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By Adam Hersh
Economist, Center for American Progress

This is the House Republican’s idea of a “jobs agenda”? They must be joking. In fact, the policy platform outlined by House Majority Whip Kevin McCarthy (R-CA) offers a laundry list of half-baked policies that are resounding jobs killers. That’s because, across the board, the Republican “jobs agenda” reduces demand, undermines middle class families, blocks development of renewable energy industries, and recreates the possibility of future financial crises.

The Republican budget plan, for instance, is the most complete articulation of the GOP’s flawed strategy for job creation and economic growth. Passed by the House on a party-line vote in April, it was rejected by the Senate. But the plan still illustrates core party principles that voters should know are at stake in the 2012 elections. The Republican budget:

• Ends Medicare as we know it, kicking low income and middle class retirees into the Kafkaesque and inefficient private insurance market.

• Tears gaping holes in public investments in education and lifelong learning, efficiency enhancing infrastructure and energy modernization, and science research and technological R&D that create jobs today, “crowd-in” private investment, and provide a foundation for long-run sustained economic growth.

• Offers tax cuts to U.S. billionaires paid for by raising taxes on the middle class and shredding social protections for those hit hardest by the economic downturn, the most efficient policies to boost jobs and economic growth in the short-term.

All told, the Republican budget would kill an estimated 1 million jobs.

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By Robert Reich
Chancellor's Professor of Public Policy, University of California at Berkeley

One full year after the financial reform bill spearheaded through Congress by Christopher Dodd and Barney Frank was signed into law, Wall Street looks and acts much the way it did before. That’s because the Street has effectively neutered the law, which is the best argument I know for applying the nation’s antitrust laws to the biggest banks and limiting their size.

Treasury Secretary Tim Geithner says the financial system is “on more solid ground” than prior to the 2008 crisis, but I don’t know what ground he’s looking at.

Much of Dodd-Frank is still on the drawing boards, courtesy of the Street. The law as written included loopholes big enough to drive bankers’ Lamborghini’s through — which they’re now doing. (more…)

When will America’s teachers follow the lead of Wall Street and start making some sacrifices for the children?

Dave Johnson

By Dave Johnson
Fellow with Campaign for America’s Future

We had bailouts and bonuses for Wall Street but letdowns and layoffs for Main Street. We had a deficit commission but no jobs commission. We have tax cuts for the rich and budget cuts for the rest of We, the People. And this week the President is having a “summit” with the heads of giant corporations. So how about holding a summit with the unemployed?

President Obama is holding a “summit” with 20 or so CEOs Wednesday, “to ease strained relations with business.” NY Times: Obama to Meet With Executives,

President Obama will host a roundtable with about 20 corporate chiefs on Wednesday, according to the White House, part of an attempt to ease strained relations with business.

… With the mood for the meeting already lightened by his recent announcements of a trade deal with South Korea and a compromise on tax cuts with Congressional Republicans, Mr. Obama and the executives will discuss an overhaul of the tax system…

See if you can guess what sort of “overhaul of the tax system” suggestions are likely to come out of a “summit” with top CEOs. Hint: a recent “summit” with Republican leaders resulted in a plan for extending tax cuts for the rich and cutting the inheritance tax. (more…)

Michael Winship

By Michael Winship
Senior writer at Bill Moyers Journal on PBS

I attended a screening this week of Alex Gibney’s new documentary, Client 9. It’s the story of the rise and fall of New York State Governor Eliot Spitzer, brought down by imperial hubris and a reckless penchant for ladies of the evening.

Gibney, an Oscar-winning filmmaker, creates a fascinating narrative. Both he and Spitzer readily concede that it was the former governor who did himself in; he haplessly provided the guns and ammo that polished him off. But there is a compelling case made suggesting that there were plenty of enemies, both in politics and business, with a motive to see him destroyed, plus the wherewithal and contacts to help grease the skids.

After all, it was Spitzer who, as state attorney general and self-appointed “Sheriff of Wall Street,” went after corruption and greed in the finance industry, exposing investment bank stock inflation, securities fraud, predatory lending practices, exorbitant executive compensation and illegal late trading and market timing perpetrated by hedge funds and mutual fund companies. Some of these practices were, of course, major factors in the calamitous financial follies of 2008.

