Long live Studs Terkel
The commoner's raconteur was a mere 96 years young, according to a New York Times-AP report!
"Obamacons" to the rescue
Once again, Obama bears to the right: An AP report at TPM has Obama asking Rep. Rahm Emanuel (D-IL) to become his first Chief of Staff.
Emanuel is a veteran of President Clinton's White House, and has made a rapid ascent of the House leadership ladder since his election to Congress. He was chairman of the Democratic campaign committee two years ago when the party won a majority for the first time in more than a decade, and he cemented his reputation as a prodigious fundraiser and strong-willed political strategist.
This tack is unsurprising (see this, this, this). Paul Volker, the former Federal Reserve Chairman who ushered in the neo-liberal era and tamed the 1970s stagflation economy, had already joined Obama, as the Washington Independent reminds its readers. So too the self-styled Eisenhower Republican, Bill Clinton, who recently made peace with Obama (see this) after race-baiting the Senator in the spring! Scott McConnell, Editor of the American Conservative, will vote for Obama, rightly identifying the Senator as a first-rate Clintonista. Across the Atlantic, the Economist discusses what it terms the "Obamacon" phenomenon and wonders if this group, when coupled to President Obama's conservative governance, will produce the next great electoral realignment in the United States.
On a more hopeful note, Glen Ford suggests that finance capital's recent and radical troubles could provide the urban poor with an opportunity to oppose the ethnic cleansing (gentrification) of America's great cities. Perhaps a resistance effort of this kind would compel Slick Willie to take his office from Harlem and move it to the increasingly inviting spaces in SoHo!
Ohio: Soon to be the land of lawsuits, according to the New York Times. "If the outcome of next week's presidential election is close, this precariously balanced state could be the place where the two parties begin filing the inevitable lawsuits over voting irregularities, experts say."
The American economy contracted by .3% in the third quarter according to the Commerce Department.
But, of course:
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.
The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don't serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.
It is clear that extortion pays, according to the Washington Post report.
Arno Mayer warns, "Predictions of the American empire's imminent decline are exaggerated: without a real military rival, it will continue for some time as the world's sole hyperpower."
American sociologist Andrew Arato, writing recently for a European audience in the Reset Dialogues on Civilization, made a few surprising claims:
In the United States a party may very well come to power that has the ideological inclination to carry out and solidify a paradigm change abandoning the Washington consensus, and in the direction of regulated capitalist economies. Moreover, this party, for a change, is led by a remarkable person, who has in domestic and economic policy at least a capable team around him. Thus what we are witnessing is not only a dramatic crisis, but also its potential longer-term solution.
What makes Arato's assertions unusual is the fact that the Democratic Party, as led by the Democratic Leadership Council and the Democratic National Committee, has shown no penchant whatsoever to abandon the "Washington Consensus" and America's global empire. Nor has the Party revealed a commitment to implementing a tightly "regulated capitalism." In fact, key Congressional Democrats just recently led their Party and a few obstinate Republican hardliners in the fight to give Wall Street the better part of a trillion dollars with little in the way of effective supervision! In what sense would this fealty towards finance capital and the Pentagon mark a break with the recent past?
In fact, despite the candidate's rhetoric of change during the fall campaign, he has made no effective promise to break with the past. We can easily see the truth of this judgment when we consider what a left-democrat committed to implementing decisive reforms may want to include in his or her minimal program. I would suggest this program would include the following:
What is the intent of this program? Briefly put, Pax Americana and market fundamentalism, America's duopolistic party system, Wall Street and Main Street (such as they have been known since the end of the Second World War) must go and they must be sent off quickly if the country hopes to move beyond the present crisis and to generate the resources needed to master the ominous crises of the future. A principled abandonment of power politics, big finance and self-destructive modes of life — these make up the general goals a minimal reform program ought to achieve if successful.
Yet, the historical record shows that our "dramatically impressive candidate" intends to support America's global empire and fund its militarism when he is the President. He has already rattled the saber in South Asia, the Middle East and South America just as he has pledged to defend Israel without exception. He will support these gestures of aggressive self-assertion by adding troops to the Army and money to the always-bloated Pentagon budget. Once again, Americans will not receive a "peace dividend" from their President because this "tranquil force"
intends to prepare for war! Nor, for that matter, might the impoverished billions around the world expect a respite from America's intrusive and self-serving foreign policies and, of course, from the demented militarism that supports those policies. With respect to America's relationship to the world as a whole, system maintenance remains a key goal for both parties and their candidates. Empire always enjoys bipartisan support in the United States.
