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Today's Stories October 29, 2009 Michael Neumann October 28, 2009 Moshe Adler Dave Lindorff Frank Joseph Smecker Alexandra Early M. Shahid Alam Vijay Prashad John Ross Franklin Lamb Gregory Travis Susan Galleymore Website of the Day October 27, 2009 Mike Whitney Patrick Cockburn Stewart J. Lawrence Alan Farago Ralph Nader Dave Lindorff Bouthaina Shaaban Brian M. Downing Elections in Afghanistan, the Second Time Around Iain Boal Carl Finamore Jayne Lyn Stahl Website of the Day October 26, 2009 Bill Quigley / Paul Craig Roberts Uri Avnery Mike Whitney Michael Snedeker Shamus Cooke David Michael Green Martha Rosenberg Patrick Bond Binoy Kampmark Website of the Day October 23-25, 2009 Alexander Cockburn Christopher Ketcham Jeff Gore Gareth Porter Jayne Lyn Stahl Saul Landau Mike Whitney Nikolas Kozloff Ron Jacobs Russell Mokhiber Missy Beattie Ricardo Alarcón de Quesada Stephen Lendman David Ker Thomson Rannie Amiri Ronnie Cummins Norm Kent Charles R. Larson David Yearsley Lorenzo Wolff Ben Sonnenberg Kim Nicolini Poets' Basement Website of the Weekend October 22, 2009 Dan Pearson / Jonathan Cook Paul Craig Roberts The US as Failed State Mark Engler Johann Hari Brian M. Downing Eric Toussaint Tom Mountain Israel Shamir Charles Thomson Website of the Day October 21, 2009 Pam Martens Linn Washington, Jr. Liaquat Ali Khan D. K. Wilson Franklin Lamb Norman Solomon Stephen Fleischman Patrice Higonnet Binoy Kampmark Kevin Coval / Website of the Day October 20, 2009 Sharon Smith Tariq Ali Mark Brenner Bouthaina Shaaban Michael D. Yates Dean Baker Dave Lindorff John Ross Ricardo Alarcón de Quesada Kevin Zeese Gilad Atzmon Website of the Day October 19, 2009 Mike Whitney Greg Moses John Ross Michael Donnelly Jayne Lyn Stahl Eric Walberg Russell Mokhiber Barbara Rose Johnston John V. Whitbeck Christopher Ketcham Website of the Day October 16-18, 2009 Alexander Cockburn Saul Landau Paul Craig Roberts Carl Ginsburg Ralph Nader Nikolas Kozloff Carlo Galli Dave Lindorff Catherine Rottenberg
/ Neve Gordon Marshall Auerback Nicola Nasser Windy Cooler James L. Secor Ron Jacobs Wes Jackson Jesse Lerner-Kinglake David Ker Thomson Against Leaders Missy Beattie Emily Ratner Stephen Martin Michael Snedeker Charles R. Larson David Yearsley Peter Stone Brown Poets' Basement Website of the Weekend October 15, 2009 Andrew Cockburn Brian M. Downing Ramzy Baroud Danny Weil M. Idrees Ahmad Margaret Kimberley Ricardo Alarcón de Quesada Harvey Wasserman Nirmal Ghosh Charles R. Larson Website of the Day October 14, 2009 Michael Neumann M. Reza Pirbhai Gareth Porter Paul Craig Roberts John Strausbaugh Fortress Moon Ralph Nader Dean Baker Charles Modiano Nadia Hijab Walter Brasch Website of the Day October 13, 2009 Peter Linebaugh Shamus Cooke John Ross Brendan Cooney Frida Berrigan Yves Engler David Macaray Dave Lindorff Mark Weisbrot Ricardo Alarcón de Quesada Binoy Kampmark Website of the Day October 12, 2009 Pam Martens Mike Whitney Martha Rosenberg Jessica Arents Eamonn McCann Bill Hatch Sen. Russell Feingold Niranjan Ramakrishnan Gideon Levy Iyad Burnat Alan Cabal Dan Bacher Website of the Day October 9-11, 2009 Alexander Cockburn James Bovard Kathleen and Bill Christison Andy Worthington Marc Levy Tariq Ali Mike Whitney Paul Craig Roberts Alan Nasser Jack Z. Bratich Steve Breyman David Michael Green Dave Lindorff Paul Buchheit Jim Goodman Missy Beattie Michael Leonardi Nadia Hijab Mel Packer David Macaray James T. Phillips Charles R. Larson Michael Donnelly David Yearsley Lorenzo Wolff Poets' Basement Website of the Weekend October 8, 2009 Saul Landau Paul Fitzgerald / Linn Washington, Jr. Marshall Auerback Dave Lindorff David Rosen Chris Darimont / Misty MacDuffee John V. Walsh Stewart Lawrence Charles R. Larson Website of the Day October 7, 2009 Brendan Cooney Paul Craig Roberts Dean Baker Jonathan Cook John Stanton Joanne Mariner Ricardo Alarcón de Quesada Stephen Lendman Sen. Russell Feingold Mary Lynn Cramer Website of the Day October 6, 2009 Mike Whitney Gareth Porter Jonathan Cook Boris Kagarlitsky Iain Boal Ron Jacobs John Ross Michael Dickinson Stephen Fleischman Ira Glunts Missy Beattie Website of the Day October 5, 2009 Pam Martens Mike Whitney Paul Craig Roberts Harry Browne Sara Mann Omar Barghouti Shamus Cooke Brenda Norrell Fred Gardner Binoy Kampmark Copenhagen Blues: McChrystal and the Afghan Trap Website of the Day October 2-4, 2009 Alexander Cockburn Saul Landau Diana Johnstone Greg Moses William Blum Brian Cloughley Russell Mokhiber John Ross Ellen Brown David Ker Thomson David Macaray Gary Engler Robert Fantina Lisa Stolarski / Naomi Archer Anthony Papa Joe Allen Harry Browne Ron Jacobs Charles R. Larson David Yearsley Poets' Basement Website of the Weekend
