority and the Civillian Conservation Corps. Let's build some wind farms all across the country. Let's fund research in energy - I'm sure many of my fellow IT workers at Lehman and other financial institutions would gladly switch over to working in other fields. Gladly. If people have jobs, they have money. They have money, the spend it. Economy better. Seriously, Economics 101 ... and The New Deal 101.
5. Empower bankruptcy judges to renogiate mortgages ... and get rid of any bankruptcy consequences for 6 months to 1 year of the new mortgage. If you still default, then you can ruin your credit.
6. Regulate the fucking economy. Adam Smith is rolling over in his grave guys. This is not capitalism. For example: increase the requirements for buying on margin (buying stock with money you don't have), tax speculation, regulate derivatives; re-instate Glass-Steagall (separate commercial from investment banking).
   

A few things I'd do after the immediate crisis passed:

1. Give stockholders real rights. Stockholders - the owners of a company - should be approving things like executive pay. Let's incentivize companies to do the right thing.
   
2. Expand Medicare and create a universal, single payer health care. NOW. No one should go bankrupt because they can't pay their medical bills. (Currently, half of all bankruptcies are the result of medical bills).
   

There's so many more things we should do - take a look at Kucinich's comprehensive plan - but these are the most obvious and pressing I think.

Some parting thoughts:

- "... there are no libertarians in a financial crisis." Paul Krugman on Real Time with Bill Maher
- Aren't you glad Bush didn't succeed to privatizing Social Security???

I'm not the only one with the Great Depression on the mind ....

... according to the consumerist

Oh, FDR, how I adore thee

"The present administration has either forgotten or it does not want to remember the infantry of our economic army. These unhappy times call for ... plans ... that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the pyramid." - FDR

The Great Depression v2.0

I've been saying or hinting for a while now that the current fiscal crisis we are in is absolutely akin to the Great Depression. I think most people think (thought?) that I was overreacting. Well, now I'm, sadly, not the only one.

McCain & Hoover: The fundamentals are strong!
"The day before Hoover insisted that the fundamentals were strong was the day that came to be known as Black Thursday, when in heavy trading the Dow Jones Industrial Average lost about 9 percent of its value. And while, in endless stock-footage documentaries showing images of dumbfounded traders over a soundtrack of mournful jazz clarinets, the crash is supposed to begin the Great Depression, it wasn't quite so. The real cause was the collapse of the banking system, which followed the crash in part because Hoover believed strong fundamentals would protect the economy from disaster."

The panic sets in ...:
"At some point, the new president might have to do what FDR did in the wreckage of early 1933--declare a "bank holiday" and announce emergency rules to govern banking and finance until the crisis is broken. For the country's sake, I think this a better approach than buying up junked banks and failed financial firms, one by one. People have the right to ask: what exactly are the rest of us getting for our money?"

I know that after eight years of a President who respects neither the constitution or history I shouldn't be surprised. But really, who hasn't heard the old adage that those who fail to learn history are doomed to repeat it. (Actually, the quote is "Those who cannot remember the past are condemned to repeat it")

Mostly, when I employ this adage, I'm talking abou t the economy; about, what I see as, the fundamental lesson we learned during the Great Depression: that the government plays a fundamental role in the economy, both to ensure stability and to ensure true capitalistic competition or consumer protection when capitalistic competition is impossible (utilities for example). Ok, all of that didn't come directly out of the Great Depression. The latter came out of the Gilded Age but I thought I'd throw it in for good measure.

Anyway, my point is this: the financial crisis were are seeing is a) exactly what happened during the Great Depression (run on banks causing a crash of the economy), b) a direct result of the financial deregulation of the last two decades, especially the repeals of the Glass-Steagall Acts (a trend that, instead of being nipped in the bud by the government - you know, the one bailing out these free market corporations - is being continued by the process.), and c) is only not as a bad as the Great Depression (well, so far - fingers crossed) because we still have some remnants of the New Deal era regulations and safe guards in place.

Seriously, what is wrong with this country? Why do people buy this bullshit? How is it that I, a financial and economic lay person by most accounts, can say 'I told you so' and we have the top honchos of Wall Street scurrying around trying to justify their greed?