This candidate fares no better on Pax Americana's second pillar: Big finance. I say this because we recently could watch him provide qualified but firm support to the reactionary Paulson Plan and its progeny. Despite his mild criticisms of the Plan, he translated his rhetorical bet-hedging into Plan support as such when he voted for the Senate version of the bill. The upshot: When the time came to make a stand against America's plutocracy, and there could never be a more decisive moment than this one, he stood with Wall Street, not Main Street.
The vote for Paulson's gift to Wall Street was not the first time this candidate indulged in such a politically revealing act. He previously supported the:
Finally, the one-time community organizer has even upped the ante this election cycle with regards to the use and abuse of money in presidential electoral politics. He accomplished this by accumulating a massive war chest, which his staff put to effective use during the campaigns. He now stands as "…the most successful presidential fundraiser ever," according to OpenSecrets.org, having gathered $639M. This "victory," when coupled to his probable success on Election Day, merely reaffirms the point that money — and money in vast quantities — drives America's political system. In the future, presidential candidates will treat his 2008 campaign as having set a new funding bar for serious candidates.
After recounting Senator Obama's record, the constraints he will face and the debts he must clear, we may still hope that this "remarkable person" will prove himself worthy of the enormous demands a faltering country and world will surely place upon him. Nevertheless, what we should expect, if we wish to be prudent, is for President Obama to closely observe the recent traditions of his office, the common and time-tested practices of his government and, to be sure, the demands he acquired from his corporate sponsors.
During this time of crisis, Americans should not let Barack Obama's charisma tempt them to indulge in "delusions of adequacy," as Andrew Arato has. They need more from their political system. Demanding more is a reasonable response to the crisis of the moment.
According to WPXI in Pittsburgh, City Councilman Rev. Ricky Burgess recently accused the local McCain campaign of using Ashley Todd's explosive story to insult the city, its black community and to foment racial division before the presidential election. Burgess demanded an apology from the McCain campaign.
Mike Whitney reminds his readers that the global economic crisis will cost many their livelihoods and, in the end, their lives, personal goods which are significantly more valuable than their non-existent 401(k) plans, houses, boats, cars, etc. Famine, violent resource conflicts and an ubiquitous morbidity — these social bads promise to be commonplace features of the world now coming into being. The collapse of the world economic system exacerbates these outcomes. This general point is worth keeping in mind as this system reforms around the Chinese Yuan as the new reserve currency. Given this particular change, most Americans will not safely watch the degradation of life across the planet from the sidelines, so to speak. They are likely to be among the leading actors in this tragedy.
Michael Hudson concurs. His current assessment:
U.S. consumer spending and living standards will have to fall — and it seems, to fall sharply — in order to finance the "trickle down" economy at the top. Current Treasury policy is to bail out the creditors, not the debtors. The banks are being saved, but not U.S. industry, and certainly not the U.S. wage earner/consumer. Instead of pursuing a Keynesian type of deficit spending in a manner that will increase employment (government spending on goods and services, infrastructure spending and transfer payments), the Treasury and Federal Reserve are providing money to the banks to buy each other up, consolidating the U.S. financial system into a European-type system with only a few major banks. The financial system is to become monopolized and trustified, reversing two centuries of economic policy aimed at preventing financial dominance of the economy.
None of the money being given to the banks really will trickle down, of course. Instead, the largest upward transfer of property in over seventy years will occur. The policy of giving money to the wealthiest sectors — these days the financial sector — turns the trickle-down economy into a euphemism for the concentration of wealth. The pretense is that America's economy needs the financial and property overhead in order for the "real" economy to "take off" again. But a stronger financial sector selling yet more debt to the economy at large threatens to deter recovery, not to speak of a new takeoff.
In the first and last instances, as Hudson might put it, America's "wealth creators" must produce useful goods to sell to consumers, and the latter must have the wherewithal needed to purchase these goods. Manufacturing matters, and it counts not only to the owners of industrial capital, but also to those who toil or would toil in that sector along with those who depend upon industrial production as the key source of their separate but related economic activity. "This is the 'inner contradiction' of today's financial rescue operation," according to Hudson. "Finance itself cannot survive in the face of a stifled domestic 'real' economy." This point is relevant for every national economy.
Chris Hedges looks again to the right. He writes:
The ideological foundations of free-market economics and a consumer society have collapsed. This collapse is hard for us to fathom. We are still in shock and denial. We cling to old structures of meaning and outdated words to describe them. We have yet to realize that all our political science and economic textbooks have become junk. We have yet to formulate a vocabulary to describe our altered reality. We grasp, on a subliminal level, that laissez-faire capitalism is gone, but we have not viewed the corpse, scheduled the funeral and read the last rites.