One of Spitzer’s targets was Maurice “Hank” Greenberg, former chair and chief executive officer of the gigantic insurance company AIG. He was forced to resign by the AIG board in March 2005 after Spitzer charged Greenberg and the company with manipulative behaviors in violation of insurance and securities laws. Ultimately, criminal charges were dropped but when AIG collapsed during the ’08 meltdown, ultimately receiving the largest of the Federal bailouts — 182 billion taxpayer dollars – Greenberg said he was “bewildered” that things could have gone so wrong.

In Client 9, I was struck by a statement attributed to Greenberg, who in his AIG heyday supposedly was fond of joking, “All I ask for is an unfair advantage.”

Just three days before the screening, The New York Times had reported that one of the largest donors to a foundation run by the US Chamber of Commerce is a charity run by Greenberg.

According to the Times, “The charity has made loans and grants [to the chamber's foundation] totaling $18 million since 2003. U.S. Chamber Watch, a union-backed group, filed a complaint with the Internal Revenue Service last month asserting that the chamber foundation violated tax laws by funneling the money into a chamber ‘tort reform’ campaign favored by AIG and Mr. Greenberg. The chamber denied any wrongdoing.

“The complaint, which the chamber calls entirely unfounded, raises the question of how the chamber picks its campaigns, and whether it accepts donations that are intended to be spent on specific issues or political races.” (more…)

Dean Baker

By Dean Baker 
Co-Director, Center for Economic and Policy Research

The middle class is getting whacked by the Great Recession. Fifteen million people are out of work, another 9 million workers can only find part-time jobs, and millions more have given up looking for work altogether. Those lucky enough to be employed are unlikely to see any substantial wage gains for years to come.

Millions of homeowners are facing the loss of their home and more than ten million are underwater in their mortgage. Most of the huge baby boom cohort is approaching retirement with little other than Social Security to support them, now that the collapse of the housing bubble has destroyed their home equity and much of the rest of their savings.

This pain is infuriating for two reasons. First, this was an entirely preventable disaster. The housing bubble was easy to see. Competent economists had long warned of its dangers.

The second reason why the current situation is infuriating is that we know how to get the economy out of this mess. We just need to boost demand. This can be done either with much more government stimulus, more aggressive monetary policy from the Fed, or pushing the dollar down to boost exports. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet

What is the penalty for bankers who tell $40 billion lies? Somewhere between nothing and a rounding-error on your bonus.

The SEC just hit two Citigroup executives with fines for concealing $40 billion in subprime mortgage debt from investors back in 2007. The biggest fine is going to Citi CFO Gary Crittenden, who will pay $100,000 to settle allegations that he screwed over his own investors. The year of the alleged wrongdoing, Crittenden took home $19.4 million. That’s right. Crittenden will lose one-half of one percent of his income from the year he hid a quagmire of bailout-inducing insanity from his own investors. That’s it. No indictment. No prison time. Crittenden doesn’t even have to formally acknowledge any wrongdoing.

In 2007, as financial markets were freaking out about the subprime situation, Citi repeatedly told its investors that it owned just $13 billion in subprime mortgage debt. It was true–if you didn’t count an additional $40 billion in subprime debt that the company was also holding onto.

Citi’s CEO at the time, Chuck Prince, has not been charged with anything. As Yves Smith emphasizes, all of the top financial officers of every major corporation are responsible for the accuracy of their quarterly financial statements. Lying on those statements is a federal crime. This is the sort of thing that securities fraud cases are built around.