*Just because I know what people assume: I believe in capitalism. But, like, real capitalism. Capitalism that involves competition by many, consumer protections (because consumers are a part of the market too!), government regulation to ensure that competition exists and is fair or, in industries, that lend themselves to monopolies (utilities), ensure that corporations aren't taking advantage of consumers, and little to no government subsidies to private enterprises. I, particularly, believe in supporting and nurturing small business in America. Also, I do believe there are some things that do not benefit from being motivated by profit - education, health care, and the military in particular. Most importantly, though, I believe it's the role of the economy to serve society; not the other way around.

Life, Liberty, and the Pursuit of Bullshit ....

In writing my last post, I was googling to try to find the democratic party official or worker or something who said that while working for the democratic party, he didn't have to listen to the left at all. Instead, I came across a random blog - I guess it can't be that random if it showed up in google's first page search results - some guy wrote about how both the Democrats and Republicans have it wrong. Don't get me wrong, as evidenced by my voting for Nader, I think both parties have a lot of shaping up to do. However, this guy's reasons for why the democrats need to shape up are right out of the Fox News play book. Seriously, dude, seriously.

Before I, inappropriately, post a comment, I thought I'd share here my responses to his post:

Democrats still believe in higher taxes, especially the higher income people to spend on the "unfortunate". This is so stupid because

1. This reduces incentive to work. If one is "earning" without working, he'd rather not work and "earn" a little less, than work and earn a little more (and see a big chunk of earning taxed away).
2. The "unfortunate" (or anyone for that matter) does not appreciate something that is not hard earned.

Wow. Priviledged much? Would you stop working just so you could get welfare? I doubt it. Welfare and food stamps barely cover the cost of living. Welfare to "Work" is effectively slave labor - for example, Welfare to Work in New York City involves working sweeping parks for the New York City Parks and Rec. The New York City Parks and Rec has no incentive to hire anyone because they get workers for free and the workers aren't learning any valuable job skills. Also, you need to take into account the terrible education for the urban poor and that there are very few unskilled jobs where a worker can make enough to pay the bills anymore. Let's also not forget that Welfare to "Work" affected a lot of single mothers who were going back to school so they could improve their situation. So, yes, if I had a choice between working 3 jobs to barely pay the bills or going on welfare to barely pay the bills, I might take welfare.


3. Higher taxes are bad for the economy - they drive away the industry. Why would someone set up a true multinational in the US if the US is going to take 40% of their profit away, if setting up the same company in another country can reduce the tax liability by 90%. A case in the point, Schlumberger, the oil drilling company is moving to Dubai

The vast majority of corporations in the US don't pay any taxes at all so this argument doesn't make sense (and it makes it a bit comical that you think US corporations pay 40% of their profits in taxes). Companies are moving away even though they don't pay any taxes. Also, historically, all nations have had trade importation regulations which would encourage a company, especially one who wants to sell to the enticing American consumer, to stay. If no one is employed, no one can buy your product so it's not actually in a companies best interest to move away.
In fact, the most prosperous time in the US was '63 or so, when all the New Deal regulations were still strongly in place and might be considered the height of economic regulations. Post-WWII to the '80s saw the smallest gap between rich and poor; today the gap between the rich and the poor is as large if not larger than it was during the 20s ... an era that lead to the Great Depression, which is where we are now.
Last but not least, who said that the US supporting and bending over backwards to have "true multinational" corporations is the goal of the economy. I would argue that the purpose of the economy is to serve society - with jobs, products, education, health care - not the other way around.


5. What part of never kill the goose that lays the golden egg you don't understand?

Depends who you think the goose is. Clearly you think it's corporations. I'd argue it's consumers who make corporations profitable. So having an economic system that ensures capitalistic competition (which we currently don't have) and supports an ardent middle class, is in the best interest of the country.

6. This country was founded on the notion of "Life, liberty and the pursuit of happiness". It is pursuit of happiness, not provision of happiness.