"People get very clearly that Washington found hundreds of billions of dollars to bail out rich people in a way the government does not usually intervene," said Anthony Pollina, The Progressive Party candidate for governor in Vermont. "They understand that the government came up with all this money to support the wrong group of people. People get that in their gut. There is anger. It is not rage yet. There is still a little bit of disbelief. I may be running for governor, but all people want to talk about is how did we come up with all this money to give to rich people on Wall Street and why didn't they let them pay their mortgage off."
Millions of people will lose their homes. Jobs and savings will vanish. The government will continue to lurch from crisis to crisis.
Hedges believes two populisms (self-organized movements) will emerge in response to the crisis, a left (radical democrat) and right (reactionary Christian) version. They can be considered populist because both will take root within civil society, will reflect American's capacity for self-organization and will intentionally oppose America's political and economic elite. Although populist in nature and intent, they likely will diverge in attractiveness and ultimate significance: A political victory of one variant could be judged progressive whereas the victory of the other will likely end with a Christian fascist dictatorship, as Hedges often warns.
GOP skullduggery in Virginia: According to a report in The Virginian-Pilot, a flyer now circulating around Virginia informs Democrats that they will vote on November 5th, not the 4th!
According to the ACLU, it "…demanded information from the government about reports that an active military unit has been deployed inside the U.S. to help with 'civil unrest' and 'crowd control' — matters traditionally handled by civilian authorities. This deployment jeopardizes the longstanding separation between civilian and military government, and the public has a right to know where and why the unit has been deployed."
The formal request can be found here (.pdf)
The "socialism of fools" at work
The Associated Press reports:
Two white supremacists allegedly plotted to go on a national killing spree, shooting and decapitating black people and ultimately targeting Democratic presidential candidate Barack Obama….
ABC News reports that the plot exposed on Monday is just "…one of a handful of serious threats against the Democratic presidential candidate…."
In yet another revealing and thus self-destructive interview Governor Sarah Palin refused to apply the 'terrorist' label to abortion clinic bombers, according to AlterNet and DailyKos. Video from the relevant interview with Brian Williams:
Palin, it would appear, failed to notice the irony in her position.
Gary Leupp praised the movements of the 1960s — "The '60s were good!" — for their many achievements while also noting that era continues to haunt the American right. The vindictive right expresses its bitterness through the smears it directs towards Obama or, for that matter, the Clintons, three centrist Democrats who pose no threat to Republican hegemony. Leupp's essay may be found at Dissident Voice.
The New York Times reports that American companies are shedding workers in response to the contraction of consumer demand. The official unemployment rate now stands at 6.1%. It is expected to rise in the future.
Political justice in Ohio: Unfortunately, the Bush regime and the Republican Party have not abandoned their efforts to undermine Ohio's democratic institutions. Bush, according to Sherrod Brown (here), the Washington Post (here), Roll Call (here), Consortium News (here and here) asked the Justice Department to see what it can do to force 200,000 newly registered Ohioans to reconfirm their registration. The Bush regime's goal: To disenfranchise voters likely to vote for Democratic candidates.
Alan Greenspan admitted to having made a mistake when "…he…put too much faith in the self-correcting power of free markets and…failed to anticipate the self-destructive power of wanton mortgage lending." So, in the end it turns out the earth is not flat….
Mike Whitney's latest article begins by noting that the credit crisis has abated somewhat. This has come about because:
The US Treasury and Federal Reserve are now underwriting the entire financial system. The free market has been abandoned altogether. Everything from commercial paper to money markets is now backed by the "full faith and credit of the United States". Without that explicit government guarantee, the credit markets would still be frozen and the system would crash.
Following the global trend, the Dow fell again, today, according to the New York Times.
The good news: The continuing failure of the McCain-Palin strategy which, by attacking Obama, amounts to an appeal to the GOP's racist base.
In his latest, Michael Hudson asks:
Is it too much to say that we are seeing the end of economic democracy and the emergence of a financial oligarchy — a self-serving class whose actions threaten to polarize society and, in the process, stifle economic growth and lead to the very bankruptcy that the bailout was supposed to prevent?