The SEC’s own statements about what went on at Citi are damning. If the agency can make this kind of information public, they ought to be pursuing criminal prosecutions. The SEC says that senior Citi management had been collecting information about the company’s subprime situation as early as April 2007, but repeatedly cited the $13 billion figure to investors over the next six months, waiting to acknowledge the additional $40 billion in subprime debt until November 2007. The SEC also says that Crittenden knew the “full extent” of Citi’s subprime situation by September at the latest, but the company continued to cite $13 billion in earnings reports through October. (more…)

Don McNay

By Don McNay
Award winning financial columnist and structured settlement guru 

“I don’t give a damn about my bad reputation.”
-Joan Jett 

In my childhood, Northern Kentucky was a hot spot for organized crime. In a town full of hustlers, prostitutes and gamblers, the profession they looked down on was loan sharking.

Loan sharks preyed on the poor and most desperate. The sharks charged high rates of interest for short term loans. The practice was illegal and, often, dangerous.

It wasn’t unusual for a loan shark to wind up floating in the Ohio River. One of the biggest names in the business, Frank “Screw” Andrews, (who is a central character in Hank Messick’s book, Syndicate Wife) “accidentally fell” out of a 4th floor window.

If Screw was in business today, he would be a captain of industry. Loan sharking is now legalized. Today, we call the loan sharks “payday lenders.”

The stock of payday lenders is traded on the New York Stock Exchange and NASDAQ. Many payday lending companies do business with Wall Street’s biggest banks.

As Gary Rivlan notes in his book, Broke USA, “the working poor have become big business.”

Rivlan’s book is a must read. It’s a riveting piece of work by a first-rate writer.

As far as flow and writing style, it reminds of Joe Nocera’s 1994 classic history of personal finance in America, A Piece of the Action.

A good idea would be to read Rivlan’s book immediately after reading Nocera’s book.

A Piece of the Action shows how we went from a nation without credit cards to where they are so important in many people’s lives. Broke USA shows how the decades of easy credit and loose regulation has created a new business category called the “Poverty Industry.”

You wouldn’t think that poor people would be a growth market, but businesses make big money off people who live paycheck to paycheck.

Rivlan’s book had a personal connection for me. Much of his narrative takes place in Dayton, Ohio, a city I know well. Don Donoher, the longtime basketball coach at the University of Dayton, was best man in my parents’ wedding and I am named for him.

Frank “Screw” Andrews “fell” out of the window in 1973. He never dreamed that nearly 40 years later, his business would be operating legally in almost every city in the country.

Screw knew how to bribe local officials with cash payments. He didn’t live to the see such bribery legalized in the form of lobbying and political fundraising.

Broke USA makes it clear that the public and those in the media don’t care for payday lenders much.

It also makes it clear how many friends the Poverty Industry has made by paying big dollars to lobbyists and giving huge contributions to lawmakers.

They are also funded by Wall Street.            

Until I read Broke USA, I didn’t realize what a big hand the “too big to fail” banks have in creating the Poverty Industry.

Citigroup, JP Morgan Chase and Bank of America are just some of the big banks that make huge profits, directly or indirectly, from the Poverty Industry.

They have another common bond. They received bailout money from the American taxpayers in 2008.

They are directly or indirectly in the Poverty Industry. Since we bailed them out, that makes us directly or indirectly in the Poverty Industry, too.

Rivlan’s book paints a depressing picture of America.

Entrepreneurs who want to be rich and don’t care how they do it are matched with people who don’t handle money well.

The people peddling poverty products have figured out the there is a strain of Americans who are the financial equivalent of drug addicts. They will pay any price, fee, or interest rate as long as they can get an immediate fix. They don’t care about tomorrow. They just want money today.

Just like a heroin addict, a financial junkie will usually die before the addiction runs out.

The uplifting side of Rivlan’s book is that a great deal of it is devoted to reformers.

He writes extensively about people like Martin Eakes of North Carolina, who has developed a poverty financing model at reasonable interest rates, and to Bill Faith, an Ohio activist who got that state to pass a restrictive cap on payday lenders’ interest rates.

Those who want to fight the Poverty Industry can look at what Eakes and Faith have done and follow their road map.

It’s not an easy battle. The Poverty Industry has tons of lobbyists, lawyers, legislatures and “too big to fail” financial institutions backing them up.

Poor people don’t have well-paid lobbyists. But as Rivlan’s book makes clear, focused and committed lobbyists can make up the difference.