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Obama's Bogus PopulismPay Curbs and Bank LoansBy MARSHALL AUERBACK How appropriate that with Halloween just around the corner, the Fed and Treasury have announced a coordinated effort that will put the central bank at the forefront of pay regulation on the zombie firms now kept alive courtesy of US government largesse. Trick or treat for the US taxpayer? The new pay regulations are ostensibly designed try to align the financial incentives of managers with the longer-term performance of their firms. The Federal Reserve will have direct oversight over the pay of tens of thousands of executives, bankers, and traders. The oversight is being justified as a “safety and soundness issue“, according to Fed Chairman, Ben Bernanke. Had the Fed and Treasury demonstrated similar concerns about the overheating housing market, the degeneration of lending standards, and the proliferation of dangerous Over The Counter (OTC) derivatives during the past 10 years, it could have done much to alleviate today’s still profound financial instability. This measure, by contrast, reeks of bogus populism. In the words of Reuters’ columnist, Jeffrey Cane:
As Cane acknowledges, the curbs only apply to the newest wards of the state, the likes of AIG, Chrysler, GM, Bank of America, and Citibank. The more than 700 banks and other companies that have directly benefited from the government’s largesse are not affected – even those who are minting profits from credit markets propped up by trillions of dollars of the taxpayers’ money, and who continue to benefit as a consequence of the FDIC guarantees of their commercial paper, which substantially reduced borrowing costs at a time of uniquely high financial stress. Yet we’re still neither proposing any kind of serious regulation, nor any kind of resolution mechanism to deal with the problem of “too big to fail” banks. The Fed has other big ideas: Federal Reserve Chairman Ben S. Bernanke has also called on Congress to ensure that the costs of closing down large financial institutions are borne by the industry instead of taxpayers. He has called for a “credible process” for imposing losses on the shareholders and creditors, saying “any resolution costs incurred by the government should be paid through an assessment on the financial industry.” That would be the very same financial industry that has already received trillions of dollars in financial guarantees and aid by the Federal Government, wouldn’t it? The left hand giveth, and the right hand taketh away. It’s all a big shell game. Given the absence of structural changes in the industry, this will simply increase the cost of credit, so the taxpayer will end up paying again. What’s with the Fed’s new-found populism? It’s as if Ben Bernanke has started to channel his inner Huey Long. There could well be other motivations at play here. The Federal Reserve, as we know, is now under uncomfortably high public scrutiny and its hitherto secretive actions are being subject to the greatest degree of Congressional and press scrutiny that the institution has experienced in its 96-year history. True, in the 1970s, the then-Chairman of the Committee of Financial Services, Henry Reuss, sought to challenge the constitutionality of the Federal Open Market Committee’s ultimate decision-making power on monetary policy, but he was denied standing. The Supreme Court never ruled on the issue. But now, like so many other things, the Fed’s privileged status in our society is again being queried. A healthy dose of skepticism in regard to their actions is well merited. And what of the Obama Administration itself? It demonstrates a similar kind of cognitive dissonance evinced by the Federal Reserve. Having left open the gates of the asylum, the President and his main economic advisers profess shock, (”shock!”) that the sociopaths who run our investment banks are back to their old tricks, daring to gamble in a totally uninhibited manner with the taxpayers’ dollars. These are the same dollars which have been all but guaranteed by Treasury Secretary Geithner, who promised that there would be “no more Lehmans”. These are the very same tax dollars now being deployed to lobby against financial reforms, which will mitigate the practices that created the mess in the first place. The next time, these same banks are likely to leave a catastrophe far scarier than any Halloween costume. Having been duped, the President now seeks to deploy a cheap political trick. He is attacking an easy political target, but as usual, doing nothing concrete to ameliorate credit conditions. Indeed, his actions will likely increase the cost of credit. Just over the weekend, the President again lambasted the banks for failing to enhance credit availability. During his weekly address, the President said banks should “return the favor” of their recent taxpayer-financed bailout by lending more money to small businesses. As a taxpayer, I don’t recall ever granting this “favor”, but that aside, the President still demonstrates huge conceptual confusion when it comes to the economy. Under the guidance of Larry Summers