Is this really America or a bad dream?

September 28, 2010 at 9:19 am | Posted in Economy, Pirates!, politics straight up | Leave a comment
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According to Stuart Varney and his conservative friends, it is immoral for those who have benefited most to pay higher taxes than those who are scraping by.

(WaPo) The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession.

The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

[snip]

Rea Hederman Jr., a senior policy analyst at The Heritage Foundation, a conservative think tank, agreed that census data show families of all income levels had tepid earnings in 2009, with poorer Americans taking a larger hit. “It’s certainly going to take a while for people to recover,” he said.

Is this really the kind of morality American stands for?

(CAP) The “Pledge to America” budget would mean $11.1 trillion in deficits over the next 10 years. By 2020, the federal budget deficit would be 6.3 percent of gross domestic product, the federal debt would exceed 93 percent of GDP, and interest payments on the debt would be more than $1 trillion a year. The budget deficit would be about $200 billion larger in 2020 under the “Pledge to America” plan than it would be under President Barack Obama’s budget, and over the next 10 years deficits would be $1.5 trillion higher than under the president’s budget.

The substantial increase in deficits under the “Pledge to America” budget are due to the significant tax cuts that come from extending all expiring tax provisions and the implementation of several new tax cuts.

Voting Republican in November will guarantee that your life — unless you are one of the super rich — continues to be worse every year.

UPDATE: Matthew Yglesias points us to a chart showing actual distribution of wealth, what people think the distribution of wealth is (“estimated”) and what people believe to be the ideal breakdown. Is it any wonder that economic policy in this country is so heavily weighted toward those who own the most?

Back with Black

April 25, 2010 at 7:55 pm | Posted in Economy, journalism, politics straight up, Uncategorized | Leave a comment
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Last week William Black, author and professor of economics and law at the University of Missouri, testified before the House Financial Services Committee with regard to the financial industry. On April 23, 2010 he sat down with Bill Moyers:

Vodpod videos no longer available.

The more I hear about the current “financial reform” legislation, the less I am convinced it is going to address any of the real problems.

Thank you, Bill Moyers. You will be missed.

“Don’t ask, don’t tell”

April 22, 2010 at 1:30 am | Posted in Economy, House of Representatives, politics straight up, Reality Bites | 1 Comment
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The someone is William K. Black, Associate Professor of Economics and Law at the University of Missouri, Kansas City School of Law, a white-collar criminologist and former financial regulator. He told the House Financial Services Committee what few others are willing to say about the financial meltdown and the need for a serious change in attitude.

the lenders, the banks that created nonprime derivatives, the rating agencies, and the buyers all operated on a “don’t ask; don’t tell” policy

Thanks to Firedoglake for the video.

Nail meet hammer

March 13, 2010 at 4:43 pm | Posted in Economy, politics straight up | Leave a comment
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Chicago : Jno. B. Jeffery Pr. & Eng., 1884 (Library of Congress)

Hammer Ted Frier, over at They Gave Us A Republic, hits the nail squarely:

Conservatives are right to warn that public dependence on government can become a debilitating addiction.

Yet, conservatives do not appear equally sensible to the fact that the reason the free market is such a prodigy of productivity is precisely because an intricate and specialized division of labor makes every citizen dependent on every other citizen. So, when government responds to this productive interdependence with laws preventing the strong from exploiting the weak, this is not socialism but justice.

“The good old days”

February 4, 2010 at 2:42 pm | Posted in Economy, Historical | Leave a comment
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Raymond Barger Studio, Stamford, Connecticut. 1946 October 19. (Library of Congress)

With continuing news of more bonuses to the financial geniuses who caused the collapse of the US economy and the constant drumming of anti-union forces, it behooves us to understand what and how Americans are losing more and more every year.

I recommend this NYT article from July 2005.

Yonkers, New York. Mrs. Harold Garrity, suburban housewife. August 1942. (Library of Congress)

Labor’s share, which has historically represented 60 to 65 percent of the total, has fallen in the last five years to the low end of that range. But for Mr. Gordon at Northwestern, that is only part of the story. Capital’s share, he says, has increasingly found its way to upper-income families as stock options, dividends, special bonuses and the like.