Congress is putting the finishing touches on financial reform legislation and the “too big to fail” banks are fighting tool and nail to prevent a separate consumer protection agency, like the one Elizabeth Warren has been pushing, from seeing the light of day.

If Broke USA did anything, it convinced me why a separate agency is needed.

Without regulation, there are people and businesses who will find new ways to make money off poor people and don’t give a damn about their bad reputations.

***

Don McNay is the author of two books, the most recent being “Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery.” McNay also is an award-winning financial columnist and contributor to The Huffington Post, where this piece was first published. His web site is www.donmcnay.com . McNay earned master’s degrees from Vanderbilt and American College and was inducted into the Eastern Kentucky University Hall of Distinguished Alumni. He is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field, CLU, ChFC, MSFS, and CSSC.

David Sirota

By David Sirota
Political journalist, best-selling author and syndicated newspaper columnist

Based on John Kerry’s 2004 declaration that “I actually did vote for the $87 billion before I voted against it,” you could credibly argue that the Massachusetts Democrat is the founder of modern political flip-flopping — the James Naismith of the political world’s most dazzling sport. By that metric, though, you would also have to acknowledge that Kentucky Republican Sen. Mitch McConnell is the game’s Michael Jordan.

As the upper chamber’s GOP leader, McConnell backed the Wall Street bailout in 2008, calling it “one of the finest moments in the history of the Senate.” A year and a half later, he was telling reporters that he vehemently opposes bailouts of big business.
Now, just weeks after that textbook “for-it-before-against-it” feat, McConnell and his Republican cohorts are leaping past the Kerry-inspired fundamentals. Determined to pull off an all-star caliber act of “for-it-against-it-for-it” acrobatics, the GOP is pushing a bailout for yet another big business: the Oil Industry.

True, we haven’t heard that word — “bailout” — during the Gulf disaster, which the government calls the worst petroleum spill in U.S. history. But we have heard a lot about the oil industry’s “liability cap” — a term that is just another synonym for “bailout.”

See, someone is going to bear the massive cost of damage to the Gulf Coast economy. The lost wages, sales and revenues will be borne by either A) fishermen, motel owners and other small businesses whose livelihoods are being choked in oil plumes, B) taxpayers whose cash would finance disaster aid and victims’ benefits or C) oil firms whose rig caused the catastrophe in the first place. In this particular calamity, a bailout would permit C to pass off major portions of the economic cost to A and B. 

Which, of course, is precisely what existing liability caps are designed to do. 

That’s right, under current law, “Oil companies face unlimited liability for the cleanup costs of an offshore spill, but their liability for economic damages to affected communities is capped at $75 million,” reports Congressional Quarterly.

Considering the fact that oil-spill costs can far surpass $75 million, this is the old “too big to fail” idea propping up the oil companies. Applied specifically to the Gulf cataclysm, the statute suggests that the national interest is best served by having taxpayers and communities foot the bill for the destruction rather than having companies like British Petroleum suffer the balance-sheet pain of paying the full damages. 
In response, Democrats are proposing sensible new legislation to eliminate the cap and reaffirm the “polluter pays” principle. As President Obama’s associate attorney general told Congress this week, “We don’t think there should be an arbitrary cap on financial liability.”

Yet, McConnell apparently does. Appearing on “Meet the Press,” the Republican leader, who weeks ago railed on “guaranteed perpetual taxpayer bailouts,” not only refused to support eliminating the liability cap, but warned of “the danger of taking the cap too high” — in effect, opposing even moderately reducing the size of the bailouts that the cap inevitably creates.

Obviously, the GOP is trying to help its oil industry benefactors stall for time. As Sen. Bernie Sanders, I-Vt., said in chastising the obstructionism, “A year from now, the television cameras will be gone, and it will be a fisherman who’s trying to file a claim and he’s going to be by himself” with no means of redress.

That’s the Republicans’ unfortunate goal, and because of the GOP’s intransigence, prospects for the Democrats’ legislation remain cloudy. What’s clear, however, is McConnell’s place in the Flip-Flopping Hall of Fame. His spectacular contortions have earned him a hallowed spot in the building’s brand new Bailout Wing. 