He answers his question with:
Everything that I have read in economic history leads me to believe that we are entering a nightmare transition era. The business cycle is essentially a financial cycle. Upswings tend to become economy-wide Ponzi schemes as banks and other creditors, savers and investors receive interest and plow it back into new loans, accruing yet more interest as debt levels rise. This is the "magic of compound interest" in a nutshell. No "real" economy in history has grown at a rate able to keep up with this financial dynamic. Indeed, payment of this interest by households and businesses leaves less to spend on goods and services, causing markets to shrink and investment and employment to be cut back [emphasis added].
Michael Winship debunks the Republican smear ACORN campaign while recalling the political scandal generated by the Bush effort to politicize the Justice Department after the 2004 election. In that instance the Justice Department fired some of its attorneys for refusing to prosecute weak voter fraud cases.
Anthony DiMaggio, in his fine article on the smear ACORN operation, concludes with the following:
The Republican Party and right-wing media's attack on ACORN is motivated primarily by their fear of electoral defeat, and their contempt for poor, minority voters who will help usher in that defeat. Sadly, the Obama campaign failed to condemn this racist hate movement by distancing itself from ACORN in the third debate. It should be applauding the group for its important and necessary work in registering disenfranchised voters. At a time when Obama leads in the polls by 6.5-7% over McCain, he should feel empowered to take on racism and class biased directed at those who're simply exercising their basic, democratic right to vote. This may be asking too much, sadly, from Democratic leaders who would rather pander to the affluent than stand up for the disadvantaged.
Noam Chomsky recommends choosing the lesser evil in a recent interview:
The New York Times found serious conflict of interest problems at the Treasury Department. It appears that Secretary Paulson has surrounded himself with Goldman Sachs alumni while also making decisions which have materially affected his one-time employer.
Yet, the good news will quickly end with a McCain defeat next month. Then Obama's prodigious fund-raising effort will merely reinforce the power of money exercises in America's political system.
The Washington Independent believes the next administration will not prosecute members of the preceding administration for the war crimes they committed while holding office. Why would they make the effort when so many of the incoming leadership will be directly or indirectly tainted by the Bush regime's criminal acts.
Political justice in Ohio: McCain's southwest Ohio campaign chairman, Joe Deters, is using his official office (county prosecutor) to investigate voters and suppress votes in Hamilton County, Ohio, according to an AP report. There have been allegations of voter fraud in the region, which is unsurprising since fraud-mongering is a Republican Party campaign strategy, but the investigation seemingly lacks transparency and suggests that Deters is abusing his official position to achieve partisan political objectives.
Michelle Bachman (R-MN), near the end of her anti-liberal, anti-intellectual, anti-Democratic Party and anti-Obama diatribe on Hardball, called for a McCarthy-like media investigation into anti-Americanism (see the article on the incident at the Huffington Post).
Bachman, according to the StarTribune, also wishes to save the fluorescent light bulb from its planned-for extinction! What do "good Americans" get when they send Muslim-Terrorist-Liberal-anti-American-Socialists to Congress? They get 'Commie-Fag-Junkie' Congressmen imposing fluorescent bulbs on them!
Although the Republicans wear their patriotism on their sleeves, some Pinko-Liberal-North Eastern Establishment-Media folk, like Jay Bookman of the Atlanta Journal-Constitution (see also here), have noticed that: Republican officials are not too fond of the American people.
They fear the wrath of those Americans drawn into political participation by anger at the direction that the GOP has tried to take their country. And they are trying desperately, frantically, to try to prevent that verdict from being delivered.
Pam Martens asserts:
Americans are correctly outraged at the spectacle of U.S. crony capitalism crashing stock and bond markets around the globe while simultaneously watching the poster boys of crony capitalism on Monday, October 13, 2008 march up the granite steps of the United States Treasury building in their Armani shoes and heist a fresh $125 Billion of taxpayer dough in broad daylight.
According to Yves Smith of Naked Capitalism:
Bernanke is trying desperately to stop deleveraging. That is neither a wise nor viable objective. There is too much debt relative to the underlying economies. More has to be written off, and the trick is how to do that without producing a crisis in confidence (oh wait, we are past that point, aren't we?). But what Bernanke and his fellow central bankers are trying to do is move bad assets over to the government balance sheet AND provide equity to banks so they go make more loans. The problem is that this merely increases aggregate indebtedness, when a signficant rataionalization needs to take place.
Hopefully, Treasury and the Fed are out of panic mode and will be a little less quick to throw money at every problem that arises. But if they continue with their recent pattern, the US is on its way to debt default, either via substantial inflation or an explicit failure to pay [emphasis added].
The bailout is meant to loosen the credit market in the near-term. Yet, the New York Times suggests that that objective is unrealistic. It is unrealistic because the recipients of the government's aid may hoard their gift-money or put it to other uses.