“We had much less income inequality in the first couple of decades after World War II because of strong unions, restricted trade and a decline in immigration,” Mr. Gordon said. “Then all three reversed, which means that the income from productivity falls to the bottom line and for the time being stays there.”

Federal Deficit Fueled By Bush Tax Cuts

May 10, 2009 at 10:53 am | Posted in Bush, Economy, politics straight up | Leave a comment
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The trillions spent on giveaways to the richest Americans needing them least dwarfed the expanded expenditures on defense and homeland security, entitlements like the Medicare prescription drug benefit or other discretionary spending.

"The trillions spent on giveaways to the richest Americans needing them least dwarfed the expanded expenditures on defense and homeland security, entitlements like the Medicare prescription drug benefit or other discretionary spending."

Give This Guy A Cigar.

May 5, 2009 at 10:09 am | Posted in Economy, health | Leave a comment
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Detroit, Michigan. Chrysler girls shopping for pocketbooks following a style show presented by the Chrysler Girls Club of the Chrysler Corporation at Saks Fifth Avenue store.  Fall 1942

Detroit, Michigan. Chrysler girls shopping for pocketbooks following a style show presented by the Chrysler Girls' Club of the Chrysler Corporation at Saks Fifth Avenue store. Fall 1942

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.

This big story was so easily missed because it runs against one of the main myths that our elites have cultivated about the US economy: that the country has a “comparative advantage” in highly skilled labor. In this story, the United States will continue to lose manufacturing and other “less-skilled” jobs as its economy becomes more concentrated in highly skilled sectors. This story was convenient for our elites because it meant that the decline of manufacturing was a necessary, if sometimes painful, part of a natural economic progression.

It also justified the growing inequality in US society that benefited not just Wall Street bankers and CEOs, but also millions of doctors, lawyers, economists, and other highly educated workers. These people took their six-figure salaries as a birthright, even as the pay of less educated workers stagnated or declined.

Not only is the current way of operating unfair but, lest we forget, “workers” are “consumers” and “consumers drive the economy.”

Go read the whole thing here. It’s not long.

And while you are at it, take a look at this brief paper by David E. Bloom and David Canning of the Harvard School of Public Health:

Group of federal employees waiting for treatment at the Public Health Service Dispensary #32, which has recently been opened for the exclusive benefit of government workers (between 1909 and 1932)

Group of federal employees waiting for treatment at the Public Health Service Dispensary #32, which has recently been opened for the exclusive benefit of government workers (between 1909 and 1932)

A great deal of the literature on economic growth has been devoted to studying the impact of education on aggregate economic performance and comparing the results with the rate
of return to education identified by the Mincer (1974) log wage equation. We believe that ours is the first study to compare the estimates of the macroeconomic effect of health on output with the
microeconomic estimates of the effect of health on wages now available.

We estimate that a one percentage point increase in adult survival rates increases labor productivity by about 2.8 percent, with a 95 percent confidence interval of 1.2 to 4.3 percent.

All emphasis mine.

(Cross-posted at FromLaurelStreet)

Consider This Chart.

May 3, 2009 at 9:06 am | Posted in Economy, Historical | Leave a comment
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“Legal chicanery and pitch darkness were the banker’s stoutest allies.”

April 30, 2009 at 12:29 pm | Posted in Economy, Historical, senate | 2 Comments
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Cong. Henry B. Steagall, Chairman House Banking Currency (between 1936 and 1937)

Cong. Henry B. Steagall, Chairman House Banking Currency (between 1936 and 1937)

Bloomberg News reported last week that “House Speaker Nancy Pelosi plans to push for a comprehensive inquiry, saying that three-quarters of Americans want to know what led to the bankruptcy of Lehman Brothers Holdings Inc. and the collapse of Bear Stearns Cos. and Merrill Lynch & Co. She favors one patterned after Senate Banking Committee hearings led by Ferdinand Pecora starting in 1933 …”

As John Anderson at Firedoglake correctly points out, “the bankers want to go back to giving themselves whopping pre-Crash bonuses; continue to rip-off credit card consumers with fine print and surprise rate increases; and haven’t the least intention of letting their Congressmen change the laws to allow a bunch of bankruptcy judges to modify the mortgage terms of desperate homeowners.”