***

David Sirota is the bestselling author of the books “Hostile Takeover” (2006) and “The Uprising” (2008). E-mail him at ds@davidsirota.com or follow him on Twitter @davidsirota. This is his latest column for Creators Syndicate.

Dean Baker

 By Dean Baker
Co-Director of the Center for Economic and Policy Research

Economists seem to specialize in bad logic, or so one might think based on the recent debate over breaking up the big banks. Former Treasury Secretary Larry Summers, who is currently President Obama’s top economic advisor, pointed out on the Lehrer News Hour on Friday that failures of small banks can present as much of a problem or more than the failure of a huge “too big to fail” institution (TBTF). He specifically noted the savings and loan crisis of the 80s.

This point is true. With bad regulation, the simultaneous collapse of many small banks can pose as much a threat to financial stability as the failure of even the largest bank. However, this fact has nothing to do with the opposite proposition – that TBTF banks pose special problems to the financial system.

The basic point is straightforward: by definition a TBTF bank will not be allowed to fail. The losses to its creditors are deemed too dangerous to the financial system and/or the economy as a whole.

This implies two things. First, because creditors know that the government will stand behind the debt of a TBTF in a crisis, they view its debt as less risky than the debt of other institutions. This means that the TBTF banks will be able to borrow at lower cost than other institutions. CEPR did a short paper last fall that suggested that the size of this TBTF subsidy to large banks could be as much as $34 billion a year.

The other implication is that TBTF banks will be able to take more risks than other banks. If other banks were perceived as engaging in risky ventures, creditors would shy away, thereby depriving them of the capital they need. However, because creditors know that the government will bail them out if a TBTF bank gets in trouble, they will keep the money flowing regardless of how risky the activities of the bank. This is a recipe for many more bailouts.

Paul Krugman and others have pointed out that effective regulation, like that exercised in Canada, can prevent TBTF banks from engaging in risky behavior. It can also, in principle, prevent these banks from profiting from the TBTF subsidy. But Canada is not the United States. We have to ask whether it is likely that our regulators will clamp down on activities that are very profitable for TBTF institutions, even if they pose great risks to the financial system.

Let’s imagine a hypothetical situation. Suppose that a regulator wants to clamp down on risky actions by the financial industry. Let’s call that regulator “Brooksley Born.” We’ll assume that she is head of the Commodities Futures Trading Commission. Let’s imagine that she wants to regulate the sale of credit default swaps and other derivative instruments.

Further, let’s assume that there are people in top positions at the Treasury, the Federal Reserve Board, and the Securities and Exchange Commission, all of whom have close contacts with the executives of the TBTF institutions. We’ll call those people “Robert Rubin”, “Larry Summers”, “Alan Greenspan” and “Arthur Levitt.” These powerful officials might try to prevent Brooksley Born from effectively regulating derivatives. They would probably question her understanding of modern finance, since very smart people at the TBTF institutions say that the current system for trading derivatives is just fine without additional regulation. They might also ridicule her proposed regulations of derivatives, which for purposes of our hypothetical scenario we can assume is not perfect. Since these powerful officials hold top positions in government, they would likely be able to prevent Brooksley Born from regulating derivatives.

Regulation in the real world looks like this hypothetical scenario. There are never unambiguous cases where risky actions are evident to all. Big banks pay smart people multi-million dollar salaries to explain why their actions are perfectly safe. These smart people can even make an $8 trillion housing bubble appear like a perfectly normal housing market.

If we want regulators who have a chance against the institutions they are regulating, we should not want institutions that are as large and politically powerful as Goldman Sachs, JP Morgan, Citigroup and the other TBTF institutions. Regulators can always make stupid mistakes and small banks acting collectively can also be a substantial force against effective regulation. But, given the power of the large banks at present, we are starting the game with a rigged deck. If it comes to placing a bet between a vigilant regulator pushing sound regulation and the TBTF banks pursuing profits, the smart money is with the banks.

***

Dean Baker is author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy,” PoliPoint Press, LLC. This piece was first published on Truthout.