On the other hand, Mike Whitney reports that "[t]he credit markets have begun to thaw. Interbank lending is beginning to ease and the financial system has begun to function a bit more like it should." Yet, Whitney does not use this information to predict a return to normal banking operations. Following William Engdhal (here), He instead expects the Wall Street survivors to use the new and emerging situation to attack the European Union. This fight is in their interests and theirs alone. He concludes with:
The damage that the investment banks and their non-bank counterparts (Hedge funds, broker dealers, SIVs etc) have done to the broader economy and the lives of hundreds of millions of people around the world who will suffer needlessly for their excessive and fraudulent activity, is incalculable. Still, the remedy is simple and straightforward. The banks in question should be forced to establish their solvency according to "mark to market" evaluations (Triple A MBS=$.22 on the dollar) and if they cannot meet minimal capital standards; they should be taken into receivership, their equity shareholders wiped out, their leading executives removed, and they should be transformed into public utilities under the supervision of the Congress of the United States. Once the banks are entrusted to our elected officials, we can move on to the Federal Reserve. The "price fixing" and manipulation of interest rates by privately-owned banks is a failed experiment. It's time to move on. Abolish the Fed.
News from the Bizarro World: Steve Lohr of the New York Times suggests that excessive government regulation produced the Fannie Mae and Freddie Mac debacle!
The Dow has swung wildly today, according to the Wall Street Journal, as fears of a recession deepened.
The Dow climbed to a 400 point gain for the session during the last hour of the trading day. To be sure, the volatility did little to bring calm to the market.
The right stuff
Justin Raimondo of AntiWar.com has just posted a political obituary of the Republican Party. In his analysis, the GOP's fate has become so deeply entwined with that of America's now faltering empire that it may barely survive the dénouement now in progress.
Glenn Greenwald recently addressed the same theme. He concluded his latest assessment of the right with the following:
Is there anything at all going well for the Right this year? The whole edifice appears to be crumbling faster than one can celebrate its demise. It's as though they're being simultaneously unmasked and punished for everything they've done over the last eight years. And they obviously realize that as they are now turning on each other with the same venomous accusations and demonization tactics that they've used to prop themselves up in power.
And that's to say nothing of the fact that the President they spent years creepily glorifying as a holy mix of Napoleon, Caesar and Ronald Reagan — the Ultimate Standard-Bearer of their movement — has become the most detested and failed President in modern American history. The undeniable reality…is that this is now a small and broken fringe whose worldview is not only anathema to, but in many cases repellent to, the mainstream, and the evidence for that is growing by the day.
Live by a personality cult; die by that personality cult…
How much of the present crisis can be blamed on ideology? Do you think that the ideas of Milton Friedman or the 30 year-long bias towards market fundamentalism contributed to the present troubles in the financial markets? Is this the end of the laissez-faire, free market "trickle down" era?
Robert Pollin: This is certainly a huge crisis for Friedmanite economics and neoliberalism more generally — which all along was the ideology that touted free markets and deregulation to privatize profits, but to come begging for government bailouts when the inevitable crises emerged. This is certainly not the first financial crisis under the neoliberal regime. There have been regular severe crises since the 1987 Wall Street crash. These crises were all quelled through Federal Reserve/Treasury bailout operations. Whether or not this crisis will mean the end of the neoliberal era will depend on political mobilization — specifically, how successful the left will be in building coalitions behind an agenda that combines egalitarianism with a stable financial system. I would say this: if the left is unable to defeat neoliberalism now, and build some version of social democracy or "leashed capitalism", then we will never do it.
Bloomberg and Naked Capitalism (here and here) inform us that banks receiving 'government cheese' can treat their gifts as, well, gifts! This looks to be just another credibility enhancing gesture for Secretary of the Treasury Paulson. Also credibility enhancing were Paulson's gangster methods for getting the banks to agree to participate in his latest plan. As Yves Smith points out, "[e]arly in his career, Paulson was a staffer for John Erlichman. It appears that imprinting stuck."
Relying upon new polling data, the New York Times reports that the McCain campaign's recent smear operation has hurt their own candidate in the polls. It is worth recalling that the race card maneuver also failed to help the Clintons defeat Obama. Let America wait for the election before patting itself on the back.
On the other hand, E.J. Dionne asks:
Are we witnessing the re-emergence of the far right as a power in American politics? Has John McCain, inadvertently perhaps, become the midwife of a new movement built around fear, xenophobia, racism and anger?
