Thank You Mr. Feckless President

Part of the Dodd-Frank financial reform bill - at best a very tepid attempt to reign in the excesses of the financial industry – was the creation of the Consumer Finance Protection Bureau. The CFPB, a brainchild of Elizabeth Warren, now a senator from Massachusetts, was one of the only good things to come out of the act. Dodd-Frank’s already weak improvements in regulating the financial industry are currently being further watered down by a massive bankster lobbying effort. No matter how low the thieving banksters get, there always seems to be another moral nadir for them to plumb.

Warren was naturally slated to be nominated for the head of the CFPB, but since she’d certainly have faced stiff opposition from the Repugs, Obama was too chickenshit to nominate her. His fecklessness, in this case at least, was a great gift to the people, since Warren was then free to contest a senate seat which she won. Obama went on to nominate Richard Cordray, also a good pick for the post, but since the Repugs hate the idea of financial regulation as a matter of principle, they’re doing everything they can to block his appointment unless or until they can weaken the commission’s mandate into worthlessness.

Had Obama nominated Warren she’d be stuck in limbo, rather than be the strongest voice for banking and finance reform in the Senate. Lately she’s been pushing the idea of pegging student loan interest at the same level as what the big banks are paying. Student loan rates are soon to rise from 3.4% to 6.8% if new legislation isn’t passed. This is part of the cockamamie way politics is made in Washington, with temporary fixes to long-term problems that only require the same shit sausage to be recycled again later. Meanwhile the banks are paying 0.75% so she’s been asking why students should be paying 9 times as much interest as the banksters.

It gets worse: The US government earned a cool $51 billion from the student loan program last year. So the US is making a lot of money off of the backs of struggling students at the same time it is paying the banks to take its money. When you charge less than the rate of inflation, you are essentially giving the money away. One of the ways the banksters have been using that free money is to turn around and buy US treasuries - which are now paying about 2%. This free money is one of the reasons why the banks just posted their best profits ever.

Senator Warren will hold their feet to the fire. They’ll get away with their shenanigans for now because they own the government, but Warren will be relentless in changing the paradigm and I dare say, if she chose to run for president in 2016 she’d give Hillary a run for her money.

So thank you Mr. Feckless President for giving us Senator Elizabeth Warren.

Student loan debt, at $1.1 trillion, now exceeds credit card debt, with the average student owing about $27,000 at graduation. What’s more, student loan debt cannot be written off in bankruptcy, except in very rare circumstances. A lot of that debt has been taken on because government is no longer willing to support higher education to the extent it once was or should be. After all, an educated citizenry is one of the primary goals of society, so it makes no sense to punish people who seek a higher education who don’t happen to have rich parents. Anytime anyone who could benefit from higher education is denied the opportunity, the whole society loses.

In some European countries, students who qualify for public universities not only do not pay tuition but also receive a stipend to allow them to concentrate on their studies. I graduated from City College (now University) of New York, while working 30 hours a week and single parenting. It was very tough, but it would have been impossible if I’d had to pay tuition. At the time, back in the sixties, tuition was free, I only had to pay a small student fee and buy textbooks. Today there are no (that I know of) free public institutions of higher learning in America, and many of them are not just charging tuition but charging a lot.

Charging high tuition at public colleges and gouging of student borrowers is part of the trend in the last 30 years of the 1% not being willing to pay their fair share of the cost of a healthy and educated society. Personal responsibility, they scream, while they pad their own deep pockets with tax breaks and corporate welfare. They bankrupt their banks by making casino bets with the people’s money, knowing Joe Schmo, the US taxpayer, will bail them out, while they rail against the 47% who only want government handouts for inconsequential things like food, health care, shelter, education. Congress wants to cut back on the food stamp program, literally taking food out of the mouths of children, to save a few billion dollars, while refusing to consider a very small stock transaction tax - 0.5% - that would yield $350 billion a year.

One Repug congressman working hard to cut slothful unworthy takers off of food stamps, is himself a very big benefactor of farmer’s welfare programs, the biggest receiver of farm aid in his state. But, of course, that’s somehow different.

In fact, the Repugs only control the House of Representatives by a wide margin because of efficient gerrymandering, since Dumbo candidates for the house received more votes in total than the Repugs. That disconnect doesn’t happen only in the US: in the recent Malaysian election the ruling party won 60% of the seats even though the opposition won the popular vote. Democracy is sloppy, but that’s unfortunately all we have to work with.

Meanwhile there are individuals like Elizabeth Warren who rise up to make great changes in spite of the built-in disadvantages of the political systems they are forced to work with.

Half-Assed is the New Standard

Once again, this time pertaining to financial reform, the Democratic congress has chosen half-assed over real reform. Hype over reality. Kid gloves over strong regulation. Though not directly connected, the recent sweetheart deal with Goldman Sachs is indicative of slap-on-the-wrist regulation. Biggest Fine Ever!, dominated the news. To recap, Goldman gave the task to create a mortgage backed security to a hedge fund manager named Poulson, who picked out the worst mortgages he could find because he planned to bet on the security tanking. Goldman then sold the securities to its clients without disclosing that vital information or the fact that they themselves were also betting against the security. They made a bundle on the backs of their own customers.

