Greenspan tries to rewrite history

In an article titled "The Born Prophecy," published in the May, 2009 American Bar Association Journal, Richard Schmitt writes about a 1996 conversation between Brooksley E. Born (shortly after she was named to head the Commodity Futures Trading Commission) and Alan Greenspan, the Chairman of the Federal Reserve.

The influential Greenspan was an ardent proponent of unfettered markets. Born was a powerful Washington, DC lawyer with a track record for activist causes. Over lunch in his private dining room at the stately headquarters of the Fed in Washington, Greenspan probed their differences.

Well, Brooksley, I guess you and I will never agree about fraud," Born, in a recent interview, remembers Greenspan saying.

"What is there not to agree on?" Born says she replied.

"Well, you probably will always believe that there should be laws against fraud, and I don't think there is any need for a law against fraud," she recalls him saying. Greenspan, Born says, believed the market would take care of itself.

Further down in this same article Schmidt notes that, according to Greenspan, Born has mischaracterized the conversation and that the alleged conversation is "wholly at variance with my decades-long-held view." Actions speak louder than words, of course, proving that Greenspan is largely responsible for ruining the economy of the United States, and that he is lying to attempt to deny a conversation that is wholly consistent with his lack of interest in regulating financial institutions during his tenure at the Fed. Eliot Spitzer, recently appearing with Arianna Huffington on CNBC, makes one strong point after another. Stress test the banks now, he asks? Shouldn't they have been monitoring the banks all along? It's as if a doctor who, after ten years under your care, and after you've suffered a heart attack, finally decides to take a blood test. What the hell has he been doing for ten years, given that he wasn't doing anything meaningful to monitor your health. According to Spitzer (see the ten-minute video here), Greenspan's approach was absolutely destructive to the life savings of middle class tax payers, who are now in the process of subsidizing the big banks "who are burning our money." He points out that not one CEO of a bank has been removed. To the extent that some of the banks look OK at the moment, it's only because the federal government recently handed them a trillion dollars; "the Fed is sliding the money to the banks" through a "flim-flam game." That's the money they are burning through. He sees more financial crises to come, because we haven't made any significant changes to the system. "We have leveraged the future of our kids." He seriously doubts that the bank "stress tests" are real. Rather, he suspects that they are based on fantasy numbers relating to jobs and debt. He further points out that the Fed is run by the CEO's of the very banks that got us into trouble. Spitzer refers listeners to an article he recently wrote for Slate. The questions focus on whether we should trust the Fed, especially the New York Fed:
Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.
Huffington points out that the money we're dealing with now is taxpayer money and that it makes the Enron problem look minuscule. Economist Robert Shiller (see the separate video) also suggest that the stress tests are not really about objective data, but they are about "animal spirits." They are attempts to make the American investors feel confident.

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The GOP are for Healthcare reform! Honest!

Frank Lutz, in yet another sterling example of Republican doublespeak, calls on the GOP to 'support Healthcare Reform". Only one problem with that statement - the GOP has absolutely no proposals to reform healthcare. Not one! The only perspective he offers is how to sound like you are for reform, yet offer no proposal of your own. From the article:

“You simply MUST be vocally and passionately on the side of REFORM,” Luntz advises in a confidential 26-page report obtained from Capitol Hill Republicans. “The status quo is no longer acceptable. If the dynamic becomes ‘President Obama is on the side of reform and Republicans are against it,’ then the battle is lost and every word in this document is useless. “Republicans must be for the right kind of reform that protects the quality of healthcare for all Americans. And you must establish your support of reform early in your presentation.” Instead, Luntz says Republicans should warn against a “Washington takeover” of health care, and insist that patients would have to “stand in line” with “Washington bureaucrats in charge of healthcare.”
That would be instead of standing in line waiting for a 'for profit' bureaucracy to determine your fate. As it currently stands, the current proposals are too limited, since none of the current proposals on the table include single-payer, as used in most of the developed world. In fact, at recent senate hearings physician activists in favor of single payer were removed from the chamber and arrested for interrupting the proceedings, while the committee went on to hear solely from industry lobbyists in favor of industry-based solutions. [via Politico]

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The myth of the American Elite

I came across a wonderful post at firedoglake today, a few days after it posted. Dean Baker, writing about the Fiat-Chrysler merger, highlights the growing disparity between so called 'knowledge workers' and the blue-collar manufacturers who have so often been at the sharp end of outsourcing. As he states

The media coverage of the auto bailouts has focused on the need for union autoworkers to take big pay cuts, causing them to once again miss the real story. The Fiat-Chrysler deal shows that the pay problem is at the top, not the bottom. At the end of the day, the new Chrysler is still likely to be producing most of its cars in the United States. What the new company will be getting from abroad is technology and top management. [...] While this story of the US becoming a high skills center in the world economy may have been comforting to the elites, and was widely promoted by economists and the news media, there was never much truth to it. Highly skilled professionals did well in recent decades not because they succeeded in international competition, but rather because they were largely sheltered from it.
Over the past ten years those elites have gained in accelerating salaries and in a lower tax burden (see also my earlier post on the rich/poor tax divide) while the blue collar workers wages have largely stagnated, and fallen behind in real terms. As Baker says
If we compare wages for assembly-line workers in Europe and the United States, there would not be much difference between the pay of UAW members and their counterparts in Europe. However, there would be a very large difference between the multi-million dollar pay packages of the top executives at the US companies and their European counterparts. The pay gaps persist among the more highly paid engineers and management personnel.
The remaining differences are that European workers do not need to reserve a significant portion of their weekly wage to cover healthcare costs, that they receive many more vacation days (between four and eight weeks for most Europeans), and that their supervisors, engineers and management are not a world apart in terms of salaries, benefits, and lifestyles.

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Growing opposition to Obama’s Tax Haven clampdown

Opposition to President Obama's plans to close the fiscal loophole of Tax Haven's is under increasing pressure from business, lobbyists, and the media. You can be sure many Senators and Congressmen, worried about their campaign contributions in the run up to 2010, will be conveying this sense of alarm to the President. Bloomberg ran with a story this morning, quoting some very influential Democrats including Senate Finance Committee Chairman Max Baucus, Representative Joseph Crowley, a Democrat on the tax-writing House Ways and Means Committee, and Senator Barbara Boxer. This latest attack follows a lot of negative, primarily republican generated, commentary since last Monday, including the expected outrage from the Republican caucus and their media friends (particularly Fox). One of the most telling, however, was a seemingly innocent comment from CNBC's Erin Burnett, during an interview on Morning Joe last week. She basically said that 'avoiding taxes' is a perfectly acceptable and legal practice and is basically the fault of our 35% corporate tax rate. To Ms Burnett, and all of the other people who think that tax avoidance is perfectly acceptable, I'll share another quote that I discovered while following this story - posted on a discussion thread

"My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residence within this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which may point out that, however elaborate and artificial such methods may be, those who adopt them are "entitled" to do so. There is, of course, no doubt they are within their legal rights, but that is no reason why their effort, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship."

Lord Simon, L.C., Latilla v Inland Revenue Commissioners (1943)
Video and more details after the fold

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