I'd say it's pretty difficult to be happy when you cannot afford to eat. And I'm not sure how taxation really impedes your ability to pursue happiness ... unless you believe happiness is equivalent to money and then I just sort of feel sorry for you. Our founding fathers - you know, the ones that wrote the Declaration of Independence - also said "No taxation without representation" so they created a system of representation. Also, since the supreme court long ago ruled that a corporation is entitled to the benefits of being considered a "person" under the law; shouldn't corporations also be required to bare the burdens - such as taxation - of being a "person" under the law.


7. This is Capitalism, not Socialism. US is prosperous because of enormous wealth creation by Capitalism. Socialism didn't work in USSR, it didn't work in North Korea, it didn't work in East Germany, it didn't work in China (till it shunned its Socialist/Marxist policies in favor of Capitalism).

Well, we sort of have capitalism (just like China, the USSR, East Germany and North Korea sort of had socialism and just like China now sort of - very very sort of - now has capitalism). Capitalism is based on many, small entities competing which we generally don't have today given corporate consolidation, corporate welfare, and a systematic dismantling of consumer protections in the last 20 or so years. Also, Adam Smith, the father of capitalism, warned against the treachery of corporations in the same industry cohorting to manipulate the "invisible hand" which they do today, perfectly legally. There's nothing that says that the government does not play a role in a capitalist economy - in fact, that's a huge lesson we learned during the Great Depression and was the basis for the New Deal. Then there's NAFTA: a trade agreement, especially one that trumps government rules, is by definition not capitalistic. I could go on and on ...

Secondly, there's nothing to say that there aren't areas of society that should be socialized; areas that don't benefit from the motivation of profit - education or health care, for example. Moreover, even today, the amount of government money flowing through our economy - fire fighter, police, and teacher salaries, research grants, subsidies for corporations etc etc - is greater than the stock market, effectively making the US one of the most "socialist" countries in the world and thus making your argument absurd.

Also, our current "wealth" goes to about 1% of the population so in fact, your "capitalism" has made most Americans less wealthy.

In fact, I would argue that what we currently have - a system that both republicans and democrats support with ridiculous campaign contributions and corporate lobbyists - is much closer to fascism (by definition, a corporate run state) than socialism.


-- End Inappropriate Comment --

America: The New India?

One of the things I've always hated about liberal intellectuals is the glorification of non-Western culture. I'm not saying that eastern cultures don't have positives - they have plenty - but they also have many many negatives (just as we do).

I remember talking with a friend of mine who was preparing to head to grad school for Indian History. She began telling me about how the Indian government was so responsive to the people - responsive in a way that the American government isn't. Specifically, she was talking about the Indian government's attempts at dealing with the exponential increase in suicides among poor farmers.

I looked at her quizzically. In America, I said, we would never get to a point where poor farmers are so desperate that they start killing themselves - we subsidize farmers, we have welfare. I wasn't saying that any of these solutions were perfect - the subsidies of Reagan should surely be replace by the revolving loans of Roosevelt; welfare plus promotion/creation of middle class jobs should surely replace welfare-as-slave labor, i'm sorry, i mean "welfare to work" - but the point was that in American, for better or worse, we generally keep people from killing themselves because of financial ruin.

Turns out that I was wrong. In the wake of the recent mortgage crisis (and I mean recent in the sense that it's the direct result of 20 years of deregulation of financial markets and tearing down social safety nets of the New Deal), people have begun killing themselves rather then watch their houses - likely the accumulation of their life's work - be sold off to the lowest bidder.

Is this seriously what America - and it's lofty ideals - has come to? Seeing suicide as an effective solution - for debtors and creditors alike - to what generally amounts to wall street's speculation and predatory lending? During the Great Depression - and don't kid yourselves, this is Great Depression #2, we just have enough of the safety nets enacted by the New Dealers in place to keep the economy from complete and utter collapsie - people shot the bankers and cops who came to foreclose houses, not the other way around. The people said, fuck you - if you're going to sell my house for a fraction of what I owe you and not give me the opportunity to buy it, I'm taking to the streets with guns and fire and stuff. Or something like that.

Ever since Bush got into office, I just cannot help constantly thinking of the old adage: "Those who cannot learn from history are doomed to repeat it." It's become my sad sad mantra as I watch people throw away the very solutions to problems they are claiming to solve.

And repeat it we will.

Read the article The Suicide Solution by Barbara Ehrenreich at TheNation.com.