I’m not in America, nor have I ever had much connection to the drek the comes out of the mainstream media, but I can still state with some confidence that the sordid details were glossed over. The $550 million fine is but 4% of Goldman’s yearly earnings, which, as it happens, were no less than a gift from the American taxpayer. They moreover, were fined for civil, rather than criminal fraud - which it most decidedly was - and did not even have to admit their guilt. So simple, we give them tens of billions of dollars. They lie and cheat and steal like serial offenders. We bust them for one infraction, for which they use a tiny bit of the money we’ve showered them with to pay a paltry fine. Nothing to it, all a matter of the cost of doing business.

So now we have financial reform legislation touted as the biggest change since the Great Depression which has some potentially good parts but which doesn’t address the greatest problems of all. Yes, there’s a long and desperately needed consumer protection agency but it’s housed in the FED, notorious for being a lax regulator in the pockets of industry, instead of being independent. The effectiveness of the agency will depend in large part on who is chosen to head it. Considering the track record of the Obama administration, I wouldn’t be surprised if a former lobbyist for the banking industry were chosen to head it. The best candidate for the post is Elizabeth Warren, a woman who’s been a strong advocate for the agency, but she is considered ‘controversial’, possibly because she might actually be an effective regulator.

Yes, most derivatives will have to go through exchanges where purchasers will have to show sufficient capital. Hopefully they’ll no longer be able to buy $100 worth of derivatives with $97 of borrowed money. However, not all derivatives will be included in the regulations and the banksters have two full years to play before the rules take force.

The banksters will still be able to use their own capital – the money you have on deposit in your checking account, for instance – to gamble in ‘exotic’ securities, though they will be somewhat restricted in the amount they’ll be able to use for that type of speculation.

The problem is that the two most important, most imperative changes necessary to avoid the next too-big-to-fail meltdown did not make the cut. First, of course, the banks that were too big to fail before are even bigger and there’s nothing in the legislation to break them up. Supposedly the legislation sets up a mechanism so that if they get into trouble they will be wound down and closed but if they are still so large, you can bet your little finger they’ll be bailed out again.

Secondly, the Glass-Steigel act of 1933, which created a clear separation between retail banking and investment – read casino – banking and which was gutted on Bill Clinton’s watch in the deregulation fervor of the time was not reinstated. The biggest banksters can still engage in risky behavior knowing they’ll get bailed out.

And since Obama chose to save the banks but leave the peasantry to fend for themselves, the underlying causes of the meltdown are still operative; foreclosures are at an all time high and property prices are still going down. Under the most optimistic likely scenarios unemployment will stay around 10% for the foreseeable future.

The trillions of dollars thrown at the banks has set back the day of reckoning, but not eliminated it. The people who enabled the meltdown by pushing for deregulation and who in their rose-colored blindness never saw the crisis coming are in charge of Obama’s economic team so how are they going to fix the economy? More of the same stupidity?

One additional imperative if America’s economic ills are to be dealt with is to clamp down on speculation. As I’ve said before (sorry if my repetitions are boring you) what’s desperately needed to make a fairer society and end the tendency towards financial bubbles and their subsequent bursting - with devastating consequences for the greater economy - is to adequately tax financial transactions, capital gains and wealth in general.

There’s been a call lately to place a 0.025 tax on financial transactions. A person buying a million dollars of stock would pay a measly $2500 in taxes, which would bring in about $175 billion per year in revenue. That miniscule tax would be enough to abruptly end computerized trading where super computers owned by the likes of Goldman Sachs buy and sell stocks within thousands of a second. That is an important outcome, but that rate is not enough. Buyers of securities who do so for more than speculation would no more be deterred by a 1% tax than a .025 tax. An investor with a million bucks to plunk down in the market for the long haul is not going to be discouraged from buying stocks because of a $10,000 tax. Of course they’d bitch and moan but tough shit, that’s less than what a person earning $50,000 per year pays in income taxes so hardly worth anyone’s sympathy.

So then, figure about $700 billion in revenue from a 1% tax and half America’s huge deficit is wiped out. As stated previously, the rich have too much money: they don’t need it and it’s not good for the country or the world. However, even the quarter percent tax will be a hard sell in the congress since it’s owned, lock, stock and barrel by the banksters.

No, the big push now is to trim the deficit on the backs of Social Security recipients. We’re easy targets, so they think. Getting America’s fiscal house in order is of utmost importance but the idea that the only way that can be accomplished is on the backs of pensioners and Medicare and social services is ludicrous. Supposedly it’s not a good idea to raise taxes in a recession but that really only applies to taxes on lower income people who need and spend every penny they have. Raising taxes on the wealthy does almost nothing to dampen demand (how many yachts and Rolex watches can one person own?) and has virtually no negative effect on economic growth. The extra money you give a millionaire may be fun and games for him but does nothing to stimulate the economy except to engender asset bubbles.

I’m sorry, I can’t rant anymore on this; besides I’ve said it all before. The system is fucked and nothing in the political pipeline is going to change it for the better. So be it.