Sadly enough, this reactionary movement has been waiting for its moment to arrive for the last four decades. It has long been an entrenched component of the New Right consensus. And its time to shine seems to be at hand now that the GOP consensus is collapsing.
This is a defining moment in American history. The next few weeks and months will see us stabilize and weather this crisis or descend into a terrifying dystopia. I place no hope in Obama or the Democratic Party. The Democratic Party is a pathetic example of liberal, bourgeois impotence, hypocrisy and complacency. It has been bought off. I will vote, if only as a form of protest against our corporate state and an homage to [Karl] Polanyi's brilliance, for Ralph Nader. I would like to offer hope, but it is more important to be a realist. No ethic or act of resistance is worth anything if it is not based on the real. And the real, I am afraid, does not look good.
Sadly but unsurprisingly, CNN (AP) reports that the economic crisis has already consumed some Americans. It may be that the dystopian moment has already arrived:
Across the country, authorities are becoming concerned that the nation's financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.
John Dolan offers "been there, done that" advice to those who fall through the cracks. Antidepressants are essential, given his experience.
Democracy Now addresses the election fraud 'controversy' here.
Getting government off our backs…
Following Europe's lead if not also conforming to its demands, the United States intends to inject $250B into nine banks, according to reports (this, this, this, this, this). It also plans to guarantee new bank debt for the next three years, guarantee all non-interest bearing bank deposits and become the buyer-of-last-resort of commercial paper. It is significant that Paulson wants the banks to use this money, not hoard it.
In any case, for some obscure reason, the government's proposed intervention into the economy, along with the interventions it already has implemented, should not be considered a "take over of the free market," according to the President. Rather, this massive intervention is meant to "preserve" the market.
As Paul Craig Roberts points out, the price of these interventions sums to $2.1T!
Might Bush's disclaimer mean that governments "preserve free markets" whenever their interventions help if not also enrich big capital but "take over free markets" whenever they help the common folk? It seems that it can and does!
Roberts rightly notices the irony in all of this!
As we should always ask: Cui bono? Business Week reports that:
Among the firms expected to get funding: JPMorgan Chase (JPM), Citigroup (C), and Bank of America (BAC) were to receive $25 billion apiece; Wells Fargo (WFC) was to get between $20 billion and $25 billion; Goldman Sachs (GS) and Morgan Stanley (MS) were down for $10 billion each, and the Bank of New York (BK) and State Street (STT) were slated for $2 billion to $3 billion apiece.
Stock prices look poised to rise again today in response to this massive and global government intervention into the economic system, according to Business Week.
Economists warn against too much enthusiasm [about the rescue plan], as financial crisis and the economic slowdown are both going to get a lot worse. There are reports of a dramatic worsening of credit card and auto debt — as our next subprime crisis is now only months away.
The long-term dilemma, according to EURO Intelligence:
We continue to try to save every single bank, systemically relevant or not, in which case we will have successfully transfered a private sector credit risk into a public sector solvency risk. We will have done what Iceland did, on a bigger scale.
Or else, we would only guarantee the systemically important banks, which is effectively all we can afford, considering that we might also want to spend a bob or two on a fiscal stimulus to ameliorate this very sharp recession. But in this case, not every bank is safe, and consequently cross border issues can arise. In that case we would need some explicit money market insurance, with a cap perhaps.
So this leaves us with the inescapable logic of a pan-European bank rescue plan. If we had done this from the start, it would have been a lot cheaper, since it is cheaper to save 44 banks than all 8000, the total number of banks in the EU. The rules would be a lot more symmetric.
The New York Times reports that the stock market has behaved erratically this morning, climbing 360 points before falling to 8 points below its starting position.
Class struggle in TINA's world
From Michael Hudson's latest:
We are now entering the financial End Time. Bailout "Plan A" (buy the junk mortgages) has failed, "Plan B" (buy ersatz stocks in the banks to recapitalize them without wiping out current mismanagers) is fizzling, and the debts still can't be paid. That is the reality Wall Street avoids confronting. "First they ignore you, then they denounce you, and then they say that they knew what you were saying all the time," said Gandhi. The same might be said of today's overhang of debts in excess of the economy's ability to pay. First the policy makers pretend that they can be paid, then they denounce the pessimists as spreading panic, and then they say that of course students have been taught for four thousand years now how the "magic of compound interest" keeps on doubling and redoubling debts faster than the economy can squeeze out an economic surplus to pay.
What has ended is the idea that "the magic of compound interest" can make economies rich without having to work and without industry. I hope we have seen the end of derivatives formulae seeking to make money by playing in a zero-sum game. A debt overhang always ends either in foreclosure of the debtor's property, or in a debt annulment to preserve the economy's overall freedom and equity.