Senators Couzens, Fletcher and Special Prosecutor Ferdinand Pecora of Senate Banking Committee probing the collapse of numerous banking institutions in the Detroit area.  January 11, 1934

Senators Couzens, Fletcher and Special Prosecutor Ferdinand Pecora of Senate Banking Committee probing the collapse of numerous banking institutions in the Detroit area. January 11, 1934

This is nothing new in the world. Americans, through their elected representatives, have tried to change this dynamic before.

(Wiki) The investigation was launched by a majority-Republican Senate, under the Banking Committee’s chairman, Senator Peter Norbeck. Hearings began on April 11, 1932, but were criticized by Democratic Party members and their supporters as being little more than an attempt by the Republicans to appease the growing demands of an angry American public suffering through the Great Depression. Two chief counsels were fired for ineffectiveness, and a third resigned after the committee refused to give him broad subpoena power. In January 1933, Ferdinand Pecora, an assistant district attorney for New York County was hired to write the final report. Discovering that the investigation was incomplete, Pecora requested permission to hold an additional month of hearings. His expose of the National City Bank made banner headlines and caused the bank’s president to resign. Democrats had won the majority in the Senate, and the new President, Franklin D. Roosevelt, urged the new Democratic chairman of the Banking Committee, Senator Duncan U. Fletcher, to let Pecora continue the probe. So actively did Pecora pursue the investigation that his name became publicly identified with it, rather than the committee’s chairman.

Stock exchange leader swears to tell all before Senate probers / Underwood & Underwood, Washington.  Richard Whitney, with right hand raised, before the Senate banking committee.  c. 1932

Stock exchange leader swears to tell all before Senate probers / Underwood & Underwood, Washington. Richard Whitney, with right hand raised, before the Senate banking committee. c. 1932

As reiterated by SEC Chairman Arthur Levitt during his 1995 testimony before the United States House of Representatives, the Pecora Investigation uncovered a wide range of abusive practices on the part of banks and bank affiliates. These included a variety of conflicts of interest such as the underwriting of unsound securities in order to pay off bad bank loans as well as “pool operations” to support the price of bank stocks. The hearings galvanized broad public support for new banking and securities laws. As a result of the Pecora Commission’s findings, the United States Congress passed the Glass-Steagall Banking Act of 1933 to separate commercial and investment banking, the Securities Act of 1933 to set penalties for filing false information about stock offerings, and the Securities Exchange Act of 1934, which formed the SEC to regulate the stock exchanges.

[snip]

In 1939 Ferdinand Pecora published a memoir [unfortunately, out of print] that recounted details of the investigations, Wall Street Under Oath. Pecora wrote: “Bitterly hostile was Wall Street to the enactment of the regulatory legislation.” As to disclosure rules, he stated that “Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker’s stoutest allies.”

The Banking Committee’s hearings ended on May 4, 1934, after which Pecora was appointed as one of the first commissioners of the SEC.

Morgan partner testifies. Washington, D.C., Dec. 18. Appearing at the Senate Railroad Financing Inquiry today, Arthur M. Anderson, Partner in J.P. Morgan & Co., told the Committee that his firm and other New York banks lost money through financing the terminal deal between Missouri Pacific Railroad and Terminal Share Inc. Anderson admitted that Morgan handled a $61,000,000 Missouri Pacific bond issue in 1931.  December 18, 1936.

Morgan partner testifies. Washington, D.C., Dec. 18. Appearing at the Senate Railroad Financing Inquiry today, Arthur M. Anderson, Partner in J.P. Morgan & Co., told the Committee that his firm and other New York banks "lost money" through financing the terminal deal between Missouri Pacific Railroad and Terminal Share Inc. Anderson admitted that Morgan handled a $61,000,000 Missouri Pacific bond issue in 1931. December 18, 1936.