and Timmy Geithner, policy has continued to preserve the interests of big financial companies, rather than implementing government programs that directly sustain employment and restore states’ finances. To make matters worse, the Obama Administration is already preoccupied with “paying for” additional spending through tax hikes or spending cuts elsewhere. It does not appear to be willing to let the fiscal position of the federal budget grow as needed to meet current challenges. All of which collectively will serve to cause incomes to stagnate and personal balance sheets to deteriorate, thereby diminishing creditworthiness. Repeat after me, Mr. President: “Enhance creditworthiness and improved credit conditions will follow; personal balance sheets before bank balance sheets.” You improve aggregate demand, and incomes will rise, as will the borrowers’ capacity to borrow. All of which makes it easier for lenders to lend. It’s so simple that even a banker can figure it out. And here is why the whole model of securitization itself precludes improving credit conditions. In the words of L. Randall Wray and Eric Tymoigne in “It isn’t Working: Time for More Radical Policies“, When a commercial bank makes a loan, the loan officer wonders “how will I get repaid”. Because the loan is illiquid and will be held to maturity, it is the ability to repay that matters-and it is most prudent to rely on income flows rather than potential seizure and forced sale of the asset at some time in the possibly distant future and in unknown market conditions. On the other hand, when an investment bank makes a loan, the loan officer wonders “how will I sell this asset”. The future matters only to the degree that it enters the value of the asset today because it will be sold immediately. But you can't sell anything today via securitisation. It’s Halloween at the end of this week, so it wouldn’t be right to conclude this post without a bit of Halloween imagery. Last week, I described the bankers as vampires (with full tribute to Matt Taibbi ) and the banks as zombies. I have also noted (as has my colleague, Anat Shenker) the tendency of many deficit terrorists (many of whom are the largest beneficiaries so far of taxpayer bailouts, but who still claim we “can’t afford” to help the vast majority of Americans) to deploy imagery relating to our government spending as something unnatural or unhealthy. We hear characterizations of the budget deficit as a “national cancer” (former Illinois Senator, Paul Simon), or government spending as something akin to a heroin addiction (a description I heard last week at a Financial Forum in Denver, Colorado). True to my love of Hammer Film horror classics, I prefer a different image to describe our government spending. It’s a necessary blood transfusion, without which the patient (in this case, the US economy) dies. But like any blood transfusion, you want to give it to a sick patient who has a chance to get better, not a terminally ill one (i.e. like our TBTF banks), who are being propped up by phony accounting (what we might call a life support system, where the government steadfastly refuses to pull the plug). Unfortunately, these “blood transfusions” have hitherto been misallocated. No amount of populist grandstanding by the President or the Fed can change that. When we aid banks in this way, it is like using our blood to feed vampires instead of giving that blood to people who could genuinely use a transfusion. This causes those vampires, in turn, to prey on the rest of us. By the same token, introducing pay restrictions on the likes of AIG, BofA, or Citi is akin to complaining about the quality of the clothing being worn by the zombies as they rampage and munch away on the living. Happy Halloween everybody. Marshall Auerback is a market analyst and commentator. He is a brainstruster for the Franklin and Eleanor Roosevelt Institute. He can be reached at MAuer1959@aol.com
Inside the New Print Edition of Our Subscriber-Only Newsletter! Obama and Black America Ten months into Obama-time, the plight of black Americans is terrible. Yet overwhelmingly they rally behind the president. In a powerful report from the Deep South Kevin Alexander Gray asks the question: what should the black political agenda be? Mark Rudd counterposes “organizing” with “activism” and describes what it will take to build a movement. H. Bruce Franklin gives a chronology of the march into Afghanistan. Get your new edition today by subscribing online or calling 1-800-840-3683 Contributions to CounterPunch are tax-deductible. Click here to make a donation. If you find our site useful please: Subscribe Now! CounterPunch books and t-shirts make great presents.Order CounterPunch By Email For Only $35 a Year !
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Now Available from CounterPunch Books! Yellowstone Drift:
"Powerful and shocking ..
Waiting for
Lightning
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