Victory at what cost?

I'm on Lawrence Lessig's mailing list. Here is an excerpt from an email he sent today, which you can read at Huffpo:

However good, however essential, however transformative this health care bill may be, we should not mistake success here as a sign that Washington has been cured. Indeed, as Glenn Greenwald reminded us over the weekend -- in an essay that should be every reformer's required reading -- success on this bill is no justification for:

claiming that it represents a change in the way Washington works and a fulfillment of Obama's campaign pledges. The way this bill has been shaped is the ultimate expression -- and bolstering -- of how Washington has long worked. One can find reasonable excuses for why it had to be done that way, but one cannot reasonably deny that it was.

Obama's victory was achieved because his team played the old game brilliantly. Staffed with the very best from the league of conventional politics, his team bought off PhRMA (with the promise not to use market forces to force market prices for prescription drugs) and the insurance industry (with the promise -- and in this moment of celebration, let's ignore the duplicity in this -- that they would face no new competition from a public option), so that by the end, as Greenwald puts it, the administration succeeded in "bribing and accommodating them to such an extreme degree that they ended up affirmatively supporting a bill that lavishes them with massive benefits." Obama didn't "push back on the undue influence of special interests," as he said today. He bought them off. And the price he paid should make us all wonder: how much reform can this administration -- and this Nation -- afford?

Another thing: As Greenwald noted in his excellent article, to get this bill passed Obama used "the exact secret processes that he railed against and which he swore he would banish."

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What won’t Obama tell us.

What isn't Barack Obama telling us? According to Dan Froomkin, there are ten major things, and Froomkin isn't pulling any punches. Not a very open government, it turns out. And for those who might think I'm an Obama basher, I voted for Barack Obama. Based on his sordid record, George W. Bush had an even more secretive government than Obama's, and I have little doubt that John McCain would have carried on in the tradition of George Bush (and McCain would have likely have involved us in a third war in the Middle East). What I would say based on these ten immensely important questions, is a major disappointment in Barack Obama, and an even bigger disappointment in the thoroughly corrupt electoral and political systems of the United States.

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Senator Ted Kaufman stands out

Arianna Huffington has recognized the excellent work of Senator Ted Kaufman, who dares to comes out swinging against Wall Street.

In the last week alone, Kaufman has taken to the Senate floor to deliver two major -- and blistering -- speeches. The first was a masterful overview, offering chapter and verse on what led to the financial crisis and what, specifically, needs to be done to ensure that we "build a regulatory system that will endure for generations instead of one that will be laid bare by an even bigger crisis in perhaps just a few years or a decade's time." . . . . The great thing about Kaufman is that he isn't afraid to use direct, pointed language, saying that "fraud and lawlessness were key ingredients" in the financial collapse. And he's willing to name names: in his attack on derivatives, he called out Alan Greenspan, Robert Rubin, and Larry Summers as key cheerleaders for unregulated derivatives markets . . .
But why is Kaufman speaking out against dysfunctional/corrupt Wall Street banks while most other senators are timid? The absence of money as a factor in his decision making.
Kaufman didn't need to raise any money to become a senator -- he was appointed. And he doesn't need to raise any money for his reelection campaign -- he's not running. At 71, with a long, distinguished career in government under his belt, Kaufman is completely unencumbered by the need to curry favor and approach moneyed interests with his hat in his hand. So let's all take a good look at Ted Kaufman. This is what it looks like when our representatives are not beholden to special interests, and are only serving the public interest.

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Using the U.S. census as a teachable moment

I received my census form in the mail today. I don't generally think twice about it - I understand why the government needs this information to allocate representation, funding, etc. But the insert caught my eye: the Census Bureau took the time to tell me that I don't need to worry about what they're going to do with my personal information. It is, after all, protected by law. Here's an excerpt from the Census Bureau website:

We depend on your cooperation and trust, and promise to protect the confidentiality of your information. Title 13 of the U.S. Code protects the confidentiality of all your information and violating this law is a crime with severe penalties. In addition, other federal laws, including the Confidential Statistical Efficiency Act and the Privacy Act reinforce these protections.
Obviously the Census Bureau considers these assurances regarding the legal protection of privacy to be crucial to getting honest answers. I'm not surprised - the information could certainly be used to identify likely tax evasion, immigration status, even occupancy codes. It is very sensitive information in its raw, unaggregated form. This isn't my first census form. I've had the opportunity to participate in the previous two censuses. But for me, for the first time, I am not reassured by their claim. After all, I'm pretty sure that warrant-less wiretaps are illegal too. As is torture - isn't it? I believe the evidence is strong that our government has authorized or allowed both activities. Certainly it was necessary to pass legislation giving telecommunications companies immunity from prosecution for participating in wiretaps. I'm no legal expert but to this citizen that means that the wiretaps are acknowledged to be illegal - we just won't do anything about it. So, how can I have any faith that the Census Bureau would live up to it's claims? How can anyone? But it's an opportunity. This is one of those "teachable moments" that a parent, or teacher would apply to an unruly child. What more natural consequence could there be for lawless behavior by the government than to say "You know what? I won't tell you that information because I don't trust you to act in good faith with it." The census, as an opportunity for civil feedback, is a perfect time to teach that lesson. I only wish that it could be recognized as civil feedback instead of the apathy that it would undoubtedly be labeled as.

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How do Wall Street banks make their money?

In the March 4, 2000 episode of Rolling Stone, Matt Taibbi answers a question on many peoples' minds: To exactly does Wall Street make so much money that it could hand out multi-billions of dollars in bonuses last year and this year? The story of Taibbi detailed article is that the Wall Street banks use at least seven major scams to make their money, and most of them involve taking advantage of American taxpayers. The seven scams can be summarized in one principle: "the answer . . . is basically twofold: they raped the taxpayer, and they raped their clients." Taibbi's entire article is available online. If the extremes, the corruption and the opacity of Wall Street have angered you, you'll appreciate Taibbi's facts, as well as his colorful descriptions. The first of the seven major cons described by Taibbi is the "Swoop and Squat," by which Taibbi is referring to the fact that AIG should not have been able to hand over big chunks of cash to a single creditor like Goldman when AIG was about to go belly up. Taibbi correctly refers to this maneuver as a "fraudulent conveyance." That money accounts for $19 billion in cash that Goldman would not have had without the massive intervention by the United States. As Taibbi asks: "To is that $13.4 billion in 2009 profits looking now?" Taibbi cautions that these numbers don't even include the direct bailouts of Goldman Sachs and other big banks. I'll mention one more of the seven major Wall Street cons described by Taibbi: "The Dollar store." Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley applied for and received permission to become bank holding companies, which made them available for increased federal financial support. Why would they do that? You probably won't read this anywhere in your local newspaper, because it's real news.

Institutions that were, in reality, high risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless stream of "free money" courtesy of unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.

When Goldman Sachs and Morgan Stanley received those expedited federal bank charters, they were given permission to go to the Fed to borrow huge amounts of money at 0%. Taibbi points out that without this federal gravy, these banks would've totally collapsed, because they had no other way to raise capital at the time. Consider what the banks did with this taxpayer money, however.

Borrowing at 0% interest, banks like Goldman now have virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they brought from the government at 0% and went it back to the government by buying treasury bills that pay interest of three or 4%. It was basically a license to print money--no different than attaching an ATM to the side of the Federal Reserve.

Taibbi writes that that "The Dollar Store" goes a long way to explaining the enormous profits of Goldman Sachs last year. The entire article is well worth reading. Taibbi has once again done a terrific job of describing the corrupt ways of Washington and Wall Street.

Continue ReadingHow do Wall Street banks make their money?