Pecora points to the crux of the problem which is unfortunately still with us today:

That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the Oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a whole group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they had nothing to do with the misfortunes that overtook the country in 1929-1933; that they were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob blinding seeking victims.

This is Richard Whitney in 1934, four years before he was sent to Sing Sing prison for embezzlement, decrying the National Securities Exchange Act of 1934:

Bill Moyers has links for additional information about the Pecora Commission and the current debate.

Before the Pecora Commission of the 1930s, there was the Pujo Commission, formed in 1912 to investigate the so-called “money trust,” a small group of Wall Street bankers that exercised undue influence over the nation’s finances. The full transcripts of the Pujo Commission are available here.

HOUSE OF REPRESENTATIVES. COMMITTEES. SPECIAL SUBCOMMITTE OF BANKING AND CURRENCY TO INVESTIGATE MONEY TRUSTS, KNOWN AS PUJO COMMITTEE. McMORRAN OFMI; HAYES OF CA; NEELEY OF KS; GUERNSEY OF ME; PUJO OF LA, CHAIRMAN; DAUGHTERY OF MO; BYRNES OF SC; A CLERK; HEALD OF DE; A CLERK; SAMUEL.  c. 1912

HOUSE OF REPRESENTATIVES. COMMITTEES. SPECIAL SUBCOMMITTE OF BANKING AND CURRENCY TO INVESTIGATE 'MONEY TRUSTS,' KNOWN AS 'PUJO COMMITTEE.' McMORRAN OFMI; HAYES OF CA; NEELEY OF KS; GUERNSEY OF ME; PUJO OF LA, CHAIRMAN; DAUGHTERY OF MO; BYRNES OF SC; A CLERK; HEALD OF DE; A CLERK; SAMUEL. c. 1912

(American National Biography) The majority report stated that the committee was unable
to say that a deliberate effort had been made by any group to
form a combination to control money and credit. It did conclude,
however, that such a “community of interest” among a small number
of financiers had come about through stock holdings, interlocking
directorates, and other devices for controlling financial institutions,
public utilities, railroads, and industrial corporations. The
minority report agreed that abuses existed but rejected the proposed
remedies. In all, twenty-one recommendations were made in the
majority report, including approval of bank consolidations by
the comptroller of the currency, restrictions on interlocking
bank directorates, the prohibition of voting trusts and deposits
by interstate corporations at unregulated banks, the prohibition
of loans made by banks to their own directors, and the incorporation
and regulation of bank clearing houses. Although the report was
criticized by some and its suggested reforms were not enacted
into law, the Pujo investigation was widely publicized by the
press, and it increased pressure for banking reform.

Frank N. Sheppard of Natl Bankers Assn. before Borah Slush Fund Committee, October 22, 1924

Frank N. Sheppard of Natl Bankers Ass'n. before Borah Slush Fund Committee, October 22, 1924

(See also Jay Gould)

The power of the banking lobby needs to be broken. But as the Bloomberg article notes:

Members of Congress may be reluctant to tackle the recommendations of such an inquiry because of financial industry donations to political campaigns, said Wall Street historian Charles Geisst.

Financial services has been the biggest contributor in every U.S. election cycle in the last 20 years, according to the Center for Responsive Politics, a Washington research group that tracks campaign money. Its individual and political action committee donations in 2007 and 2008 totaled $463.5 million, compared with $163.8 million from the health-care industry and $75.6 million from energy companies.

Interview With The President

April 29, 2009 at 7:52 pm | Posted in Economy, Obama! | Leave a comment
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Garden of the White House and corner of the White House, c. 1921.  Frances Benjamin Johston, photographer.

Garden of the White House and corner of the White House, c. 1921. Frances Benjamin Johston, photographer.

David Leonhardt, an economics columnist for The (NY) Times and a staff writer for the magazine, recently spoke for almost an hour with President Obama in the Oval Office where they had a fairly detailed conversation about the economy, jobs, education, health care, the President’s economic advisors, etc. The “lightly edited transcript” is an interesting read.

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