This means that the postmodern economy as we know it must end — either in financial polarization and debt peonage to a new oligarchic elite, or in a debt cancellation, a Jubilee Year to rescue society. But when the government says that it is reviewing "all" the options, this reality is not one of them [emphasis added].
After pointing to the vast amount of money national governments were willing to give to their banks, indeed, to give away with few or even no obligations, Chris Floyd then notes:
But putting aside for a moment the actual intent, details and results of the global bailout offers, it is their very extent that shocks, and shows — in a stark, harsh, all-revealing light — the brutal disdain with which the national governments of the world's "leading democracies" have treated their own citizens for decades.
To be sure, the common folk everywhere were told that the "free lunch era" had concluded, and that every man and woman must now work hard for their bread or perish. The market's discipline would teach them the ways of the new reality.
This is one of the main facts that ordinary citizens around the world should take away from this crisis: the money to maintain, secure and improve the lives of their families and communities was always there — but their governments, and their political parties, made a deliberate, unforced choice not to use it for the common good. Instead, they subjugated the well-being of the world to the dictates of an extremist cult. A cult of greed and privilege, that preached iron discipline to the poor and the middle-class, but released the rich and powerful from all restrictions, and all responsibility for their actions.
Power without responsibility and profits without production, liberty without citizenship and human beings without humanity — these were the goals the market fundamentalists sought and often achieved in practice.
In any case, the stock markets approved of the crisis management measures taken over the weekend by the G-7 countries (see also this, this, this), according to the New York Times and the Wall Street Journal (this). Yet:
The ultimate judgment on this weekend's developments, however, may have to wait until Tuesday, when credit markets re-open after the Columbus Day holiday. Problems in the flow of credit are at the root of the current crisis; if these markets remained locked on Tuesday, stocks could once again fall.
The Lewis-McCain-Obama exchange
It has been a difficult month for the McCain campaign. Obama solidifies his lead as the days pass and McCain confronts an electorate which fears what the future could bring, a future largely generated by the policies of George W. Bush.
Its response: The McCain campaign went 'negative,' presumably in order to recapture the momentum it lost when America's long-simmering financial crisis boiled over and ignited a global economic crisis.
The McCain campaign's attacks on Obama's character were such that the naturally compliant media felt obliged to criticize the McCain campaign for its divisive identity politics. Both the McCain campaign and the country as a whole were embarrassed by the rhetorical excesses of some McCain supporters, at least one of which violently threatened Obama.
One of the more notable responses to this situation can be found in a message written by the one-time Hillary Clinton supporter Representative John Lewis (D-GA). His statement:
"As one who was a victim of violence and hate during the height of the Civil Rights Movement, I am deeply disturbed by the negative tone of the McCain-Palin campaign. What I am seeing today reminds me too much of another destructive period in American history. Sen. McCain and Gov. Palin are sowing the seeds of hatred and division, and there is no need for this hostility in our political discourse.
"During another period, in the not too distant past, there was a governor of the state of Alabama named George Wallace who also became a presidential candidate. George Wallace never threw a bomb. He never fired a gun, but he created the climate and the conditions that encouraged vicious attacks against innocent Americans who only desired to exercise their constitutional rights. Because of this atmosphere of hate, four little girls were killed one Sunday morning when a church was bombed in Birmingham, Alabama.
"As public figures with the power to influence and persuade, Sen. McCain and Governor Palin are playing with fire, and if they are not careful, that fire will consume us all. They are playing a very dangerous game that disregards the value of the political process and cheapens our entire democracy. We can do better. The American people deserve better."
Lewis' statement could only be consequential for the McCain campaign, for, as the Los Angeles Times reminds us, "[a]t a campaign forum in August, McCain named Lewis as one of the three people he would rely on most in his administration."
"McCain did not take the scolding well," as John Nichols noted.
McCain replied to Lewis:
ARLINGTON, VA — U.S. Senator John McCain today issued the following statement:
"Congressman John Lewis' comments represent a character attack against Governor Sarah Palin and me that is shocking and beyond the pale. The notion that legitimate criticism of Senator Obama's record and positions could be compared to Governor George Wallace, his segregationist policies and the violence he provoked is unacceptable and has no place in this campaign. I am saddened that John Lewis, a man I've always admired, would make such a brazen and baseless attack on my character and the character of the thousands of hardworking Americans who come to our events to cheer for the kind of reform that will put America on the right track.
"I call on Senator Obama to immediately and personally repudiate these outrageous and divisive comments that are so clearly designed to shut down debate 24 days before the election. Our country must return to the important debate about the path forward for America."
The Obama campaign's statement on the McCain-Lewis exchange:
"Senator Obama does not believe that John McCain or his policy criticism is in any way comparable to George Wallace or his segregationist policies. But John Lewis was right to condemn some of the hateful rhetoric that John McCain himself personally rebuked just last night, as well as the baseless and profoundly irresponsible charges from his own running mate that the Democratic nominee for President of the United States 'pals around with terrorists.' As Barack Obama has said himself, the last thing we need from either party is the kind of angry, divisive rhetoric that tears us apart at a time of crisis when we desperately need to come together. That is the kind of campaign Senator Obama will continue to run in the weeks ahead," said Obama-Biden spokesman Bill Burton.
It would be naïve to expect America to have surpassed racial and religious politics or, for that matter, chauvinism and xenophobia. Each has been an enduring feature of its political culture; it is too late in the game to expect a miracle cure of these problems. Nevertheless, I can only consider it a good sign that the media took the McCain campaign to task for the reactionary turn it has recently adopted. When it comes to smear tactic politics the right has gotten a relatively free pass from the media. It is time that they pay the fare for this ride.
Another defeat for the Bush administration
The New York Times now reports that the White House intends to modify the Paulson Plan!
Two weeks after persuading Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the Bush administration has put that idea aside in favor of a new approach that would have the government inject capital directly into the nation's banks — in effect, partially nationalizing the industry.
As recently as Sept. 23, senior officials had publicly derided proposals by Democrats to have the government take ownership stakes in banks.
Unfortunately but not unsurprisingly, cronyism will remain a feature of the financial system after the Treasury Department implements the new Plan.
Industry executives quickly told Mr. Paulson that they liked the idea [partial nationalization], though they warned that the Treasury should not try to squeeze out existing shareholders. They also begged Mr. Paulson not to impose tough restrictions on executive pay and golden-parachute deals for executives who are fired.
Mr. Paulson heeded those pleas. In his remarks on Friday, he carefully noted that the government would acquire only "nonvoting" shares in companies. And officials said the law lets the Treasury write most of its own restrictions on executive pay, and those restrictions can be lenient if they are applied to a set of fairly healthy companies.
Be that as it may, pressure mounted on the G-7 countries to provide additional detail to their plan before the markets open on Monday, according to the Financial Times.
Bloomberg reports that
Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.
Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.
The draft communiqué under consideration is ``too weak'' and fails to reflect the gravity of the financial turmoil, Italian Finance Minister Giulio Tremonti told reporters in Washington before the talks began. ``We won't sign it.''
But, Tremonti softened his early position after the meeting, according to a New York Times report. The G-7 meeting thus produced an agreement, but one short on details. So the fear remains of the consequences issuing from an uncoordinated response to the crisis.
If other countries do not follow the same course as Britain [a bank recapitalization program]…, it could destabilize the financial system, because money may flow to Britain from countries without those same guarantees.
Doubt remained the predominant sensibility among the G-7 members, according to the Financial Times.
No G7 official was sure the plan would work, so deep is the global financial crisis. If it does not, the next steps would be one of two nuclear options: either to guarantee all liabilities of banks, effectively nationalizing the financial system, or for governments to seek to bypass financial institutions by lending direct to companies and households. Officials hope they will not have to contemplate these options.
The Wall Street Journal reports that Congress might consider passing a stimulus package after the election. President Bush will likely oppose such legislation, according to the Journal article.
[h]ere's what the American people need to know: that the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively.
Yet, as Mike Whitney remarks
Confidence in the system has disappeared. The government has lost the moral authority to rule. People have lost faith in everything. Bush has created a tinder box which could explode in flames at any time. It is a dangerous situation.
So, who should Americans and every other person in the world believe? George W. Bush or their lying eyes.
John McCain: If your campaign does not stop equating Sen. Barack Obama with terrorism, questioning his patriotism and portraying Mr. Obama as "not one of us," I accuse you of deliberately feeding the most unhinged elements of our society the red meat of hate, and therefore of potentially instigating violence.
At a Sarah Palin rally, someone called out, "Kill him!" At one of your rallies, someone called out, "Terrorist!" Neither was answered or denounced by you or your running mate, as the crowd laughed and cheered. At your campaign event Wednesday in Bethlehem, Pa., the crowd was seething with hatred for the Democratic nominee — an attitude encouraged in speeches there by you, your running mate, your wife and the local Republican chairman.